Maass v Musion Events Ltd & Ors

An arbitral tribunal must give each party a reasonable opportunity to present its case before determining jurisdiction. A final award must be construed objectively and ordinarily determines the issues falling within the reference; a tribunal cannot recast a dispositive jurisdiction ruling as merely preliminary. Under section 68 of the Arbitration Act 1996, substantial injustice does not require proof that the result would probably have been different. It is sufficient that the procedural irregularity deprived a party of a proper opportunity to advance a reasonably arguable case and that the tribunal might realistically have reached another conclusion. Where the parties have agreed LCIA procedures governing correction of awards, section 57 of the Act does not apply.

The claimant challenged a final LCIA award concerning the interpretation of an intellectual property licensing agreement. The arbitrator declared that certain perpetual licences survived termination, dismissed the claimant’s counterclaim and ordered him to pay the defendants’ legal and arbitration costs.

The claimant had previously challenged the arbitrator’s jurisdiction, principally on the basis that the first defendant had not become party to the agreement or its arbitration clause. The arbitrator had initially treated jurisdiction as determined, then corrected that finding as preliminary and directed that jurisdiction would be decided after further submissions and a hearing. In the final award, however, he confirmed his jurisdiction without giving the claimant the promised opportunity to present his case. The issues were whether the award determined jurisdiction, whether that procedure constituted a serious irregularity causing substantial injustice, and what relief should follow.

1. The final award determined jurisdiction. Construed objectively, the September award did not merely restate the arbitrator’s earlier preliminary finding. Its dispositive paragraph confirmed jurisdiction, dealt with the counterclaim and made final costs orders. The description of the award as final reinforced that conclusion. The principle in Charles M Willie & Co (Shipping) Ltd v Ocean Laser Shipping Ltd (The “Smaro”), [1999] 1 Lloyd’s LR 225, supported the distinction between a final award disposing of the reference and an interim award disposing of only part of it (para [33]).
2. There was a breach of the tribunal’s general duty. Having decided jurisdiction without notifying the parties that it would depart from the procedure previously directed, the arbitrator failed to give the claimant a reasonable opportunity to present his case. That was a breach of section 33 of the Arbitration Act 1996, falling naturally within section 33(1)(a) (paras [38]-[39]).
3. Substantial injustice was established. The claimant did not need to prove on the balance of probabilities that further submissions would have changed the result. The applicable test was whether the alternative argument was better than hopeless and whether the tribunal might realistically have reached the opposite conclusion. The court must avoid rehearing the arbitration (para [40]). The jurisdictional challenge, including the contention that the first defendant had become party to the arbitration agreement only through the pleaded status issues, was reasonably arguable. The evidential burden on those issues lay with the first defendant (paras [41]-[42]).
4. The court therefore found a serious irregularity and decided to grant relief under section 68. The appropriate form and scope of relief, including whether it should affect the whole or only part of the award, were reserved for further submissions (para [44]). The judge also held that section 57 did not apply because the parties had agreed the LCIA Rules, including their correction procedure, as their contractual regime for correcting awards (para [27]).

The judgment describes the underlying LCIA arbitration and the arbitrator’s September 2014 final award. The High Court found that the award contained a serious irregularity and granted relief under section 68, with the precise relief reserved for further submissions.