ZCCM Investments Holdings Plc v Kansanshi Holdings Plc & Anor

The court decided multiple applications arising from a 22-page arbitral "Ruling on Claimant’s Permission Application". The judge held that the Ruling was a procedural ruling and not an award for the purposes of section 68 of the Arbitration Act 1996, and therefore a section 68 challenge did not arise.

As to the merits, the judge analysed ZCCM’s contentions that the tribunal had failed to deal with key issues (including alleged express misrepresentations as to the holding and use of funds, breach of fiduciary duty, breach of the shareholders’ agreement and the appropriate rate of interest) and concluded the tribunal had fairly and constructively dealt with those issues. The tribunal’s refusal of permission was sustainable on the basis that ZCCM had not demonstrated falsity or loss on a prima facie basis.

The judge also refused ZCCM’s application to amend late to raise a fraud (s.68(2)(g)) challenge and refused the extension of time: the alleged Zambian Revenue Authority correspondence did not amount to material evidence of fraud that would probably have affected the tribunal’s decision, and delay/exhaustion considerations weighed against late amendment.

Background: ZCCM (a Zambian state-related shareholder) sought permission from an arbitral tribunal to pursue a derivative claim on behalf of Kansanshi Mining PLC (KMP) against Kansanshi Holdings Ltd (KHL) and others concerning large intercompany transfers from KMP to FQMF between 2006 and 2014. ZCCM alleged misrepresentation, breaches of fiduciary duty, breach of an amended shareholders' agreement and related torts, claiming higher interest or an account of profits. The tribunal refused permission after a January 2018 hearing, producing a reasoned 22-page Ruling.

Nature of applications before the court: ZCCM brought (i) a s.68(2)(a)/(d) challenge to the Ruling (the Original Arbitration Claim), (ii) a s.68(2)(g) fraud challenge (the Fraud Claim) based on later-obtained correspondence between KMP and the Zambian Revenue Authority (ZRA), and (iii) an application for an extension of time to bring the Fraud Claim. KHL resisted, arguing among other points that the Ruling was not an award, that ZCCM had not exhausted arbitral remedies, and that the ZRA correspondence did not evidence fraud.

Issues framed by the court: (i) Is the tribunal’s Ruling an arbitral award for the purposes of s.68? (ii) If it is an award, did the tribunal commit serious irregularity by failing to deal with specified issues (express representations about the holding/use of funds; breach of fiduciary duties; breach of the ASHA; rate of interest/loss; availability/repayment of funds)? (iii) Was ZCCM precluded by failure to exhaust remedies (Article 39/section 57) or by section 73? (iv) Should time be extended to permit a fraud challenge and, if so, does the ZRA correspondence establish that the award was obtained by fraud?

Reasoning and findings: The judge held that the Ruling was a procedural determination on permission to pursue a derivative claim and not a final award because it did not determine the merits, the arbitration remained live and the tribunal was not functus officio; form and context supported treating it as a ruling rather than an award. On the alternative hypothetical that it was an award, the judge applied the high threshold for s.68 relief: the court reads arbitral decisions in a commercial, non-nitpicking way and will only intervene in extreme cases. The judge analysed each alleged omission and concluded that the tribunal had considered the relevant representations and evidence in aggregate, properly "triaging" overlapping allegations and rejecting the dishonesty and loss arguments on a reasonable factual and counterfactual analysis (including causation and the availability of counterfactual alternatives). The ZRA correspondence was not shown to be decisively inconsistent with the material before the tribunal and would not probably have affected the outcome; the fraud application therefore failed and the extension of time was refused (notwithstanding some culpable delay). The court also observed that, had the Ruling been an award and there been a material omission, ZCCM would also have been required to exhaust arbitral processes (Article 39/section 57) before pursuing s.68 relief.

First instance: The court dismissed ZCCM’s challenges. The s.68 challenge to the tribunal’s Ruling could not succeed because the Ruling was a procedural order and not an award; on the alternative hypothesis that it was an award, the tribunal did not commit a serious irregularity in the manner alleged and the fraud/extension applications also failed. The court therefore dismissed the Original Arbitration Claim, the Fraud Claim and the extension of time application on those grounds.