The Republic of Kazakhstan v World Wide Minerals Ltd & Ors

Under section 68(2)(d) of the Arbitration Act 1996, an arbitral tribunal fails to deal with an issue where that issue is essential to the result and the award does not determine it, viewed fairly and commercially in the context of the proceedings.

The distinction between an issue and an argument preserves a high threshold, but a complete defence to the claim is plainly an issue. A tribunal need not address every argument or give detailed reasons, and may dispose of an issue through a logically anterior determination. It must, however, address every essential issue arising from the route it has chosen to decide the dispute. Failure to address a central issue may itself establish substantial injustice, particularly where the outcome might have been different.

Kazakhstan applied under section 68(2)(d) of the Arbitration Act 1996 to challenge an UNCITRAL award concerning causation and loss in an investor-State arbitration. The award attributed approximately US$13.7 million of sunk costs to Kazakhstan’s breach concerning an export licence.

A previous challenge under section 68(2)(a) had succeeded before HHJ Pelling QC. The Court had set aside parts of the earlier award and remitted all issues concerning causation and quantification of loss. On remission, Kazakhstan advanced a counterfactual case that the investment would have failed and the Management Agreement would have been terminated even without the export-licence breach.

The central question was whether the Tribunal had dealt with that counterfactual case and, if not, whether the omission caused substantial injustice.

1. Challenge allowed. The Tribunal failed to deal with Kazakhstan’s counterfactual case and thereby committed a serious irregularity under section 68(2)(d) of the Arbitration Act 1996.

2. The three questions were whether the counterfactual case was an “issue”, whether it was “put to” the Tribunal, and whether the Tribunal failed to “deal with” it. The parties accepted that the counterfactual case was an issue, that it had been put to the Tribunal at length, and that it was central to Kazakhstan’s defence. If established, it would have provided a complete answer to WWM’s claim for loss.

3. Whether an award deals with an essential issue requires a fair, commercial and commonsense reading of the award as a whole, in the factual context of the pleadings, evidence and submissions. A tribunal need not address every argument or explain every step. It may deal with an issue by deciding a logically anterior point. But where the issue arises from the route adopted by the tribunal, section 68(2)(d) is engaged unless the issue is determined.

4. The Tribunal’s paragraph 268 recognised that a respondent could use a counterfactual analysis to rebut a claimant’s case on injury or causation and stated that the disputed issues would be decided on the evidence and arguments presented. That route required consideration of the counterfactual case. Paragraph 293 did not do so. Its references to the investment’s existing risk of failure and to “others” did not determine whether the Management Agreement would have been terminated in any event. Nor did later references to the evidence or to a “decisive factor” cure the omission.

5. The omission was not an ambiguity capable of correction by an interpretation under Article 35 of the 1976 UNCITRAL Rules. Interpretation is not a mechanism for revisiting an issue that the tribunal should have decided but did not. Kazakhstan therefore had not failed to exhaust an available arbitral process under section 70(2) of the Arbitration Act 1996.

6. Substantial injustice was established. Had Kazakhstan’s counterfactual case succeeded, WWM might have suffered no loss. The failure to determine a central issue was inherently likely to cause substantial injustice. The challenge was upheld. Consequential relief was reserved.

1. High Court (Commercial Court): The earlier 2019 award was challenged under section 68(2)(a) and parts concerning causation, loss and costs were set aside and remitted in The Republic of Kazakhstan v World Wide Minerals Limited [2020] EWHC 3068 (Comm); [2021] 1 Lloyd’s Rep 593.
2. High Court (Commercial Court): The present section 68(2)(d) challenge to the remitted award succeeded. The question of consequential relief was reserved.