ENGLISH COURT CONSIDERS CHALLENGES TO A FURTHER AWARD MADE AFTER REMISSION TO THE TRIBUNAL FOLLOWING AN EARLIER SUCCESSFUL CHALLENGE

In Reliance Industries Ltd and another company v The Union of India [2020] EWHC 263 (Comm), the English Commercial Court (the “Court”) considered a series of challenges under sections 67 and 68 of the Arbitration Act 1996 (the “Act”) to a further award (the “Further Award”) made on issues remitted to the Tribunal after earlier challenges to parts of an arbitration award (the “Final Partial Award” or “FPA”) brought under sections 67, 68 and 69 of the Act.

As described in our previous blog post, the dispute between Reliance Industries Limited and BG Exploration & Production India Limited (the “Claimants”) and the Union of India (the “Government”) concerned issues of cost recovery in relation to two production sharing contracts (“PSCs”). The FPA was issued in October 2016 and the Tribunal issued the Further Award in October 2018.

In the most recent proceedings, the Court rejected the Government’s various challenges to the Further Award, including finding that: (i) on remission, the Tribunal had jurisdiction to revisit an intention to reject a case, until it issued an award containing that decision; and (ii) the Tribunal’s consideration of witness evidence in the context of its decision on the meaning of an agreement did not constitute a serious irregularity. The Court accepted the Claimants’ case that the majority of the Tribunal was wrong in finding that it lacked jurisdiction to consider, on remission of the Further Award, documents on the record and further argument in support of the case remitted.

The decision explores a number of interesting and difficult issues that may arise as to the scope and nature of the Tribunal’s task when addressing issues which have been remitted to it.

Background: challenges to the FPA

One of the Claimants’ challenges to the FPA under s. 68(2)(d) of the Act concerned whether the Tribunal ought to have considered whether some categories of “development costs” fell outside the scope of a contractual cap on the basis that the Defendant had specifically agreed that they should do so (referred to as the “Agreements Case”). The Tribunal took the view in the FPA that the Agreements Case “no longer fell for determination” in light of its conclusion on a separate, but related, argument (the “Estoppel Case”).

In considering the challenge to the FPA, the Court held that the Tribunal’s determination of the Estoppel Case was not dispositive of the Agreements Case. The failure to reach a conclusion on the Agreements Case therefore constituted a serious irregularity under s. 68(2)(d). The Court remitted the Agreements Case to the Tribunal for determination pursuant to s. 68(3)(a) (the “Order”). The Tribunal then made the Further Award.

Key Issues

Eight challenges to the Further Award were made by the Parties. The challenges of broader legal interest are discussed below.

Government’s “Challenge A” to the entire Further Award: under s. 67 of the Act for want of substantive jurisdiction, because remittal only required consideration of the merits of the remitted issue if the Tribunal had not already reached a conclusion in respect thereof

It was accepted by the Court, among other things, that the jurisdictional framework for a remission includes the principle that “the powers and duties of the arbitrator cannot exceed what is necessary to give effect to the order for remittal” (Carter v Harold Simpson Associates (Architects) Limited [2005] 1 WLR 919). The Government contended that a new consideration of the merits of the Agreements Case would only be necessary if the Tribunal had not reached a decision in the FPA. Had the Tribunal simply omitted to express the decision on the Agreements Case because the issue “no longer fell for determination”, the Tribunal was held to that decision and it could rectify the irregularity by simply stating that it had reached such a decision. It was unnecessary – and therefore not open - for the Tribunal to adjudicate on the Agreements Case afresh.

The Court disagreed. In principle, even if a Tribunal had formed an intention to reject a case, it could revisit that intention on remission until it issued an award containing that decision. In the FPA the Tribunal had recorded that the Agreements Case “did not fall for consideration”, therefore the Tribunal had the powers and duties to achieve that consideration, to give effect to the Order.

Government’s “Challenge B” to the Further Award in so far as it determined the “Agreements Case”: under s. 68(2)(a) and/or s. 68(2)(c) and/or s. 68(2)(d), on the basis that the Tribunal wrongly took into account witness evidence tendered by the Claimants in support of the Estoppel Case in relation to the question of whether there was an agreement

The Court considered that the parties “allowed matters to proceed […] without the rigour in compartmentalisation of evidence that is now sought to be argued by the Government”. However, the Court found that it did not follow from the fact that the evidence was considered for the Agreements Case that “the experienced Tribunal actually used (or that there was a serious risk that it actually used) the subjective understanding of a witness to decide the meaning of the agreement recorded […] or to contradict, vary, add to or subtract from the agreement there recorded”.

Claimants’ “Challenges 1, 2 and 3”: claim of lack of substantive jurisdiction, because the Tribunal refused to take into account evidence and arguments which had not been relied on by the Claimants prior to remittal

The majority of the Tribunal took the view that the Claimants were seeking to make new submissions expanding on the Agreements Case, relying on documents which were on the record prior to the FPA but not referred to for that purpose. It found that it was not the purpose of remittal for a party to have a second opportunity to improve upon its case and, the Court having remitted the FPA because the Agreements Case was undecided, the Tribunal had simply to determine that case as if had done so when the FPA was issued. The Claimants argued that in so deciding, the Tribunal had wrongfully declined jurisdiction.

The Court upheld the Claimants’ s. 67 challenge. The majority had incorrectly determined that it lacked substantive jurisdiction. It had mis-formulated the principle as described by Rix J in The Avala ([1996] 2 Lloyd’s Rep 135) as requiring it to decide the remitted issue on the basis of the submissions and evidence before it at the time of the award’s release, whereas Rix J had made clear that the remitted issue should be decided on the basis of the issues pleaded.  

As the remission in this case required the Tribunal to consider and determine the Agreements Case, it had jurisdiction to consider the documents on the record and hear further argument in support of the case already pleaded. It was for the Tribunal to control the further argument and the proceedings to “achieve fairness and avoid unfairness”.

Comment

The decision elicits the importance of setting out in the clearest possible terms in any court order the issues to be remitted to the Tribunal for consideration. Any ambiguity as to the scope of such an order may provide fertile ground for a further challenge by a party to the award, based on the questions of what it is necessary for the Tribunal to consider to give effect to the order.

The decision also affirmed the view that a Tribunal could not simply content itself with stating that it had already reached a decision at the time of the original award. Rather, the Tribunal must apply its mind to the merits of the issue which had been remitted for consideration. This exercise could extend to taking into account any evidence which was on the record and argument on that case, provided that the case was not itself new.

For more information, please contact Andrew Cannon, Partner, Hannah Ambrose, Senior Associate or your usual Herbert Smith Freehills contact.