English Commercial Court finds tribunal’s refusal to allow amended statement of case constitutes serious irregularity
In June 2021, the Commercial Court handed down judgment in PBO v (1) DONPRO and others  EWHC 1951 (Comm). It found (among other things) that the tribunal’s refusal to permit the claimant to amend its statement of case, and the fact that the tribunal had reached certain conclusions in the award without giving the parties an opportunity to address those matters, constituted a serious irregularity. As such, the claimant’s challenges under s.68 Arbitration Act 1996 were successful.
The parties were in dispute over series of contracts for the sale and purchase of cocoa beans. The first and second respondents had brought claims under three contracts concluded with the claimant, PBO. PBO made a counterclaim under eleven contracts made with the third respondent. Each of the contracts was governed by English law and incorporated the Federation of Cocoa Commerce Contract Rules for Cocoa Beans (FCC Rules) which in turn incorporated an agreement for disputes to be referred to FCC Arbitration in accordance with the FCC Arbitration and Appeal Rules (FFC Arbitration Rules).
A tribunal was appointed under the FCC Arbitration Rules and, in December 2019, it found in favour of the first and second defendants and ordered that PBO make payment to them. PBO’s counterclaim was dismissed.
PBO appealed under the FCC Arbitration Rules. Prior to the close of those appeal proceedings, PBO changed legal representatives. Its new lawyers submitted an application to amend PBO's statement of case because they had identified what they considered to be a number of new grounds of appeal. The tribunal refused the amendments. It also found that the third respondent had been entitled to cancel certain contracts because PBO had displayed an intention not to perform within Rule 19.5 of the FCC Rules. In respect of another of PBO’s claims (which had not been raised before the first instance tribunal), the tribunal held that it fell outside the scope of disputes within its jurisdiction.
PBO brought claims under s.68 Arbitration Act 1996, arguing that there had been serious irregularity in the arbitral proceedings causing it substantial injustice.
The Commercial Court upheld the s.68 challenge on all grounds.
Application to amend statement of case
The Court found that, when exercising its discretion on the procedural decision on the amendments to the statement of case, the tribunal was required to comply with its general duty under s.33 Arbitration Act 1996. That section sets out that:
- The tribunal shall –
(a) act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting his case and dealing with that of his opponent, and
(b) adopt procedures suitable to the circumstances of the particular case, avoiding unnecessary delay or expense, so as to provide a fair means for the resolution of the matters falling to be determined.
2. The tribunal shall comply with that general duty in conducting the arbitral proceedings, in its decisions on matters of procedure and evidence and in the exercise of all other powers conferred on it."
The Court acknowledged that it was rare that a case management decision would be so unfair as to amount to a serious irregularity, but this was such a case because the tribunal failed to apply applicable principles, failed to grapple with the merits of the application and had reached a decision that no reasonable tribunal would have reached.
Tribunal’s finding on lack of jurisdiction
The Court found that it was not the tribunal’s jurisdiction which was in issue, but the fact that the tribunal had, of its own motion, considered that it might not have jurisdiction. There had been no jurisdictional challenge from the other side so what the tribunal should have done was to raise the matter with the parties, giving them an opportunity to address the tribunal on the issue. The tribunal failed to do this, meaning that PBO did not have a fair opportunity to address the jurisdiction point and had suffered substantial injustice as a result.
Tribunal’s ruling on Rule 19.5 FCC Rules
Similarly, in deciding that PBO had displayed an intention not to perform contractual obligations, the tribunal had departed from the way the case had been presented by both parties and did so without warning. PBO was not aware it would face an argument based on Rule 19.5 and was not, therefore, given the opportunity to address the relevant points.
This is a rare example of the English Court finding that procedural irregularities in arbitration proceedings led to substantial injustice. The Court was clear that there was no suggestion of bias on the part of the tribunal but that a failure to meet its obligations under s.33 Arbitration Act 1996 was enough to justify the claimant’s s.68 challenge.
Click here for the judgment.