LMH v EGK

A challenge to an arbitral award under Arbitration Act 1996, s.68 requires both a specified serious irregularity and substantial injustice. The provision is concerned with due process, not correction of errors of fact, law or reasoning. A tribunal has dealt with an issue if it has addressed it, even inadequately. It may assess damages using its own calculations where the relevant building blocks and criticisms were in play, provided it does not decide on a wholly new basis without a fair opportunity to respond. A computational error may require recourse under the applicable correction mechanism before a s.68 challenge. An ordinary non-computational error is not, by itself, a serious irregularity.

LMH applied under s.68 of the Arbitration Act 1996 to set aside an ICC award arising from a dispute concerning the expiry and possible renewal of a long-term telecommunications services agreement. The tribunal rejected EGK’s case that the agreement had not expired, but found that LMH had breached an obligation to negotiate renewal in good faith and awarded EGK €10,270,400, including lost profits.

LMH advanced five grounds, alleging failures to address causation, give reasons, deal fairly with evidence and submissions, apply the agreed measure of loss, and give a further opportunity to comment on the tribunal’s discounted cash-flow calculation. The central issue was whether any alleged defect fell within the closed categories of serious irregularity and caused substantial injustice.

1. All five challenges dismissed. Section 68 establishes a closed list of serious irregularities and a high threshold. The applicant must show both an irregularity within the statutory categories and substantial injustice.
2. The tribunal dealt with causation and gave reasons. It was sufficient that it addressed the issue, whether well, badly or indifferently. The tribunal’s findings that good-faith negotiations would probably have produced agreement on a six-year term and a 50:50 revenue share addressed counterfactual causation.
3. A tribunal need not refer in its reasons to every item of evidence. Evaluation of evidence and the correctness of factual or legal conclusions are generally matters for the tribunal, not a s.68 review. There is no absolute requirement to challenge every aspect of a witness’s evidence in cross-examination, particularly where the issue concerns a hypothetical counterfactual rather than historical fact.
4. The tribunal was entitled to fashion its own damages calculation from matters in play and from the evidential building blocks supplied by the parties. LMH’s criticisms of the quantum evidence made adjustments foreseeable. The tribunal’s use of a discounted-cash-flow methodology, adjustments for duration, market share and revenue share, and a broad 20% reduction did not involve a procedural unfairness.
5. The apparent error in the point at which the revenue-share adjustment was made might arguably be a computational error. If so, the available correction procedure under Article 36 of the ICC Rules and s.57 of the Arbitration Act 1996 had first to be exhausted, creating a bar under s.70(2)(b). If it was merely an error in reasoning, it did not ordinarily fall within s.68. The challenge therefore failed in either event.

First-instance decision. The judgment does not state any prior appellate decision in the same proceedings.