OAO Northern Shipping Company v Remolcadores De Marin SL (Remmar)

A tribunal commits a serious irregularity under section 68 of the Arbitration Act 1996 if it decides an essential issue which the parties were not given a fair opportunity to address. This applies to unargued points of law, construction and fact. Substantial injustice is established where the irregularity deprived the applicant of an opportunity to advance a reasonably arguable case which might have produced a different result. The court must not retry the arbitration, but may set aside or remit the award where the statutory threshold is met. A tribunal must also deal with all issues put to it, including material evidence relevant to quantum.

The buyers applied under section 68 of the Arbitration Act 1996 to set aside, alternatively remit, an award arising from the sale of an ice-classed tug. They alleged that the sellers had misrepresented the vessel’s engine power by providing a class certificate stating a total rated power of 1,265 kW.

The tribunal rejected the claim on the previously unargued basis that the sellers had represented only that the certificate was authentic, not that its contents were true. It nevertheless found for the buyers on falsity, inducement, reasonable grounds, exclusion or waiver, and loss. The issues were whether the tribunal had denied the buyers a fair opportunity to address the representation issue and whether it had failed to deal with an issue concerning quantum.

1. The application under section 68 of the Arbitration Act 1996 succeeded. The award was set aside and remitted to the tribunal for further consideration.

2. Section 68 establishes a high threshold. It is a long-stop remedy directed to serious procedural failures, not a disguised appeal on fact or law. The applicant must show both a serious irregularity within the closed statutory categories and substantial injustice: Lesotho Development v Impregilo SpA [2006] 1 AC 221.

3. The tribunal must give each party a reasonable opportunity to address every essential building block of its decision. This duty applies to unargued points of law or construction as well as to unargued factual issues. A tribunal need not invite submissions on every inference from facts already fully in issue, but it must raise a new decisive point before relying on it. The principles in The Vimeira [1984] 2 Lloyd's Rep 66, Zermalt Holdings SA v Nu Life Upholstery Repairs Ltd [1985] 2 EGLR 14 and ABB AG v Hochtief Airport [2006] 2 Lloyd's Rep 1 applied.

4. The tribunal’s finding that there was no representation was an essential building block of the award. The parties had addressed the other elements of the claim, but the buyers had not been invited to make submissions or adduce evidence on whether presenting the class certificate objectively conveyed the truth of its contents. The small-claims nature of the arbitration made it especially important to identify the live issues accurately. The reasoning in Pacol v Rossakhar [2000] 1 Lloyd's Rep 109 was relevant by analogy.

5. Substantial injustice did not require the court to conclude that the tribunal would necessarily have reached the opposite result. It was enough that the buyers had been deprived of an opportunity to advance submissions which were at least reasonably arguable, or better than hopeless, and which might have led to a different conclusion: Vee Networks Ltd v Econet Wireless International Ltd [2005] 1 Lloyd's Rep 192. The proposed submissions concerning the objective effect of presenting the latest class certificate had an arguable prospect of success. Implied representations are assessed objectively from the viewpoint of the reasonable representee: Geest plc v Fyffes [1999] 1 All ER (Comm) 672.

6. The quantum issue also required remission. The tribunal assessed the cost of upgrading the engine but failed to address the buyers’ expert evidence that allowance had to be made for the time required to carry out the upgrades. That was a failure to deal with an issue put to the tribunal under section 68(2)(d).

The judgment concerned a section 68 challenge to an arbitral award dated 18 October 2006. The award was set aside and remitted to the tribunal for further consideration.