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The Challenges of Arbitration Awards: The English High Court’s Approach and its Implications
The Challenges of Arbitration Awards: The English High Court’s Approach and its Implications
Introduction:
When parties are dissatisfied with an arbitration award, they often seek redress through domestic courts. The High Court of England and Wales frequently addresses challenges based on ‘serious irregularity’ in arbitration proceedings. This article explores why parties choose to sit their arbitration in foreign jurisdictions, specifically focusing on commercial contracts in Pakistan with arbitration clauses seating disputes in London. We also examine the seriousness required for a Section 68 application under the English Arbitration Act 1996 and the consequences of making such applications before the High Court.
Arbitration in Pakistan and London:
The Government of Pakistan, through state-owned entities (SOEs), is increasingly involved in high-value contractual disputes often resolved through LCIA arbitration clauses. Over 84% of LCIA-administered arbitrations are seated in England. The High Court's supervisory jurisdiction means challenges to arbitral awards often take place publicly. Due to Pakistan’s outdated arbitration legal framework and slow judicial system, parties prefer resolving disputes in London.
The Dispute:
The High Court recently dealt with a challenge to an arbitral award involving parties based in Pakistan. In Quaid-e-Azam Thermal Power (Private) Ltd v Sui Northern Gas Pipelines Limited [2024] EWHC 70 (Comm), a challenge was brought under Sections 68 and 33 of the English Arbitration Act 1996. The underlying dispute concerned unpaid invoices under a Gas Supply Agreement (GSA) for Regasified Liquefied Natural Gas (RLNG). The High Court dismissed the challenge, finding no ‘serious irregularity’ as pleaded by Quaid-e-Azam Thermal Power (QAPTL).
The Parties:
Sui Northern Gas Pipelines Limited (SNGPL) is listed on the Pakistan Stock Exchange and is 32% owned by the Federal Government. The challenge stemmed from an award issued in favour of SNGPL against QAPTL, a public sector company owned by the Government of Punjab. QAPTL operates a thermal power plant reliant on RLNG as its main fuel.
The Challenge:
Section 68 of the Act allows parties to challenge an arbitral award on the grounds of ‘serious irregularity.’ In this case, the High Court focused on two key matters: (i) the tribunal's allowance for the parties to go beyond their written submissions, and (ii) the extent to which a tribunal must address all issues raised by the parties. QAPTL argued that SNGPL’s late submissions were inconsistent with its previous case. However, the High Court agreed with SNGPL that its claim was not for actual losses but for QAPTL’s failure to pay for gas under the GSA’s ‘Diversion of Gas and Take or Pay’ clause. The challenge was brought on two grounds:
- Section 33: The Tribunal allegedly acted in breach of Section 33 by determining the claim on an unpleaded basis, denying QAPTL a reasonable opportunity to respond.
- Section 68: The Tribunal allegedly failed to rule on a determinative issue.
Serious Irregularity:
The leading authority on Section 68 challenges, RAV Bahamas Ltd v Therapy Beach Club Inc [2021], prescribes that intervention should be limited to ‘extreme’ cases, imposing a ‘high threshold.’ The High Court found that QAPTL was not deprived of an opportunity to respond and upheld the Tribunal’s approach.
Failure by the Tribunal to Address Issues Raised:
QAPTL’s second ground was dismissed based on Secretary of State for the Home Department v Raytheon Systems Ltd [2014], with the High Court finding no prejudice caused to QAPTL.
Conclusion:
The case highlights the court’s reluctance to set aside an award under Section 68 unless the high threshold of seriousness is met. The High Court allows significant flexibility for parties to improve their case without finding new issues raised outside pleadings. Contracting parties must anticipate ancillary issues and address them comprehensively. England remains a popular jurisdiction for arbitration, particularly for Pakistani parties. The reliable legal system, backlog in Pakistani courts, and outdated arbitration laws in Pakistan contribute to this preference. The discussion of Section 68 proceedings emphasizes the need for a thorough appreciation of each dispute’s factual and legal matrix. Understanding how the English courts approach challenges is crucial for parties outside England considering arbitration in London.
- Due to Pakistan’s outdated arbitration legal framework and slow judicial system, parties prefer resolving disputes in London.
- The Tribunal allegedly acted in breach of Section 33 by determining the claim on an unpleaded basis, denying QAPTL a reasonable opportunity to respond.
- The High Court found that QAPTL was not deprived of an opportunity to respond and upheld the Tribunal’s approach.
