BPY v MXV

An application under Arbitration Act 1996, s 68, requires proof of a serious irregularity and substantial injustice. The threshold is deliberately high, reflecting the policy of finality in arbitration. A tribunal’s failure to put every factual allegation expressly to a witness will not necessarily breach its duty of fairness. The relevant question is whether the parties and witnesses had a fair opportunity, viewed in the proceedings as a whole, to address the case. In arbitration, the tribunal generally has procedural discretion, subject to fairness. An alleged error of law is ordinarily a matter for an appeal under s 69, not a serious irregularity under s 68. A preliminary award deciding limitation issues on the assumption that contracts were valid does not necessarily determine their validity or enforceability on the merits.

BPY applied under s 68 of the Arbitration Act 1996 to challenge a merits award and a costs award made in a consolidated London-seated LCIA arbitration. The arbitration concerned whether three sale and purchase agreements created enforceable payment obligations or were sham transactions.

BPY alleged that the arbitrator had decided the case on an unpleaded dishonesty case, failed to conduct the proceedings fairly, appeared biased, revisited matters determined in a preliminary limitation award, and failed to deal with the alleged unlawful obtaining and use of documents.

The issues were whether any alleged irregularity fell within s 68 and, if so, whether it caused substantial injustice.

1. The applications were dismissed. BPY had not established any serious irregularity, individually or cumulatively, under s 68 of the Arbitration Act 1996.
2. The governing approach, summarised in Reliance Industries Ltd v The Union of India [2018] EWHC 822 (Comm), required proof of breach of the tribunal’s duty, serious irregularity and substantial injustice. The threshold was high because the statutory scheme prioritised finality. The applicant did not need to prove that the result would probably have been different, but had to show that the tribunal might well have reached a significantly different outcome.
3. The arbitrator’s central issue was whether the agreements created payment obligations. That issue had been extensively investigated through documentary evidence, witness evidence and cross-examination. The additional question of the purpose for which the agreements were made was not the essential issue. The arbitrator was therefore entitled to make findings about dishonesty and later use of the documents without having every aspect put in precisely the form advanced by BPY.
4. The principle in Browne v Dunn [1894] 6 R 67 is founded on fairness, but is not inflexible. Edwards Lifesciences LLC v Boston Scientific Scimed Inc [2018] EWCA Civ 673 showed that the question is whether the witness and parties had a fair opportunity to respond, having regard to the proceedings as a whole. In arbitration, the tribunal may adopt procedures without oral cross-examination on every point, subject to s 33. P v D [2019] EWHC 1277 was distinguishable because there had been no cross-examination on the core issue in circumstances where the tribunal had indicated that such questioning was appropriate.
5. The preliminary limitation award determined only that the relevant documents and payments were related to the agreements. It proceeded on the assumption that the agreements were valid and binding and expressly reserved their validity and enforceability. It therefore did not prevent the arbitrator from deciding on the merits that the agreements were shams.
6. No issue concerning the alleged unlawful obtaining or deployment of the documents had been put to the arbitrator. BPY had not objected in the arbitration and had lost any right to object under s 73. Nor had it shown that the documents were unlawfully obtained under Ukrainian law or that their admission caused substantial injustice.