RQP v ZYX

An interlocutory comment or procedural ruling by an arbitrator is not necessarily an award. The court determines that question substantively, having regard to finality, the nature of the issue, the tribunal’s description, formality, reasoning, applicable formal requirements, the reasonable recipient’s view and the surrounding context.

Under Arbitration Act 1996, s. 42, the court generally supports the arbitral process and does not rehear or review the tribunal’s decision to make a peremptory order. A pending jurisdictional challenge does not automatically prevent enforcement. Its apparent strength, the nature of the order and the stage of the arbitration are relevant. A cross-claim under a separate contract is not a transaction set-off merely because it is relied on as a defence, and cannot be brought into the arbitration absent jurisdiction under the arbitration clause.

The judgment concerned three applications arising from an LCIA arbitration between RQP and ZYX concerning royalties and other rights under a licence agreement. RQP applied under s. 67 of the Arbitration Act 1996, alleging that the arbitrator had made awards on jurisdiction during a mid-stream case management conference and in a subsequent email.

ZYX applied under s. 42 to enforce a peremptory order requiring RQP to provide security for a possible award. RQP opposed enforcement, arguing that the arbitration agreement had been terminated by ZYX’s alleged repudiatory breach and that the arbitrator therefore no longer constituted “the tribunal” for s. 42 purposes. RQP also sought to set aside an order permitting alternative service and imposing a compressed timetable.

1. RQP’s s. 67 application dismissed. The arbitrator’s oral preliminary comments at the MSCMC were not an award. They were informal, brief, unsigned, unwritten, did not state the seat or date, and were not communicated through the LCIA. The subsequent email was likewise not an award and did not comply with the applicable formal requirements. The arbitrator expressly reserved the substantive trade mark jurisdiction issue for determination with the merits. His view that the Request for Arbitration was wide enough to encompass certain claims was procedural and did not render him functus officio.
2. In relation to the counterclaim based on the Second Consultancy Agreement, the court proceeded on the parties’ agreed assumption that the arbitrator’s decision could be treated as an award. The cross-claim was not an equitable or transaction set-off. It lacked the necessary close connection with the claim and arose under a separate agreement, involving different contracting parties and its own jurisdiction provision. It was not manifestly unjust for RQP to pursue it in the English courts. Even if it had been a transaction set-off, the arbitration clause did not extend to a claim arising from a contract with a third party and brought only through an assignment.
3. Order under s. 42 made. The requirements in s. 42(3) and (4) were satisfied. The court’s discretion should generally be exercised to support the arbitral process, without reviewing whether the tribunal ought to have made the peremptory order. A jurisdictional challenge does not itself prevent an order under s. 42. Relevant considerations included the arguable, but unresolved, strength of the alleged termination; the fact that the order required security which could ultimately be returned; and the advanced stage of the arbitration.
4. The order was to carry a penal notice. No other effective sanction was apparent, and contempt proceedings are the usual means of enforcing an order under s. 42. RQP’s application to set aside Foxton J’s orders was dismissed because the alleged shortcomings in the time estimate and disclosure had no material adverse consequence and would not have altered the orders.