Primera Maritime (Hellas) Ltd & Ors v Jiangsu Eastern Heavy Industry Co Ltd & Anor

A challenge under section 68(2)(d) of the Arbitration Act 1996 concerns due process, not the correctness or quality of an arbitral tribunal’s reasoning. The court asks whether an issue was put to the tribunal, whether the tribunal failed to deal with it, and whether substantial injustice resulted.

An award must be read reasonably and commercially as a whole. A tribunal may dispose of an issue implicitly, by deciding a logically anterior point, or as part of a composite conclusion. Once the tribunal has dealt with an issue, errors in reasoning, factual evaluation, or treatment of particular evidence cannot establish serious irregularity under section 68(2)(d).

The claimants bought two bulk carriers under shipbuilding contracts with the defendants. An arbitral tribunal found that the defendants had renounced the contracts but that the claimants subsequently affirmed them. It therefore dismissed the claimants’ damages claims.

The claimants applied under section 68(2)(d) of the Arbitration Act 1996 to set aside and remit the award. They alleged that the tribunal had failed to deal with two issues: whether the defendants’ renunciation continued after affirmation, and whether the claimants would have sold, or “flipped”, the contracts at a profit.

The central question was whether either complaint disclosed a failure to deal with an issue causing substantial injustice, rather than an impermissible challenge to the tribunal’s factual conclusions or reasoning.

1. The application was dismissed. Section 68 is a due-process safeguard available only in extreme cases. An applicant must establish an irregularity within the closed categories in section 68(2) of the Arbitration Act 1996 and resulting substantial injustice. It cannot use section 68 to challenge the correctness of an award.

2. For section 68(2)(d), the court asks whether the relevant matter was an issue, whether it was put to the tribunal, whether the tribunal failed to deal with it, and whether that failure caused substantial injustice. The alleged distinction between repeated and continuing renunciation was largely semantic. The relevant issue was whether conduct after affirmation revived the claimants’ right to terminate.

3. The award, read reasonably and commercially as a whole, dealt expressly with continued renunciation. It recognised that persistence in a previous renunciation, including unequivocal silence, could revive a right to terminate. It nevertheless found that the parties’ continuing communications left matters fluid and that the defendants’ silence did not amount to renewed or continuing renunciation. Whether post-affirmation words, conduct, or silence continued a renunciation was a question of fact for the tribunal.

4. Section 68(2)(d) does not permit a qualitative review of how well an issue was addressed. A tribunal need not answer every argument or set out every reasoning step. It may dispose of an issue through a logically anterior finding or a composite conclusion. Once an issue has been dealt with, alleged defects in reasoning provide no basis for intervention.

5. The tribunal also dealt with the proposed resale of the contracts. It found that the evidence did not establish on the balance of probabilities that a resale would have occurred. Any alleged failure to mention or give sufficient weight to particular evidence concerned factual evaluation, not failure to determine an issue. The point was also academic after the tribunal’s liability findings and could not have caused substantial injustice.

6. The court did not determine the defendants’ alternative reliance on section 70(2). It observed that a party alleging omission of an issue should ordinarily consider first asking the tribunal to act under section 57.

• High Court (Commercial Court): The claimants’ application under section 68(2)(d) of the Arbitration Act 1996 to set aside and remit the third interim award was dismissed: [2013] EWHC 3066 (Comm).

• Arbitral tribunal: The tribunal dismissed the damages claims. It found that the defendants had renounced the shipbuilding contracts but that the claimants subsequently affirmed them.