Union Marine Classification Services LLC v The Government of the Union of Comoros & Anor

A section 68 challenge cannot be used to reopen an arbitrator’s factual evaluation or substitute the court’s assessment of the evidence. Intervention is reserved for exceptional cases, such as genuinely overlooking evidence that materially matters or misunderstanding its effect. The court must protect the integrity of arbitral fact-finding.

Parties may confer an additional, ad hoc jurisdiction on an existing arbitrator by a sufficiently clear agreement. A prior award does not create an issue estoppel on a matter that was not submitted for determination and was expressed only as an aside. A claim for damages for the loss of a fixed-term contract may objectively amount to acceptance of repudiation. Any irregularity must also have caused substantial injustice.

Union Marine sought under section 68 of the Arbitration Act 1996 to set aside a second partial award made by the sole arbitrator, Bruce Harris. It also sought his removal under section 24.

The first award had found that Comoros’s termination of the contract was repudiatory, but had rejected Union Marine’s damages claim. A correction subsequently found that Union Marine had failed to make minimum payments and ordered an account and damages for Comoros. The parties later exchanged emails agreeing that the arbitrator should determine competing declarations concerning whether the contract remained alive or had been terminated.

The second award held that Union Marine had accepted Comoros’s repudiation by failing to pay, by claiming damages for the remaining term, or alternatively that Comoros’s later termination notice was effective. The central issues were whether the arbitrator had jurisdiction, whether his treatment of non-payment and the damages claim constituted serious irregularity, and whether Union Marine had suffered substantial injustice.

1. The section 68 challenge was dismissed in its entirety. The June 2016 email exchange objectively constituted an ad hoc agreement conferring jurisdiction on the arbitrator to determine the competing declarations about termination. The parties’ agreement was sufficiently clear, even though it was not contained in a single formal document.
2. The first award did not determine whether Union Marine had accepted Comoros’s repudiatory breach. The words in paragraph 94 were conditional, parenthetical and plainly an aside. They did not create an issue estoppel. The arbitrator was therefore entitled to determine acceptance in the second award. The principle that an arbitrator cannot reconsider the subject matter of his own prior award, discussed in Emirates Trading v SFI, did not apply.
3. A challenge based on an alleged error in evaluating evidence does not ordinarily engage section 68. Only an exceptional failure to consider evidence, such as genuinely overlooking evidence that materially mattered or misunderstanding it, could potentially amount to serious irregularity. The cases of Arduina v Celtic Resources, Sonatrach v Statoil, A v B and New Age v Range Energy supported that narrow approach.
4. There was evidence supporting the finding that Union Marine had not made the required payments after 17 April 2012. Union Marine had not put forward positive evidence or a proper contrary case. Its complaint therefore amounted to disagreement with the arbitrator’s factual conclusion. The arbitrator was entitled to consider documentary material accompanying the written submissions, and section 34 gave him broad powers concerning the admission and assessment of evidence.
5. The arbitrator was also entitled to conclude that Union Marine’s claim for damages for the loss of the whole fixed-term contract constituted acceptance of repudiation. That conclusion was open on the evidence and was not reviewable under section 68 merely because Union Marine disagreed with it.
6. In any event, substantial injustice was not established. Union Marine could not use a declaration that the contract remained alive without Comoros’s cooperation, and Comoros would in any event have been entitled to serve a further valid termination notice. The evidential complaint could not be transformed into an excess of powers under section 68(2)(b), consistently with Lesotho v Impreglio. The contingent application for removal under section 24 was unnecessary and would not have been justified.

This was a first-instance Commercial Court decision. The judgment records that an earlier challenge to the correction was rejected by Eder J and that the Court of Appeal refused permission to appeal on 12 February 2016. Permission to appeal against the second award under section 69 was later refused by Teare J on 6 April 2017.