UK Court Opinions

U.K. COURT FINDS ARBITRATION RESPONDENT DID NOT WAIVE OBJECTION TO JURISDICTION OF ARBITRATION TRIBUNAL

March 1, 2018 by John Pitblado

The Queen’s Bench Division of the U.K.’s High Court of Justice has reversed a partial award by a tribunal of the London Court of International Arbitration (“LCIA”), which held that an arbitration respondent lost its right to challenge the validity of a request for arbitration by failing to object until after serving its Response and shortly before its Statement of Defence was due. The court agreed with the tribunal that the request for arbitration violated LCIA Rules by seeking to join two disputes arising under separate contracts in a single proceeding. The court disagreed, however, with the conclusion that the respondent untimely challenged the tribunal’s jurisdiction based on the invalid request. Reading Section 31 of the 1996 Arbitration Act together with Article 23.3 of the LCIA Rules, the court found that objections to jurisdiction must be made no later than the time for the Statement of Defence.

A v. B, [2017] EWHC 3417 (Comm)

This post written by Alex Silverman.

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ENGLISH HIGH COURT OF JUSTICE ORDERS DISCLOSURE OF BANK’S RECORDS RELATED TO MISDIRECTED REINSURANCE PREMIUMS

January 24, 2018 by Michael Wolgin

In a proceeding seeking an order for disclosure of documents from Barclays Bank, the English High Court of Justice considered the scope of the agency involved in a run-off agreement between a reinsurance broker and another entity (“SMP”) in connection with collecting and transmitting of premiums under an Excess of Loss reinsurance policy issued by a Lloyd’s consortium. After SMP allegedly failed to pay $541,884.90 in premiums that it had received, a dispute arose whether the broker was responsible to repay the missing funds, or alternatively, whether the broker itself was damaged by SMP’s misuse of the funds. The consortium contended that the SMP was the agent of the broker, while the broker contended that SMP was simply entitled to collect the premiums due under the policy and pay them to the consortium, but that no agency relationship existed in that regard.

The court analyzed the run-off agreement and determined that the broker was entitled to assert that it was the beneficial owner of the premiums held in the account, even if it held those premiums on trust for the reinsured or was itself subject to obligations to pay them to the Consortium. The court therefore ruled that the order of disclosure from the bank was needed to enable the broker to identify the persons responsible for instructing the bank to pay the monies away, and to defend itself from the consortium’s potential claim. The court further found that the bank may have some culpability, which further supports its production of the documents. Miles Smith Broking Ltd. v. Barclays Bank PLC [2017] EWHC 3338 (Ch) (Dec. 15, 2017).

This post written by Michael Wolgin.

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LONG-TIME REINSURANCE ATTORNEY RULED NOT QUALIFIED TO ARBITRATE 9/11 WORLD TRADE CENTER REINSURANCE DISPUTE

November 22, 2017 by Michael Wolgin

An attorney with “considerably more than ten years’ experience of insurance and reinsurance law” has been deemed unqualified to arbitrate a reinsurance dispute stemming from the September 11, 2001 terrorist attack on the World Trade Center. The arbitration agreement called for an arbitration tribunal consisting of “persons with not less than ten years’ experience of insurance or reinsurance.” The High Court of Justice, Business and Property Courts of England and Wales, determined that this language required appointment of an individual with more than ten years’ experience in the business of insurance or reinsurance, rather than the law of insurance or reinsurance.

The court’s determination was largely dictated by a 2000 decision in which the judge held that the parties to an arbitration agreement utilizing the same language intended a “trade arbitration” meaning “the tribunal was to consist of persons from the trade or business of insurance or reinsurance.” Although the court acknowledged the strength of the argument that the “ordinary and natural meaning” of “experience of insurance or reinsurance included experience acquired not only from working within the insurance and reinsurance industry but also from working with or on behalf of that industry,” the court nevertheless held that the previous decision was not so “obviously wrong” that the precedential decision (Company X v. Company Y date July 17, 2000), should be departed from.

The court relied in part on the fact that the 2000 decision was “mentioned in Butler & Merkin’s Reinsurance Law … at paragraph C-0729.” This was accepted as evidence that the decision was “fairly well known in the legal/reinsurance claims community.” Therefore, in light of “the importance of precedent,” if the parties had intended a different meaning than that adopted in the “fairly well known” prior case, they would have used different language. As such, the court ruled that legal insurance or reinsurance experience was not sufficient under the clause and the attorney could not be appointed as an arbitrator. Tonicstar Ltd. v. Allianz Ins. PLC, [2017] EWHC (Comm) 2753.

This post written by Benjamin E. Stearns.

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ENGLAND’S HIGH COURT OF JUSTICE UPHOLDS ARBITRATION AWARD FINDING NO “SERIOUS IRREGULARITY”

November 14, 2017 by John Pitblado

Claimant’s application under s. 68(2)(d) of the Arbitration Act 1996 alleged serious irregularity in the award of an arbitral tribunal alleging the tribunal failed to deal with all the issues that were put before it, and requested that the Court set aside or vary the award rather than remit it to the tribunal, as one of the arbitrators had acted inappropriately.

Claimant listed four aspects of its defense which were not addressed: (1) collateral estoppel; (2) conclusive evidence; (3) failure to meet the burden of proof; and (4) overstatement. The Court concluded none of the complaints were justified.

With respect to the alleged inappropriate behavior, claimant’s party-appointed arbitrator sent an email to its counsel, not copying the petitioner or any other member of the Tribunal, stating that “both party-appointed arbitrators were upset by the conduct of the chairman,” expressed highly negative views about him, and that the party-appointed arbitrator was going to ask the chairman to resign. The email was marked “highly confidential: not to be used in the arbitration” and explicitly stated that the email “could not be referred to in the arbitration or afterwards.” The chairman did not resign and the arbitration proceeded “with no suggestion that there were any other internal difficulties on the Tribunal.”

The Court was astonished that the email was sent, stating that “any communication by one arbitrator with one party which concerns the arbitration may give rise to concerns that that arbitrator is not acting fairly or impartially for the simple reason that it creates the impression of a close relationship between the arbitrator and the party and rises the specter of other such communications.” Despite this, the Court did not set aside the Award, noting that disclosure of the email “might have created a somewhat awkward working environment, it is not something that experienced, professional people could not deal with.”

With respect to the claimant’s request for confidentiality, the Court concluded that as the Award was not confidential by a U.S. lawsuit, it was “unrealistic to argue that [claimant] continues to have any expectation of confidentiality in the Award.”

Symbion Power LLC v. Venco Imtiaz Construction Company, Case No: HT-2016-000211 (Royal Courts of Justice, London March 10, 2017)

This post written by Nora A. Valenza-Frost.

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DESPITE HEAVY CRITICISM OF THE RATIONALE, BRITISH COURT REFUSES TO ENFORCE ARBITRAL AWARD SET ASIDE BY RUSSIAN COURT

November 6, 2017 by Carlton Fields

The British High Court of Justice recently decided not to enforce an arbitral award in a dispute over the calculation of the purchase price of a Russian metallurgical company where a Russian court set aside that award and Russian appellate courts affirmed the decision. The plaintiff had argued the British court should not recognize the Russian judgments setting aside the award because it was the result of bias, while the defendant argued under the doctrine of ex nihilo nihil fit that because the award had already been set aside there was nothing for the British court to enforce.

The court started its analysis by observing the heavy burden borne by the party challenging the foreign court decision. Not only must the party show the decision is wrong or manifestly wrong, they must also show the decision is “so wrong as to be evidence of bias, or be such that no court acting in good faith could have arrived at it.”

The original Russian judge decided to set the award aside on three grounds: (1) the non-disclosure of potential bias because of the arbitrator’s relationships with expert witnesses was non-waivable; (2) the arbitrators’ method of calculating the purchase price violated public policy because it did not follow the purchase agreement’s terms; and (3) the dispute involved a “corporate claim” which is non-arbitratable under Russian law. It is noteworthy that the latter two grounds were not ones raised by the parties and were only raised by the judge in her written opinion.

In a lengthy opinion, the British High Court criticized the Russian court’s decision on all three grounds. On the non-disclosure issue, the British court took issue with the Russian court’s failure to address the appropriate test for waiver (actual or constructive notice), and failure to reach any factual conclusions. The court also took issue with the sua sponte nature of the latter two grounds. On the public policy issue in particular, the court found it difficult to see how the arbitrators acted in contravention of the agreement terms in arriving at a price calculation. Moreover, even if it were in contravention, that would amount to an error of law at most, not an act against public policy. On the non-arbitrability issue, the court determined that the Russian judge might have been a pioneer in concluding that corporate disputes are not arbitrable, because it could not find any record of cases holding applying that rule. However, a number of Russian courts since have followed her ruling.

Despite taking issue with the “shaky” grounds upon which the Russian court decided to set aside the award, and with the Russian appellate courts’ decisions affirming, the High Court nevertheless refused to enforce the award. It held that the decisions were not “so extreme and perverse that they can only be ascribed to bias” against the Plaintiff. For that reason, the court dismissed the application to enforce the award and did not reach the ex nihilo nihil fit argument.

Maximov v. Open Joint Stock Co., [2017] EWHC 1911 (Comm) July 27, 2017.

This post written by Thaddeus Ewald .
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