A v B

Where a company’s undertaking, including arbitration claims and liabilities, passes to another company by a foreign statutory merger or court-sanctioned scheme, the transfer is not necessarily an equitable assignment under English law. The English court should recognise the substantive effect of the foreign law and give effect to the successor’s status, consistently with comity. The arbitration does not lapse merely because the transferor is dissolved before notice is given. Notice to the opposing party and submission to the tribunal may still be required to implement the substitution in the arbitration. A challenge based on the tribunal’s alleged lack of power under applicable arbitration rules is lost under section 73 of the Arbitration Act 1996 where the objecting party participated without raising it and could reasonably have discovered the ground.

E challenged a second partial award made in an ICC arbitration concerning a long-term iron ore supply contract. The tribunal had substituted F for P, an Indian company which had merged into F under a court-sanctioned scheme under sections 391–394 of the Indian Companies Act 1956. The tribunal then awarded F US$39,472,800 plus interest.

E argued that P’s arbitration claim had passed only by equitable assignment, that notice should have been given before P’s dissolution, and that the arbitration had consequently lapsed. E also argued that the 1998 ICC Rules did not empower the tribunal to substitute F. The issues were whether Indian law required recognition of F’s succession, whether the arbitration survived, and whether E’s procedural objections were barred.

1. The challenges were dismissed. The transfer of P’s entire undertaking to F under the Indian court orders included the arbitration claims, rights and liabilities. Although the arrangement was not “universal succession” in the strict civil-law sense, its substantive effect was universal succession in that F succeeded to the undertaking as a whole, rather than by separate assignments of individual assets.

2. The transfer could not properly be characterised as an equitable assignment. The court had to recognise the effect of the Indian statutory scheme and orders. The reasoning in Baytur SA v Finagro Holding SA [1992] 1 QB 610 concerned an equitable assignment and did not prevent recognition of a court-ordered statutory transfer of rights and obligations.

3. The arbitration therefore did not lapse when P was dissolved. After the effective date, notice was given to E and the tribunal, and F submitted to the tribunal’s jurisdiction. The tribunal was bound to recognise the Indian scheme and was right to substitute F for P.

4. The absence of an express joinder provision in the 1998 ICC Rules did not deprive the tribunal of power. The application was properly understood as substitution to give effect to the Indian orders, rather than joinder of an additional party. Article 15 permitted the tribunal to settle procedural rules where the ICC Rules were silent.

5. E’s objection under sections 67 and 68 of the Arbitration Act 1996 was also barred by section 73. E had participated in the arbitration without objecting to the tribunal’s power to substitute F and could, with reasonable diligence, have discovered the alleged ground. The complaint did not concern substantive jurisdiction within section 30(1), and the tribunal had not exceeded its powers or committed serious irregularity.

6. Costs followed the event.