Brockton Capital Llp v Atlantic-Pacific Capital Inc

Relief under section 68 of the Arbitration Act 1996 is subject to a deliberately high threshold. A tribunal breaches its duty of fairness where it decides an issue on which a party had no reasonable notice or opportunity to make submissions, and the irregularity causes substantial injustice. That is distinct from a party’s failure to use an opportunity that was available. A tribunal’s failure to refer expressly to particular evidence will rarely constitute a serious irregularity, since findings of fact are ordinarily for the tribunal. Where a breach of the general duty is established, remission to the existing tribunal remains appropriate unless there are objective grounds for losing confidence in its ability to decide the outstanding issues fairly.

Brockton challenged a partial final award and a final award made in an ICC arbitration concerning placement-agent agreements governed by New York law. The tribunal held that contractual provisions releasing Brockton from further fee payments and permitting termination were unenforceable penalties. Brockton alleged that the penalty issue concerning the termination provision had not been pleaded and that it had no fair opportunity to address it. It also alleged that the tribunal had ignored material evidence on contractual construction. The application required the court to determine whether either complaint amounted to a serious irregularity under section 68 of the Arbitration Act 1996, and, if so, whether remission or vacation of the awards was appropriate.

1. The application succeeded in relation to the tribunal’s treatment of paragraph 2(g)(ii) of the Tripartite Agreement. The penalty argument in APC’s post-hearing memorial was directed solely to paragraph 2(g)(i), concerning the withholding of fees. It did not give notice that the separate termination provision in paragraph 2(g)(ii) was alleged to be an unenforceable penalty.

2. Brockton had an available opportunity to respond to the penalty argument concerning paragraph 2(g)(i). Its letter reserved its position but did not clearly object to the admission of the new case, and it made submissions on other new arguments. It also failed to seek leave to make further submissions after the tribunal’s subsequent email. The tribunal was therefore entitled to regard Brockton as having chosen not to address the paragraph 2(g)(i) issue.

3. The position concerning paragraph 2(g)(ii) was different. The tribunal decided an issue of which Brockton had no notice and on which it had no opportunity to make submissions. That breached section 33(1)(a) of the Arbitration Act 1996. The irregularity caused substantial injustice because Brockton’s argument that the termination provision was necessary to protect against potentially catastrophic consequences was plainly arguable and might have affected the result.

4. The statutory threshold under section 68 is deliberately high, as explained in Lesotho Highlands Development Authority v Impregilo SpA and others [2006] 1 AC 221. The distinction between absence of an opportunity and failure to use an available opportunity was supported by Terna Bahrain Holding Company WLL v Bin Kamil Al Shamsi and others [2013] 1 All ER (Comm) and The Magdalena Oldendorf [2008] 1 Lloyd's Rep 7.

5. The complaint concerning the tribunal’s reliance on one email and failure to mention other evidence was rejected. The duty of fairness is distinct from the tribunal’s autonomous power to make findings of fact. Such a failure will constitute a serious irregularity only in the most exceptional case, if ever: Bulfracht (Cyprus) Ltd v Boneset Shipping Co Ltd [2002] 2 Lloyd's Rep 681 and Sonatrach v Statoil [2014] EWHC 875 (Comm).

6. The awards were remitted to the existing tribunal. There were no objective grounds for concluding that confidence in the tribunal’s ability to reach a fair and balanced decision had been lost.

The judgment concerned a section 68 challenge to a partial final arbitral award dated 16 October 2013 and a final arbitral award dated 14 February 2014. The awards were remitted to the existing arbitral tribunal.