Fox Williams – New Offices

16 November 2015 saw Fox Williams move into fabulous new offices at 10 Finsbury Square London EC2. http://pembrokere.com/10-finsbury-square.htm

If passing do drop in to see us.

Vis Pre-Moot in London

Pre-Moot in London:

On the weekend 27-28 February 2016 Fox Williams’ International Arbitration Group will be hosting a Willem Vis Pre-Moot in their new offices in the City of London.

The Pre-Moot will be on the official problem of the 23rd Vis Moot.

Teams and arbitration practitioners, lawyers and academics with interest in participating or judging are encouraged to register their interest in attending the Pre-Moot as early as possible.

Precise timings will be circulated nearer the time depending on the number of participants.

Location:

The Pre-Moot will be held at Fox Williams’ new offices at 10 Finsbury Square, London EC2A 1AF.

Registration:

For further information and registration please contact Ms Sabrina Janzik at sjanzik@foxwilliams.com   (http://www.foxwilliams.com/profiles/132/)

 

We look forward to welcoming you to the 23rd Willem Vis London Pre-Moot !

Delay in Award Does not Justify Setting Aside

In BV Scheepswerf Damen Gorinchen v The Marine Institute [2015] the Court decided that delay on the part of a tribunal in issuing its award cannot, of itself, justify setting aside the award under s.68 of the Arbitration Act 1996.

Delay might well amount to a breach of the tribunal’s section 33 duty and, therefore, qualify as a “serious irregularity” for the purposes of s.68(2)(a). The Court did not consider that delay was a failure to conduct the proceedings in accordance with the procedure agreed by the parties, for the purposes of s.68(2)(c) even though the relevant institutional rules (LMAA) included that the Award should: “normally be available within not more than six weeks from the close of the proceedings”. To hold otherwise would be a distortion of language.

The Court’s main reasoning was that delay would not generally affect the outcome of the dispute, such that there could be no substantial injustice that would justify setting aside. In order to satisfy that test of substantial injustice, it has to be shown that, but for the inordinate delay (which on this hypothesis amounts to the relevant “serious irregularity”), the tribunal might well have reached a different conclusion more favourable to the challenger. It is impossible to satisfy that test unless it can be shown that there has in fact been a failure to deal with all the issues within s.68(2)(d). If the Award is otherwise unimpeachable and has dealt with all the issues, it makes no difference whether it was produced a month or twelve months (as it was) after the hearing, since however long the Award has taken to produce, the applicant cannot show that it has caused or will cause substantial injustice. That is why delay on its own does not amount to serious irregularity.

The Court then followed Primera Maritime (Hellas) Ltd v Jiangsu Eastern Heavy Industry Co Ltd [2013] and Secretary of State for the Home Department v Raytheon Systems Ltd [2014] (the former holding that “…Once it is recognised that [the tribunal] has dealt with the issue, there is no scope for the application of section 68(2)(d). …, the sub-section does not involve some qualitative assessment of how the tribunal dealt with it. Provided the tribunal has dealt with it, it does not matter whether it has done so well, badly or indifferently.”)

The Court held that the “issues” complained of were at best sub-issues or sub-sub-issues in any event. It is but another example of the Court determining issues at a high level so as to maintain a “high threshold” that has been said to be required for establishing a serious irregularity.

One interesting reflection is whether the appropriate remedy in this instance would have been a challenge under s.24 rather than s.68. The former provides that a party may apply to the court to remove an arbitrator on the grounds that he has refused or failed to use all reasonable despatch in making an award, and that substantial injustice has been or will be caused to the applicant. Before applying to the Court an aggrieved party must exhaust his remedy for removal under institutional rules. A Court is unlikely to second guess the institutional assessment and, furthermore, there remains the issue of establishing substantial injustice which the Court is likely to be fairly difficult to persuade on the reasoning of this case. A s.24 challenge would, in all probability, have suffered the same fate.

 

 

Whether Request without Fee is Valid

The steps that must be taken to stop time for the purposes of a contractual time bar provision must be determined by construing the contract and, as the contract itself is unlikely to say much beyond incorporating institutional rules, that means construing the rules.  The Court so decided in Libero Commodities SA v Augustin [2015]

Bylaw 302 of the 2011 version of the International Cotton Association (ICA) provides:

“1. Any party wishing to commence arbitration under these Bylaws … shall send us a written request for arbitration …

2. When sending the request, the Claimant shall also send:

… such application fee as may be due …”

Disputes arose in relation to the price under a contract for the sale of cotton. By a further agreement the parties agreed to submit the pricing dispute to ICA arbitration. The latter agreement also provided that if the reference was not commenced by a specified day the price was to be fixed at a spcified price.

On the final date specified, the seller sent a fax to the ICA requesting arbitration, but did not pay the required fee. The arbitration did not proceed further until the fee had been paid.

The first tier tribunal decided that failure to pay the required fee at the time of  the request meant that the seller had not validly commenced arbitration by the required date. The seller appealed to an appeal committee of the ICA, which decided that arbitration had been validly commenced in time, and, further, reached a decision on the substantive pricing issue.

The buyer challenged theappeal committee’s award.

The Court dismissed the appeal against the award on the issue of the commencement of arbitration. However, it allowed the buyer’s appeal against the substantive decision.

In relation to the commencement issue,the Court held that, as a matter of construction, it was not a prerequisite to the effective commencement of arbitration that the request for arbitration should be accompanied by the relevant fee. This conclusion was borne out by four principal factors:

  • Bylaw 302 drew a distinction between the “request for arbitration” and other matters (including the payment of the fee) that should be sent “when sending the request”.
  • The Bylaws did not expressly provide that the matters specified in Bylaw 302(2) were preconditions to the effective commencement of arbitration.
  • A written request for arbitration could be a meaningful and effective document without the matters specified (including the fee).
  • There was no commercial absurdity in this interpretation, and, indeed, it was consistent with the TAC’s own views.

It should not be assumed that the position will be the same under all institutional rules. For example, Article 1.4 of the LCIA  Rules (2014) provides that “The date of receipt by the Registrar of the Request shall be treated as the date upon which the arbitration has commenced for all purposes (the “Commencement Date”), subject to the LCIA’s actual receipt of the registration fee.” Similarly, the issue in this case was decided under the provisions of the 2011 ICA bylaws: those bylaws have since been amended to make clear that an arbitration is not commenced until the requisite fee has been paid.  However, Article 4.4 of the ICC Rules (2012) provides: “Together with the Request, the claimant shall: …b) make payment of the filing fee …
In the event that the claimant fails to comply with … these requirements, the Secretariat may fix a time limit within which the claimant must comply, failing which the file shall be closed without prejudice to the claimant’s right to submit the same claims at a later date in another Request.”

The Court further held, obiter, that some of the matters, such as the other party’s identity, were prerequisites of a valid notice.  Accordingly, it remains the case that it is important to check any applicable rules carefully and ensure that all requirements are addressed when commencing arbitration.

Interplay between ss. 9 & 44

In Jacobs E&C Ltd v Laker Vent Engineering Ltd [2015] the Court decided a short point on the interation between ss. 9 & 44 of the Arbitration Act 1996.

Jacobs applied under s.44 (an injunction in support of arbitral proceedings) for delivery up of a ‘Quality Certification Dossier’ said to be neccessary for an overal take-over of the project (a biomass combined heat and power plant) in default of which liquidated damages of £16,200 per day would apply.  Laker sought to stay the application for an injunction in favour of the arbitration.

The Court held that it had power to grant injunctions under s.44 and it either does or does not grant that relief.  The question of a stay under s.9 simply does not arise.

On the facts the Court held that there was no sufficient urgency for it to act under s.44 and that the tribunal could act (it was formed and active) and hence the Court would not.

 

Developments in India

Over the last few years, the Indian judiciary has made significant strides in establishing India as an arbitration-friendly jurisdiction. Most notably the decision in Bharat Aluminium Co v Kaiser Aluminium Technical Services Inc (BALCO) closed the door on a controversial line of authority, which since 2002 had allowed the Indian courts to intervene in arbitrations seated outside the country. It was a decision that was prospective only and still left some major issues, in particular, ONGC v Saw Pipes where the Supreme Court had held that an award that conflicted with Indian law would be contrary to public policy and therefore unenforceable.  This expanded public policy ground had since been applied in Phulchand Exports Ltd Vs OOO Patriot, as a standard for challenging enforcement of foreign-seated awards in India.  The obvious concern for parties was that the Saw Pipes and Phulchand Exports cases appeared to permit a substantive review of the merits of any award rendered outside of India.  However, in Shri Lal Mahal Ltd Vs Progetto Grano Spa, the Supreme Court addressed this concern holding that the expression “public policy of India” should be given a narrow meaning and that the enforcement of a foreign award would be refused on this ground only if it is contrary to the fundamental policy of Indian law such as the interests of India; and justice or morality.  The Supreme Court reinforced its decision in Renusagar Power Company Ltd Vs General Electric Company and overruled the expansive interpretation of public policy as laid down in Phulchand Exports. This has provided welcome relief to parties involved in foreign seated arbitrations.

Notwithstanding these strides forward there remain some rogue decisions.  For example, the Delhi High Court has granted an anti-arbitration injunction restraining McDonald’s from continuing with an LCIA arbitration in London against its Indian joint venture partners. The court found that the arbitration agreement was incapable of being performed or was inoperative. Further, it ruled that the plaintiffs would be prejudiced on the ground of forum non conveniens if they had to arbitrate in London and that McDonald’s had submitted to the jurisdiction of the Indian courts and the Indian Company Law Board.

Of greatest concern is the judge’s finding on forum non conveniens, which has no application to arbitration agreements. Further, the judge’s findings appear inconsistent with the authorities on which he relied. (Bakshi v McDonald’s India Pvt. Ltd)

Returning the the theme of arbitration-friendly the Supreme Court of India has made two further helpful and orthodox decisions.

Firstly, it upheld a decision of the Bombay High Court, holding that an arbitration agreement does not have to be signed.  The Supreme Court concluded that, while it was mandatory for an arbitration agreement to be in writing, a valid arbitration agreement could be construed from the correspondence between the parties.  Moreover, in this case the applicant had submitted a counterclaim and had therefore submitted to the jurisdiction of the arbitral tribunal.  The Court found that there was a valid arbitration agreement.

This decision should assist the Indian courts in rejecting future challenges to arbitral awards on the basis that there was no express arbitration agreement executed between the parties. If an intention to refer the dispute to arbitration can be inferred through the exchange of communication between the parties, that will sufficient (Govind Rubber v Louis Dreyfus Commodities).

Secondly, the Supreme Court of India has dismissed a party’s challenge to the jurisdiction of an arbitrator appointed by the Singapore International Arbitration Centre (SIAC).

The dispute resolution clause in a joint venture contract between the parties provided for arbitration with the arbitrator to be appointed “in accordance with the rules of arbitration of the Singapore Chamber of Commerce“. The seat of the arbitration was Singapore and the underlying law of the contract was Indian law.

The respondent contended the clause as meaning a reference to SIAC and requested that SIAC appoint an arbitrator. The applicant challenged the jurisdiction of the arbitrator contending that the arbitration agreement should be governed by Indian law, and that parties had not excluded the application of the Indian Arbitration and Conciliation Act 1996.

The Supreme Court held that it would be reasonable to construe the clause as meaning that the arbitral appointment was to be made by SIAC. In doing so, the court upheld the principles of freedom of contract and party autonomy by focusing on the reasonable construction and interpretation of the dispute resolution clause, limiting the scope of judicial intervention in the sphere of India-related international arbitration (Pricol v Johnson Controls Enterprise)

 

Costs – Assessing the Amounts

The Courts have been grappling for some time with only allowing a proportionate and reasonable amount to be recovered by the successful party.  A useful rule of thumb (which could apply equally to arbitration) was expressed by Leggatt J in Kazakhstan Kagazy plc v Zhunus [2015]:

The touchstone is not the amount of costs which it was in a party’s best interests to incur but the lowest amount which it could reasonably have been expected to spend in order to have its case conducted and presented proficiently, having regard to all the relevant circumstances. Expenditure over and above this level should be for a party’s own account and not recoverable from the other party.”

This should be readily translatable into an answer expressed in currency.

English Court refuses to enforce ICC Award

One of the key attractions of international arbitration is the relative ease of enforcement by reason of the New York Convention (“NYC”). Furthermore, the ICC prides itself on the enforceability of its awards.  As Steyn J (as he then was) said in Bank Mellat v GAA Development Co [1988]: “it is regarded as the first imperative of the ICC system that the awards under it should be enforceable … The system of scrutiny of awards by the Court contributes to the enforceability of ICC awards.” That the English Court of Appeal declined to enforce an ICC award therefore raises, at the very least, an eyebrow.

The case was Dallah v Ministry of Religious Affairs, Government of Pakistan [2009].  The Court had to consider s.103 Arbitration Act 1996 that closely follows Article V of the NYC and which is in the following terms:

“(1) Recognition or enforcement of a [NYC] award shall not be refused except in the following  cases. (2) Recognition or enforcement of the award may be refused if the person against whom it is  invoked proves … (b) that the arbitration agreement was not valid …”

The court decided the following points:

Firstly, the interrelationship of the courts of the supervisory jurisdiction (here France) and those of the enforcing country – the court held that s.103 was only brought into play where the award was made in a seat of another jurisdiction.  In that context the right to try and ‘prove’ something involves a right to adduce evidence and the court was not constrained to merely to review the tribunal’s award.  The court had, in this context the same rights as the courts of the supervisory jurisdiction.

Secondly, whether the Government of Pakistan was a party to the relevant agreement and agreement to arbitrate was in issue.  The judge had found that the subjective intention of all parties was that the Government was not to be a party having applied French law.  The appeal court agreed.  The tribunal had applied transnational laws to reach a different conclusion

Thirdly, it was argued that the Government was estopped from denying that it was a party as the tribunal was a court of competent jurisdiction that had ruled on the matter and the Government had not challenged that in the courts of the seat.  The tribunal represented a court of competent jurisdiction if, and only if, the parties agreed to confer jurisdiction upon it.  As the Government had not agreed to be a party, no estoppel could arise.  The absence of challenge was not fatal as the very purpose of Article V of the NYC was to preserve the right to challenge enforcement on the grounds of fundamental validity and integrity.

Finally, the court held that as a matter of discretion (noting that enforcement may be refused) it would normally be the proper exercise of discretion not to enforce an award once it was found that the entity against whom enforcement was sought was not a party to the arbitration agreement.  There was a general requirement to enforce subject to specific defences.  The court said that it was difficult to contemplate a more complete defence than the absence of consent to arbitrate.  The court approved the statement in Kanoria v Guinness [2006]:

“ … the limited circumstances in which an English court can be persuaded to refuse  enforcement of a [NYC] award concern … the structural integrity of the arbitration proceedings.  If the structural integrity is fundamentally unsound, the court is unlikely to make a discretionary  decision in favour of enforcing the award.”

Attacking Reference or Award by Non-Party

Section 72 of the Arbitration Act 1996 provides a right of challenge for a person who does not participate in arbitral proceedings to which it is alleged that he is a party, but which he denies.  Sections 30 to 32 provide a route for admitted parties to challenge the extent of the tribunal’s jurisdiction but that is plainly not an option for a party who denies it is a party to the alleged contract.

The options available to such a party are, firstly, to ignore the proceedings.  The risk is that an enforceable award may follow and the challenge will have to come at the stage of a Court granting leave to enforce.  That can be a high risk strategy.  In England that would be on the basis that the tribunal lacked substantive jurisdiction (s.66(3)) but the party needs to be aware of the different jurisdictions that enforcement would be available and the relevant ability to challenge enforcement in each jurisdiction.  Of course, many jurisdictions will have similar enforcement provisions by reason of the New York Convention.

The second option is by Court proceedings seeking a declaration of invalidity and / or an injunction to restrain the arbitral proceedings: Law Debenture Trust v Elektrim Finance [2005].  The Court may grant such a declaration or an injunction, for example, where there is a forged signature to the alleged agreement: Albon v Naza Motor [2007] or where an award is obtained by fraud: Arab National Bank v El-Abdali [2005].

The third option is to participate, challenge the jurisdiction under s.30 and, if necessary, challenge the award under s.67.  Any s.30 challenge to the tribunal must be undertaken promptly having regard to s.73.  Where a party challenges before the tribunal its jurisdiction and fails, there can be no valid objection to his participating thereafter in a determination on the merits: Hackwood v Areen Design Services [2005].

In yet another eminently sensible decision the Court of Appeal has taken a broad view on the ambit of the “proceedings” referred to in s.72. In Broda Agro Trade v Alfred Toepfer [2010] T commenced arbitration proceedings against B under the rules of GAFTA claiming damages for breach of an alleged contract for the supply by B to T of a quantity of milling wheat. B took the view that no contract was concluded and requested GAFTA not to accept jurisdiction. The GAFTA tribunal issued an interim award on jurisdiction concluding that there was a binding contract. B did not participate in the steps leading to that interim award.  In the substantive dispute B served and filed submissions but continued to maintain that there was no binding contract. The tribunal held that B was in breach of contract and awarded damages to T. The judge held that, although B had not taken part in the proceedings leading to the interim award on jurisdiction, it had taken part in the proceedings on the merits and therefore could not make an application questioning whether there was a valid arbitration agreement under s. 72. B submitted that on its true construction the reference in s.72 to a person “who takes no part in the proceedings” was to a person who did not take part in the proceedings in which the tribunal decided whether it had substantive jurisdiction.

The Court of Appeal held that the wording of s.72 was clear. There was no basis for an implied restriction of the words “takes no part in the proceedings” to the proceedings relating to the determination of the substantive jurisdiction of the arbitrators. The purpose of the requirement was clear. A person who considered that he had not entered into an arbitration agreement was entitled to ignore the arbitration proceedings. If he took that course, his right to claim relief from the court could not be restricted because he did not participate in those proceedings. If, on the other hand, he participated in the proceedings, whether in relation to the jurisdiction of the arbitrators or in relation to the exercise of their asserted substantive jurisdiction, and was disappointed by their decision, he could fairly be required to bring proceedings to challenge their award within the limited time applicable to an application under s.67.

It is clear from Broda Agro that if the strategy of no-participation is followed it must be complete and a party cannot partially participate and try and ‘have its cake and eat it.’  Non-participation must be total.

Interest Update

Two recent cases have discussed issues relating to interest.  Firstly, Sonatrach v Statoil looked at post-award interest and, secondly, Martrade Shipping & Transport GmbH v United Enterprises Corporation looked at the application of the Late Payment of Commercial Debts (Interest) Act 1988 to international arbitration.  It is convenient to use those cases as an opportunity to review some basic principles.

Most references are concerned with recovering damages. With damages there is normally an award of interest.  The general principle as stated in Panchand Freres SA v. R. Pagnan & Fratelli[1] is that “In a commercial transaction, if the plaintiff has been out of his money for a period, the usual order is that the Defendant should pay interest for the time for which the sum has been outstanding.”

A failure to award interest can cause substantial prejudice to a party and in CNH Global NV v PGN Logistics Ltd[2] an award that was corrected by the Tribunal so as to include interest (inadvertently omitted from the original award) and which was done when the tribunal was functus, was allowed to stand as whilst it was an irregularity in the reference it did not cause substantial injustice within the terms of s.68 Arbitration Act 1996.

Approaches

In Europe and the U.S., an award of interest is common place.  Asian countries such as China, Taiwan, India, and Korea generally allow interest where there is default in the payment of money.  Interest is no more than the price of money (if borrowed) or the opportunity cost of money (if not borrowed)[3]. Rates at which interest should be awarded on damages may be heavily influenced by contractual terms on interest. The parties will often have stipulated a rate of interest for the late payment of invoices under the contract: should the same rate be used for interest on awards of damages?  Although awards of interest are matters of discretion for the Arbitral Tribunal, it seems right in principle that if the parties have agreed the price of money, that rate should be applied or at least considered in any award of damages. Of course, there may be good reason why the rate of interest on late paid invoices is higher than might be the case for damages. The parties might know that the product being sold was financed under especially expensive borrowing facilities and that interest on damages might not need to be compensated at the same rate.  Alternatively, there could be a coercive effect in setting a high rate to encourage payment of invoices.  It is suggested, however, that in normal circumstances a contractual rate should be applied to any award of interest on damages.

Interest on What and from When

Interest is normally awarded on the entire amount awarded but care should be taken not to overcompensate a claimant by awarding interest on the entire amount from the date of breach[4]. For example, interest on lost profits might run from each of the relevant years of loss rather from the date of breach. Equally, interest should, in principle, not be awarded on tax on grossed up damages (the grossing up being necessary if the damges are taxable in the hands of the claimant).  The tax is not a loss to the claimant and the claimant will simply be obliged to account to the tax authorities upon receipt. Unless there is a liability to the tax authorities for interest, it should generally not be awarded on the tax element of the loss.

Simple or Compound?

The further issue is whether interest should be awarded on a simple or compound basis[5].  Again, if the point is dealt with elsewhere in the contract, the same principle might be applied to the award of damages.  If the issue is not covered elsewhere then, as ever, it is a matter of discretion for the Tribunal. The point was considered by the House of Lords in Sempra Metals Ltd v. Inland Revenue Commissioners[6].  The House held that the time had come to recognise that money had a value: the court had a common law jurisdiction to award interest, simple and compound, as damages on claims for the non-payment of debts as well as on other claims for breach of contract and in tort.  Furthermore, a Tribunal is entitled to take into account the prevailing commercial practice of borrowing and investing on a compound basis.

Margins

If no rate is mentioned in the contract, a margin over bank base rates is probably the right starting point. The base rates should be taken as those prevailing in the country where the aggrieved party has its main banking arrangements. The margin may depend on whether the aggrieved party is a net borrower or depositor. A net borrower might be better compensated by say a margin over base rates equivalent to the rate a comparable company would be expected to pay and likewise a net depositor the rate a similar company might command on its deposits. A rate of 1 or, perhaps, 2% over bank base rate might be appropriate.  Generally, the larger and wealthier an organisation the cheaper will be its borrowing costs and hence the lower the rate of interest it will be able to recover.  Equally, the larger and wealthier an organisation the more money it will have to invest / deposit and the more sophisticated its treasury function and hence the higher the rates of interest it will receive on deposits.

In England there is a useful statute for the victims of late payment: the Late Payment of Commercial Debts (Interest) Act 1988.  The Act prescribes interest that is not intended to be compensatory rather it is penal and aimed to act as a deterrent to late payment.  The Act applies to domestic transactions but also has limited international reach.  This is because s.12 provides that where parties to a contract with an international dimension have chosen English law to govern the contract, the choice of English law is not, of itself, sufficient to attract the application of the Act.  To do so there must be a “significant connection” between the contract and England or the contract must be one that would be governed by English law apart from the choice of law.  The application of the Act to international arbitration albeit seated in England was reviewed by Popplewell J in Martrade Shipping & Transport GmbH v United Enterprises Corportation[7]Popplewll J identified the sorts of factors that would amount to a significant connection are (a) where the place of performance of obligations under the contract is England; (b) one of the parties is English; (c) the parties carry on some relevant part of their business in England; and (d) the economic effect of non-payment may be felt in England.  A London arbitration clause alone is insufficient connection[8].

The Court held that although choice of London arbitratuon will generally be treated as a choice of English law under Article 3 of trhe Rome Convention, that choice was to be ignored for the purposes of s.12 due to words providing ‘but for that choice’.

Post – Award

Finally, it is appropriate to consider whether any and if so what interest should be awarded post-award. In principle, it would seem logical that nearly every award should carry interest post-award down to payment.  In some instances it may be difficult to conceive of circumstances that would make it appropriate to not award such interest. It is incumbent on the party claiming interest to seek such an award and for the arbitral tribunal to consider making an award in those terms. Failure to do so can create difficulties as any judgment entered so as to enforce the award can usually only be in the terms of the award.  For example, §66(2) of the 1996 Arbitration Act states “ . . . judgment may be entered in terms of the award.” If the award does not deal with post-award interest, there is nothing an enforcing court can do: Walker v Rome[9].  As Aikens J (as he then was) said in that case “Section 66 of the 1996 Act enables the court to embody an award made by the tribunal in a judgment of the court.  But it does not empower the court to add an extra judgment for post-award interest when the arbitrators have not made such an award … Any attempt by the court to add a judgment for interest would be an intervention by the court … and so would infringe the principle set out in s.1(c) of the 1996 Act.”

If an award does not provide for post-award interest and payment is not made promptly, it may be appropriate to enter judgment in the terms of the award; for judgments may, depending on the jurisdiction, carry interest—e.g., in England under the Judgments Act 1838 judgments carry interest at the rate of 8%[10] on a simple (non-compounded) basis.

The authorities on this area were reviewed by Flaux J in Sonatrach v Statoil[11]Flaux J observed that Aikens J had not overlooked the statutory interest in Walker v Rome for Aiken J had said a little earlier in the judgment: “If interest was payable at all after the date of the judgment, then it would be payable under the Judgments Act 1838 …”

Aikens J was to make the same point in Pirtek (UK) Ltd v Deanswood Ltd[12] in a case where the court held that an arbitrator had no jurisdiction to make an award on interest in respect of a previous award where no interest had been awarded.  He said: “ … the difficulty could have been avoided by a much earlier application to make the Award a judgment.  Judgment Act interest would then have run on the sum awarded.”

As the above cases demonstrate once judgment has been entered under s.66 (or s.101(2) in the case of a foreign New York Convention award) of the Arbitration Act 1996 that judgment has the same characteristics as any other judgment and carries interest accordingly: the obligation to honour the award merges into a judgment which carries interest: see Dalmia v National Bank[13] and Gater Assets Ltd v Nak Naftogaz (No. 2)[14].  In the latter case Beatson J (as he then was) said: “The essential difference is that the obligation to honour an award arises by virtue of the agreement of the parties, whereas in the case of a judgment it follows from the powers of the court.”

 


[1] [1974] 1 Lloyd’s Rep 394

[2] [2009] EWHC 977 (Comm).  As the judge described it “This was simply a howler which was sought to be corrected.”  The writer represented the award creditor.

[3] Care should, however, be taken not to over compensate by looking too closely at the opportunity cost.  For remoteness reasons a claimant should not usually be compensated for the actual use they might have put the money to i.e. it would have purchased stock that has significantly increased in value.  The normal measure will be lost interest that the funds would have attracted.

[4] In general terms interest should run from when payment was due in the case of debts and from when the loss was suffered in the case of damages.  In civil law systems (such as France, Germany and Switzerland) as it is not sufficient merely for the payer to be in breach and the innocent party must give notice of default for interest to accrue, it will generally run from the date of the notice.  Practice Guideline 13 of the Guidelines for Arbitrators on how to approach the making of awards on interest, suggests that a mid-point is taken when losses are suffered over a period.

[5] English law gives the tribunal discretion: Arbitration Act 1996 s49.  In contrast Swiss law provides that compound interest cannot be awarded (Swiss Code of Obligations Articles 105 and 314).

[6] [2007] 3 WLR 354.

[7] [2014] EWHC 1884 (Comm)

[8] The Court allowed an appeal against an award that granted interest under the Act.  The Court was plainly very conscious not to extend domestic policy to international parties and not to dissuade international parties from choosing English law and seat.

[9] [1999] 2 All ER (Comm) 961, [2000] 1 Lloyd’s Rep 116.

[10] A generous rate at the time of writing such that it may be beneficial NOT to seek post-award interest and rely upon this or similar provisions.

[11] [2014] EWHC 875 (Comm)

[12] [2005] EWHC 2301 (Comm); [2005] 2 Lloyd’s Rep 728

[13] [1978] 2 Lloyd’s Rep 223, 275

[14] [2008] EWHC 1108 (Comm); [2009] 1 ALL ER (Comm) 667

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