Allawi v The Islamic Republic of Pakistan

An extension of time to challenge an arbitral award under section 68 of the Arbitration Act 1996 is exceptional. The court must evaluate all relevant circumstances, including the length and reasonableness of the delay, any contribution by the respondent, irremediable prejudice, the continuation of the arbitration, the strength of the proposed challenge and overall fairness. No factor has automatic priority.

The statutory policy of speedy finality means that substantial delay is inimical to the scheme of the Act. A tribunal is not generally required to decide every issue raised if it has reached its decision on issues sufficient to dispose of the case. A failure to determine an issue for the purposes of a possible costs argument will not ordinarily amount to serious irregularity.

The claimant sought an extension under CPR rule 62.9 and section 70(3) of the Arbitration Act 1996 to bring a section 68 challenge to an arbitral award. The proposed challenge alleged that the tribunal had failed to decide whether Pakistan had breached article 2(2) of a bilateral investment treaty, although it had dismissed the substantive claims for failure to establish causation and had awarded Pakistan its costs.

The application was made approximately a year after the ordinary time limit and more than eight months after an earlier extension. The claimant relied on an alleged assurance that Pakistan would not enforce the costs award. The court also considered the strength of the proposed challenge, prejudice to Pakistan and the fairness of allowing the challenge to proceed.

1. The extension application was dismissed. The court considered all relevant circumstances, including the length of delay; whether the claimant had acted reasonably; whether Pakistan had caused or contributed to the delay; irremediable prejudice; whether the arbitration had continued; the strength of the proposed challenge; and fairness in the broadest sense.

2. The delay was extremely substantial when measured against the 28-day period in section 70(3). That period reflects the policy of speedy finality in arbitration. The fact that Pakistan had waited several months before seeking enforcement did not reduce the claimant’s obligation to challenge within time.

3. The reasonableness inquiry was objective. Mrs Justice Carr found that no unequivocal assurance had been given at the Goring Hotel meeting. In any event, later events, including advice to preserve legal rights, an application to correct the costs award and a later enforcement letter, made it unreasonable to abandon the challenge.

4. The proposed section 68 challenge was weak. A tribunal is not generally required to determine every issue raised once it has reached findings sufficient to decide the case. The court found no principled basis for requiring determination of an investment-treaty breach issue merely because it might affect costs. The tribunal had addressed the issue and had dismissed the claims in their entirety.

5. The proposed challenge would also expose Pakistan to further unrecoverable costs beyond mere delay. The cited arbitration decisions did not establish a general rule that failure to prove causation after establishing an investment-treaty breach requires no order as to costs.

6. Considering the factors cumulatively, it would not be unfair to refuse the extension. The set-aside application and security-for-costs application therefore did not arise for determination.

First-instance decision. The judgment records applications concerning an earlier enforcement order made by Males J, but determines only the extension application.