English court holds arbitral order, subject to conditions, an award

In YDU v SAB and BYH [2022] EWHC 3304 (Comm), the English High Court has deemed an arbitral tribunal's order for specific performance, which was subject to conditions, an award for the purposes of the English Arbitration Act 1996 (the Act). In so doing, it has respected the Tribunal's own classification of the decision, yet prompted questions as to the applicability of section 39 of the Act, on provisional decisions, to awards.

Background

The underlying London-seated LCIA arbitration concerned an uncompleted sale of shares by the Claimant to the First Defendant. In what the Tribunal had termed a "Partial Final Award", the Tribunal had ordered the Claimant to transfer the shares to the First Defendant within a particular timeframe. This was "on condition" of satisfaction by the First Defendant of certain payment-related requirements. The Tribunal had also expressly ordered the Claimant not to sell the shares to anyone other than the First Defendant.

The Tribunal had also explained that it was reserving jurisdiction to resolve any dispute as to the meaning or effect of the preconditions, or the way forward if the First Defendant was unable to comply with the preconditions. In the event, the First Defendant obtained two extensions to complete the preconditions, granted in the form of two further Partial Final Awards.

The Claimant applied to the English High Court for a declaration that the Tribunal's order for specific performance did not constitute an award. It argued that the order's conditionality and the Tribunal's reservation of jurisdiction prevented the order from being final and therefore an award.

Decision

The Act does not define an award; it simply confirms that the effect of an award is that it is final and binding. By way of preliminary matter, the court briefly considered the "usual position" that once an award has been rendered, a tribunal is functus officio in relation to the matters decided (i.e. it lacks any power to re-examine those matters, or issue any further ruling in relation to them). However, it deemed it "too dogmatic and absolutist a position to say that something which is 'an award' can never be revisited".

Nonetheless, on the basis of three different analyses, the court held that the order constituted an award:

1. Section 48(5) of the Act makes clear that a tribunal has the power, unless otherwise agreed by the parties, to order specific performance of a contract (other than a contract relating to land). It was consistent with this section and the general principles set out in section 1 of the Act (such as the parties being free to agree how their disputes are resolved and the courts not intervening except as provided by the Act) that "the court should give effect to procedures and decisions adopted by a tribunal which seek to make effective and to provide supervision over an order for specific performance which it has made". On this analysis, the order was final in the sense that the Tribunal could not have revisited it absent a change in circumstance.
2. The order could be regarded as a "provisional award" under section 39 of the Act. This section is headed "Power to make provisional awards" (emphasis added), and the provision allows parties to agree that the tribunal be entitled "to order on a provisional basis any relief which it would have power to grant in a final award", and provides that "[a]ny such order shall be subject to the tribunal's final adjudication". This provision is also mirrored in Rule 25.1 of the LCIA Rules. The court held that the order could be regarded as a provisional award under section 39, because the Tribunal had made a decision that happened to be subject to modification and to the Tribunal's final adjudication.
3. The order that the Claimant not sell the shares to anyone other than the First Defendant could be characterised as an interim measure – in other words, "an order preserving rights or property pending a specified event or further order". In the arbitration agreement, the parties had agreed that "any ruling by the arbitration tribunal on interim measures shall be deemed to be a final award with respect to the subject matter thereof and shall be fully enforceable as such."

Although unnecessary to rely on the case, the court also drew attention to Konkola Copper Mines v U&M Mining Zambia Ltd [2014] EWHC 2374 (Comm). In that case, an order that a party do something, unless that party "showed cause" as to why that order should not be made, was deemed an award (although the judge in that case noted some potential enforcement concerns). Nonetheless, the court in the present case commented that if the award in Konkola was held to be an award, then "a fortiori" the order in this case was also a final and binding award.

Finally, the court dismissed an alternative claim by the Claimant, which had sought to remit the order that the Claimant not sell the shares to anyone other than the First Defendant back to the Tribunal for reconsideration, pursuant to section 68(2)(f) of the Act.

Comment

The decision confirms a tribunal's ability to both retain a degree of supervision over orders for specific performance and to issue orders which involve some conditionality, without this necessarily impeding the classification of the order as an award. This distinction is important, as awards and orders (that do not qualify as awards) are subject to different enforcement mechanisms.

That said, one of the bases on which the court classified the order as an award is worthy of further comment: that of the application of section 39 of the Act to awards. As stated, the heading of the provision refers to "awards", yet the body of the provision refers to "orders", and the word "provisional" appears in both. There is mixed authority as to the meaning of this provision.

In its September 2022 consultation paper on reform of the Act (which predated the hearing and decision in the present case), the English Law Commission proposed that this provision be limited to orders (that are not awards), explaining that it "prefer[s] the argument that it should be the body of the section, not its heading, which is decisive." Further, "given that any ruling under section 39 is explicitly provisional, and subject to reconciliation in a final award, or even 'reversal', we think that it would be premature to subject a ruling under section 39 to the full range of challenges against awards (under sections 67 to 69)."

This judgment is therefore potentially at odds with the Law Commission's proposal. As the consultation process evolves, it will be interesting to see whether the uncertainty around the status of decisions which are "provisional" or "conditional" in nature is resolved.

For more information, please contact Craig Tevendale, Partner, Finnuala Meaden-Torbitt, Senior Associate, or your usual Herbert Smith Freehills contact.