Stockman Interhold SA v Arricano Real Estate Plc

An arbitration award will not be set aside merely because its reasoning can be analysed as inconsistent with an earlier award. The court must identify whether the earlier determination decided the same issue. A finding concerning the parties’ relationship while a contract remained in force did not determine the likelihood that an option would later be exercised or the proper construction of the option agreement.

Under the Arbitration Act 1996, a serious irregularity requires substantial injustice. Where an arbitrator has given independent reasons sufficient to support the result, an uncanvassed subsidiary reason will not ordinarily justify intervention. Repudiatory breach and the equitable clean-hands jurisdiction involve different questions. An arbitrator bound by an earlier finding of breach may independently assess whether the conduct warrants refusal of specific performance.

The claimant and defendant were parties to agreements concerning their joint venture in a Ukrainian shopping-centre development. Disputes were referred to separate UNCITRAL and LCIA arbitrations. The parties agreed that determinations in the UNCITRAL arbitration would bind the LCIA arbitration.

The UNCITRAL tribunal found that disclosure of confidential information constituted repudiatory breach. In the first LCIA award, the arbitrator applied that reasoning and found that the call option had not been validly exercised because of non-compliance with the escrow arrangements. The award was remitted by Field J under Arbitration Act 1996, section 68(2)(d), for reconsideration of that issue.

In the second award the arbitrator found the escrow requirements non-essential, ordered specific performance, and rejected the clean-hands argument. The claimant challenged those conclusions under sections 67 and 68. The central issues were whether the arbitrator had exceeded his jurisdiction or the remission, acted unfairly, or failed to deal with an issue.

1. The challenges to the declarations and specific-performance order were dismissed. The arbitrator was entitled to construe the call-option agreement by considering the contractual language, context, factual background and commercial common sense.
2. The UNCITRAL tribunal’s finding that the claimant was a medium-term investor concerned the parties’ position pending valid exercise of the call option and the question of repudiatory breach. It did not determine whether exercise of the option was more likely than not, nor did it prevent the arbitrator from considering that likelihood when construing the option agreement. There was therefore no inconsistent determination, issue estoppel, excess of jurisdiction, or departure from the remission.
3. The arbitrator’s reliance on the short-term-investor analysis had not been canvassed and created potential unfairness. However, his extensive analysis of the contractual context, the underlying bargain and the escrow mechanism supplied an independent basis for the conclusion. The claimant had not shown that it might realistically have obtained a different result, or substantial injustice for the purposes of section 68.
4. The question whether conduct amounted to repudiatory breach was distinct from the discretionary question whether the defendant had clean hands and should receive specific performance. The arbitrator was bound by the earlier finding of repudiatory breach but was entitled to assess the defendant’s conduct for himself in deciding whether equitable relief should be refused. Refusal of specific performance on that ground should be made sparingly.
5. The arbitrator had addressed the alleged nexus between the misconduct and the benefit sought. Inadequate elaboration of reasoning is not a failure to deal with an issue under section 68(2)(d).
6. The paragraph reserving jurisdiction to hear a possible damages claim was treated, by agreement, as reserving the question whether jurisdiction existed. Further issues concerning disclosure orders were adjourned for consideration after the arbitrator’s determination. The remaining claims for relief under the Act were dismissed.

First-instance decision. The judgment records that Field J remitted the First Award on 16 July 2012 for reconsideration under section 68(2)(d) of the Arbitration Act 1996. The present court determined the challenges to the Second Award and adjourned further issues concerning later disclosure orders.