English Commercial Court holds that tribunal’s decision to exclude expert evidence did not constitute “serious irregularity”
In an arbitration with seat in England, s.68 of the Arbitration Act (the “Act”) permits a challenge to an award on the basis of “serious irregularity”. In K v S  EWHC 2386 (Comm), the Commercial Court dismissed a s.68 challenge attempting to strike at a case management decision made by a tribunal, on which the tribunal had taken submissions. The case illustrates why, in such circumstances, such a challenge may be ambitious.
The main dispute
The dispute in which the challenge took place arose out of an engineering, procurement and construction subcontract. Essentially, each party, K and S, claimed the other was in breach.
In the arbitration (under LCIA rules) that followed, K counterclaimed against S alleging that the events had damaged its reputation for reliability and, broadly speaking, caused it difficulties with other counterparties. It sought damages for this, and a later list of topics for expert evidence in the arbitration included quantification of the same.
Accordingly, K served an expert report (by a forensic accountant) on S. This report, however, contained conclusions that S’s defaults had directly caused a collapse of K’s business and referred to a number of contributing factors not previously raised by K. The report then went on to assess K’s overall losses as a figure far in excess of K’s pleaded case.
The tribunal’s order
The issue of the admissibility of this report came before the tribunal as S objected to it being used as it relied on new, unpleaded, facts to raise a new claim. The tribunal took written submissions from the parties and convened a hearing, after which it ruled in favour of S and excluded the expert report.
The s.68 challenge
Under s.68, one of the basis upon which the court can find that a “serious irregularity” exists is that the tribunal has failed in its general duty of fairness under s.33 of the Act. K attempted to rely on this in relation to the tribunal’s order; its assertion being that the decision to exclude the report was unfair as it deprived K of the ability to present its case on these losses. The judge rejected this position. Broadly this was because:
First, s.68 was concerned with due process and so provided no basis upon which the court could act provided due process had been followed. On the facts of the case that had clearly been established and, as this was otherwise a decision which squarely fell within the tribunal’s procedural/case-management powers (under s.34 of the Act) there was no basis to intervene.
Second, s.68 is concerned only with a challenge to awards. Applying previous authority (ZCCM Investments Holdings Plc v Kansanshi Holdings PLC  EWHC 1285 (Comm)) the court looked to whether there was a final determination of the merits of a substantive issue. Accordingly, the relevant “award” would have been a finding by the tribunal on the recoverability of the relevant damages – and the tribunal’s procedural order was not that.
In essence, this case was concerned with a procedural decision squarely within a tribunal’s usual case management powers. It is therefore unsurprising that the court dismissed the s.68 challenge and it illustrates that such a route would rarely be fertile ground for redress in such circumstances. Simply put, the case was concerned with an issue in respect of which, during the process, there were more appropriate routes for K to follow. For example, as the judge noted, there were mechanisms in the applicable institutional rules to deal with when a party wished to amend its case, or K could have pursued other procedural orders from the tribunal.
Click here for a copy of the judgment.
Stephen Lacey would like to thank Natalia Kubesh for her assistance in the preparation of this article