Sumukan Ltd v Commonwealth Secretariat

An arbitral agreement which incorporates an appointment statute requires material compliance with the safeguards prescribed by that statute. A commercial party remains bound by an agreed arbitral scheme, including one under which the other party has a role in appointments. However, it is entitled to insist upon compliance with procedural safeguards that promote the tribunal’s independence and impartiality.

Failure to consult independent governments before appointing the tribunal’s president invalidated the appointment and deprived the tribunal of substantive jurisdiction. Post-appointment notification did not cure the defect, and the de facto judicial-office doctrine has no application to a private arbitration. A participant does not lose a jurisdictional objection under section 73 where it reasonably assumed that the responsible party had complied with the agreed appointment procedure and had no grounds for suspicion.

Sumukan contracted with the Commonwealth Secretariat for arbitration before the Commonwealth Secretariat Arbitral Tribunal under its statute. The tribunal awarded that software title belonged to the Secretariat. Sumukan challenged the award under sections 67 and 68 of the Arbitration Act 1996.

The tribunal’s president, Professor Chappell, had been appointed without the consultation with Commonwealth governments required by the 1999 statute. Toulson J dismissed the challenges: [2007] EWHC 188 (Comm). Sumukan appealed. The central questions were whether the defective appointment deprived the tribunal of substantive jurisdiction and, if so, whether the defect had been cured or barred by section 73.

Decision

Appeal allowed. The award was set aside for want of substantive jurisdiction and the dispute was remitted for arbitration before a differently and properly constituted tribunal under the 2004 statute, unless the parties reached a compromise.

1. Waller LJ held that Sumukan was bound by the commercial arbitration agreement, including its reference to the tribunal’s statute. It could not complain merely that the agreed scheme gave the Secretariat a role in constituting the tribunal. That agreement did not, however, deprive Sumukan of its contractual right to insist on compliance with the statute’s own appointment safeguards.

2. The consultation requirement was not confined to ensuring regional representation. It also protected parties compelled to arbitrate with the Secretariat by promoting the independence and impartiality of those appointed. The undisputed failure to consult Commonwealth governments before Professor Chappell’s appointment as a member, and then as president, was therefore material. His defective appointment affected the substantive jurisdiction of the tribunal which he presided over.

3. Notification of an appointment already made was not consultation and did not cure the defect. The holding-over provision could preserve the office of a validly appointed president pending a successor. It could not validate an appointment which had never complied with the required procedure.

4. Waller LJ, with whom Sedley LJ and Sir Anthony Clarke MR agreed, held that the de facto judicial-office doctrine had no place in this private arbitration. The tribunal’s authority depended on the parties’ contractual terms, leaving no common-law basis to cure a want of appointment power.

5. Section 73 of the Arbitration Act 1996 did not preclude Sumukan’s challenge. It could reasonably assume that the Secretariat, which was responsible for the procedure, had appointed the tribunal lawfully. Sumukan neither knew nor had grounds to suspect the defect. The section 68 issues consequently required no determination.

• Court of Appeal (Civil Division): Allowed Sumukan’s appeal and set aside the award for lack of substantive jurisdiction.
• Commercial Court: Toulson J dismissed Sumukan’s applications under sections 67 and 68 of the Arbitration Act 1996: [2007] EWHC 188 (Comm). That decision was reversed.
• Commercial Court and earlier Court of Appeal proceedings: Colman J refused permission to appeal on a point of law under section 69. The Court of Appeal had dismissed Sumukan’s appeal from that decision on 21 March 2007.