English court grants retroactive extension of time to enable arbitral process opportunity to "correct itself"

In a further example of the pro-arbitration exercise of pragmatism, in (1) Xstrata Coal Queensland Pty Ltd (2) Sumisho Coal Australia Pty Ltd (3) Itochu Coal Resources Australia Pty Ltd (4) ICRA OC Pty Ltd v Benxi Iron & Steel (Group) International Economic & Trading Co Ltd [2016] EWHC 2022 (Comm), the English High Court has granted an application under s79 of the English Arbitration Act 1996 (the "Act") to extend the time-limit within which a party could apply to the Tribunal under Article 27 of the LCIA Rules 1998 to correct an ambiguity relating to the identity of one of the Claimants.

Whilst the exercise of the Court's discretion has been helpful to the Claimants, the case is a reminder in transactions with related contracts and multiple parties to ensure that the parties are clearly and correctly defined and the parties bringing claims are those properly entitled to do so, either by virtue of being signatory to the arbitration agreement or by otherwise being able to benefit from it.

Background: Contract did not expressly refer to one of the Claimants, and referred to another company

The four Claimants in this application had prevailed in an LCIA arbitration against the Respondent. The claim was brought under a contract in which the first claimant entered on behalf of itself, and as agent for two of the other claimants and a further company, ICRA NCA Pty Limited ("ICRA NCA"). The contract also referred to a joint venture to which all four Claimants were party (and to which ICRA NCA was not a party).

When seeking enforcement of the award in the PRC, the Chinese court refused recognition and enforcement on the basis of the Respondent's objection that one of the claimants (ICRA OC Pty Ltd, or "ICRA OC") was not party to the contract and arbitration agreement.

The Tribunal treated ICRA OC, as opposed to ICRA NCA, as (i) party to the contract (including the arbitration agreement); (ii) one of the joint venturers; (iii) party to the claim before the Tribunal; and (iv) beneficiary of the Award. Nevertheless, the Award did not explain how the Tribunal had dealt with the fact that IRCA NCA (and not ICRA OC) was referred to in the contract.

Claimants seek clarity from the tribunal: Article 27 of the LCIA Rules 1998

The Claimants (including ICRA OC) sought to rely on Article 27.3 of the LCIA Rules 1998, which refers to correction of Awards and Additional Awards. They sought an additional award or, alternatively, corrections to the award. However, by the time the Chinese court had made its decision declining recognition and enforcement, the time limit of 30 days from receipt of the award to make such applications had expired.

The LCIA confirmed that "while sympathetic to the Claimants' position, … absent agreement of the parties or an order from a competent court extending time for the application" the tribunal was "functus officio", i.e. it had fulfilled its mandate and could not hear the application.

The Claimants' application

The Claimants applied to the English court for a retroactive extension of time under s79 of the Act to make the Article 27 application to the Tribunal.

Section 79(1) provides that "[u]nless the parties otherwise agree, the court may by order extend any time limit agreed by them in relation to any matter relating to the arbitral proceedings". Section 79(4) clarifies that such extension may be made even after the time limit has already expired. The Court observed that, in practice, the time limit under Article 27 of the LCIA Rules 1998 would "almost always expire before the outcome was known of a contested attempt under the New York Convention to obtain recognition and enforcement of an award in another country".

English court's decision

An arbitral award is final and binding, subject to the limited grounds of challenge defined in the Act.  Therefore, whilst it is permissible under s57 of the Act for a tribunal to correct an award or make an additional award in certain circumstances, it is important that this provision is not used to "re-open" decisions on matters of jurisdiction or substance which are final.

The Court analysed Article 27 and, on the basis that the differences between Article 27 and s57 of the Act were not material in this case, considered the scope of s57. The Court referred to the decision in Torch Offshore LLC v Cable Shipping Inc [2004] EWHC 787 (Comm), in which s57(3)(a) and (b) had been considered. In that case, it was both noted that (i) "[t]he policy which underlies the Act is one of enabling the arbitral process to correct itself where possible, without the intervention of the Court" and (ii) as s57(3)(a) permits a tribunal to "clarify or remove any ambiguity", it would allow an application where an award which contains inadequate rationale or incomplete reasons for a decision is likely to be ambiguous or need clarification.

Section 57(3)(a) allows a tribunal to correct "an ambiguity" and the Court was satisfied that the words "errors of a similar nature" in Article 27(1) would allow the same thing. After an analysis of the historical development of the LCIA Rules, the Court rejected the argument that the express reference of "ambiguity" in the LCIA Rules 2014 meant that "ambiguity" was not covered by the LCIA Rules 1998.

No re-opening of the tribunal's award, no undue delay

In considering the application, the Court was not constrained by the Tribunal's earlier position (in response to a separate request for clarification) that "the grounds for granting corrections are narrow in scope". However, against the spectre of a full blown jurisdiction hearing (as feared by the Respondent), the Court considered that the Tribunal "will carefully control" the process.

Noting that the lack of explanation by the Tribunal regarding how it dealt with party identity (ICRA OC vs. ICRA NCA) affected the parties to the arbitration and the Chinese court, and impeded the arbitral process, the Court concluded that enabling the arbitral tribunal to provide such explanation would be a "just and reasonable approach".

The Court found that there was no undue delay by the Claimants in making the s79 application. The Claimants acted reasonably in awaiting the outcome of the Chinese proceedings.

Impact on recognition and enforcement

The Court declined to express a view on the various expert opinions on Chinese law submitted on the issue of whether it was open to the Chinese court to reconsider the decision on recognition and enforcement. The Court expressly deferred to the Chinese court on this matter, but noted the "persuasive reasons" in one of the opinions offered in favour of reconsideration. Even if reconsideration by the Chinese court was not possible, clarifying the position would be beneficial in case the same objection was raised if the Claimants sought to enforce the award in other jurisdictions.

The Court granted the retroactive extension of time to make an application to the Tribunal under Article 27 of the LCIA Rules.

Comment

This is another pragmatic and pro-arbitration decision by the English court, which followed the maxim that the arbitral process ought to be allowed to correct itself where possible. Further, the Court swiftly dismissed the argument that application for clarification of the Award should have been made prior to awaiting the outcome of the enforcement proceedings. In the circumstances of this case, the Claimants would not have had an incentive to seek the clarification before the argument about the proper parties was raised successfully by the respondent in the recognition and enforcement proceedings in China.  

However, whilst the Claimants can now make an application to the tribunal under Article 27, it remains open for the tribunal to decline to grant the application. If the tribunal clarifies the ambiguity, it may also remain open for the Respondent to seek to challenge the Award in the English court and, as indicated by the Court, the position as to whether the Award can be recognised and enforced in China remains unclear.   

For further information, please contact Hannah Ambrose, Professional Support Consultant, Maximilian Szymanski, Associate or your usual Herbert Smith Freehills contact.