Republic of Kazakhstan v World Wide Minerals Ltd & Anor

A tribunal breaches its duty of procedural fairness where it assesses damages on a basis that was not advanced and was not fairly in issue, without giving the parties an opportunity to address it. Under Arbitration Act 1996, s 68, the applicant must establish serious irregularity and substantial injustice. The threshold is high, but it does not reduce the tribunal’s obligation to warn the parties when it identifies a point outside the case presented. Substantial injustice is established where the applicant shows that, if given the opportunity, the tribunal might well have reached a significantly different outcome. In such circumstances, the ordinary remedy is remission of the affected issues to the tribunal.

The Republic of Kazakhstan challenged an arbitral award under Arbitration Act 1996, s 68. The arbitration concerned claims by World Wide Minerals Ltd and Paul A Carroll QC under a bilateral investment treaty and related agreements.

The tribunal rejected the principal expropriation case but found breaches concerning an export licence and notice of bankruptcy proceedings. It awarded approximately US$13.7 million by reference to sunk costs, although the defendants had advanced a global damages case based on the assumption that all alleged breaches would be established. The central issues were whether the tribunal had decided damages on a point which Kazakhstan had not had a fair opportunity to address, whether that caused substantial injustice, and whether the award should be set aside or remitted.

1. Challenge allowed. The tribunal had breached its duty under Arbitration Act 1996, s 33, and the breach constituted a serious irregularity under s 68(2)(a).
2. The governing principles, summarised in Terna Bahrain Holding Company WLL v Al Shamsi [2012] EWHC 3283 (Comm), require proof of breach of s 33, serious irregularity and substantial injustice. The statutory threshold is deliberately high, but a tribunal must warn the parties and invite submissions where it decides the case on a point which has not been raised and is not fairly in issue. The distinction is between having no fair opportunity and failing to use an opportunity that existed.
3. The requirement that a point be “in play” or that its essential building blocks be in the arena, explained in Reliance Industries Ltd & Anor v The Union of India [2018] EWHC 822, did not assist the defendants. Damages caused by particular breaches were not in play. The defendants had advanced a global, all-or-nothing claim and had not claimed sunk costs as loss caused by the individual breaches found proved.
4. The tribunal therefore should either have dismissed the damages claim on the basis advanced by Kazakhstan or issued an interim award and invited further evidence and submissions on causation and quantum. Its unilateral assessment of sunk costs deprived Kazakhstan of a fair opportunity to address matters including the effect of the findings that the defendants had no rights to the Southern Mines and that Kazakhstan was entitled to terminate the Management Agreement.
5. Substantial injustice was established. Had Kazakhstan been given the opportunity to address causation and loss, the tribunal might well have reached a different conclusion and produced a significantly different outcome. The court did not need to decide that the result probably would have been different.
6. Consistently with Obrascon Huarte Lain SA v Qatar Foundation for Education, Science and Community Development [2019] EWHC 2539, s 68 is not a route for correcting ordinary errors of law or fact. The challenge concerned procedural unfairness.
7. The relevant paragraphs concerning quantification of loss were set aside. Under the default approach referred to in The Secretary of State for the Home Department v Raytheon Systems Limited [2015] 1 Lloyd’s Rep. 493, all issues concerning causation and quantification of loss were remitted to the tribunal.

First-instance decision. The judgment records no appeal from an earlier court decision. It concerned a challenge to an arbitral award under Arbitration Act 1996, s 68.