Interprods Ltd v De La Rue International Ltd

An arbitration clause covering disputes arising out of or in connection with a contract ordinarily extends to disputes concerning termination and contractual consequences of alleged criminal conduct. Serious allegations of bribery do not, without clear exclusionary language, remove the dispute from the tribunal’s jurisdiction.

Intervention under section 68 of the Arbitration Act 1996 requires a breach of the tribunal’s duty of fairness, a serious irregularity and substantial injustice. The threshold is deliberately high. A tribunal need not put every point to witnesses where fairness is assessed in the circumstances as a whole, particularly where a party has chosen not to participate in the hearing.

Interprods had acted as agent and distributor for De La Rue under agency agreements containing LCIA arbitration clauses. After a meeting at which De La Rue alleged that Interprods had admitted an intention to use commission to pay bribes, De La Rue terminated the agreements and commenced arbitration.

The arbitrator held that De La Rue was entitled to terminate the agreements and withhold outstanding commission. Interprods challenged the award under sections 67 and 68 of the Arbitration Act 1996, contending that the arbitrator lacked jurisdiction and had committed serious irregularities. The issues were whether the dispute fell within the arbitration clause and whether the arbitrator’s conduct caused a serious irregularity giving rise to substantial injustice.

1. Jurisdiction. The arbitration clause covered disputes arising out of or in connection with the agency agreements, including disputes concerning termination and liability to pay commission. Applying the approach in Fiona Trust and Holding Corporation v Privalov [2007] 4 AER 951, the parties were presumed to have intended disputes arising from their contractual relationship to be determined by the same tribunal unless the wording clearly excluded the issue.

2. The alleged criminal purpose of the commission did not take the dispute outside the clause. The agreements themselves contemplated termination for commission of any criminal offence. The contractual claim and the defences to that claim, including the alleged bribery admission, therefore fell within the arbitrator’s jurisdiction.

3. The November 2011 correspondence did not limit the submission to arbitration. Interprods had referred its claim to commission, and the defences to that claim were necessarily within the scope of the reference. The correspondence’s separate reference to alleged corruption by De La Rue did not address the alleged admission by Interprods.

4. Section 68 challenge. The principles summarised in Terna Bahrain Holding Company v Ali Marzook Al Bin Kamil Al Shamsi [2012] EWHC 3283 were applicable. The applicant had to establish a breach of the tribunal’s duty under section 33, a serious irregularity and substantial injustice. The threshold was high because the Arbitration Act 1996 substantially restricted court intervention.

5. The arbitrator acted fairly in fixing a hearing date by telephone conference despite Interprods’ absence. The issue was simple, adequate opportunities had been provided, and Interprods had not shown that participation was impossible. The conduct was not a serious irregularity and was not sufficiently remote from ordinary arbitral procedure to justify intervention.

6. The circumstances did not create apparent bias. Applying the fair-minded and informed observer test in Porter v Magill [2001] UKHL 67, informed by A v B [2011] 2 Lloyd’s Reports 591 and Helow v Secretary of State for the Home Department [2008] 1 WLR 2416, the arbitrator’s appointment in other cases involving solicitors from the same firm did not establish a real possibility of bias.

7. The conduct of the merits hearing did not constitute a serious irregularity. The arbitrator was not required to ask further questions on every alleged discrepancy or to consider an unsigned and undated witness statement in circumstances where Interprods had failed to attend and had not called the witness. In any event, Interprods could not show that the alleged defects might well have produced a significantly different outcome.

8. Both the section 67 and section 68 challenges were dismissed.

The judgment records an LCIA arbitration award dated 3 July 2013. Interprods challenged that award under sections 67 and 68 of the Arbitration Act 1996. The High Court dismissed both challenges.