Time to stop trying? Attempting to sidestep the ‘rehearing’ nature of a s.67 jurisdiction challenge

GPF GP S.à.r.l. v Republic of Poland [2018] EWHC 409 (Comm)

Overview

The recent decision of the Commercial Court in GPF GP S.à.r.l. v Republic of Poland [2018] EWHC 409 (Comm) reinforces what should, by now, be well-known to be the unassailable position that a challenge to jurisdiction under section 67 of the Arbitration Act 1996 takes place as a full rehearing of that challenge and not as a review of the arbitral tribunal’s prior decision on the same issue of jurisdiction.

The patent unpopularity of that position in many quarters of the arbitral community is illustrated by the most recent hard-fought attempt in this case to argue that this approach is not justified and should be restricted wherever possible. The decision demonstrates however that attempts to pick away at the position, post the Supreme Court in Dallah Real Estate v Pakistan [2010] UKSC 46, or to seek by other routes to sidestep the effect of a rehearing will be unavailing.

The decision of Bryan J unsurprisingly but usefully confirms that:

(a) that there is no difference between a question of jurisdiction ratione personae or ratione materiae: both are subject to a rehearing;

(b) that the position is no different where a party fails to raise issues in the arbitration and seeks to raise wholly new points on the s.67 challenge, irrespective of the nature of the jurisdictional aspect in play; and

(c) that resort by a party to ‘waiver’ to preclude the other party from raising such new points on the rehearing

The decision also contains a useful analysis of the concept, in the context of a BIT, of creeping expropriation qualifying as an expropriation in aggregate effect and the application of a BIT arbitration clause in that context (not addressed in this case note).

The Background

In a dispute between GPF (Griffin) and Poland under a BIT between Belgium, Luxembourg and Poland, Griffin claimed that a Polish court judgment constituted an expropriation measure. Griffin financed a property group seeking to invest in the redevelopment of ex-State properties for commercial and residential use. It claimed for violation of the fair and equitable treatment standard in the BIT and for indirect or creeping expropriation, similarly in breach of the BIT, relying on a series of acts or course of conduct by authorities and the court, attributable to Poland. A distinguished tribunal (Prof. Gabrielle Kaufmann-Kohler, Prof. David Williams QC, Prof. Philippe Sands QC) held that aspects of Griffin’s claim fell outside the arbitration clause in the BIT and could not be pursued, effectively tying Griffin to reliance solely on the court judgment and not the “prior measures” on which it also relied in support of its FET / expropriation claims.

Griffin challenged the Award under section 67 and, in so doing, supplemented in material aspects its case with new evidence as to the drafting history of the BIT and the “prior measures” and developed additional and different arguments. Poland contended that this was not permissible.

Poland’s Two Points and Bryan J’s Decision

Poland took two points, against the background of the general undesirability of the rehearing rule as eroding the efficacy of international arbitration, buttressed with reference to what the Judge referred to as “the spirited attack on the re-hearing approach undertaken by the editors of Arbitration Law 5th edn” (Robert Merkin and Louis Flannery QC).

(1) A difference between identity of party and scope of dispute jurisdictional issues?

First, Poland argued that the rehearing approach, enshrined in Dallah, was on analysis only applicable in a case which involved a question of jurisdiction ratione personae, i.e., a fundamental issue concerning a claimant who claimed not to be party to the arbitration agreement, and not where the issue arising is one of jurisdiction ratione materiae, or the scope of disputes referred to arbitration.

It argued that the seminal decision of Rix J. in Azov Shipping Co. v Baltic Shipping Co. [1999] 1 Lloyd’s Rep 68, on which Lord Mance’s speech in Dallah was said to hinge, concerned only a substantial issue of fact as to whether a party had entered into an arbitration agreement, not a scope of disputes issue. Reference was also made to a s.67 decision of Toulson J in Ranko Group v Antarctic Maritime SA [1998] ADRLN 35 (post Azov) in which, he held that it would be wrong for the courts to rely on new evidence which “could perfectly well have been put before the arbitrator, but was not placed before him, and with no adequate explanation why it was not”. Toulson J based his decision, in part, on the reduced role of the courts under the Arbitration Act 1996. With that in mind, Poland argued that the Court should not seek to extend the rehearing principle any further than was strictly justified, i.e. to ratione personae issues only.

Bryan J’s decision was an emphatic rejection of any distinction either in the cases or in principle and a vigorous endorsement of the validity of the Dallah principle [70]:”In each case, where it is said the tribunal has no jurisdiction, it is on the basis that either there is no arbitration agreement between the particular parties, or that there is no arbitration agreement that confers jurisdiction in respect of the claim made. In each case if the submission is proved, the Tribunal has no jurisdiction as no jurisdiction has been conferred upon it by the parties in an arbitration agreement. In such circumstances it is for the Court under section 67 to consider whether jurisdiction does or does not exist, unfettered by the reasoning of the arbitrators or indeed the precise manner in which arguments were advanced before the arbitrators.”

(2) Waiver by Griffin of its Right to Raise New Points / New Evidence

Secondly, Poland argued that the doctrine of waiver applied, because Griffin could have advanced the new materials and arguments before the arbitrators but failed or chose not to do so and should therefore be taken to have waived them or to be precluded from running them, even at a rehearing. The argument is, unfortunately, only shortly summarised in the judgment.

The difficulty with this argument, as explained by the Judge, is that once it is recognised that a rehearing is an entirely de novo determination, it is difficult to see how and where waiver will arise.

He put it this way [72]: “it is difficult to see how a waiver could arise in circumstances where it is well established that there can be a re-hearing under section 67, a fact parties are taken to know), and in the context of no restriction being set out in section 67 itself restricting what arguments may be re-run, no question of any loss of a right to advance particular arguments on a re-hearing under section 67 can arise”.

However, while conceivably some form of formal abandonment of a point in the arbitral jurisdiction hearing on which the other relied to its prejudice and detriment and which could not be redressed at the rehearing might amount to a waiver, in the present case (as in most if not all) Poland dealt with the ‘new’ points in detail and could not point to any prejudice.

Conclusion

While the logical underpinning, the justifications and the demerits of a Dallah approach will doubtless and understandably continue to be discussed in the arbitral community (as illustrated by an entertaining debate between Sir David Steel and Louis Flannery QC at the recent Quadrant Chambers International Arbitration Seminar), in practical ‘practitioner’ terms it has been a wholly sterile one since 2010, and perhaps it is time to recognise that fact.

Arbitral Appeals under s.69…No Second Bites? – Simon Rainey QC and Peter Stevenson

Agile Holdings Corporation v Essar Shipping Ltd [2018] EWHC 1055 (Comm)

Overview: second bites at s.69(3)?

The English statutory regime for appeals against arbitration awards on questions of law under s.69 of the Arbitration Act 1996, as is well known, applies a two stage process: (i) the application of permission to appeal and, (ii), if permission is granted the appeal itself.

Section 69(3) sets out the matters on which the Court is required to be satisfied as pre-conditions for granting permission to appeal. Where a party unsuccessfully resists permission on the basis that some or all of the requirements are not met, can it nevertheless reargue the point or points all over again on the appeal proper? 

The position and the few cases in this area were recently considered by the Commercial Court in Agile Holdings Corporation v Essar Shipping Ltd [2018] EWHC 1055 (Comm).

The answer is: “it depends”.

How the issue arose

The claimant sought permission to appeal against an arbitration award on a question of law arising from the Award. The defendant opposed permission on various grounds including a submission that the tribunal had not been asked to decide the relevant question (and therefore that the threshold requirements of s.69(3) of the Arbitration Act were not met). It was contended that the argument now being sought to be run had never been argued in that way before the arbitrators. The claimant disputed that and put in evidence of the written submissions and the transcript of the oral submission. The Judge granted permission, rejected the submission and held that the point had been argued. He refused an application by the defendant for an oral hearing on the point.

On the full appeal, the defendant sought to re-open the issue and re-argue its original submission.

The Commercial Court’s decision

The Judge (HHJ Waksman QC, sitting as a deputy Judge of the High Court) allowed the appeal in full. On the s69(3)(c) point, he held that:

(i) the exercise undertaken by the judge granting leave to appeal involves a detailed consideration of the threshold questions;

(ii) once leave has been granted, there is every reason to move onto the merits of the question without the distraction of re-litigating tangential points which have already been decided;

(iii) a party cannot resist the appeal on the basis that the threshold requirements of s.69(3)(a) and (d) are not met. Those issues arise exclusively at the leave stage and the decision of the judge at that stage is final;

(iv) the position is different in respect of the requirements of s.69(3)(c) because, whether a point was put to the tribunal is tied to the issue of whether there is a question of law arising out of the award at all;

(v) however, while the Court hearing the appeal may not be bound as to whether the question arises from the award, it should give considerable weight to the decision of the judge granting leave.

Simon Rainey QC, leading Peter Stevenson, represented the successful appellant.

The Detailed Reasoning of the Court

The defendant submitted that the Court did not have jurisdiction to entertain an appeal because the threshold requirements of s.69(3) were not met.

In support of that proposition it relied upon two authoritiesMotor Image v SCDA Architects [2011] SGCA 58, a decision of the Court of Appeal of Singapore, and The Ocean Crown [2010] 1 Lloyd’s Rep. 468 a decision of Gross J (as he was).

(1) In Motor Image v SCDA Architects, the Singaporean court considered identical appeal provisions in s.49 of the Singapore Arbitration Act 2002. The judge at first instance (Prakash J., as she was) had granted permission to appeal a question of law under those provisions. When the same judge heard the appeal she decided that the question did not arise on the facts as decided by the tribunal. She took the view that as a result the appeal should be dismissed. The Court of Appeal agreed. It held that this sort of point could be reargued on appeal because it went to the very jurisdiction of the court to hear the appeal in the first place. In other words, the grant of leave was a finding that the court had the relevant jurisdiction. So if on further analysis, one of the threshold conditions was not made out, the court was actually deprived of jurisdiction and could not hear the appeal.

HHJ Waksman QC rejected that analysis. He held that once leave has been granted, the question of whether the Court has jurisdiction to determine the appeal has been determined. Subject to any challenge to that decision, the Court has jurisdiction to determine the appeal. The effect of this finding is that it is not open to a party to meet an appeal under s.69 by re-arguing points which relate exclusively to the threshold requirements for permission. Specifically the Judge held that a party cannot re-argue (i) that the determination of the question will not substantially affect the rights of the parties (s.69(3(a)); or (ii) that it is not just and proper for the court to determine the question (s.69(3)(d)).

(2) The decision The Ocean Crown was of a different nature. In that case there were three separate questions of law for appeal for which permission had been granted. The third question involved the allegation by the appellant that the tribunal had sought to restrict the ambit of a well-known legal principle concerning salvage remuneration and had thereby committed an error of law. The respondent argued that the tribunal had done no such thing but was merely dealing with how that principle was to be applied on the particular facts of the case. On that analysis there was no error of law at all.

Gross J. held that, in determining whether a question of law arises out of the award (a pre-requisite of allowing an appeal) the court is not bound by the decision of the judge granting leave.

As HHJ Waksman QC noted, Gross J’s decision not concerned with the threshold requirements of s.69(3) of the Act. It is concerned with whether s.69 is engaged at all: s.69 only permits appeals on questions of law arising from an award (s.69(1)). The Judge described this as ‘the Law Question’ which he distinguished from the issue of whether the question of law was actually put to the tribunal (which he described as ‘the Determination Question’).

However, although not addressing the point head on, the Judge appears to have accepted that the Determination Question is connected to the Law Question and is therefore not merely a threshold requirement for obtaining leave, but may also be considered as part of the substantive appeal.

Having drawn this distinction the Judge held that he was not prohibited from reconsidering whether the question of law raised in the appeal was one that the tribunal had been asked to determine. But he emphasised that the Court should give ‘considerable weight’ to the decision of the judge granting leave to appeal, particularly if (i) the decision was made after an oral hearing; and/or (ii) the materials before the judge granting permission are the same or substantially the same as those before the appeal court.

Adopting that approach the Judge reviewed the material advanced by the defendant and held that he was in no doubt that the question of law was one that the tribunal had been asked to determine.

Conclusions

The decision of the Judge is helpful in three respects.

First, it clarifies that the decision of the judge granting permission to appeal is final and determinative of that issue. It is not open to a party to meet an appeal by arguing that the threshold requirements for leave to appeal were not met and leave should not have been granted. In that respect it drew a clear distinction between the position under English law and the approach taken by the Singaporean Court of Appeal in Motor Image v SCDA Architects.

Second, it confirms that when determining whether the question of law arises from the award, the Court hearing the appeal is not bound by the decision to grant leave and, as part of that process, can reconsider whether the question was one that the tribunal was asked to determined.

Third, it provides clear guidance as to the weight that should be given to the decision of the judge granting leave to appeal. If the judge granting leave considered the issue and had the same material before him/her, ‘very considerable weight’ should be given to the original decision.

It is to be hoped that this robust approach discourages defendants who are unsuccessful at the permission stage from re-opening such points thereby rendering the s.69 process more time-consuming and more costly.

Don’t be late. Arbitrate.

We are all familiar with the ‘Italian Torpedo’ where a party to a contract containing an arbitration clause commences proceedings in a jurisdiction which will not recognise its effect. The Africa Reefer [2015] EWHC 1950 (Comm), provides a salutary lesson against overconfidence that one’s chosen court will, indeed, determine that arbitration does not apply.

Pears were carried from Argentina to Antwerp under a bill of lading incorporating a charterparty subject to London arbitration. The bill of lading was subject to the Hague-Visby Rules and a one year time limit. The claimants commenced proceedings in Belgium and the parties awaited the final report of the court surveyor. After this was produced the defendant, in November 2012, served a defence objecting to the jurisdiction of the Belgian courts on the grounds that the dispute was subject to London arbitration. The claimants took no steps to commence arbitration, confident that it would succeed on this point under article 96 of the Belgian Private International Code and article 91 of the Belgian Maritime Law. Much to their surprise, in 2014 the Belgian court found for the defendant.

In 2015 the claimants sought an extension of time of three years and eight months for commencing arbitration relying on s.12(3) (b) of the Arbitration Act 1996 which provides for the court to order that an extension be given where: “the conduct of one party makes it unjust to hold the other party to the strict terms of the provision in question”. Burton J declined to grant the requested extension. There was no conduct by the defendants upon which the claimants could rely which made it unjust to hold the claimants to the one year time limit. The defendants had been entitled under Belgian law to participate in the Belgian proceedings up until the time when they raised the jurisdiction objection in November 2012, and it was common ground that by doing so the defendants had not waived their right to claim arbitration. Thereafter, the claimants took no steps to commence arbitration until their rude awakening in 2014 when the Belgian court found for the defendant.