Payward, Inc & Ors v Maxim Chechetkin

Recognition or enforcement of a New York Convention award may be refused where enforcement would contravene UK public policy protecting consumers. The court must independently consider the fairness of a consumer contract term under the Consumer Rights Act 2015, even if an arbitral tribunal has upheld the term. A choice of foreign law cannot remove statutory consumer protection where the contract has a close connection with the UK. An overseas arbitration clause may be unfair where it prevents effective consideration of UK consumer and financial-services legislation, particularly where the foreign tribunal is unsuited to applying that law. An enforcing court is not bound by an arbitral tribunal’s jurisdictional conclusions when applying section 103 of the Arbitration Act 1996.

The claimants sought recognition and enforcement under section 101 of the Arbitration Act 1996 of a JAMS arbitration award made in California. The award required the defendant, a UK-resident consumer, to arbitrate disputes in California and restrained him from pursuing related English proceedings concerning alleged breaches of the Financial Services and Markets Act 2000.

The defendant relied principally on the public-policy exception in section 103(3) of the Arbitration Act 1996, invoking the Consumer Rights Act 2015 and the Financial Services and Markets Act 2000. The central issues were whether he was a consumer, whether the arbitration clause was unfair, whether the award could prevent determination of his statutory claims, and whether the court was bound by the arbitrator’s conclusions.

1. Consumer status. The defendant was a consumer under section 2(3) of the Consumer Rights Act 2015. He contracted as a full-time lawyer, had no relevant cryptocurrency business or professional activity, and had no material cryptocurrency experience when the contract was made. The scale, frequency and sophistication of later trading did not alter that conclusion.
2. Independent review under section 103. The court was not bound by the arbitrator’s conclusions on jurisdiction or enforceability. Dallah Co v Ministry of Religious Affairs of Pakistan [2011] 1 AC 763 established that a tribunal’s decision on its own jurisdiction does not bind a court in a non-supervisory country asked to enforce the award. The arbitrator had not decided the English statutory issues; she had simply declined to apply English law.
3. Consumer legislation and public policy. Sections 71, 74 and 62 of the Consumer Rights Act 2015 express UK public policy. Section 71 required the court to consider the fairness of the arbitration term. Section 74 applied the Act despite the choice of California law because the contract had a close connection with the UK. Section 62 required assessment of whether the clause caused a significant imbalance contrary to good faith.
4. Applying the objective fairness assessment, arbitration in California under the JAMS Rules imposed significant disadvantages. It deprived the defendant of the protection of the supervisory framework of the Arbitration Act 1996, required costly US representation, and placed English consumer and financial-services issues before an arbitrator without relevant English-law expertise. The clause was therefore unfair.
5. Financial-services public policy. The alleged statutory claim had at least a prima facie basis. Enforcement would prevent its determination and would frustrate the public-policy objectives underlying sections 19, 23 and 26 of the Financial Services and Markets Act 2000, including regulation, criminal enforcement and the unenforceability of agreements made in breach of the general prohibition.
6. The fallback arguments failed. The issues were capable of arbitration in principle, and the injunction against pursuing the English proceedings had been submitted to arbitration. Nevertheless, enforcement of the award would be contrary to UK public policy under section 103(3). The award was not recognised or enforced, and the arbitration claim failed.