B v A

An arbitrator’s error in applying the law chosen by the parties does not, without more, amount to an excess of jurisdiction or serious irregularity. A challenge based on failure to apply the chosen law requires a conscious disregard of that law, and that requirement is necessary but not sufficient. Section 67 of the Arbitration Act 1996 concerns substantive jurisdiction, not errors in applying the governing law. A challenge based on an alleged error in applying foreign law may therefore fall under section 68(2)(b) only in an exceptional case involving the requisite impropriety. The court dismissed the proposed challenge because the arbitrators had considered Spanish law and the complaint was merely one of construction.

B sought to challenge a majority ICC arbitration award made in favour of A. The underlying share purchase agreement was governed by Spanish law, with London as the seat of arbitration. The majority awarded A a contractual indemnity of €15 million and other sums for breaches of warranties and representations.

B alleged that the tribunal had failed to decide the dispute in accordance with the chosen law, contrary to section 46 of the Arbitration Act 1996. The preliminary issue was whether the material relied upon disclosed a case with a realistic prospect of success under sections 67 and/or 68.

1. Preliminary issue. The court answered “no”. The material did not disclose a realistic prospect of success for a challenge to the award under sections 67 or 68 of the Arbitration Act 1996.
2. Section 46 requires the tribunal to decide the dispute in accordance with the law chosen by the parties. The suggested distinction between an ordinary legal error and an error sufficiently serious to amount to a departure from the chosen law was rejected. For a challenge of this kind, conscious disregard of the chosen law is necessary, although it is not sufficient by itself.
3. The tribunal had carefully considered Spanish law. It concluded that the parties could agree their own contractual indemnity and that Article 10.1 of the share purchase agreement was a consensual remedy to be interpreted under Spanish law. The complaint therefore concerned the correctness of the tribunal’s construction, not conscious disregard or impropriety.
4. Following Lesotho Highlands Development Authority v Impregilo SPA and others [2006] 1 AC 221, an error of law does not constitute an excess of power under section 68(2)(b). That principle applies whether the alleged error concerns English law or foreign law.
5. Section 67 could not assist B. “Substantive jurisdiction” is defined by section 82 by reference to section 30(1)(a)–(c), concerning the arbitration agreement, constitution of the tribunal and matters submitted to arbitration. An error in applying the chosen law does not fall within that definition. The approach was consistent with Peterson Farms Inc v C&M Farming Limited [2004] 1 Lloyd’s Rep. 603.
6. The dissenting arbitrator’s opinion was not formally part of the award. It might be relevant as evidence on procedural matters, but it could not properly establish the content of Spanish law beyond the evidence given at the arbitration. In this case it was inadmissible or of little relevance to the application.
7. The challenge was accordingly hopeless once B abandoned any allegation of impropriety and relied only on the alleged misinterpretation of Article 10.1.