Mordchai Ganz v Petronz FZE & Anor

A challenge under section 67 of the Arbitration Act 1996 proceeds as a full rehearing of substantive jurisdiction. The court determines jurisdiction for itself and is neither bound nor restricted by the tribunal’s reasoning or conclusion.

Whether an agreement, including an arbitration agreement, was authentic and legally binding is assessed objectively by reference to words and conduct. The party asserting the agreement bears the persuasive burden of proving it on the balance of probabilities. Extrinsic evidence, including subsequent conduct and contemporaneous documents, may show that an apparently valid document created no contract.

Separability does not save an arbitration clause where the evidence shows that the arbitration agreement itself was not authentically concluded.

The claimant challenged an LCIA tribunal’s final award on substantive jurisdiction under sections 67 and 68 of the Arbitration Act 1996. The tribunal had concluded that a purported share purchase agreement was not an authentic and concluded agreement binding on the parties, that its arbitration clause was invalid, and that it lacked substantive jurisdiction apart from costs.

The claimant’s case was later limited to contending that the arbitration agreement remained valid and binding between himself and the second defendant, Abraham Goren. He alleged that the tribunal had acted unfairly by failing to permit or require handwriting expert evidence concerning a signature attributed to the proposed corporate purchaser.

The central issues were whether the SPA and arbitration agreement had been objectively concluded, whether separability produced a different result for the arbitration clause, and whether the tribunal’s procedure caused serious irregularity and substantial injustice.

1. Delay and procedure. The application to dismiss the claim summarily was refused. The Commercial Court Guide procedure was intended for an early paper-stage disposal and was inappropriate after the hearing had been reached and evidence had been adduced. Delay, absent abuse of process, did not determine the section 67 or section 68 challenges.
2. Section 67. Applying Dallah Real Estate and Tourism Holding Company v The Ministry of Religious Affairs, Government of Pakistan [2010] UKSC 46, the court conducted a full rehearing and determined jurisdiction for itself. The tribunal’s view had no legal or evidential value on the jurisdictional question, although its reasoning could provide useful assistance.
3. The applicable test for authenticity and contractual formation was objective, following RTS Flexible Systems Ltd v Molkerei Alois Muller [2010] UKSC 14. The question was what had been communicated by words or conduct and whether that objectively established an intention to create legal relations and agreement on the essential terms. The claimant bore the burden of proving an authentic and legally binding SPA and arbitration agreement on the balance of probabilities.
4. The court considered the SPA, signatures, surrounding correspondence, alleged payments, the Falcon transaction, banking correspondence and the absence of later references to the SPA. Taken together, the evidence did not establish an authentic and binding agreement with Petronz. The payments were loan repayments rather than advances under the SPA. The evidence concerning the purported Petronz signature was speculative and the contemporaneous documentation was inconsistent with the alleged SPA.
5. Section 7 of the Arbitration Act 1996, as explained in Premium Nafta Products Ltd v Fili Shipping Company [2007] UKHL 40, required the arbitration agreement to be treated as separate from the main contract. It did not, however, establish the existence of an arbitration agreement where the evidence showed that the arbitration agreement itself had not been authentically concluded.
6. The section 68 challenge failed. The tribunal had not refused the requested handwriting evidence on the basis alleged. The claimant had an opportunity to pursue disclosure and expert evidence in subsequent directions and could not establish procedural unfairness. The issue of substantial injustice therefore did not arise.
7. The arbitration agreement was not valid and binding between the claimant and Mr Goren, and the tribunal had no substantive jurisdiction over them. The section 67 and section 68 challenges were dismissed.

This was a first-instance application challenging an arbitral award. The judgment describes the LCIA arbitration and the tribunal’s award but records no prior court judgment or appeal.