Recent guidance on loss of right to object in England
Two decisions from the English courts provide recent guidance on the operation of section 73 of the Arbitration Act 1996 (the “Act”), by which a party to arbitral proceedings may, by delay, lose the right to object to the tribunal’s jurisdiction or other serious irregularity.
First, the English High Court dismissed an application to set aside an arbitral award for serious irregularity, finding that the applicant had lost the right to object by failure to act “promptly”, in Radisson Hotels APS Danmark v Hayat Otel Işletmeciliği Turizm Yatırım Ve Ticaret A.Ş.  EWHC 892 (Comm) (“Radisson v Hayat”). This was even though the irregularity was stark: the claimant-nominated arbitrator had ex parte communications with the claimant and its expert during the arbitration.
More recently, in National Iranian Oil Company v Crescent Petroleum Company International Ltd  EWCA Civ 826 (“NIOC v Crescent”), the Court of Appeal, in the context of an application considering whether it was sufficient to raise the “substance” of an objection to the Tribunal’s jurisdiction for the purposes of section 73, held that only the first instance court has jurisdiction to grant permission to appeal against a decision under section 73.
The implications of both decisions are considered below.
Radisson v Hayat :factual background
Hayat was the owner of a hotel in Turkey. It brought a claim against the hotel manager Radisson in an ICC arbitration, seated in London.
The arbitration commenced in October 2018 and the tribunal comprised the ICC-appointed chair, Mr A, the Radisson-nominated arbitrator, Ms B, and the Hayat-nominated arbitrator, Ms C.
Between March and May 2019, Ms C had ex parte communications with Mr O (Hayat’s expert adviser on quantum) and with a board member of Hayat’s parent entity, including leaking internal tribunal emails.
The timing of Radisson’s knowledge of these events was key. Between September 2021 and January 2022, a former lawyer for Hayat told Radisson that Ms C had had ex parte discussions with Hayat but provided no documentary evidence. On 4 January 2022 Radisson received a USB drive from Mr O containing a Word document apparently reproducing the text of tribunal emails leaked by Ms C. By 13 January Radisson was aware of the content of the Word document.
Between 13 and 25 January, Radisson then actively participated in the arbitration twice, including filing a rejoinder on quantum. Radisson obtained native copies of the emails by 25 January and first raised an objection based on Ms C’s ex parte communications on 26 January.
Radisson v Hayat :key issues of knowledge and timing
The Court held that section 73 requires a party to an arbitration to act “promptly” if they consider there are grounds for objection. If the applicant took part in proceedings without objection after the grounds arose, the burden passes to them show they did not know, and could not with reasonable diligence have discovered, the grounds for objection. The question was not when Radisson had “cogent evidence” necessary to bring its challenge, but rather when Radisson “believed it had grounds for objecting”.
The Court found that Radisson knew the grounds of objection by 13 January 2022 when it had the emails in Word document format. Having received those documents from Mr O (a “credible source”) Radisson did not need the native versions of the emails to believe it had grounds for an objection. The court cited an internal email between counsel for Radisson as showing it had made a strategic decision not to raise the objection immediately, in order not to reveal its hand. By continuing to take part in the arbitration between 13 and 25 January 2022 without raising the objection, Radisson was precluded from raising it later.
NIOC v Crescent :Court of Appeal cannot grant permission to appeal against section 73 determination
In NIOC v Crescent, Crescent brought a claim against NIOC for failure to perform a gas supply contract, in a London-seated arbitration. NIOC challenged the tribunal’s remedies award in the English courts under section 67 of the Act on the basis that the tribunal lacked substantive jurisdiction.
Crescent responded that NIOC was precluded from advancing the challenge because it had not raised its objection promptly, as required by section 73. At first instance, the Commercial Court dismissed that argument as a preliminary issue, finding that NIOC had complied with section 73 as it had raised before the tribunal “the substance” of its objection to the tribunal’s substantive jurisdiction, even if it had not raised the specific stages of the argument and facets of Iranian law which it later relied on to narrow the scope of the arbitration clause. However, it also summarily dismissed NIOC’s section 67 challenge. Pursuant to section 67(4), the Commercial Court granted NIOC permission to appeal against the summary dismissal of the section 67 application but was not asked, by Crescent, to grant permission for it to cross-appeal on the section 73 issue.
Crescent then sought permission from the Court of Appeal to cross-appeal. That Court observed that, under section 67(4), only the first instance court has jurisdiction to grant permission to appeal a decision under section 67 of the Act (and likewise under section 68(4) for challenges under that section). It went on to hold that section 73 is “entirely ancillary” to sections 67 and 68 of the Act. Accordingly, a determination relating to delay under section 73, “whichever way it goes”, falls within the ambit of those sections and their permission requirements. The Court of Appeal therefore lacked jurisdiction to grant permission and dismissed the application for permission to cross-appeal.
These cases illustrate that parties to English-seated arbitrations must consider carefully the investigation of potential objections and when to raise them, lest they be precluded from doing so later. Outcomes will turn on facts, but Radisson v Hayat illustrates that this may occur even when the delay after becoming aware of the grounds for objection is relatively brief and the grounds for objection are very serious irregularities.
As for NIOC v Crescent, the case was somewhat unusual in that the first instance judge made a separate, preliminary order on Crescent’s section 73 argument, rather than decide the section 67 application in a more typical, rolled-up, way. Had the judge done so it may have been arguable that his grant of permission to appeal in respect of the section 67 application encompassed points Crescent might want to make on section 73 (the Court of Appeal left this point open). Either way, the case illustrates how parties seeking to challenge such determinations must be aware of the permission requirements and consider when that is appropriately applied for.
Thanks to Cressida Shaw and Beatrice Sexton for their help in the preparation of this article.