A salutary lesson for parties seeking to enforce Arbitration Awards

Published on
5 min read

A timely reminder that for parties seeking to enforce an Award on an ex-parte basis need to make sure the Court is apprised of all relevant matters.

The English courts have provided a timely reminder in A v B [2020] EWHC 952 (Comm) of ensuring that parties enforcing Awards: (1) need to ensure the judge is apprised of all relevant matters if they are applying on an ex-parte basis; and (2) have not run the risk of potentially compromising an Award after the event.  The judge set aside an ex-parte order seeking to enforce a USD 36 million Award and directed that a factual enquiry needed to be made before the Court could decide whether the Award should be enforced.

Background

The parties had arbitrated a dispute between them before a tribunal seated in London which was settled by consent in 2018.  The tribunal recorded the settlement in a Consent Award.  The Award provided that the defendant pay the claimant in instalments each quarter (1 January, 1 April, 1 July and 1 October) until the Award had been satisfied. 

The defendant failed to pay the instalment due on 1 October 2019.  The defendant did not pay it until 16-17 October 2019.  The defendant argued that the claimant had failed to provide it with payment instructions 10 business days prior to the payment date as was required under the terms of the Consent Award.  The payment instructions were only provided on 23 September 2019. 

The defendant further argued that at a meeting on 4 October, the parties orally agreed that the claimant would not enforce the Award (i.e. the claimant would not demand accelerated payment of all amounts due under the Award). 

Despite this, on 8 October 2019, the claimant’s English solicitors made a demand for payment of all amounts due under the Award.  On 14 October 2019, the claimant issued a claim before the court to enforce the Award.  The claimant applied in the alternative that the Award should be enforced under sections 101(2) and 66(1) Arbitration Act 1996.  On 17 October 2019, Mr Justice Teare made an order on the papers giving permission to enforce the Award on the basis of the alternative ground.  

The defendant applied to have the Order set aside on the grounds that: (1) section 101(2) did not apply to Awards made in the United Kingdom and was therefore not within the definition of a “New York Convention Award” set out in section 100 Arbitration Act 1996; (2) there was no power under section 66(1) to order judgment in the terms made; and (3) the court should exercise its discretion under section 66 and refuse leave to enforce the Award.

Decision

The judge refused to grant leave to enforce the Award until a factual determination had been made regarding the defendant’s challenges to the application. The judge held that:

  1. in respect of the claimant’s application for leave to enforce under section 101, section 101 makes clear that it relates to enforcement of Awards made abroad in a New York Convention State and not those made in the UK (with section 66 Arbitration Act 1996 dealing with enforcement of Awards made in the UK).  The claimant made submissions implying that the judge disposing of the application on the papers would have been aware that section 101 did not apply.  The judge was not impressed by this implication and made clear that it is “it is incumbent upon the applicant making an ex parte application on the papers to ensure that all relevant points are drawn to the attention of the judge and to assume that the judge will scrutinise the papers to identify mistakes on the part of the applicant misunderstands the nature of an application on the papers.”  The judge concluded that had that been brought to the judge dealing with the application on the papers’ attention he may have not made the Order.  The judge therefore concluded she had no choice but to set aside the Order enforcing the Award under section 101.
  2. In respect of the defendant’s challenge under section 66 the judge concluded, applying the decision in West Tankers Inc v Allianz SpA [2012] EWCA Civ 27, that a further factual enquiry needed to be made regarding whether there had been a failure to make the instalment and whether the Award had established a right to payment of the accelerated sum.  The judge therefore concluded that the claimant was not able to obtain the order sought under section 66 until that had been determined.
  3. In respect of the third ground of whether the defendant had shown a realistic prospect of defending a claim to enforce, the judge held that even though the 2018 settlement agreement had a no oral variation clause, that could not be said to have disposed of the issue.  The factual dispute about whether an oral agreement had been reached which was intended to compromise the terms of the Award needed to be resolved before the court could determine whether to make an order granting leave to enforce.

Conclusion

The decision is a timely reminder that whilst enforcement of Awards under the Arbitration Act 1996 is supposed to be a streamlined process, parties seeking to enforce an Award on an ex-parte basis need to make sure the Court is apprised of all relevant matters. It also demonstrates that parties need to be careful when dealing with defaulting parties after an Award or settlement agreement has been made not to do or say anything which may be construed as compromising the terms of that Award or settlement agreement. For example, it may assist parties who discuss events of default once an Award or settlement agreement has been entered into to circulate a note of the discussions to the other side recording exactly what was discussed in order to prevent a situation later on where a defaulting party argues that something was agreed orally which then needs to be explored by the courts. 

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