Nestor Maritime SA v Sea Anchor Shipping Co Ltd

Challenges to arbitral awards based on serious irregularity must be brought promptly. Under Arbitration Act 1996, a party which participated in the arbitration without objecting is generally barred from raising the irregularity later unless it proves that it did not know, and could not with reasonable diligence have discovered, the grounds of objection.

An award is obtained by fraud only where the fraud is committed by a party to the arbitration, or by another person whose fraud is attributable to that party through participation or knowledge. Extensions of the 28-day time limit are exceptional. The court considers the length and explanation of delay, responsibility for it, prejudice, the continuation of the arbitration, the strength of the challenge and overall fairness, while giving substantial weight to finality.

Nestor Maritime SA sought an extension of time under sections 80(5) and 70(3) of the Arbitration Act 1996 and CPR Part 62.9 to challenge an arbitral award under section 68(2)(g). The award followed an arbitration concerning alleged misrepresentations about the condition of an oil tanker and ordered the Sellers to pay substantial sums to Sea Anchor Shipping Co Ltd.

The proposed challenge alleged that measurements in a supplementary survey report had been fabricated and fraudulently relied upon in the arbitration. The application was made approximately six and a half months out of time. The central issues were whether section 73 barred the challenge and, if not, whether the court should exercise its discretion to extend time.

1. Section 73 bar. The Sellers failed to show that the alleged irregularity could not with reasonable diligence have been discovered during the arbitration. The accuracy and provenance of the 2007 survey measurements were central issues in the arbitration. The relevant documents were disclosed, the witnesses and circumstances were available for investigation, and there were grounds to suspect fabrication. The Sellers’ failure to obtain evidence from relevant survey personnel meant that the burden under section 73(1)(d) was not discharged.
2. Fraud under section 68(2)(g). The court accepted the construction in Elektrim SA v Vivendi Universal: the provision concerns fraud by a party to the arbitration, or fraud by another to which that party was privy. It was insufficient merely to allege that witnesses had lied or that third parties had fabricated evidence. Even taking the Sellers’ evidence at its highest, it did not establish fraud by, or properly attributable to, the Buyers.
3. Extension of time. The court adopted the factors identified in Kalmneft v Glencore, with particular emphasis on delay, reasonableness and whether the respondent contributed to it. The policy of finality in arbitration and the statutory requirement for great expedition applied equally to complex international commercial disputes. The delay before and after the alleged discovery of the fraud was not reasonably explained.
4. The proposed challenge was, in any event, extremely weak. The Sellers’ evidence contained substantial internal inconsistencies, including contradictory accounts concerning measurements in the forepeak tank. The weakness of the case and the delay outweighed any unfairness caused by refusing the Sellers an opportunity to pursue the substantive challenge.
5. The application for an extension of time was refused. Counsel were directed to seek agreement on a draft order, including costs.

First-instance application in the Commercial Court. The judgment records earlier unsuccessful challenges and appeals concerning the arbitral award, but the present application was a discrete challenge and no lower-court decision is identified.