Evidence in International Arbitration CR PDF

Arbitration
the international journal of arbitration, mediation and

dispute management
2014 Volume 80 No.2
ISSN: 00037877.
Editorial Board
Dr Michael O’Reilly, Editor

Professor Derek Roebuck, Editor Emeritus
Senior Research Fellow, Institute of Advanced Legal Studies,
University of London
Dr Gordon Blanke, Book Review Editor
Counsel, Baker & McKenzie. Habib Al Mulla, Dubai
Dominique Brown-Berset
Attorney-at-Law, Partner, Brown and Page, Geneva
Hew R. Dundas
Chartered Arbitrator
Arthur Harverd
Chartered Accountant, Carter Backer Winter, London
Julio César Betancourt
Head of Research & Academic Affairs at the Chartered Institute of
Arbitrators
Dr Colin Ong
Barrister, Essex Court Chambers; Dr Ong Legal Services, Brunei
© Chartered Institute of Arbitrators 2014
Published in Association with Sweet and Maxwell

Sweet & Maxwell ® is a registered trademark of Thomson Reuters (Professional) UK
Limited. Computerset by Sweet & Maxwell. Printed and bound in Great Britain by Hobbs
the Printers Ltd, Totton, Hampshire. No natural forests were destroyed to make this product:
only farmed timber was used and replanted.
Table of Contents
Editorial
Michael O'Reilly 123
Articles
When Even Fraud Is Not Nearly Enough. Recourse Against Arbitral
Awards and Public Policy Considerations: An Anglo-Australian
Perspective
Julian Sher and Nicholas Kazaz 124
Section 69 of the English Arbitration Act 1996—When Fact and Law
Collide
Andrew Tweeddale, Keren Tweeddale and Natasha Nguyen 136
Evidence in International Arbitration: Criteria for Admission and
Evaluation
Konstantin Pilkov 147
Commercial Arbitration in Dubai
Daniel Brawn 156
If It Ain’t Broke, Don’t Change It
Neil Kaplan 172
A Tribute to the Contribution of Hew Dundas to Fifty Issues of
Arbitration
Derek Roebuck 176
2013 Alexander Lecture
Investomercial Arbitration: Whence Cometh It? What Is It? Whither
Goeth It?
Charles N. Brower 179
Cases
Two Rarities: Subpoenaing an Arbitrator for Cross-Examination and
Court Enforcement of a Peremptory Order
Hew R. Dundas 196
The Enforcement of Adjudicators’ Awards under the Housing Grants,
Construction and Regeneration Act 1996: Part 50
Kenneth T. Salmon 204
Enforcement of Foreign Arbitral Awards in India: Lal Mahal Reduces
the Scope for Court Interference
Rathin Somnath 217
The Application of the Fiona Trust Principle of “One-Stop”
Adjudication to a Non-Exclusive Jurisdiction Clause: Ryanair v Esso
Italiana
Jonathan Haydn-Williams 220
Staying Defences
Patrick Taylor 226
Book Reviews
Arran Dowling-Hussey 228
Robert Morgan 229
Contributors
DANIEL BRAWN: Senior Associate, Galadari Advocates, Dubai
CHARLES N. BROWER: International Arbitrator, 20 Essex Street, London
ARRAN DOWLING-HUSSEY: DipArb, DipICArb, FCIArb; Barrister; Accredited Mediator;
Adjudicator and Arbitrator practising from the Law Library, Dublin and Temple Court
Chambers
HEW R. DUNDAS: FCIArb; DipICArb; Chartered Arbitrator; CEDR-Accredited Mediator;
International Arbitrator, Mediator and Expert Determiner
JONATHAN HAYDN-WILLIAMS: Senior Counsel, Goodman Derrick LLP
NEIL KAPLAN CBE: QC, SBS, International Arbitrator
NICHOLAS KAZAZ: Solicitor(England & Wales); Barrister (England & Wales); Associate
in the London office of Holman Fenwick Willan LLP
ROBERT MORGAN: Barrister (England & Wales, Queensland); Consulting Editor, Asian
Dispute Review
NATASHA NGUYEN: Lawyer, Corbett & Co Solicitors, London
KONSTANTIN PILKOV: MCIArb; Advocate, Partner, Cai & Lenard, Ukraine
DEREK ROEBUCK: Editor Emeritus, Arbitration
KENNETH T. SALMON: Solicitor; Consultant to Weightmans LLP, Manchester
JULIAN SHER: Barrister
and Solicitor (Western Australia); Partner and Head of the Perth
office of Holman Fenwick Willan
RATHIN SOMNATH: Year
V student (BSc (Hons) and LLB (Business Law Hons)), National
Law University, Jodhpur
PATRICK TAYLOR: Principal, Patrick J Taylor Solicitors
ANDREW TWEEDDALE: Director, Corbett & Co Solicitors, London
KEREN TWEEDDALE: Barrister; Senior Lecturer at South Bank University, London
Editorial
In this issue we include a selection of articles and presentations covering a wide range of
topics from a variety of jurisdictions.
Julian Sher and Nicholas Kazaz deal with recourse against awards with a particular focus
on the regime applicable in Australia. Andrew Tweeddale, Keren Tweeddale and Natasha
Nguyen deal with appeals on a question of law under the English legislation and focus in
particular on the distinction between errors of fact and errors of law. Konstantin Pilkov
looks at the criteria for admission and evaluation of evidence in international arbitration.
Daniel Brawn provides an overview of commercial arbitration in Dubai, a seat of growing
importance. And Neil Kaplan proposes that arbitrators may consider directing a “Kaplan
Opening”—an opening hearing in advance of the main hearing.
We then have a specially requested tribute to Hew Dundas whose contribution to this
Journal is unique. Editor Emeritus, Derek Roebuck presents a brief outline of that
contribution (to date) which comprises 84 articles, 50 of which have appeared in consecutive
issues, the 50th of which appears in this present issue. As the current Editor I would also
like to thank Hew.
We publish the Alexander Lecture 2013 by Charles N. Brower on investomercial
arbitration, that is, arbitration based on a commercial transaction but covered by the
investment protection regime established by international convention, commonly through
a bilateral investment treaty. This is an area of growing importance in world arbitration and
this is a timely contribution.
We have the usual reviews of cases. Hew Dundas (in his 50th consecutive piece) deals
with two rarities—subpoenaing an arbitrator for cross-examination and court enforcement
of a peremptory order. And not to be outdone Kenneth T. Salmon, whose contribution is
also outstanding, presents the 50th instalment in his series on the enforcement of adjudicators’
awards under the Housing Grants, Construction and Regeneration Act 1996. Rathin Somnath
considers the important case of Lal Mahal decided by the Indian Supreme Court, dealing
with the enforcement of foreign awards. Jonathan Haydn-Williams considers the application
of the Fiona Trust principle to a non-exclusive jurisdiction clause. And Patrick Taylor looks
at a recent case dealing with the difficult question of defences in court which include
elements which may, if advanced as an independent claim, be caught by an arbitration
agreement. Arran Dowling-Hussey and Robert Morgan have provided book reviews.
As always, we are grateful to all authors and reviewers and greatly appreciate the time
they spend ensuring that the Journal continues to be a key reference in this field.
Michael O’Reilly
Editor
(2014) 80 Arbitration, Issue 2 © 2014 Chartered Institute of Arbitrators 123

Articles
When Even Fraud Is Not Nearly Enough. Recourse

Against Arbitral Awards and Public Policy
Considerations: An Anglo-Australian Perspective
Julian Sher
Nicholas Kazaz
The new regime for domestic commercial arbitration reflects how far Australia has come
in creating a substantively distinct jurisdiction for commercial dispute resolution as an
alternative to the courts. An avowed desire to avoid the replication of processes through
the courts motivated the authors of the UNCITRAL Model Law on International Commercial
Arbitration (the Model Law).1 Their aim was to restrict drastically the scope for curial
intervention in order to achieve speedy, cost-effective, fair and final resolution of disputes.
The Model Law has now been adopted into Australian state law for domestic commercial
arbitrations,2 following its earlier reception into Australian federal law for international
arbitration.3 It is a moot point whether this makes Australia a more attractive jurisdiction
for those contemplating arbitration. Perhaps the point to be made is that the new legislation
should make domestic arbitration in Australia more time and cost effective than before.
1. Statutory Ethos: England and Wales versus Australia

The English4 and Australian legislatures have each taken different approaches to drafting
their legislation to allow recourse against awards. The objectives of both regimes are
generally the same, but their methods of reaching those objectives are significantly different.
While England and Wales take a restrictive approach, which reflects the special public
policy considerations underpinning the English legislation, the Australian approach is a
more general reflection of the Model Law, as adopted into the Australian legislation: the
uniform Commercial Arbitration Acts (State Acts) and the International Arbitration Act
1974 (Cth) (IAA 1974), respectively. The differences between these textual approaches are
significant, but as regards the practical implementation of those provisions, the distinctions
are perhaps not all that great. In England and Wales, only the most exceptionally serious
of cases will be set aside, even where serious procedural irregularities occur. By contrast,
in Australia, following the literal text of the legislation, any breach of natural justice in
connection with the making of an award may arguably be contrary to or in conflict with
Australian public policy, triggering the possibility of recourse, including setting aside.5
Severe restriction of curial intervention has been a fundamental element of English
arbitration for a long time. By enacting the Arbitration Act 1996 (the English Arbitration
1
UNCITRAL Model Law on International Commercial Arbitration (1985), with amendments as adopted in 2006.
2
The uniform Commercial Arbitration Acts (CAA) have come into force in all Australian states and territories
except for the Australian Capital Territory. The Acts are as follows: Commercial Arbitration Act 2012 (WA),
Commercial Arbitration Act 2010 (NSW), Commercial Arbitration Act 2011 (Vic), Commercial Arbitration Act
2011 (SA), Commercial Arbitration Act 2011 (Tas), Commercial Arbitration Act 2013 (Qld).
3
The relevant act is the International Arbitration Act 1974 (Cth) which applies in all Australian states and territories.
4
England and Wales constitute a single jurisdiction. Scotland and Northern Ireland are distinct jurisdictions. When
we refer to England or the United Kingdom, this refers to the jurisdiction of England and Wales.
5
Castel Electronics Pty Ltd v TCL Air Conditioner (Zhongshan) Co Ltd (No.2) [2012] FCA 1214 at [19].
124 (2014) 80 Arbitration, Issue 2 © 2014 Chartered Institute of Arbitrators

Arbitral Awards and Public Policy: An Anglo-Australian Perspective 125
Act), the UK Parliament adopted the Model Law, but went much further, by severely
restricting the possibility of setting aside in particular. The English courts have interpreted
rights of recourse against an award under the English Arbitration Act, as confining setting
aside to only the most egregious and reprehensible of cases. The House of Lords explained
the radical nature of the 1996 changes to English arbitration law in Lesotho Highlands
Development Authority v Impregilo SpA, by reference to the pre-existing law.6 Lord Steyn
explained that the major purpose of the changes was “to reduce drastically the extent of
intervention of courts in the arbitral process”.7
On the face of it, that strongly articulated expression of curial exclusion (save for the
worst cases, where there is no practical alternative) contributes to the United Kingdom
being a desirable seat for arbitration. This is borne out by indications from the business
community, demanding speed and finality—with cost effectiveness as the additional bonus.8
The enactment of arbitration legislation in Australia and the United Kingdom was the
culmination of the historical evolution of the common law. The High Court of Australia
recently observed that historically both Australia and England have approached relationships
between: (i) the parties; and (ii) the parties and the arbitrators in terms of private law.9
Notably, in view of the public policy considerations explicit in the current arbitration
regime, the High Court of Australia has relevantly observed that performance of the arbitral
function is not purely a private matter of contract, in which the parties have given up their
rights to engage judicial power; nor is it “wholly divorced from the exercise of public
authority”.10 It was the Court’s view that the development of commercial law should not
be restricted by “the complete insulation of private commercial arbitration”.11 The High
Court’s conclusion from its analysis of the interaction between the statutory regimes relevant
to commercial arbitration was that they involved the exercise of public authority, whether
by the arbitral tribunal or by the court.12
Perhaps counterintuitively, the narrower scope for the English courts to intervene may
be one of the attractions for companies that choose that seat for their arbitrations,13 in
preference to jurisdictions like Australia, arguably perceived to be more liberal or untested
than the United Kingdom. Australia has not yet had a case testing the extent of curial
intervention to set aside an award under the State Acts. One must turn to the ordinary
principles of statutory construction laid down by the High Court of Australia, as well as
precedents in the international arbitration context.
There are no explicit insights into the ethos of the State Acts to explain restricted curial
intervention and the public policy which the legislation is meant to reflect—other than
general considerations, arising from the Model Law (and international arbitration), embodied
in the new legislation as “paramount objectives”. Although there is a relationship between
the Model Law and the English Arbitration Act, the expression of purpose and policy from
the UNCITRAL draftsmen seems a far cry from the explicit comments made by the sponsors
of the English Arbitration Act in the House of Lords.
The question—at least in Australia—is identifying where, on the spectrum of gravity of
public policy breaches, one would find the justification for setting aside an award altogether,
in contrast to mere remittal to the arbitrators. What is the test for remittal rather than setting
aside? An important statutory trigger for such recourse is the public policy ground. How
6
[2005] UKHL 43; [2006] 1 A.C. 221; [2005] 3 All E.R. 789; [2005] 2 Lloyd’s Rep. 310 at [26] and [27].
7
Lesotho Highlands Development Authority v Impregilo SpA [2005] UKHL 43; [2006] 1 A.C. 221; [2005] 3 All
E.R. 789; [2005] 2 Lloyd’s Rep. 310 at [26].
8
Queen Mary, University of London and PWC, International Arbitration Survey 2013: Corporate Choices in
International Arbitration: Industry Perspectives, available online at: http://www.pwc.com/gx/en/arbitration-dispute
-resolution/assets/pwc-international-arbitration-study.pdf [Accessed February 18, 2014].
9
TCL Air Conditioner (Zhongshan) Co Ltd v The Judges of the Federal Court of Australia [2013] HCA 5 at [9].
10
Westport Insurance Corp v Gordian Runoff Ltd [2011] HCA 37; 244 CLR 239 at [20].
11
12
13
There are many reasons for which commercial entities may choose English arbitration, not least the renowned
expertise and breadth of experience available.
(2014) 80 Arbitration, Issue 2 © 2014 Chartered Institute of Arbitrators

126 Arbitration
this trigger operates in England and Wales is clear. When this trigger will operate is an
academic consideration, because it is such an exceptional remedy. Its likely operation in
Australia (on the domestic front) will be an interesting comparative (and meanwhile,
speculative) exercise, until the first decision is handed down. Any decision will have
profound relevance to Australia’s perception of itself as an attractive jurisdiction for domestic
arbitral dispute resolution.
2. England and Wales
An expression of public policy

The notion that a judgment can always be set aside if impugned by fraud14 is not the norm
in commercial arbitration, unlike in litigation in general. The recent English decision in
Chantiers de l’Atlantique,15 where the arbitration was tainted by fraud, illustrates this point.
The English High Court held that even though the critical expert evidence (given at the
arbitration hearing) was fraudulent, the award should not be set aside. In coming to this
decision, the Court’s view was that the result would probably not have been any different
even if truthful evidence had been given.
This result will by no means have startled those familiar with English commercial
arbitration law. It was merely one of the latest in a consistent line of English authority,
articulating how recourse against awards is to be achieved. There is a mandatory statutory
regime, with strict recourse provisions. The key to Chantiers de l’Atlantique is an
understanding of the English Arbitration Act, the underlying public policy considerations,
as well as the law governing the arbitration in question.
The decision is of interest in Australia, since it coincides (more or less) with the
introduction of the new Model Law based State Acts. The common Model Law provenance
of the English and Australian legislation provides limited guidance on how the State Acts
are likely to be interpreted and applied in Australia. The English Arbitration Act goes much
further than any Australian legislation by explicitly radically restricting curial intervention.
Like the Commonwealth, with respect to international arbitration, Australian states and
territories have adopted the Model Law for domestic arbitration. The relevant provisions
allow the setting aside of an award on the application of an aggrieved party on a generally
expressed public policy ground. It differs markedly from the language of the English
Arbitration Act which codifies a list of particularised grounds, including the rolled-up fraud
and public policy ground.
These two approaches to statutory drafting do not of themselves reveal a great deal about
differing approaches to their interpretation in England and Australia. The key to the English
approach is the public policy considerations on which the English Arbitration Act is explicitly
based and their implementation by the courts.
A feature of the English case law is the explicit reflection of the policy considerations at
the heart of the statutory remedy. This invites the questions whether those considerations
are relevant in Australian domestic arbitration law and how the new State Acts will be
interpreted by the relevant Australian courts. That will involve an analysis of the English
and Australian legislation, the Model Law and any explanatory material, as well as relevant
case law. Accordingly, Chantiers de l’Atlantique merits further scrutiny.
14
Robert Merkin and Louis Flannery, Arbitration Act 1996, 4th edn (London: Routledge, 2008), p.155–163 (note
commenting on the English Arbitration Act s.68).
15
Chantiers de l’Atlantique SA v Gaztransport & Technigaz SAS [2011] EWHC 3383 (Comm).

Chantiers de l’Atlantique v Gaztransport: A summary

This was an application under the English Arbitration Act to set aside an arbitration award
on the grounds that it was obtained by fraud on the part of the respondent, Gaztransport
(GTT). The arbitration was held in Paris in the French language pursuant to the Procedural
Rules of the International Commercial Court (ICC), which are essentially akin to the
procedure in civil law jurisdictions including France, as regards matters such as disclosure.
The arbitrators were French (albeit the President of the Tribunal was Belgian), and the
parties and their lawyers were French. The agreement between the parties out of which the
arbitration had arisen was subject to French law.
Despite that, the application to set aside was made to the High Court of Justice of England
and Wales because the underlying agreement stipulated that the place of arbitration was to
be London. It followed that the High Court was the supervisory court to which the application
to set aside had to be made.
The claimant in the arbitration (and the applicant in the application to set aside) was a
major French shipbuilding company that specialised in building Liquefied Natural Gas
(LNG) carriers designed to carry LNG held at extreme sub-zero temperatures (CAT). GTT
was a company specialising in the design of containment systems technology for LNG
carriers and land-based LNG storage systems. It was jointly owned by significant
corporations, namely, Gaz De France, Total and Saipem.
The core of the dispute was whether there was poor workmanship by the shipyard in the
adhesive bonding of the secondary insulation barrier of the containment. Subsequent tests
of the LNG vessels suggested that there was indeed a serious fault which needed to be
rectified before the vessels could enter service. It was agreed that GTT would carry out a
test programme in a laboratory. This was done. Unfortunately the results of the tests were
totally unsatisfactory, causing a reaction of some consternation within GTT. Yet GTT did
not tell CAT about these results, which were deliberately concealed—as was the
consternation for that matter.
CAT made an application under the English Arbitration Act s.68(2)(g) for the award to
be set aside on the grounds that it was obtained by fraud on the part of the respondent.16
The court articulated the issue before it in the subsequent application to set aside the arbitral
award for fraud as follows:
“[W]hat matters ultimately is whether the allegations now relied upon … establish to
the requisite standard that the Award was obtained by fraud”.
This is a reference to the many allegations in the arbitration and the application to set aside.
These involved criticisms not only of GTT’s design, but also of GTT’s failure to disclose
the test results in question.
At the arbitration hearing in Paris, GTT called a witness who produced an expert’s report
disclosing certain test results, but not the results which caused the consternation. CAT’s
case, in the application to set aside, was that the witness intentionally concealed from the
tribunal the existence of the tests and the test results, and made a number of deliberately
misleading statements to the tribunal.
16
The relevant section provides as follows:
“(1) A party to arbitral proceedings may (upon notice to the other parties and to the tribunal) apply to the
court challenging an award in the proceedings on the ground of serious irregularity affecting the tribunal,
the proceedings or the award. A party may lose the right to object (see section 73) and the right to apply
is subject to the restrictions in section 70(2) and (3).
(2) Serious irregularity means an irregularity of one or more of the following kinds which the court considers
has caused or will cause substantial injustice to the applicant:
…
(g) the award being obtained by fraud or the award or the way in which it was procured being
contrary to public policy.”

128 Arbitration
The tribunal dismissed CAT’s claims on various grounds, the most relevant of which
was that CAT could not establish the necessary criterion as a matter of French law of “gross
fault”.
A few weeks after the award was published, CAT received a tip-off from a whistle-blower
who was a disaffected employee of GTT. He suggested that CAT should look at the various
test results and that CAT had been the victim of fraud. Subsequently, an anonymous
whistle-blower provided CAT with a document in a plain brown envelope. It was the internal
GTT email referring to the test results indicating unacceptable adhesive failures.
Lessons from Chantiers de l’Atlantique

The judgment in Chantiers de l’Atlantique demonstrates the extremely restrictive approach
of English courts to the setting aside of arbitral awards. Flaux J. enunciated the following
four principles in relation to the English Arbitration Act s.6817:
1. An arbitral award will only be set aside for fraud in extreme cases as s.68 is
“designed as a longstop only available in extreme cases”.
2. Fraud is dishonest, reprehensible or unconscionable conduct and it must be
distinctly pleaded and proved, to a heightened burden of proof.18
3. The award itself must have been obtained by fraud. This will be where
“the party which has deliberately concealed the document has, as a
consequence of that concealment, obtained an award in its favour. The
Party relying on section 68 (2)(g) must therefore also prove a causative
link”.19
This means that there has to be fraud in the arbitration itself.
4. The evidence of fraud must not be of such a kind “as could have been obtained
or produced at the arbitration hearing with reasonable diligence” and the
evidence must be “so material that its production [at trial] would probably
have affected the result”. It is not necessary to show that it would have affected
the result, as this would be to usurp the function of the arbitrators in the event
that it were to be remitted to them.
It is also useful to note that Flaux J. emphasised that the arbitration had been conducted
under the IBA Rules on the Taking of Evidence in International Arbitration, under which
there was no duty to disclose relevant documents (as might have been required under English
Civil Procedure Rules Pt 31).
The English Arbitration Act and its ethos

The English Arbitration Act allows a party to arbitral proceedings to apply to court
challenging an award on the ground of serious irregularity affecting the tribunal, the
proceedings or the award.20
A serious irregularity means an irregularity which the court considers has caused or will
cause substantial injustice to the applicant. The codified list of grounds of irregularity which
may trigger an application includes “the Award being obtained by fraud or the way in which
it was procured being contrary to public policy”.21
17
Chantiers de l’Atlantique SA v Gaztransport & Technigaz SAS [2011] EWHC 3383 (Comm) at [54]–[61].
18
The burden of proof is set out in Hornal v Neuberger Products Ltd [1954] 1 Q.B. 247 and Re H (Minors) [1996]
A.C. 563.
19
Flaux J. was relying on the decision in Elektrim SA v Vivendi Universal SA [2007] EWHC 11 (Comm); [2007]
1 Lloyd’s Rep 693 at [82].
20
English Arbitration Act s.68(1).
21
English Arbitration Act s.68(2)(g).

Once there is shown to be serious irregularity on one or more of the grounds, the court
may remit the award to the tribunal, set it aside in whole or in part, or declare it to be of no
effect, in whole or in part.22 The critical requirement is that an irregularity will only be
“serious” if it causes or will cause a substantial injustice to the applicant. It follows that
even where fraud is proved, the court must still be satisfied that a substantial injustice to
the applicant will result. “Injustice to the applicant”, in contrast to general injustice, contrary
to the values of the justice system, represents the radical pragmatism characterising the
English Arbitration Act.
A court may only set aside an award, or declare it to be of no effect, if it is satisfied that
it would be inappropriate to remit the matters in question to the tribunal for reconsideration.23
The thrust of this provision is that setting aside is the solution only where the impugned
conduct is of such a kind that there is nothing else left that would be an appropriate form
of relief. The effect is to reserve setting aside for the exceptional cases, where it is
inappropriate to leave it to the tribunal to rectify its own mistakes, or any flaws in the
procedure adopted in the arbitration.
The codified list of possible irregularities is exhaustive, leaving no room for the courts
to develop new grounds of serious irregularity in a manner that might lead to a general
supervisory jurisdiction.24
Specifying fraud as well as other conduct contrary to public policy as a single ground
suggests the same treatment for both types of conduct. The English courts have, however,
observed that where a party has procured the award in a way which is contrary to public
policy, but short of fraud, it will normally be necessary to satisfy the court that some form
of reprehensible or unconscionable conduct has contributed in a substantial way to obtaining
an award in that party’s favour. But it is also said that a court should not be quick to interfere
under this provision. It should only be used in extreme or serious cases.25
The difficulty is in understanding the nature of behaviour so serious, yet not warranting
the ultimate remedy of setting aside. The best way of illustrating where the line has been
drawn is by referring to actual examples.
In Miller’s Timber Trust v Plywood Factory Julius Potempa,26 the plaintiff applied to
have the awards set aside and the umpire removed. The court was not persuaded that this
was the correct remedy where the umpire had acted honestly and in good faith, despite
making awards which contravened the prevailing legal requirements.
It was said that if the evidence had been that the umpire was disposed to favour one or
other of the parties, the court would not have regarded remittal as the appropriate solution.
These observations are obsolete in the context of post-1996 English arbitration law, where
a specific approach to curial intervention is recognised and applied by the courts. They do,
however, show that setting aside is reserved for only the worst and most exceptional cases,
involving dishonesty and bad faith on the part of the tribunal.
Pacol Ltd v Joint Stock Co Rossakhar27 is a more recent example of setting aside, having
been decided under the 1996 Act. Colman J. described it as “the paradigm of a case where
the award ought to be set aside”. The arbitrators made their award without giving the parties
prior notice of their intention to reopen the question of liability. Remittal was held to be
inappropriate because the arbitration would have to be re-opened and re-pleaded. What is
more, it was held that it would be “quite wrong to allow the arbitrators to build anything
on the structure of the award”, by granting a remittal.
Setting aside may be either an inappropriate or an appropriate remedy, depending on the
circumstances. It is inappropriate where arbitrators make a genuine mistake, but appropriate
22
23
24
Merkin and Flannery, Arbitration Act 1996 (2008), p.155–163 (note commenting on the English Arbitration Act
s.68).
25
Profilati Italia Srl v PaineWebber Inc [2001] 1 All E.R. (Comm) 1065 at [17].
26
(1939) 63 Ll. L. Rep. 184.
27
[2000] 1 Lloyd’s Rep. 109.

130 Arbitration
where they make a serious and irrevocable error of justice, affecting the integrity of the
entire arbitration.
The House of Lords has spoken of “the radical changes brought about by the Act” to
explain its “ethos”.28 In the parliamentary debate on the occasion of the reading of the
Arbitration Bill in the House of Lords in 1996, the relationship between arbitration and
court proceedings was put in these words:
“I have never taken the view that arbitration is a kind of annex, appendix or poor
relation to court proceedings. I have always wished to see arbitration, as far as possible,
and subject to statutory guidelines no doubt, regarded as a freestanding system, free
to settle its own procedure and free to develop its own substantive law … . That is not
the position generally which has been taken by English law, which adopts a broadly
supervisory attitude …
Other countries adopt a different attitude and so does the UNCITRAL model law.
The difference …is … quite a substantial deterrent to people to sending arbitrations
… [to England and Wales] …
…[The Arbitration Bill] … has given the court only those essential powers which
I believe the court should have; that is, rendering assistance when the arbitrators cannot
act in the way of enforcement or procedural steps, or, alternatively, in the direction of
correcting very fundamental errors.”29
There was no need for the drafters of the Arbitration Act to set out the circumstances in
which setting aside would be appropriate because the case law already sufficiently set the
parameters.
One of the fundamental purposes of the English Arbitration Act was to reduce drastically
the extent of court intervention in the arbitral process.30 The rationale for refusing to set
aside awards in cases short of fraud has been expressed as precluding what would otherwise
become the granting of a remittal or setting aside in virtually every case.31 This proposition
was accepted in Chantiers de l’Atlantique.32 Even where the aggrieved party relied upon
fraud, it was still necessary to prove not only that the new evidence was unavailable at the
time of the arbitration, but that it would have had an important influence on the result.33
This criterion is critical because of the language in the English Arbitration Act.
The words “obtained by fraud” in the English Arbitration Act have been held to mean
the fraud of a party to the arbitration—or to which the party was privy—not fraud committed
by anyone connected with the arbitral process. It has been observed that
“this fits in with the general ethos of the Act, which is to give the courts as little chance
to interfere with arbitrations as possible … If this wording referred to the fraud of
anyone else … involved in the arbitral process … that would give unsuccessful parties
carte blanche to apply to court to set aside or remit an award.”34
The intention is to exclude cases where a witness for one or other party perjures him or
herself.35
The House of Lords has remarked that the original conception of s.68 was in these terms:
28
E.R. 789; [2005] 2 Lloyd’s Rep. 310 at [17].
29
Lord Wilberforce, Hansard, col.778 (January 18, 1996), as cited in Lesotho Highlands Development Authority
v Impregilo SpA [2005] UKHL 43; [2006] 1 A.C. 221; [2005] 3 All E.R. 789; [2005] 2 Lloyd’s Rep. 310 at [18].
30
English Arbitration Act s.1(c).
31
Profilati Italia Srl v PaineWebber Inc [2001] 1 All E.R. (Comm) 1065 at [20].
32
Chantiers de l’Atlantique SA v Gaztransport & Technigaz SAS [2011] EWHC 3383 (Comm) at [53].
33
Elektrim v Vivendi Universal SA [2007] EWHC 11 (Comm); [2007] 1 Lloyd’s Rep 693 at [82].
34
Elektrim SA v Vivendi Universal SA [2007] EWHC 11(Comm); [2007] 1 Lloyd’s Rep 693 at [80].
35
Elektrim SA v Vivendi Universal SA [2007] EWHC 11(Comm); [2007] 1 Lloyd’s Rep 693 at [79].

“[it] … is really designed as a long stop only available in extreme cases where the
tribunal has gone so wrong in its conduct of the arbitration that justice calls out for it
to be corrected.”36
This was in the context of an appeal to resolve the issue of whether the arbitrators had
exceeded their powers by making an award in a currency other than that stipulated in the
contract. Lord Steyn observed that s.68 was not designed to achieve the “right” decision,
but, rather, a fair arbitral hearing, leading to an impartial arbitral adjudication.
The case law reflects the view that applications to set aside will, more often than not, be
unsuccessful.37 It follows that a setting aside order would only be available in cases involving
such reprehensible behaviour that no other remedy is appropriate. This would probably
include the case where a tribunal itself has committed fraud. It is more difficult to imagine
an example where a procedural irregularity committed in good faith would warrant setting
aside.
3. Australia
Public policy and Australian domestic commercial arbitration

The State Acts allow an arbitral award to be set aside if the court finds that “the award is
in conflict with the public policy of … [the State]”.38 The reference to public policy should
be understood in the context of the paramount object of the legislation, which is “to facilitate
the fair and final resolution of commercial disputes by impartial tribunals without
unnecessary delay or expense”.39
The public interest in achieving the paramount objective is explicitly recognised. It must
be achieved
“by enabling the parties to agree about how their commercial disputes are to be resolved
(subject to … such safeguards as are necessary in the public interest)”.40
There is no explicit language distinguishing between fraud and other conduct contrary to
public policy, nor does there need to be. 41 Both fraud and failure to apply the safeguards
of natural justice are paradigm examples of conduct in conflict with or contrary to public
policy and the public interest. They are both at the heart of the administration of justice.
Specifically, the legislation promotes the observation of good faith in the resolution of
arbitral disputes.42
The State Acts provide that they must be interpreted with regard to the need to promote
the application of the provisions of the Model Law, having regard also to documents relating
to UNCITRAL itself and its working groups for the Model Law.43
The International Arbitration Act defines public policy in the context of both the
enforcement of foreign awards and recourse against awards.44 With respect to the latter the
IAA provides:
36
E.R. 789; [2005] 2 Lloyd’s Rep. 310 at [27], citing the Report of the Departmental Advisory Committee on Arbitration
Law on the then Arbitration Bill cl.68.
37
Elektrim v Vivendi Universal SA [2007] EWHC 11 (Comm); [2007] 1 Lloyd’s Rep 693; Cuflet Chartering v
Carousel Shipping Co Ltd [2001] 1 All E.R. (Comm) 398; Thyssen Canada Ltd v Mariana Maritime SA [2005]
EWHC 219 (Comm).
38
CAA s.34(2)(b)(ii), all state legislation.
39
CAA s.1C(1) (WA), (NSW), (SA) and (Tas); s.1AC(1) (Qld); s.1AA(a) (Vic). The dual objectives of the case
management system found in the superior courts are reducing delay and achieving cost effectiveness.
40
CAA s.1C(2)(a) (WA), (NSW), (SA) and (Tas); s.1AC(2)(a) (Vic) and (Qld).
41
Cf. CAA s.34, all state legislation.
42
CAA s.2A(1), all state legislation.
43
CAA s.2A(3) (WA), (NSW), (Vic), (Tas) and (Qld); s.2A(2) (SA). Cf. TCL Air Conditioner (Zhongshan) Co
Ltd v The Judges of the Federal Court of Australia [2013] HCA 5 at [6].
44
IAA s.8(7A) and s.19(1)(b) respectively.

132 Arbitration
“for the avoidance of any doubt … for the purposes of … [the Model Law
art.34(2)(b)(ii)] … an award is in conflict with or contrary to, the public policy of
Australia if:
(a) the making of the … award was induced or affected by fraud or corruption;
or
(b) a breach of the rules of natural justice occurred in connection with the making
of the … award.”45
Identical language is used in relation to identifying when the enforcement of foreign awards
would be contrary to public policy. It follows that “public policy” includes procedural as
well as substantive questions.46 On the face of it, any departure from the rules of natural
justice in connection with the making of an award under the International Arbitration Act
would offend fundamental notions of fairness and justice—in conflict with or contrary to
public policy.47
This is also likely to be the interpretation under the State Acts, in the light of the common
adoption of the Model Law at both state and federal levels. Unlike the IAA, the State Acts
do not define the meaning of “public policy”. They bundle up all impugned conduct
generally, under the rubric of being in conflict with or contrary to public policy.
The language imported into the legislation from the Model Law contains guidance. The
Model Law is said to contain an exhaustive list of the grounds on which an award can be
set aside. “Violation of public policy”—one of the grounds for setting aside an award—is
said “to be understood as serious departures from fundamental notions of procedural
justice”.48 The key adjective is “serious”, indicating that the wide language of the State Act
may encompass, but not be confined to, conduct of a “most reprehensible” or a “most
egregious” kind. This suggests a range of impugned conduct, which must at least be serious.
Fraud is the obvious example of the most serious violation. But, importantly, it is also a
serious departure from the principles of trust, honesty and integrity at the heart of the
administration of justice. Fraud and corruption are the antithesis of the public interest. They
are fundamentally in conflict with public policy objectives. It is no coincidence that the
word “violation” is used in this context, to give adequate expression to the level of
disapproval such reprehensible behaviour engenders. The language of the Explanatory Note
to the Model Law, focusing on procedural rather than substantive justice, invites a question
as to the degree of procedural irregularity contemplated. The answer must be “serious
departures”, including departures from principles of natural justice—like fraud, equally
antithetical to procedural and to substantive justice.49 This is consistent with the language
of the English Arbitration Act, where the relevant ground for setting aside differentiates
between conduct amounting to “fraud or … contrary to public policy”.50
Restrictions on granting recourse against an award

In the rather Delphic language of the Model Law, the State Acts apply as follows:
“This Act does not affect any other Act by virtue of which certain disputes may not
be submitted to arbitration or may be submitted to arbitration only according to
provisions other than those of this Act.”51
45
IAA s.19.
46
Castel Electronics Pty Ltd v TCL Air Conditioner (Zhongshan) Co Ltd (No.2) [2012] FCA 1214 at [19]. An
appeal to the High Court of Australia was successful, but on different grounds.
47
48
Explanatory Note by the UNCITRAL Secretariat to the 1985 Model Law on International Commercial Arbitration
as amended in 2006, para.46.
49
Assistant Commissioner Condon v Pompano Pty Ltd [2013] HCA 7.
50
Merkin and Flannery, Arbitration Act 1996 (2008), p.155–163; and English Arbitration Act s.68(2)(g).
51
CAA s.1(5), as incorporated into all State Acts.

Stating the obvious, it follows that the State Acts do not apply to particular state laws which
exclude submission to arbitration, or which allow submission under some other law. The
logic is that the State Acts are an exclusive means of seeking relief, save where other laws
exclude such relief altogether, or make specific provision for such relief.
The expression of exclusionary intent explicitly delimits the restricted extent of court
intervention, namely: “In matters governed by this Act, no court shall intervene except
where so provided in this Act.”52
Chapter VII of the Model Law (“Recourse Against Award”) makes it crystal clear that
recourse to a court to set aside an award may only be made in conformity with the procedures
and processes prescribed by the Law.53
To all intents and purposes, this is the last word on the exclusivity question.54 Yet it has
been suggested that this may amount to a denial of “curial remedies in regard to excess of
jurisdiction” which “may strike at the very heart of any such provision”.55 These remarks
are now obsolete. They apparently stem from the line of authority regarding the operation
of traditional privative clauses designed to protect decisions made under enactments
applicable to jurisdictional error and judicial review.56 They do not take into account the
fundamental policy of pragmatism and flexibility at the heart of the legislation. The State
Acts now allow much more flexibility in the choice of remedies, aiming to fix a problem,
rather than provide retribution for the aggrieved party. The court may suspend the setting
aside application to allow the arbitration to continue, or allow the arbitrators to take other
steps to obviate setting aside the award.57
Seen in this light, two things become apparent. First, even where there is a complaint of
fraud or of similarly seriously reprehensible conduct, the court has the flexibility to allow
arbitrators to deal pragmatically with the source of the complaint. Secondly, the courts are
expected and obliged to grant pragmatic relief, consistent with the paramount object of the
State Acts. Even where setting aside is deemed appropriate, the decision will be based on
pragmatic grounds consistent with the objectives of the legislation.
Likely developments in Australia

Australia has not yet had a domestic arbitration case explaining how the judicial discretion
to set aside a domestic arbitral award is, or is likely to be, applied. No Australian case
explicitly confines the remedy of setting aside an award to only the most extreme cases.
Fortunately, guidance is available from cases on the nearly identical regime for international
arbitration.
A question for Australian lawyers remains: how to identify when setting aside is
appropriate in a domestic arbitration. What is the trigger for setting aside instead of remittal?
In England and Wales it is explicitly limited to the very worst of cases where the integrity
of the administration of justice leaves no alternative. Is the position practically any different
in Australia, despite the differences in the statutory language used?
In England and Wales, even where serious procedural irregularities have occurred, setting
aside is not there for the asking. In Australia, the level of generality of the statutory language
prompts the question of where the line should be drawn to justify setting aside. It has been
observed that the ordinary grammatical meaning of the text is that any breach of natural
justice in connection with the making of an award could justify setting aside.58 Does this
mean—by stating it so broadly—that even the most trivial breach would be actionable?
52
CAA s.5, all State Acts.
53
CAA s.34(1).
54
Bishop v Chung Bros (1907) 4 C.L.R. 1262 at 1273.
55
Marcus S. Jacobs QC, Commercial Arbitration Law and Practice (Sydney: Law Book Company), p.560, remarking
on the possible effect of Kirk v Industrial Court of NSW (2010) 239 C.L.R. 531.
56
Cf. Houssein v Department of Industrial Relations and Technology NSW (1982) 148 C.L.R. 88.
57
CAA s.34(4), all State Acts.
58

134 Arbitration
This issue has attracted some judicial commentary in Australia with respect to international
arbitration. It is suggested that the setting aside power will be used only in the most serious
cases despite the generality of the statutory language.59 What is more, despite the differences
between the language of the English and Australian legislation, the Australian courts will
not deny the enforcement of an international award where an English court has previously
refused to set aside that award.60
The Federal Court of Australia has questioned the view that less seriously impugned
conduct may qualify for relief, as well as the reprehensible and unconscionable sort of
conduct in the English Arbitration Act.61 The first point is that a breach unlikely to affect
the outcome of an arbitration should not result in the award being treated as being in conflict
with public policy. Secondly, it is said that the inclusion of less serious breaches would be
inconsistent with the paramount objective of the State Acts. The final point is that the
inclusion of lesser breaches would be inconsistent with the pro-enforcement bias of the
arbitration legislation.62 All three of these points not only have considerable force in their
own right, but they all seem entirely consistent with the aim of creating a seamless uniform
arbitral system across jurisdictions.
4. A Shared Ethos?
In view of the expressed objectives of the Australian domestic arbitration regime and the
public policy considerations on which it is based, it is unlikely that Australian courts would
take a different approach to the English courts. There are, consistently with notions of
comity and uniformity between jurisdictions, strong indications that Australian courts will
find the English case law persuasive, in relation to both domestic and international arbitration.
Coeclerici Asia (Pte) Ltd v Gujarat NRE Coke Ltd is a case in point.63 In the aftermath
of an English court refusing to set aside the award,64 the litigation moved to Australia.
Coeclerici successfully obtained judgment from the Federal Court of Australia for amounts
owing, the appointment of receivers and ancillary relief. In the Australian proceeding Gujarat
NRE’s defence relied upon provisions of the IAA empowering a court to refuse the
enforcement of a foreign award, if it would be contrary to public policy to do so, on the
ground of a breach of natural justice.65
The Federal Court of Australia discussed in detail the reasons for the judgment delivered
in the English proceedings.66 Despite the English decision that their case was devoid of
merit, the respondents persisted in arguing that the alleged failure by the arbitrators to grant
them natural justice entitled them to escape the consequences of enforcement of the award
in Australia. But the Federal Court held that one of the relevant circumstances to be
considered in the Australian proceedings was that the dispute was being dealt with by way
of arbitration, in particular, under the English Arbitration Act.67 The Court held that not
only had they received ample opportunity to be heard, but the English court had actually
ruled against them on that very issue.68 Extending that point, the Federal Court observed
that “it would generally be inappropriate for … [it] … to reach a different conclusion on
the same question as that reached by the court of the seat of the arbitration”.69
59
Castel Electronics Pty Ltd v TCL Air Conditioner (Zhongshan) Co Ltd (No.2) [2012] FCA 1214.
60
Coeclerici Asia (Pte) Ltd v Gujarat NRE Coke Ltd [2013] FCA 882.
61
62
CAA ss.35–36, all State Acts.
63
[2013] FCA 882.
64
NRE Coke Ltd & Anor v Coeclerici Asia (Pte) Ltd [2013] EWHC 1987 (Comm).
65
IAA s.8(7)(b); Coeclerici Asia (Pte) Ltd v Gujarat NRE Coke Ltd [2013] FCA 882 at [26].
66
Coeclerici Asia (Pte) Ltd v Gujarat NRE Coke Ltd [2013] FCA 882 at [86]–[91].
67
Coeclerici Asia (Pte) Ltd v Gujarat NRE Coke Ltd [2013] FCA 882 at [92].
68
69

Gujarat NRE subsequently made an unsuccessful appeal to the Full Court of the Federal
Court of Australia,70 confirming Australia as a pro-enforcement jurisdiction and
demonstrating that the Australian courts will tend to give weight to decisions of the court
of seat of the arbitration.
5. Conclusions: Where Next?

The State Acts must be interpreted so as to promote uniformity between the application of
the legislation to domestic commercial arbitrations and the application of the Model Law
to international commercial arbitrations.71 The court must not exercise its power to set aside
an award unless it is satisfied that it would be inappropriate to remit the matters in question
to the arbitral tribunal.72 This is despite the plain words of the State Acts saying simply,
without elaboration, that recourse is available whenever public policy is breached. The
element of propriety was presumably added to give effect to the paramount objective of the
State Acts.
It follows that remittal is the default position, setting aside being reserved only for
inappropriate cases. These are the rare cases where remittal would be inadequate to redress
breaches so serious as to bring the administration of justice into question, for example,
securing an award by corrupt means.
It has been suggested that the discretion to set aside an award will only be exercised
“when fundamental notions of fairness or justice are offended”.73 This broad general approach
is consistent with the meaning of the legislation. It allows setting aside when appropriate,
that is to say, where conduct seriously offends public policy. Equally, it finds pragmatic
solutions short of setting aside in most cases, where radical surgery is not the solution.
The new arbitration regime is designed to keep intervention by the courts to a minimum,
apparently even where egregious conduct occurs. The signs are that Australian courts are
following this approach, guided by universal public policy considerations inherent in the
Model Law.
In the most serious cases, the court may set aside an award. However, this will take place
only on the rarest of occasions. Instead, remittal is likely to become the default recourse in
the majority of cases.
70
Gujarat NRE Coke Ltd v Coeclerici Asia (Pte) Ltd [2013] FCAFC 109.
71
CAA s.2A(1), all State Acts.
72
CAA s.34A(8), all State Acts.
73

Section 69 of the English Arbitration Act
1996—When Fact and Law Collide
Andrew Tweeddale
Keren Tweeddale
Natasha Nguyen
1. Introduction
It has often been said that an arbitrator is master of the facts.1 Challenges to arbitrators’
awards have rarely ever been permitted based purely on an error of fact.2 In Vinava Shipping
Co Ltd v Finelvet AG (The Chrysalis)3 Mustill J. remarked, albeit as obiter dicta, that the
court had no jurisdiction to consider appeals on questions of fact—even if the parties agreed.
Similarly, in Geogas SA v Trammo Gas Ltd (The Baleares)4 Steyn L.J., in the Court of
Appeal, held that: “The principle of party autonomy decrees that a Court ought never to
question the arbitrators’ findings of fact.”
The Arbitration Act 1996 (AA 1996) has sought to reinforce this position. The AA 1996
s.69, which governs appeals, is highly restrictive. It applies only to appeals on questions of
law arising out of the award and that question must be one which the arbitral tribunal was
asked to determine. Furthermore, the AA 1996 s.81(2) makes clear that:
“Nothing in this Act shall be construed as reviving any jurisdiction of the court to set
aside or remit an award on the ground of errors of fact or law on the face of the award”.
A “question of law” is defined by the AA 1996 s.82(1), which states that it means a question
of English law for a court in England and Wales or one of Northern Irish law for a court in
Northern Ireland. This is the case even if the law of the contract is similar to English law.5
However, the situation is less clear when questions of fact are bound into questions of
law. A question of mixed fact and law can arise where the arbitral tribunal needs to decide
on the interpretation of a contract, custom or statute. Furthermore, it used to be thought that
where a finding of fact was based on no evidence whatsoever, this gave rise to a point of
law.6 However, given the emphasis in the AA 1996 on less judicial intervention, this principle
has recently come under the scrutiny of the courts. This article looks at recent case law
which has considered when the courts will entertain appeals which involve questions of
mixed fact and law. It also considers how the courts approach identifying a question of law.
2. Identifying a Question of Law

The starting point for any challenge under the AA 1996 s.69 is to identify a question of
law. In Kershaw Mechanical Services Ltd v Kendrick Construction Ltd,7 Jackson J. (as he
1
Mustill & Boyd, Commercial Arbitration, 2nd edn (London: Butterworths, 1989), p.596; and Steyn L.J. in Geogas
SA v Trammo Gas Ltd [1993] 1 Lloyd’s Rep. 215 at 227 CA.
2
An example of where a challenge was permitted was in the middle of the nineteenth century when it was permissible
to challenge an award where the arbitrator admitted there was an error of fact: Mills v The Master, etc. of the Mystery
of Bowyers 3 K. & J. 66.
3
[1983] 2 All E.R. 658.
4
[1993] 1 Lloyd’s Rep. 215 at 232 CA.
5
Reliance Industries Ltd v Enron Oil and Gas India Ltd [2002] 1 All E.R. (Comm) 59.
6
See, e.g. Edwards (Inspector of Taxes) v Bairstow [1956] A.C. 14.
7
Kershaw Mechanical Services Ltd v Kendrick Construction Ltd [2006] EWHC 727 (TCC).

Section 69 of the English Arbitration Act 1996—When Fact and Law Collide 137
then was) addressed the issue of approaching appeals under s.69 by reference to four distinct
topics. These were:
1. What evidence can the court consider in determining an appeal under the AA
1996 s.69(2)?
2. Is there a philosophy of non-intervention which should influence the court?
3. What degree of deference should be shown to the arbitrator’s decisions on
questions of law?
4. How should the court identify any questions of law arising out of an award?
What evidence can the court consider in determining an appeal under the
AA 1996 s.69(2)?
In most cases the court can only consider the arbitral award as evidence.8 For example,
HOK Sport Ltd v Aintree Racecourse Co Ltd9 concerned an appeal against the decision of
an arbitrator on the measure of damages payable to Aintree. It was alleged that the architect,
HOK Sport Ltd, had breached its duty of care in failing to warn that a newly constructed
sports stand would have lower seating capacity than required. The parties had prepared and
served “voluminous evidence and documentary materials”10 including sections of the
pleadings, closing submissions and the transcript of evidence in the arbitration. H.H. Judge
Thornton QC held that none of this material was admissible in relation to whether there
was a question of law arising out of the award. Judge Thornton referred to the following
dicta from Coleman J. in Foley’s Ltd v City and East London Family and Community
Services11:
“The jurisdiction provided under section 1 of the 1979 Act provides for the court to
consider any questions of law arising out of an award. For that purpose the court is to
be provided with the award. If the award does not indicate in the reasons attached to
it precisely the route which the arbitrator has followed from the submissions indicated
in the award to the conclusion at which he has arrived, it is open to a party to apply
under section 1(5) of the Arbitration Act for further reasons.
… That and only that, is the available material upon which the court can determine
applications for leave to appeal.”
Judge Thornton confirmed that the above passage was equally applicable to AA 1996 s.69.
However, on rare occasions, exceptions to the strict approach in HOK Sport are made
due to the particular facts of the case, such as in Kershaw v Kendrick.12 This case concerned
an appeal against an arbitrator’s partial award determining what sums were due to a
sub-contractor on its final account. The case turned on the true interpretation of a passage
related to pricing (referred to as “the Qualification”) which formed part of a series of items
of correspondence incorporated into the sub-contract. Although the arbitrator had identified
the correspondence in his award, it had not been fully reproduced. Jackson J. determined
that in this case the award could not be read in isolation: it formed part of a series of
documents which needed to be examined in order to properly interpret it. He concluded
that the guidance in Hok Sport should be modified so that, in addition to the award, the
court can also look at any documents referred to in the award which it needs to read in order
to determine the appeal. What is evident, however, is that the courts will only allow a limited
amount of evidence to be adduced by the applicant in order to determine the issue of law
that is the subject of the appeal.
8
If the parties have agreed to dispense with a reasoned award AA 1996 s.69(1) states that an appeal cannot be
brought.
9
[2002] EWHC 3094 (TCC).
10
[2002] EWHC 3094 (TCC) at [15].
11
[1997] A.D.R.L.J. 401 at 402–403.
12
Kershaw Mechanical Services Ltd v Kendrick Construction Ltd [2006] EWHC 727 (TCC).

138 Arbitration
Is there a general philosophy of non-intervention which should influence

the courts?
Recent first instance decisions show that judges have divergent views on whether there is
a general philosophy of non-intervention. This issue arose in Kershaw v Kendrick, where
the respondent argued that a philosophy of non-intervention by judges underpinning the
AA 1996 should discourage the court from allowing an appeal under s.69(2)(a). The
argument relied on a passage from the judgment of Lord Steyn in Lesotho Highlands
Development Authority v Impregilo Spa13 in which his Lordship referred to the
non-interventionist role of the court as the ethos of the AA 1996. In Kershaw v Kendrick
the appellant argued that Lesotho was irrelevant as it did not concern an appeal under s.69
(which had been barred under the ICC rules) but concerned a challenge under the AA 1996
s.68. Furthermore, the parties in Kershaw v Kendrick had expressly agreed that there should
be an appeal on questions of law to the court.
Jackson J. found that there was no philosophy or ethos underpinning the AA 1996 that
would prevent a court from deciding any questions of law raised by an appeal. He came to
this conclusion based on the principle of party autonomy which is one of the principles on
which Pt 1 of the AA 1996 is founded. If the parties have agreed that an appeal should lie
to the courts on any questions of law, this should not be prevented. Moreover, the principle
of non-intervention stated in s.1(c) is qualified by the words “except as provided by this
Part”; s.69(2)(a) being a provision falling within that exception. Lesotho was distinguished
on the basis that it concerned a challenge under the AA 1996 s.68.
In contrast, in National Trust for Places of Historic Interest or Natural Beauty v Fleming14
Henderson J. remarked15 that
“… The court should … be very sparing in its interventions in the arbitral process,
and this philosophy is reflected in the provisions of section 69.”
Judge Hegarty QC referred to this comment in Harvey v MIBI16 and also made a similar
observation17:
“I accept that a commitment to the autonomy of the dispute resolution process chosen
by the parties is a factor which underpins the present approach to judicial intervention
in arbitration matters, as enshrined in the 1996 Act.”
Judge Hegarty then stated:
“I very much doubt if even a total absence of any evidential basis for a finding of fact
can give rise to a question of law for the purposes of section 69”
and gave his judgment accordingly.
What degree of deference should be shown to the arbitrator’s decisions on

questions of law?
Numerous authorities have stated that, as a general rule, courts should seek to uphold
arbitration awards. In Kershaw v Kendrick, Jackson J. considered a line of cases beginning
with The Chrysalis18 which considered the way in which courts should approach arbitration
awards. Mustill J. considered that the arbitrator’s approach to decision making should be
in three stages. First, the facts should be ascertained (this includes making findings on any
13
[2005] UKHL 43; [2005] 3 W.L.R. 129.
14
[2009] EWHC 1789 (Ch).
15
[2009] EWHC 1789 (Ch) at [12].
16
Unreported December 21, 2011 (Lawtel transcript 2011 12 26706791).
17
Harvey v MIBI Unreported December 21, 2011 (Lawtel transcript 2011 12 26706791) at [40].
18
Vinava Shipping Co Ltd v Finelvet AG (The Chrysalis) [1983] 2 All E.R. 658.

facts which are in dispute); secondly, the relevant law should be determined; and thirdly,
the law should be applied to the ascertained facts (this stage involves an element of judgment
by the arbitrator). Mustill J. pointed out19 that there was not “a uniquely ‘right’ answer to
be derived from marrying the facts and the law, merely a choice of answers, none of which
can be described as wrong”.
This scenario is illustrated by White Rosebay Shipping SA v Hong Kong Chain Glory
Shipping Ltd.20 In this case the issue was whether a party had affirmed a charterparty by its
conduct. The court held that whether a party had done so or not was a judgment for the
tribunal and as the exercise of a tribunal’s judgment was not a mechanical exercise and
would result in different conclusions from different tribunals, there was no “right” answer.
The court could not say that in applying the law of affirmation to the facts there was one
answer only. This meant that the court could not conclude that the tribunal must have
misunderstood the principles it directed itself to apply and so must have erred in law. The
court stressed that it was not its role to substitute for the tribunal’s answer the answer it
might have given had it been the tribunal of fact.
Mustill J. in The Chrysalis was of the view that only the second stage could properly be
the subject of an appeal under the AA 1996 s.69. He observed21 that:
“In some cases an error of law can be demonstrated by studying the way in which the
arbitrator has stated the law in his reasons. It is, however, also possible to infer an
error of law in those cases where a correct application of the law to the facts found
would lead inevitably to one answer, whereas the arbitrator has arrived at another; and
this can be so even if the arbitrator has stated the law in his reasons in a manner which
appears to be correct: for the court is then driven to assume that he did not properly
understand the principles which he had stated.”
However, Mustill J. recognised that a court might be less willing to substitute its own
judgment for that of the arbitrator if the issue concerned an area of industry in which the
arbitrator had extensive practical experience. The Chrysalis therefore sets out a very narrow
scope for appeals on issues of mixed fact and law and subsequent courts have shown an
unwillingness to widen it.
Following The Chrysalis, Bingham J. in Zermalt Holdings SA v Nu-Life Upholstery
stated22:
“As a matter of general approach, the courts strive to uphold arbitration awards. They
do not approach them with a meticulous legal eye, endeavouring to pick holes,
inconsistencies and faults in awards, and with the objective of upsetting or frustrating
the process of arbitration. Far from it. The approach is to read an arbitration award in
a reasonable and commercial way, expecting, as is usually the case, that there will be
no substantial fault that can be found with it.”
In Gill & Duffus SA v Société Pour L’exportation Des Sucres SA,23 Sir John Donaldson
M.R. expressed a general reluctance to reverse the decision of a trade tribunal. However,
the issue at hand in that case was one of contract construction and thus one of law. As there
was no suggestion that contracts for the sale of sugar differed from contracts for the sale
of any other soft commodity, there was no reason to consider that the tribunal was in a
better position than the court to come to a decision in this case.
19
Vinava Shipping Co Ltd v Finelvet AG (The Chrysalis) [1983] 2 All E.R. 658 at 663.
20
[2013] EWHC 1355 (Comm); [2013] 2 All E.R. (Comm) 449.
21
22
[1985] 2 E.G.L.R. 14 at 14. The principle was subsequently approved in Majorboom Ltd v National House
Building Council [2008] EWHC 2672 (TCC) at [10].
23
[1986] 1 Lloyd’s Rep. 322.

140 Arbitration
By contrast, in Andre et Cie v Cook Industries24 one of the issues which arose concerned
the interpretation of some exchanges by telex. Bingham J. considered that though the
construction of the exchanges was a question of law, these exchanges took place in a context
where communications were sent from trader to trader in a fast-moving situation. In these
circumstances a trade tribunal would have an insight that was not available to the court. He
was not willing to differ from the tribunal’s decision in such a situation unless the tribunal’s
decision was plainly untenable.
From this line of authority Jackson J. in Kershaw v Kendrick derived two principles25:
“1. The court should read an arbitral award as a whole in a fair and reasonable
way. The court should not engage in minute textual analysis.
2. Where the arbitrator’s experience assists him in determining a question of
law, such as the interpretation of contractual documents or correspondence
passing between members of his own trade or industry, the court will accord
some deference to the arbitrator’s decision on that question. The court will
only reverse that decision if it is satisfied that the arbitrator, despite the benefit
of his relevant experience, has come to the wrong answer.”
In Seagrain LLC v Glencore Grain BV26 the court applied the second of Jackson J.’s
principles. In Seagrain the arbitrators decided that the sending of the samples to a particular
laboratory did not constitute an executive act under a clause of the contract. The court held27:
“This is the kind of issue on which the court gives considerable weight to the views of the
trade tribunal.”
However, while deference is often given by the courts to the views of trade tribunals it
is not invariably so. In Novasen SA v Alimenta SA28 Popplewell J. stated that29:
“I would naturally be reluctant to differ from a trade tribunal such as the FOSFA Board
of Appeal on a question of the interpretation of one of its standard clauses unless I
were satisfied that despite the collective experience of the Board it were wrong.
Nevertheless in this case the deference due to their views is somewhat tempered by
the fact that the tribunal did not articulate any reasoning for their conclusion, either as
to the wording of the clause, or as to the commercial considerations which might have
influenced the effect which they found the clause to have … I do not therefore find
my conclusion affected by the deference which I naturally afford to the views of the
parties’ chosen and specialist tribunal.”
Thus courts will often give deference to the views of arbitral tribunals where that tribunal
is possessed of some special skill or knowledge—such as a trade tribunal. However, where
the tribunal is simply giving its view on a matter of law, where it is no more qualified to
opine on the point of law than a court, then such deference will not usually be given.
How should the court identify questions of law arising out of an award?
One of the issues faced by the courts is the tendency of appellants to try to pass off questions
of fact as questions of law. This was noted in the DAC Report on Arbitration Bill 1996
(DAC Report)30:
“There have been attempts, both before and after the enactment of the Arbitration Act
1979, to dress up questions of fact as questions of law and by that means to seek an
24
[1986] 2 Lloyd’s Rep. 200.
25
Kershaw Mechanical Services Ltd v Kendrick Construction Ltd [2006] EWHC 727 (TCC) at [57].
26
27
Seagrain LLC v Glencore Grain BV [2013] EWHC 1189 (Comm) at [37].
28
29
[2013] EWHC 345 (Comm); [2013] 2 All E.R. (Comm) 162 at [26].
30
The DAC Report at [286].

appeal on the Tribunal’s decision on the facts. Generally, these attempts have been
resisted by the Courts but to make the position clear, we propose to state expressly
that consideration by the Court of the suggested question of law is made on the basis
of the findings of fact in the award.”
In Majorboom Ltd v National Housing Building Council,31 Coulson J. referred to this
statement within the DAC Report and found that the purported questions of law raised by
the applicant were in reality questions of fact. He emphasised that the AA 1996 s.69 requires
the identification of “clear, crisp questions of law”.32 He observed that the detailed nature
of the questions posed in this case only served to demonstrate that they were not questions
of law at all and the approach adopted by counsel, in deconstructing the words of the
arbitrator, did not receive a warm welcome from the court.33 Nevertheless, Coulson J.
recognised that when arguments are refined, sometimes an applicant will be able to identify
more clearly in argument the issues of law on which he seeks permission to appeal.
Similarly, in Penwith DC v VP Developments Ltd,34 Akenhead J. dismissed an application
for leave to appeal under the AA 1996 s.69. He called the case a “prime example of a wholly
unjustified application”35 and emphasised the following36:
“As this Court and the Commercial Courts have said on many occasions, parties must
not come to the Court seeking leave to appeal on an apparent question of law which
on any sensible analysis is in reality an appeal on a question of fact. The Court will
not and should not treat what may arguably be an incorrect finding of fact as a question
of law.”
The approach that the English courts have consistently adopted is that the question of law
should be clearly and succinctly stated. If the question of law cannot be clearly expressed
then the likelihood is that it will involve not only questions of law but also questions of
fact. Nevertheless, in Hok Sport,37 H.H. Judge Thornton QC considered that where a question
has been clumsily phrased it is open to the court to amend the wording of a suggested
question of law as raised by the application to confine the question to one of law which
arises out of the award.
Can the court infer an error of law based on the arbitrator’s findings?
Recent cases have applied the three-stage approach set out by Mustill J. in The Chrysalis38
in deciding whether an arbitrator has made an error of law. Ramsey J. referred to these
guidelines in London Underground v Citilink Telecommunications Ltd,39 concurring with
Mustill J. that only the stage at which the arbitrator ascertains the law can be subject to an
appeal under the AA 1996 s.69. Ramsey J. also referred to the judgment of Steyn L.J. in
The Baleares,40 which observed that sometimes parties ask the court to draw reasonable
inferences from the arbitrator’s findings of fact. Steyn L.J. considered this to be another
oblique way to challenge an award based on findings of fact. He stated that the purpose of
this argument is often to put forward a new legal argument which was not put before the
arbitrators. He asserted that it is
31
[2008] EWHC 2672 (TCC).
32
Majorboom Ltd v National Housing Building Council [2008] EWHC 2672 (TCC) at [14].
33
34
[2007] EWHC 2544 (TCC).
35
Penwith DC v VP Developments Ltd [2007] EWHC 2544 (TCC) at [1].
36
Penwith DC v VP Developments Ltd [2007] EWHC 2544 (TCC) at [23].
37
Hok Sport Ltd v Aintree Racecourse Co Ltd [2002] EWHC 3094 (TCC); [2003] B.L.R. 155.
38
39
[2007] EWHC 1749 (TCC); [2007] 2 All E.R. (Comm) 694.
40
Geogas SA v Trammo Gas Ltd [1993] 1 Lloyd’s Rep 215.

142 Arbitration
“contrary to well established principle for the Court to draw inferences from findings
of fact in an award on the basis that it would be reasonable to do so”.41
He considered that the court may only draw inferences from findings of fact when those
inferences are “truly beyond rational argument”.42
In Penwith,43 Akenhead J. set out some general observations at the end of the judgment
as to when a proper application under AA 1996 s.69 should be made. His Lordship stated:
“Applications for leave to appeal on questions of law must not be dressed up as
questions of law when they are, on proper analysis, criticisms of the Arbitrator’s
findings of primary and secondary fact. It is not enough to say on an application for
leave to appeal on a question of law that the Arbitrator made findings of fact which
no reasonable Arbitrator could or should have made. It is not for the Court to substitute
its own view of the facts for that of the Arbitrator. Whilst one can understand the
frustration of a party against whom an Arbitrator has made a controversial finding of
fact, that frustration does not justify an application to the Court for leave to appeal on
a question of law.”
The circumstances in which the court may draw inferences from the facts were described
in the decision of Lord Diplock in Pioneer Shipping v BTP Tioxide (The Nema)44:
“… it may be that the facts found are such that no reasonable person acting judicially
and properly instructed as to the relevant law could have made the determination under
appeal. In these circumstances, too, the court must intervene. It has no option but to
assume that there has been some misconception of law that has been responsible for
the determination.”
In Majorboom,45 Coulson J. accepted that a mixed question of fact and law may be the
subject of a s.69 application. However, Coulson J. emphasised46 that the courts have
repeatedly stated that there can be no error of law if the conclusion reached by the arbitrator
is within the permissible range of conclusions open to him or her.47
In MRI Trading AG v Erdenet Mining Corp LLC48 Eder J., at first instance, allowed an
appeal under s.69 and varied the tribunal’s award.49 The issue in the case turned on whether
a purported contract was legally binding on the parties. The tribunal had concluded that it
was not binding because of uncertainty; however, in arriving at its conclusion the tribunal
had failed to take account of other documents such as a settlement agreement which had to
be read with the contract to understand what the parties had intended. Eder J. concluded50
that “no reasonable tribunal correctly applying the relevant legal principles could have
reached such a conclusion”. Erdenet appealed to the Court of Appeal. Tomlinson L.J., giving
the leading judgment, noted that the parties had agreed the relevant principles of law to be
applied by the tribunal in deciding whether an agreement was not legally binding for
uncertainty.51 Tomlinson L.J. remarked that the tribunal had failed to take account of one
of those principles and therefore its decision that the contract was unenforceable was
41
Geogas SA v Trammo Gas Ltd [1993] 1 Lloyd’s Rep 215 at [229].
42
43
Penwith DC v VP Developments Ltd [2007] EWHC 2544 (TCC).
44
[1982] A.C. 724 at 742.
45
Majorboom Ltd v National Housing Building Council [2008] EWHC 2672 (TCC).
46
47
See also The Matthew [1992] Lloyds Rep. 323; Foleys Ltd v City and East London Family and Community
Services [1997] A.D.R.L.J. 401; Benaim (UK) Ltd v Davies Middleton & Davies Ltd [2005] EWHC 1370 (TCC);
and Sinclair v Woods of Winchester Ltd [2006] EWHC 3003 (TCC).
48
49
MRI Trading AG v Erdenet Mining Corp LLC (MRI Trading) [2012] EWHC 1988 (Comm); [2013] 1 All E.R.
(Comm) 1 at [26].
50
MRI Trading AG v Erdenet Mining Corp LLC (MRI Trading) [2012] EWHC 1988 (Comm); [2013] 1 All E.R.
(Comm) 1 at [15].
51
MRI Trading AG v Erdenet Mining Corp LLC [2013] EWCA Civ 156; [2013] 1 Lloyd’s Rep. 638 at [16].

“flawed”.52 Tomlinson L.J. therefore agreed with the decision of Eder J. that the tribunal
had erred in not having regard to the settlement agreement and dismissed the appeal.
Equally, an error of law was inferred in (1) Wuhan Ocean Economic & Technical
Company Ltd and (2) Nantong Huigang Shipbuilding Co Ltd v Schiffahrts-Gesellschaft
“Hans Murcia” MBH & Co KG.53 The arbitral tribunal held that a shipbuilder’s failure to
procure renewal of a refund guarantee within a reasonable time before its expiry was a
breach of an implied term within the shipbuilding contract. Moreover, the tribunal held that
seven days before expiry of the guarantee this failure had become a repudiatory breach.
Cooke J. found that, in holding that the breach was repudiatory, the arbitrators had erred
in law by failing to give effect to their finding that whenever arbitration was commenced
the refund guarantee would be extended automatically as a matter of construction. Thus the
buyers were under no risk of losing the refund guarantee provided that they commenced
arbitration, as they could do after the expiry date. Cooke J. concluded that although the
arbitrators had set out the right test for repudiatory breach they had not applied it correctly.
The conclusion they reached was one which no reasonable arbitrator could reach by applying
the correct test to the facts in this case.
MRI Trading54 and The Hans Murcia55 have shown that the courts will intervene where
they consider that the arbitral tribunal’s decision is not one that a reasonable tribunal could,
correctly applying the relevant legal principles, have reached. MRI Trading illustrates that
it is not always easy to determine what a question of law is and what a question of fact is.
It might, for example, be argued that identifying the documents which make up a contract
is a question of fact. However, the judge concluded that it was a question of law because
it involved issues of contractual interpretation. Tsakiroglou & Co v Noblee Thor GmbH56
indicates the difficulties that the courts have in deciding what is a question of fact and what
is a question of law. The case revolved around whether a contract had been frustrated
because of the closure of the Suez Canal. At first instance this was said to be a question of
fact. However, before the House of Lords it was said to be a question of law by one Law
Lord, a question of evidence by another and a question of mixed fact and law by a third
Law Lord.
3. Does a Question of Law Arise Where there Is Insufficient or No

Evidence to Support a Fact?
There have been various attempts to circumvent the principle that the arbitrator’s findings
of fact must be taken as conclusive. Most commonly, attempts have been made to argue
that the issue of whether there is insufficient evidence or no evidence to support a material
fact is itself a question of law. Under the AA 1950 this was a legitimate ground for
challenging an award: Edwards (Inspector for Taxes) v Bairstow.57
Following the introduction of the AA 1979 the question whether the Edwards v Bairstow58
principle was still applicable came before the courts. In The Baleares59 Steyn L.J. held that
an appeal on the Edwards v Bairstow principle did not constitute an appeal on a point of
law under the AA 1979. Steyn L.J. stated60:
52
MRI Trading AG v Erdenet Mining Corp LLC [2013] EWCA Civ 156; [2013] 1 Lloyd’s Rep. 638 at [18].
53
54
MRI Trading AG v Erdenet Mining Corp LLC [2013] EWCA Civ 156; [2013] 1 Lloyd’s Rep. 638.
55
Wuhan Ocean Economic & Technical Cooperation Co Ltd v Schiffahrts-Gesellschaft Hansa Murcia mbH & Co
KG [2012] EWHC 3104 (Comm); [2013] 1 All E.R. (Comm) 1277.
56
[1962] A.C. 93.
57
[1956] A.C. 14.
58
Edwards (Inspector for Taxes) v Bairstow [1956] A.C. 14.
59
60

144 Arbitration
“The Arbitrators are the masters of the facts. On an appeal the Court must decide any
question of law arising from an Award on the basis of a full and unqualified acceptance
of the facts of the Arbitrators. It is irrelevant whether the Court considers those findings
of fact to be right or wrong. It also does not matter how obvious a mistake by the
Arbitrators on an issue of fact might be. That is of course an unsurprising position.
After all, the very reason why parties conclude an arbitration agreement is because
they do not wish to litigate in the Courts. Parties who submit their disputes bind
themselves by agreement to honour the Arbitrator’s Award on the facts. The principle
of party autonomy decrees that a Court ought never to question the Arbitrator’s findings
of fact.”
However, this was obiter dicta and the point was not addressed by the other members of
the Court of Appeal. Although the approach advocated by Steyn L.J. was followed in
Secretary of State for the Environment v Reed International61 and Blexen Ltd v G Percy
Trentham Ltd62 there were other first instance decisions which contradicted Steyn L.J.’s
views on whether the Edwards v Bairstow principle was still good law. In Capital and
Counties Plc v Hawa,63 Millet J. was of the opinion that where there was no evidence to
support a fact then this gave rise to an error of law. It seemed however to be accepted that
finding a fact based on insufficient evidence would no longer give rise to a right to challenge
on a point of law.
Following the introduction of the AA 1996 the issue of whether a complete lack of
evidence gave rise to a point of law was considered by Etherton J. in Guardcliffe Properties
Ltd v City & St James.64 Etherton J. concluded that Reed International had been wrongly
decided and chose to follow the approach of Millet J. in Capital and Counties.65 Similarly
in Fence Gate Ltd v NEL Construction Ltd66 H.H. Judge Thornton QC held that it may be
possible to raise a question of law where there was a complete lack of evidence to support
a material finding of fact. The judge made a distinction between circumstances where a
finding of fact is made on insufficient evidence and where it is made on a complete lack of
evidence.
The leading textbooks seemed also to favour the approach of Steyn L.J. Mustill and
Boyd67 stated that
“it is now clearly impossible to challenge the findings of fact in an award on the ground
that there was no evidence to support them”.
Russell68 stated:
“the argument that it is a question of law whether there is material to support a finding
of fact is no longer available”.
However, Merkin’s69 conclusion was different and seemed to follow H.H. Judge Thornton’s
approach in Fence Gate Ltd v NEL. While Merkin accepted that an award could not be
challenged for insufficient evidence to support the arbitrator’s findings of fact, it may be
possible to challenge it on the basis that there was no evidence at all.70
61
[1994] 1 E.G.L.R. 22.
62
(1990) 21 Con L.R. 61, 65.
63
[1991] 2 E.G.L.R. 133, 134.
64
[2003] 2 E.G.L.R. 16.
65
Capital and Counties Plc v Hawa [1991] 2 E.G.L.R. 133 at 134.
66
[2001] All E.R. (D) 214.
67
Commercial Arbitration, 2001 Companion Volume, 2nd edn (London: Butterworths, 2001), p.357.
68
David St John Sutton, Judith Gill and Matthew Gearing (ed.), Russell on Arbitration, 22nd edn (London: Sweet
& Maxwell, 2002), p.395.
69
Arbitration Law, 3rd edn (London: Routledge, 2004), paras 15.42–15.44 and 21.9–21.11.
70
Referred to by Cooke J. in Demco Investments Commercial SA & Ors v SE Banken Forsakring Holding Aktiebolag
[2005] EWHC 1398 (Comm) at [42].

More recent authority has however moved away from the view that a complete absence
of evidence can give rise to a point of law. In Demco Investments Commercial SA & Ors
v SE Banken Forsakring Holding Aktiebolag,71 Demco Investments applied for permission
to appeal against arbitrators’ findings that a company it had sold to the respondent had
mis-sold pensions to investors. The arbitrators had considered evidence for 222 sample
cases where mis-selling had been alleged. Demco Investments argued among other things
that the arbitrators had made an error of law in making factual findings on some of the
sample cases based on inferences which no reasonable arbitrator could have made. Cooke
J. found that the AA 1996 left no room for appeal on this basis. Section 34(2)(f) provides
that it is for the Tribunal to decide all procedural and evidential matters. The DAC Report
further supports this position, stating that:
“Clause 34(2)(f) helps to put an end to any arguments that it is a question of law
whether there is material to support a fact.”72
As neither the DAC Report nor the AA 1996 s.34(2) had been raised in Guardcliffe
Properties Ltd v City & St James or in Fence Gate Ltd v NEL Construction Ltd, Cooke J.
considered that he was not bound to follow those decisions.73
The issue was again addressed in London Underground,74 which involved a challenge
to an award in relation to claims for delay to the Connect Project. This was a Private Finance
Initiative project involving the replacement of the communications system in London’s
underground rail network. Citilink sought to distinguish Demco and referred to Surefire
Systems Ltd v Guardian ECL Ltd75 and Rhesa Shipping Co SA v Edmunds76 to support their
submission that where there was no satisfactory evidence on a particular point, the party
bearing the burden of proof should fail on that point. Ramsey J. distinguished these cases
and adopted the reasoning in Demco, concluding that the arbitrator’s findings are not open
to be questioned as the admissibility, relevance or weight of any evidence is wholly a matter
for the arbitrator under the AA 1996 s.34(2)(f).
Despite the recent trend of finding that a complete lack of evidence did not give rise to
a point of law, the issue was again raised in House of Fraser Ltd v Scottish Widows Plc.77
Peter Smith J. reviewed all the authorities on this issue and came down in favour of the
approach adopted by Ramsey J. in London Underground and Cooke J. in Demco. A similar
conclusion was reached in Guangzhou Dockyards Co Ltd v ENE Aegiali I78 where the court,
albeit as obiter dicta, referred to Steyn L.J.’s statements in The Baleares with approval.
Equally in Watson (On Behalf of Dollingstown Football Club), Re Application (for Leave
to Appeal)79 Coghlin L.J., in the High Court of Northern Ireland, referred to the observations
of Steyn L.J. and held that they probably applied, although it was not necessary to reach a
final conclusion on this point.
The current trend is therefore not to allow an appeal on a point of law where the arbitral
tribunal has made a material finding without evidence to support this conclusion. A mistake
of fact will not amount to an excess of jurisdiction or constitute misconduct. The courts
have stressed that it is simply not possible for a party to seek permission to appeal against
an arbitrator’s findings of fact no matter how wrong they might seem to be.
71
Demco Investments Commercial SA & Ors v SE Banken Forsakring Holding Aktiebolag [2005] EWHC 1398
(Comm); [2005] 2 Lloyd’s Rep. 650.
72
DAC Report at [170].
73
Demco Investments Commercial SA & Ors v SE Banken Forsakring Holding Aktiebolag [2005] EWHC 1398
(Comm); [2005] 2 Lloyd’s Rep. 650 at [43].
74
London Underground Ltd v Citylink Telecommunications Ltd [2007] EWHC 1749 (TCC); [2007] 2 All E.R.
(Comm) 694.
75
[2005] EWHC 1860 (TCC).
76
[1985] 1 W.L.R. 948.
77
[2011] EWHC 2800 (Ch).
78
79
[2011] NIQB 66 at [33].

146 Arbitration
4. Conclusion
As can be seen from a review of the case law, applications to appeal against arbitration
awards under the AA Act s.69 rarely stand a chance of success unless there is a clear error
of law within the award. The evidence which the court can consider in such appeals is
generally limited to the award, subject to the qualification that the court may consider other
relevant documents referred to in the award in order to interpret a legal issue such as a
contract term. The courts will consider questions of mixed law and fact; however, if such
a question concerns matters within the arbitrator’s expertise the court may pay more
deference to his decision making. Moreover, the court will not intervene with the arbitrator’s
decision when there is no right answer and the arbitrator has made a decision which is
reasonable. However, the court may infer an error of law if no reasonable arbitrator would
have come to the same conclusion because, for example, it seems that the arbitrator failed
to interpret a contract correctly or has misunderstood the law. Although there are conflicting
authorities on whether an issue of law arises where there is no evidence to support a fact,
recent case law suggests that an appeal under AA 1996 s.69 will not succeed as this does
not give rise to a point of law.

Evidence in International Arbitration: Criteria for
Admission and Evaluation
Konstantin Pilkov
1. Introduction
Arbitration rules give broad authority to arbitrators regarding the consideration of evidence.1
They usually do not set any formal procedure of admission and evaluation of evidence and
say little if anything about the criteria for such admission and evaluation. The UNCITRAL
Arbitration Rules (as revised in 2010) art.27(4) provide that once a party offers evidence
to prove the facts it relies on, the tribunal is required to “determine the admissibility,
relevance, materiality, and weight of the evidence offered”.
The American Arbitration Association (AAA) International Arbitration Rules art.20(6)
provide that “[the] tribunal shall determine the admissibility, relevance, materiality and
weight of the evidence offered by any party”.
Likewise, the London Court of International Arbitration (LCIA) Arbitration Rules
art.22.1(f) empower the tribunal
“to decide whether or not to apply any strict rules of evidence (or any other rules) as
to the admissibility, relevance or weight of any material tendered by a party on any
matter of fact or expert opinion”.
The vast majority of national arbitration laws also recognise the discretion of arbitrators in
these issues.2 Thus, there is wide recognition of the arbitral tribunals’ discretion to admit
any relevant evidence they deem to have probative value, as well as of their power to reject
evidence that is irrelevant or repetitious or unsuitable to prove the facts it purports to prove.
On the other hand, in international arbitration the parties are free to submit any evidence
in order to prove the facts necessary to establish their cases. However the growing importance
of the time and cost efficiency of arbitration makes arbitrators believe that they should not
consider everything that each party has to submit or request.
Though arbitral tribunals both ad hoc and institutional regularly consider evidentiary
questions, especially those concerning relevance, reliability and the distinction between
admissibility (in the broad sense) and evidentiary weight, a degree of confusion in the
application of those criteria still exists. This article aims to assist in distinguishing what,
from the assessment of evidential value or weight, is required for admissibility, an issue to
be decided at the end of the proceedings in light of all of the evidence.
2. Admissibility
A party seeking to challenge an award because a tribunal refused to admit evidence, and
by doing so negatively affected the party’s right to present the case, may succeed. However,
it is far more difficult to convince a court that an arbitration tribunal erred when it admitted
the evidence but failed to properly evaluate its significance. In countries which based their
arbitration laws on the UNCITRAL Model Law or other arbitration-friendly legislation and
1
In this article the term “evidence” refers to both the information which is supposed to prove a fact in dispute and
the means of evidence which contains such information. This term is also used with respect to materials, expert
opinions or witness statements which being refused in admission or production, or excluded from evidence or
production cannot be considered as evidence in its strict sense if they lack any of the criteria of the admissible evidence.
2
See e.g. English Arbitration Act 1996 s.34(1) and (2); German ZPO s.1042(4); Austrian ZPO s.599(1); Ukrainian
International Arbitration Act s.19(2).

148 Arbitration
court practice it is hardly possible to challenge an award on the grounds that the arbitrator
improperly evaluated the evidence. This is resulting in arbitral tribunals often agreeing to
admit most of the evidence submitted by the parties, but giving serious consideration to the
weight that is to be attached to that evidence.
Indeed, the concept of the general admissibility of relevant evidence is recognised in
international arbitration. It was largely taken from the common law tradition (e.g. the US
evidence law with respect to admissibility establishes one seemingly simple rule: all relevant
evidence is generally admissible, evidence which is not relevant is not admissible).3 Thus,
generally speaking all relevant evidence is admissible in arbitration, except as otherwise
provided by mandatory rules, or by agreement of the parties.
The concept of deciding to “admit” or “exclude” evidence gives the broad meaning to
the term “admissibility”; that includes the evaluation and assessment of evidence in deciding
the case. Arbitrators admit evidence; that is why admissibility is the most general condition
for evidence to be admitted. In theory, the tribunal shall not consider evidence ruled
irrelevant, immaterial or inadmissible sensu stricto. That is, evidence is admissible sensu
lato if the criteria of relevance, materiality and admissibility sensu stricto are met. We
believe that when arbitration rules and arbitration laws refer to “admissibility” as the specific
criterion of evidence they use it mostly in the specific narrow sense which will be discussed
further below.
The inadmissibility of evidence may serve as a ground for it to be refused in admission
or in the ordering of production, or excluded from evidence if already admitted. Before
addressing the main focus of this article, it is necessary to distinguish between refusal or
exclusion on purely procedural grounds (e.g. non-compliance with the terms established
by the tribunal for submissions) and exclusion on the grounds of inadmissibility. The parties
can agree or the tribunal can determine that evidence must be submitted in a timely fashion;
in that respect, the tribunal can set a specific deadline for submission and can refuse any
evidence submitted after that deadline. Non-compliance with the deadline by the submitting
party does not directly affect the properties of the evidence and shall be dealt with as if it
were a procedural issue, that is, evidence may be admitted if procedural fairness is not
prejudiced. A similar approach can be taken if a party requests leave to exclude documents
which were not exchanged. The arbitrators should not consider those documents to be
automatically inadmissible. Where documents were not exchanged in accordance with the
rules of procedure, the arbitrators may adjourn the hearing to afford the disadvantaged party
a fair opportunity to examine and comment on the documents.
Relevance
Relevance is probably the first matter parties and arbitrators have to consider when deciding
whether particular materials deserve to be offered as evidence or requested for production.
The term “relevant evidence” in common law generally means evidence having a tendency
to make the existence of any fact that is of consequence in the case more probable or less
probable than it would be without the evidence. This definition is used in the common law
of evidence in which the concept of materiality is merged with relevance. However, in
international commercial arbitration these criteria are separated, as the majority of arbitration
rules empower arbitrators to decide on relevance and materiality. The International Bar
Association (IBA) Rules on the Taking of Evidence in International Arbitration (the IBA
Rules) clearly specify relevance to the case and materiality to its outcome as two main
criteria for evidence to be admitted or requested for production. Having that in mind we
would tend to define the relevance of evidence in international arbitration as having a logical
connection with what the evidence purports to prove in the case.
3
US Federal Rules of Evidence r.402.

Evidence in International Arbitration: Criteria for Admission and Evaluation 149
Both common and civil law take the approach that relevance, not being a matter of strict
law, rests upon common sense and a general convention about reasoning. In civil law the
connection with the law is more visible: the applicable law helps to determine in general
what is relevant (i.e. what needs to be proved for a case to be resolved).
Though relevance is named as the first criterion for admission in practice it is not easy
to separate the wheat from the chaff. Arbitrators are reluctant to limit the evidence that can
be submitted and normally err toward permitting parties to present evidence, including the
introduction of materials of questionable relevance.4 Arbitrators are mindful of the fact that
their award can be set aside if a party was “unable to present the case”. It should be
emphasised that parties must only be afforded a fair opportunity for presenting their cases;
this does not mean that arbitrators are required to wait until a party actually avails itself of
the right to be heard. Thus, a party cannot insist on the admission of evidence that the
tribunal considers irrelevant. However, it would be unrealistic to rely fully on that way of
thinking. As national arbitration laws usually do not counterbalance that basic principle of
arbitral proceedings which protects the party’s right to be heard and do not help arbitrators
with any special rules concerning relevance,5 we may conclude that any irrelevancy-based
refusal to admit evidence submitted by a party is associated with significant risk, unless the
evidence is manifestly irrelevant.
Materiality
In common law systems the concept of materiality is merged into the concept of relevance
and retains no independent viability.6 However, in international arbitration practice the
materiality criterion is considered mostly in relation to its connection to the outcome of the
case, whereas relevance concerns the general relationship between evidence and the case.
The relevance of each element of materiality is a more or less independent category, just
as the admission of one piece of evidence that proves the fact in question does not diminish
the relevance to the same fact of any other piece of evidence. Materiality is a dependant
category: after the admission of one piece of evidence each subsequent piece of evidence
or testimony concerning the same fact becomes less material. Materiality is thus ultimately
connected with the sufficiency of evidence: after the tribunal is provided with sufficient
evidence any other relevant evidence of the same fact is no more material to the outcome
of the case. (For example, once the date of the appointment of a company’s officer is
confirmed by an extract from a public register there might be no need for the tribunal to
receive a board resolution on the appointment.) Tribunals can exclude evidence that is
duplicated. Such evidence is excluded as lacking sufficient materiality, but not as lacking
relevance. Besides, evidence cannot be both irrelevant and immaterial, as the materiality
can be assessed only with respect to the relevant evidence.
The risk associated with immateriality-based refusal to admit evidence may be significant
where a tribunal ultimately recognises the non-existence of the facts which a party was
aiming to prove with that evidence. It may happen that, after sufficient evidence has been
admitted and any further evidence has been refused, the reliability of some of the admitted
evidence becomes doubtful. This situation may require the tribunal to invite the parties to
present additional evidence.
4
George M. Von Mehren and Claudia T. Salomon, “Submitting Evidence in an International Arbitration: The
Common Lawyer’s Guide” (2003) 20(3) Journal of International Arbitration 290.
5
Among the exceptions is the Swedish Arbitration Act s.25 (SFS 1999:116) that empowers arbitrators to refuse
to admit evidence if it is “manifestly irrelevant”.
6
See US Federal Rules of Evidence r.401, which deals with relevance and does not mention materiality as a separate
criterion.

150 Arbitration
Admissibility sensu stricto

In contrast to relevance and materiality, admissibility sensu stricto is a purely legal criterion.
Arbitral tribunals possess broad discretion in determining admissibility sensu stricto under
the IBA Rules and the majority of arbitration rules. However, this discretion faces a number
of limitations in practice, even in those cases when arbitration rules specifically state that
evidence need not be admissible in law to be admitted by the tribunal.7
The admissibility criterion functions through rules of exclusion which are based either
on the assumption that a trier-of-fact may attach undue weight to particular types of evidence
(e.g. hearsay) or on the belief that certain values or interests need to be protected (e.g.
privileges). Unlike the relevance and materiality criteria, the legal systems in many countries
are quite specific about the limits imposed on the admissibility of particular evidence. This
might be illustrated by the fact that substantive laws in many countries often contain specific
rules which affect the admissibility of evidence in national court proceedings.8 This often
leads to a debate about whether those rules are procedural (and as such part of the lex fori
but not part of the lex arbitri), in which case it is not mandatory for arbitrators to follow
them; or whether those rules are integral parts of the substantive law and have to be applied
by the arbitrators. In the latter case it is within the arbitrator’s discretion how to apply the
substantive law. However, it is widely recognised by scholars and arbitration practitioners
that the discretion of arbitrators in determining admissibility is subject to the following
limitations:
1. Evidence obtained in a manner that is contrary to international public policy
(e.g. testimony obtained through torture) shall not be admissible.
2. Evidence may be protected by a privilege or secret (professional privilege,
trade secrets, governmental secrecy). Although most arbitration laws and
most arbitration rules are silent on this issue,9 it is generally recognised that
arbitrators must take into consideration the above-mentioned privileges and
secrets.10
It is beyond the scope of this article to analyse problems related to privilege in arbitration.
It is sufficient to say that privilege rules allow a person or party to refuse to disclose certain
information, even though that information might be relevant and reliable.11 At this point we
can agree that privilege rules affect the admissibility of evidence.12
Thus, while deciding on admissibility sensu stricto arbitrators should take into
consideration at least international public policy and the applicable privilege rules. In both
cases it is the party that opposes the admission of the evidence who bears the burden of
proof that the evidence is inadmissible sensu strictu.
When can questions of admissibility be determined in arbitration?

The practice in international arbitration tribunals is to admit most if not all the evidence
and to rely on the arbitrators’ skills in the evaluation of evidence. Arbitrators are akin to
7
See, e.g. Singapore International Arbitration Centre (SIAC) Rules 2013 r.16.2.
8
The Ukrainian Civil Code art.218(1) envisages that a court decision cannot rest on witness testimonies if some
matters regarding the existence of an agreement are in question.
9
The AAA International Arbitration Rules are among the exceptions. They explicitly state that “[t]he tribunal shall
take into account applicable principles of legal privilege, such as those involving the confidentiality of communications
between a lawyer and client” (art.20).
10
See Anne Véronique Schlaepfer and Philippe Bärtsch, “A Few Reflections on the Assessment of Evidence by
International Arbitrators” (2010) 3 International Business Law Journal 211. See also the IBA Rules art.9(2)(b) which
envisage that the tribunal has the power to exclude any evidence on the grounds of “legal impediment or privilege
under the legal or ethical rules determined by the Arbitral Tribunal to be applicable”.
11
Richard M. Mosk and Tom Ginsburg, “Evidentiary Privileges in International Arbitration” (2001) 50(2) The
International and Comparative Law Quarterly 345.
12
Michelle Sindler and Tina Wustermann, “Privilege Across Borders in Arbitration: multijurisdictional nightmare
or a storm in a teacup” (2005) 23(4) ASA Bulletin 620.

professional judges, but not to the jury in common law courts. They do not need to be
“protected” from hearing inadmissible evidence or withdrawn till the question of
admissibility is argued by the parties and decided by the professional judge. Although in
many national court proceedings there is a fundamental distinction between evidentiary
objections that affect the admissibility of evidence and those that affect its weight, in
international commercial arbitration it is the same person, the arbitrator, who decides the
admissibility and the weight of evidence. Thus, the classic concerns of common law courts
on the admissibility of evidence do not apply in international arbitration. How does this
statement correspond to a situation in which a tribunal determines that it should not review
a document of questionable admissibility, and appoints an independent expert to review
and report on that document without disclosing its content? This is not a case of arbitrators
protecting themselves from considering any potentially inadmissible evidence. The practice
of review by an impartial expert is used only because in deciding whether the evidence is
admissible the in camera procedure is not generally applicable in international commercial
arbitration, for any evidence presented to arbitrators should be presented to the other party
as well.
However, if the question of admissibility sensu stricto can be considered before the
content of the evidence has reached the tribunal, it may be useful to do so. We may not
disagree that “it is not easy to ‘undo’ an impression, even if it is ultimately decreed that the
impression should never have been made”.13
Thus, it is advisable to raise questions relating to the relevance, materiality or admissibility
of evidence at the time when the evidence is submitted or requested for production. In cases
where the above questions were not known at the time when the evidence was submitted,
they may be raised immediately after the issues do become known.
Different approaches to admitting, ordering production of or excluding

evidence
As Patricia Shaughnessy noted, refusing to admit evidence is distinct from, albeit related
to, refusing to order the production of evidence.14 We might even say that arbitrators usually
deal differently with the criteria of relevance and materiality when there are questions about
the admission of evidence offered by a party, requests for the production of evidence or the
exclusion of the admitted evidence to be decided.
This difference is colourfully demonstrated in documents of the International Institute
for Conflict Prevention and Resolution in which it is recognised that
“since requests for information based on possible relevance are generally incompatible
with the need for speed and efficiency, disclosure should be granted only as to items
that are relevant and material and for which a party has a substantial, demonstrable
need in order to present its position”.15
Though materiality has already been mentioned, the “substantial, demonstrable need in
order to present its position” which a party might have is nothing more than the materiality
criterion. Thus, since the production of evidence requires the expenditure of time and effort,
the materiality criterion is the one to emphasise.
The IBA Rules also show how the admission of evidence submitted is distinct from
ordering the production of evidence. Materiality is paramount in the latter case as the tribunal
needs to compare the production of evidence with the burden which has to be placed on the
13
Ula Cartwright-Finch and Craig Tevendale, “Privilege in International Arbitration: Is It Time to Recognize the
Consensus?” (2009) 26(6) Journal of International Arbitration 834.
14
Patricia Shaughnessy, ”Dealing with Privileges in Arbitration” (2007) 51 Scandinavian Studies in Law 457.
15
CPR Protocol on Disclosure of Documents and Presentation of Witnesses in Commercial Arbitration art.1(a),
available online at: http://www.cpradr.org/Resources/ALLCPRArticles/tabid/265/ID/614/CPR-Protocol-on-Disclosure
-of-Documents-and-Presentation-of-Witnesses-in-Commercial-Arbitration.aspx [Accessed February 18, 2014].

152 Arbitration
other party or on other resources to be spent. The IBA Rules16 require the party requesting
the production of evidence to state how the documents requested are relevant to the case
and material to its outcome. The IBA Rules mention the criterion of materiality also in
respect to evidence which is submitted by a party,17 but in this case it is mentioned rather
as a reminder of the ideal qualities of evidence. This is confirmed also by the wording of
art.3.11, which requires the party to believe in the relevance and materiality, not to confirm
or prove them. Compliance with the lowest standard of relevance and materiality is tested
when the tribunal is deciding on the exclusion of evidence. According to the IBA Rules,18
any document, statement, testimony or inspection can be excluded from evidence if they
lack sufficient relevance or materiality. Arbitration practice shows that cases in which
evidence is excluded for lacking relevance or materiality may be rare. Material must be
manifestly irrelevant for it to be excluded.
This lowering of the relevance and materiality requirements allows us to distinguish three
“standards” which are applied when deciding on the admission of evidence, ordering
production and exclusion.
3. Evaluation of Evidence
It is commonly recognised that the admissibility of evidence does not automatically guarantee
that the evidence will be considered as having probative value. There are more or less
explicit relevance, admissibility and materiality criteria for determining whether a piece of
evidence is admissible, whereas the methods for weighing evidence and determining the
sufficient level of proof are subjective and somewhat inexplicable.19 The weight of the
evidence usually refers to its persuasive effect on the arbitrator’s mind. It is within the
discretion of the tribunal to evaluate the evidence submitted by the parties, though the parties
can agree on the sufficiency, as will be discussed later.
The weight of the evidence includes questions of credibility (reliability) and the evaluation
of inferences which can be made from the evidence.
Credibility
The ultimate question for any evidence is whether it constitutes reliable proof of what it is
offered to prove. This, of course, turns on a closer inspection of the credibility or reliability
(both words are used as synonyms of the other) of the evidence in question. The assessment
of credibility is one of the functions of an arbitrator when weighing up evidence. At the
admissibility stage the evidence is required to be prima facie credible, that is, it must have
sufficient indicia of reliability and authenticity to establish that it appears to show what it
is offered to prove. The above definition is of course circular, in that it refers to the
“reliability and authenticity of the evidence” in defining “credibility of the evidence”. To
put things more simply we can define “credibility” as the capacity of being worthy of belief
or confidence, trustworthy.
When the reliability of a document is under investigation the question of its authenticity
is logically prior to the question of reliability. An authentic document—i.e. not a
forgery—may or may not be reliable evidence of what it purports to show; and yet, if a
document is not authentic it is hard to imagine how it could be helpful. As a result, the
authenticity of a document is often considered to be a precondition for its use in an arbitration
proceeding.
16
IBA Rules art.3.3(b).
17
IBA Rules art.3.11.
18
IBA Rules art.9.2(a).
19
Audun Jøsang and Viggo A. Bondi, “Legal reasoning with subjective logic” (2001) 8(4) Artificial Intelligence
and Law 290.

Depending on the nature of the evidence and the manner in which it is introduced, a
number of different indicators (internal or external) might be applied to assess its reliability.
Internal indicators of reliability of a document include elements of the document itself, such
as signatures, the form of handwriting, etc. External indicators might rely on other evidence:
testimony about how a document was obtained, expert testimony on its authenticity, etc.
There are also many techniques used when deciding on the reliability of material or
testimonies that contradict each other (e.g. where the inconsistency is between a current
and a prior assertion of fact, the more recent assertion generally is disregarded in favour of
the earlier assertion).
The tribunal can admit relevant and admissible evidence even though the credibility is
in doubt. This admission does not mean that the tribunal cannot afford that evidence
decreased probative value. Ultimately, it is very unlikely that the tribunal would decide to
not admit something into evidence because its authenticity has not been established. In fact,
it might be better to admit that document as the reliability of evidence can be fully assessed
in its entirety with all other evidence. Besides, if a document is revealed to be a forgery, it
is the document itself that proves the lack of authenticity, therefore its admission is necessary.
Sufficiency
To carry its burden of proof, a party has to offer sufficient evidence. It is probable that it is
because this statement is self-evident that the term “sufficiency” is almost never mentioned
in arbitration rules. In assessing the sufficiency of evidence the arbitrator must determine
whether there is any valid line of reasoning and permissible inferences which could lead a
rational person to the conclusion reached by the arbitrator on the basis of the evidence.
Basically, sufficiency is not a criterion of a single piece of evidence, but rather the point at
which the standard of proof is met. After reaching that point any additional evidence, though
it is relevant and admissible, does not add anything material to the process of proving the
fact.
Although the sufficiency can be finally assessed only in the process of weighing the
evidence, the tribunal can take the initiative to manage the case by indicating in advance
the evidence that it considers necessary to establish the prima facie proof of certain facts
at issue. In doing so arbitrators should adhere to the due process and impartiality principles
of arbitration proceedings.
4. Party Autonomy and Arbitrators’ Discretion

In the legal literature analysing the roles of the parties and the tribunal in evidentiary matters,
it is often concluded that the rules governing arbitral proceedings make it clear that the
admissibility, relevance, materiality and weight of any evidence are for the arbitrator to
determine. Sometimes it is considered that the tribunal itself determines the relevance,
materiality and probative value of all evidence submitted by the parties, and does not need
to hear arguments from the parties concerning these matters. It is thus for the parties to
submit the evidence and for the tribunal to evaluate it.
We would rather tend to the approach that allows the parties to retain autonomy and
control over the evidentiary issues, even though the parties rarely use their autonomy in
that way. The majority of arbitration laws do establish an environment in which the parties
can agree on the application of almost any criteria for the evidence. As noted by Holtzmann
and Neuhaus the UNCITRAL Model Law art.19(2) specifies that the power conferred on
the arbitral tribunal includes the power to determine the admissibility, relevance, materiality
and weight of any evidence. Of course, this provision is not mandatory and is therefore
subject to the parties’ will. Alternatively, they can agree on particular rules of evidence, for
example that certain evidence should be deemed inadmissible, or that a certain kind of

154 Arbitration
document be sole type of evidence. In this case, the arbitral tribunal should abide by that
choice.20
Of all the criteria used, the inadmissibility of particular evidence (e.g. special contractual
rules which exclude certain materials from evidence) and the issue of sufficiency are the
two criteria on which the parties most frequently agree. Though it is the arbitrators’ function
to determine whether the evidence in its entirety would rationally support a party’s allegation,
the parties may agree on what may constitute sufficient evidence (e.g. by way of indicating
in the contract a document that constitutes sufficient evidence of fulfilment of a contractual
obligation).
The inadmissibility of illegally obtained evidence is a significant element in compliance
with public policy rules. That is why in deciding on the admissibility of evidence the tribunal
cannot be as flexible as in any other evidentiary matters. In deciding on the admissibility
of evidence the autonomy of the parties and the tribunal may not be contrary to international
public policy.
In any case, even if the parties rely on the tribunal in matters related to the application
of the criteria for evidence, this only means that the parties do not introduce any specific
rules regarding how the relevance, materiality and other criteria should be “measured”.
However, when a party submits evidence the opposing party should be provided with an
opportunity to comment on the relevance, materiality, admissibility or probative value of
that evidence.
5. Conclusions
As we have seen the threshold for admitting evidence in international arbitral tribunals is
typically quite low, so admissibility, the key question in much of the legal discussion in
courts in common law countries, is not a crucial issue in arbitration. Arbitrators focus more
on the evidentiary weight they are going to give the evidence.
The basic prerequisites of the admissibility of any kind of evidence in international
arbitration are its relevance and materiality. In general, if evidence is shown to be relevant,
material, prima facie credible, and is not barred by an exclusionary rule, it is admissible.
The liberal application of these seemingly simple evidentiary rules is necessary to avoid
sterile legal debate over admissibility so that the tribunal can concentrate on the pragmatic
issues of the case. The tribunal should not, however, be loaded with excessive unnecessary
materials. From that perspective it might be reasonable for the tribunal to determine that
when introducing documents the submitting party must provide a short description of each
document, clearly specifying its relevance, materiality and probative value.
Though in international arbitration the trier-of-fact is not a civilian jury, but a professional
fully capable of admitting evidence and rendering objective determinations about the
probative value at the end of the proceeding, questions of admissibility should be decided
initially, especially if there are claims that any privilege rules apply or if any violation of
international public policy is shown. Consideration of any such matters should not lead the
procedure into technical formalities.
Three rather different approaches might be applied when deciding on admission of
evidence, ordering production and exclusion: the relevance and materiality of the evidence
submitted by a party must be shown for it to be admitted; the relevance and significant
materiality must be stated by a party and recognised by the tribunal for the production of
evidence to be ordered; for evidence already admitted to be excluded it must be manifestly
irrelevant.
20
H.N. Holtzmann and J.E. Neuhaus, A Guide to the UNCITRAL Model Law on International Commercial
Arbitration: Legislative History and Commentary (The Hague: Kluwer Law, 1995), p.566.

The above “standards” do not apply when dealing with admissibility sensu stricto,
because any inadmissible evidence needs to be refused in admission, excluded or refused
in ordering for production.
The criteria for the admission and evaluation of evidence discussed in this article are
very much connected to each other. They may be separated and grouped for convenience
only. In practice the necessity for the application of any of the criteria for evaluation may
arise at the admissibility stage. The assessment of the materiality of any additional evidence
requires the admitted evidence to be evaluated. The categories of relevance, materiality and
weight of evidence are dynamic—anything that was irrelevant to the case may become
relevant while the case is in progress. The admissibility and reliability of evidence are more
static criteria; they are almost exclusively attached to the evidence itself and have little
relation to the case and other evidence. If the authenticity and thus the reliability of a
document is in doubt it is so irrespective of the essence of the case, even if the authenticity
was put in doubt because of contradictions between that document and the set of other
materials.
Finally, we must emphasise that party autonomy extends also to evidentiary issues and
the application of criteria for evidence, and being a crucial value cannot be negatively
affected. The arbitral tribunal should abide by the agreement of the parties unless it is
contrary to international public policy.

Commercial Arbitration in Dubai
Daniel Brawn
Dubai is one of seven Emirates that comprise the United Arab Emirates (UAE). Dubai has
long been a trading centre for the Middle East and has recently placed itself as a travel hub
and a five-star tourist destination; Dubai now seeks to place itself as a centre for international
dispute resolution. In Arabic culture, the preference is to settle disputes by negotiation,
either directly between the parties or under the guidance of a leading citizen. The growth
of international trade has brought a wider range of disputes and there is reluctance amongst
international parties to submit their disputes to the Dubai courts, where proceedings are
conducted in Arabic, can be lengthy and there is a perception that judges tend to protect
the interests of the establishment. For this reason, international contracts generally provide
for disputes to be resolved by arbitration rather than by court litigation.
The UAE’s civil law system is based upon its UAE Civil Code,1 which was itself based
upon the Egyptian Civil Code,2 which was based upon the Napoleonic Code to the extent
that it complied with the Islamic Sharia. There is no binding judicial precedent, although
decisions of the Court of Cassation (the highest court) may be persuasive. In addition to
Federal law, each Emirate has laws and courts of its own and within the Emirates there are
Free Zones which have their own commercial laws (UAE criminal law applies within the
Free Zones).
The leading arbitration centre is the Dubai International Arbitration Centre (DIAC) which
has its own set of Arbitration Rules (the DIAC Rules). Dubai has also established the Dubai
International Financial Centre (DIFC), a financial Free Zone with its own commercial laws
and courts and its own Arbitration Law,3 based on the UNCITRAL Model Law, and its
own Arbitration Centre with its own DIFC-LCIA Arbitral Rules (the DIFC-LCIA Rules)
administered with the London Court of International Arbitration (LCIA). The ICC Rules
are most commonly used for international arbitration.
The purpose of this article is to examine the law relating to commercial arbitration in
Dubai. For convenience, the masculine terms “he” and “his” include the female and, whether
there is one arbitrator or three, they are referred to as “the tribunal”, where appropriate.
1. Sharia Law
A basic understanding of Sharia law is helpful, both because it is the foundation of UAE
law and because the Arab understanding of arbitration is drawn from the Sharia. Sharia
means literally “the way” or “the path” and comprises a body of principles pertaining to
moral, economic, social and political issues which Muslims regard as being prescribed by
God to govern human life. There are two sources of Sharia: the Holy Qur’an, which Muslims
believe was recited by God to the Prophet Mohammad (Peace Be Upon Him); and the
Sunnah, which are the acts and sayings of the Prophet and his Companions while he was
alive. However, the Qur’an and the Sunnah are not self-explanatory and they require scholars
to interpret them and adapt them for contemporary usage as society develops, in order to
create a code of rules and principles that will assist people to live in accordance with God’s
law. This interpretation and development is achieved by the application of fiqh
(understanding) and ijtihad (legal reasoning of a learned jurist). If no acceptable interpretation
is readily available, one may be achieved by the application of qiyas (reasoning by analogy
1
Law of Civil Transactions, Federal Law No.5 of 1985.
2
The Hanafi School is the dominant school of Islam in Egypt.
3
DIFC Law No.1 of 2008.

Commercial Arbitration in Dubai 157
to deduct legal principles), ijma (consensus of the community), urf (custom and practice)
and maslahah (the requirements of public interest, or the common good). Fundamental
principles of the Sharia are good faith in one’s dealings with other people and a prohibition
on unjust enrichment.
The UAE follows the Sunni branch of Islam, within which four main schools have
evolved to interpret the Sharia. By art.1 of the Civil Code, if no appropriate provision is to
be found in UAE law then the judge must decide in accordance with the Sharia, having
regard to the most appropriate solution from the schools of Imam Malik and Imam Ahmad
bin Hanbal, and if none is found there, then from the schools of Imam al-Shafi’i and Imam
Abu Hanifa. By art.27 of the Civil Code, laws may not be applied if they are contrary to
the Sharia.
2. Arbitration under the Sharia

The approach to arbitration under the Sharia differs from that in the West, where an arbitral
award is generally regarded as a binding alternative to a court judgment. In England, for
example, arbitration can be traced back to the early Christian period where, although the
decision of a bishop was not enforceable in law, the parties’ agreement to appoint him
included a penalty if his decision was not obeyed, and that penalty was enforceable.4 The
decision itself became enforceable with the introduction of the first English Arbitration Act
in 1698,5 and today the award is binding save for a limited right of appeal.
Within the UAE, the Maliki and Hanbali Schools put great trust in arbitration and regard
the arbitrator’s decision as binding; indeed, under the Maliki School, the arbitrator’s
appointment cannot be revoked after the commencement of the arbitration. The Shafi School
sees the position of an arbitrator as inferior to that of a judge and the appointment can be
revoked at any time prior to the publication of the award. The Hanafi School sees the
arbitrator as the agent of the party who appointed him and there is no requirement to be
neutral or impartial, with the result that the arbitral award has less force than a court
judgment.6
All four major Schools hold that there must be a dispute which the parties agree to refer
to arbitration, and that the parties’ mutual agreement to arbitrate forms the basis of the
arbitrator’s jurisdiction. Although the Holy Qur’an refers to deciding disputes at arbitration,
it is silent as to arbitration clauses and therefore it has been suggested that under the Sharia
parties cannot agree to arbitrate future disputes which have not yet arisen. However, in
practice an arbitration clause in a contract is enforced and arbitration is widely used for
contractual disputes. Furthermore, the Sharia does not prohibit the appointment of an
arbitrator by a third party and appointing institutions are commonly named in contracts.
Those Islamic scholars who regard arbitration as mere conciliation base their view upon
a reference to arbitration in Verse 4.35 of the Holy Qur’an which relates to matrimonial
disputes and suggests that there should be one arbitrator from his family and one from hers;
this would indeed appear more akin the Western notion of conciliation. Other scholars rely
upon Verse 4.58 to argue that an arbitration decision should be binding and that therefore
there should be an odd number of arbitrators. Yet others say that arbitration should be
binding in the same way that a contract would be binding under the Sharia.
The Arab view of arbitration has also been coloured by the recent history of its application
in Arabia. Kutty argues that arbitration became discredited during the 1960s and 1970s
when certain arrogant Western arbitrators dismissed “with terms of a humiliating nature”
4
James Behrens, “The History of Mediation of Probate Disputes” (2002) 68 Arbitration 138.
5
See Lord Hacking, “Arbitration Law Reform in Europe” (1999) 65 Arbitration 180.
6
See Zeyad Alqurashi, “Arbitration under the Islamic Sharia”, abstract of paper available online at: http://www
.scribd.com/doc/192000790/Arbitration-Under-the-Islamic-Sharia [Accessed February 18, 2014].

158 Arbitration
Arab law as primitive and inadequate.7 Kutty cites Saudi Arabia v Arab American Oil Co,8
following which the Saudis passed a resolution prohibiting government agencies from
participating in arbitration. Kutty argues that “the legal community throughout the Arab
world is still manifesting its hostility to transnational arbitration” and that many believe
“that the international arbitration framework was developed without any consideration being
given to their culture, values, and legal traditions”.
The position under the Sharia is therefore somewhat fluid but certainly an arbitral award
is not enforceable until it has been ratified by a judge as being compliant with the law, and
it may be set aside if it does not comply.9 Kutty points out, however, that as the Holy Qur’an
provides expressly for arbitration in some form and the Companions of the Prophet used
arbitration to settle commercial disputes, there is scope for the evolution of arbitration
practice as interpretation of the Sharia evolves to meet modern demands.10 Indeed Ayad
argues that such interpretation is necessary to Islam and is legitimate and binding.11 In the
modern era, many Arab nations have acceded to the New York Convention on the
Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) and
have adopted modern domestic arbitration laws based upon the UNCITRAL Model Law,
and have established their own arbitration centres with recognised international rules.
Arbitration procedural law

Arbitration proceedings in the UAE are governed by Federal Law No.11 of 1992 arts
203–218, as amended by Federal Law No.30 of 2005 (the Civil Procedure Code or CPC),
which is not based on the UNCITRAL Model Law (although the DIFC Arbitration Law
is). A draft Federal Arbitration Law based on UNCITRAL has been discussed but remains
only a draft. The DIAC Rules are the most commonly used, although financial disputes
may be referred to the Emirates Securities and Commodities Authority or the International
Islamic Centre for Reconciliation and Arbitration, and some public sector bodies such as
the Dubai Municipality and the Roads and Transport Authority have their own arbitration
rules.
An arbitration agreement must be in writing, though it may be incorporated by reference,
as in a charterparty contract,12 and the subject of the dispute must be defined in the terms
of reference or in the award.13 If one party seeks a stay of court proceedings to arbitration,
he must raise that point at the first court hearing, otherwise he is considered to have waived
his right to arbitration.14 The Dubai courts accept that the termination of a contract is separate
from the arbitration agreement contained within the contract, and that the transfer of a
contract includes the transfer of the arbitration agreement.15 If the parties are unable to agree
the appointment of an arbitrator, or if a nominated arbitrator refuses or withdraws or is
removed, either party may apply to the court to make the appointment and there is no appeal
against the court’s decision.16 Once appointed, the tribunal must notify the parties of the
date and place of the first hearing within 30 days of the appointment and the award must
be rendered within six months of the first hearing unless the parties agree an extension or
grant the tribunal the power to order an extension; the tribunal must give a copy of the
7
Faisal Kutty, “The Shari’a Factor in International Commercial Arbitration” (2006) Loy. L.A. Int’l Comp. L. Rev.
565, 591 and 592.
8
(1963) 27 I.L.R. 117.
9
Joseph Schacht, An Introduction to Islamic Law (Oxford: Oxford University Press, 1982), p.189.
10
F. Kutty, “The Shari’a Factor in International Commercial Arbitration” (2006) 28 Loy. L.A. Int’l Comp. L. Rev.
565, 597.
11
Mary Ayad, “Harmonisation of International Commercial Arbitration Law and ‘Sharia’” (2009) 6 Macquarie
Journal of Business Law 102.
12
Civil Appeal No.325 of 2011.
13
CPC art.203(2) and (3).
14
CPC art.203(5); Dubai Court of Cassation Case No.228/2007, judgment dated February 24, 2007.
15
Dubai Court of Cassation, Petition No.40/2004, judgment dated September 26, 2004.
16
CPC art.204.

award to each party within five days and the court will consider ratification at the request
of a party in the normal way for filing claims in court.17 An arbitral award cannot be enforced
until it has been ratified by the court, which may rectify material errors in the award.18
Although UAE law does not provide for a right of appeal as such, at both the ratification
and enforcement stages the party resisting enforcement may raise similar arguments to those
that might be raised if there was a right of appeal. Ratification and enforcement are
considered below.
Parties to court proceedings may agree to submit their dispute to an arbitrator appointed
by the court to hear that dispute and not anything other than that dispute19; the court will
supervise and control the arbitral proceedings20; the tribunal must lodge the award with the
clerk of the court within 15 days of making the award and must provide copies to the parties
within 5 days of that, and the court should fix a hearing within 15 days to consider ratification
of the award.21
Beyond that, arbitral proceedings are flexible and largely unconstrained by legal
procedures other than those agreed by the parties,22 and any institutional rules that they
adopt. Redfern and Hunter point out that: “National courts could exist without arbitration,
but arbitration could not exist without the courts”,23 because the assistance of the courts is
required not only to supervise the arbitral process but also to enforce any ensuing award.
UAE law makes no express provisions for confidentiality of arbitral proceedings, but in
practice arbitration is considered confidential. Express provisions are contained in the DIAC
and DIFC-LCIA Rules24; they may be included in the underlying contract and it is prudent
also to include them in the terms of reference, which the parties should sign to confirm their
acceptance. Under both sets of Rules, the claimant makes a Request for Arbitration to the
institution and the respondent submits its Answer to the Request, but if there is no Answer
the institution will nonetheless proceed to appoint the tribunal in accordance with the
arbitration agreement and transfer the file to the tribunal. The parties submit their Statement
of Claim and of Defence (and Counterclaim if there is one) in the customary way.
As for corporate transparency, there is no general public access to land registry data or
corporate information such as accounts and names of shareholders, which can hinder the
gathering of evidence. Indeed, it can be difficult to discover exactly what the law is, given
that there is no binding judicial precedent and the civil law system provides a code rather
than a set of firm rules, although Court of Cassation judgments tend to be followed.
Translations of court decisions into English are often unintelligible and translations of the
CPC can be misleading; it is advisable to obtain several translations and sit down with an
Arab colleague to consider to what extent the translations accurately represent the Arabic
original.
The DIFC courts

The DIFC has its own Court of First Instance, Court of Appeal and Execution Judge.
Proceedings are conducted in English, procedure is based on the English Civil Procedure
Rules, the principles of binding judicial precedent are recognised, and a Power of Attorney
(see below) is not required. The DIFC Court has jurisdiction over claims involving DIFC
companies or contracts which were made or performed within the DIFC area, or which the
17
CPC arts 208(1), 210 and 213(3) respectively.
18
CPC art.215(1).
19
Dubai Court of Cassation, Case No.133/2007, judgment dated September 23, 2007.
20
Dubai Court of Cassation, Case No.273/2006, judgment dated February 4, 2007.
21
CPC art.213(1); art.213(2) relates to arbitrations arising in appeal cases.
22
CPC art.212(1).
23
Nigel Blackaby et al., Redfern and Hunter on International Arbitration, 5th edn (Oxford: Oxford University
Press, 2009), para.7.03.
24
DIAC Rules art.41, DIFC Arbitration Law art.14 and DIFC-LCIA Rules art.30.

160 Arbitration
parties agree to refer to the DIFC Court.25 A decision of the DIFC Court is executed within
the DIFC area by the DIFC Execution Judge and outside the DIFC area through the local
courts, subject to certain formalities, and the Dubai Court Execution Judge may not question
the merits of the DIFC Court decision.26
The DIFC Court of First Instance may ratify domestic and foreign arbitration awards,27
even when the underlying dispute has no connection with the DIFC, and there is only one
level of appeal. This may become the preferred method for enforcement of foreign awards
without the numerous challenges that are so common in the Dubai courts. Indeed, it may
be possible to seek ratification of a domestic arbitral award in the DIFC Court, even when
the dispute has no connection with the DIFC, and then seek enforcement of that decision
in the Dubai courts, or indeed any Gulf Cooperation Council (GCC) country.28 Some Arab
lawyers complain that the DIFC courts are not compliant with the Sharia, but the process
may be effective given that the Dubai courts may not question the merits of a decision of
the DIFC courts.
Domestic arbitration
A few words are required in relation to domestic arbitration. For the most part, the DIAC
Rules meet the expectations of international lawyers: the parties exchange their respective
pleadings, including a comprehensive statement of the facts and legal arguments, all the
relevant documentary evidence and a statement of the relief sought.29 This works well where
the parties’ lawyers are familiar with international arbitration proceedings, but there can be
difficulties when a party’s lawyers are not so familiar. Often they expect the process to be
similar to UAE court proceeding: frequently their pleadings contain only generalised
statements and no supporting documentation, because they expect the judge to know and
to apply the law and to make enquiry to discover the facts; a judge hearing a technical claim
will appoint an expert to assess the claim and report as to what sum should be awarded,
and it is not unusual for a claimant to apply to DIAC for an arbitrator to appoint an expert
to tell the arbitrator how much to award, while the claimant makes no attempt at all to
quantify or support its claim. Sometimes a party has clearly fed its pleadings through internet
translation software in which the Arabic words have been translated literally into English.
This can produce statements such as:
“The Counter Respondent cannot facilitate but twirl its back at the reliance of grandeur
of the 1st Counter Claimant in the case at bar and the incomprehensible idea is
demonstratively sprawled and all told in truth and in fact the causes were significantly
and religiously complied.”
The tribunal may find it challenging to ensure that each party has a fair opportunity to
present its case and to respond to the case of the other party, without creating the impression
of assisting a party with its case. Where problems relate to the use of the English language
or inexperience with English proceedings, the tribunal should exercise patience and explain
matters clearly and grant extensions of time where necessary. However, the tribunal should
guard against a manipulative respondent seeking to employ wrecking tactics to hinder or
prevent the reference from proceeding.
25
Dubai Law No.16 of 2011 art.5A.
26
Under the terms of a 2009 Protocol of Enforcement between Dubai courts and DIFC courts, and confirmed in
Dubai Law No.16 of 2011 art.7(3)(c).
27
DIFC Court Law No.10 of 2004 art.24(1).
28
See GCC Convention for the Execution of Judgments, Delegations and Judicial Notifications art.1.
29
See DIAC Rules arts 23 and 24.

The arbitrator
The traditional application of the Sharia imposed restrictions on who could serve as an
arbitrator: he had to have the same qualifications as a judge and be of mature age, wise,
free, male and Muslim. The prohibition on women appears to have derived from the lesser
weight given to the testimony of women based upon the proposition that they were weaker
than men and their testimony was less credible,30 although other Islamic scholars say that
there were female arbitrators. The prohibition on non-Muslims was based upon the principle
that only a Muslim could properly apply the Sharia in judging between two other people.
This attitude is changing and today there are excellent arbitrators in Dubai who are not
Muslim and are not male. As for “free”, slavery was abolished in the UAE in 1963. The
present requirements for an arbitrator in the UAE are set out in the CPC art.206: he must
not be a minor or legally incapacitated or under a guardianship or be a criminal who has
been deprived of his civil rights or an undischarged bankrupt. The number of arbitrators
must be uneven, the arbitrator must confirm in writing his acceptance of the appointment
and if he then withdraws without good reason, the court may order him to pay
compensation.31
Under the DIAC Rules, the parties may agree how many arbitrators there should be, but
if there is no agreement the default position is one arbitrator unless DIAC decides that three
would be more appropriate for the particular dispute; an arbitrator must be impartial and
independent, and a sole arbitrator or chairman of the tribunal may not be of the same
nationality as one of the parties unless the other party agrees.32 The DIFC-LCIA Rules have
similar provisions.33
Claims against the Government

There is no sovereign immunity as such in Dubai, but no claim may be brought (whether
in court or in arbitration) against the Ruler or the Government of Dubai or any government
department, institution or corporation without first obtaining consent from the Ruler’s
Court.34 Written details of the claim must be deposited with the Legal Adviser at the
Department of Legal Affairs, who should notify the relevant government authority within
one week and the authority should respond within 15 days. There is then a two-month period
for amicable settlement and if that fails, the claimant may then proceed to court or arbitration.
The purpose of this provision is not (as cynics might suggest) to prevent such claims
being brought but to allow amicable settlement, in the Arab way. Note, however, that a
judgment or award may not be enforced by seizing or attaching public property35; Article
247 of the CPC lists the types of property that may not be seized. These provisions may
hinder the successful claimant from enforcing any award that he may be fortunate enough
to receive, but common practice is for a senior member of one party to have a quiet word
with a senior member of the other party and reach agreement between themselves.
Public policy
Islamic jurisprudence is the reference point for interpretation of UAE law and includes
“public order”, which comprises the rules and foundations upon which society is based, in
such a manner as not to conflict with the Sharia.36 As a matter of public policy, “Arbitration
30
Faisal Kutty, “The Shari’a Factor in International Commercial Arbitration” (2006) 28 Loy. L.A. Int’l Comp. L.
Rev. 565, 608.
31
CPC arts 206(2), 207(1) and 207(2).
32
DIAC Rules arts 8, 9 and 10.
33
DIFC-LCIA Rules arts 5 and 6.
34
Dubai Law No.10 of 2005, which amended Dubai Law No.3 of 1996 Concerning Government Claims.
35
Law No.10 of 2005 art.3; also UAE Civil Code art.103.
36
UAE Civil Code arts 2 and 3.

162 Arbitration
shall not be permitted in matters in which settlement is not permitted”37: this includes
commercial agency agreements38; labour disputes39; disputes relating to deferred debt40;
issues such as forgery and criminal activity, which must be referred to the court and the
arbitration must be suspended until the court has reached a final decision41 (a respondent
can claim that a document has been forged and thereby cause the arbitration to be suspended
for sometimes up to a year). Insurance disputes can be arbitrated, but an arbitration clause
in an insurance contract is void “unless contained in a special agreement separate from the
general printed conditions in the policy of insurance”.42
The Court of Cassation recently nullified an award on the ground that the arbitrator had
found the respondent to be in breach of a law requiring the registration of contracts for the
sale of land which the Court deemed was a matter of public policy that could not be resolved
through arbitration.43 Blanke argues that this decision is flawed and questions its compliance
with the Sharia,44 but in any event the tribunal should endeavour to ensure that its award is
enforceable and is well advised to base its decision on breach of contract (i.e. that one party
did not do what it agreed to do in the contract) rather than upon breach of a statutory
provision which a judge may view as encroaching upon his own jurisdiction.
The provisions of the New York Convention art.V(2), by which the enforcement of an
arbitral award may be refused, include that the subject matter of the difference is not capable
of settlement by arbitration under the law of that country45 and that enforcement would be
contrary to the public policy of that country.46 Such provisions are of particular importance
in the UAE, where the judge will consider not only the terms of the contract but also broader
principles of public policy and the common good.
Interim measures
If a party makes an application to the court after the arbitration has commenced, the court
is likely to refer that application to the tribunal, although the court will retain jurisdiction
in relation to measures that require the court’s input, such as attachment orders and
injunctions to preserve evidence, and any agreement to the contrary is void.47 The tribunal
may seek court assistance, for example to penalise a witness who fails to attend or refuses
to answer, or for third parties to produce necessary documents, or for “legal assistance”.48
There are no specific provisions in UAE law for the tribunal to grant interim relief or
conservationary measures and it has been suggested that such provisions would conflict
with the CPC art.220, by which the executive judge alone has jurisdiction “to rule in all
disputes concerning urgent provisional implementation”. Possibly this article relates to the
enforcement of final decisions rather than to interim measures taken by the tribunal, but in
any event in practice tribunals routinely order interim measures where such provisions are
included in the institutional rules which the parties choose to adopt. Under the DIAC Rules,
the tribunal can order interim measures, including injunctions and measures for the
conservation of goods involved in disputes.49 The DIAC Rules have been interpreted as
encompassing orders for security for costs and anecdotally such orders have been made.
37
CPC art.203(4).
38
Federal Law No.18 of 1981 (as amended), the Commercial Agency Law art.6.
39
Federal Law No.8 of 1980 (as amended), the Labour Law.
40
UAE Civil Code art.733.
41
CPC art.209(2).
42
UAE Civil Code art.1028(d).
43
Baiti Real Estate Development v Dynasty Zarooni Inc Cassation Appeal No.14/2012.
44
Gordon Blanke, “Public Policy in the UAE” (2013) 79 Arbitration 98.
45
New York Convention art.V(2)(a).
46
New York Convention art.V(2)(b).
47
CPC arts 22 and 24.
48
CPC art.209(2)(a), (b) and (c) respectively.
49
DIAC Rules art.31.

The DIFC Arbitration Law contains similar provisions and the DIFC-LCIA Rules provide
expressly for orders for security for costs.50
Challenging an arbitrator’s appointment

An arbitrator’s appointment may be challenged on the same grounds as a judge’s, but the
application must be made within five days of notification of the appointment or the date on
which the applicant became aware of the grounds for challenge.51 The grounds are52:
• A disqualifying marriage or family or business relationship or inheritance
matter between the arbitrator and one of the parties.
• Conflicting interests as counsel, witness or expert in other proceedings.
• The arbitrator has previously brought a claim against one of the parties.
• One of the parties has worked for him or he has been feeding or housing them
or has received a gift from them.
• One of the parties chose him as an arbitrator in a previous case.
• A relationship which makes it probable that he will be unable to rule without
bias.
Alternatively, the parties may agree to remove the arbitrator, or the court may remove him
if he deliberately neglects his appointed task after it is brought to his attention in writing.53
In DIAC arbitration, a prospective arbitrator is required to provide a Statement of
Independence disclosing any circumstances that may give rise to justifiable doubts as to
his independence or impartiality.54 Either party may object to a proposed arbitrator and
DIAC will be strict in withdrawing the proposal if there is any hint of conflict of interest.
An appointment may be revoked if the arbitrator violates the arbitration agreement or does
not act fairly and impartially as between the parties or fails to proceed with reasonable
diligence, or if either party subsequently discovers circumstances that give rise to justifiable
doubts as to his impartiality or independence.55 Similar provisions appear in the DIFC-LCIA
Rules.56
Challenging the tribunal’s jurisdiction

UAE law does not provide for the principle of Kompetenz-Kompetenz, by which the tribunal
has jurisdiction to decide its own jurisdiction. The parties may agree in their arbitration
agreement or in the arbitration rules they adopt that the tribunal may rule on its own
jurisdiction, otherwise a party must raise a jurisdictional challenge before the court. In
DIAC arbitration, the Executive Committee will refer a jurisdictional challenge to the
tribunal if it is satisfied prima facie that there is a valid arbitration agreement (if not, the
arbitration will not proceed) and the tribunal will normally rule on its own jurisdiction as
a preliminary issue.57 The DIFC Arbitration Law uses similar terms.58
Terms of reference
The subject of the dispute must be defined in an arbitration document,59 which is taken to
mean a terms of reference document separate from the award itself, setting out the nature
50
DIFC Arbitration Law art.24, DIFC-LCIA Rules art.25.2.
51
CPC art.207(4).
52
CPC arts 114(1) and 115.
53
CPC art.207(3).
54
DIAC Rules art.9.8.
55
DIAC Rules art.13.
56
DIFC-LCIA Rules art.10. See also DIFC Arbitration Law art.18.
57
DIAC Rules arts 6.2 and 6.4.
58
DIFC Arbitration Law art.23(1) and DIFC-LCIA Rules art.22(1).
59
CPC art.203(3).

164 Arbitration
of the dispute and the parties’ arguments and evidence, signed by all the parties and initialled
on every page. By signing the terms of reference the parties should not afterwards be able
to claim that the arbitration was invalid, unless the tribunal’s decision strays beyond the
terms of the arbitration agreement. It is arguable that UAE law does not actually require
such a document and that it is sufficient to state the relevant information in the award itself,
or that there is no requirement that the terms of reference be signed in Dubai (as the award
must be), but best practice is to produce a terms of reference document and sign it in Dubai.
Although the DIAC Rules contain no express provisions in relation to a terms of reference
document, advice from DIAC is that if one of the parties does not sign the terms of reference
(it is always the respondent) then the tribunal in its award must set out the steps it took to
obtain signature and explain why signature was not obtained. The Dubai Municipality Rules
and the identical Roads and Transport Authority Rules state that if one of the parties does
not sign, the tribunal must set a time limit for signature and on expiry of that time limit “the
arbitration shall proceed and the award shall be made”. Clearly, it cannot be the case that
the arbitration is invalid if the terms of reference document is not signed by both parties,
because if that were the case then any respondent could void the arbitration by failing to
sign.
Power of attorney to bind a company to arbitration

There are no provisions in UAE law, as there are in other legal systems, whereby a party
contracting with a company in good faith is entitled to assume that the contract is validly
executed, and therefore in the UAE a person who signs a contract must prove that he is
entitled to do so.60 A limited liability company may appoint up to five managers who may
bind the company,61 or the articles of association may name a manager who can bind the
company, but any other person is required to have a valid power of attorney (POA).
A POA may be “general” or “special”.62 An arbitration clause is recognised as being
distinct from the contract in which it is written and therefore a person who signs a contract
that includes an arbitration agreement must have a special POA expressly entitling him not
only to sign the contract but also to agree an arbitration clause,63 because that will exclude
the jurisdiction of the court. A company manager may delegate to a third party the right to
agree an arbitration clause provided that right is specifically mentioned in the third party’s
POA.64 Without a valid POA granted by someone entitled to grant it, no person may bind
a company to arbitration and the court may refuse to ratify the award.65
The UAE Civil Code art.925 sets out criteria which determine whether a POA is valid:
(a) The principal must have the right to act in relation to the particular matter.
(b) The agent must not be prohibited from acting in the matter entrusted to him.
(c) The subject matter of the agency must be capable of being performed by an
agent.
A POA must be typed in Arabic and must be notarised by a public notary. Both the grantor
and the grantee or their agents must attend the notary, they must produce the POA itself
and their identity cards and, in the case of a company, the trading licence and the articles
of association. If the POA is issued outside the UAE, it must be notarised in the country of
issue and at the UAE embassy of that country and then translated into Arabic by a certified
translator and legalised at the Ministry of Foreign Affairs in the UAE. It is common for a
POA to have English on the left of the page and Arabic on the right.
60
CPC art.58(2).
61
UAE Federal Law No.8 of 1984 (as amended), the Commercial Companies Law arts 235 and 237.
62
63
CPC art.203(4); see also Dubai Court of Cassation Petition No.164/2008, judgment dated October 10, 2008;
Dubai Court of Cassation, Petition No.273/2006, judgment dated February 4, 2007.
64
Dubai Court of Cassation, Petition No.220/2004, judgment dated January 17, 2005.
65
CPC art.216(1)(b).

The courts take this procedure literally and it is common for the unsuccessful party to
argue at the enforcement stage that the award is invalid because the person who signed the
contract was not authorised to agree an arbitration clause. The common law doctrine of
estoppel has no place in UAE law and arguments based upon waiver of the right to object
are unlikely to succeed. It may be possible to convince a judge that there is an injustice
when the claimant who initiated and lost the arbitration then claims that the award is invalid
because the person who signed the contract on his behalf was not authorised to agree an
arbitration clause. In general, however, the courts insist that a contract must be signed by
someone who was authorised to sign not merely the contract but also an arbitration
agreement.
Power of attorney to act as counsel

An advocate may only act on behalf of a party in court if he has a valid special POA,
otherwise his acts will not be valid.66 A foreign principal should appoint an agent within
the UAE and the principal will be bound by the legal submissions of his agent.67 If an
advocate does not provide his POA at the first court hearing, and the client is represented
by a different advocate at the second hearing, the client has not lost the right to request that
the case be stayed to arbitration, because the first advocate was never acknowledged by the
court.68
This has been taken to mean that in arbitration too an advocate must hold a valid POA.
The Court of Cassation held recently that this requirement does not apply to arbitration,
because by the CPC art.212, arbitrators are bound only by the provisions of the CPC Ch.3
(i.e. arts 203–218) and any specific procedures agreed upon by the parties; the grounds
upon which an arbitral award may be annulled are set out in the CPC art.216 and they do
not include the invalidity of the advocate’s POA.69 Best practice, however, is for the tribunal
to require the advocates to provide copies of their POAs at the preliminary meeting and to
check that the arbitration agreement and the POAs of the advocates were signed by someone
who was authorised to do so and to record in the terms of reference that the parties
acknowledge that each other’s POAs are valid.
It is possible for a POA to be ratified retrospectively,70 although ratification of a contract
may not amount to ratification of an agreement to arbitrate unless the ratification says so.71
Thus if an attorney has a POA to represent a client in court but no special POA to represent
the client in arbitration, the client will be precluded from relying on the absence of a special
POA to arbitrate if he has impliedly conferred authority, for example by giving the attorney
documents to submit in the arbitration.72 For the sake of completeness, note also that it is
not permitted to appoint an attorney who is an enemy of the opposing party.73
Evidence
In court proceedings, witness testimony may not contradict documentary evidence, witnesses
are questioned by the judge, they must sign the court’s record of their statement and although
there is no general disclosure a party may be required to disclose documents upon which
he relies.74 Arbitration procedure is more flexible and the law of evidence does not apply
66
CPC arts 55(2) and 58(2); Dubai Court of Cassation, Case No.38/2009, judgment dated April 4, 2009.
67
CPC art.58(1).
68
Dubai Court of Cassation, Case No.38/2009, judgment dated April 4, 2009.
69
No citation given but see article by Al Tamimi & Co, “No need for a POA in UAE Arbitrations”, available online
at: www.tamimi.com [Accessed February 18, 2014].
70
71
Dubai Court of Cassation, Petition No.220/2004, judgment dated January 17, 2005; Petition No.51/2005, judgment
dated May 28, 2005.
72
See Dubai Court of Cassation, Petition No.273/2006, judgment dated March 5, 2007.
73
74
Federal Law No.10 of 1992, Law of Evidence in Civil and Commercial Transactions arts 36, 44 and 18.

166 Arbitration
unless the parties agree or the tribunal directs.75 The tribunal determines the extent of any
disclosure and often the IBA Rules on Taking Evidence are adopted. Oral evidence must
be given on oath,76 which is usually, “I swear by Almighty God that I shall tell the whole
truth and nothing but the truth” but may vary according to the custom of the particular
witness’s religion. Tribunals generally adopt common law procedures whereby cases are
presented by advocates and witnesses are cross-examined by the other party. UAE law does
not recognise the English concepts of legal professional privilege or “without prejudice”
communications and any such documents may be disclosed without the other party’s consent
(the DIFC Court does recognise these concepts).
There is no requirement in the CPC that an expert must be impartial or independent,
although there is in the DIAC Rules when the expert is appointed by the tribunal, and similar
provisions appear in DIFC arbitrations.77
The award
The domestic award should be made in Dubai; it must comprise a copy of the arbitration
agreement, a summary of the parties’ cases and their evidence, together with the reasoning,
place and date of the award; it must be signed by all the arbitrators (this is taken to mean
that the decision and its reasoning must be signed on every page, the remainder of the award
should be initialled),78 any dissenting opinion must be included and if one arbitrator refuses
to sign, that fact must be mentioned in the award; if the award is not in Arabic, then for
enforcement purposes a translation is required; the award is deemed made on the date it is
signed; a copy must be given to each party within five days79; the award must be rendered
within six months of the preliminary meeting unless the parties agree explicitly or implicitly
to extend that period or grant the tribunal the power to extend it, or the court extends it.80
At the ratification stage, the court may return the award to the tribunal to address omissions
or make clarifications, in which case the tribunal must issue its decision within three months,
or alternatively, the court can itself correct material flaws.81 Often the recipient of a
favourable award is well aware of the difficulties he will face in achieving enforcement of
the award and he uses it to leverage a favourable settlement by agreement. This reflects the
Arab desire to settle matters between themselves and their notion that arbitration is not
binding but is an aspect of conciliation.
Under the DIAC Rules, the six-month period commences on the date the tribunal receives
the file from DIAC but the tribunal can extend the period by six months on its own motion
and the Executive Committee of DIAC may extend it further.82 It is advisable to include
such a provision in the terms of reference. The DIFC Arbitration Law does not impose a
six-month requirement and the DIFC-LCIA Rules are silent as to a situation in which the
arbitration is conducted under those Rules but under UAE law and has been running for
six months but the award has not been made.
Costs
Under the CPC, the tribunal may “assess their fees and the costs of the arbitration and they
may rule to impose all or part of this on the losing party”, although the court may amend
this assessment in a manner appropriate to the effort expended and the nature of the dispute.83
75
By virtue of CPC art.212.
76
CPC art.211.
77
DIAC Rules art.30.1; DIFC Arbitration Law art.33; the DIFC-LCIA Rules art.21.
78
Dubai Court of Cassation, Petition No.233 of 2007, judgment dated January 13, 2008.
79
CPC arts 212(4)–(7) and 213(3), respectively.
80
CPC art.210; Dubai Court of Cassation, Case No.222/2006, judgment dated February 25, 2007.
81
CPC arts 214 and 215.
82
DIAC Rules art.36.3 and 36.4 respectively.
83
CPC art.218.

In DIAC arbitration there is a fee (currently AED 5,000)84 payable to DIAC for registering
a claim or a counterclaim. DIAC will then require an “advance on costs” based upon the
value of the claim in accordance with a table attached to the appendix to the Rules, which
is intended to cover the anticipated fees and expenses of the tribunal and of any expert
appointed by the tribunal, although the amount may be increased if the arbitration proves
more complex than anticipated. The advance on costs should be paid in equal shares by
both parties but if (as commonly happens) the respondent fails to pay its share, the claimant
will be obliged to pay the respondent’s share in addition to its own, or the claim will not
proceed, and the same applies if the claimant fails to pay its share of the advance on costs
in relation to any counterclaim. If (as commonly happens) the respondent fails to mention
in its Answer to the Request for Arbitration that it has a counterclaim, and then includes a
counterclaim with its defence, the tribunal should inform DIAC, who will notify the parties
of the increased advance on costs required in relation to the value of the counterclaim; the
tribunal may continue with the arbitration while payment is sought, but may not issue its
award until payment has been made in full. If the amount of the claim or counterclaim is
increased during the arbitration, the tribunal should inform DIAC, who will require an
increased fee.
Under the DIAC Rules, the tribunal may decide in its final award which party shall bear
the costs and in what proportion,85 and this will include DIAC’s fee and the advance on
costs, but the Rules are silent specifically as to the successful party’s legal costs. Generally
these are awarded in accordance with “the English Rule” that costs should follow the event.
In DIFC arbitration, the fees are set out in the schedule of arbitration costs appended to the
DIFC-LCIA Rules and the successful party may be awarded its reasonable legal costs to
reflect its relative success and failure in the arbitration, unless the parties have agreed
otherwise and provided they were claimed in the arbitration.86
However, a setback occurred in 2013 when the Court of Cassation held that under the
DIAC Rules, “costs” include the DIAC fee and the advance on costs, but not the attorney’s
fees; if a party chooses to be represented by an attorney he does so at his own cost, which
is why the Rules do not include legal costs; pursuant to the CPC art.216(1), the arbitrators
exceeded their jurisdiction by awarding costs of AED 110,000 whereas general practice in
the court is to award nominal attorney’s fees of AED 500–2,000.87 The order for AED
110,000 in attorney’s fees was severed and AED 1,000 was substituted; the rest of the award
was confirmed. This decision does not accord with normal practice in DIAC arbitrations
and does not address the common situation where both parties apply for their costs, thereby
arguably as a matter of contract granting the tribunal jurisdiction to award costs.
Interest
The Sharia prohibition on payment of interest might suggest that an arbitral award could
be unenforceable for public interest considerations under the UAE Civil Code art.3, but in
practice this is not the case. As with most Arab jurisdictions, the UAE has legalised the
payment of interest and in those Arab states that have not, the part relating to interest may
be severed and the rest of the award enforced. In the UAE, in relation to commercial debt,
if the contract does not stipulate a rate of interest the rate may not exceed 12 per cent.88
However, in arbitration as in court proceedings interest is usually awarded at 9 per cent
unless the contract proscribes a rate, either as a figure or as a percentage above the prevailing
EIBOR rate.89 In the DIFC Court, interest is awarded at 1 per cent above the three-month
84
The UAE dirham is pegged to the US dollar at 3.67; there are currently six dirhams to the English pound.
85
DIAC Rules art.37.10 and Appendix to the Rules art.4.
86
DIFC Arbitration Law art.38(5)(f) and DIFC-LCIA Rules art.28.
87
Real Estate Objection for Cassation, Claim No.282/2012, judgment dated February 3, 2013.
88
UAE Federal Law No.18 of 1993, the Commercial Transactions Law art.76.
89
Emirates Interbank Offer Rate.

168 Arbitration
EIBOR rate. Unlike courts, arbitral tribunals can award compound interest, which is likely
to be enforceable in Dubai, although possibly not in Abu Dhabi.
Anecdotally, where the respondent has refused to pay its share of the advance on costs
or has otherwise sought to delay or wreck the arbitration, and the tribunal’s final decision
goes against the respondent, some tribunals have been known to hit the respondent with 12
per cent interest as a punishment. Twelve per cent is indeed a punishment, but such a practice
may be frowned upon by a judge at the enforcement stage and a rate of 9 per cent is
considered more appropriate.
Ratification of domestic awards

Commonly the losing party will refuse to honour the award and the winning party must
seek to enforce it through the courts, which involves a two-stage process of ratification
(because a domestic arbitral award must be ratified by the court before it can be enforced)
followed by execution90; international arbitral awards are dealt with separately below. At
the ratification stage, the court should not consider the merits of the award,91 but whether
it complies with legal requirements and if it does not comply the court may refuse to
recognise it or may return it to the tribunal for clarification within three months.92 There is
no right of appeal as such against an arbitrator’s decision,93 and the court will not hear the
case de novo, but commonly the unsuccessful party will raise at the ratification stage the
same arguments that it would have raised if the right of appeal had been available. Any
decision of the Court of First Instance can be appealed to the Court of Appeal and then to
the Court of Cassation unless the parties have expressly waived the right of appeal or the
value of the dispute does not exceed AED 200,000.94 When ratified, the award can be taken
to the Court of Execution (see below), where this process starts again, with the result that,
in extreme cases, the ratification and execution process can take several years to achieve.
A recent case held that a domestic arbitral award can only be set aside under the CPC
art.216 on grounds linked: (1) to the arbitration agreement; or (2) to the proceedings:
(a) no proper arbitration agreement or it had lapsed or the tribunal exceeded its
jurisdiction;
(b) the tribunal was not properly appointed, or the subject of the arbitration was
not stated, or a party was not competent to agree to arbitration or an arbitrator
did not fulfil the legal requirements; or
(c) there is an invalidity in the award or in the procedure.95
From a summary of all the provisions of the CPC, it appears that an award may be challenged
on the following grounds:
• The arbitration agreement was not in writing (art.203(2)).
• The subject of the dispute was not defined in the arbitration document
(art.203(3)).
• The award was rendered with no or an invalid arbitration deed (art.216(1)(a)).
• The tribunal exceeded its jurisdiction under the arbitration agreement
(art.216(1)(a)).
• The tribunal considered matters that by law may not be arbitrated (art.203(4)).
• The tribunal was not properly appointed (art.216(1)(b)).
• The tribunal did not decide in accordance with the law (art.212(2)).
90
CPC arts 214 to 216 relate to court ratification of arbitral awards; arts 235 to 238 relate to implementation of
foreign judgments and arbitral awards; and arts 239 to 243 relate to execution.
91
Dubai Court of Cassation, Case No.273 of 2006, judgment dated February 4, 2007.
92
CPC art.214.
93
CPC art.217.
94
CPC art.173; see also Dubai Court of Cassation, Case No.278/2008, judgment dated April 14, 2009.
95
Dubai Court of Cassation, Petition No.270 of 2008, judgment dated March 24, 2008.

• The tribunal did not issue its decision within six months, without a valid
extension (art.210(1) and (2)).
• The arbitrators were not properly appointed (art.216(b)).
• An arbitrator was a minor or under a guardianship or was deprived of his civil
rights because of some criminal penalty or was an undischarged bankrupt
(art.206(1)).
• The person who signed the arbitration agreement lacked capacity (art.203(4)).
• Witnesses did not swear the oath (art.211).
• Some form of procedural irregularity, such as failure by an arbitrator to sign
both the reasoning and the dispositive (i.e. the substance) of the award
(art.216(1)(c)).
• Public policy considerations.96
The unsuccessful party commonly resists enforcement on whatever grounds come to hand
(there is no disincentive, because awards of costs in the courts are nominal) and appeals
any adverse decision as far as the Court of Cassation, in order to delay payment for so long
that the other party is willing to accept a compromise settlement rather than continue trying
to enforce the award for its full amount. Other common tactics are for a recalcitrant
respondent to ignore procedural requirements, for example by filing submissions out of
time so that they are rejected, or to refuse to accept delivery of documents, and then rely
upon this apparent injustice to argue that he was denied a fair opportunity to present his
case.
Enforcement of foreign arbitral awards

The CPC art.235 sets out conditions for the enforcement of foreign court orders and art.236
applies this to foreign arbitration awards. The conditions are:
(a) The UAE courts did not have jurisdiction and the foreign courts did.
(b) The court that made the order had jurisdiction under the laws of that country.
(c) The parties to the dispute were properly notified and represented.
(d) The order has become final and binding according to the law where it was
made.
(e) The award does not conflict with a previous ruling of a UAE court and it does
not contravene propriety or public order.
By the CPC art.238:
“The principles stipulated in the preceding articles shall be not-withstanding any rulings
or pacts between the State and any other state in this regard”.
The UAE has entered into a number of treaties and conventions for the enforcement of
arbitral awards, including the New York Convention97 and the ICSID Convention, and some
38 bilateral treaties, particularly with other Arab states, some 28 of which are actually in
force.
A common reservation made by states ratifying the New York Convention is that
recognition of foreign awards is confined to those rendered in states that recognise and
enforce judgments of the ratifying state. There are six official languages of the New York
Convention and Arabic is not one of them; confusion was caused when this mutual
recognition reservation appeared on the New York Convention website in relation to the
UAE, but it is now accepted that the UAE did not in fact make any such reservation when
it signed the Convention.
96
See Petition No.146/2008, judgment dated November 9, 2008.
97
Decree No.43 of 2006 of June 13, 2006, which came into force on November 19, 2006.

170 Arbitration
The grounds upon which enforcement of foreign arbitral awards may be refused are
almost identical under the New York Convention art.V, the UNCITRAL Model Law art.36
and the DIFC Arbitration Law art.44(1):
(i) a party was under some incapacity, or the arbitration agreement is invalid
under the law to which the parties have subjected it or, in the absence of any
indication thereon, under the law of the state or jurisdiction where the award
was made;
(ii) a party was not given proper notice of the appointment of an arbitrator or of
the arbitral proceedings or was otherwise unable to present his case;
(iii) the award deals with a dispute that does not fall within the terms of the
submission to arbitration, or it contains decisions on matters beyond the scope
of the submission (although it may be possible to sever those parts);
(iv) the composition of the tribunal or the procedure was not in accordance with
the parties’ agreement or, in the absence of such agreement, with the law of
the state or jurisdiction where the arbitration took place; or
(v) the award has not yet become binding on the parties or has been set aside or
suspended by a court of the state in which the award was made; or
(vi) if the court in the country where recognition is sought finds that:
(a) the subject matter of the dispute would not have been capable of
settlement by arbitration under the laws of that country; or
(b) enforcement of the award would be contrary to the public policy of
that country.
The New York Convention art.VII(1) envisages enforcement under an available bilateral
or multilateral treaty if that is more favourable. As for enforcement of an ICSID award, by
the Washington Convention art.54:
“each contracting state must recognise an ICSID award as if it were a final judgment
of its own national courts and enforce the obligation imposed by that award”.
It is fair to say that the Dubai courts have in the past been suspicious of arbitration and
reluctant to enforce arbitral awards which they felt impinged upon their own jurisdiction.
In the well-known Bechtel case,98 an international arbitration award against a government
department was set aside on the ground that witnesses had not given evidence under oath
as required by the CPC art.211. The Court may have been seeking to shield the government
body from an unfavourable award, but the decision sent a negative message to the
international legal community.
The Dubai courts have recently been more willing to respect international arbitration,
although they remain protective of their own jurisdiction in relation to domestic arbitration.
In one 2012 case, the losing party resisted enforcement of a foreign arbitral award on various
grounds including: the person who signed the arbitration clause lacked capacity to sign; the
formation of the tribunal was invalid; the arbitrator applied English rather than UAE law;
there were no terms of reference; the witnesses were not sworn in properly; a copy of the
arbitration agreement was not appended to the award; and the award was not rendered within
six months. The Court of First Instance held that this was an international arbitration award
and therefore the court’s supervisory role was limited to ensuring that the award did not
breach the terms of the New York Convention, because the provisions of the CPC do not
apply to the enforcement of foreign awards. This decision was upheld by the Dubai Court
of Cassation, which held that the CPC applies to domestic arbitration awards, while the
New York Convention applies to international arbitration awards.99
98
International Bechtel v Department of Civil Aviation of the Government of Dubai, Dubai Court of Cassation,
Petition No.503/2003, judgment dated May 15, 2005.
99
Dubai Court of Cassation, Case No.132/2012, judgment dated September 18, 2012.

Execution
The successful party must now seek to have the award enforced by the Execution Court,
although the unsuccessful party may already have taken steps to conceal his assets. The
executive judge will ask the losing party to make payment within 15 days, failing which
he will decide whether to enforce the award by attaching any assets or enforcing against
assets which have previously been attached and selling them through public auction to settle
the award amount. If property is located in the area of another court, the judge may transfer
the matter to the executive judge of that court to supervise the sale of the property, but it is
the first judge who distributes the proceeds between the creditors.100
The losing party in the arbitration may seek to resist execution on the same grounds that
he sought to resist ratification. In addition, the decision of the executive judge may itself
be appealed on grounds that101:
(a) The executive judge lacked jurisdiction to execute the award.
(b) The particular property should not have been seized or sold.
(c) Persons other than the adversaries participated in the seizure.
(d) Issues relating to the order of priority between the creditors.
(e) There are grounds to defer implementation.
(f) A person seeks to avoid imprisonment for failure to pay the sum ordered.
(g) Deferment of payment by the debtor or payment in instalments.
3. Conclusion
The Dubai courts are coming to terms with international arbitration and are less jealous of
their own jurisdiction and more willing to enforce arbitration awards provided they comply
with Sharia principles of fairness and good order. The DIFC Court may become the obvious
venue for the enforcement of international arbitration awards, but if Dubai hopes to become
a major centre for dispute resolution it requires a modern legal structure which is recognisable
to the business community, which supports the arbitration process swiftly and which enforces
domestic as well as foreign awards. English is the language of international business and
parties resent the expense and variable quality of translations of documents and convoluted
procedure. Dubai has a new Company Law and a proposed new Insolvency Law; a modern
Arbitration Law based upon the UNCITRAL Model Law is urgently required to carry the
legal system into the twenty-first century, so that modern business people may feel confident
to use Dubai as a venue to resolve disputes.
100
CPC arts 219 and 220.
101
CPC art.222(1).

If It Ain’t Broke, Don’t Change It
Neil Kaplan
When it was once suggested to Groucho Marx that he should do something for posterity
he famously replied, “What has posterity ever done for me?” I do not think for one moment
that Official Referee George Alexander Scott (1862–1933) thought the schedule which now
bears his name would be used in its various forms 80 years after his death.
For those not familiar with it, the “Scott Schedule” is simply a way of setting out claimed
defects with columns for both parties to summarise briefly their arguments on each point
and a blank column for the judge or tribunal to write in its decision.1 Not only is the Scott
Schedule format used to list defects in construction cases; it can also be used just as
efficiently for listing a multiple range of topics that need a decision by a tribunal.
Alan Redfern has booked his place in posterity as the founding co-author of an excellent
book on international commercial arbitration. However, just to be sure, he adapted the Scott
Schedule into the “Redfern Schedule” which we all now use for itemising disputed document
requests.2
Lucy Reed was probably too young to worry about posterity when she suggested the
“Reed Retreat”—more of which later.
A suggestion made by Klaus Sachs in a paper given in Rio became labelled the “Sachs
Protocol”. This was a method by which the tribunal and the parties worked together with
experts to attempt to determine precisely what had happened in a complex project.3
Even I have made a modest attempt to create an eponymous schedule which is a pro-forma
schedule to be used for itemising costs claimed in an arbitration.4
The purpose of this article is to suggest something new which I guess might be called
the “Kaplan Opening” (KO).
Before exploring it further let me set out the relevant background.
When I started practice at the bar far more reliance was placed on oral advocacy. Over
the last 30 years or so there has been a substantial increase in the use of written advocacy
at the expense of orality.
A crucial piece of oral advocacy was the opening of a case. In those days the judge rarely
had an opportunity of getting to know the case and had frequently been given the papers
only the night before. There were not as many specialised lists as there are today and case
management as we know it today was more a thing of the future.
Thus, the opening of a case was absolutely crucial. You had the judge or tribunal in your
hands. You could explain the case to them whilst at the same time making it clear that they
could only decide the matter in your client’s favour. You took them through the agreed
bundle (far more skeletal that its fleshier modern counterparts) and by the time you had
finished you could be sure that the tribunal fully understood your case.
At the end of an opening, however good, things could only go downhill. Witnesses might
not come up to proof. The judge might see a point you had missed or avoided. Your opponent
1
Examples of Scott Schedules are set out in John Tackaberry and Arthur Marriott, Bernstein’s Handbook of
Arbitration and Dispute Resolution Practice, Vol.2 (London: Sweet & Maxwell, 2003), paras A54-071, A54-073
and A54-074.
2
For an explanation of Redfern Schedules see Nigel Blackaby and Constantine Partasides, Redfern and Hunter on
International Arbitration, 5th edn (Oxford: Oxford University Press, 2009), paras 6.113–6.116.
3
See Alison Ross, “A Sachs-y New Approach to Expert Evidence?” (2010) 5(3) Global Arbitration Review.
Available online at: http://globalarbitrationreview.com/journal/article/28513/a-sachs-y-new-approach-expert-evidence
[Accessed February 18, 2014].
4
See Neil Kaplan, “Problems at Both Ends” in S. Kroll, L. Mistelis, P. PeralesViscasillas and V. Rogers,
International Arbitration and International Commercial Law: Synergy, Convergence and Evolution (London: Wolters
Kluwer, 2011), pp.284, 288–290.

If It Ain’t Broke, Don’t Change It 173
might have dented one or more of your witnesses in cross-examination—or just been very
persuasive.
There is a story, more likely to be true than apocryphal, that when two well-known QCs
were against each other in a construction case, the one acting for the plaintiff stood up and
immediately referred the judge to p.1 of the agreed bundle. Opposing counsel, sensing that
his learned friend would be taking the judge through the bundle by reading out each page,
immediately intervened and suggested to the judge that it might be of assistance if instead
both counsel gave a 15-minute summary of their respective cases. Plaintiff’s counsel turned
green as his introduction to the bundle was contemporaneous with that of the judge. A short
adjournment enabled him to find out from his instructing solicitor what the case was about.
How different it all is today. By the time the case gets to an oral hearing the tribunal will
be drowning in the claimant’s memorial on the merits, with witness statements and
documents relied upon, the respondent’s defence memorial with witness statements and
documents relied upon, claimant’s reply, and if necessary the defence to counterclaim and
at least one rejoinder. On top of all that there may be skeletal opening arguments some of
which will be far from skeletal.
It is not an exaggeration to say that in many cases the tribunal will have received hundreds
and sometimes a thousand or more pages of submissions alone.
When the hearing commences provision might have been made for an hour or two for
brief written openings then straight into the cross-examination of the claimant’s first witness.
The present procedure whereby everything is put in writing at length and effectively
dumped on the tribunal is perhaps a reaction to the present state of the common law which
has taken away all immunity of counsel in the conduct of litigation and arbitration, hence
making it a necessary safeguard (especially in particularly litigious jurisdictions) to throw
in everything in order to protect the advocate from possible suit—mostly frivolous.
However, the modern procedure is based on a fallacy and that is that the tribunal is capable
of taking in and processing all this material. Lucy Reed in her lecture in Hong Kong in
December 2012 explained how important, even crucial, it is for a counsel in international
arbitration to
“focus not so much on what may go on in an arbitrator’s head but more on how much
can fit in an arbitrator’s head”.5
This is not new. As the Roman lawyer, Quintilian, said in the first century AD:
“[W]e must not always burden the judge with all the arguments we have discovered,
since by so doing we shall at once bore him and render him less inclined to believe
us”.6
Advocacy is after all the art of persuasion. To be persuasive you need to be succinct.7
5
Lucy Reed, “Tribunal Decision-Making: Art, Science, Sport?”, available online at: http://neil-kaplan.com/#kaplan
-lecture [Accessed February 18, 2014].
6
Quintilian’s Institutes of Oratory, Book V, Ch.12.8. Quintilian’s treatise on the art of oratory is an exhaustive
analysis of Roman educational practices, treasured for centuries by Western scholars. Available online at: http:/
/rhetoric.eserver.org/quintilian/ [Accessed February 18, 2014].
7
As to the benefits of brevity in pleadings, Lucy Reed said this in her 2012 Kaplan Lecture (“Tribunal
Decision-Making: Art, Science, Sport?”, available online at: http://neil-kaplan.com/#kaplan-lecture [Accessed
February 18, 2014]:
“My first position as a lawyer was as law clerk to a US federal trial judge, the Honorable Barrington D. Parker.
One case in front of Judge Parker involved a challenge by the US Postal Service to a private company that was
delivering business mail in competition with the Postal Service and, allegedly, in violation of the US Constitution
Article I, Section 8(7), which gives the federal government sole authority ‘[t]o establish post offices and post
roads.’ The company and the Postal Service filed extensive written submissions and evidence, and spoke at
length in the hearing. The postal workers union, represented by one Mozart Ratner, entered the case as amicus.
Mozart Ratner filed, in my memory, a 10-page brief that elegantly framed the Constitutional arguments. Mozart
Ratner spoke at most for a few minutes at the hearing. The end of the story? His presentations effectively became
Judge Parker’s opinion in favor of the Postal Service.
You will surmise that I am a fan of the Mozart Ratner approach to pleading.”

174 Arbitration
Christopher Newmark has sensibly made the point that, to improve

“the tribunal’s understanding of the case early in the proceedings is not difficult, but
it does require a deliberate effort on the part of both counsel for the parties and the
tribunal. Counsel should appreciate that there are significant advantages to be gained
in terms of case management from developing the issues in the case more fully from
the outset. And the tribunal must commit to reading and becoming familiar with the
written materials it is sent from the start of the proceedings. If this is done, then the
tribunal can work with the parties to develop bespoke procedures that are suitable for
the case, thereby taking advantage of the flexibility that arbitration offers.”8
How then do we achieve this? This leads me nicely to my proposal which I believe will
ameliorate the problems to which I have adverted.
At a convenient time in the arbitration, probably after the first round of written submissions
and witness statements but well before the main hearing, the tribunal should fix a hearing
at which both counsel will open their respective cases before the tribunal. They may be
required to serve skeleton arguments in advance. After the openings any expert witness
should make a presentation of his or her evidence and explain the areas of difference from
the expert of like discipline on the other side.
What are the advantages of this proposal?
1. It will ensure that the whole tribunal will read into the case at a far earlier
stage than hitherto.
2. It will enable the tribunal to understand the case from that point on, and will
inform its subsequent case preparations.
3. It will enable the tribunal to have a meaningful dialogue with counsel about
peripheral points, unnecessary evidence and gaps in the evidence.
4. It will facilitate the tribunal in putting points to the parties which they will
then have time to consider and to respond to.
5. It will enable the tribunal to meet and discuss the issues far earlier than hitherto
and thus meet the aspirations of the Reed Retreat.
6. It will assist in ensuring speedier and, I would suggest, better awards.
7. Bringing the parties together, with their trial counsel, well in advance of the
hearing, means that there is a chance that at least part of the case may be
settled, or points of disagreement minimised.
Further, the fact that the parties are physically in front of the tribunal tends to engender
more of a reasonable approach, which is quite different to the aggressive way that lawyers
often communicate with each other when not before the tribunal. Much of what is produced
as a result of this aggressive display is not helpful to the tribunal. It is worth pointing out
that whereas it is easy to write offensively it is far harder to replicate this verbally in front
of three arbitrators and the other side without losing credibility or sympathy.
I hope it can be said that taking an approach like this would be complying with the
exhortation contained in the Hong Kong Arbitration Ordinance s.46, which requires the
tribunal
“to use procedures that are appropriate to the particular case, avoiding unnecessary
delay or expense, so as to provide a fair means for resolving dispute to which the
arbitral proceedings relate”.9
One possible objection may be that it will increase the cost of the arbitration. I do not believe
that this is necessarily so, as it may in fact result in the dropping of some issues and may
8
Christopher Newmark, “Controlling Time and Costs in Arbitration” in Lawrence Newman and Richard Hill, The
Leading Arbitrators’ Guide to International Arbitration, 2nd edn (New York: JurisNet LLC, 2008), p.83.
9
Also see the UK Arbitration Act 1996 s.33.

If It Ain’t Broke, Don’t Change It 175
assist in ensuring that the main hearing proceeds more expeditiously and thus more
economically. But in any event it will ensure a better informed tribunal which will assist
in ensuring a better award and a speedier one too. But even if it does increase the costs
marginally it is surely a worthwhile price to pay to enjoy the obvious benefits it will provide.
Too many counsel think that they should control the way in which a case is presented to
a tribunal. Most experienced tribunals, however, have their own way of organising the
proceedings and if this proposal catches on counsel will just have to understand that this
procedure will assist not only the tribunal but also the parties.
This early dialogue with counsel may also help to prevent the service on the tribunal,
fairly late in the day, of a large number of authorities. The tribunal will be able to remind
counsel of the wise and practical words of Lord Diplock in Lambert v Lewis in the context
of counsel citing cases to illustrate a well-established principle:
“The citation of a plethora of illustrative authorities, apart from being time and
cost-consuming, presents the danger of so blinding the court with case law that it has
difficulty in seeing the wood of legal principle for the trees of paraphrase.”10
It is also surprising how much space is taken in written submissions explaining to an
experienced tribunal such complex issues such as “offer and acceptance” and the implication
of terms! Although not all tribunals are comprised of legal geniuses, it ought to be assumed
that a tribunal chosen by the parties or appointed by an institution will at least understand
the basic principles of law. Is it really necessary to cite Carlill v Carbolic Smoke Ball Co11
or Donoghue v Stevenson12 to a common law tribunal?13
In my view, there is also a lot to be said for imposing reasonable page limits. I accept
that it might be difficult to arrive at a fair figure for the early rounds of submissions, but
by the time one gets to closing written submissions, surely, it must be reasonable for a
tribunal to impose page limits. In my experience, too many arbitrators are reluctant to do
this, but I think that it does concentrate the mind of the drafter so as to enable him or her
to be succinct in the final summary of the case. If it is not possible, at the end of the case,
with all that has been said and written previously, to be able to summarise succinctly where
your case has ended up, something must have gone wrong.
I am pleased to be able to end by stating that this article is not theoretical. I have used it
in a technical case where I was sole arbitrator and had no expert of my own, nor assessor.
The KO took place three months prior to the hearing and I found it of immense benefit in
my preparation for the hearing. I believe counsel found it valuable too. It certainly flushed
out some issues which were then dealt with in the time available prior to the hearing. Had
these issues only been raised at the main hearing a real problem would have been created.
I therefore encourage my colleagues to consider using the KO because I am sure they
and the parties will benefit from its advantages. So to adapt a slogan used many years ago:
“KO rules—OK?”
10
[1982] A.C. 225 HL at 274–275.
11
[1893] 1 Q.B. 256.
12
[1932] A.C. 562; 1932 S.C. (H.L.) 31; 1932 S.L.T. 317.
13
I accept, of course, that different considerations might apply with a mixed tribunal.

A Tribute to the Contribution of Hew Dundas to
Fifty Issues of Arbitration
Derek Roebuck
This issue is the fiftieth in which one of Hew Dundas’s 84 contributions has appeared. His
gift to the journal is unique and unlikely ever to be equalled, though I’m sure every reader
shares my hope that it will be greatly extended.
Hew sent in his first note not long after I became editor. “On Uberrima Fides” appeared
in February 2002, in the first issue of Vol.68, coinciding with a new publisher and new
format. It was a good omen. It corrected the suggestion in an earlier article that English law
required parties to all contracts to act in good faith. Its tone was measured but authoritative.
The courts have since shown that to have been justified.
Thereafter the flow of case notes, with articles and the occasional book review, has been
as rich as it has been regular. To the next number Hew contributed no less than four case
notes. No one writes a better. He adopted the structure he was consistently to follow:
Introduction; The Facts; The Law; The Decision; Conclusion; sometimes with a paragraph
of background, or description of the history in the lower courts, and sometimes with extended
comment. They became the models for other contributors to learn from.
The next number had three of Hew’s case notes, and the fourth had four more: 12
contributions on matters of immediate practical importance to CIArb members. The journal
was giving them more value and had taken on a new stature, which the intellectual quality
of those case notes justified.
The 2003 volume had five more case notes, plus an article: “Recent Developments
Regarding Costs in Litigation” (2003) 69 90–101. Costs were a subject of special concern
to Hew, which he has shared with the present editor and, indeed, with another regular
contributor, David Altaras, who also wrote an article on costs in the same number, which
was devoted to costs. Their practical relevance is self-evident; what needs perhaps to be
expressed is their contribution to the proclaimed ambition of the journal, to be part of the
transformation of the Institute into a learned society.
Another continuing concern of Hew’s has been appeals from awards under the Arbitration
Act 1996 s.69. “Appeals on Questions of Law: Section 69 Revitalised” (2003) 69 172–183
not only reported the decisions in Lobb v Aintree1 and Northern Pioneer,2 it also reviewed,
explained, criticised and justified the state of the law and practice then. Hew developed his
critique in later numbers, e.g. (2007) 73 127–137, with a proper recognition of the
contribution of the master: “Mustill LJ’s dictum in Aden Refinery3 appears, with the benefit
of hindsight, splendid common sense”.
Appeals and costs were included in Hew’s critical review article, “Arbitration and the
English Courts: Progress and Regress” (2006) 72 104–118, which comprehended all the
more important developments in the first ten years of implementation of the Arbitration
Act 1996.
A superficial count of Hew’s case notes would miss both their quantity and range. For
example, what at first glance appears to be one note, “Questions of Law, Extensions of
Time, Injunctions and Bias” (2006) 72 373–387, reviews four decisions, one from the High
Court of Australia.
1
HOK Sport v Aintree TCC Case HT 02-122 [2002] All E.R. (D) 250.
2
CMA CGM SA v Beteilungs KGt MS Northern Pioneer Schiffahrtsgesellschaft mbH & Co [2002] EWCA Civ
1878; [2003] 1 Lloyds Rep. 212.
3
Aden Refinery Co Ltd v Ugland Management Co Ltd [1987] 1 Q.B. 650.

A Tribute to the Contribution of Hew Dundas to Fifty Issues of Arbitration 177
The special value of Hew’s work is the careful thinking based on practical experience.
His range of contacts in many various fields of arbitration is impressive, perhaps unequalled.
He gave us a glimpse in (2003) 69 172–183 at 172:
“The principal purpose of the present article is twofold: (1) for purposes of completeness
of Arbitration, to bring the record up-to-date with reports of the two recent important
cases; and (2) to argue that s69 does have a continuing validity. I am fortified in this
latter context by a solicitors’ in-house newsletter which stated (echoing comments
made to me separately by two leading maritime arbitrators):
‘So few arbitrated disputes now reach the courts that one wonders how English
commercial law will develop, all appealed awards being private matters. This is
particularly worrying in the context of some of our key markets, such as ship
chartering and, of course, reinsurance, where standard form contracts or clauses
are widely used, the effect of which impacts on many of our clients. In light of
that, the decision of the Court of Appeal in [Northern Pioneer4] was welcome.’”
That’s it! Busy members, with little time to spend, probably at the weekend, with easier
reading as a temptation, are more likely to press on after such an introduction.
They would be unwise to fail to read any of his pieces, lest they miss simple but essential
hints such as this, in relation to a recent decision on partial enforcement (2008) 74 337:
“Given that CIArb award writing teaching is to combine all the amounts payable into
one total (for simplicity), care will have to be taken (in appropriate circumstances)
with the way this is expressed.”
And he goes on to show how it should be done. There has never been any sign of Hew’s
love and command of the most abstruse scholarship tempting him to forget what we are all
about.
Hew likes nothing better than a good argument. That is one of the reasons he has, I
suspect, enjoyed writing his case notes as much as we have enjoyed reading them. But he
knows the value of what he calls “common sense”. For example, he sees no value in
publishing arbitrators’ dissenting opinions (2010) 76 762–763:
“It has always been my view… that dissenting opinions are to be discouraged as far
as possible…. In a recent case in which I was involved, the outset of tribunal
deliberations saw a powerful dissenting voice; the end result was a unanimous, seamless
award, in part possibly because the dissenter, so I suppose (I do not know for certain),
saw the dangers of visible dissent, in part (I do know for certain) because of outstanding
diplomacy on the part of the chairman, who handled the proponents of two powerfully
and diametrically opposed starting points so that there was never any ill-feeling,
rancour, or even harsh words exchanged.”
A good fight, bringing out the best of both sides, with agreement on the better argument.
That is Hew’s vision of arbitration.
All Hew’s case notes treat the judges with proper respect but his first care is to tell it
straight. “A victory for common sense” is real approbation (2009) 75 452. On the next page
“I am unpersuaded that the present case fits his Lordship’s maxim” (that justice must be
seen to be done) is gently withering. His note in (2009) 75 284–288 on Metropolitan v
Atmore5 is blunt: “In summary, this decision is, in my opinion, plain wrong.”
Such a straightforward approach to criticism is invaluable. Hew is ever aware of any hint
of judicial policy. He knows that what the practitioner wants to know is not so much what
the courts have said but what that indicates they will hold.
4
CMA CGM SA v Beteilungs KGt MS Northern Pioneer Schiffahrtsgesellschaft mbH & Co [2002] EWCA Civ
1878; [2003] 1 Lloyds Rep. 212.
5
Metropolitan Property Realizations Ltd v Atmore Investments Ltd [2008] EWHC 2925 (Ch).

178 Arbitration
Unsupportable challenges to arbitrators on the ground of conflict of interest are deplorable

chicanery. Hew will have nothing to do with them and his excoriations are blunt (2012) 78
80:
“While counsel … is, no doubt, obliged to use every ‘proper’ avenue … some of his
arguments seem … at best wafer-thin, more accurately spurious, and it is greatly to
be hoped that Flaux J’s robust dismissal of them means that they do not reappear.”
The ideological foundation for all Hew’s work is unshakeable: arbitration must serve the
parties. As he wrote in (2008) 74 100:
“In the vernacular, ‘Obvious, innit?’ From my perspective of years in the commercial
world, I am greatly heartened by their Lordships emphasizing the importance of the
perceptions of the businessman, being the user of arbitration.”
How did that “businessman” evade my editorial cosh? I usually had my way about
gender-specific language though I had to give in to his insistence on the use of what must
be some sort of plupluperfect tense particular to his native land. And, though neither of us
could ever be called a pedant, we could rejoice together when the outcome of a dispute
depended on a “simple typographical error” or “a multi-billion dollar potential liability was
materially affected by the positioning of an apostrophe” (2012) 78 386.
I know Hew was pleased when he received the accolade his case notes deserved, being
cited with approval by a judge he admired. I thought he had mentioned that in a later note
but, try as I might, all my efforts have failed to find it. I guess he was too modest to do more
than mention it to me.
I have never understood how Hew does it. He is the busiest of all the busy people I know.
Yet he never fails to meet a deadline or any other obligation, which he takes on more
willingly and with greater cheerfulness than most. I have sometimes wondered whether he
isn’t a syndicate, as Joyce Grenfell joked that Enid Blyton was. But then the next email
reveals that Hew was at his desk at 03.30 this morning.
From the start Hew took responsibility for making sure, through his writings that
Arbitration developed steadily towards our common goal, of a learned journal which served
the needs of its readers for the best thinking on all matters of importance, while performing
those reporting functions of a professional journal which a newsletter could not.
Wise old William West said in his collection of useful precedents, published in 16476:
“And as physicians should unprofitably store themselves with the understanding of
the several natures and properties of herbs and roots and other simples, and the art of
Physic, if they did not show us the use and fruit thereof in curing diseases, and restoring
health: so doubtless the doctrine of all other arts and sciences is idle and barren if use
and practice be not therewith conjoined.”
Hew’s writings are all testimony to that truth. Long may he add to them, turning his 50
contributions into the century we look forward to applauding in another 12 years.
6
William West, The First Part of Symboleographie: Which may be Termed the Art, or Description, of Instruments
and Presidents (London: Miles Flesher, last edn 1647 reprinted Clark NJ: Lawbook Exchange, 2008), Preface.

2013 Alexander Lecture
Investomercial Arbitration: Whence Cometh It?
What Is It? Whither Goeth It?
Charles N. Brower*
“It is more in keeping with the dignity of the foreign sovereign to submit himself to
the rule of law than to claim to be above it.”1
It is an understatement to say that I am honoured beyond measure by the invitation extended
by the Chartered Institute to deliver this year’s Alexander Lecture. I have of course been
made aware of the enormous contributions made by the late John Russell Willis Alexander
to international arbitration and to this Institute, for which I express my deep respect. Indeed,
it was his initiative that created this distinguished lecture series.
Since the inaugural Alexander Lecture was given in 1974 by the inimitable Lord Justice
Denning, then Master of the Rolls, he has been followed by a succession of the greatest
personalities in the law. I am humbled—deeply humbled—by the lineage I have been invited
to follow.
I would like to acknowledge my indebtedness to the French artist Paul Gauguin, whose
monumental painting “Whence Come We, What Are We, Whither Go We”, done in Tahiti
in 1897, has inspired the title of this Alexander Lecture.
1. Introduction
Until recently, international dispute settlement processes did not acknowledge the unique,
hybrid nature of the investor-State relationship. The rules and practices of commercial
arbitration focused on purely private disputes between two private entities, and were not
originally designed to factor in the exercise of a host State’s public authority. Treaty-based
adjudication, on the other hand, was restricted to inter-State disputes under public
international law, which mainly governed relations between sovereign States. In such
circumstances, a foreign investor mistreated by its host State was forced to choose between
the proverbial rock and its opposing hard place: the only options available to it were either
to co-operate with the host State, e.g. by submitting to its laws and public authority; or to
convince its home government to intervene on its behalf.2 This most often was a choice
between two hopeless alternatives.
Since the mid-twentieth century, however, the field of contractual arbitration has
developed special rules and practices to provide certain minimum safeguards against the
unreasonable exercise of public authority by a contracting host State. In parallel, public
international law processes have come to enable private investors to invoke directly the
responsibility of sovereign States. Thus, foreign investors can rely today upon both
contractual and treaty-based dispute resolution processes to protect themselves against the
political risks inherent in foreign investment.
This lecture argues that as a result of these developments a distinct, hybrid field of law
has emerged which I propose be dubbed “investomercial” arbitration, and which addresses
*
The author expresses his deep gratitude to Shashank P. Kumar, his immediate past Legal Adviser at the Iran-United
States Claims Tribunal and an advocate enrolled with the Bar Council of Delhi, for his devoted assistance in the
preparation of this lecture.
1
Rahimtoola v The Nizam of Hyderabad [1958] A.C. 379 at 418 per Lord Denning.
2
See e.g. Noel Maurer, The Empire Trap: The Rise and Fall of U.S. Intervention to Protect American Property
Overseas (Princeton NJ: Princeton University Press, 2013), p.20.

180 Arbitration
the relationship between foreign investors and host States. Investomercial arbitration is
neither purely private, nor strictly public. Rather, it represents a phenomenon whereby the
contractual and treaty-based dispute settlement processes complement each other and work
together to minimise political risk and provide a secure, independent and predictable legal
regime for cross-border investment flows. Investomercial arbitration has helped us move
from gunboat diplomacy to an era in which cross-border investment disputes are settled
peacefully, based on some notion of the rule of law. It marks a shift from a power-based to
a rules-based approach for settling international investment disputes.3 Thus the conventional
distinction between commercial arbitration and treaty-based investor-State arbitration is no
longer valid. The real distinction is between investomercial arbitration on the one hand,
and strictly private-party arbitration on the other.
Following this Introduction, Part 2 addresses the question “Whence cometh it?” It
delineates the hybrid nature of the relationship between foreign investors and host States,
identifying its peculiar characteristics. Parts 3 and 4 together endeavour to describe “What
is it?” Part 3 shows how contractual arbitration between foreign investors and host States
has developed to account for the involvement of State parties by importing international
law. Part 4 looks at how the treaty-based arbitration process that by definition involves
international law nonetheless has come to account for the private, contractual interest in
the underlying relationship between the foreign investor and the host State. Part 5 ventures
to answer “Whither goeth it?”
2. The Relationship between the Foreign Investor and the Host State
Succinctly stated, investomercial arbitration is a product of the dual role played by States
as both contracting parties and lawgivers.
Several vehicles are available to investors for investing abroad, the most common and
simple example being an investment contract concluded with the government of the host
State or a State-owned entity.4 Before an investor enters into such a contractual relationship
with the host State, it is, relatively speaking, in the driver’s seat. It offers the host State
prospects of generating employment, increasing exports, injecting capital into the local
economy, productivity and technology spillovers, hence the promise of overall economic
growth and development.5
Once the contract is concluded and the investment made, however, the bargaining
positions are immediately and starkly reversed. Then it is the State that is behind the wheel.
Under the investment contract, the investor usually makes long-term commitments of capital
and other resources in order to ensure the economic viability of its investment.6 The
investment becomes virtually immobile, the long investment horizons ensuring that the
investor cannot easily withdraw from its contractual commitments. Debt financing of the
investment poses further limitations on the investor’s freedom. By contrast, the host State
may be tempted to renege on its contractual promises to the foreign investor.7 Once an
investor has “sunk” its investment, a State may decide to terminate or unilaterally modify
its contractual relationship with the investor by exercising its public authority. This
3
See generally, Maurer, The Empire Trap: The Rise and Fall of U.S. Intervention to Protect American Property
Overseas (2013).
4
For a discussion of the various types of investment contracts, see Jan Ole Voss, The Impact of Investment Treaties
on Contracts between Host States and Foreign Investors (Leiden: Brill, 2010), pp.17–25.
5
Nathan M. Jensen, Nation States and the Multinational Corporation: A Political Economy of Foreign Direct
Investment (Princeton NJ: Princeton University Press, 2006), pp.28–33; Andrew Guzman, “Why LDCs Sign Treaties
That Hurt Them: Explaining the Popularity of Bilateral Investment Treaties” (1997) 38 Virginia Journal of International
Law 639, 660.
6
See e.g, Margarita T. B. Coale, “Stabilization Clauses in International Petroleum Transactions” (2002) 30 Denver
Journal of International Law and Policy 217 at 219.
7
Ivar Alvik, Contracting With Sovereignty (Oxford: Hart Publishing, 2011), pp.2–3; see generally Raymond
Vernon, Sovereignty at Bay: The Multinational Spread of US Enterprise (New York: Basic Books, 1971).

2013 Alexander Lecture 181
phenomenon, whereby the contracting parties’ relative bargaining positions are reversed,
totally and swiftly, has given rise to the term “obsolescing bargain”.8
Mindful of the obsolescing nature of the bargain, an investor can seek to leverage its
initial advantage to secure better terms and assurances from the host State, but this may, in
turn, only tempt the host State further to exit the bargain once the investment is made.9 Thus
an investor, if it over-bargains, may preordain the State’s destruction of its bargain. The
relationship between investor and host State often becomes a constant see-saw or tug-o’-war.
The obsolescing nature of the bargain and the ensuing inevitable political risks are
peculiar features of alien investments with host States, as distinguished from purely
commercial transactions, and have a clear and present effect on investment decisions.10
Even as econometric studies show a “degree of ambiguity” in their conclusions, survey-based
analyses “unequivocally support” the view that foreign investors account for political risks
in their investment decisions.11 Similarly, UNCTAD, in its 2013 edition of the World
Investment Report, states that one of the main reasons for the 18 per cent “sharp decline”
in cross-border investment flows in 2012 was “policy uncertainty in a number of major
economies” which “gave rise to caution among investors”.12
The international community has developed a variety of strategies to address the political
risk inherent in cross-border investments. Means to account for political risk vary from
third-party political risk insurance to a variety of corporate approaches aimed at managing
political risk.13 Insofar as the political risk inherent in cross-border investments essentially
represents the problem of the uncertainty of the host State’s conduct, international dispute
settlement processes, too, have responded to provide greater security and certainty for
cross-border investment flows.
3. Contractual Arbitration
Although a State may be acting in its private capacity when entering into contracts with
foreign investors, it also can easily exercise its public authority, e.g. through legislative
changes, to escape from its contractual commitments according to its perceived needs and,
more importantly, its convenience. As the Tribunal in Amco Asia v Indonesia acknowledged,
this feature distinguishes investment contracts with States from purely private, commercial
contracts:
“However, it [the relationship between Amco Asia and Indonesia] is not identical to
a private law contract, due to the fact that the State is entitled to withdraw the approval
it granted for reasons which could not be invoked by a private contracting entity,
and/or to decide and implement the withdrawal by utilising procedures which are
different from those which can and have to be utilised by a private entity.”14
Under the private process of commercial arbitration, as developed in disputes between two
private parties, unless the parties are able to agree otherwise, the municipal law of the host
State normally is considered to be the proper law governing the investment contract, which
8
Vernon, Sovereignty at Bay: The Multinational Spread of US Enterprise (1971), p.46.
9
Alvik, Contracting With Sovereignty (2011), p.3.
10
Multilateral Investment Guarantee Agency (MIGA), World Investment and Political Risk 2009 (Washington
DC: MIGA, 2010), p.28.
11
Multilateral Investment Guarantee Agency (MIGA), World Investment and Political Risk 2009 (Washington
DC: MIGA, 2010), Annex 5, p.89.
12
UNCTAD, World Investment Report 2013 (New York: UNCTAD, 2013), p.xii.
13
Jeswald W. Salacuse, The Three Laws of International Investment: National, Contractual, and International
Frameworks for Foreign Capital (Oxford: Oxford University Press, 2013), p.246.
14
Amco Asia v Indonesia (1985) 24 International Legal Materials 1022 at 1029 (the Award was subsequently
annulled, but for other reasons relating to the valuation of the investment).

182 Arbitration
an arbitral tribunal is bound to apply.15 Such law is of course notoriously subject to change.16
If an arbitral tribunal constituted to resolve a contractual dispute is bound to apply the
municipal law of the host State as the proper law, the contractual arbitral process alone
cannot offer any meaningful protection against the political risk inherent in the investment
contract.17
To get around this problem, arbitrating parties and tribunals alike have fashioned five
solutions. The first of these is to include international law in the governing law clause of
the investment contract. Based on the principle of party autonomy, parties to an investment
contract remain free to agree to the application of national and and/or international law,18
and have done so on numerous occasions.19 Such a choice may be express or implied.20
Thus in TOPCO v Libya,21 the choice of law clause stated that the:
“Concession shall be governed by and interpreted in accordance with the principles
of law of Libya common to the principles of international law and in the absence of
such common principles then by and in accordance with the general principles of law,
including such of those principles as may have been applied by international tribunals.”
Moreover, even in cases in which the national law governs the investment contract, whether
by choice of the parties or by the application of mandatory rules of national law, international
law may come to apply “indirectly” through its incorporation into the national legal system
at issue.22 While the autonomy to choose the law governing an investment contract may
seem obvious to many now, it is important to remember that until relatively recently (some
would argue, even now)23 the Calvo Doctrine, which rejected outright the applicability of
international law to investment contracts, held considerable sway in the international
community.24
15
Hege Elizabeth Kjos, Applicable Law in Investor State Arbitration: The Interplay between National and
International Law (Oxford: Oxford University Press, 2013), pp.83–84.
16
Derek William Bowett, “State Contracts with Aliens: Contemporary Developments on Compensation for
Termination or Breach” (1988) 59 British Yearbook of International Law 49; Robert Y. Jennings, “State Contracts
in International Law” (1961) 36 British Yearbook of International Law 156, 156–157.
17
This is not to say that the political risk will always translate into host State action, or that the host State action
may not be justified under the applicable law, but only that even such a purely private process as commercial arbitration
has evolved in response to the involvement of sovereign States in what otherwise would be a private process.
18
Institut de Droit international, Resolution on Arbitration Between States, States Enterprises or State Entities,
and Foreign Enterprises (Santiago de Compostela, September 12, 1989), art.6; Hege Elizabeth Kjos, Applicable Law
in Investor State Arbitration: The Interplay between National and International Law (Oxford: Oxford University
Press, 2013), p.70.
19
Kjos, Applicable Law in Investor State Arbitration: The Interplay between National and International Law
(2013), p.71.
20
Sapphire International Petroleums Ltd v National Iranian Oil Company (1963) 35 I.L.R. 136 at 172; Kjos,
Applicable Law in Investor State Arbitration: The Interplay between National and International Law (2013), pp.71–80
(highlighting the need for “a more careful approach in finding the implicit choice of law”, p.76).
21
Texaco Overseas Petroleum Co v The Government of the Libyan Arab Republic, Award on the Merits, January
19, 1977 (1978) 17International Legal Materials 1, para.32.
22
See e.g. BG Group Plc v Argentina, Award, December 24, 2007, para.97; LIAMCO v Libya; LIAMCO v Libya,
(1981) 20 International Legal Materials 1, 37; Kjos, Applicable Law in Investor State Arbitration: The Interplay
between National and International Law (2013), pp.181–189 (concluding that “arbitral tribunals may and do apply
international law to the dispute when the national legal order in question incorporates international law. Yet, the fact
that no State is fully ‘monist’ … should caution investors in relying on the application of international law via national
law”).
23
See e.g. M. Sornarajah, The Settlement of Foreign Investment Disputes (The Hague: Kluwer Law International,
2000), p.241.
24
Jan Ole Voss, The Impact of Investment Treaties on Contracts between Host States and Foreign Investors (Leiden:
Brill, 2010), pp.39–41 (summarising the various arguments and reasons against the principle of party autonomy in
investment contracts, but noting that “it is still the predominant view that the principle of party autonomy governs
the choice of law in international contracts between State entities and foreign investor”, p.40); D. Shea, The Calvo
Clause: A Problem of Inter-American and International Law and Diplomacy (Minneapolis MN: Minnesota University
Press, 1955), p.18; Wenhua Shan, “From ‘North-South’ Divide to Private Public Debate: Revival of the Calvo Doctrine
and the Changing Landscape in International Investment Law” (2007) 37 Northwestern Journal of International Law
and Business 631; Kjos, Applicable Law in Investor State Arbitration: The Interplay between National and International
Law (2013), pp.163–164.

As the second solution to the State-as-both-party-and-lawgiver problem tribunals

themselves, deciding contractual disputes between foreign investors and host States, have
resorted to applying various theories of “internationalisation” to argue that investment
contracts, by their very nature, are governed by public international law,25 “transnational
law”, “general principles of law”26 and even “principles rooted in the good sense and common
practice of the generality of civilised nations—a sort of ‘modern law of nature’”.27 Scholars,
too, have argued that investment agreements with alien investors, by their very nature, are
subject to “quasi” public international law,28 and find their Grundlegung in the international
sphere.29 Thus, an international investment contract, being governed by its very nature by
a set of rules other than the national law of the host State, remains governed by those rules
despite a change in the municipal law of the host State.
The third device for injecting international law into an otherwise contractual arbitration
can be provided by the rules under which the investor and its host State arbitrate. Behold
the ICSID Convention, which was designed for contractual investment arbitration,30 and
art.42(1) of which provides that “[t]he Tribunal shall decide a dispute in accordance with
such rules of law as may be agreed by the parties”,31 but expressly authorises the combined
choice of national and international law as the applicable law32:
“In the absence of such agreement, the Tribunal shall apply the law of the Contracting
State party to the dispute (including its rules on the conflict of laws) and such rules of
international law as may be applicable.”
A fourth mechanism used to insulate the investor-State contractual relationship from
subsequent changes in the law governing the contract is the so-called “stabilisation clause”.
Such a clause protects the investor against unilateral modifications of the law governing
the contract by the host State.33 This is done by specifying in the investment contract that
subsequent legislation and changes by the State party do not apply to its contractual
relationship with the investor. Because such a clause “freezes” the law governing the
investment contract, any different, subsequently enacted national law of the host State is
ineffective as regards a later dispute. This protects the investor against unfair exercise of
regulatory authority by the State to modify its contractual relationship with the investor ex
post. Tribunals have confirmed the effect of stabilisation clauses on the public authority of
host States to change their laws vis-à-vis investors covered by such clauses.34 In its 1979
25
Sapphire International Petroleums Ltd v National Iranian Oil Company (1963) 35 I.L.R. 136 at 173 (the arbitrator
went on to note that: “[t]his contract therefore has a quasi international character which releases it from the sovereignty
of a particular legal system, and it differs fundamentally from an ordinary commercial contract”).
26
V.V. Veeder, “The Lena Goldfields Arbitration: The Historical Root of Three Ideas” (1998) 47 International
and Comparative Law Quarterly 747, 752.
27
Petroleum Development v Sheikh of Abu Dhabi, Award, September 1951, (1952) 1(4) International and
Comparative Law para.149.
28
Richard B. Lillich, “The Law Governing Disputes under Economic Development Agreements: Reexamining
the Concept of ‘Internationalization’” in Charles N. Brower and Richard B. Lillich (eds), International Arbitration
in the 21st Century (Irvington NY: Transnational Publishers, 1993), p.61.
29
Prosper Weil, “The State, the Foreign Investor, and International Law: The No Longer Stormy Relationship of
a Ménage à Trois” in S. Schlemmer-Schulte and K.-Y Tung (eds), Liber Amicorum Ibrahim F.I. Shihata (The Hague:
Kluwer Law International, 2001), pp.839, 844–845.
30
Antonio R. Parra, The History of ICSID (Oxford: Oxford University Press, 2012), p.132.
31
ICSID Convention art.42(1).
32
Duke Energy v Ecuador, ICSID Case No.ARB/04/19 Award, August 18, 2008, para.196; ICSID Model Clauses,
Doc. ICSID/5/Rev. 2 (February 1, 1993), V, A.
33
L.J. Bouchez, “The Prospects for International Arbitration: Disputes between States and Private Enterprises” in
A.H.A. Soons (ed.), International Arbitration: Past Prospects (Leiden: Martinus Nijhoff, 1990), p.115.
34
LETCO v Liberia, Award (1986) 26 International Legal Materials 646, 666–667; Revere Copper v OPIC, Award
(1986) 56 International Legal Reports 258 at 280; AGIP v Congo, Award (1979) 21 International Legal Materials
726 at para.84; CMS v Argentina, ICSID Case No.ARB/01/8 Award (2005) para.151. Even tribunals which have
adopted a “markedly different” approach to the interpretation of the stabilisation clause at issue compared to the
Texaco award have agreed with the “the principle that contractual limitations on the right to nationalize were possible
under public international law”: Christopher Greenwood, “State Contracts in International Law—The Libyan Oil
Arbitrations” (1983) British Yearbook of International Law 27, 81 (in discussing Kuwait v Aminoil, (1982) 21
International Legal Materials 976).

184 Arbitration
Athens Resolution on “Arbitration between States, State enterprises, or State Entities, and
Foreign Enterprises” the Institut de Droit international expressly recognised that
“[t]he parties may agree that domestic law provisions referred to in the contract shall
be considered as being those in force at the time of conclusion of the contract”.35
Insofar as stabilisation clauses protect against subsequent changes in the actual proper law
of an investment contract, it can be said that such clauses
“constitute an alternative to an explicit choice of public international law or general
principles of law rather than a way in which to achieve a more profound, or just
different, degree of internationalisation”.36
A 2008 study by John Ruggie and the International Finance Corporation noted that “[t]he
practice of using stabilization clauses of some kind is widely established across industries
and regions of the world”.37
The fifth device for eliminating the possible effects the State as lawgiver can have on
its contractual obligations to an investor is “delocalisation” of the lex fori.38 As with respect
to the internationalisation of the proper law, one does not have to believe fully in theories
of delocalisation39 to appreciate real and significant developments in the arbitral process
designed to account for the participation of sovereign States.
As one example of what can happen, the capacity of a State or a State-owned entity to
participate in the contractual arbitration process may be considered to be different, as far
as the State itself is concerned, from that of private investors. It is not unusual for States or
State entities to be prohibited under their relevant domestic law from submitting disputes
with private entities to arbitration.40 Such a State or its entity may therefore argue that it
lacks the capacity to arbitrate disputes with private foreign investors. While this underscores
the importance of confirming the authority of the State party or representative signatory to
the contract before the contract is concluded,41 such confirmation does not necessarily
foreclose the possibility of an incapacity objection by a State when a dispute arises. Even
if a contract with an arbitration clause is concluded, a State can later enact legislation which
mandates reference of all disputes arising under investment contracts to its domestic courts.42
In response to this problem, several national laws on commercial arbitration have
responded by expressly recognising that a State or a State-owned entity which is party to
an arbitration agreement cannot rely on its own law to contest its capacity to be a party to
an arbitration or the arbitrability of a dispute covered by the arbitration agreement.43 This
35
Institut de Droit international, Resolution on [t]he Proper Law of Contract in Agreements between a State and
a Foreign Private Person (Athens, September 11, 1979), art.3.
36
Ole Spiermann, “Applicable Law” (2005) 2(5) Transnational Dispute Management 22.
37
Stabilization Clauses and Human Rights: A research project conducted for IFC and the United Nations Special
Representative of the Secretary-General on Business and Human Rights, May 27, 2009, p.4, available online at: http:
//www.ifc.org/wps/wcm/connect/9feb5b00488555eab8c4fa6a6515bb18/Stabilization%2BPaper.pdf?MOD=AJPERES
&CACHEID=9feb5b00488555eab8c4fa6a6515bb18 [Accessed February 18, 2014].
38
See generally, Jan Paulsson, “Delocalization of International Commercial Arbitration: When and Why It Matters”
(1983) 32 International and Comparative Law Quarterly 53.
39
See e.g. W. Michael Reisman, Systems of Control in International Adjudication and Arbitration: Breakdown
and Repair (Durham NC: Duke University Press, 1992), pp.132–134.
40
Press, 2009), p.97 (citing the examples of France, Belgium and Venezuela). In some States, e.g. the Mercosur States,
such limitations may relate to the notions of administrative decisions and contracts. See Eduardo Silva-Romero, “ICC
Arbitration and State Contracts” (2002) 13(1) ICC International Court of Arbitration Bulletin 34, 39–41.
41
Press, 2009), p.98.
42
Robert Y. Jennings, “State Contracts in International Law” (1971) 37 British Yearbook of International Law
156, 172 (referring to the Losinger case, Permanent Court of International Justice Series A/B No.67).
43
See e.g. Swiss Private International Law Act 1987 art.177(2); Tresor Public v Galakis, Cour de cassation, May
2, 1966, 93 Clunet 648 (1966); Nigel Blackaby et al., Redfern and Hunter on International Arbitration, 5th edn
(Oxford: Oxford University Press, 2009), p.98; Eduardo Silva-Romero, “ICC Arbitration and State Contracts” (2002)
13(1) ICC International Court of Arbitration Bulletin 34, 38.

position is now supported by the practice of arbitral tribunals themselves that have concluded
that a State party “cannot legitimately shirk the obligations resulting from the arbitration
agreement to which it has freely consented”.44
Whether this issue is classified as one of “capacity”, “arbitrability”45 or even “immunity”,46
it reflects the common belief that it is “plainly unsatisfactory for a State or State agency to
be entitled to rely on its own law to defeat an agreement it has freely entered into”.47 As
Klaus Peter Berger explains:
“The notion of sovereignty as developed in public international law and the confidence
of the private party in the validity of the arbitration agreement concluded with the state
or state-controlled party bind the state to the arbitration agreement which it cannot
rescind unilaterally by invoking its internal law. This rule is a specification of the more
general principle of ‘non concedit venire contra factum proprium’ which in itself, is
a general principle of transnational law.”48
Another example of delocalisation relates to the defence of State immunity to the judicial
recognition and enforcement of arbitral awards. To the extent that the control mechanism
for the contractual arbitral process requires that awards be recognised and enforced by the
domestic courts of a particular jurisdiction, States have sought to claim immunity from the
jurisdiction of the national courts supervising the arbitration (primary jurisdiction) as well
as immunity from execution of the award in the courts tasked with enforcing the award
(secondary jurisdiction).49
With respect to immunity from the jurisdiction of the courts of the primary jurisdiction,
it is now generally accepted that the existence of an arbitration agreement between a State
and an investor amounts to a waiver of the State’s jurisdictional immunity.50 This position
is reflected in the national laws of several States.51 In contrast to the effect of an arbitration
agreement on the jurisdictional immunity of a State party to a contractual arbitration
proceeding, however, a waiver of the State’s immunity from proceedings for the enforcement
or execution of an arbitral award in a secondary jurisdiction cannot generally be implied
from the existence of an arbitration agreement.52 In order to solve this problem, the ICC
Rules of Arbitration expressly provide that “[e]very award shall be binding on the parties”
and that
44
Faced with an objection that a State or State entity was forbidden from concluding arbitration agreements under
its national law, the ICC International Court of Arbitration refused to rule on the validity of the arbitration agreement,
allowing the arbitration to proceed: Eduardo Silva-Romero, “ICC Arbitration and State Contracts” (2002) 13(1) ICC
International Court of Arbitration Bulletin 34, 39–41.
45
See e.g. Tresor Public v Galakis, Cour de cassation, May 2, 1966, 93 Clunet 648 (1966); Blackaby et al., Redfern
and Hunter on International Arbitration (2009), p.99.
46
Court of Appeal, Stockholm, June 19, 1980, (1981) 20 International Legal Materials 893.
47
Blackaby et al., Redfern and Hunter on International Arbitration (2009), p.98.
48
Klaus Peter Berger, “Re-examining the Arbitration Agreement: Applicable Law—Consensus or Confusion?”
in Albert Jan van den Berg (ed.), International Arbitration 2006: Back to Basics? ICCA Congress Series 2006
Montreal (The Hague: Kluwer, 2007), pp.301–334.
49
Blackaby et al., Redfern and Hunter on International Arbitration (2009), pp.667–668. On the concept of State
immunity, see Malcolm N. Shaw, International Law, 2nd edn (Cambridge: Cambridge University Press, 1988), p.373
(noting that the “independence and equality of states made it philosophically as well as practically difficult to permit
municipal courts of one country to manifest their power over foreign sovereign states, without their consent”). See
also Hersch Lauterpacht, “The Problem of Jurisdictional Immunities of Sovereign States” (1951) 28 British Yearbook
of International Law 220.
50
51
See e.g. English State Immunity Act 1978 s.9. See also UN Convention on Jurisdictional Immunity of States
and their Property art.17; US FSIA, 28 U.S.C. s.1605(a)(6). See further Blackaby et al., Redfern and Hunter on
International Arbitration (2009), p.668; G.R. Delaume, “Recognition and Enforcement of State Contract Awards in
the United States: A Restatement” (1997) 91 American Journal of International Law 476.
52

186 Arbitration
“[b]y submitting the dispute to arbitration under the Rules, the parties undertake to
carry out any award without delay and shall be deemed to have waived their right to
any form of recourse insofar as such waiver can validly be made”.53
An earlier version of this rule was at issue in Creighton v Qatar before the French courts.
In 1982, Creighton Ltd, a company incorporated in the Cayman Islands with operations in
the United States, entered into a contract with the Government of Qatar for the construction
of a women’s hospital in Doha. In November 1986, however, Creighton was expelled from
the project by the Qatari Government. Creighton commenced ICC arbitration under the
contract in 1987. Following a final award in its favour in October 1993, Creighton applied
to enforce the award in French courts against Qatari Government bank accounts in France.
Qatar objected, by claiming immunity from execution. Following lengthy proceedings in
French courts, in 2000 the Cour de cassation found that, by participating in the ICC
arbitration, Qatar had waived not only its immunity from jurisdiction, but also its immunity
from execution.54 In reaching this conclusion, the Court relied upon the “principles of
international law governing the immunities of foreign states” and an earlier version of the
ICC Rule noted above.55
To summarise, it is true that “States are bound to fulfill their [contractual] obligations
to the same extent as private persons”.56 But, State parties to investment contracts are
fundamentally different from private parties to commercial contracts. States, unlike private
parties, possess the power unilaterally to rewrite their contractual relationship with an
investor through a legislative change in the proper law. This is a political risk inherent in
investment. To address this, contractual arbitration has developed various mechanisms
aimed at restricting the host State’s control over the proper law and the dispute settlement
process. In terms of the applicable law, this has been achieved through: (1) a direct choice
of international and/or national law as the proper law; (2) theories of internationalisation
(including an indirect reference to international law in monist jurisdictions); (3) applicable
arbitration rules; and (4) stabilisation clauses. The arbitral process has similarly responded
(5) with various theories of “delocalisation” of the lex fori, the rules relating to the capacity
of States to submit disputes to arbitration, and developments in the area of State immunity
from the recognition and enforcement of arbitral awards.
4. Investment Treaty Arbitration

Conversely to contractual arbitration, which originates in private investment contracts, the
origins of treaty-based arbitration lie in public international law instruments between
sovereign States. This does not, however, mean that the underlying investment contract and
the domestic law of the host State become irrelevant. To the contrary, the treaty arbitration
process is inextricably linked to the underlying investment contract as well as to the domestic
law of the host State.
By entering into investment treaties,57 State parties express their general consent to
submit disputes with foreign investors to arbitration. This general offer is accepted when a
specific foreign investor challenges the actions of the host State in a manner prescribed by
the given treaty, e.g. by serving a notice of dispute. As has been pointed out by the Court
of Appeal of England and Wales, the agreement to arbitrate which results from following
53
ICC Rules 2012 art.34(6). The rule can also be found in the 1988 Rules (art.24) and the 1998 Rules (art.28(6)).
54
Creighton Ltd v Qatar, decision of the Cour de cassation of July 6, 2000, (2000) 25 Yearbook of Commercial
Arbitration.
55
Eduardo Silva-Romero, “ICC Arbitration and State Contracts” (2002) 13(1) ICC International Court of Arbitration
Bulletin 34, 44 (suggesting that the Cour de cassation can be seen as recognising the ICC Rule as a “general principle
of international commercial law” or lex mercatoria).
56
Saudi Arabia v Aramco, Award (1958) 27 International Law Reports 117, 192.
57
Bilateral investment treaties (BITs), multilateral treaties, Energy Charter Treaty (ECT) and investment chapters
in free trade agreements (FTAs).

the treaty route is not itself a treaty. It is an agreement between a foreign investor on the
one side and the host State on the other.58 The law governing this agreement is international
law, but that does not make it a treaty because a foreign investor does not possess the
personality to conclude treaties under international law.59 It is a contract governed by
international law.
Thus, the first means by which an otherwise purely contractual dispute between an
investor and its host State may be submitted to a treaty-based tribunal for decision is an
arbitration clause that extends beyond claims for breach of the treaty’s substantive
protections.60 Whether a tribunal actually has the jurisdiction to consider purely contractual
claims depends of course on the scope of the State’s consent as contained in the text of a
given treaty. Many investment treaties contain generic compromissory clauses in which
contracting State parties consent to submit to arbitration “any” or “all” disputes arising out
of or in connection with protected investments.61 In Article 9 of the Italy-UAE BIT, for
example, the two States agree to submit “[a]ll kinds of disputes or differences … between
the Contracting State and an investor of the other Contracting State concerning an
investment” to international arbitration. The United States’ 2012 Model BIT goes one step
further and specifies that claims concerning a breach of “an investment agreement” may
be submitted to arbitration.62 Other treaties limit the jurisdiction of tribunals to claims
alleging a violation of the substantive standards of protection set out in the treaty itself,
such as those relating to expropriation, fair and equitable treatment, national treatment,
etc.63
Most arbitral tribunals have interpreted such generic provisions as conferring jurisdiction
also over purely contractual claims.64 A leading authority on this continues to be the decision
of the ad hoc Committee in the Vivendi proceeding. In its decision, the ad hoc Committee
observed that Article 8 of the Argentina-France BIT, which provided that “[a]ny dispute
relating to investments made under this Agreement between one Contracting Party and an
investor of the other Contracting Party” may be submitted to arbitration
“does not use a narrower formulation, requiring that the investor’s claim allege a breach
of the BIT itself. Read literally, the requirements for arbitral jurisdiction in Article 8
do not necessitate that the Claimant allege a breach of the BIT itself: it is sufficient
that the dispute relate to an investment made under the BIT”.65
Some tribunals, however, have had difficulty concluding that such broad compromissory
clauses confer jurisdiction over purely contractual claims.66 The Tribunal in SGS v Pakistan
did not “see anything” in the broadly worded text of Article 9 of the Pakistan-Switzerland
BIT that could be read as conferring jurisdiction over “claims resting ex hypothesi exclusively
on contract”.67 The Tribunal in LESI-DIPENTA v Algeria reached a similar conclusion on
the scope of the generic clause in the Algeria-Italy BIT. It reasoned that the consent of State
parties to the treaty “is not given extensively for all rights and claims that could be related
to an investment”. Instead, the Tribunal read into the text of the compromissory clause
58
Republic of Ecuador v Occidental Exploration and Production Co [2005] EWCA Civ 1116 [32]–[33].
59
James Crawford, “Treaty and Contract in Investment Arbitration” (2008) 24 Arbitration International 351, 361.
60
Cf. J. Griebel, “Jurisdiction over ‘Contract Claims’ in Treaty-Based Investment Arbitration on the Basis of the
Wide Dispute Settlement Clauses in Investment Agreements” (2007) 4(5) Transnational Dispute Management 14.
61
Zachary Douglas, The International Law of Investment Claims (Cambridge: Cambridge University Press, 2009),
p.234; Anthony Sinclair, “Bridging the Contract/Treaty Divide” in Christina Binder et al. (eds), International Investment
Law for the 21st Century: Essays in Honour of Christoph Schreuer (Oxford: Oxford University Press, 2009), pp.92,
93.
62
US Model BIT 2012 art.24(1)(a)(i)(C).
63
For example, Malaysia-Ghana BIT art.7(1); NAFTA art.1116; ECT art.26(1).
64
SGS v Philippines, ICSID Case No.ARB/02/6 para.131; SGS v Paraguay, ICSID Case No.ARB/07/29 para.129.
65
Compañía de Aguas del Aconquija SA and Compagnie Générale des Eaux/Vivendi Universal v Argentine
Republic, ICSID Case No.ARB/97/3, Decision on Annulment, July 3, 2002, para.55.
66
Joy Mining v Egypt, ICSID Case No.ARB/03/11, Decision on Jurisdiction, August 6, 2004, para.64;
LESI-DIPENTA v Republic of Algeria, ICSID Case No.ARB/03/8 Award, January 10, 2005.
67
SGS v Pakistan, ICSID Case No.ARB/01/12, Decision on Jurisdiction, August 6, 2003, para.161.

188 Arbitration
“a requirement that measures complained of amount to a violation of the bilateral

agreement, which means in particular that they be of an unjustified or discriminatory
nature … . This is not necessarily the case for any breach of contract.”68
While these latter decisions may have been driven by “philosophical concerns”,69 they
nonetheless have been subject to doubt for two reasons. First, reading “requirements” of
the sort posited by the LESI-DIPENTA Tribunal into the text of a dispute settlement provision
which confers jurisdiction over “any” or “all” disputes arguably is inconsistent with the
rules of treaty interpretation contained in the Vienna Convention on the Law of Treaties.
These rules require that the express terms of the treaty must be taken as the authentic
expression of the agreement of the parties.70
A second doubt is represented by the comments of Gaillard, a member of the
LESI-DIPENTA Tribunal, who has separately cautioned that
“it may seem odd to interpret a treaty as creating a jurisdictional basis for a treaty-based
tribunal in cases where it is not called upon to rule on alleged violations of that treaty
[because] [t]here is always a danger in divorcing the jurisdictional provisions from
the substantive terms of the same treaty in that this may suggest that the treaty-based
tribunal has jurisdiction but is invited to rule in a vacuum.”71
However, there is nothing inherently “odd” in a treaty-based tribunal being vested with the
jurisdiction over claims not relating to the given treaty.72 The Iran-United States Claims
Tribunal, established pursuant to the Algiers Accords between Iran and the United States,
has decided a number of claims by United States nationals against Iran alleging a breach
of contract. Similarly, other treaty-based tribunals have readily found jurisdiction over
non-treaty claims, including claims based entirely on national law73 and even customary
international law.74 Moreover, tribunals with jurisdiction over non-treaty-based claims are
not “invited to rule in a vacuum”. If the parties to an investment contract are unable to agree
on the applicable law, the practice of tribunals suggests that national law primarily applies
to contractual claims.75 This does not mean that international law will inevitably be
irrelevant.76Article 30(2) of the US Model BIT, for example, provides that a tribunal tasked
with adjudicating claims concerning the alleged breach of an investment authorisation or
investment contract “shall apply”:
“(a) the rules of law specified in the pertinent investment authorization or
investment agreement, or as the disputing parties may otherwise agree; or
(b) if the rules of law have not been specified or otherwise agreed:
68
LESI-DIPENTA v Republic of Algeria, ICSID Case No.ARB/03/8 Award, January 10, 2005, paras 25–27 as
translated in Anthony Sinclair, “Bridging the Contract/Treaty Divide” in Christina Binder et al. (eds), International
Investment Law for the 21st Century: Essays in Honour of Christoph Schreuer (Oxford: Oxford University Press,
2009).
69
Anthony Sinclair, “Bridging the Contract/Treaty Divide” in Christina Binder et al. (eds), International Investment
Law for the 21st Century: Essays in Honour of Christoph Schreuer (Oxford: Oxford University Press, 2009), p.96.
70
Richard Gardiner, Treaty Interpretation (Oxford: Oxford University Press, 2008), pp.144–145.
71
Emmanuel Gaillard, “International Arbitration Law” (2005) New York Law Journal (October 6) (emphasis
added).
72
See Robert Jennings and Arthur Watts (eds), Oppenheim’s International Law (Oxford: Oxford University Press,
1992), p.927.
73
Iurii Bogdanov, Agurdino-Invest Ltd, Agurdino-Chimia JSC v Government of the Republic of Moldova, Award,
September 22, 2005 s.2.1.
74
Chevron Corp and Texaco Petroleum Corp v The Republic of Ecuador, Interim Award, December 1, 2008,
para.109.
75
(2013), pp.172–175; Société Ouest Africaine des Betons Industriels (SOABI) v Senegal, ICSID Case No.ARB/82/1,
Award, February 25, 1988, para.5.02; Compañía de Aguas del Aconquija SA and Compagnie Générale des Eaux/Vivendi
Universal v Argentine Republic, ICSID Case No.ARB/97/3, Decision on Annulment, July 3, 2002, para.96.
76
See also, on the role of international law when national law primarily applies, Kjos, Applicable Law in Investor
State Arbitration: The Interplay between National and International Law (2013), pp.181–211.

(i) the law of the respondent, including its rules on the conflict of laws;
and
(ii) such rules of international law as may be applicable.” (Footnote
omitted.)
A second means by which treaty-based tribunals can exercise jurisdiction over claims
concerning the breach of an investment contract is the use of the so-called “umbrella clause”.
A 2003 study noted that approximately 40 per cent of the BITs surveyed contained some
form of an umbrella clause.77 While the actual language of such clauses is obviously
important for determining their scope and effect,78 a typical umbrella clause requires that
“[e]ach Contracting Party shall constantly guarantee the observance of commitments
it has entered into with respect to the investments of the investors of the other
Contracting Party”.79
Tribunals and scholars offer four distinct and greatly divergent theories on the scope and
effect of such a clause.80 At the most negative end, those subscribing to the “narrow”
interpretation of umbrella clauses generally refuse to give them any effect, arguing that the
“appropriate interpretative approach is … in dubio mitius”,81 and that such clauses do not
“have the effect of transforming all contract disputes into investment disputes under the
Treaty”.82 The biggest argument against the “narrow interpretation” approach is that, contrary
to the rule of effet utile, it refuses to give any meaning to the text of such clauses.83
At the opposite, most positive end of the spectrum, certain tribunals and scholars take
the position that an umbrella clause automatically “elevates” a contractual breach to a breach
of the treaty.84 According to such a “broad” view, the umbrella clause has the effect of
directly “internationalising” the investment contract, with the result that any breach of the
contract would automatically and immediately constitute a breach of the treaty. The criticism
of this approach is similar to that of the internationalisation of investment contracts in
general, namely, that international law is not designed to provide a complete framework of
the proper law for a contract between a private investor and a host State.85
In between these two extremes are two views, both positive as regards the effect of such
clauses, but conceptually divergent. Expressing the more conservative of the two views,
some tribunals have taken the position that
77
J. Gill et al., “Contractual Claims and Bilateral Investment Treaties—A Comparative Review of the SGS Cases”
(2004) 21 Journal of International Arbitration 397, 403 (“[I]n a sample of bilateral investment treaties taken from
Investment Treaties (ICSID ed., 2003), 94 of 236 (about 40%) contained umbrella clauses”).
78
For example, the Salini Tribunal was of the view that the Italy-Jordan BIT art.2(4) (1996), which required each
contracting party to “create and maintain in its territory a legal framework apt to guarantee to investors the continuity
of legal treatment including the compliance, in good faith, of all undertakings assumed with regard to each specific
investor”, only represented a commitment “to create and maintain a legal framework apt to guarantee the compliance
of all undertakings assumed with regard to each specific investor”. Salini Costruttori SpA & Italstrade SpA v Hashemite
Kingdom of Jordan, Decision on Jurisdiction, November 9, 2004, para.126. See also Andrew Newcombe and Lluís
Paradell, Law and Practice of Investment Treaties (Alphen aan den Rijn: Kluwer Law International, 2009), pp.445–448;
Jan Ole Voss, The Impact of Investment Treaties on Contracts between Host States and Foreign Investors (Leiden:
Brill, 2010), pp.231–235.
79
Switzerland-Pakistan BIT art.11.
80
See e.g. M. Sasson, Substantive Law in Investment Treaty Arbitration: The Unsettled Relationship between
International Law and Municipal Law (Alphen aan den Rijn: Kluwer Law International, 2010), Ch.7; James Crawford,
“Treaty and Contract in Investment Arbitration” (2008) 24 Arbitration International 351, 367.
81
SGS v Pakistan, ICSID Case No.ARB/01/12, Decision on Jurisdiction, August 6, 2003, para.171.
82
Joy Mining v Egypt, ICSID Case No.ARB/03/11, Award on Jurisdiction, August 6, 2004, para.81.
83
See e.g. Jan Ole Voss, The Impact of Investment Treaties on Contracts between Host States and Foreign Investors
(Leiden: Brill, 2010), pp.252–255; James Crawford, “Treaty and Contract in Investment Arbitration” (2008) 24
Arbitration International 351, 368.
84
See e.g. Fedax NV v Venezuela, ICSID Case No.ARB/96/3, Award, March 9, 1998; Emmanuel Gaillard,
“Investment Treaty Arbitration and Jurisdiction over Contract Claims—The SGS Cases Considered” in Todd Weiler
(ed.), International Investment Law and Arbitration: Leading Cases from the ICSID, NAFTA, Bilateral Treaties and
Customary International Law (New York: Transnational Publishers, 2005), pp.324, 344.
85
See below.

190 Arbitration
“[p]urely commercial aspects of a contract might not be protected by the [umbrella

clause] in some situations, but the protection is likely to be available when there is
significant interference by governments or public agencies with the rights of the
investor”.86
As Crawford points out, this approach is riddled with the problem of indeterminacy and
uncertainty as it focuses on the character or motive of the breach.87 The Tribunal in SGS v
Paraguay appeared to recognise this in noting that
“[i]t is thus difficult to articulate a basis on which the State’s actions, solely because
they occur in the context of a contract or a commercial transaction are somehow no
longer acts of the State, for which the State may be held internationally responsible”.88
The other, more positive view is the “integrationist” or indirect approach, which gives effect
to umbrella clauses, but stops short of automatically converting contractual claims to treaty
claims by way of some “instant transubstantiation”.89 According to this position, a breach
of the investment contract can lead to the breach of an umbrella clause, but it is the treaty
breach which provides the cause of action for the foreign investor in the arbitration
proceeding. As explained by the ad hoc Annulment Committee in CMS v Argentina:
“In speaking of ‘any obligations it may have entered into with regard to investments’,
it seems clear that [the umbrella clause] is concerned with consensual obligations
arising independently of the BIT itself (i.e. under the law of the host State or possibly
under international law) … The effect of the umbrella clause is not to transform the
obligation which is relied on into something else; the content of the obligation is
unaffected, as is its proper law.”90
The use of treaty arbitration for pursuing claims based on the breach of a contract, whether
by virtue of a generously broad arbitration clause or due to an umbrella clause, raises the
issue of the law applicable to the investment contract in such an arbitration. The vast majority
of investment treaties today that provide to the foreign investor a direct procedural right of
recourse specify the choice of international law, either by itself,91 or in combination with
the national law of the host State,92 as the law to be applied by the tribunal.93 As earlier
noted, Article 42 of the ICSID Convention provides that:
“(1) The Tribunal shall decide a dispute in accordance with such rules of law as
may be agreed by the parties. In the absence of such agreement, the Tribunal
shall apply the law of the Contracting State party to the dispute (including its
rules on the conflict of laws) and such rules of international law as may be
applicable.”94
The tribunal in Goetz v Republic of Burundi observed that the
“[c]hoice of law clauses in investment protection treaties frequently refer to the
provisions of the treaty itself, and more broadly, to international law principles and
rules. This leads to a remarkable comeback of international law after a decline in
86
CMS v Argentina, ICSID Case No.ARB/01/8, Award, May 12, 2005, para.299.
87
James Crawford, “Treaty and Contract in Investment Arbitration” (2008) 24 Arbitration International 351, 368.
88
SGS v Paraguay, ICSID Case No.ARB/07/29, Award, February 10, 2012, para.72.
89
SGS v Philippines, ICSID Case No.ARB/02/6, Decision on Jurisdiction, para.126.
90
CMS v Argentina, ICSID Case No.ARB/01/8, Decision on Annulment, September 25, 2007, para.95. See also
MTD Equity v Chile, ICSID Case No.ARB/01/7, Decision on Annulment, March 21, 2007, para.187; Marion Unglaube
v Costa Rica, ICSID Case No.ARB/08/1 and ICSID Case No.ARB/09/20, Award, May 12, 2012.
91
For example, NAFTA art.1131(1).
92
For example, US Model BIT 2012
93
(2013), p.222.
94
ICSID Convention art.42(1).

practice and jurisprudence, in the legal relations between host States and foreign
investors”.95
Despite the primary applicability of international law in investment treaty disputes, however,
domestic law does not lose its relevance.96 Moreover, the relevance of domestic law is not
restricted to its consideration as a fact or evidence97; it goes further, as tribunals may be
required to apply national law.98
In elucidating the hybrid foundations of international law, Douglas explains that
“[c]ustomary international law contains no substantive rules of property law. They
[sic] cannot be a source of rights in property. Nor do investment treaties purport to lay
down rules for acquiring rights in rem that are exercisable against the world at large.
It is therefore the municipal law of the host state that determines whether a particular
right in rem exists, the scope of that right, and in whom it vests.”99
Since investment treaties do not contain substantive rules of property law, Douglas notes
that “[t]here must be a renvoi to a municipal property law”.100 To the extent that investment
treaties
“require a territorial nexus between the investment and one of the contracting State
parties, that property law is the municipal law of the state in which the investor alleges
that it has an investment”.101
In other words, although investment treaties often specify the types of assets and rights that
are protected as an “investment”, these rights and assets are acquired from, and subsist in,
the domestic law of the host State. This may appear to suggest that States can rely on their
domestic law as an excuse for the non-fulfilment of their obligations under public
international law. However, as explained by Judge Morelli in his Separate Opinion in the
Barcelona Traction case:
“There is nothing abnormal in this reference of an international rule to the law of a
given State. In reality, no subordination of international responsibility, as such, to the
provisions of municipal law is involved; the point is rather that the very existence of
the international obligation depends on a state of affairs created in municipal law,
though this is not so by virtue of municipal law but, on the contrary, by virtue of the
international rule itself, which to that end refers to the law of the State.”102
Expropriation claims provide a good example of this logic. When an investor alleges the
breach of a treaty provision concerning expropriation, the claim is a treaty claim and
international law primarily applies.103 But, there cannot be an expropriation unless the
claimant demonstrates the existence of proprietary rights in the first place. Therefore, “the
95
Goetz v Republic of Burundi, ICSID Case No.ARB/95/3, Award, February 10, 1999 (2000) 15 ICSID
Review—Foreign Investment Law Journal 457, 488–489.
96
(2013), pp.240–269.
97
Case Concerning Certain German Interests in Polish Upper Silesia (Germany v Poland), Judgment, May 25,
1926, Permanent Court of International Justice Ser.A No.7, p.19.
98
(2013), p.241.
99
Zachary Douglas, “The Hybrid Foundations of Investment Treaty Arbitration” (2004) 74 British Yearbook of
International Law 151, 197–198.
100
Douglas, “The Hybrid Foundations of Investment Treaty Arbitration” (2004) 74 British Yearbook of International
Law 151, 198.
101
Douglas, “The Hybrid Foundations of Investment Treaty Arbitration” (2004) 74 British Yearbook of International
Law 151, 198.
102
Case Concerning the Barcelona Traction, Light and Power Co, Ltd (Belgium v Spain), Separate Opinion of
Judge Morelli [1970] 3 International Court of Justice Reports 234.
103
(2013), p.242.

192 Arbitration
legal materialisation of the Claimant’s alleged investment is a fundamental aspect of the

merits”.104 In Azinian v Mexico, a US waste management corporation brought an expropriation
claim against Mexico under Article 1131(1) of NAFTA, which expressly provides that
NAFTA tribunals are required to settle disputes “in accordance with this Agreement and
applicable rules of international law”. The fact that NAFTA tribunals “may not decide a
dispute by reference to the internal law of a Nafta Party”105 did not prevent the Azinian
Tribunal, however, from finding in favour of Mexico on the ground that a competent Mexican
court had held the contract to be invalid under Mexican law, and therefore “there is by
definition no contract to be expropriated”.106 This approach has been confirmed by several
treaty-based tribunals,107 as well as the Iran-United States Claims Tribunal.108
Tribunals asked to adjudicate a claim concerning the breach of a contract on the basis
of a generic compromissory clause in an investment treaty must respect the parties’ choice
of applicable law in the underlying contract. In the absence of such agreement, the law
governing the contract may be taken to be the domestic law of the host State.109 Claims
concerning the alleged breaches of umbrella clauses require the application of international
law as well as the proper law of the underlying contract in a two-step process. A claim for
the breach of an umbrella clause is in the first instance a treaty claim. Therefore, a tribunal
must begin by applying the rules of treaty interpretation contained in the Vienna Convention
in order to determine the scope and effect of such a clause in the treaty. Next, in order to
determine whether there has been a breach of the underlying contract that triggers a breach
of the umbrella clause, a tribunal presumably will apply the law chosen by the parties to
the contract, or, in the absence of an agreed choice by them, apply the national law of the
host State, subject, however, to any rules applicable under the treaty.110 In MTD Equity v
Chile, the claimant argued that the investment contracts at issue were governed by
international law because they were internationalised through the umbrella clause in the
BIT. The ad hoc Committee and the Tribunal had no hesitation in rejecting this argument:
“The Tribunal has to apply the BIT. The breach of the BIT is governed by international
law. However, to establish the facts of the breach, it will be necessary to consider the
contractual obligations undertaken by the Respondent and the Claimants and what
their scope was under Chilean law.”111
The application of the proper law of the underlying contract by a treaty-based tribunal tasked
with determining whether there has been a contractual breach has important implications
for bringing contractual claims before treaty-based tribunals. For example, the host State
may not itself be a party to an investment contract, which may have been concluded between
the foreign investor and a State entity. In such a case, the ability of a foreign investor to
bring a claim against the State party to an investment treaty for the breach of a contract
with its State entity will depend upon the law of the host State, and not the international
legal rules of State responsibility dealing with the attribution of conduct. This is because
the domestic law of the host State, which is the proper law of the investment contract, will
104
Generation Ukraine v Ukraine, ICSID Case No.ARB/00/9, Award, September 16, 2003, para.8.8.
105
International Thunderbird Gaming Corporation v United Mexican States, Award, January 26, 2006, para.88.
106
Robert Azinian v United Mexican States, ICSID Case No.ARB(AF)/97/2, Award, November 1, 1999, para.100.
107
For example, EnCana Corp v The Republic of Ecuador, LCIA Case UN3481, Award, February 3, 2006, para.184;
International Thunderbird Gaming Corp v United Mexican States, Award, January 26, 2006, para.208.
108
For example, George E. Davidson (Homayounjah) and The Government of the Islamic Republic of Iran, Award
No.585-457-1 (March 5, 1998), reprinted in 34 Iran-U.S. C.T.R. 3, 22–23.
109
(2013), pp.171–176. But see ICSID Convention art.42(1): “In the absence of such agreement, the Tribunal shall apply
the law of the Contracting State party to the dispute (including its rules on the conflict of laws) and such rules of
international law as may be applicable”.
110
(2013), p.251.
111
MTD Equity Sdn. Bhd. & MTD Chile SA v Chile, ICSID Case No.ARB/01/7, Decision on Annulment, March
21, 2007, para.73. See also Award, May 25, 2004, para.187.

determine the definition of “State” for the purposes of the underlying contract. Thus, if the
State entity that is party to a contract possesses a distinct legal personality under the domestic
law of the host State, a contractual claim against the host State may be found to be not
subject to the jurisdiction of a tribunal constituted under a treaty.112 It was for this reason
that the ad hoc Committee in Vivendi observed that:
“whether there has been a breach of the BIT and whether there has been a breach of
contract are different questions. Each of these claims will be determined by reference
to its own proper or applicable law—in the case of the BIT, by international law; in
the case of the Concession Contract, by the proper law of the contract, in other words,
the law of Tucumán. For example, in the case of a claim based on a treaty, international
law rules of attribution apply, with the result that the state of Argentina is internationally
responsible for the acts of its provincial authorities. By contrast, the state of Argentina
is not liable for the performance of contracts entered into by Tucumán, which possesses
separate legal personality under its own law and is responsible for the performance of
its own contracts.”113
To summarise, the hybrid nature of the relationship between the investor and the host State,
and the political risk inherent therein, motivate the application of international law in
contractual disputes and domestic law in treaty disputes. Moreover, with the advent of BITs
with generic compromissory clauses and umbrella clauses, the dispute settlement process
under investment treaties can often provide a meaningful remedy for the breach of the
underlying contract. Thus there are three similarities between contractual arbitration and
treaty-based arbitration:
• First, in both types of arbitration, the agreement to arbitrate is a contract
between the investor and the State.
• Second, in both cases, the investment contract forms the bundle of rights
ultimately sought to be protected. These rights are acquired, and subsist under,
domestic law, usually that of the host State.
• Finally, both contractual and investment treaty arbitration seek to account for
the hybrid nature of the contractual relationship between the investor and the
State. This is achieved by appealing to international law through mechanisms
aimed at regulating State conduct.
Ergo, investomercial arbitration!
5. Concluding Remarks
Now, “Whither goeth it?”
In 2012, 58 new treaty-based arbitrations were initiated, which, as UNCTAD has noted,
then constituted the “highest number of known treaty-based disputes ever filed in one year
and confirms that foreign investors are increasingly resorting to … arbitration” under
investment treaties.114 This increase in investment arbitration does not, however, automatically
imply the irrelevance of contractual arbitration. Between 1972 and June 30, 2013, 19 per
cent of all cases registered and administered by ICSID had arisen out of investment contracts
112
V. Heiskanen, “State as a Private: The Participation of State in International Commercial Arbitration” (2010)
7 Transnational Dispute Management 1; James Crawford, “Treaty and Contract in Investment Arbitration” (2008)
24 Arbitration International 351, 363.
113
Compañía de Aguas del Aconquija SA and Compagnie Générale des Eaux/Vivendi Universal v Argentine
Republic, ICSID Case No.ARB/97/3, Decision on Annulment, July 3, 2002, para.96 (footnote omitted).
114
UNCTAD, Recent Developments in Investor-State Dispute Settlement (ISDS), IIA Issues Note No.1 (May 2013),
available online at: http://unctad.org/en/PublicationsLibrary/webdiaepcb2013d3_en.pdf [Accessed February 18,
2014].

194 Arbitration
between foreign investors and host States.115 Similarly, in its 2012 Report on States, State
Entities and ICC Arbitration, the ICC Commission on Arbitration and ADR reported that
approximately 10 per cent of all ICC arbitration proceedings involved a State or a State
entity.116 The viability and continuing relevance of contractual arbitration for complex
cross-border deals is reflected in the fact that in at least 22 contract-based arbitrations
between foreign investors and States or State-owned entities active in the period 2011–2012
a minimum of US $1 billion was in dispute. By comparison, for the same period,
approximately 48 treaty-based disputes were active in which at least US $1 billion was in
dispute. Moreover, in several instances, investors pursued both treaty and contractual
arbitration proceedings.117
The disparity in absolute numbers of treaty-based and contractual arbitrations may be
explained by the fact that, in the case of investment treaties, States express their general
consent for all prospective disputes concerning protected investments. By contrast, consent
to contractual arbitration is specific, and is usually expressed through pre-negotiated
arbitration clauses in investment contracts. If States restrict the scope of their consent to
arbitrate under investment treaties, as some States appear to have done,118 or back out of
investment treaties altogether,119 there may be an increase in the use of contractual arbitration
by foreign investors to protect against the political risk associated with investing abroad.
Indeed, even an economist who advised an earlier Australian Government to drop
investor-State arbitration clauses from its BITs recently observed that
“when an investor sinks substantial sums of money into an investment, they are more
likely to negotiate individual investment contracts with their own disputes provisions”.120
In order to protect against the political risk inherent in investment contracts, any effective
third-party dispute settlement mechanism must account for the hybrid nature of the
investor-State relationship. Since an investment contract is ultimately always grounded in
domestic law (usually the law of the host State), a dispute settlement process confined
entirely to the national legal order does not provide any guarantee against the political risk
that a State may unilaterally change the terms of an investment contract through changes
in its domestic law. This is the reason why the contractual arbitration process in various
ways incorporates international law, which is more directly concerned with the exercise of
a State’s sovereign authority. Investment treaty arbitration, on the other hand, is effective
in regulating sovereign conduct, and provides a direct right to an investor to pursue a claim
against a host State. Yet, it has to account for the reality that the bundle of rights that
constitutes the investment contract is grounded in domestic law. The treaty cannot be wholly
separated from the contract, or from domestic law. The treaty and the contract are mutually
reinforcing.
115
ICSID, The ICSID Caseload—Statistics, Issue 2013-2, available online at: https://icsid.worldbank.org/ICSID
/FrontServlet?requestType=ICSIDDocRH&actionVal=CaseLoadStatistics [Accessed February 18, 2014].
116
ICC Commission on Arbitration and ADR, ICC Commission Report: States, State Entities and ICC Arbitration,
2012, p.2, available online at: http://www.iccwbo.org/Advocacy-Codes-and-Rules/Document-centre/2012/ICC
-Arbitration-Commission-Report-on-Arbitration-Involving-States-and-State-Entities-under-the-ICC-Rules-of-Arbitration
/ [Accessed February 18, 2014].
117
See Michael D. Goldhaber, “Arbitration Scorecard” (2013) (July) Focus Europe 22.
118
ICSID Press Release, “Ecuador’s Notification under Article 25(4) of the ICSID Convention”, December 5,
2007, available online at: https://icsid.worldbank.org/ICSID/FrontServlet?requestType=CasesRH&actionVal
=OpenPage&PageType=AnnouncementsFrame&FromPage=Announcements&pageName=Announcement9 [Accessed
February 18, 2014].
119
UNCTAD, Denunciation of the ICSID Convention and BITs: Impact on Investor-State Claims, IIA Issues Note
No.2, December 2010, p.1, available online at: http://unctad.org/en/docs/webdiaeia20106_en.pdf [Accessed February
2, 2014].
120
See Douglas Thompson, “London: The economic case against investment treaties” (2013) 8(6) Global Arbitration
Review, November 7, available online at: http://globalarbitrationreview.com/news/article/32032/ [Accessed February
18, 2014] (reporting the remarks of Emma Aisbett, a professor of economics at the University of Hamburg, at the
21st Investment Treaty Forum of the British Institute of International and Comparative Law held on October 24,
2013 in London).

Far from distinguishing it from commercial arbitration, the hybrid nature of investment
treaty arbitration represents a fundamental and essential feature of any fair, impartial and
effective mechanism for third-party adjudication of disputes between a foreign investor and
a host State. This is because the public-private nature of the dispute settlement process
reflects the peculiar nature of the relationship between the investor and the State. From such
a functionalist perspective, contractual arbitration and investment treaty arbitration are not
so different, as they both seek to account for the exercise of a State’s public authority and
the political risk it entails for cross-border investment flows. Both represent law’s attempts
to keep pace with reality.
It has been debated whether or not contractual arbitration and investment treaty arbitration
are, or are not, like apples and oranges.121 Frankly, this is a nonsensical debate. Apples and
oranges are both fruits, whose purpose is to be eaten for the benefit of the same consumer.122
Indeed, spectrometric analysis by NASA has confirmed that “apples and oranges are very
similar”.123 The details of contractual arbitration and investment treaty arbitration may be
quite different. Yet, both exist to serve the international community’s need for certainty
and security in cross-border investment flows. They are not, as Romanians would say, like
grandmothers and machine guns.124 Together they constitute “investomercial” arbitration,
in which an orange a day will keep the doctor away well into the future just as surely as
does an apple!
121
See Sebastian Perry, “Investment and Commercial Arbitration: Like Apples and Oranges,” (2013) 8(5) Global
Arbitration Review, October 14, available online at: http://globalarbitrationreview.com/news/article/31965/investment
-commercial-arbitration-apples-oranges/ [Accessed February 18, 2014].
122
See e.g. Leonard Barkan, Mute Poetry, Speaking Pictures (Princeton NJ: Princeton University Press, 2013),
p.27 (noting that “[a]pples and oranges—both fruit, both sweet, both (roughly) spherical—might, after all, be quite
reasonable objects of comparison”).
123
Scott A. Sandford, “Apples and Oranges—A Comparison” (1995) Annals of Improbable Research, available
at: http://www.improbable.com/airchives/paperair/volume1/v1i3/air-1-3-apples.html [Accessed February 18, 2014].
124
Leonard Barkan, Mute Poetry, Speaking Pictures (Princeton NJ: Princeton University Press, 2013), p.27.

Cases
Two Rarities: Subpoenaing an Arbitrator for
1
Cross-Examination and Court Enforcement of a
2
Peremptory Order
Hew R. Dundas
1. Introduction
Several previous articles in Arbitration have examined frequently recurring topics such as
challenges to and appeals against awards so readers will by now be very familiar with the
minutiae of ss.67, 68 and 693 and with the considerable body of jurisprudence developed
around them. The present Case Notes cover two issues arising under the Act, the first of
which appears to be the first case of its kind, the second apparently only the second of its
kind.
In Sumner, the issue concerned whether, in the loser’s challenging an award, the arbitrator
could be compelled by court order to appear in court in the hearing of that challenge to be
cross-examined and in Patley Wood the issue was what considerations should govern the
court’s exercise of its discretionary power given by s.42 to enforce an arbitrator’s peremptory
order
2. Sumner
Ordering the arbitrator to give evidence—the facts

A rent review in respect of the lease of a property in Falmouth was determined in an
arbitration; the claimants were the landlords, Costa was the tenant and D, the second
defendant, was the arbitrator, nominated by the President of the Royal Institution of Chartered
Surveyors (the RICS).
Each of landlords and tenant were represented in the arbitration by surveyors acting as
experts and the arbitration was on a documents-only basis save that D had the right to hold
a hearing if he considered it appropriate (in fact there was no hearing). The experts addressed
three potential comparables4 very close by. D’s award was duly issued on January 30, 2012
and, since his valuation was lower than the existing rental of £40,000 p.a., the rental stayed
the same since the review was upwards-only.
In the award, D stated that he derived no assistance from comparable Y (wholly different
to X and Z) and said (inter alia):
“9.4 [The tenant’s expert] states that [comparable Z] should not be attributed any
significant weight due its timing post subject review date and could not have
had any secondary effect of influencing a prospective tenant bidding for the
subject property at the review date. [The landlord’s expert] contends the
1
Sumner & Makin v Costa Ltd & D [2013] EWHC 4116 (Ch), per H.H. Judge Simon Barker QC, judgment dated
July 14, 2013 but not posted on BAILII until December 20, 2013.
2
Patley Wood Farm LLP v Brake & Brake [2013] EWHC 4035 (Ch), per Peter Smith J., judgment dated December
18, 2013.
3
References in the form s.00 are to section 00 of the Arbitration Act 1996 (the Act) unless otherwise stated.
4
For the purposes of this article, the three comparables are called X, Y and Z.

Subpoenaing an Arbitrator and Enforcement of a Peremptory Order 197
transaction was agreed closest to the subject review date by inference drawn
from the date on which the agreement to lease was signed.
9.5 On the basis of the evidence presented to me by [the landlords’ expert] it was
not until 4 months after the subject review date that … a binding contract on
[comparable Z was signed]. Accordingly for this reason, having regard to the
established case law on post review date evidence, I prefer [the tenant’s
expert’s] approach and have not accordingly attributed any weight to this
transaction.
9.6 The transaction which I find to be most helpful based on the evidence
presented to me is [comparable X].”
The key words, so far as affects the present proceedings, were in para.9.5: “having regard
to the established case law on post review date evidence”. Relevant case law is the decision
of Staughton J. in Segama NV v Penny Le Roy5 of which p.109A-C is included in the RICS
Handbook of Rent Review (the RICS Handbook) at para.7.9.6 under the heading “(e)
Evidence of open market lettings and rent review agreements taking place after the review
date: admissible”.
The landlords issued proceedings against the tenant, focusing on D’s un-particularised
reference to case law on post-review date evidence; they also made a s.68 challenge and a
s.69 appeal, seeking: (1) under s.68, remitting the award to another arbitrator or to the
arbitrator generally or at least on the effect of comparable Y on the rent review; (2) under
s.69, granting leave to appeal and determination of questions of law inter alia as to: (a)
whether a transaction agreed four months after the review date was admissible and had
potential weight in relation to its primary effect, that of evidencing the state of the market
at the review date; (b) whether a reasonable arbitrator in D’s position could in the
circumstances logically, reasonably and properly have given comparable Z no weight and
simply derive the rent from comparable X.
On the same date, agents for the landlord’s solicitors wrote to D asking him: (1) to set
out and explain the case law to which he had regard and how he had applied it; (2) to admit
that there had been irregularities in the conduct of the arbitration; and, (3) to withdraw or
reconsider his award. D replied that his reasons were as set out in his award and that he had
nothing further to add, save that he stood by the award.
The landlords next issued new proceedings against the tenant and D jointly, seeking,
inter alia, under ss.57, 68 and 70 that (1) D be required to clarify his award and set out his
full reasoning and case law to which he had had regard and (2) remitting the award to a
different arbitrator or to D.
In a witness statement, D inter alia conceded that his reference to “case law” had not
been well chosen, i.e. not technically in the way that a lawyer would refer to “case law”
and he confirmed that nothing had been relied on beyond that provided by the parties, i.e.
confining the references to “case law” to the commentary from the RICS Handbook. He
also addressed an alternative approach to valuation on the hypothesis that weight was indeed
to be attached to comparable Y, explaining that he would not have disregarded comparable
X altogether and given weight only to comparable Y and concluding that he would have
made a small adjustment and then split the difference between the rental adopted (i.e. based
on X) and comparable Y. He observed that the relevant rent would, even then, still have
fallen short of £40,000 p.a.
The landlords now applied for an order entitling them to cross-examine D in the
forthcoming challenge hearing, an application opposed by D’s counsel. The former contended
that cross-examination was essential in order to understand or be clear as to D’s reasoning
and their counsel pointed to the original reasons at para.9 of the award, the confirmation of
those reasons with a statement that D had nothing to add and then, three months later, a
5
(1984) 1 E.G.L.R. 109.

198 Arbitration
witness statement explaining the reasons already given and supplementing those reasons
by four matters as to which there had been no evidence.
What had emerged was that D had never relied, as such, on “case law”—that being a
non-lawyer’s term of art referring only to the summary in the RICS Handbook. The fact
that D appeared to have, or may be criticised as apparently having, misunderstood the
substance of the note in para.7.9.6 was not a ground for cross-examination, although it
might be a ground for permission to appeal, which would be a matter for later consideration.
However, the landlords’ counsel itemised a long list of matters concerning D and his award
upon which cross-examination was appropriate and he also made submissions as to the
consequences of a refusal of permission to cross-examine, specifically: (1) the landlords
wanted to be able to submit that inferences must be drawn enabling them to succeed on
their substantive challenges to the award; and (2) this included whether there might be any
point in doubt.
Concerning the court’s jurisdiction, the landlords’ counsel submitted (inter alia):
(1) the application for cross-examination was only partly about the arbitrator
being required to give reasons; it was also a matter within the court’s inherent
power to control its own process in order to ensure that matters before it were
dealt with justly; in this context, the general principle set out at s.1(c) should
be understood as not inhibiting the court’s general power over its own process;
(2) s.70(4) provided that, where a tribunal had given either no reasons or
inadequate reasons with the result that the matter in issue on an application
or under appeal could not be considered properly, the court could order the
tribunal to state the reasons in sufficient detail for that purpose;
(3) in principle there was no jurisdictional objection to an order for
cross-examination;
(4) authority6 existed for the proposition that an arbitrator may be compelled to
appear before a court by subpoena, albeit that it was not clear from the report
of that case whether that subpoena had been confined to the production of
documents;
(5) the present hearing, apart from this application and the question of whether
or not permission should be given to appeal, was a final hearing; it was
accepted that for the purposes of an appeal or an application it would be a
rare and special case for oral evidence to be taken, but even then jurisdiction
existed7;
(6) in this case the court should be satisfied that the claims are not “fishing” since
there were material inconsistencies requiring explanation: (a) as to what were
the full reasons for the award; and (b) in order to reconcile the apparent
inconsistencies between the award and D’s witness statement; and
(7) the position of an arbitrator is quite different from that of a judge, and the
policy reasons for “protecting” a judge in cross-examination about his or her
determinations were not applicable.
In response, D’s counsel submitted (inter alia) that:
(1) as to the law, the jurisdiction is at best questionable and, in the light of s.1(c),
the limit of the court’s power to require reasoning is that set out at s.70(4);
(2) that power is a power to order the tribunal to state reasons, not a power to be
examined upon them; logically, it envisaged only written material being
ordered;
6
Lendon v Keen [1916] 1 K.B. 294.
7
Civil Procedure Rules (CPR) Pt 32.7 in relation to cross-examination of a witness on an application or hearing
other than a trial.

(3) although this was a final hearing, these proceedings were not a trial but were
applications under s.24 (for removal) and s.68 and, subject to permission to
appeal being granted, s.69; accordingly, the relevant part in the CPR is Pt
32.7(2), and the notes thereto make clear that, whilst no guidelines are given
in relation to cross-examination, it will only be in an exceptional case where
such an order was made;
(5) there was no escaping that an order would be equivalent to an order for
cross-examination of a judge on his or her judgment, which would be
improper;
(6) the court has appropriate powers to correct inadequacy in an award and/or in
arbitrators under ss.68, 69 and 24; cross-examination was not usual, even on
a removal application;
(7) D’s witness statement was not a response to a request for clarification under
s.57(3), but was an answer to the questions raised in a letter from the landlords’
solicitors;
(8) responding by way of written evidence was and is the appropriate course for
an arbitrator in such a situation; requiring an arbitrator to give oral evidence
went too far;
(9) the context of the award was a dispute conducted and decided on documents
only by non-lawyers who were all specialists in valuation; accordingly their
awards are not to be expected to be to the standard of a judgment, nor are
they expected to give rise to oral evidence;
(10) the key criteria by which an award was to be judged were those identified or
referred to by Morgan J. in the recent case of Compton v Spence8 citing
speeches by Lord Phillips, then Master of the Rolls, in English v Emery
Reimbold & Strick Ltd9 and by Lord Brown in South Bucks District Council
v Porter (No.2)10; in particular Lord Phillips observed that the award must
identify the issues vital to the conclusion and explain their resolution but need
not be comprehensive and Lord Brown observed that the reasoning must give
rise to substantial doubt as to whether there had been an error in law;
(11) what the landlords were really seeking were further reasons sufficient to
undermine the award but that was an improper approach because “further
reasons” are addressed by Parliament through the provisions of s.70(4) under
which a court may compel the statement of further reasons where those given
are not sufficient for the court to consider the matter before it; and,
(12) finally, there was no basis for any attack made on D’s integrity, as had clearly
been the landlords’ intention (per their counsel’s skeleton argument) that one
purpose of cross-examination was to attack D’s professional character, going
beyond partiality and embracing dishonesty.
Ordering the arbitrator to give evidence—the judgment

H.H. Judge Barker QC said11 that the starting point must be to consider the court’s
jurisdiction.
While D’s counsel had not submitted that there was no jurisdiction, albeit that he had
submitted that such was doubtful, the Judge accepted the force of the submissions that
ss.1(c) and 70(4) discourage intervention by the court, but they did not prohibit jurisdiction
to direct cross-examination; s.1(c) was not mandatory but discouraging, “should not” as
opposed to “must not”. He accepted that s.70(4) was aimed at putting the court in a position
8
[2013] EWHC 1101 (Ch); [2013] 2 P. & C.R. 15.
9
[2002] EWCA Civ 605; [2002] 1 W.L.R. 2409.
10
[2004] UKHL 33; [2004] 1 W.L.R. 1953.
11
Sumner & Makin v Costa Ltd & D [2013] EWHC 4116 (Ch) at [36].

200 Arbitration
to resolve an application rather than providing a portal through which a party may call for
an arbitrator to pass and to speak to his or her award. Sections 1(c) and 70(4) do not go so
far, on their natural and ordinary meaning, as to impose anything approaching an absolute
bar on an arbitrator being required to state his or her reasons orally under cross-examination;
nor did the section go so far as to require the court alone to set out what was to be stated.
He did not rule out the possibility of an order being made for an arbitrator to speak orally
to the reasons for an award.
Should that happen in this case? In H.H. Judge Barker QC’s judgment it should not.
The arbitral process selected by the parties had been written, leaving it to the arbitrator
to call for oral participation if he thought fit, and was to involve only experienced valuation
surveyors and no lawyers. The key requirement was that an expert decision should be made
by someone experienced in the field upon considering the expert evidence of experienced
professionals selected by the parties. The sole issue—the market rent at the review date—was
a factual one and, subject to assumptions and disregards, familiar to the three professionals
involved.
D had been engaged to produce a written award and had done so. By his, and his own
counsel’s, concession it was not flawless, the reference to “case law” being inapposite or
wrong. Further questioning about this would not assist the determination of the forthcoming
ss.68/69 applications.
While allegations of partiality and dishonesty were obviously very serious matters, they
were not themselves a ground for permitting cross-examination, not least because Parliament
could easily have included such a provision in the Act had it considered that arbitrators
should be so exposed when their integrity is under challenge.
As to the question of drawing adverse influences, it was clearly open to the landlords to
seek to have such inferences drawn but it would be wrong in principle to accede at this
stage to a submission that such inferences could not be refuted. That would be an affront
to the rules of natural justice because D would be denied the opportunity to answer an
assertion that an adverse inference should be drawn.
The Judge considered the present application for cross-examination to be unnecessary
and inappropriate. If the reasons given in the award could, on the face of what D had written,
be shown to be insufficient or worse then the landlords would succeed.
In addition, interrogation of the arbitrator would be contrary to the principles which
underpin the process of arbitration, both generally and as deliberately selected by the parties
in this case, namely a relatively inexpensive and swift mechanism for obtaining an expert
final decision to resolve the commercial dispute.
The landlords’ application was dismissed.
3. Patley Wood
The exercise of the court’s discretion under s.42—the facts

The arbitrator had ordered dissolution of a partnership and he was trying to supervise its
winding up and the drawing up of dissolution accounts but the defendants, losers in the
arbitration, had refused to comply with a series of arbitrator orders. In particular, they had
refused to provide the partnership books and records to the partnership accountant or to
give the requisite authority to the accountant to liaise with the single joint expert accountant
appointed by the arbitrator pursuant to his award, thereby preventing any further steps being
taken in the arbitration. While the defendants accepted that they had not complied with the
arbitrator’s peremptory order, they contended: (1) that the court must not “rubber stamp”
that order by issuing an injunction in the same terms; and (2) that, relying on the only s.42
decision they could find,12 it must be satisfied that it was appropriate to exercise its discretion
12
Emmott v Michael Wilson & Partners Ltd [2009] EWHC 1 (Comm); [2009] 2 All E.R. (Comm) 856.

in this way. With a court hearing concerning other challenges to the Award listed for March
2014, the defendants’ position was that the Judge should make no order on the present s.42
application and should adjourn it to be heard with or immediately after the applications
challenging the award.
The essential issue was the fact that the claimant was, during all the period in dispute, a
partner in the partnership and it remained so until the dissolution was finalised. It followed
that it was entitled to full unrestricted access to the partnership books, irrespective (as was
one of the key issues in dispute) of whether accounts were to be drawn up by the partnership
accountant, B, or by the accountant appointed in the award, or both. In either case, the
claimant was entitled to see the books for the purpose of progressing those accounts and
there had to be an account and that was an important factor in considering whether or not
the claimant’s s.42 application should be granted.
The exercise of the court’s discretion under s.42—the judgment

Section 42 provides (inter alia):
“42 Enforcement of peremptory orders of tribunal
(1) Unless otherwise agreed by the parties, the court may make an order
requiring a party to comply with a peremptory order made by the
tribunal.
(2) An application for an order under this section may be made—
…
(b) by a party to the arbitral proceedings with the permission
of the tribunal (and upon notice to the other parties), or
…
(3) The court shall not act unless it is satisfied that the applicant has
exhausted any available arbitral process in respect of failure to comply
with the tribunal’s order.
(4) No order shall be made under this section unless the court is satisfied
that the person to whom the tribunal’s order was directed has failed
to comply with it within the time prescribed in the order or, if no
time was prescribed, within a reasonable time.
(5) ….”
The claimant contended that all the requirements of s.42 had been made out so that it was
entitled to seek to enforce the peremptory order. This was not a wasted exercise since: (1)
accounts would be required in any event; and (2) it was a partner and entitled to see the
books.
In Emmott, Teare J. had been faced with a s.42 application but there had been a difference
in that that application was listed together with a s.67 challenge and he heard both
applications together, granting the s.42 order and dismissing the s.67 challenge.13 However,
in reaching that latter conclusion he had said this14:
“I shall deal with MWP’s challenge to the jurisdiction but I am not persuaded that,
even if [it] succeeded, it would undermine the peremptory order. Mr Emmott
counterclaims a 33% interest in [the] MWP shares. The Steppe shares must be a major
part of the value of those shares and so the peremptory order can be supported as an
order in support of that counterclaim. This is reflected in the reasons given by the
tribunal for its order made on 26 September: This is so whether or not the Respondent’s
new proprietary claim to 27% of the Claimant’s Steppe shareholding is successful.”
13
Emmott v Michael Wilson & Partners Ltd [2009] EWHC 1 (Comm); [2009] 2 All E.R. (Comm) 856 at [45].
14
Emmott v Michael Wilson & Partners Ltd [2009] EWHC 1 (Comm); [2009] 2 All E.R. (Comm) 856 at [33].

202 Arbitration
Thus, Teare J. had been willing to have made the s.42 order even if the s.67 application had
survived and, in Peter Smith J.’s view, the same applied here where the s.42 application
was being made in the context of the defendants’ multiple challenges to the Award, to be
heard (before a different judge) in March 2014. It followed that he was prepared to consider
the situation now on the assumption that the defendants had an arguable case that their
challenges would be successful.
Peter Smith J. said that he found Teare J.’s judgment helpful subject to two points: (1)
it was a decision of a judge at first instance and is therefore persuasive; (2) Teare J. had set
out how he had exercised his discretion under the particular circumstances before him but
a decision on the facts of a particular case was always of limited relevance when a judge
was considering the exercise of a different discretion in a different case. There could in
reality be no precedent established by the exercise of a discretion in such circumstances.
Nevertheless it was useful to consider Teare J.’s careful judgment, in particular his paras
59 and 62 which had, inter alia, been relied upon by Counsel for the present defendants:
“59 I also accept, as submitted on behalf of MWP, that s.42 confers a discretion
upon the court and that it would be inconsistent with the existence of a
discretion that the court should act as a rubber stamp on orders made by the
tribunal. However, I do not accept that the court must in every case satisfy
itself that the case is a proper one for the order which is sought if by that is
meant that the court must review Decision[s] made by the tribunal and consider
whether the tribunal ought to have made the order in question. The reasons
that I do not accept that submission are as follows:
(i) It is inconsistent with general principle (c) in the context of sections
33 and 40 of the Act.
(ii) The Act confers on the court limited powers to rehear or review
decisions of the tribunal. It would be surprising if a power to rehear
or review was hidden within s.42.
(iii) It is true that the making of an order under s.42 exposes the party
against whom the order is made to being in contempt of court if he
breaches the order. But that is the purpose of s.42. It may only be
exercised when the arbitral process is exhausted and the party in
question has failed to comply with a peremptory order. I am not
persuaded that the exposure of that party to being in contempt of
court requires the court to rehear or review the arbitrator’s decision
to grant the peremptory order.
(iv) Counsel relied on a passage in Merkin On Arbitration at paragraph
16-25: “… the court has a discretion under s.42 of the 1996 Act
whether or not to make an order. Relevant factors will doubtless be
the reasonableness of the requirements imposed by the arbitrators’
peremptory order, and whether the court takes the view that the
problem could be resolved by the arbitrators themselves in their
approach to the arbitration” (emphasis added). If this passage is
intended to mean that the court will routinely consider whether it
would have made the order I do not consider.
…
62 In what circumstances then might a court decide not to make an order that a
party comply with a peremptory order of the tribunal? In general terms the
answer to that question will be where such an order is not required in the
interests of justice to assist the proper functioning of the arbitral process; see
para.212 of [the] DAC report. This is not the occasion for a comprehensive
list of such circumstances, even assuming it were possible to compile such a
list. One example might be where there has been a material change of

circumstances after the peremptory order was made. Another might be where
the tribunal has not fulfilled its duty to act fairly and impartially between the
parties in breach of its general duty to do so. Another might be where the
tribunal has made an order which it had no power to make.”
Peter Smith J. observed that it would be quite wrong for a court to consider the exercise of
its s.42 discretion as being a rubber-stamping exercise since, even without s.42, the court
retained a discretion as to the enforcement of orders which are under appeal. Nevertheless
he accepted and agreed with Teare J.’s observation that the exercise of a s.42 discretion did
not require a court to revisit the order that was being sought to be enforced because that
would create a great difficulty since the s.42 hearing would then be a lengthy and detailed
affair. The fact that the order was under appeal was, per se, a factor to be borne in mind but
was not conclusive.
The other facts that were relevant were that the defendants had not sought to comply
with the peremptory order despite their obligations to do so and were simply attempting to
act as if the award had been stayed when it had not been; no credible reason had been put
forward to justify this stance and, while the presence of the appeal is also a factor, it is not
a decisive one.
Peter Smith J. concluded that he should exercise his discretion by acceding to the
claimant’s s.42 application. It was entitled to enforce the award and the defendants were in
breach of their contractual duties and their duties in the arbitration and under the award
itself. The fact that they are challenging the award was one factor but the claimant’s rights
to have access to the accounting records and the undoubted inevitability of accounts in one
form or another being prepared justified the making of the s.42 order. When balanced against
those factors, the appeal was of no great significance.
This arbitration should, given the defendants’ stance, be continued by the court exercising
its power under s.42.
4. Comment/Concluding Remarks
In my submission, both judgments are to be commended as expressions of solid judicial
common sense leading to wholly correct decisions.
While Peter Smith J. expresses an important caveat concerning the precedential value
of the two s.42 decisions, it is clear that he is wholly aligned in principle with Teare J. and,
despite that caveat, we practitioners very largely know where we stand in this context.
Given that the application in Sumner to cross-examine an arbitrator appears to be the
first of its kind, we have been assisted by comprehensive submissions by respective counsel
and it remains to be seen what will be decided in any second case, if ever. While there are
clear pointers towards such cross-examination being inappropriate as a general rule, H.H.
Judge Barker QC was careful to confine himself to the facts of the present case, assisted
by the key factor that this was a documents-only rent review arbitration conducted between
three valuation surveyors.
5. Postscript
As you will read elsewhere in this issue of Arbitration, this is a milestone/landmark issue
for me15; may I take this opportunity of expressing my warmest thanks for: (1) the wonderful
support and encouragement from the two Editors I have served under, Professor Derek
Roebuck and Michael O’Reilly; (2) the splendid support from Susan Faircloth and the Sweet
& Maxwell production team; and, finally (3) the many heart-warming expressions of
gratitude, congratulations, interest, etc. from so many members of the CIArb.
15
I have every intention of reaching 100 in Vol.92(4) (November 2026).

The Enforcement of Adjudicators’ Awards under
the Housing Grants, Construction and Regeneration
Act 1996: Part 50
Kenneth T. Salmon
1. Introduction
The Act means the Housing Grants, Construction and Regeneration Act 1996, as amended
by the Local Democracy, Economic Development and Construction Act 2009 Pt 8. The
“new” provisions apply to contracts entered into on or after October 1, 2011.
The main regulations are contained in the Scheme for Construction Contracts (England
& Wales) Regulations 1998 (the Principal Regulations).1 They have been amended by the
Scheme for Construction Contracts (England & Wales) (Amendment) (England) Regulations
2011.2 The new Scheme applies only to contracts for construction operations in England
entered into on or after October 1, 2011. For earlier contracts the Principal Regulations
apply.
There are separate Regulations for contracts for work in Scotland applicable to contracts
made on or after November 1, 2011.3 The new Regulations apply only to contracts for work
in Scotland entered into on or after this date. For earlier contracts the Scheme for
Construction Contracts (Scotland) Regulations 19984 applies.
There are new separate regulations for Wales, applicable to contracts for construction
operations in Wales entered into on or after October 1, 2011.5
In this article, a reference to “the Scheme” is to the Principal Regulations for England
and Wales, or the Scheme for Scotland, as the context so requires.
We are now seeing reported cases under the new provisions as well as cases under the
old law. The law is stated at December 31, 2013. This article covers the Court of Appeal
decision on the limitation period for recovery of sums paid under an adjudication award;
the enforcement and stay of execution when the claimant is insolvent or may be so;
jurisdiction and misconceived arguments; and natural justice.
2. Construction Contract—Implied Term—Time for Repayment

Aspect Contracts (Asbestos) Ltd v Higgins Construction Plc6 This was an appeal from the
decision of Akenhead J.7 in which he held that the time for a claim for repayment of monies
paid pursuant to an adjudicator’s award ran from the date when the original underlying
right of action had accrued. In so doing he declined to follow the decision of H.H. Judge
Stephen Davies (as he then was) in Ennis,8 that there was an implied term that an
unsuccessful party to an adjudication was entitled to be repaid sums paid pursuant to the
adjudicator’s award if it was subsequently finally decided or agreed that these sums were
not due; and that the cause of action accrued at the date the payment had been made. The
Court was asked to decide whether Akenhead J. was right not to do so.
1
Scheme for Construction Contracts (England & Wales) Regulations 1998 (SI 1998/649).
2
Scheme for Construction Contracts (England & Wales) (Amendment) (England) Regulations 2011 (SI 2011/2333).
3
Scheme for Construction Contracts (Scotland) Amendment Regulations 2011 (SI 2011/371).
4
Scheme for Construction Contracts (Scotland) Regulations 1998 (SI 1998/687) (S.34).
5
Scheme for Construction Contracts (England and Wales) Regulations 1998 (Amendment) (Wales) Regulations
2011 (SI 2011/1715) (W.194).
6
[2013] EWCA Civ 1541, judgment November 29, 2013.
7
Aspect Contracts (Asbestos) Ltd v Higgins Construction Plc [2013] EWHC 1322 (TCC); [2013] B.L.R. 417.
8
Jim Ennis Construction Ltd v Premier Asphalt Ltd [2009] EWHC 1906 (TCC), H.H. Judge Stephen Davies.

Adjudicators’ Awards: Housing Grants, Construction and Regeneration Act 1996 205
The facts were relatively straightforward and involved a claim by Higgins for payment
for 17 weeks’ delay said to have been attributable to Aspect’s failure to discover the full
extent of asbestos when surveying a housing estate. The survey was carried out in March
2004. Higgins took adjudication proceedings in June 2009. They won before the adjudicator
and in August 2009 Aspect paid them £658,017 by reason of the decision. In February 2012,
Aspect took proceedings in the High Court to finally determine the dispute and sought to
recover the money they had paid. Higgins counterclaimed the amount they had won in the
adjudication. When the counterclaim was met with a limitation defence, Higgins pleaded
the claim against them was also statute barred.
The court was asked to decide four preliminary issues.
1. Was it an implied term of the contract that an unsuccessful party to
adjudication would be entitled to seek a final determination by litigation and
if successful recover payment made?
2. If there was such an implied term, what was the applicable limitation period?
3. What was the limitation period applying to Higgins’s counterclaim?
4. Did Aspect have a claim in restitution?
Akenhead J. had found there was no such implied term. It was unnecessary because the
unsuccessful party in adjudication could always sue for a declaration that he was not liable
(as Aspect had done in its claim form in this case). Although a declaration of non-liability
was not formally part of the preliminary issues, he also decided that such a declaration was
an assertion of a cause of action that accrued when the alleged breach of contract or duty
occurred and that was more than six years ago. He dismissed the claim.
The Court of Appeal construed the parties’ contract having in mind the Scheme
para.23(2), which provided that the decision of the adjudicator was binding until the dispute
was finally determined. It was thus clear that the binding nature of adjudication was
temporary and liable to be displaced by subsequent legal action or agreement. If money
had to be paid which should not have been paid, there must be some mechanism whereby
it could be recovered. Although the need for repayment was not expressed in para.23(2) it
was inherent in the words used and that was the true intent of the paragraph. It did not matter
whether one called this a process of construction or one of implication. It came to the same
thing—the court was trying to decide what the words meant.
Negative declaratory relief was an ungainly remedy with a number of potential
disadvantages. In addition it was not at all clear on what juridical basis it could be said that
a declaration of non-liability carried with it an automatic right of repayment. Then there
was a difficult question whether a declaration was liable to be time barred at all. This issue
was controversial, given that a cause of action was usually an assertion of entitlement.
The claim was not statute barred because the cause of action accrued at the date of the
“overpayment”. The counterclaim was, however, out of time on the conventional ground
that more than six years had elapsed since the breach of contract or duty relied on. This
caused no inequality in the parties’ positions, since the successful party always knows he
has a claim and can easily issue proceedings any time he chooses.
The possible issue of unjust enrichment was not argued.
Comment
Many will no doubt welcome the implication of the term for repayment by and will regard
it as justification for the additional or new limitation period. The rationale for the dismissal
of the counterclaim is more debatable. For some of the difficulties which the judgment
leaves unresolved, readers are referred to a review by one of the counsel involved, Isabel
Hitchings of Crown Office Chambers, in her construction blog posted December 4, 2013

206 Arbitration
for PLC.9 As she also says it is evident from the judgment that the term as to repayment is
henceforward to be implied into every construction contract.
3. Enforcement—Insolvency—Balancing of Accounts—Whether
Summary Judgment Should be Granted
J&A Construction (Scotland) Ltd v Windex Ltd10 The defenders in this Scottish case resisted
enforcement of an adjudicator’s award for £120,000 on the basis that the pursuer’s latest
accounts showed an excess of liabilities over assets, that this was a basis for winding up
under the Insolvency Act 1996 (IA) ss.122(1) and 123(2) and that it was proper to infer
insolvency.
For the pursuers it was stressed there had been no formal insolvency event, such as a
liquidation or administration order. The pursuers continued to trade as a going concern and
had financial support from associated companies and directors’ loans. To allow contested
averments as to insolvency to delay matters would run counter to both the need for speedy
decision-making in adjudication and the policy that adjudicators’ awards should be enforced.
This proposition had powerful support from the opinion of Lord Macfadyen in SL
Timber11and qualified agreement from the case of Integrated Building Services.12
His Lordship had recently reviewed this area of law,13 noting that in England a stay of
execution will usually be granted if the claimant is insolvent whereas in Scotland the “English
solution” is achieved by the balancing of accounts in bankruptcy.
It came to this: had the defenders averred sufficient by way of alleged insolvency to
prevent enforcement, or at least to require an investigation whether the pursuers would be
able to reimburse the defenders should the award prove to be erroneous?
His Lordship reviewed English authority on the application of different parts of IA s.123
and held its principal function was to define situations in which a company was unable to
pay its debts for the purpose of winding-up proceedings. The balance sheet and cash flow
tests were both aimed at this question, were fact sensitive and not to be applied in a
mechanistic or arithmetical manner. The starting point was to ascertain if a company was
“commercially” able to pay its debts as they fell due. A company might remain creditworthy
and fully able to trade notwithstanding that its liabilities exceeded its assets. The burden of
proof was on the party asserting insolvency. All relevant circumstances were to be taken
into account. There was no rigid demarcation between cash flow and balance sheet; for
example further loans may assist cash flow but also give rise to balance sheet concerns.
If a balance sheet deficiency of itself could prevent or delay enforcement this would
have serious ramifications for the operation of the adjudication regime. Even in the context
of winding-up proceedings a balance sheet deficiency did not necessarily mean an order
would be granted.
Absent clear or uncontested evidence of insolvency, it would be very difficult for a
defender to resist enforcement.
Whilst it was tempting to order an enquiry into the pursuer’s finances to do so would
inject unacceptable delay and uncertainty into the operation of the adjudication system.
The point was not without difficulty. An adjudicator’s award was
9
Available online at: http://construction.practicallaw.com/blog/construction/plc/?p=1496 [Accessed February
18, 2014].
10
[2013] CSOH 170, per Lord Malcolm, opinion October 30, 2013.
11
SL Timber Systems Ltd v Carillion Construction Ltd [2002] SLT 997.
12
Integrated Building Services Engineering Consultants Ltd v PIHL UK Ltd [2010] CSOH 80; [2010] B.L.R. 622
at [21], [28] and [34], per Lord Hodge.
13
Connaught Partnerships Ltd (In Administration) v Perth & Kinross Council [2013] CSOH 149.

“a novel and unusual legal beast. It amounts to an enforceable illiquid debt—but it has
been arrived at by the use of a process designed to provide a quick, rather than a correct
result. It is provisional and subject to the ultimate resolution of the dispute.”14
However, his Lordship concluded that too much violence would be done to the adjudication
regime as intended by Parliament if the defender’s plea were to succeed. Accordingly the
award would be enforced.
Comment
Lord Malcolm’s opinion in this case is a further illustration of the different approach between
the courts of Scotland and England. Whilst in line with previous dicta, this case refines the
Scottish approach, so that unless there is an insolvency event, there must be clear or
uncontested evidence of insolvency before the principle of the balancing of accounts will
be applied. It is interesting to compare this decision with that of Akenhead J. in Westshield,15
where the facts warranted an accounting exercise akin to the balancing of accounts; because
of this summary judgment was refused. A comparison of these two decisions might appear
to suggest that the difference of approach between the two jurisdictions has narrowed
appreciably. Whether this will prove to be so is, however, uncertain, given the fact-specific
nature of the decision in Westshield.
4. Enforcement—Insolvency—Company Voluntary
Arrangement—Whether Summary Judgment Should be Granted
Westshield Ltd v Mr David Whitehouse and Mrs Lisa Whitehouse16 This is a decision of
some importance. It builds on Bouygues17 and distinguishes the decision of Coulson J. in
Mead.18
The defendants Mr and Mrs Whitehouse (the defendants) employed Westshield (the
claimant) under a JCT minor works contract entered into in August 2007 to carry out
sub-structure works for their house in Cheshire. The contract sum was £262,074. The
contract was not subject to the Act but contained an adjudication clause.
There were delays and variations and the claimant sought additional payment beyond
the £371,000 it had been paid.
The claimant entered into a Company Voluntary Arrangement (CVA) in December
2010. Under the CVA the claimant proposed to pay listed creditors (the list did not include
the defendants) £10,000 for 36 months. The CVA showed a balance sheet deficit of some
£4.4 million and a sum of £1.8 million was said to be due it for retentions and other disputed
sums. One of the CVA provisions contained a set-off clause similar in terms to the Insolvency
Rules 1986 (IR) r.4.90.
In May 2011 the claimant submitted a claim for £270,000. There was little or no reaction
to this.
On March 6, 2013 the claimant served a notice of adjudication claiming a total of
£279,956 together with other relief.
At first the defendants’ solicitors argued that no dispute had crystallised and reserved
their position on jurisdiction. Noting that the claimant was in a CVA, they pointed out that
the claimant would be unable to enforce any award because the defendants were sure to
obtain a stay of execution.
14
J&A Construction (Scotland) Ltd v Windex Ltd [2013] CSOH 170 at [14], per Lord Malcolm.
15
See 4. Enforcement—Insolvency—Company Voluntary Arrangement—Whether Summary Judgment Should
be Granted.
16
[2013] EWHC 3576 (TCC) Akenhead J., judgment November 18, 2013.
17
Bouygues (UK) Ltd v Dahl-Jensen (UK) Ltd [2000] B.L.R. 49.
18
Mead General Building Ltd v Dartmoor Properties Ltd [2009] EWHC 200 (TCC); [2009] B.L.R. 225, Coulson
J.

208 Arbitration
Mr Paul Jensen was appointed adjudicator. The defendants’ solicitors repeated their
reservation in relation to the lack of a dispute and added extensive arguments about the
ramifications of the CVA. For the first time they intimated a valid and substantial
counterclaim for negligence relating amongst other things to membrane and drainage defects.
They pointed out that the CVA cl.23(e) required the Supervisor to address the extent of the
mutual dealings between the parties and reserved the defendants’ position on jurisdiction
in this regard also.
In the response to the referral the defendants reserved their position on the crystallised
dispute and CVA and challenged the claim on its merits point by point. There were further
submissions and the adjudicator produced his 18-page decision on April 16, 2013. He had
already indicated that he believed he had jurisdiction and went on to order the defendants
to pay the claimant £132,667.56 including interest and that the defendants should pay his
fees.
The defendants paid the adjudicator’s fees but did not pay the claimant. After the decision
the defendants’ solicitors wrote a series of letters to the CVA Supervisor arguing, with an
increasing degree of refinement, that the defendants had incurred significant cost and expense
remedying defective works and considered themselves to be creditors, and demanding that
the Supervisor agree and admit the claims. They submitted a proof of debt leading to a
conclusion that there was a net sum of £199,805 due to the defendants. The Supervisor
declined to adjudicate whilst the same issue was being put to the court in enforcement
proceedings.
The court refused to grant summary judgment for the following reasons:
1. By virtue of the IA s.5, the defendants were bound by the CVA whether or
not they had notice of the creditors meeting, or had lodged a claim and or had
otherwise participated in the CVA.
2. The existence of the CVA did not act as any bar on adjudication and the
adjudicator was right to disregard the defendants’ challenge.
3. The argument about crystallisation of the dispute had been abandoned and it
followed that the adjudicator had jurisdiction to decide what he did and prima
facie the decision was enforceable. The impact of the CVA might have been
a defence in the adjudication but was never argued as such by the defendants,
who chose to rely on it as a jurisdictional reservation.
4. However, as in Bouygues, there was a real issue whether the decision could
be summarily enforced. The court had to construe the CVA conditions as if
they were contractually binding between the parties, in the context of the
defendants having submitted a belated and just sufficiently credible challenge
to the substance of the adjudicator’s decision as well as raising an arguable
counterclaim. There were gaps in the submission and a general lack of hard
evidence but the court could not say the claims were so lacking as not to be
bona fide.
5. On analysis condition 23(e) of the CVA was exactly analogous to the issue
the court addressed in Bouygues. Thus the effect of condition 23(e) was that
“claims and cross claims merge and are extinguished so that … there is
only a single claim represented by the balance of the account”.
To borrow further from Bouygues,
“in those circumstances it is difficult to see how a summary judgment
can be of any advantage to either party where, as [condition 23(e)] makes
clear, the account can be reopened at some stage”.
6. Thus, it was for the Supervisor to carry out the accounting exercise, to give
greater or lesser weight to the adjudication decision as he saw fit provided it

was done in a bona fide way and could be said to be an accounting under
condition 23(e). The longstop was the right of recourse to the court at least
for the defendants in accordance with the further provisions of condition 23(f).
The court suggested it would almost inevitably be for the best if the matter
was resolved amicably.
7. The right to summary enforcement with reliance being placed on the Act
s.108 was undermined by the fact that this was not a statutory adjudication.
But it was also undermined by the impact of the IA provisions about CVAs.
It mattered not that the counterclaim was not raised effectively in the
adjudication, where, as here, it could be said to be a consequence of the mutual
dealings envisaged by condition 23(e). There was no issue estoppel or res
judicata.
The question of stay did not arise. However, the court said it would not have granted a stay
given the claimant’s current financial position, where the CVA had almost been complied
with and it had a strong order book. The question of stay was not completely academic as,
if there were no stay, the full sum under the adjudication decision would be paid without
set-off, whereas the CVA conditions called for an accounting—which allows for both claim
and cross-claim to be taken into account.
It followed that the application for summary judgment was dismissed. Any further steps
in the proceedings would have to await the outcome of the Supervisor’s account and the
proceedings were ordered to be stayed until further order. The court left open the question
whether a further summary judgment application might be made after the accounting.
Comment
This decision is curious. It may tend to reduce the efficacy of a CVA when the subject
company might otherwise successfully trade on and potentially out of its financial difficulty.
It may be that it will come to be regarded as a decision based on its own peculiar facts: that
it was a contractual not a statutory adjudication and that the CVA had a set-off provision
modelled on IR r.4.90. That provision lay at the heart of the decision and in the court’s
opinion put the case on all fours with Bouygues. In turn this may explain why the court did
not follow the decision of Coulson J. in Mead.
In adjudication enforcement proceedings, contractual provisions which attempt to override
the Act are usually ignored as being of no effect. This judgment does not say so but perhaps
the fact that it was a contractual adjudication also meant there was no need to have regard
to the underlying statutory purpose. Still there may be a scintilla of concern in some quarters
that this potentially offers another route by which an unsuccessful party may avoid the
consequences of an adjudicator’s decision. It remains to be seen whether the same result
will follow in the case of a statutory adjudication, when perhaps the insolvency regime and
the legitimate purposes of CVAs are more to the fore.
5. Enforcement—Stay of Execution—Financial Position—Existence

of Winding up Petition
Alexander & Law Ltd v Coveside (21BPR) Ltd19 This was an application to enforce an
adjudicator’s award in favour of the claimant Alexander & Law Ltd (the contractor) for
just over £200,000 following what was decided to be a wrongful termination of the contract
by the defendant Coveside (the employer). The chronology is important.
In May 2011, the employer engaged the contractor for construction works at a
development in Buckingham Palace Road, London.
19
[2013] EWHC 3949 (TCC) Coulson J., judgment December 12, 2013.

210 Arbitration
In February 2013, the contract was varied to provide for extra work to neighbouring
properties.
In March 2013, a certificate became due and was not paid.
On March 25, 2013 the contract was terminated by the employer by reason of the
contractor’s poor financial position, the contractor having by then ceased trading.
In May 2013, a director of the contractor set up a new company called A&L Construction
Ltd.
On June 26, 2013 a creditor presented a winding-up petition against the contractor for
a debt of £36,000 (unrelated to the Buckingham Palace Road project). It was supported by
eight creditors including the employer whose debt was listed as £471,000. Some of the
other debts also related to the works at Buckingham Palace Road.
The adjudication decision was made on August 14, 2103. The bulk of the money awarded
arose out of the March certificate.
At the date of the hearing of the summary judgment application on December 3, 2013,
the winding-up proceedings stood adjourned (for the second time). One reason for the
adjournment was that the Registrar of the Companies Court had been informed by the
contractor of its application for summary judgment which if successful would, it was said,
enable it to pay off its creditors.
The employer resisted enforcement and alternatively sought a stay of execution of any
judgment on the basis that the contractor was insolvent within the meaning of the Insolvency
Act 1986 s.123, because amongst other things it was unable to pay its debts as and when
they fell due. At the root of the dispute on enforcement was the relevance or otherwise of
the winding-up proceedings.
Coulson J. granted the application for summary judgment but ordered a stay of execution.
The reasons for the decision are summarised below.
Summary judgment
(a) The usual principles

The court set out the “usual principles” of enforcement as found in previously decided
cases.20
(b) “Near miss” theory

Was there such a thing as a “near miss” theory? That is to say, was it plain that the
adjudicator had reservations about his own decision such that the court should consider this
to be a relevant factor? There was no such theory. Once the adjudicator had reached his
decision, then whatever his reservations might be, that was an end to the matter.
(c) An impecunious claimant

The current position was set out in Straw.21 That case did not consider the position where
there was a winding-up petition but no order had been made upon it. Research revealed one
case that did deal with that situation, Harwood,22 in which H.H. Judge Seymour entered
judgment but granted a stay until after the winding-up petition was dealt with. Thus, if the
20
Macob Civil Engineering Ltd v Morrison Construction Ltd [1999] B.L.R. 93; Bouygues (UK) Ltd v Dahl-Jensen
(UK) Ltd [2000] B.L.R. 49; Carillion Construction Ltd v Devonport Royal Dockyard Ltd [2005] EWCA Civ 1358;
[2006] B.L.R. 15.
21
Straw Realisations (No.1) Ltd v Shaftsbury House (Development) [2010] EWHC 2597 (TCC); [2011] B.L.R.
47.
22
Harwood Construction Ltd v Lantrode Ltd Unreported November 24, 2000 TCC.

winding-up order was made the stay would continue but if the petition was dismissed the
stay would end.
The employer submitted that the contractor was insolvent both because of the evidence
of an unsatisfied judgment and because of the existence of the winding-up petition which
showed they were unable to pay their debts as and when they fell due. The fact that there
were undisputed supporting creditor debts of £193,838 and a bank overdraft of £260,000,
apart from other disputed debts of £90,000, was said to mean that they were likely to be
wound up in the next month. If so the order would relate back to the date of presentation
of the petition, meaning that the contractor was insolvent at the date of the application for
summary judgment. The fundamental problem with that argument was that it required the
TCC to decide whether or not the petition would succeed. Among a number of other
considerations the court would be concerned if defending parties thought the existence of
a winding-up petition would provide a means of avoiding enforcement of an adjudicator’s
decision. The court declined to express a view on the likely outcome of the petition. It
decided the existence of the petition was not a reason not to enter judgment. Therefore,
summary judgment was granted.
Stay of execution
The principles to be applied were those set out in Wimbledon.23 The employer had large
claims against the contractor and no issue arose as to the latter’s financial position at the
time of the contract. That left two issues to be decided.
(a) Inability to repay

The court had first to determine a dispute as to the likely date for repayment. The contractor
suggested that would be November 2015. The court disagreed. Most cases in the TCC were
brought to trial within a year so the relevant date was November 2014.
The court also concluded that there was a high risk that the claimant would be unable
to repay the judgment sum, if so required, in November 2014 for several reasons, namely:
1. The undisputed debts list was £10,000 more than the judgment sum net of
VAT. If no stay was granted there was a possibility that those debts might be
paid off, leaving no reinvestment for the future.
2. There was £90,000 of disputed creditors and it was reasonable to assume that
some part of the sums claimed was likely to be owed and there would be
nothing left for these creditors if the undisputed debts were paid.
3. The employer and the court only knew what was in the public domain. Given
the known debts, there might be other creditors and no money to pay them.
4. There was the bank overdraft of £260,000 and it was plain on the evidence
that the judgment sum would if paid go in reduction of this sum. If on payment
the bank decided to cut its losses and not extend the overdraft facility, no
other creditor would receive anything.
5. The contractor stopped trading no later than March 2013 but had not taken
alternative action such as applying for an administration order which might
have allowed it to trade its way out of its difficulties. That meant that an
invoice discounting scheme (such as had been suggested as a possibility)
would not work—there would be no income to discount.
6. There was no evidence that the contractor had a viable trading future. The
cash flow analysis was made by a director and its adoption and bland
assumptions and projections based on it by accountants were “unhelpful”
when there was no evidence of trading for the past nine months.
23
Wimbledon Construction Co 2000 Ltd v Derek Vago [2005] EWHC 1086 (TCC); [2005] B.L.R. 374.

212 Arbitration
7. Then there was the existence of A&L Construction. The inference was that
it was set up to trade in the contractor’s place but without its debt.
For these reasons the court was in no doubt that the contractor would not be in a position
to repay the judgment sum in November 2014.
(b) Was the employer’s failure to pay the cause (in whole or significant
part) of the contractor’s financial difficulty?
The court would focus on the nature and timing of the non-paying party’s default as found
by the adjudicator. In this case the many claims and cross-claims that had never been decided
by the adjudicator were irrelevant for this purpose, as both parties agreed and as had been
relied on in a previous judgment of the same judge, at [54].24
The court found that the employer was not a significant cause, let alone the sole cause,
of the contractor’s financial position. Any contribution the employer may have made was
very modest. The court listed a number of reasons for that conclusion, the first and main
reason being based on timing. Payment on a certificate was found to be due in late March
2013. The contractor had not traded since then. The simple point was irrefutable: the debts
of the creditors whether admitted or disputed were all created prior to that date. The final
reason was that the contractor’s parent company was not seeking repayment of dividends
due to it. Thus the contractor was only as solvent as its parent company allowed it to be.
That again was nothing to do with the employer.
The conclusion was that the employer neither caused nor significantly contributed to
the fact that the contractor was not in a position to repay the judgment sum.
(c) Other matters

The court took into account the parties’ general conduct. A number of criticisms had been
made of the employer in the winding-up proceedings regarding non-payment, which the
court did not accept.
The employer was an SPV. Concern was expressed that the properties the subject of the
contract had been largely sold. But there was no evidence as to the employer’s financial
position and the court was not persuaded that it was relevant. If it became so in the future,
the contractor could seek a freezing order.
Execution was stayed.
Comment
One slightly worrying aspect of the decision was the conclusion that the failure to pay the
certified sum due in March 2013 did not make a significant contribution to the contractor’s
insolvency. Although the contractor had not traded from around the time of the certificate,
that might tend to suggest a connection between the two events rather than the contrary.
6. Enforcement—Stay of Execution—Voluntary Liquidation

Maguire & Co Ltd v Mar City Developments25 The claimant sought to enforce the decision
of an adjudicator whilst preparing to go into members’ voluntary liquidation. A company
can only be voluntarily wound up if it is solvent and it is necessary for the directors to make
a declaration of solvency. In this case, the court undertook a full analysis of the claimant’s
financial position and, adopting what it described as “a cautious approach”, granted a partial
24
Pilon Ltd v Breyer Group Plc [2010] EWHC 837 (TCC); [2010] B.L.R. 452.
25
[2013] EWHC 3503 (TCC) Edwards-Stuart J., judgment August 13, 2013.

stay of execution pending the filing of a declaration of solvency, after which the claimant
could apply to lift the stay.26
7. Jurisdiction—Misconceived Arguments
JG Walker Groundworks Ltd v Priory Homes (East) Ltd27 This was an application for
summary judgment by the claimant on October 11, 2013 to enforce the award of Mr Richard
Silver for the sum of £38,832.51, plus interest and by which he also directed the defendant
to pay his fees and expenses of £8,260 plus VAT.
The defendant had engaged the claimant by a simple purchase order to construct roads,
sewers and groundwork for eight new bungalows. The claimant said that variations and
additions to the works were agreed during the course of the project, the value of which was
included in three payment applications. Two applications were paid and a payment was
made on account of the third application, leaving a balance which the defendant refused to
pay and which the claimant referred to adjudication.
On enforcement, the defendant served a skeleton argument relying solely on the argument
that there were “serious errors and inconsistencies” in the award made by the adjudicator
and suggesting that it could not stand. This was soon abandoned as the points made were
wholly misconceived.
On the morning of the hearing, however, the defendant served a further skeleton argument
raising two new points, both of which related to jurisdiction. The first argument relied on
a precise definition of “the contract” as not including any sum that might be due under the
“varied contract” or “contract as varied”. It relied on the fact that the adjudicator referred
to “the contract” at many places in his award but never to the contract as varied. It was said
that the adjudicator had power to determine only what was due under the contract and not
what was due under the contract as varied, whether the variations were agreed or not.
This submission was not accepted. The notice of intention to refer described the contract
as subject to re-measurement; this suggested that the parties anticipated there would be
variations to the scope of the works over the course of the contract. This view was supported
by the fact that additional work was set out in full in a document attached to an invoice on
April 30, 2013. The adjudicator was required to determine what was due to the claimant.
The defendant sought to argue a second point, namely that the dispute concerned “the
final account” yet the claimant sought to widen it to encompass the valuation of an interim
valuation. It relied on references to correspondence and alleged that it was accepted by both
parties in the course of the reference that the dispute was about the claimant’s final account.
The court decided the adjudicator plainly had jurisdiction to determine whether or not the
application in question was an interim application or a final application. He determined that
point against the defendant and was right to do so.
The second point was held to have no more merit than the first point and the claimant
was entitled to summary judgment.
The only error the defendant identified was one made by the adjudicator, who found the
final date for payment to be May 19, 2013 when it should have been June 19, 2013. This
was found to be a slip and interest was awarded from the correct date.
In addition, the claimant was entitled to payment of the adjudicator’s fees on the giving
of an undertaking to pay those fees to the adjudicator when received from the defendant.
Finally, since the arguments put forward by the defendant were wholly without merit,
the defendant was required to explain why it should not pay the costs of the application on
an indemnity basis.
26
A copy of the judgment was not available and this brief note is based on a report by Practical Law Construction.
27
[2013] EWHC 3723 (TCC) Edwards-Stuart J., judgment December 6, 2013. This report was compiled with the
assistance of Jessica Johnson.

214 Arbitration
Comment
It is of interest that the claim included reimbursement of the adjudicator’s fees even though
the claimant had not paid them. Recovery was permitted on the claimant undertaking to
pass the fees on when paid by the defendant. As might be expected the court was prepared
to consider making an order for costs on the indemnity basis and invited written submissions.
The judgment does not record the outcome.
8. Natural Justice—Decision Made on Basis for which Neither Party

Contended
Roe Brickwork Ltd v Wates Construction Ltd28 The claimant was a brickwork contractor
and the defendant the main contractor for the construction of three blocks of flats for the
Ocean Estate in Tower Hamlets. The claimant claimed its work was delayed by about six
months and it had suffered significant loss and expense.
In the adjudication it claimed three heads of loss:
1. Additional preliminaries and loss of overheads and profit (OHP) of £52,000
and £121,000 respectively.
2. Loss of productivity for various causes in the total of £465,000.
3. Additional supervision and management in the sum of about £122,000
The adjudicator assessed the value of the claims and awarded a gross sum of £381,459 plus
interest. He did not allocate particular sums to the heads of loss. He said the actual net sum
due should reflect the amounts already paid under each head of award and further that “the
parties will know what is already paid under each head”.
The defendant resisted the application on two grounds. First, the adjudicator had assessed
OHP by way of increasing the amounts awarded for other heads of loss by 13 per cent. It
was said that he had no jurisdiction to do that; alternatively the approach was adopted
without allowing the parties the opportunity to make submissions and was a breach of
natural justice which had a material impact on findings as to value.
The second ground was that the decision lacked certainty and was unenforceable. It
contained no findings about the sums paid and since these were not agreed there was no
way of knowing what was due. The claimant’s answer to that was to say that the defendant
had since asserted that it had paid £97,992 on account and accordingly there could be no
dispute about the balance of £283,467 and it confined its application to that sum plus interest.
The defendant’s principal contention in the adjudication was that the claimant’s claim
should be valued by reference to the cost of the additional/wasted hours and not by using
day work rates or in the latter case there should be no separate claim for OHP. If the
defendant was wrong about that, it said that the preconditions for the application of the
Hudson formula for calculating the claim had not been met. It was clear that the issues
before the adjudicator included the validity of the use of day work rates, the duplication
between rates (if used) and the separate claim for OHP based on Hudson.
It was now well recognised that the court would not interfere with the decision of an
adjudicator who had answered the question referred to him even though the court took the
view that the answer was wrong or that the adjudicator had made an obvious mistake (leaving
aside the rare cases where there were concurrent CPR Pt 8 proceedings29 for a declaration
at the same time as the application for summary judgment on the award).
In the context of this case the observance of the rules of natural justice meant that the
adjudicator should not decide a point not argued or put forward in the submissions made
to him. If he was minded to do so he must give the parties an opportunity to make
28
[2013] EWHC 3417 (TCC) Edwards-Stuart J., judgment November 11, 2013.
29
Proceedings under the Civil Procedure Rules Pt 8.

submissions. By contrast an adjudicator could reach a decision on a point of importance on

the material before him on a basis for which neither party had contended, provided they
were aware of the relevant material and the issues arising had been fairly canvassed. It was
fairly obvious that the conclusion about whether or not there had been a breach of natural
justice would in the great majority of cases be very fact specific.
The defendant submitted that the adjudicator had not been entitled to identify the number
of hours, apply the contractual all-inclusive day work rate and then make an addition for
OHP. The claimant’s response was that it had claimed OHP in addition to its losses calculated
by reference to day work rates and that entitlement had been very much in issue. On
reflection the court narrowly preferred the claimant’s submission and accepted that what
the adjudicator did fell within the scope of his jurisdiction. In reality the defendant’s real
complaint was that the adjudicator treated the day work rates as representing the cost of
labour. That point was thoroughly ventilated during the referral. It was true that the
adjudicator did not produce a calculation that was consistent with the claimant’s approach
but his methodology differed in only one minor respect from the way in which the case was
presented to him. The effect of that methodology was to produce a lower figure for OHP
than the sum produced by the claimant’s approach. So even if the court had been persuaded
that the adjudicator should have consulted the parties before adopting his own approach,
the result had no adverse effect on the defendant so that the breach, if there was one, was
not a material breach.
The second ground was shortly disposed of. It was true that the adjudicator did not
ascertain any particular sum due to the claimant. However by the time of the application
the defendant had accepted that no more than a stated sum had been paid on account.
Accordingly there was no remaining dispute as to what was due under the decision.
The claimant was entitled to summary judgment for the difference.
That left a sum of about £50,000 in dispute but that was not a dispute that was before
the adjudicator. The court therefore stayed the action so that this dispute could be referred
to adjudication if the claimant was so minded, with permission to both parties to lift the
stay on two weeks’ notice.
9. Summary
Construction contract—implied term—time for repayment

See Aspect Contracts (Asbestos) Ltd v Higgins Construction Plc.
By virtue of the Scheme s.23(2), every construction contract contained a term that a sum
paid by the unsuccessful party in adjudication had to be repaid if the dispute was finally
determined in its favour, and the time for bringing proceedings ran from the date of the
payment.
Enforcement—insolvency—balancing of accounts—whether summary

judgment should be granted
See J&A Construction (Scotland) Ltd v Windex Ltd.
Unless there was an insolvency event, clear or uncontested evidence of insolvency was
required to resist enforcement. A balance sheet deficiency of itself could not prevent or
delay enforcement as this would have serious ramifications for the operation of the
adjudication regime.

216 Arbitration
Enforcement—insolvency—company voluntary arrangement—whether

summary judgment should be granted
See Westshield Ltd v Mr David Whitehouse and Mrs Lisa Whitehouse.
Summary judgment was refused in a contractual adjudication where there was a CVA
the provisions of which required an accounting along the lines of the IR r.4.90. The CVA
provisions might have been a defence in the adjudication but had not been relied on as such.
Enforcement—stay of execution—financial position—existence of

winding-up petition
See Alexander & Law Ltd v Coveside (21BPR) Ltd.
The existence of a winding-up petition was to be taken into account as evidence of the
claimant’s inability to pay its debts as and when they fell due and also at the time the
judgment sum might become repayable. Although the court granted summary judgment,
execution was stayed pending the hearing of the petition.
Enforcement—stay of execution—voluntary liquidation

See Maguire & Co Ltd v Mar City Developments.
A partial stay was granted pending the filing of a declaration of solvency, where the
claimant was preparing to go into members’ voluntary winding up.
Jurisdiction—misconceived arguments
See JG Walker Groundworks Ltd v Priory Homes (East) Ltd.
Two arguments on jurisdiction were found to be entirely without merit and the court
required the defendant to explain why it should not make an order for costs on the indemnity
basis.
Natural justice—decision made on basis for which neither party contended

See Roe Brickwork Ltd v Wates Construction Ltd.
There was no breach of the rules of natural justice and the adjudicator had jurisdiction.
An adjudicator could reach a decision on a point of importance on the material before him
on a basis for which neither party had contended, provided they were aware of the relevant
material and the issues arising had been fairly canvassed.

Enforcement of Foreign Arbitral Awards in India:
Lal Mahal Reduces the Scope for Court Interference
Rathin Somnath
1. Introduction
The Supreme Court of India, in its judgment in Shri Lal Mahal Ltd v Progetto Grano Spa,1
has clarified the Indian position on the enforcement of foreign awards. The judgment has
been hailed by the industry as a welcome step towards realigning the arbitration mechanism
in India with the international arbitral framework. This judgment comes close on the heels
of the 2012 Supreme Court judgment of BALCO v Kaiser Aluminium Technical Services
Inc,2 which again had taken a pro-arbitration stance, in limiting court intervention in the
enforcement of a foreign arbitral award.
The decision in Lal Mahal concerns the challenge to the enforcement of a foreign arbitral
award on the grounds of “public policy”.3 The court interpreted the term “public policy”
relying on its previous decisions in Renusagar Power Co Ltd v General Electric Co,4Oil
and Natural Gas Corp Ltd v Saw Pipes Ltd5 (ONGC), Phulchand Exports Ltd v OOO.
Patriot,6 all of which were rendered prior to the BALCO judgment. The BALCO judgment
has had a significant impact in the Supreme Court’s determination of Lal Mahal.
2. Position of the Law Prior to Lal Mahal

The Supreme Court in Renusagar had dealt with the challenge to the enforcement of a
foreign arbitral award on the grounds of “public policy” under the Foreign Awards Act
19617 (the Foreign Awards Act 1961 was the applicable law concerning enforcement before
the Arbitration and Conciliation Act 1996 took effect). It laid down that a foreign award
can be challenged on the grounds of “public policy” if it was contrary to: first, the
fundamental policy of Indian law; or secondly, the interests of India; or thirdly, justice or
morality.
Subsequently, in ONGC, the court was required to interpret the term “public policy” in
the Arbitration and Conciliation Act 1996 s.34. Section 34 concerns “set-aside” proceedings
which can only be commenced at the seat of arbitration. Moreover a s.34 application can
only be made within three months of the passing of the award. Therefore, as the set-aside
proceeding is the first stage of inquiry, the court interpreted the term “public policy” more
widely and included within its ambit the term “patent illegality”. It did, however, clarify
that the illegality must go to the root of the matter and that, if the illegality is of a trivial
nature, it cannot be held to be against public policy. It further held that the award can only
be set aside if it was so “unfair and unreasonable that it shocks the conscience of the court”.
The term “patent illegality” is so broad that the courts were invariably given a right to
assess the merits of the dispute through this judgment. Phulchand (2011) extended the
definition of “public policy” under the set-aside proceedings of ss.34–48. The Arbitration
and Conciliation Act 1996 s.48 concerns the enforcement of, or challenge to the enforcement
of, foreign arbitral awards. The effect of the decision in Phulchand was that the scope of
“public policy” to “set aside” an award passed in India (under Pt I s.34) and to challenge
1
2
3
Arbitration and Conciliation Act 1996 s.48.
4
1994 Supp. (1) S.C.C. 644.
5
(2003) 5 S.C.C. 705.
6
(2011) 10 S.C.C. 300.
7
Section 7(1)(b)(ii).

218 Arbitration
the enforcement of a foreign arbitral award (under Pt II s.48) would be the same. The
reasoning here could be attributed to the position of the law prior to BALCO whereby the
court in Bhatia International v Bulk Trading SA8 had held that Pt I shall also be applicable
to foreign arbitral awards.
Subsequently, in 2012, the decision in BALCO corrected the position of law to bring it
in line with established notions of international arbitration law. It held that Pt I shall not
apply to foreign arbitral awards; the municipal arbitration legislation (Pt I) must be restricted
to arbitrations seated within the territory of India.
3. Lal Mahal
The dispute in Lal Mahal concerned the sale of a particular type of wheat. The contract
provided for the condition of the wheat to be tested and certified by SGS at the place of
loading. SGS India conducted the testing and certified that it complied with the contract.
However, once the wheat was delivered, the buyer had a further test conducted by SGS
Geneva which found that the wheat was not compliant with the parameters stipulated in the
contract. Therefore the buyer commenced arbitration under GAFTA. The tribunal ruled in
favour of the buyer. The seller contended that the contract stipulated that the test could be
conducted only at the place of loading; the test by SGS Geneva was therefore invalid.
Moreover, the seller ceased to be liable once the goods were loaded on the ship as the parties
had entered into an FOB contract. Aggrieved by the decision of GAFTA, the seller challenged
its enforcement on the grounds that the award was against the terms of the contract.
4. Analysis
The court in Lal Mahal established the difference between the assessment of foreign and
domestic arbitration awards. It applied the narrower interpretation of “public policy”
elucidated by the court in Renusagar and struck down its decision in Phulchand, finding
that judgment to be incorrect law.
The reasoning was that the “set-aside” proceeding is the first stage of inquiry at the
domestic level and hence the scope of “public policy” is wider than in an “enforcement”
proceeding, which is a second stage of inquiry. The inquiry at the second stage must be
narrower in scope as the award has already passed the scrutiny at the seat of arbitration.
Therefore the term “patent illegality” does not fall within the ambit of “public policy”
with regard to the enforcement of foreign arbitral awards. The narrower three-point
interpretation adopted in Renusagar must be applied. The court further stated:
“If a ground supported by the decisions of that country was not good enough for setting
aside the award by the court competent to do so, a fortiori, such ground can hardly be
a good ground for refusing enforcement of the award”.
The Supreme Court, based on the above reasoning, enforced the award in favour of the
buyer.
5. Comment
Every award can be subjected to inquiry at two stages: the set aside (s.34) stage and the
enforcement (s.48) stage. An ideal arbitration framework envisages minimal court
interference in giving effect to an arbitral award. The inquiry at the first stage is critical as
it is bound by limitations, i.e. the set-aside proceedings must be initiated within three months
of the passing of the award. After three months, the award becomes final and binding. There
is no such limitation for enforcing the award. In fact one of the grounds for challenging the
8
(2002) 4 S.C.C. 105.

Enforcement of Foreign Arbitral Awards in India 219
enforcement is if the award has been set aside at the seat of arbitration, essentially signifying
that the award has not yet become final and binding. Therefore, the inquiry envisaged under
the set-aside proceeding (s.34) is a broad or wide scrutiny; the standard of review at the
enforcement stage need not be as stringent as that of s.34. A uniform adoption, understanding
and interpretation of this international position would promote arbitration as a viable dispute
resolution mechanism for resolving international commercial disputes.
A deviation from such an understanding and interpretation would lead to the “double
exequatur” problem, which was one of the significant limitations of the Geneva Convention.
The subsequently drafted New York Convention sought to overcome this drawback by
narrowing the scope for court interference after the award has become final and binding.
The scope for court interference at the enforcement stage must henceforth be narrower
and Lal Mahal has indeed affirmed this position of law from an Indian arbitral jurisprudence
perspective.

The Application of the Fiona Trust Principle of
“One-Stop” Adjudication to a Non-Exclusive
Jurisdiction Clause: Ryanair v Esso Italiana
Jonathan Haydn-Williams
1. Introduction
The Court of Appeal handed down its decision in Ryanair Ltd v Esso Italiana Srl1 on
November 19, 2013. The main point of interest is the Court’s decision to determine the
prospect of success of the “lynchpin” contractual claim, at the stage of deciding whether a
non-exclusive jurisdiction clause extended to tortious claims for damages for breach of
competition law.
2. The Facts
Between 1999 and April 2006, Ryanair Ltd (Ryanair) contracted with Esso Italiana Srl
(Esso) for the purchase of jet fuel at Italian airports. The relevant parts of the applicable
law and jurisdiction clause provided that:
“This Agreement shall be governed by the laws of England … For the purposes of the
resolution of disputes under this Agreement, each party expressly submits itself to the
non-exclusive jurisdiction of the Courts of England.”
In June 2006, the Italian Competition Authority (ICA) decided that certain oil companies,
including Esso, which were engaged in the sale of jet fuel at various Italian airports, had
breached the EC Treaty art.81, now the Treaty on the Functioning of the European Union
(TFEU) art.101. The breach consisted of the operation of an information sharing cartel
which inflated the price of jet fuel supplied at the Italian airports. The ICA fined the cartel
members. Esso’s fine was more than £66 million.
Ryanair contended that it had suffered loss as a result of the inflation of the price of jet
fuel and commenced an action in the English Commercial Court against Esso, alleging:
1. breach of a contract; and
2. the commission of a statutory tort under English law in vindication of rights
arising out of TFEU art.101.
The breach of contract alleged was in respect of an express term providing for adjustment
to the contractual price of jet fuel if that price did “not conform to the applicable laws,
regulations or orders of a government or other competent authority”, with a proviso entitling
an adversely affected party to terminate the contract. The breach was said to be charging
an unadjusted price, when adjustment should have been made in the light of the unlawful
activity of the cartel.
When the case came before the Court of Appeal (see 4. below), Ryanair added an
allegation of breach of an implied contract term that Esso’s prices for jet fuel would not be
inflated as a consequence of any breach by Esso of EU competition law.
Esso was alleged to be liable for the statutory tort, first, in relation to the fuel supplied
under the contract between Ryanair and Esso and, secondly, in relation to fuel supplied
under contracts between Ryanair and other cartel members. The “second limb” was advanced
on the basis that Esso was jointly and severally liable for any breach of statutory duty
1
[2013] EWCA Civ 1450, Rix, Patten, Tomlinson L.JJ.

The Application of the Fiona Trust Principle: Ryanair v Esso Italiana 221
committed by any cartel member, which had supplied Ryanair with jet fuel at an inflated
price.
Esso challenged the jurisdiction of the English court.
3. The First Instance Decision

Before Eder J., Ryanair argued that the English courts had jurisdiction over the proceedings
by virtue of the non-exclusive jurisdiction clause in the contract between itself and Esso.
The argument relied on applying—to a non-exclusive jurisdiction clause—the Fiona Trust2
principle, as enunciated by Lord Hoffman in that case in relation to an arbitration clause:
“In my opinion the construction of an arbitration clause should start from the assumption
that the parties, as rational businessmen, are likely to have intended any dispute arising
out of the relationship into which they have entered or purported to enter to be decided
by the same tribunal. The clause should be construed in accordance with this
presumption unless the language makes it clear that certain questions were intended
to be excluded from the arbitrator’s jurisdiction.”
Eder J. accepted Ryanair’s counsel’s submissions, concluding that the English courts had
jurisdiction because:
1. the rational or reasonable businessman would have contemplated that there
would, or at least might, be a contractual claim such as was advanced by
Ryanair and would also have contemplated that the “first limb” of Ryanair’s
breach of statutory tort claim (in relation to fuel supplied under the
Ryanair/Esso contract) could also be advanced in the English courts under
the non-exclusive jurisdiction clause;
2. that a single tribunal should resolve both those disputes was consistent not
only with Fiona Trust, but also with The Angelic Grace,3 in which Leggatt
L.J. had referred to claims that were “so closely knitted together”;
3. the possibility that the breach of tort claim might arise under Italian law was
not material, since the contract claim would also involve consideration of
Italian law;
4. although the position as to the “second limb” of the statutory tort claim (under
which Esso was alleged to be jointly and severally liable for Ryanair’s losses
on purchases of fuel from other cartel members) was “much more difficult”,
it would be a “forensic nightmare” for the contract claim and the “first limb”
of the statutory tort claim to be pursued in England, whilst the “second limb”
of that claim was pursued in another jurisdiction. Accordingly, it was to be
presumed that rational businessmen would have considered that the
non-exclusive jurisdiction clause was intended to cover such a claim.
Esso appealed.
4. The Court of Appeal’s Decision

The Court of Appeal upheld the appeal, concluding that the English courts did not have
jurisdiction over the proceedings. Rix L.J. delivered the unanimous decision of the Court,
noting that:
2
Fiona Trust & Holding Corp v Privalov [2007] UKHL 40; [2007] 4 All E.R. 951.
3
The Angelic Grace [1995] 1 Lloyd’s Rep. 87, in which the Court of Appeal upheld an injunction to restrain
proceedings in tort commenced in Italy in breach of an arbitration clause, where an arbitration had been commenced
in England in respect of contractual and tortious causes of action.

222 Arbitration
1. the “whole edifice” of Eder J.’s decision rested on the claim that Ryanair had
a remedy for breach of contract;
2. Esso had conceded before Eder J. that the English courts had jurisdiction over
Ryanair’s claim in contract, but it was clear from Esso’s skeleton argument
that its position had also been that Ryanair’s contractual claim had no
foundation; and
3. in its skeleton arguments on appeal, Esso described the contractual claim as
“bogus” in that the price adjustment clause was not intended to deal with
anti-trust laws, but with governmental fuel price regulation.
On the first day of the appeal hearing the Court raised the question of whether there was
any prospect of Ryanair’s contractual claim succeeding. It seemed to the Court to be a
necessary part of Ryanair’s argument based on the Fiona Trust presumption in favour of
the rational and reasonable businessman’s preference for one-stop adjudication, that
Ryanair’s contractual claim had some prospect of success. If there was no arguable claim
of breach of contract, it became harder to see why rational businessmen would interpret the
jurisdiction clause in the contract as covering a separate claim for breach of statutory duty
arising out of conduct in Italy.
Accordingly, the Court adjourned the hearing to enable Esso to serve amended grounds
of appeal and the parties to serve any supplementary skeleton arguments or evidence.
At the resumed hearing, the Court remained of the view that a “holistic” approach was
necessary, i.e. that the issue of whether the statutory tort claim was so closely connected
with the contractual claim that the parties must be taken to have contracted on the basis that
the former would fall within the jurisdiction clause, could not be properly evaluated without
at the same time evaluating Esso’s argument that the price adjustment provision did not
envisage or cover a claim based on anti-competitive conduct contrary to TFEU art.101. No
argument had been advanced on behalf of Ryanair during the adjournment that the
interpretation of the price adjustment clause could not be grasped at the present stage because
of matters of matrix or context.
Rix L.J. accepted Esso’s argument that the interpretation which Ryanair sought to give
to the price adjustment clause distorted its plain meaning. He stated that cartel infringements
of TFEU art.101 were “simply not within the purview” of the clause. Accordingly, there
was no prospect of Ryanair having a claim against Esso for breach of that clause.
Ryanair’s additional argument that a term must be implied into the contract that prices
would not be inflated in consequence of any breach of EU competition law was rejected,
as having no basis.
Given the Court’s decision that Ryanair’s contractual claim had no prospect of success,
or—as Rix L.J. finally put it—“there is no contractual dispute”, the Fiona Trust presumption
that rational and reasonable businessmen prefer one-stop adjudication could not, in the eyes
of the Court, assist Ryanair. Rix L.J. thought that:
“where … all that has happened is that a buyer has bought goods from a seller who
has participated in a cartel … rational businessmen would be surprised to be told that
a non-exclusive jurisdiction clause bound or entitled the parties to that sale to litigate
in a contractually agreed forum an entirely non-contractual claim for breach of statutory
duty pursuant to article 101, the essence of which depended on proof of unlawful
arrangements between the seller and third parties with whom the buyer had no
relationship whatsoever”.
The Angelic Grace decision could not assist Ryanair either because there was no contract
claim “closely knitted together” with a claim in tort.

5. Commentary
The decision perhaps gives rise to more questions than answers.
Is the decision subject to appeal to the Supreme Court?

According to the LexisNexis website, the deadline for an appeal passed without an appeal
being lodged.
Was the case correctly decided by the Court of Appeal?

The key point that led the Court of Appeal to overturn the first instance decision was its
view that the issue of whether Ryanair’s contractual claim(s) had some prospect of success
should be considered at the stage of the challenge to the court’s jurisdiction, rather than at
a later point.
Rix L.J stated that “It was often part and parcel of a challenge to the jurisdiction that a
claim raised no proper issue for trial” and attributed to Ryanair’s counsel, with approval,
the statement that
“even where a claim form is served without permission under the Judgments Regulation,
it is open to challenge the court’s jurisdiction on the basis that the claim has no
reasonable prospect of success”.
On their face, those are surprising propositions.
Article 23(1) of the Judgments Regulation4 provides that:
“If the parties, one or more of whom is domiciled in a Member State, have agreed that
a court or the courts of a Member State are to have jurisdiction to settle any disputes
which have arisen or which may arise in connection with a particular legal relationship,
that court or those courts shall have jurisdiction. Such jurisdiction shall be exclusive
unless the parties have agreed otherwise.”
As one author has put it: “Unlike under the national rules, the English court must accept
jurisdiction and hear the case where there is such an agreement”.5
There was such an agreement in the contract between Ryanair and Esso. There is no
suggestion in Rix L.J’s judgment that the jurisdiction clause was invalid or did not extend
to Ryanair’s contractual claim(s). Rather, he held that the contractual claims stood no
prospect of success. That is not an issue that is open to a court of a Member State to consider
in relation to its jurisdiction under the Judgments Regulation art.23(1). The fact that the
jurisdiction clause was expressed to be non-exclusive does not take it outside the scope of
art.23(1).
It is to be noted that Rix L.J. moves from stating that “Ryanair’s construction of the
clause [the price adjustment clause] simply does not begin to work” to a statement that
“there is no contractual dispute”. Those are two different propositions. It is submitted that
the correct position was that there plainly was a contractual dispute: the court did not consider
it was arguable, but that is a different matter. By virtue of the jurisdiction clause and art.23(1),
Ryanair was entitled to commence proceedings in England for breach of contract and the
English court was seised of the case.
The Court was entitled to interpret the jurisdiction clause—in particular whether it
extended to non-contractual claims—according to English law. However, it seems to follow
from the above that Rix L.J’s application of the Fiona Trust principle to the facts of the
present case proceeded on a false premise. Having set out Lord Hoffman’s exposition of
4
Regulation (EC) 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial
matters [2001] OJ L12/1.
5
Pippa Rogerson (ed.), Collier’s Conflict of Law, 4th edn (Cambridge: Cambridge University Press, 2013).

224 Arbitration
the principle, Rix L.J. stated that “Such reasoning, however, does not carry over into a
situation where there is no contractual dispute”. It is submitted that Lord Hoffman’s reasoning
does apply to a situation where the English court is clearly seised of a dispute as to alleged
breaches of contract, by virtue of a jurisdiction clause (albeit that it considers the allegation
to have no prospect of success), and the issue is raised as to whether it should interpret that
clause as extending to tortious claims.
It is worth repeating Lord Hoffman’s expression of the “one-stop adjudication” principle:
“the construction of an arbitration clause should start from the assumption that the
parties, as rational businessmen, are likely to have intended any dispute arising out of
the relationship into which they have entered or purported to enter to be decided by
the same tribunal”. [Emphasis added.]
Lord Hoffman referred to “any dispute” and not to “any dispute with some prospect of
success”. To the extent that the Court of Appeal in Ryanair v Esso sought to imbue rational
businessmen with the foresight and knowledge to wish for a one-stop tribunal only where
disputes have some prospect of success seems unrealistic. It also ignores the fact that where
a tribunal has jurisdiction over a dispute, which it disposes of at an early stage, leaving
remaining disputes to be adjudicated by another tribunal, there will be two stops and not
one.
It is possible that if the Court of Appeal had approached Ryanair v Esso on the basis that
it was seised of a contractual dispute, it might still have concluded that the Fiona Trust
principle did not require it to interpret the jurisdiction clause as extending to both limbs of
the statutory tort claim. Lord Hoffman’s words “arising out of the relationship into which
they have entered” might have justified a finding that the “first limb” of the tortious claim
(for the loss on sales under the contract between Ryanair and Esso) was within the scope
of the jurisdiction clause, whereas the “second limb” (for losses resulting from sales of fuel
by other oil companies, for which Ryanair sought to make Esso jointly and severally liable)
was not. It does not seem inevitable that to split the first and second limbs of the statutory
tort claim would have created a “forensic nightmare”. However, if that were the conclusion,
which rational businessmen should be presumed to have contemplated, the result could
have been that neither of the tortious claims fell within the scope of the jurisdiction clause.
What significance does the Court of Appeal decision have for arbitration?
Given that Fiona Trust was concerned with an arbitration clause, any appellate decision
which involves consideration of it has potential significance for arbitration. However, just
as Rix L.J. stated that by no means all of the Fiona Trust reasoning applies to non-exclusive
jurisdiction clauses, the same may be true in reverse.
It would perhaps be unfortunate if Ryanair v Esso led parties to argue (or arbitrators to
conclude) that an arbitral tribunal, when ruling on whether an arbitration clause extends to
non-contractual claims, should consider whether a contractual claim has any prospect of
success and, if not, should be disposed of at the stage of Kompetenz-Kompetenz. In practical
terms, arbitrators might take the view that matters of “matrix or context” (to adopt Rix L.J.’s
phrase) are often necessary to determine the meaning of contract terms alleged to have been
breached and that it is seldom appropriate to consider them at a preliminary stage. However,
it would not be surprising to see the argument finding its way to the English courts on a
preliminary ruling or appeal as to jurisdiction.
Given its decision that there was no contractual claim on which to “hang” non-contractual
claims, the Court of Appeal did not grapple with the difference between the two limbs of
the competition law tort claim. However, it was addressed at first instance, Eder J. concluding
that rational businessmen would not have wanted the “forensic nightmare” of the “first
limb” of the claim (or, really, claims) being decided in one jurisdiction, whilst the “second
limb” fell to be decided in another jurisdiction. That conclusion may not transfer readily

into the arbitration sphere. The “first limb” concerned loss claimed as a result of inflation
of the price of jet fuel sold under the contract between the parties, whilst the “second limb”
related to losses in relation to fuel sold to Ryanair by other oil companies, whom—for
example—Esso might have wished to join as third parties. In the context of an arbitration,
with no facility to join third parties, it would not seem surprising for rational businessmen
to have intended a “first limb” type tortious claim to be within the ambit of an arbitration
clause, but a “second limb” type of claim to be outside it.
6. Conclusion
It is submitted that the Court of Appeal adopted the wrong approach in Ryanair v Esso
Italiana. Had the Court accepted, as a first step, that it had jurisdiction over the contractual
claim by virtue of the Judgments Regulation art.23(1), rather than conflating that with the
issue of whether the contractual claim had any prospect of success, it would have been
unlikely to reach the conclusion that there was no contractual claim. It was that conclusion
which led the Court to what is submitted to be the erroneous view that the reasoning in
Fiona Trust did not apply.
The application of the Fiona Trust principle of “one-stop adjudication” might not have
led the Court of Appeal to the conclusion of the Commercial Court, at first instance, that
the English courts had jurisdiction over both “limbs” of the competition law tort pleaded
by Ryanair. It does not seem impossible that the Court of Appeal would have decided that
there was jurisdiction over the “first limb”, but not the “second limb” of the tort claim.
It is to be hoped that Ryanair v Esso Italiana will have little impact on arbitration,
notwithstanding its consideration of the Fiona Trust principle, but there may be a temptation
for parties hoping to limit the scope of an arbitration clause to seek to rely on the decision.

Staying Defences
Patrick Taylor
In the recent English Commercial Court case of Guidance Investments Ltd v Guidance
Hotel Investment Company BSC (Closed) Ltd1 a question arose as to whether or not it was
appropriate to stay the defendant’s defence and counterclaim on the grounds that the matters
pleaded within it were covered by an arbitration agreement.
Guidance Hotel Investment Co (defendant (D)) invests in hotels. Guidance Investments
(claimant (C)) is an investment manager. Under an agreement between them, D agreed to
pay fees to C for investment services. But by cl.9 of that same agreement the termination
of C’s appointment was covered by a specific Event of Default regime and by cl.13 any
disputes arising out of or in connection with an Event of Default would be referred to
arbitration. So, in broad terms, general disputes could be litigated in the courts whereas
disputes about an Event of Default would be arbitrated.
C claimed that fees to which it was entitled had not been paid. C issued proceedings to
recover those fees. D pleaded a defence and counterclaim relating to C’s alleged default
which D said caused it loss to the extent that it extinguished any liability it may have to C.
C then sought to stay D’s counterclaim on the grounds that the matters pleaded, being related
to an Event of Default, were caught by the arbitration agreement. D resisted this application.
The court (Hamblen J.) first decided that as a matter of construction of the clauses, the
regime in cll.9–13 did not apply to the counterclaim. Accordingly no stay would be ordered.
But the court then considered the more interesting question: if it were wrong on the
construction point, how should one deal with a defence presented in court litigation which
includes a matter which is caught by an arbitration clause?
The Arbitration Act 1996 s.9(1) provides:
“A party to an arbitration agreement against whom legal proceedings are brought
(whether by way of claim or counterclaim) in respect of a matter which under the
agreement is to be referred to arbitration may (upon notice to the other parties to the
proceedings) apply to the court in which the proceedings have been brought to stay
the proceedings so far as they concern that matter.”
The Court approved Professor Merkin’s summary of the legal position2:
“If C has a claim against D which is not governed by an arbitration clause, and D has
a counterclaim against C which is governed by an arbitration clause and which gives
rise to a transaction set-off, C is not entitled to a stay of D’s counterclaim in any
proceedings brought by C. Instead, the court is entitled to resolve the dispute which
gave rise to the counterclaim in order to allow D’s defence to be recognised. The effect
is to override C’s right to insist upon arbitration in respect of the counterclaim.”
The authorities which support this proposition were examined. In Aectra Refining v Exmar
NV,3 Hoffmann L.J. said it was necessary to distinguish between “independent set-off” and
“transaction set-off”: the former does not require any relationship between the transactions
out of which the cross-claims arise, whereas transaction set-off is a cross-claim arising out
of the same transaction or one so closely related that it operates in law or in equity as a
complete or partial defeasance of the claim. In the case of transaction set-off, Hoffmann
L.J. concluded that that the authorities favoured allowing the set-off to be pleaded;
notwithstanding its submission to arbitration.4
1
[2013] EWHC 3413 (Comm).
2
Robert M. Merkin, Arbitration Law, 4th edn (St Helier: Informa Professional, 2012), para.8.29(b).
3
[1995] 1 All E.R. 641.
4
Aectra Refining v Exmar NV [1995] 1 All E.R. 641 at [685c–g].

Staying Defences 227
In the present case C acknowledged that if there is a right of transaction set-off then it
may be relied upon as a defence. C disputed, however, that any such right arose in this case
because its claim for fees was related to the most recent instalments of fees, whereas D’s
cross-claim related to historic events. The Court accepted that this potential chronological
mismatch may be relevant. It then concluded5:
“I am reluctant finally to decide this issue as it involves determination of whether or
not there is a particular right of defence and it is likely to require a consideration of
issues of fact. In particular, it is the Defendant’s case that there has been an ongoing
breach of contract by the Claimant in failing to inform it of the matters which give rise
to its claim. But for that breach of duty the claim might well have been raised when
there was a co-incidence in time between the fees claimed and the events founding the
counterclaim. This may well be relevant to considerations of justice and the functional
requirement. I am inclined to the view that this is the type of case in which the mere
fact that the cross-claim arises out of the same contract is unlikely to be sufficient to
establish the injustice necessary to found a right of equitable set-off and that further
facts will need to be established. However, since it is not necessary to express a final
view on the matter, I do not propose to do so.”
Although the Court dismissed the application without deciding the matter, this is an
interesting illustration of what remains a difficult area. Had D’s cross-claim fallen within
the ambit of the arbitration agreement it would have been necessary to decide the point.
That would clearly have required evidence. Potentially in this case, the scope of that evidence
could have covered the entire transaction history and could well involve a decision on many
of the points which would be relevant to the substantive case.
5
Guidance Investments Ltd v Guidance Hotel Investments Co BSC (Closed) [2013] EWHC 3413 (Comm) at [94].

Book Reviews
Arbitration in England with Chapters on Scotland and Ireland,
by Julian D.M. Lew, H. Bor, G. Fullelove and J. Greenaway, (Alphen
aan den Rijn: Kluwer Law International, 2013), 792 pp., £140, ISBN:
978-9-0411-3998-6.
The majority of this textbook, as is clear from the title, focuses on the spectrum of issues
that can arise at any point before, during or after the arbitration process from an English
law perspective. One of the 28 chapters looks at Scotland and another chapter looks at the
law relating to the Republic of Ireland. Not quite half of the chapters are individually
authored by practitioners who need little introduction, such as Julian Lew QC (who also
edits this impressive monograph along with Harris Bor, Gregory Fullelove and Joanne
Greenaway), Prof Philip Capper and Klaus Reichert S.C. The other half of the book has a
number of co-authored chapters written by two or three practitioners. The law is stated as
of the end of 2012, six or so months before the title’s publication in summer 2013. At £140
for a textbook of nearly 750 pages, this work is very affordable when one recalls that
comparable books have been priced at £350–£400 in recent times.
Whilst the main focus of the book is England, the last two chapters of the book might be
commented on at this juncture. At first instance, there is a superficial logic to including
comment on the two neighbouring jurisdictions to England, with their respective 2010
Arbitration Acts; both obviously fall outside the scope of the 1996 Arbitration Act which
underpins the other 26 chapters. However, on closer examination the rationale for the
commentary, within this title, by former CIArb President Hew R. Dundas and Klaus Reichert
S.C., of Brick Court Chambers, is not as obvious as might be thought. Those students,
practitioners, and others who want a full understanding of the legislative regime governing
Scottish arbitration would in many instances be able to refer to a relatively recent title that
Dundas co-authored with Prof Fraser Davidson and David Bartos.1 The comment just made
is by no means a criticism of Dundas’s contribution to the present work: he more than does
what is asked of him in the space available. However, one may only suggest that the 30
pages or so within the wider textbook will not be of interest to many readers whose focus
lies south of the Scottish border. Whereas those who are more interested than most in
Scottish arbitration are likely to want to look at the more comprehensive textbook by Messrs
Davidson, Dundas and Bartos. The position in relation to the chapter on the Republic of
Ireland is similar, albeit slightly different.
Irishman Klaus Reichert S.C. is a leading counsel whose practice focuses on international
arbitration from his base at Brick Court Chambers in London. Whilst Reichert, within his
own 17-page chapter in the present work, compliments Barry Mansfield’s 2012 annotation
of the Irish 2010 Act,2 he benignly somewhat overstates the significance of that title, which
is a comparatively short annotation of the relevant legislation rather than a more
comprehensive treatment of arbitration in the Republic of Ireland. There is thus, for the
time being, a vacuum in terms of written work that addresses Irish arbitration subsequent
to the introduction of the new legislation in 2010. Thus Reichert’s short impressionistic
overview of the position in Ireland is of some help until the lacuna in Irish academic
commentary is addressed by more comprehensive works, as it presumably will be in 2014.
Turning to the main part of this book, it is most impressive and is a credit to Julian Lew
and the other editors. The management of the editorial process should not be overlooked
1
Fraser Davidson, Hew R. Dundas and David Bartos, Arbitration (Scotland) Act 2010 (Edinburgh: W. Green,
2010).
2
Barry Mansfield, Arbitration Act 2010 and Model Law: A Commentary (Dublin: Gill and Macmillan, 2012).

Book Reviews 229
when the scale and diverse range of the contributors is considered. In a clear and easily
accessible manner the development and operation of the present English arbitral system is
authoritatively outlined. Whilst parts of the book will not be as compelling to some readers
as to others, such as the descriptions of the antecedents of arbitral institutions such as the
Chartered Institute of Arbitrators, the range of issues covered is considerable. Many readers
therefore will understandably be active and interested in particular areas but can if they
choose avoid some areas by “dipping in and out” of the title as their individual professional
and academic demands necessitate. Along with all the substantive mainstream areas, such
as, say, enforcement, there are also useful treatments of somewhat niche areas such as
commodity arbitration in the chapter by Michael Swangard. The team of nearly 45
contributors has made a very strong contribution to legal scholarship in this area. It is hoped
that this title will be supported by the arbitral community, and that in the years to come it
may be revised and updated as required. The editors to their credit have in the main addressed
the fact that the chapters are (save for one or two, where an author of an individual chapter
co-writes a later chapter) written by different people but also managed, as is needed, to
maintain a continuous identifiable thread through this title dealing with the practice and
law on arbitration in England.
Arran Dowling-Hussey
Arbitration Law of Korea: Practice and Procedure, by Kap-You

(Kevin) Kim and John P. Bang, (New York: Juris Publications,
2012), xx + 508pp., US $160, ISBN: 978-1-933833-77-4.
South Korea ticks many of the “plus” boxes for a regional international commercial
arbitration jurisdiction in Asia. It was the fourth jurisdiction in the greater Asia region (after
Hong Kong, Singapore and India) to adopt (in 1999) the 1985 version of the UNCITRAL
Model Law (which version remains Korea’s arbitration law and applies to both international
and domestic arbitration). It was the seventh greater Asian jurisdiction (after Cambodia,
India, Japan, the Philippines, Sri Lanka and Thailand) to become a Contracting State to the
New York Convention. The country’s principal arbitral organisation, the Korean Commercial
Arbitration Board (KCAB), offers modern procedural rules (the International Arbitration
Rules 2011) that meet modern international standards and are substantially nuanced with
the Arbitration Act 1966 as amended. The South Korean courts are arbitration-friendly and
consistently apply a pro-validity approach towards arbitration agreements and awards.
Despite these pluses, the gradually increasing international business of the KCAB and
the appeal that South Korea might have as a civil law-based arbitral venue for disputes
involving parties from (inter alia) Asiatic Russia, North China and even Japan, the country
is not regarded as an Asian hub, though commentators are beginning to perceive it as a
potentially emerging one.1 As a number of other jurisdictions have learned, the mere adoption
of the Model Law does not of itself guarantee admission to the exclusive club of leading
arbitral jurisdictions. Obstacles to hub status in South Korea have, however, been seriously
addressed since 2011. These include the absence of government support, previously
user-unfriendly international arbitration rules, lack of suitable physical facilities for
arbitrations and the inability of international law firms to establish offices in South Korea.
The most obvious evidence of change is the launch on May 27, 2013 of the Seoul
International Dispute Resolution Centre (IDRC), a joint initiative of the KCAB and the
Korean Bar Association, with support and funding from the Seoul Metropolitan Government
1
Global Arbitration Review, Guide to Regional Arbitration 2013. See Regional Arbitration Centres—Ones to
watch: Asia, available online at: http://globalarbitrationreview.com/regional-arbitration/directory/4/article/31490
/ones-watch-asia [Accessed February 18, 2014].

230 Arbitration
and the Ministry of Justice. Modelled on Maxwell Chambers in Singapore, the IDRC’s
premises in central Seoul will host several international arbitral institutions, including the
ICC, LCIA, HKIAC, SIAC and AAA/ICDR.
Arriving at just the right time to assist South Korea’s “big push” for international
arbitration business and recognition as an Asian hub comes Arbitration Law of Korea:
Practice and Procedure, the brainchild of a leading international arbitration firm, Bae, Kim
& Lee LLC of Seoul, of which the General Editors and all contributors are members. This
alone makes for an admirable degree of uniformity of purpose and approach in the writing,
for which both the General Editors and the publishers are to be applauded.
The book begins with informative contextual discussion of the history, development and
status of arbitration in South Korea (both international and domestic), and of the factors
favouring selection of the country as an arbitral seat. This is supplemented by comparative
statistical commentary on the uptake of ICC arbitration between 1998 and 2009 by Asian
parties, of whom Korean parties have comprised by far the greatest number.
The team of authors then discuss the arbitration process in chronological order, from
arbitration agreement to award, with copious references throughout to the 1966 Act as
amended, the KCAB International Arbitration Rules 2011 and the Domestic Arbitration
Rules 2011, decisions of the South Korean courts and the opinions of leading overseas
arbitration commentators. The only exception to chronology is the chapter on interim
measures, which appears between the later chapters on court involvement during the arbitral
process and on the setting aside, recognition and enforcement of awards. Throughout the
work, the text is detailed but at the same time easily digestible by the practitioner and
supplemented by discussion of arbitration practice in South Korea.
The book is refreshingly free of filler, the three appendices being limited to the texts of
the 1966 Act as amended and the two sets of KCAB rules. The work is also adequately
(though fairly simply) indexed for a book of its size.
Criticisms of the book are very few. Its international credentials would have been furthered
if, in common with commentaries published in other Model Law jurisdictions, the authors
had discussed the application of international soft law and practice instruments, such as
UNCITRAL’s Notes on Organizing Arbitral Proceedings and the IBA’s Rules on the Taking
of Evidence in International Commercial Arbitration and Guidelines on Conflicts of Interest
in International Arbitration. This is, however, a minor criticism.
Accessible, readable and (a rare achievement for any commentary) blending
comprehensiveness with concision, this book will be invaluable both to those lawyers
(Korean and foreign) who are familiar with arbitration law and practice in South Korea and
to those who seek to learn anew about the subject.
Robert Morgan

Evidence in International Arbitration CR PDF

Hochgeladen von

Dokumentinformationen

Originaltitel

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

Evidence in International Arbitration CR PDF

Hochgeladen von

Copyright:

Verfügbare Formate

Arbitration

the international journal of arbitration, mediation and

Dr Michael O’Reilly, Editor

Published in Association with Sweet and Maxwell

(2014) 80 Arbitration, Issue 2 © 2014 Chartered Institute of Arbitrators 123

When Even Fraud Is Not Nearly Enough. Recourse

1. Statutory Ethos: England and Wales versus Australia

124 (2014) 80 Arbitration, Issue 2 © 2014 Chartered Institute of Arbitrators

(2014) 80 Arbitration, Issue 2 © 2014 Chartered Institute of Arbitrators

2. England and Wales

An expression of public policy

(2014) 80 Arbitration, Issue 2 © 2014 Chartered Institute of Arbitrators

Chantiers de l’Atlantique v Gaztransport: A summary

(2014) 80 Arbitration, Issue 2 © 2014 Chartered Institute of Arbitrators

Lessons from Chantiers de l’Atlantique

The English Arbitration Act and its ethos

(2014) 80 Arbitration, Issue 2 © 2014 Chartered Institute of Arbitrators

(2014) 80 Arbitration, Issue 2 © 2014 Chartered Institute of Arbitrators

(2014) 80 Arbitration, Issue 2 © 2014 Chartered Institute of Arbitrators

Public policy and Australian domestic commercial arbitration

(2014) 80 Arbitration, Issue 2 © 2014 Chartered Institute of Arbitrators

Restrictions on granting recourse against an award

(2014) 80 Arbitration, Issue 2 © 2014 Chartered Institute of Arbitrators

Likely developments in Australia

(2014) 80 Arbitration, Issue 2 © 2014 Chartered Institute of Arbitrators

(2014) 80 Arbitration, Issue 2 © 2014 Chartered Institute of Arbitrators

5. Conclusions: Where Next?

(2014) 80 Arbitration, Issue 2 © 2014 Chartered Institute of Arbitrators

2. Identifying a Question of Law

136 (2014) 80 Arbitration, Issue 2 © 2014 Chartered Institute of Arbitrators

(2014) 80 Arbitration, Issue 2 © 2014 Chartered Institute of Arbitrators

Is there a general philosophy of non-intervention which should influence

What degree of deference should be shown to the arbitrator’s decisions on

(2014) 80 Arbitration, Issue 2 © 2014 Chartered Institute of Arbitrators

(2014) 80 Arbitration, Issue 2 © 2014 Chartered Institute of Arbitrators

(2014) 80 Arbitration, Issue 2 © 2014 Chartered Institute of Arbitrators

(2014) 80 Arbitration, Issue 2 © 2014 Chartered Institute of Arbitrators

(2014) 80 Arbitration, Issue 2 © 2014 Chartered Institute of Arbitrators

3. Does a Question of Law Arise Where there Is Insufficient or No

(2014) 80 Arbitration, Issue 2 © 2014 Chartered Institute of Arbitrators

(2014) 80 Arbitration, Issue 2 © 2014 Chartered Institute of Arbitrators

(2014) 80 Arbitration, Issue 2 © 2014 Chartered Institute of Arbitrators

(2014) 80 Arbitration, Issue 2 © 2014 Chartered Institute of Arbitrators

(2014) 80 Arbitration, Issue 2 © 2014 Chartered Institute of Arbitrators 147

(2014) 80 Arbitration, Issue 2 © 2014 Chartered Institute of Arbitrators

(2014) 80 Arbitration, Issue 2 © 2014 Chartered Institute of Arbitrators

Admissibility sensu stricto

When can questions of admissibility be determined in arbitration?

(2014) 80 Arbitration, Issue 2 © 2014 Chartered Institute of Arbitrators

Different approaches to admitting, ordering production of or excluding

(2014) 80 Arbitration, Issue 2 © 2014 Chartered Institute of Arbitrators

(2014) 80 Arbitration, Issue 2 © 2014 Chartered Institute of Arbitrators

4. Party Autonomy and Arbitrators’ Discretion

(2014) 80 Arbitration, Issue 2 © 2014 Chartered Institute of Arbitrators

(2014) 80 Arbitration, Issue 2 © 2014 Chartered Institute of Arbitrators

(2014) 80 Arbitration, Issue 2 © 2014 Chartered Institute of Arbitrators

156 (2014) 80 Arbitration, Issue 2 © 2014 Chartered Institute of Arbitrators

2. Arbitration under the Sharia

(2014) 80 Arbitration, Issue 2 © 2014 Chartered Institute of Arbitrators

Arbitration procedural law

(2014) 80 Arbitration, Issue 2 © 2014 Chartered Institute of Arbitrators

The DIFC courts

(2014) 80 Arbitration, Issue 2 © 2014 Chartered Institute of Arbitrators