Commercial Court takes rare decision to refuse enforcement of arbitration award on public policy grounds in crypto case

The Commercial Court has refused to enforce a foreign-seated arbitration award on the grounds that to do so would be contrary to public policy, including because it was contrary to certain protections provided under the Consumer Rights Act 2015 (CRA), which the judge held were an expression of UK public policy. The case suggests that businesses may have difficulties enforcing foreign judgments or arbitral awards against consumers in the UK, where the underlying contract had a close connection to the UK and the decision applied a (contractually agreed) foreign governing law without reference to the CRA: Payward Inc v Chechetkin [2023] EWHC 1780 (Comm).

Mr Chechetkin, a UK-based consumer, undertook various trading activities on Payward’s Kraken cryptocurrency trading exchange in 2020 and lost more than £600,000. Payward’s terms of service were governed by California law and contained a Judicial Arbitration and Mediation Service Rules (JAMS) arbitration clause with disputes to be determined by sole arbitrator seated in San Francisco.

Section 74 of the CRA specifies that where (as in this case) a consumer contract has a close connection with the UK, the CRA applies regardless of whether the parties have chosen a non-UK governing law. The arbitration award applied only California law, without taking account of the CRA. The judge held that this alone was sufficient to make the award unenforceable as a matter of public policy.

The judge also found that the arbitration clause was "unfair" pursuant to s.62 of the CRA, which provides that an unfair term of a consumer contract is not binding on the consumer. The judge was clear that the mere fact that a consumer contract provides for disputes to be resolved in arbitration does not make it unfair. However, this clause was unfair, as it contained a number of significant disadvantages for Mr Chechetkin – including that he had to use US attorneys, which was expensive and inconvenient, and that a US arbitrator was not an appropriate tribunal for the issues in the case.

For more information, see this post on our Arbitration Notes blog.