Compania Sud-Americana De Vapores S.A. v Nippon Yusen Kaisha

An application under section 68 of the Arbitration Act 1996 requires both a specified serious irregularity and substantial injustice. A tribunal’s failure to give a party a reasonable opportunity to deal with an opponent’s case may constitute an irregularity, particularly where the opponent’s conduct reasonably indicates that the point is abandoned. Substantial injustice is not automatic. The court asks whether, absent the irregularity, the tribunal might have reached a different conclusion. It need not decide what the tribunal would have decided. Where undisputed facts make the tribunal’s conclusion inevitable, the absence of cross-examination may cause no substantial injustice.

Compania Sud-Americana de Vapores S.A. applied under section 68 of the Arbitration Act 1996 to set aside parts of an arbitral award concerning the termination of a joint container service agreement with Nippon Yusen Kaisha.

The tribunal had allowed Nippon Yusen to rely on an alleged agreement reached at meetings on 4 and 5 June 2003, although its conduct during the arbitration had led Compania Sud-Americana to believe that the point was no longer pursued. Compania Sud-Americana therefore had not fully cross-examined Nippon Yusen’s witnesses on the alleged agreement. The tribunal’s majority nevertheless found that the agreement existed and that it terminated the agreement. The central issues were whether there was a serious irregularity and whether it caused substantial injustice.

1. The application was dismissed. Section 68 contains two cumulative limbs: one of the specified irregularities must be present, and the court must consider that it has caused or will cause substantial injustice.

2. The tribunal’s duty under section 33 of the Arbitration Act 1996 includes giving each party a reasonable opportunity to put its case and deal with its opponent’s case. In the circumstances, Nippon Yusen had impliedly abandoned reliance on the alleged June agreement. Its silence after Compania Sud-Americana expressly stated that the point appeared to have been abandoned reasonably led Compania Sud-Americana to conclude that the point was not live. The tribunal’s subsequent admission of the point deprived Compania Sud-Americana of a reasonable opportunity to cross-examine Nippon Yusen’s witnesses. This was an irregularity.

3. The irregularity did not cause substantial injustice. The court was not required to decide what the arbitration would have produced without the irregularity. The question was whether the tribunal might have reached a different conclusion.

4. The parties accepted that the joint service would end after the fourth cycle. The tribunal was entitled to conclude that the SGEX agreement regulated that service and could not remain in force after the service ended, unless the parties made a further agreement continuing the service. They had made no such agreement. On the undisputed facts, termination of the service necessarily terminated the SGEX agreement. The tribunal was therefore entitled to find that further cross-examination could not affect the result.

5. The high threshold for section 68 relief was reaffirmed. The provision is a long-stop remedy for extreme cases, but the absence of substantial injustice remained decisive here.

First-instance application under section 68 of the Arbitration Act 1996 concerning an arbitral award dated 1 December 2008.