Stockman Interhold SA v Arricano Real Estate Plc

A remission of an arbitral award revives jurisdiction only to the extent stated in the remission order, construed in its factual and procedural context. It normally concerns issues within the original reference, but may require consideration of later events relevant to those issues. A tribunal may award damages in lieu of, or in addition to, specific performance where that jurisdiction was preserved or validly expanded. A party which fails to object promptly to substantive jurisdiction may lose the right to object under the Arbitration Act 1996.

For a fraud challenge under section 68(2)(g), fraud must have materially influenced the award and caused substantial injustice. A condition precedent is ordinarily assessed when it falls to be satisfied; later events do not retrospectively prevent satisfaction.

The judgment concerned applications arising from a series of LCIA arbitration awards in a dispute concerning Stockman’s shares in Assofit and Arricano’s call option. The First Award found that the call option had been validly terminated and not validly exercised. On a challenge under section 68(2)(d) of the Arbitration Act 1996, Field J remitted the award to reconsider whether non-compliance with the escrow agreement invalidated the option exercise and to decide remaining issues.

The arbitrator subsequently issued further awards, including awards concerning specific performance, escrow arrangements, damages and the deposit of the option price. Stockman challenged the Fourth Award for excess of jurisdiction, the Fifth Award under section 68(2)(g) for fraud, and the Seventh Award on jurisdictional and fraud-related grounds. The central questions were the scope of the remission, waiver and the tribunal’s continuing jurisdiction, and whether alleged misrepresentations about deposited funds caused substantial injustice.

1. Jurisdiction on remission. The scope of a remission depends on the proper construction of the remission order viewed against the background known to the court and the parties. The arbitrator’s jurisdiction had been revived only for the issues remitted: whether the escrow requirements invalidated the call option exercise and the issues consequential on that determination. A remission does not ordinarily permit a wholly new dispute, but the arbitrator could consider later events relevant to the remitted question and to the relief consequential upon it. The remission therefore encompassed claims for damages in lieu of or in addition to specific performance.
2. Expansion, waiver and functus officio. The parties’ correspondence constituted agreement to refer the damages claim arising from the transfer of the shares to Althor. In any event, Stockman failed to object promptly to the tribunal’s substantive jurisdiction and waived that objection under section 73 of the Arbitration Act 1996. The arbitrator did not become functus officio after ordering specific performance because jurisdiction had been reserved and section 48(5) permitted the same remedial powers as a court. The arbitrator therefore had jurisdiction to award damages in addition to specific performance and to permit the relevant amendment.
3. Fraud challenge. The representations made about the funds held with Renaissance and Emergex became false when withdrawals occurred, and Arricano was treated as having knowledge of that position. The court applied the contextual approach to corporate attribution in Meridian Global Funds Management Asia Ltd v Securities Commission and Bilta (UK) Limited (in liquidation) v Nazir (No 2). The Fifth Award was accordingly procured by fraud.
4. Nevertheless, the fraud did not cause substantial injustice. The condition in the Second Award had to be assessed when the option price was required to be deposited. Since the deposit condition had been satisfied at that time, subsequent withdrawals could not retrospectively invalidate it. The court therefore declined to remit the Fifth Award. The jurisdictional challenges were rejected on the reasoning stated above.

The judgment itself records earlier challenges to the arbitration awards, including Field J’s remission order and Burton J’s judgment dated 22 October 2015. This was a first-instance decision on the applications before the Commercial Court.