This review covers, without seeking to be exhaustive, the court decisions and developments in the field of arbitration in 2023 which caught the authors’ attention. It covers the main cases and trends in England and Wales, as well as in other key common law arbitration seat jurisdictions including Hong Kong SAR and Singapore.

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Introduction

Commencing arbitration and arbitrability

    Notice of arbitration

    Failure to appoint an arbitrator

    Which law applies to an arbitration agreement?

    Which law applies to determine validity of an arbitration agreement?

    Binding effect of alternative dispute resolution mechanism clause

    Who decides – the tribunal or the court?

       Tiered arbitration clauses

       Who are the parties?

    Scope of arbitration clauses

       Liability versus quantum in insurance cases

       Winding-up proceedings

       Replacement contracts

    Are damages available for a breach of obligation to arbitrate by a non-party?

    Lifting a stay

    Submission to jurisdiction of court by taking a “step in the proceedings”

Arbitrators and procedure

    Procedure

    Arbitrator immunity

    Confidentiality of arbitral deliberations

    Confidentiality orders

Appealing awards

    Counting time to appeal

       When was the award made?

       Time extensions

    Is permission to appeal needed?

    Challenging the award: substantive jurisdiction (section 67)

       Jurisdiction or merits

       Jurisdiction – whether there is a binding arbitration agreement

    Challenging the award: serious irregularity (section 68)

    Failure by the tribunal to comply with section 33 (general duty of tribunal) (section 68(2)(a))

       Non-disclosure by an arbitrator

       Failure by the tribunal to deal with all the issues put to it

    Various section 68 grounds

       Decision not based on arguments

       Fraud and public policy

    Appeal on point of law (section 69)

       New points of law

       Hong Kong appeals

    Effect of remission of an award to a tribunal

    Loss of right to object (section 73)

    Security

Court assistance and intervention

    Anti-suit injunctions

       Arbitrations with a foreign seat

       The Hong Kong approach

    Restraining foreign challenges to awards

    Intervention in third-party proceedings

    Section 44 of the Arbitration Act 1996

    Sovereign immunity – appointment of a receiver

    2019 Mainland-Hong Kong Interim Measures Arrangement

Enforcement of awards

    Effect of Consumer Rights Act 2015

    Enforcement in Hong Kong

    Recognition and enforcement of ICSID awards in the UK post-Achmea

Law reform: reviewing the Arbitration Act 1996

    Governing law of the arbitration agreement

    Challenging the award based on the lack of substantive jurisdiction

    Summary disposal

    Court power in support of arbitral proceedings

    Arbitrator’s duty of disclosure

Updates to other arbitration laws

Updates to arbitration rules

    Singapore International Arbitration Centre (SIAC)

    Hong Kong International Arbitration Centre (HKIAC)

Developments in relation to how arbitrations can be funded

    England and Wales: PACCAR

    Hong Kong: BB v KO

Trends in 2023, and what 2024 might hold in store for arbitration

Introduction

Commencing arbitration and arbitrability

Notice of arbitration

In G v P 1 the Hong Kong Court of First Instance allowed the respondent borrower to set aside an enforcement order of an arbitral award by the Hong Kong Arbitration Society under sections 86(1)(c)(i) and (ii) of the Arbitration Ordinance (Cap 609), on the ground that the respondent was not given proper notice of the appointment of the arbitrator or of the arbitral proceedings and was unable to present its arguments. According to the award the applicant moneylender served its notice of arbitration on xyz@chinat.hk instead of xyz@china.hk (per the relevant agreement) and the claimant did not adduce other evidence “as to how, or when, Notice of Arbitration was served on the Respondent”.

The court warned:2

This case thus illustrates the importance of correctly complying with notification requirements and process as well as ensuring that serious typos in an award are immediately corrected.

Failure to appoint an arbitrator

In Global Aerospares Ltd v Airest AS 3 the applicant applied to the court under section 18 of the 1996 Act for the appointment of an arbitrator on the ground that, it claimed, the agreed appointment process had failed. The court refused the application, holding that failing to serve a request for arbitration under section 14(4) of the 1996 Act4 (the court held the applicant had disregarded the agreed method of service of notices, including the notice of arbitration5), with the consequence that the process for the appointment of an arbitrator had not validly begun, was not considered a failure of procedure for the appointment of an arbitrator. Therefore section 18 was not engaged and the claim was dismissed. Section 18 must be read together with various default provisions within the Arbitration Act 1996 relating to the commencement of arbitration and appointment of a tribunal (eg sections 14 to 16).

Which law applies to an arbitration agreement?

The landmark English Supreme Court decision in Enka Insaat ve Sanayi AS v OOO “Insurance Company Chubb” 6 considered which law governs an arbitration agreement. Pending reform of the English Arbitration Act 1996 which we discuss below, Enka is authority that:

In China Railway (Hong Kong) Holdings Ltd v Chung Kin Holdings Co Ltd 8 the Hong Kong High Court applied the principles in Enka to determine the governing law of the jurisdiction clause. The plaintiff commenced court proceedings in the Hong Kong courts to recover monies under a loan whereupon the defendant sought a stay claiming that the parties were bound by a jurisdiction clause in a subsequent debt repayment agreement (with disputes to be resolved in Wuhan before an arbitration committee or the local courts). Applying Enka, summarised above and specifically limb (1) thereof, the court held that Hong Kong law was the governing law and duly applied Hong Kong law to determine whether the jurisdiction clause in the subsequent agreement was exclusive in nature (and thus whether proceedings should be stayed).

The court held that it was non-exclusive (because it was permissive rather than mandatory and asymmetric) as a result of which the defendant had the burden of showing that it was more appropriate for the dispute to proceed in the foreign forum (with the non-exclusive jurisdiction clause simply one factor to be placed into the discretionary mix9), a burden which the defendant failed to discharge. Therefore, the application for a stay of the Hong Kong court proceedings was dismissed.

Which law applies to determine validity of an arbitration agreement?

In Mittal v Westbridge Ventures II Investment Holdings 10 the Singapore Court of Appeal considered the decision of the High Court of Singapore11 on whether the validity of an arbitration clause on the grounds of arbitrability was to be determined by the law of the seat or the law applicable to the arbitration clause. Here the question was relevant because the law of the seat, Singapore, recognised the issue at stake (minority shareholder oppression) as being arbitrable whereas the law applicable to the arbitration clause, India, regarded the issue as non-arbitrable.

Mittal had filed a petition before the National Company Law Tribunal in Mumbai, India, to injunct Westbridge from interfering in the management of the company on the grounds of corporate oppression. Westbridge in turn applied to the Singapore High Court for a permanent anti-suit injunction.

The Court of Appeal rejected the High Court's reasoning, although it reached the same ultimate conclusion on the facts of the case and upheld the injunction. It found the law of the arbitration agreement to be Singapore law (by applying the three-stage test in BCY v BCZ 12) and that the dispute was therefore arbitrable.

Section 11(1) of the Singapore International Arbitration Act 1994 provides that any dispute which parties have agreed to submit to arbitration under an arbitration agreement may be determined by arbitration “unless it is contrary to public policy to do so”. In in its reasoning, which considered section 11, the Court of Appeal departed from the approach adopted by other jurisdictions13 and found that “In both cases, it would be contrary to public policy to permit such an arbitration to take place”14 having applied a new two-tiered “composite approach”15 to determine the arbitrability of a dispute at the pre-award stage. The Court of Appeal was of the view that:

Thus, the law of the seat alone would normally be applicable at the post-award stage in deciding whether the matters contained in the arbitration award were arbitrable or not.

Binding effect of alternative dispute resolution mechanism clause

In Kajima Construction Europe (UK) Ltd v Children's Ark Partnership Ltd 17 the English Court of Appeal considered whether an alternative dispute resolution process was binding in respect of a construction dispute. Although the parties had settled the dispute before judgment was given, the Court of Appeal proceeded to judgment given the arguments by the parties and the importance of the issue.

The respondent was tasked by an NHS Trust to construct and maintain a hospital. The respondent subcontracted the first appellant to carry out the building works, with the second appellant guaranteeing performance. The contract mandated a 12-year limit for claims post-completion and included a dispute resolution procedure requiring disputes to be submitted to a liaison committee before proceeding to court.

The respondent commenced court proceedings to protect time (the limitation period) to recover deductions which the NHS had made and then applied to stay proceedings as per the dispute resolution procedure. The appellants in turn applied to strike out the claim and argued that the respondent's failure to comply with the dispute resolution procedure deprived it of a limitation defence.

The judge at first instance held that the dispute resolution procedure gave rise to an unfulfilled condition precedent and considered it unenforceable for vagueness. Even if enforceable, the judge would only grant a stay of proceedings under CPR 11(1)(b).18

The Court of Appeal dismissed the appeal, having found that the first instance judge19 was correct to conclude that a dispute resolution process was unenforceable for uncertainty (as to how and when the process was complete) and that – even if it had been enforceable – the proper exercise of discretion under CPR 11(1)(b) would have been to stay the claim rather than strike it out. Popplewell LJ also confirmed that a stay is not the “default remedy” in cases such as this – rather, whether a stay should be granted depends upon the particular features of the case. Where a party has commenced proceedings in breach of contract, and a stay rather than strike out would deprive the other party of a limitation defence, both factors would be important considerations in favour of striking out rather than staying the claim. In this case, there were no grounds for interfering with the judge's exercise of discretion.

Who decides – the tribunal or the court?

Tiered arbitration clauses

In C v D 20 the dispute resolution clause in a contract, between the appellant (a Hong Kong company) and the respondent (a Thai company) regarding the operation of a jointly owned broadcasting satellite, required parties to attempt to resolve the dispute through “good faith negotiations” before referring it to arbitration if the dispute could not be resolved after 60 days. The Hong Kong Court of Final Appeal confirmed21 that arbitrators, not the courts, have the final say on whether a party has complied with tiered arbitration clauses.22 This is because the issue relates to admissibility of claims and not the jurisdiction of the arbitral tribunal to determine them.

It followed that the appellant could not rely on article 34(2)(a)(iii)23 of the UNCITRAL Model Law to bring proceedings in the court to set aside the arbitral award. The court also awarded costs on an indemnity basis. Since Hong Kong adopts the UNCITRAL Model Law, this case may be followed in other UNCITRAL Model Law jurisdictions.

Who are the parties?

By contrast, in R v A and Others 24 the Hong Kong Court of First Instance set aside an HKIAC award under section 34 of the Arbitration Ordinance (Cap 609) (which allows the court to review the tribunal's ruling on its own jurisdiction if the tribunal decides that it has jurisdiction). The case is authority that the identity of the proper parties to an arbitration agreement is a question of jurisdiction and within the court's powers to review.

Scope of arbitration clauses

Liability versus quantum in insurance cases

DC Bars Ltd and Another v QIC Europe Ltd 25 concerned an insurance dispute. For a long time it has been common for arbitration clauses in insurance policies to distinguish quantum disputes (to be arbitrated confidentially) and liability disputes (to go to court). The distinction may seem hair-splitting because most insurance coverage disputes revolve around whether and how much an insurer must pay. In DC Bars v QIC Sir Nigel Teare decided that quantum disputes are concerned purely with calculation of sums owing on the basis that there is liability. This ensures that substantive issues are resolved in public whereas only the maths is decided behind closed doors.

As regards the facts of the case, the claimants commenced proceedings pursuant to an insurance policy providing business interruption cover. QIC in turn sought a stay under section 9 of the Arbitration Act 1996 which Sir Nigel Teare refused. His starting point, based on the decision of Mance J in Insurance Corporation of the Channel Islands Ltd v McHugh,26 was that a claim under an insurance policy was one against the insurers for breach of contract for failing to hold the assured harmless. Applying that principle, the court found that the real difference between the parties was one as to whether QIC was liable for the claimed business interruption losses on the second, third and fourth occasions (a claim in respect of the first occasion had been accepted by the insurer). That was not a difference as to the amounts to be paid; instead it was a dispute as to liability.

Winding-up proceedings

Winding up is a collective remedy for the benefit of all creditors, and absent special circumstances,27 it is the end of a company. When wound up, or liquidated, professional insolvency practitioners (usually specialist accountants) will take control of the company, collect in its assets, and pursue claims, as appropriate, on the company's behalf.

Ultimately, the liquidators, after deducting costs and certain statutory preferential payments, will distribute the company's assets pari passu (proportionately) among creditors according to their claims. Because of the severity of winding up, often the threat of insolvency proceedings (ie the sending of a statutory demand) can bring a recalcitrant debtor to the negotiating table quickly and cheaply.28

In Shandong Chenming Paper Holdings Ltd v Arjowiggins HKK 2 Ltd 29 the Hong Kong Court of Final Appeal recognised this very phenomenon in the context of winding up a foreign company in Hong Kong. For the court to exercise its discretionary jurisdiction the petitioner must inter alia demonstrate a reasonable possibility of benefit to itself from the winding up. The most common and obvious benefit is that the foreign company has assets within Hong Kong that the liquidator can recover. However, Shandong Chenming went further than this, deciding that commercial pressure engendered by commencing winding-up proceedings was a sufficient benefit on its own.

Contested winding up and arbitration

Generallly speaking, the most common ground to petition to wind up a debtor is to show that a statutory demand for a liquidated sum has been duly served on it, and has not been paid within the statutory time limit. However the court will not exercise its winding-up jurisdiction if the relevant debt is disputed in good faith on substantive grounds.30

Traditionally, the onus is on the debtor, and the court will consider the debtor's arguments and decide the matter in a similar manner to an application for summary judgment. If there is a viable dispute, and genuine uncertainty or nuance to the dealings, the court will not proceed to wind up the company. Instead, the creditor will need to commence proceedings in the usual way and come back and petition based on its judgment or award. However if the dispute raised clearly lacks substance, then the court will proceed to wind up the debtor. In practice, a debtor may well raise every conceivable argument in order to avoid being wound up, but the court will distinguish between genuine defences and those simply designed to obfuscate matters.

Traditionally, the above approach would apply whether or not the parties had agreed to submit their disputes to arbitration. However, common law jurisdictions in recent years have grappled with the question of whether the court should conduct this exercise and delve into the merits of a dispute when the parties have agreed to arbitration.

New approach – deference to arbitration – onus on creditor

In Salford Estates (No 2) Ltd v Altomart 31 the English Court of Appeal held that that if the debt in question was subject to an arbitration agreement and was disputed (or even “not admitted”) then, save for in “wholly exceptional circumstances” any winding-up petition should be stayed. The court expressed concern that to hold otherwise would encourage parties to an arbitration agreement, as a “standard tactic”, to bypass the arbitration agreement (and intention of the Arbitration Act 1996) by presenting a winding-up petition to apply pressure on the alleged debtor.

Broadly the new approach could be preferred because:

On the other hand, proponents of the traditional approach would argue that:

The new approach has not been adopted wholesale across the main common law jurisdictions, with certain preferring to maintain the traditional approach. There are also some nuances as to the exact test to be applied, (and Singapore in particular takes a position closer to the “middle”32) but broadly the case law falls into the below categories:

Traditional approach

Hong Kong (no Court of Appeal cases yet)

But Ka Chon v Interactive Brokers LLC [2019] HKCA 873

Dayang (HK) Marine Shipping Co Ltd v Asia Master Logistics Ltd[2020] HKCFI 311

Re NT Pharma International Co Ltd[2023] HKCFI 1623

Re Simplicity and Vogue Retailing (HK) Co Ltd [2023] HKCFI 1443

Cayman Islands

Re BPGIC Holdings Ltd 20 November 2023, unreported

British Virgin Islands

Jinpeng Group Ltd v Peak Hotels and Resorts Ltd BVIHCMAP2014/0025 and BVIHCMAP2015/0003, 8 December 2015, unreported

Sian Participation Corporation v Halimeda International Ltd BVIHCMAP2021/0017, 24 April 2023, unreported

New approach

England and Wales

Eco Measure Market Exchange Ltd v Quantum Climate Services Ltd [2015] EWHC 1797 (Ch); [2015] BCC 877

Salford Estates (No 2) Ltd v Altomart Ltd [2014] EWCA Civ 1575

Telnic Ltd v Knipp Medien und Kommunikation GmbH [2020] EWHC 2075 (Ch)

Hong Kong (no Court of Appeal cases yet)

Lasmos Ltd v Southwest Pacific Bauxite (HK) Ltd [2018] HKCFI 246

Re Shandong Chenming Paper Holdings Ltd [2023] HKCFI 2065

Sit Kwong Lam v Petrolimex Singapore Pte Ltd [2019] HKCU 4156

Singapore Court of Appeal

AnAn Group (Singapore) Pte Ltd v VTB Bank (Public Joint Stock Company) [2020] SGCA 33; [2021] LMCLQ 6

BWG v BWF (SGCA) [2020] SGCA 36

Here we focus below on the main cases handed down in 2023, but discuss prior jurisprudence where it is helpful for context.

Hong Kong

In Hong Kong the debate between approaches began in 2018 with the judgment of Harris J in Lasmos Ltd v Southwest Pacific Bauxite (HK) Ltd.33 Considering Salford Estates (No 2) Ltd v Altomart Ltd,34 Harris J also deviated from the traditional approach, holding that the court should generally dismiss a winding-up petition if: (1) the debtor disputes the debt relied on; (2) the contract under which the debt is alleged to arise contains an arbitration clause that covers any dispute relating to the debt; and (3) the debtor takes the steps required under the applicable dispute resolution clauses to commence the arbitration proceedings and files an affirmation demonstrating this. From a creditor's perspective the third condition tempers the potentially harsh effects of the new approach, since the debtor must take positive steps demonstrative of an intention to dispute the debt: simply asserting that intention to the court will not suffice.

Although it was influential, Lasmos was a first instance decision only and, as the above table (which is not exhaustive) shows, was not wholeheartedly adopted or approved.

Recently in Re Guy Lam 35 the Court of Final Appeal held that in the ordinary case of an exclusive jurisdiction clause (ie not an arbitration clause) – absent countervailing factors such as the risk of insolvency affecting third parties, or a dispute that borders on the frivolous or abuse of process – the petitioner and debtor ought to be held to the terms of their contract: ie, the petition should be dismissed.36

Since Guy Lam was decided, there have been conflicting cases involving arbitration clauses decided by different High Court judges: Re Shandong Chenming Paper Holdings Ltd 37 per Harris J; Re NT Pharma International Co Ltd 38 per Linda Chan J; and Re Inversion Productions Ltd 39 per DHCJ Le Pichon.

Re Simplicity & Vogue Retailing (HK) Co Ltd related to a guaranteed unpaid sum under bond instruments and Re NT Pharma related to an undisputed unpaid sum under a supply agreement. There was also a cross-claim but the agreements on which the petition debts were based contained arbitration clauses. In both cases Linda Chan J made winding-up orders. She held: “The ratio in Guy Lam only applies to [an exclusive jurisdiction clause], not [an] arbitration clause”.

Conversely, in Re Shandong Chenming Paper Holdings Ltd, where a petition was presented on the ground of insolvency based on non-payment of an arbitration award, but the company issued a cross-claim through a second arbitration that related to the same agreement (in essence arguing that it had a cross-claim based on arbitration agreement in excess of the petition debt), Harris J stated that the Court of Appeal and Court of Final Appeal in Re Guy Lam “were of the view that the same principles and approach applied to both an [exclusive jurisdiction clause] and an arbitration clause”,40 that this principle applied also to cross-claims and declined to follow Re Simplicity & Vogue Retailing (HK) Co Ltd, and he stayed the proceedings to freeze the date of the petition.

Finally, in Re Inversion Productions Ltd a petition was based on an unpaid debt of approximately US$24 million arising out of a loan agreement which contained an arbitration agreement. DHCJ Le Pichon considered Re Simplicity and Re Shandong but did not make a ruling on which decision was correct. Instead, the court held that taking either approach, the debtor company failed to show a proper basis for staying/dismissing the petition and ordered the company to be wound up.

Leave to appeal to the Court of Appeal was granted in Re Simplicity and Re Shandong. Hopefully, 2024 will bring clarification of the law.

Cayman Islands

On 20 September 2023 the Privy Council, on appeal from the Court of Appeal from the Cayman Islands, gave judgment in FamilyMart China Holdings Co Ltd v Ting Chuan (Cayman Islands) Holdings Corporation.41 FamilyMart concerned the question whether matters potentially falling within the court's jurisdiction to wind up a company on a just and equitable basis (as opposed to on the basis of insolvency) were arbitral. Taking a self-described pro-arbitration approach, the Privy Council ruled that, although the relief ultimately sought by the party seeking to wind up the company were not arbitral, the underlying factual and legal matters that lay at the heart of the dispute were arbitral such that court proceedings should be stayed in favour of arbitration.

Although FamilyMart was expressed to (and has been widely accepted to) confirm the Cayman Islands as a pro-arbitration jurisdiction, the Grand Court of the Cayman Island's decision in Re BPGIC Holdings Ltd,42 which was handed down two months after the decision in FamilyMart, has added some further nuance to the discussion. Unlike in FamilyMart, the question as to whether the traditional approach or the new approach should be followed in the Cayman Islands was squarely in issue. The case before the Grand Court in BPGIC concerned the question whether a winding-up petition (which was made on the basis of insolvency rather than on just and equitable grounds as was the case in FamilyMart) should be stayed or dismissed pending the resolution of a disputed debt by way of arbitration.

The Grand Court, agreeing with the petitioner, held that the approach of the Cayman Court is “to determine the threshold question of whether the dispute is genuine and substantial before dismissing a petition in favour of arbitration”, such approach being consistent with the legislative policy of the Cayman Islands’ Foreign Arbitral Awards Enforcement Act (“FAAEA”). The Chief Justice distinguished her decision from English decisions that prohibit an examination of the merits of the dispute said to be referable to arbitration on the basis that the relevant provision of the FAAEA, unlike its English equivalent, contained additional wording that permitted the court to determine whether there was in fact a genuine and substantial dispute before determining whether the matter ought to be referred to arbitration.

In making her decision, the Chief Justice expressly acknowledged that her approach “may be inconsistent with the internationalism endorsed by the Privy Council in FamilyMart” but seemingly endorsed the traditional approach in stating that: “it is consistent with the law with respect to stays in favour of foreign arbitration and with the long-standing approach of the courts on applications to stay or dismiss petitions on the ground that the debt is disputed”.

British Virgin Islands

The leading decision in the BVI is the Eastern Caribbean Supreme Court of Appeal's decision in Jinpeng Group Ltd v Peak Hotels and Resorts Ltd.43 In this judgment the Court of Appeal firmly rejected the approach taken in cases such as Salford Estates, reasoning that the “statutory jurisdiction to wind up a company based on its inability to pay its debts as they fall due unless the debt is disputed on genuine and substantial grounds” is “too firmly a part of BVI law”.

More recently, in an application for leave to the Privy Council, the Court of Appeal was invited to reconsider its decision in Jinpeng Group in the case of Sian Participation Corporation v Halimeda International Ltd.44 On 24 April 2023 the Court of Appeal refused leave to appeal to the Privy Council on the basis that the question as to whether Jinpeng Group was correctly decided did not amount to a matter of greater general and public importance. However, on 30 October 2023, the Privy Council granted leave to appeal and it is scheduled to hear a substantive appeal of the matter in March 2024. In hearing the appeal the Privy Council will be called upon to determine whether the law in the BVI should take the traditional approach per Jinpeng Group or whether the new approach should be taken following Salford Estates.

Replacement contracts

In Briggs Marine Contractors Ltd v Bakkafrost Scotland Ltd,45 a decision of Lord Braid in the Outer House of the Court of Session, the question was whether an arbitration clause in a written contract (for “no cure no pay” recovery of a sunken barge) continued to apply to a dispute under an alleged oral replacement contract (which Briggs alleged was entered into because the original contract was frustrated) so as to justify a stay of proceedings brought on the replacement contract. Although the case was heard in Scotland, the relevant contracts were governed by English law. Lord Reid held that the matters in dispute arose out of (or were in connection with) the original contract. The dispute was stayed in favour of arbitration.

Are damages available for a breach of obligation to arbitrate by a non-party?

On 6 October 2023 Butcher J in the High Court handed down two judgments relating to pollution damage and very significant clean-up costs following the grounding and sinking of M/T Prestige off Spain and France in 2002: The London Steam-Ship Owners’ Mutual Insurance Association Ltd v The Kingdom of Spain (The Prestige) 46 and The French State v The London Steam-Ship Owners’ Mutual Insurance Association Ltd.47

While there have been many judgments in the Prestige saga, these two decisions flow from the Spanish Supreme Court's 2016 judgment, under a direct rights statute, that the vessel's master (ie the captain), owners P&I Club (ie the insurer) were liable for up to US$1 billion. The Club issued two ad hoc arbitration proceedings in 2019 (against France and Spain) in both cases seeking: a declaration that each state was in breach of its obligation to arbitrate; equitable compensation and contractual damages; and an injunction to restrain each state from breaching its obligation to arbitrate with damages in lieu.

In the arbitration against France, Dame Gloster granted an anti-enforcement injunction to prevent France from enforcing the Spanish judgment outside of Spain, having concluded that section 48(5) of the Arbitration Act 1996 gave her the power to do so even in the absence of any institutional rules granting such a power. However, France argued that Dame Gloster, as arbitrator, had no such power on the basis that section 48(5) granted the tribunal the same powers as a court, and the court had no power to grant an injunction against a state, absent the state's consent, by reason of section 13 of the State Immunity Act 1978.

On appeal under section 69 of the Arbitration Act 1996 Butcher J agreed. The judge also concluded, in relation to the Spain case (where Sir Peter Gross sat as arbitrator), that the arbitrator had no power to grant damages in lieu of an injunction under section 50 of the Senior Courts Act 1981 (the successor to the Lord Cairns’ Act48). Butcher J also had to consider a separate appeal by the Club against the registration of a €855 million judgment of the Spanish Supreme Court under the Brussels I Regulation, Council Regulation (EC) No 44/2001.49

What is important, for the purpose of this article is that Butcher J, nonetheless, confirmed awards of compensation granted by both arbitrators for contravention by the states of an equitable obligation to arbitrate (in an equal and opposite sum to the amount of the foreign judgment, effectively neutralising the judgment). In the longer Spain decision Butcher J cited various authorities,50 and then held:51

Given the amounts at stake, and fact that this is one of the first cases in which monetary remedies for breach of an equitable obligation were awarded, appeals are likely.

Lifting a stay

In ZS Capital Fund SPC and Others v Astor Asset Management 3 Ltd and Another,52 a Jamaica-seated arbitral tribunal had ruled that the relief sought by the lender could only be granted by the Hong Kong courts. Consequently, the borrower applied to lift a stay of proceedings which the lender had obtained earlier from the Hong Kong court and the court duly allowed the application so that the borrower could proceed with its Hong Kong litigation, holding:53

“I agree . . . that the arbitration agreement is spent. The Tribunal has already ruled on all of the parties’ disputes, and issued the two Awards. The Tribunal ruled that insofar as the parties seek to pursue their arguments relating to the MLO [the Hong Kong Money Lenders Ordinance (Cap 163)], these should be resolved by the Hong Kong court. There is nothing further for the Tribunal to address in the arbitration proceedings. The basis for a stay accordingly has gone.”

Submission to jurisdiction of court by taking a “step in the proceedings”

In the matter of Beltran and Another v Terraform Labs Pte Ltd and Others 54 the General Division of the High Court of the Republic of Singapore dismissed an appeal against a decision denying a stay in favour of arbitration on the basis that the first defendant had taken “steps in the proceedings” for the purposes of section 6(1) of the International Arbitration Act 1994 (2020 Rev Ed) in the context of the Rules of Court 2021.

The first defendant (Terraform) had applied for a stay on the basis that there was an arbitration agreement between it and the claimants (who purchased algorithmic stable cryptocurrency tokens issued by Terraform), while the other defendants applied for a stay on case management grounds. The court held that:55

Arbitrators and procedure

Procedure

In Sky Power Construction Engineering Ltd v Iraero Airlines JSC,56 the Hong Kong High Court refused an extension of time for an application to set aside enforcement of an LCIA award in Hong Kong on the ground that the arbitral tribunal held a virtual hearing in violation of the parties’ arbitration agreement and the tribunal's own procedural orders. It also awarded indemnity costs. The issue before the court was whether a “fully virtual” hearing during the Covid-19 pandemic, objected to by one of the parties, prevented it from presenting its case adequately and violated its due process rights.

The court held that it is not within the ambit of its case management powers to interfere with a tribunal's direction for a virtual hearing where it is empowered to conduct proceedings in such a manner.

Arbitrator immunity

On 31 July 2023 the Hong Kong Court of First Instance issued judgment in Song Lihua v Lee Chee Hon (a case we discuss later in this Review).57 Mimmie Chan J held that arbitrators are entitled to arbitral immunity absent fraud or bad faith. In other words, arbitrators are generally immune from suit and cannot be compelled to testify as witnesses in relation to their arbitral functions.

The plaintiff had been granted leave to enforce an arbitral award issued by the Chengdu Arbitration Commission in Mainland China. The defendant applied to set aside the enforcement order on various grounds, including that it had been unable to present its case in the arbitration. To support these allegations the defendant inter alia asked the High Court to issue a letter of request to the Mainland Chinese judicial authorities to obtain statements from the arbitrator and the tribunal secretary – which was refused.

The court's decision affirms the protection afforded to arbitrators under Hong Kong law to maintain their independence and confer them with immunity similar to that enjoyed by judges. Costs were ordered against the defendant.

Confidentiality of arbitral deliberations

In CZT v CZU 58 the Singapore International Commercial Court declined to grant three summons applications for orders that the three members of an arbitration tribunal produce records of their deliberations.

This case confirms that arbitrators’ deliberations are usually protected from disclosure, and provided guidance as to when an exception to this protection might be found, namely when: “the facts and circumstances are such that the interests of justice in ordering the production of records of deliberations outweigh the policy reasons for protecting the confidentiality of deliberations”. The court further stated that it would “take a very compelling case to overcome these policy reasons” which would “only . . . be found in the very rarest of cases”.59

Confidentiality orders

In The Republic of India v Deutsche Telekom AG 60 the Singapore Court of Appeal refused an application for various confidentiality and sealing orders that would have directed certain Singapore proceedings be heard in private, related information and documents be concealed, files be sealed, and information relating to party identification be redacted.

In reaching this decision, the Court of Appeal noted that information relating to the arbitration was already in the public domain to such an extent that confidentiality had been “substantially lost”.

Appealing awards

Counting time to appeal

When was the award made?

An appeal under section 69 of the Arbitration Act 1996 can only be made in respect of “an award”, a term which is not defined (although section 52 sets out formal requirements). Thus, the question whether an order or direction from a tribunal is an “award” for the purposes of the 1996 Act comes up often, including before Butcher J in The French State v The London Steam-Ship Owners’ Mutual Insurance Association Ltd 61 when he had to decide whether or not France required a time extension. Butcher J summarised the case law and concluded that he was in: “no doubt that the First Partial Award was an ‘award’ for the purposes of section 69 AA 1996”.62 He reasoned that:

20. That the First Partial Award did not have a ‘dispositive section’ which set out the relief to be granted does not, in my judgment, mean that it was not an award. . . .

21. Nor, in my view, can it be said that the First Partial Award was uncertain. . . .

22. . . . If, as is assumed for the purposes of this argument, the First Partial Award was an award, and was not appealed, then that award was final and binding, and gave rise to an issue estoppel between the parties, as set out above. On that basis, the issues decided in the First Partial Award could not be contested on an appeal in relation to the Second Partial Award.”

Time extensions

Having considered all the circumstances of the case, and in particular the factors identified in AOOT Kalmneft v Glencore International AG 63 and further elaborated in Terna Bahrain Holding Company WLL v Al Shamsi,64 Butcher J in The French State v The London Steam-Ship Owners’ Mutual Insurance Association Ltd 65 (discussed above) granted an extension of time for the French State to bring its section 69 application in respect of two of its four grounds for leave to appeal on a question of law (as being points of general public importance where the arbitrator's conclusion is at least open to serious doubt).

In Lord and Others v Kinsella and Others 66 the question before Miles J was also whether time to appeal should be extended. As in the case discussed above, this required determining the date on which the award was made and also the strength of the claimants’ allegations of serious irregularity and error of law. He also applied Terna Bahrain and AOOT Kalmneft, commenting:67

Is permission to appeal needed?

The appeal in National Iranian Oil Co v Crescent Petroleum Co International Ltd and Another 68 related to when there can be an appeal without the permission of the trial judge. The Court of Appeal dismissed National Iranian Oil Co's appeal in respect of the summary dismissal by Butcher J69 of its section 67 jurisdictional challenge to an arbitral award awarding Crescent Petroleum billions of US dollars in damages.

Butcher J had granted National Iranian Oil Co permission to appeal against the summary dismissal of its section 67 claim; however, Crescent Petroleum did not seek permission to appeal against his determination of the preliminary issue concerning section 73 – thus the first question was whether the Court of Appeal had jurisdiction to grant that permission, and the answer was no.

Challenging the award: substantive jurisdiction (section 67)

Jurisdiction or merits

In Port de Djibouti SA v DP World Djibouti FZCO 70 Henshaw J considered a jurisdictional challenge brought by Port de Djibouti under section 67 of the Arbitration Act 1996, in respect of certain determinations made by Professor Dr Maxi Scherer in a final partial LCIA award. The Port alleged that the tribunal did not have jurisdiction over claims arising after it ceased to be a shareholder. DP World resisted the challenge arguing it fell outside the scope of section 67, because it did not concern an issue going to the arbitrator's “substantive jurisdiction” (as defined in the Act); rather the challenge related to the relief that the arbitrator awarded in respect of DP World's claims. In other words, the question boiled down to whether the arbitrator's determinations were on jurisdiction or on the merits of the claim.

The court concluded “that the arbitrator had jurisdiction over all the matters she determined, and that the claim must therefore be dismissed”,71 having also decided in the alternative that it did not in any event agree that the Port had ceased to be a shareholder. Obiter the court also found72 that the Port had “in any event, lost the right to object to the arbitrator's jurisdiction in respect of the whole of the Share Transfer Claim, including the question of whether PDSA remained a Shareholder after the Presidential Ordinance” under section 73 of the 1996 Act.

Jurisdiction – whether there is a binding arbitration agreement

Emirates Shipping Line DMCEST v Gold Star Line Ltd 73 relates to a memorandum of understanding creating a liner consortium with vessel-providing partners including slot purchases among the consortium members. A typhoon resulted in claims in respect of cargo loaded by Emirates Shipping Line on Gold Star's vessel. The dispute that followed was one concerning the question of who should handle the cargo claims; and additionally what information was required to defend the claim and prove indemnification: the bills of lading issued by Gold Star Lines; or the memorandum of understanding which contained an arbitration clause?

Emirates sought an indemnity for cargo claims from Gold Star in arbitration, and Gold Star in turn denied that Emirates was a party to the arbitration clause in the memorandum of understanding. The tribunal agreed that it had no jurisdiction over the dispute on the basis that Emirates had not established that it was a party to the memorandum of understanding. Emirates appealed, asserting an express agreement or an agreement implied by conduct, or that Gold Star was estopped from denying that there was an agreement. The court upheld the tribunal's conclusion that it had no jurisdiction.

Challenging the award: serious irregularity (section 68)

In LMH v EGK 74 Foxton J considered a series of five serious irregularity challenges to an ICC arbitration award under section 68 of the Arbitration Act 1996 by far the most significant of which related to errors in computation.75 The court confirmed that the list of serious irregularities in section 68 is “a closed list” and that there is no remedy under section 68 for an error in analysis. The court was practical in its analysis:

Foxton J held that section 33 does not require the tribunal to give parties an opportunity to make submissions on the tribunal's methodology or calculation – it suffices that the issues relied on by the tribunal are “in play” or “in the arena” (the origin of which test we discuss further below).

The court considered what the position would be if the error were computational only. It noted that under article 36 of the ICC Rules or, by way of default, section 57 of the Arbitration Act 1996, computational errors can be corrected. However, it also found77 that:

Failure by the tribunal to comply with section 33 (general duty of tribunal) (section 68(2)(a))

Non-disclosure by an arbitrator

In Africa Sourcing Cameroun Ltd v LMBS Société par Actions Simplifiée 78 Sir Ross Cranston, sitting as a High Court judge, considered whether the chairman of a Board of Appeal owed a duty to disclose that he may have acquired knowledge of a dispute in a way that influenced a decision by the Board not to extend a limitation period to which the claimants were subject.

The judgment makes it clear that apparent bias will not necessarily be found where the arbitration takes place in the context of a trade association where the pool of arbitrators is relatively limited. The claimants had appealed against the award under section 68(2)(a) of the Arbitration Act 1996, namely that the Board of Appeal had failed to act fairly and impartially as between the parties. The claimants also sought the removal of an arbitrator under section 24 of the 1996 Act.

Failure by the tribunal to deal with all the issues put to it

In Cipla Ltd v Salix Pharmaceuticals Inc,79 in which Cipla claimed royalties based on a patent licence in respect of a compound allegedly used by Salix in a drug, Cipla asserted that the tribunal (Lord Neuberger) had excluded new evidence at a late stage on the wrongful ground that the issue between the parties was not live. Dame Clare Moulder dismissed Cipla's challenge under section 68(2)(a) of the 1996 Act, holding that the reason the evidence was excluded was because it had been introduced too late (Lord Neuberger had not ruled on which issues were live).

The judgment contains helpful observations on allegations that evidence has been overlooked by the tribunal – there is a fine line between a ruling on admissibility of evidence and a ruling on the issues in dispute. In such cases it may be helpful to seek clarification from the tribunal.

Various section 68 grounds

In BPY v MXV 80 the applicant raised procedural objections to an LCIA award, and related costs award. The award had concluded that there had been dishonesty in the making of three purchase and sale agreements (that they were sham transactions). The applicant's allegations were raised under section 68(2)(a) (that the case had not been properly put to the witnesses accused of the sham; and that there was a real possibility of arbitrator bias); section 68(2)(b) (the findings were inconsistent with a preliminary issue award; being functus officio); and section 68(2)(d) and (g) (there was a failure to deal with the issue of some of the evidence allegedly having been illegally obtained as a matter of foreign law).

Butcher J dismissed BPY's application. Neither considered individually nor together did the objections demonstrate serious irregularity for the purpose of section 68.

Decision not based on arguments

In Sui Northern Gas Pipelines Ltd v National Power Parks Management Co (Pvt) Ltd 81 it was contended, invoking sections 68(2)(a), (b) and (d) but primarily under (a), that the identical tribunals in two related LCIA references had reached a decision on the basis of a case that neither party had put forward. Bright J found no substance in the argument. To reach that conclusion he had summarised and applied the case law and the relevance, in the context of section 33, of a point being “in play” or “in the arena” (per Popplewell J in Reliance Industries Ltd v The Union of India 82 as approved by the Privy Council in RAV Bahamas Ltd v Therapy Beach Club Inc (Bahamas) 83).

In Palmat NV v Bluequest Resources AG 84 the English Commercial Court set aside part of an LCIA award under section 68 of the 1996 Act. The part of the award which was set aside was the award of interest to Bluequest on its arbitration and legal costs, despite Bluequest not having claimed interest on these sums. (The court dismissed all Palmat's other challenges under section 68.) The court found:85

The moral of the story is that parties must plead or claim any desired interest so that interest is “in play” in the arbitration, giving the opposing party an opportunity to be heard on the point.

Fraud and public policy

In Federal Republic of Nigeria v Process & Industrial Developments Ltd 86 there was an appeal by Nigeria under section 68(2)(b) of the 1996 Act, the allegation being that awards against Nigeria had been obtained by means of fraud or in a manner contrary to public policy. Much of the lengthy judgment is concerned with the court's assessment of the evidence of dishonesty, but there are important points of principle contained in it. In earlier proceedings between the parties87 Sir Ross Cranston, sitting as a judge of the High Court, had granted Nigeria an extension of the 28-day period for an appeal based on its allegations of fraud. The question in the present case was whether fraud had actually been established.

The court agreed with the statement of Sir Ross Cranston in Africa Sourcing Cameroun Ltd v LMBS Société par Actions Simplifiée 88 that “there will be no substantial injustice if it can be shown that the outcome of the arbitration would have been the same regardless of the irregularity”. That was easily proved: it was obvious to the court that:

That aside, retention of Nigeria's documents by P&ID meant that “Nigeria's right to confidential access to legal advice was utterly compromised throughout all or most of the Arbitration. It was effectively denied an important part of the process of arbitration”.90

Knowles J's remarks highlight the shocking extent to which some individuals will go for financial gain, even if it means engaging in corrupt practices that cause harm to others. It was found that P&ID had obtained the awards through severe abuses of the arbitral process, which included paying bribes and lying about it in the arbitration evidence. Not only that, but P&ID continued to pay bribes during the arbitration and obtained access to privileged documents, which allowed them to track Nigeria's internal considerations of merits, strategy, and settlement.91

The ruling in Federal Republic of Nigeria is significant as it highlights the dangers of corruption and the importance of upholding public policy. It reinforces the importance of transparency and fairness in arbitration proceedings and the need to hold those who abuse the system accountable.

Appeal on point of law (section 69)

In Pan Ocean Co Ltd v Daelim Corporation 92 the claimant charterers entered into a time charterparty early in 2017 for the carriage of urea in bulk. By clause 45 all disputes were to be resolved by arbitration in London under LMAA Terms. The charterers applied for permission to appeal against an award for error of law under section 69 of the Arbitration Act 1996, arguing that the tribunal had applied the wrong test for the implication of a term, and that the only term that should have been implied was a duty to exercise reasonable diligence to cooperate with a re-inspection of the cargo holds. Had that test been applied to the facts as found by the tribunal, there was no delay for which the charterers were responsible.

Andrew Baker J granted permission to appeal on one point of law, namely:

Sir Ross Cranston remitted the award to the tribunal for reconsideration. The threshold point to be determined was whether the appeal was barred by section 70(2) of the 1996 Act (ie failure to exhaust any other available recourse, discussed above) due to section 57 and/or article 27 of the LMAA Terms.

Sir Ross Cranston agreed with Andrew Baker J that neither provision applied. He accepted that the terms used were wide and, as regards the LMAA, there was a clear intention that wherever possible issues arising out of an award should be dealt with by the tribunal. That was also the statutory intention, as set out in Torch Offshore LLC v Cable Shipping Inc,93 Sinclair v Woods of Winchester Ltd 94 and Bulk Ship Union SA v Clipper Bulk Shipping Ltd (The Pearl C).95 However that did not extend to overturning a decision that the tribunal intended to reach. Here, the tribunal's findings on the implied term were considered and deliberate. Section 57 could not be used to enable a tribunal to change its mind on any matter decided in an award: see Al Hadha Trading Co v Tradigrain SA 96 and Torch Offshore.

Another procedural question was discussed, although it did not arise on the facts given agreement on the threshold question, namely whether Sir Ross Cranston was free to take a different view from that of Andrew Baker J in granting permission to appeal: did a ruling in the grant of permission to appeal that there was no statutory bar under section 70(2) have a preclusionary effect in the hearing of the appeal itself? It was said by Cockerill J in CVLC Three Carrier Corporation v Arab Maritime Petroleum Transport Co (The Anbar and The Hillah),97 applying Agile Holdings Corporation v Essar Shipping Ltd (The Maria),98 that:

Sir Ross Cranston held that this principle had been laid down in relation to the qualifying requirements in section 69 and did not apply to issues arising under section 70(2). The court cited Bunge SA v Kyla Shipping Co Ltd (The Kyla) 100 as authority for the proposition that section 70(2) was a free-standing hurdle applicable to all appeals and applications for permission to appeal, and thus was open to reassessment in a section 69 case.

Finally, the court had to apply the implied term to the facts of the case. What was required was for the charterers to have exercised reasonable diligence in having the vessel re-inspected without undue delay. The parties agreed that the tribunal had erred in law in deciding that the vessel was immediately back on hire on 19 February 2017, given clause 69 of the charterparty provided that hire recommenced at the point of successful re-inspection. The appropriate remedy was to remit the award under section 69(7) of the 1996 Act. It was for the tribunal to decide what could and should have been done by the parties regarding re-inspection, whether either party was in breach in this regard, the relevant timescale for re-inspection and the financial consequences of any breach.

New points of law

In Mitsui & Co (USA) Inc v Asia-Potash International Investment (Guangzhou) Co Ltd 101 Picken J considered an unusual application in an appeal for error of law under section 69 of the 1996 Act (there had also been an application under section 68 but this was dropped before the hearing).

The dispute arose out of a contract for the sale of soybeans. The damage occurred because the vessel carrying the soybeans (which had been nominated by the defendant) broke free from its moorings, and damaged the port's ship-loaders. At issue was whether the damage/indemnity claimed was too remote – and whether the tribunal applied the correct legal test of remoteness.

Picken J allowed the appeal and remitted the award to the tribunal for it to apply the correct legal basis of remoteness (which he described in his judgment). However, Picken J held that the court had no jurisdiction to allow the respondent to re-amend its notice to add an issue that had not been raised in the original arbitration for remission to the tribunal.

Hong Kong appeals

In an unusual case decided in the last days of 2023, the Hong Kong Court of First Instance in G v N 102 suspended set-aside proceedings in respect of two HKIAC partial awards on liability and quantum, and remitted the matter to the arbitrator on grounds of public policy. The context was that, just days before the award on liability was issued, Hong Kong law on illegality changed significantly in that the Hong Kong Court of Appeal in Monat Investment Ltd v All Person(s) in Occupation of Part of the Remaining Portion of Lot No 591 in Mui Wo D.D. 4 No 16 Ma Po Tsuen, Mui Wo, Lantau Island and Another 103 followed the UK Supreme Court decision in Patel v Mirza.104

Mimmie Chan J cited the Privy Council decision in Betamax Ltd v State Trading Corporation (Mauritius) 105 as authority that question of public policy is for determination by the courts on the basis that:

Conversely, in AI and Others v LG II and Another 107 the Hong Kong High Court confirmed that a high threshold must be met before an arbitral award may be set aside in Hong Kong. The plaintiff had commenced CIETAC arbitration seated in Hong Kong, claiming that agreements for the sale and purchase of investments in trade finance funds were void for illegality, common mistake and misrepresentation. However, after the CIETAC tribunal found for the defendant, the plaintiff applied to set aside the award on the basis that the tribunal provided insufficient or inadequate reasoning for its findings, misapplied the law and violated its due process rights.

The court dismissed the plaintiff's application and ordered indemnity costs. The court made it clear that an arbitral tribunal is not obliged to elaborate on its reasoning for each and every argument raised by the parties so long as the “essential building blocks” of the tribunal's reasoning are made out, and the plaintiff is afforded a reasonable opportunity to present its case. The case underlines that Hong Kong courts are not permitted to review the merits of an award, as this would undermine the arbitral process.

Effect of remission of an award to a tribunal

In G v X and Others 108 the Hong Kong Court of First Instance upheld enforcement of a CIETAC award following the re-arbitration by a new tribunal of a limited evidential issue which did not affect the result.

In reaching this decision, Mimmie Chan J relied on Carter v Harold Simpson Associates (Architects) Ltd 109 as authority that an “award itself remains valid and binding despite having been remitted to the arbitrator” and “continues to operate so as to make the arbitrator functus officio, unable to alter his award, on those matters which were not remitted”.

She also quoted110 Lord Sumption in Sans Souci Ltd v VRL Services Ltd,111 saying:

Loss of right to object (section 73)

“If a party to arbitral proceedings takes part, or continues to take part, in the proceedings without making, either forthwith or within such time as is allowed by the arbitration agreement or the tribunal or by any provision of this Part,112 any objection–

(a) that the tribunal lacks substantive jurisdiction,

(b) that the proceedings have been improperly conducted,

(c) that there has been a failure to comply with the arbitration agreement or with any provision of this Part, or

(d) that there has been any other irregularity affecting the tribunal or the proceedings,

he may not raise that objection later, before the tribunal or the court, unless he shows that, at the time he took part or continued to take part in the proceedings, he did not know and could not with reasonable diligence have discovered the grounds for the objection.”

In other words, this section removes – by waiver – the right of a party to appeal against an award on the grounds of serious irregularity if that party was or should have been aware of the problem but continued the arbitration proceedings without raising that objection. Section 73 was discussed tangentially, as we have discussed above, in Port de Djibouti SA v DP World Djibouti FZCO.113

Radisson Hotels APS Danmark v Hayat Otel Işletmeciliği Turizm Yatirim ve Ticaret Anonim Şirketi114 raised important questions on the proper interpretation of section 73(1) in circumstances where the right to object to a partial award did not become known until later in an arbitration. Radisson sought to challenge a partial award (relating to a hotel mismanagement claim brought by Hayat) based on ex parte communications with an arbitrator. The problem was that Radisson continued to take part in the proceedings for a period of two weeks after becoming aware of improper conduct by one of the arbitrators. Radisson lost its right to challenge as a result of the delay. This case serves as a warning to parties facing similar circumstances that they must promptly challenge the effectiveness of the proceedings as soon as they become aware of the serious irregularity.

Security

In Czech Republic v Diag Human SE and Another 115 Bright J discussed the circumstances in which a party appealing against an arbitration award is required (under section 70(6) and (7) of the 1996 Act) to respectively provide security for costs and for the amount of the award itself. He dismissed the application for security and refused permission to appeal.

Bright J accepted, in regard to section 70(6) “that it is relevant not only to consider what assets the claimant has, but also whether they are readily available”.116 Section 70(7) reads: “The court may order that any money payable under the award shall be brought into court or otherwise secured pending the determination of the application or appeal, and may direct that the application or appeal be dismissed if the order is not complied with”. Bright J summarised the relevant test in respect of section 70(7) as follows:117

The judge found himself unable “to form any real view as to the substance or flimsiness of the claimant's case”.118

Having been refused permission to appeal from Bright J, the respondents sought permission to appeal from the Court of Appeal, arguing that Bright J erred in his approach to the power to order security contained in section 70(7). In late 2023 Males LJ found119 that, unlike the court of first instance, the Court of Appeal did not have jurisdiction to grant leave to appeal from a decision under section 70(7). This was because he found that: “Section 70 is ancillary or supplementary to an application under sections 67, 68 or 69, and has no application independent of those sections”.120 However Males LJ also added a lengthy obiter section which he prefaced with:

Court assistance and intervention

Anti-suit injunctions

Arbitrations with a foreign seat

The cases arose out of the same events – payments in respect of an engineering, construction and procurement (EPC) contract with Linde for an LNG plant in Russia complicated by sanctions – although two different claimants and banks were involved (Deutsche Bank, UniCredit and Commerzbank – who had issued English law on-demand bonds and guarantees). In all cases, despite arbitration agreements providing for Paris-seated ICC arbitration, RusChem commenced proceedings in Russia. The cases were: SQD v QYP,122 a decision of Bright J dated 21 August 2023, and the appeal against the decision of Bright J: Deutsche Bank AG v RusChemAlliance LLC;123 Commerzbank AG v RusChemAlliance LLC,124 a decision of Bryan J dated 31 August 2023; and UniCredit v RusChemAlliance 125 (a case formerly known as G v R).

In SQD v QYP Bright J considered whether the English courts should exercise their power to grant anti-suit relief in favour of an arbitration agreement with Paris as the seat. He concluded that relief should be refused even though the arbitration agreement was governed by English law. While he accepted that had it been an English-seated arbitration, he would likely grant an anti-suit injunction, he was unsure if it was appropriate to grant an injunction here given the Paris seat. Based on limited French law evidence, Bright J thought there was a risk that a French court would not enforce an English interim anti-suit injunction.

On appeal, although it agreed English law applied, the Court of Appeal126 took the opposite view (with a leading judgment given by Nugee LJ) on the basis of more detailed French law evidence. The Court of Appeal applied Spiliada Maritime Corporation v Cansulex Ltd (The Spiliada) 127 and held that because an anti-suit injunction was not available in France, the English court could grant one. The evidence before the Court of Appeal was that although a French court did not have the ability to grant an anti-suit injunction, it would recognise the grant of an anti-suit injunction by another court. There was therefore no perceived conflict. The Court of Appeal granted an anti-suit injunction as well as an anti-enforcement injunction.

In the Commerzbank case, a different High Court (Bryan J) granted the requested anti-suit injunction distinguishing Bright J's decision on the basis that he had more French law evidence before him, on the basis of which evidence he concluded that there was no clash or conflict with the law of the seat that could justify refusing the injunction. Bryan J went on to opine128 that the seat of arbitration is of “very limited relevance” in the granting of an anti-suit injunction under section 37 of the Senior Courts Act.

On the other hand, in the UniCredit cases, Knowles J granted an interim anti-suit injunction a couple of days after Bright J's decision referred to above.129 While he considered the approach of French courts with respect to anti-suit injunctions as a “factor in the exercise” of its discretion, he found that it could not “deprive the court of all jurisdiction”. However, a couple of months later a different judge, Teare J, refused a final anti-suit injunction on the basis that he found he did not have jurisdiction. Teare J adopted a different approach – he held that the French substantive rules on international arbitration governed the dispute – not English law – and applying The Spiliada he found that the English courts did not have jurisdiction. He also considered that the availability of anti-suit injunctions in English courts, but not in French courts, was not a sufficient reason to intervene. Unsurprisingly, given the inconsistency of his approach with the two others, this decision is being appealed.

The Hong Kong approach

In a related case, Linde GmbH and Another v RusChemAlliance LLC,130 the Hong Kong High Court issued an anti-suit injunction aimed at staying Russian court proceedings in favour of HKIAC arbitration. While the contract contained an HKIAC arbitration clause, the defendant obtained a freezing injunction from a Russian court over the plaintiff's assets in Russia. The plaintiff in turn obtained an anti-suit injunction from the Hong Kong High Court to restrain the defendant's breach of the HKIAC arbitration agreement which the defendant sought to discharge, arguing that they would not receive a fair trial in an HKIAC arbitration, and that the HKIAC award would be unenforceable outside of Russia as a result of EU sanctions.

The court dismissed the application and stated that the defendant's arguments were “grossly exaggerated, if not totally based on false premises”.131 Hong Kong generally only adopts UN sanctions and EU sanctions have no legal effect in Hong Kong. The court found there was no reason why the defendant would face any challenges in gaining access to justice and a fair trial through arbitrating in the jurisdiction. The court also did not consider that the sanctions would have any negative impact on the ability of the parties to enforce the award, as the plaintiff was part of a global group with assets outside of the European Union.

In an unrelated case, Eton Properties v Xiamen Xinjingdi Group,132 Mimmie Chan J, granted an anti-arbitration injunction, restraining a new Mainland PRC-seated CIETAC arbitration that sought to revisit issues falling outside the scope of the arbitration agreement. The specific matters injuncted had already been determined by a Hong Kong court, such that the CIETAC arbitration on those issues would amount to a “collateral attack”133 on the Hong Kong ruling. However, the injunction was more limited in scope than demanded by the applicants.

Restraining foreign challenges to awards

In Nigerian Agip Exploration Ltd v GEC Petroleum Development Co Ltd 134 Andrew Baker J confirmed that it was appropriate for the English curial court to grant an anti-suit injunction to restrain renewed proceedings in Nigeria (there had been several previous injunctions), to challenge the validity of a London-seated ICC final award (the tribunal dismissed the claimant's primary claim but awarded damages for breach of contract). Baker J also awarded indemnity costs:

Intervention in third-party proceedings

In LLC Eurochem North-West-2 v Tecnimont SpA and Another 136 there were two main questions for the Court of Appeal: did the terms of an anti-suit injunction preclude Tecnimont from intervening in third-party proceedings indirectly relevant to the arbitration; and was there a breach of the arbitration clause itself by such intervention? The Court of Appeal decided yes; although Nugee LJ dissented.

The case concerned the asset-freezing sanctions regime and banks’ refusal to pay bonds as a result. Tecnimont referred to and relied on a decree of the Italian Treasury Ministry of Economy and Finance dated 27 September 2022 whereby the Italian authorities concluded that EuroChem Agro was ultimately owned or controlled by Mrs Melnichenkom (a “Designated Person” under the sanctions regime) through EuroChem AG and others, as a result of which EuroChem Agro was subject to an asset freeze.

On 9 August 2022 Eurochem obtained an anti-suit injunction premised on a concern that its opponents would commence proceedings abroad (in breach of contract) in order to restrain payment of bonds. On 28 October 2022 EuroChem Agro commenced Italian proceedings seeking, among other things, annulment of the decree. The issue giving rise to the decision arose on 14 February 2023 when Tecnimont applied by way of a “Deed of Participation Ad Opponendum” to intervene, arguing that it had an interest. Lewison LJ held:137

“. . . there is no real doubt that its purpose in so doing was to improve its position in the Arbitration Proceedings and thus to impair (ie make more difficult) payment under the Bonds.”

Section 44 of the Arbitration Act 1996

Foxton J's decision in JOL and Another v JPM,138 a case relating to a maritime arbitration in which the injunctions sought from Foxton J would have required two vessels to be re-delivered (and so been determinative of several issues), confirms that a party to an arbitration agreement seeking interim relief from the English court will have to meet a high bar to satisfy the court that the case is one of urgency – as required by section 44(3). However, Foxton J (who refused relief on the basis that there was not sufficient urgency) also hinted that he might have granted the relief had the tribunal consented to it:

“I would not regard the fact that the LMAA tribunal does not itself have the power to grant interim injunctive relief as precluding it, to the extent it thought appropriate, from expressing its views on the merits of such an application when ruling on an application by one party for permission to apply to the court for section 44 relief. If, as the tribunal charged with granting final relief, the arbitral tribunal thought that the prospects of a final award for specific performance were slim, they might well conclude that it would not be appropriate to consent to an application to court in those circumstances.”139

Sovereign immunity – appointment of a receiver

In Deutsche Bank AG, London Branch v Central Bank of Venezuela 140 Bright J discussed whether (and agreed that) the Maduro Board (of the respondent) had waived sovereign immunity (under the State Immunity Act 1978) so as to lose the right to contest the appointment of a receiver pending the determination of the dispute in arbitration. The matter is tangential to a dispute in relation to gold bullion swaps (subjected to LCIA arbitration) entered into in 2015 between Deutsche Bank AG London Branch and the Central Bank of Venezuela, terminated as a result of 2019 US sanctions, with physical gold held by the Bank of England. Section 9 of the 1978 Act provides:

Upon a review of the language of the swap agreement, Bright J held:141

2019 Mainland-Hong Kong Interim Measures Arrangement

The Arrangement Concerning Mutual Assistance in Court-ordered Interim Measures in Aid of Arbitral Proceedings by the Courts of the Mainland and of the Hong Kong Special Administrative Region applies to arbitrations commenced before or after 1 October 2019. Uniquely, it allows parties to seek interim court assistance in Mainland China in aid of Hong Kong-seated arbitrations, and vice versa if the arbitration is administered by a “qualified arbitral institution” (eg HKIAC, ICC, HKMAG142).

The Arrangement has already been extremely successful. According to the HKIAC as of 13 October 2023:

Enforcement of awards

Effect of Consumer Rights Act 2015

In the English Commercial Court Bright J, in two decisions handed down at the end of July 2023, discussed at length the operation of the provisions of the Consumer Rights Act 2015 on consumer arbitrations, and in particular the extent to which arbitration agreements are enforceable against consumers. In Payward Inc and Others v Chechetkin 144 the agreement was held to be invalid, whereas in Eternity Sky Investments Ltd v Zhang 145 the agreement was held to be valid.

In Payward Inc v Chechetkin Bright J refused to enforce an arbitral award made in a JAMS146 arbitration seated in California on the basis that it would be contrary to public policy under section 103(3) of the Arbitration Act 1996, as enforcement would breach English consumer protection legislation and financial regulation. It has been suggested that the case represents “a rare example of the English courts refusing to enforce a foreign award on public policy grounds, and may become a leading case on the interaction between consumer protection mechanisms and standard form dispute resolution provisions” and “may have particularly significant ramifications for international business to consumer companies.”147

Mr Chechetkin, a British citizen, incurred losses trading cryptocurrency on “Kraken” a global digital online crypto asset exchange managed by Payward. He sought to recover losses by suing Payward in the English courts, on the basis that Payward engaged in regulated activity without the requisite authorisation (under the Financial Services and Markets Act 2000). However, Payward's terms of service provided (at clause 23) for mandatory JAMS Rules arbitration in San Francisco (with Californian courts having exclusive jurisdiction over appeals) and Payward duly commenced and obtained an award in a JAMS arbitration in order to prohibit Mr Chechetkin from bringing a claim before the English courts.

Bright J held:148

Bright J also found:149

Conversely, in Eternity Sky Investments Ltd v Zhang, the same judge came to the opposite conclusion when considering the Consumer Right Act 2015 – which illustrates how similar cases will turn on their facts. In Eternity Sky a HKIAC arbitration clause in a personal guarantee was deemed to be enforceable because the personal guarantee did not have a “close connection with the United Kingdom”, as required by section 74 of the 2015 Act (cited above), and therefore the 2015 Act did not need to be considered. Bright J also held that the arbitration clause was not unfair under the 2015 Act. Eternity Sky is being appealed.

Enforcement in Hong Kong

In an unusual case which we have already discussed in the context of arbitrator immunity, Song Lihua v Lee Chee Hon,150 the Hong Kong High Court refused to enforce a Chengdu Arbitration Commission award on grounds of public policy although the award had already been enforced in Mainland China, where similar complaints had been raised. The court found the conduct of one of the arbitrators was seriously irregular and violated due process rights. There was video evidence that one of the arbitrators was not physically present at one of the hearings, watching the hearing remotely on his mobile phone in public, periodically disconnecting from the hearing (so that he could not have heard what was said) and even travelling in a vehicle.

The court drew out the relevant principles and statutory provisions including: “It is clear from the authorities that where public policy is relied upon as a ground to resist enforcement of an award, it is the domestic public policy of the relevant court of enforcement which is relevant”.151 As regards Hong Kong the court summarised that: “audi alteram partem is a fundamental principle of natural justice which is recognized and enforced. This means that no person shall be judged without a fair hearing in which each party is given the opportunity to respond to the evidence against it, and to be heard on its case”.152

Mimmie Chan J cautioned: “The application of the above principles and statutory provisions means that not only must these rules be applied, but they must be seen by the objective reasonable observer to have been applied. The established and well-known rule is that not only must justice be done, but it must also be seen to be done”.153 She also found that: “Whereas an award may be recognized in one jurisdiction, its enforcement may be refused if it would be contrary to the public policy of another jurisdiction to enforce it”.154 As mentioned above, this was relevant because the Mainland Court had ruled that the award was valid and dismissed a set aside application (based on similar grounds).

In a second unusual case, in Canudilo International Co Ltd v Wu Chi Keung and Others,155 Mimmie Chan J found it appropriate to grant an extension of time to set aside enforcement of an award. In that case, a second arbitrator (in bifurcated proceedings) wrongly considered himself and the guarantors to be bound by an interim award and failed to independently decide the dispute between Canudilo and Wu, which violated the basic notions of justice and requirements for a fair hearing.

Recognition and enforcement of ICSID awards in the UK post- Achmea 156

In the case of Infrastructure Services Luxembourg Sàrl and Another v Kingdom of Spain 157 the claimants sought to enforce an ICSID award granted in Infrastructure Services Luxembourg S.à.r.l. (formerly Antin Infrastructure Services Luxembourg S.à.r.l.) v Kingdom of Spain,158 where the claimants were awarded damages for approximately €120 million. The ICSID tribunal in Antin found Spain guilty of violating article 10 of the EU's Energy Charter Treaty (ECT), which provides for the fair and equitable treatment of investors.159

The claimants applied to register the award in England and Wales. Under the Arbitration (International Investment Disputes) Act 1966, a person seeking recognition or enforcement of an ICSID Convention award is entitled to have the award registered in the High Court.160 The ICSID Convention significantly restricts the bases upon which domestic courts may refuse recognition and enforcement of an authenticated ICSID award. The UK Supreme Court in Micula and Others v Romania 161 confirmed that the English courts could not refuse to recognise an ICSID award on the grounds of public policy or that the ICSID tribunal did not have jurisdiction.162

The Antin award was registered in June 2021. Spain applied to set aside the order granting registration, claiming entitlement to immunity from the jurisdiction of the English courts.163 Spain argued that the Court of Justice of the European Union had held that the ECT violated the law of the EU. Therefore, despite Spain's status as a state party to the ECT and the ICSID Convention, Spain could not consent to arbitrate intra-EU disputes. In this case, the investors were Dutch and Luxembourg companies. Therefore, Spain argued that the ICSID tribunal did not have jurisdiction.164

The claimants disagreed and argued that Spain had submitted to the jurisdiction of the English courts based on a prior written agreement waiving immunity pursuant to section 2(2) of the State Immunity Act 1978. In the alternative, Spain had given its written consent to arbitrate disputes between the claimants and Spain, thus waiving immunity pursuant to section 9 of the 1978 Act.165

Fraser J rejected Spain's immunity defence and ruled that Spain's intra-EU objection did not override or dilute the United Kingdom's international treaty obligations under the ICSID Convention, including the obligations to recognise and enforce international arbitration awards.166 Fraser J agreed with the claimants that article 54 of the ICSID Convention and article 26 of the ECT constituted a “prior written agreement” of Spain's submission to the English jurisdiction for the purposes of section 2 of the State Immunity Act. Therefore, Spain had waived its state immunity.167

This decision highlights the importance of honouring international treaty obligations. It also reinforces the English courts’ limited scope for refusing recognition and enforcement of ICSID awards. The ruling is likely to have implications for other ECT cases where intra-EU objections are raised, and it will be interesting to see how other courts will interpret the decision.

Law reform: reviewing the Arbitration Act 1996

Largely, responses to the First Consultation Paper focused on the shortlisted topics. However, a number of consultees to the First Consultation Paper also took the opportunity to raise concerns relating to the decision in Enka Insaat ve Sanayi AS v OOO “Insurance Company Chubb”.168

On 6 September 2023 the Law Commission released its Final Report. Several reforms were proposed, including codifying an arbitrator's duty of disclosure, introducing a new rule regarding the governing law of the arbitration agreement, and introducing a power of summary disposal for decisions on issues that have no real prospect of success. It declined to make proposals on topics such as confidentiality, discrimination and appeals on a point of law.

On 7 November 2023 the King's Speech169 was published and very clearly foreshadowed what the Arbitration Bill will do:

The draft Bill was put before Parliament with a first reading in the House of Lords on 21 November 2023, and a second reading on 19 December 2023. A special procedure has been invoked which may mean that the new legislation could receive royal assent between Easter and summer 2024.

Governing law of the arbitration agreement

One of the significant changes proposed was to resolve the issues concerning the governing law of the arbitration agreement. The amendment would change the current position of law following the UK Supreme Court decision in Enka Insaat ve Sanayi AS v OOO “Insurance Company Chubb”.170

Enka involved a fire incident at a power plant in Russia. Chubb, the subrogated insurer, brought proceedings in Russia against Enka, the subcontractor, to recover.171 The construction contract in that case provided that all disputes would be resolved in London through arbitration.172 Enka then applied for an anti-suit injunction from the courts in the UK to halt the Russian proceedings on the ground that the initiation of the Russian proceedings violated the arbitration agreement. The main issue in Enka centred around whether the arbitration agreement is governed by the law of the main contract or the law of the seat. The Commercial Court173 refused to grant the injunction. However, the Court of Appeal174 overturned the decision and issued the injunction.

The Supreme Court upheld the injunction and outlined its approach in identifying the law governing an arbitration agreement (which is set out above).

Some stakeholders, however, found the principles in Enka problematic. For instance, the rules may easily lead to the application of foreign law to an arbitration agreement, even though the parties have agreed to England and Wales as the seat of arbitration. Moreover the satellite litigation would be costly and lengthy.175

Thus the Law Commission proposed amending the Arbitration Act 1996 to clarify the position so that the governing law of the arbitration agreement is either the law that the parties expressly agree applies to the arbitration agreement or, in the absence of any express agreement, the law of the seat of arbitration.176

Challenging the award based on the lack of substantive jurisdiction

During the consultation process, one of the issues that sparked debate was whether to reform the rules in section 67 of the Arbitration Act 1996 on challenging a tribunal's jurisdiction to make an award. Currently, any challenge under section 67 takes place through a full rehearing, even if a full hearing has already been held before the tribunal. The Law Commission proposed amending the Act to provide that any challenge should be by way of an appeal rather than a full rehearing, which was supported by most consultees.177 However, there were also objections, arguing that parties may not have consented to the tribunal's jurisdiction.

The Law Commission's solution is to implement procedural rules to limit new grounds of objection or evidence in section 67 challenges and to only re-hear evidence heard by the tribunal if necessary in the interests of justice.178 The Arbitration Bill also contains a minor amendment clarifying that the tribunal has the power to award costs in situations where it lacks substantive jurisdiction.179

Summary disposal

The Law Commission has suggested changes to give arbitrators the express power to make an award on a summary basis. Although arbitrators have an implicit power to use summary disposal, arbitrators are hesitant to use them due to the possibility of awards being challenged or enforcement being resisted on the grounds that a party did not have a reasonable chance to present their case.180 The proposed reform is intended to ease these concerns and promote the use of summary procedures in suitable cases, resulting in greater efficiency and less opportunity for parties to use delaying tactics.

According to the proposed changes, the test will be whether the concerned party has a “real prospect of succeeding” on the claim, issue, or defence, which test is already familiar to the English courts. Additionally, the rule will be non-mandatory, and parties could agree to opt out of the rule or specify an alternative test.181 The proposed standard is lower than the “manifestly without merit” test provided in most arbitral institutional rules.182

Court power in support of arbitral proceedings

As we have seen above, section 44 of the Act gives the court the authority to aid in arbitration proceedings by conserving evidence or granting an interim injunction. The Arbitration Bill, however, intends to modify this section by expressly stating that such orders can be issued against non-parties. This amendment proposes that the rules and case law governing similar orders against non-parties in civil litigation should extend to arbitral proceedings.183

Furthermore, another proposed amendment to section 44 could allow non-parties to have full rights of appeal against orders made under section 44. As things currently stand, appeals can only be made with the permission of the court that granted the order – whether by a party or non-party to the arbitration. However, the amendment would remove this restriction for non-parties, whereas parties to the arbitration would still be subject to the current position.184

Arbitrator's duty of disclosure

Under the proposed amendment, arbitrators would be required to disclose circumstances that “might reasonably give rise to justifiable doubts as to the individual's impartiality in relation to the proceedings, or potential proceedings, concerned”.185 This codifies the common law rules set out in Halliburton Co v Chubb Bermuda Insurance Ltd. 186

Halliburton v Chubb is a significant decision that clarified how English courts assess apparent bias in arbitrator conflicts, making it a leading case on the subject. The case arose out of the Deepwater Horizon incident, where an explosion and fire on the drilling rig caused damage.187 On the duty of disclosure the Supreme Court confirmed that arbitrators have a legal duty to disclose any facts or circumstances that may reasonably give rise to the appearance of bias. Compliance with this duty should be assessed in light of the circumstances at the time of disclosure. The failure to disclose may be considered as a factor in determining whether there was a real possibility of bias.188 Further, the arbitrator's duty to disclose and the duty of impartiality are interconnected and must be assessed at different stages of the arbitration process.189

In line with this case, the Law Commission suggested that the criteria for determining what an arbitrator should reasonably be aware of will differ from case to case. The Law Commission has suggested that it will not always be necessary for arbitrators to investigate actively whether there are circumstances that should be disclosed; instead, this will vary depending on the case. For instance, in many cases arbitrators will need to disclose overlapping appointments. However, in some sectors, such as maritime, sports, commodity, and reinsurance, established custom and practice may mean that overlapping appointments do not need to be disclosed.190

Updates to other arbitration laws

Nigeria

On 26 May 2023 Nigeria's Arbitration and Conciliation Act 1988 was replaced by the Arbitration and Mediation Act 2023. The new Nigerian Act is based on the revised UNCITRAL Model Law adopted in 2006 and strengthens Nigeria's position as a leading arbitration destination in Africa. It introduces provisions for third-party funding, emergency arbitrators, and award review tribunals. It also requires the tribunal's fees to be reasonable and fixed in the award.191

Japan

On 21 April 2023 the Japanese National Diet192 approved the Amended Arbitration Act and the Mediation Act (the “Japanese Amended Act”), which will become effective within one year from the day of promulgation on 28 April 2024. The Japanese Amended Act contains key changes, including the enforcement of tribunal-ordered interim measures and allowing arbitration agreements to meet the writing requirement even if they are not in writing. The Mediation Act sets out a mechanism for the enforcement of international settlement agreements.193

Luxembourg

Germany

Also in April 2023 a planned reform of German arbitration law (after 25 years) was announced aiming also to strengthen the attractiveness of Germany as a seat. Again the UNCITRAL Model Law was used as a precedent. The possibility of English language arbitrations and related court proceedings was also provided for.194

Updates to arbitration rules

Singapore International Arbitration Centre (SIAC)

On 22 August 2023 the SIAC started a public consultation on the draft 7th Edition of the SIAC Rules (the “Consultation Draft”), which builds on the SIAC Rules 2016 that have been used to administer international arbitration cases. The Consultation Draft contains several key improvements. To summarise, a cheaper streamlined procedure is available if the amount in dispute is under S$1 million or the parties agree.195 The expedited procedure's limit has been raised to S$10 million.196

Further, spine stiffening provisions have been added to give arbitrators more confidence. Draft Rule 46197 allows parties to apply for a preliminary determination of any issue in the arbitration. Draft Rule 17198 provides for coordinated arbitration proceedings where the same tribunal is constituted in two or more arbitrations. Draft Rule 38199 requires parties to disclose third-party funding arrangements which is in line with evolving best practices. Controversially, draft Rule 60200 proposes to reverse the presumption that awards may not be made public absent consent from the parties and the tribunal.

Draft Rule 19.5 reads:

Lastly, two grounds of challenge have been added under draft Rule 26.1 if the arbitrators are: (a) unable to perform their functions; and (b) fail to act or perform their functions according to the SIAC Rules or “within the prescribed time limits”.

Hong Kong International Arbitration Centre (HKIAC)

On 23 January 2024 the HKIAC announced a public consultation for proposed amendments to the current 2018 Administered Arbitration Rules. These amendments aim to improve the arbitration process by including, but are not limited to, provisions on diversity in appointing arbitrators, mode of communication, and data protection.202

One of the proposed changes is the inclusion of a draft article 10, which encourages parties and co-arbitrators to consider diversity when selecting an arbitrator. The HKIAC will also take diversity into account when appointing arbitrators. While the HKIAC does not provide specific guidance, the inclusion of this article demonstrates its commitment to diversity and inclusion.

Another amendment allows parties and arbitrators to communicate through any mutually agreed electronic communication method.203 Additionally, draft article 47 is dedicated to information security and emphasises the importance of data protection. Parties can agree on measures to protect information, and the arbitral tribunal may give directions to parties on ensuring information security.204 The proposed data protection measures are similar to those in the LCIA Rules, which allow the arbitral tribunal to adopt specific measures to protect shared data and issue cyber security directions.205

The proposed amendments also allow claims arising from multiple contracts to proceed under a single arbitration. Parties will be considered to have waived their right to select an arbitrator, and the HKIAC will appoint the arbitral tribunal.206

Developments in relation to how arbitrations can be funded207

England and Wales: PACCAR

On 26 July 2023, in a leapfrog appeal decision that caused ripples, the English Supreme Court held in R (on the application of PACCAR Inc and Others) v Competition Appeal Tribunal and Others208 that litigation funding arrangements based on a share of damages/recovery are DBAs for the purposes of section 58AA of the CLSA because litigation funders provide “claims management services”, defined, under section 58AA(7), by reference to earlier legislation, being the Compensation Act 2006 until 1 April 2019 and the Financial Services and Markets Act 2000 thereafter.

PACCAR has thus clarified that funding arrangements must comply with the DBA regulatory regime, failing which they are unenforceable. This had not been thought to be the case before. As such, it has given rise to disputes between claimants and funders as to whether a funder can enforce some elements of a funding agreement even though any provision for payment of a percentage of damages is unenforceable in light of PACCAR.

For example, in Therium Litigation Funding A IC v Bugsby Property LLC 209 the High Court held that there is a “serious issue to be tried” that the element of a litigation funding agreement which provides for the funder to receive a multiple of funding remains enforceable, even though the aspect which provides for a percentage of damages is unenforceable in light of PACCAR. The issue will go to a tribunal since there was an arbitration clause in the funding agreement.

Alex Neill Class Representative Ltd v Sony Interactive Entertainment Europe Ltd 210 was the first certification decision since PACCAR. In that case the Competition Appeal Tribunal (“CAT”) held that a litigation funding agreement revised in light of PACCAR to be calculated as a multiple of the funding obligation was not a DBA and was therefore enforceable for the purposes of opt-out collective proceedings before the CAT. In addition, the CAT found it permissible to include an alternative higher renumeration clause whereby the funder would be paid a percentage of awarded damages “only to the extent enforceable and permitted by applicable law”. The CAT held:211

Since PACCAR legislation has indeed been proposed to permit funder DBAs in certain contexts (but not yet arbitration). Notably, on 15 November 2023 an amendment to the Digital Markets, Competition and Consumers Bill was tabled which would remove the words “claims management services” from section 47(c) of the Competition Act 1998. Lord Bellamy explained that the purpose of the Bill was: “to mitigate the impact of [PACCAR] on litigation funding agreements for opt-out collective proceedings in the [CAT]”. The government has hinted that it might reverse PACCAR entirely (and so amend the Regulations) at the first opportunity.

There is a debate whether the PACCAR decision has consequences for arbitration funding because of how the CLSA and its definitions are worded. Moreover, arbitration by its nature is considerably more flexible than litigation. However, the conservative view is that it does apply at least to English seated arbitration not least because in Diag Human SE and Another v Volterra Fietta 212 it was held that the conditional fee arrangement charged by lawyers in an investor-state dispute settlement (ISDS) arbitration did not comply with the CLSA (and in that case could not be severed prompting a review of severance clauses in DBAs).

Hong Kong: BB v KO

Nonetheless, in BB v KO,213 the Hong Kong High Court refused to set aside an enforcement order for an arbitral award on the ground of it being contrary to public policy as a result of a contingency fee/success fee arrangement. The underlying dispute related to an agreement for BB (a US law firm) to represent KO (a businessman) in court proceedings in Nevada, USA, which included a “success bonus” and for BB to “provide strategic advice”. On the other hand, and this proved important, BB did not act as lead counsel in KO's Hong Kong litigation.

After the Nevada proceedings successfully concluded, KO refused to pay the success fee. BB brought and won an arbitration and was granted leave to enforce against KO's assets in Hong Kong. KO argued that it would be contrary to public policy to enforce an award which gives effect to a contingency fee agreement partially related to litigation in Hong Kong. The court dismissed KO's application and awarded BB indemnity costs. It was not persuaded that the Hong Kong litigation was sufficiently connected and impacted by the Nevada litigation which formed the basis of the contingency fee agreement. As such, the court could not determine that a genuine risk to the integrity of the Hong Kong court proceedings arose through enforcement of the award.

Trends in 2023, and what 2024 might hold in store for arbitration

Procedure really matters to parties

The Hong Kong case G v P 214 illustrates the importance of parties properly serving (and having proof of proper service) of notices of arbitration. It also serves as a reminder that parties should check and, if necessary, seek corrections of an award promptly (often applicable rules contain procedures and a time limit).

In the Radisson case,215 although ex parte communications (a serious irregularity) appear to have taken place between the parties and an arbitrator, the respondent nonetheless lost the right to bring a challenge. This underlines that parties must act quickly.

Procedure matters less if tribunals get it wrong

The “Commercial Court Report 2021-2022”216 confirms that in 2020-2021, of the 26 challenge applications under section 68 only one succeeded (15 were dismissed, two were discontinued, another two were withdrawn, one was stayed, two were transferred out and three were pending).217 Therefore, in 2020-2021, only 4 per cent of applications were successful. In part this is because of the second limb of section 68 which requires “substantial injustice” to be shown.

According to the same report, section 67 applications were only slightly more successful. Of 17 applications under section 67 in the year 2020-2021 only one succeeded (nine were dismissed, three were discontinued, one was transferred out and three were pending). This means only 6 per cent of applications have been successful.218

Similarly, only 5 per cent of section 69 appeals in the year 2020-2021 were successful – of 37 only two succeeded. 19 had permission refused, four were discontinued, five were dismissed, one was settled, one was transferred out and five were pending).219

Common law courts support arbitration – except for consumer disputes

The trend is that damages are available for breach of arbitration agreements (even for breaches by third parties), as demonstrated by The Prestige.220

Courts in England and Singapore, and some courts in Hong Kong, will hold parties to their agreement to arbitrate and stay or dismiss winding-up proceedings.

Some courts in Hong Kong and the courts in the Cayman Islands are outliers. In Hong Kong, following Guy Lam, it is now clear that where there is an exclusive jurisdiction clause in the underlying agreement providing for a foreign jurisdiction, the court will generally hold parties to their bargain and stay or dismiss a creditor's bankruptcy/winding-up petition if the debt is disputed. However, it is uncertain whether the same approach applies to underlying agreements with arbitration clauses. 2024 likely will bring certainty in Hong Kong as appeals in Re Simplicity & Vogue Retailing (HK) Co Ltd 221 and Re Shandong Chenming Paper Holdings Ltd 222 will be heard. We may see the increased use of unilateral arbitration clauses (where valid) to try to avoid application of the new approach.

In addition, Privy Council decisions may bring offshore jurisdictions in line with England.

Consumer disputes also seem to be an outlier as the two cases before Bright J confirm.223 Mandatory arbitration is not per se unfair but drafters of arbitration clauses should consider the applicable laws and regulations – which generally ask what a reasonable consumer would agree to. In some countries there is more consumer (and employee protection) than in others – thus as we have seen Luxembourg excludes such disputes from arbitration whereas in the United States employment disputes are frequently arbitrated (eg in JAMS arbitration). Crypto disputes may give rise to further test cases as frequently platform terms include arbitration clauses.

The decision in PACCAR continues to cause problems for arbitration finance in England

Legislation is starting to be proposed that would negate PACCAR.224 However, those amendments appear to relate only to a discrete area of law, whereas the PACCAR decision has wider ramifications.

Case law confirms that funders have started to amend their agreements, including to decouple remuneration from damages and beef up severance clauses.

Attracting arbitration is competitive – laws and arbitral rules will keep being updated

The Arbitration Act 1996 is being tweaked. The annual Commercial Court Report 2021-2022225 notes that “Matters arising from arbitration still make up a significant proportion of the claims issued in the Court (around 25 per cent) reflecting London's continued status as an important centre for international arbitration”226 including: section 67 and 68 challenges, appeals on points of law under section 69 and section 44 applications (such as injunctions).

As we have seen, Nigeria, Japan, Luxembourg, Germany and Israel are also updating their arbitration laws. This trend is set to continue. For example in February 2024, the Knesset227 approved the International Commercial Arbitration Law 2024 which again closely follows the UNCITRAL Model Law. Again, the new law is expected “to encourage use of arbitration situated in Israel as a solution for resolving international commercial disputes”.228

SIAC, HKIAC and various other institutions are updating their rules (as they periodically do) with many making similar changes. In the author's view there is a fine balance to be struck in the sense that while it is important to ensure that laws and rules reflect best practices, users also value certainty and continuity and rules need to align with laws (both of the seat and ideally of the main jurisdictions of enforcement, the UNCITRAL Model Law being a popular blueprint) which in turn should align with the New York Convention.

Amendments to the Arbitration Act 1996 are expected within the first half of 2024. It will be interesting to see how they play out

One of the amendments will “fix Enka”229 – a new section 6A will set a default law of arbitration agreement as being the seat of the arbitration. We will be following how the law develops in jurisdictions that have followed Enka 230 (like Hong Kong, as discussed above).

Trends in ISDS

During the first seven months of 2023 claimants brought at least 35 known investor-state dispute settlement (ISDS) cases pursuant to international investment agreements.231 This compares to 56 arbitrations initiated according to UNCTAD in 2022 and 79 in 2021, which suggested a downwards trend.232

This is unsurprising given the Achmea 233 decision followed by the termination of intra-EU bilateral investment treaties and the EU's step back from the Energy Charter Treaty.

However, according to the 2024 ICSID caseload statistics, the number of cases registered under ICSID rules increased, with 57 new cases registered – 16 more than in 2022. Additionally, an extra 20 cases were registered under non-ICSID rules, with UNCITRAL administering 14 of the new cases.234

Furthermore, the number of investment treaty cases related to climate change and decarbonisation measures seems to be increasing, which might have to do with the states’ decisions to phase out certain energy sources and reject projects on climate change grounds. An example is Zeph Investments which initiated two arbitrations against Australia in 2023, one based on the rejection of coal mining licences.235

The war in Ukraine and resulting sanctions by the US, EU and other states against Russia will likely give rise to further cases

English courts have been extending their reach by granting anti-suit injunctions in two cases (Deutsche Bank AG v RusChemAlliance LLC 236 and Commerzbank AG v RusChemAlliance LLC)237 where the arbitral seat was Paris, not England. The appeal in the third case, UniCredit v RusChemAlliance (formerly known as G v R),238 where a similar injunction was not granted, was heard in January 2024.

It will be interesting to see what effect new section 6A of the Arbitration Act 1996 will have. This new section will provide a default position (applying with immediate effect) that where the law of an arbitration agreement is not specified, it will be the law of the seat. In future, will the English courts be able to issue anti-suit injunctions in aid of the court of the seat if the court of the seat cannot do so (like France)? Will the availability of anti-suit injunctions be a more important consideration when specifying a seat?

As long as the Russian sanctions continue (and countervailing steps are taken by the Russian courts) we will likely see more anti-suit injunctions and related cases.