English Commercial Court's dismissal of Section 68 challenge to arbitral award confirms high bar for proving serious irregularity

On 14 January 2025, the English Commercial Court dismissed an application by Emma Louise Collins, Aman Lakhaney, Khadija Bilal Siddique, Colome Investments Limited and ALKBS LLC (collectively, the Claimants) to set aside an arbitral award issued in favour of Wind Energy Holding Company Ltd (the Defendant) due to serious irregularities pursuant to Section 68(2)(a) of the English Arbitration Act 1996 (the Act). Specifically, the Claimants argued that the sole arbitrator had breached her general duty under Section 33 of the Act by (i) refusing to adjourn a hearing, (ii) declining to admit and test evidence and (iii) taking an inappropriate approach to the award. In dismissing the claim, Mr Justice Henshaw held that the arbitrator had acted fairly and consistently with her duty. This decision confirms that the threshold to successfully challenge an award under Section 68 is high, and reinforces the non-interventionist approach of the English courts in arbitration.

Background

On 20 April 2022, the Claimants commenced an LCIA arbitration against the Defendant claiming that the Defendant was in breach of a letter of indemnity by failing to meet the Claimants' ongoing costs in a related litigation. During the course of the arbitration, the Claimants and the sole arbitrator had a series of exchanges relating to the procedural timetable and admissibility of evidence. Among them:  

• On 28 August 2023, the Claimants applied for an adjournment of the evidential hearing to allow them to address the scope of a freezing injunction on their assets ordered a month earlier in the related litigation. The Claimants stated that the injunction prevented them from accessing the funds they needed to pay for legal representation in the arbitration. The arbitrator granted a short adjournment, rescheduling the evidential hearing from 11 September 2023 to 4 October 2023.
• On 22 September 2023, the Claimants applied for a further adjournment broadly on the same basis as before. The arbitrator refused the application and invited the Claimants to fully participate in the hearing as litigants in person, in the absence of legal representation.
• On 29 September 2023, the Claimants applied for permission to submit further evidence. The arbitrator admitted the Claimants' (overdue) draft Sur-Reply to stand in lieu of their Pre-Hearing Brief (redacting any new material), two signed witness statements, and an expert report. She however declined to admit three unsigned witness statements and an additional exhibit.
• On 2 October 2023, Ms Collins (the first Claimant) informed the arbitrator that she was unfit to attend or participate in the hearing due to her mental health, although she did not expressly ask for an adjournment. The arbitrator did not adjourn the hearing any further.

Between 4 and 6 October 2023, the evidential hearing took place. The Claimants were not legally represented or present at the hearing, save that Mr Lakhaney (the second Claimant) attended remotely on 6 October for the cross-examination of the two witness statements he had submitted.

On 17 November 2023, the arbitrator circulated her award, rejecting the Claimants' claim and directing them to pay the Defendant several monetary sums.

Grounds for challenge

Against this background, the Claimants commenced English court proceedings seeking to set aside the award, pursuant to Section 68(2)(a) of the Act.

Section 68(2)(a) provides that an award may be set aside if there is a "serious irregularity" which causes "substantial injustice", including when a tribunal fails to comply with the general duty under Section 33 of the Act. Section 33 requires the tribunal to act fairly and impartially between the parties, giving each party a reasonable opportunity to put his case and deal with the opponent's, and to adopt procedures which provide a fair means for the resolution of the dispute.

The Claimants argued that the arbitrator had breached Section 33 on the following three grounds.

Ground 1 – refusing to adjourn the evidential haring

The Claimants argued that the arbitrator had (i) granted an unrealistically short adjournment and (ii) failed to further adjourn the hearing, despite the Claimants' lack of legal representation and difficulties attending the hearing (including due to Ms Collins' health issues), among other things.

However, the court found that, in the circumstances, the arbitrator's decision to proceed with the evidential hearing without further adjournment was fair and consistent with her duty under Section 33(1)(b) of the Act to avoid unnecessary delay. Specifically, the court found inter alia that: (i) the Claimants' lack of legal representation was a result of their own failure to take prompt steps to vary the freezing injunction; (ii) the Claimants had not promptly raised the existence or impact of the freezing injunction or Ms Collins' mental health problems; (iii) the Claimants' adjournment application was unspecific; (iv) the Claimants could represent themselves in the hearing; and (v) Ms Collins' absence did not cause substantial injustice because Mr Lakhaney (the second Claimant), who attended the hearing virtually, could have made submissions on her behalf.

Ground 2 – declining to fully admit the Claimants' evidence and failing to test the Defendant's case

The Claimants argued that the arbitrator (i) should have fully admitted the draft Sur-Reply and additional evidence, given that the Claimants were unrepresented and that Ms Collins was unable to attend, and (ii) failed to act fairly and impartially by not testing the Defendant's case.

The court held that the arbitrator had acted fairly. Among other things, the judge found that it was not unfair for the arbitrator to decline to admit three unsigned witness statements given that the Claimant already relied on six other witness statements. In addition, the court found that the Claimants were given a fair opportunity to test the Defendant's evidence, and that it was up to the arbitrator, on her part, to decide the extent to which she needed to probe into the Defendant's case to decide on the issues.

Ground 3 – taking an inappropriate approach to various matters in the award

The Claimants argued inter alia that the arbitrator had (i) failed to identify the weight given to the Claimants' evidence in her award; and (ii) failed to address all the disputed points when providing the reasons for her conclusions.  

However, the court found that the arbitrator had set out the reasons for the award in clear, detailed, and sufficient terms. In doing so, the judge quoted Teare J's judgment in UMS Holding Ltd v Great Station Properties SA (2017) which found, among other things, that (i) an arbitrator need not refer to every point or evidence submitted by a party in giving reasons for their decision and (ii) it would be an impermissible exercise for the court to consider the evidence before the arbitrator to assess whether a piece of evidence had been overlooked.

Decision

The court dismissed the Claimants' set aside application, holding that the arbitrator had, in the circumstances, acted fairly and consistently with her duties under Section 33 of the Act. As such, no serious procedural irregularity had occurred.

Comment

This decision is another reminder that the threshold for proving a "serious irregularity" under Section 68 of the Act is high, requiring clear evidence of "substantial injustice". A high threshold may discourage parties from using Section 68 as a means to 'relitigate' issues already decided upon by a tribunal, maintaining the finality and certainty of the arbitration process.

Mr Justice Henshaw's judgment echoes the approach in preceding cases. For example, in Islamic Republic of Pakistan v Broadsheet LLC, the court found that proving a serious procedural irregularity under Section 68 is a "high hurdle" (2019); in Konkola Copper Mines v U&M Mining Zambia (2014), the court found that Section 68 was designed as a longstop remedy, available only where the tribunal has gone so wrong in its conduct of the arbitration that justice calls for it to be corrected.

Finally, this decision also reinforces the non-interventionist approach of the English courts as it relates to an arbitrator's discretion to manage procedural and evidential matters, preserving the autonomy of the arbitration process. This discretion is captured in Section 34(1) of the Act, which provides that "[i]t shall be for the tribunal to decide all procedural and evidential matters, subject to the right of the parties to agree any matter".