Arduina Holdings BV v Celtic Resources Holdings Plc

A challenge to an arbitration award under sections 67 and 68 of the Arbitration Act 1996 must address the tribunal’s jurisdiction or an exceptional procedural failure. Section 68 does not provide a route for appealing factual findings or the arbitrator’s evaluation of evidence. A failure to consider evidence may amount to serious irregularity only where the arbitrator genuinely overlooked material evidence or misunderstood it. Even then, the applicant must establish substantial injustice. An arbitrator with jurisdiction to determine an issue under an English-law agreement may do so despite the possible consequences of the determination for related agreements governed by another law. A jurisdictional objection may also be lost under section 73 by participation without timely objection.

Arduina challenged an arbitration award under sections 67 and 68 of the Arbitration Act 1996. The award rejected Arduina’s contractual and misrepresentation claims and granted Celtic declaratory relief concerning a condition precedent in the Framework Agreement. Arduina also sought to set aside an order of Colman J permitting registration and enforcement of the arbitrator’s costs award.

The parties’ agreements contained different governing laws and arbitration clauses. The Framework Agreement, governed by English law, contained the condition precedent and the relevant arbitration clause. The assignment agreements were governed by Russian law. The principal issues were whether the arbitrator had jurisdiction to determine the condition precedent, whether permitting the counterclaim constituted serious irregularity, and whether the arbitrator’s treatment of the evidence justified intervention under section 68.

1. The challenge to the counterclaim award failed. The arbitrator had jurisdiction to determine, under the English-law Framework Agreement, whether the condition precedent had been fulfilled and whether the Framework Agreement had consequently terminated. The fact that Celtic sought the declaration to support an argument concerning the effect of the award on Russian-law assignment agreements did not deprive the arbitrator of jurisdiction. The arbitrator was not deciding the validity or effect of the assignments as a matter of Russian law.
2. The alternative challenge under section 68 also failed. It would require extreme circumstances for permitting a party to advance an issue within the tribunal’s jurisdiction to constitute serious irregularity. Arduina suffered no evidential prejudice from the late counterclaim, and the objection was in any event raised too late. By participating without asserting that the arbitrator lacked jurisdiction, Arduina was barred by section 73 unless it could show that it did not know, and could not with reasonable diligence have discovered, the grounds of objection.
3. Section 68 is confined to exceptional cases and is not a backdoor appeal on questions of fact. An arbitrator’s evaluation of evidence and resulting factual conclusions cannot be challenged merely because a party disagrees with them. A complaint that evidence was not properly considered may qualify only where the arbitrator genuinely overlooked material evidence or misunderstood it. Here, the arbitrator had considered and evaluated the relevant evidence concerning reliance and misrepresentation.
4. Arduina also failed to establish substantial injustice. It had learned of the relevant developments shortly after the agreements were made, elected to keep the Framework Agreement alive, and produced no satisfactory evidence of loss caused by the alleged irregularity. The challenges to the award therefore failed, and the application to set aside Colman J’s enforcement order also failed.

First-instance decision. The judgment records that Colman J had made an order on 8 March 2006 permitting registration and enforcement of the costs award. That order was not set aside.