"C" v. "D"
English Commercial Court: Cooke J:  EWHC 1541 (Comm): 28 June 2007
Available on BAILII @ http://www.bailii.org/ew/cases/EWHC/Comm/2007/1541.html
Bernard Eder QC and Stephen Houseman (instructed by Allen & Overy LLP) for the Claimant, C
Jonathan Hirst QC, Robert Howe and Shaheed Fatima (instructed by Robin Simon LLP) for the Defendant, D
INSURANCE: LONDON ARBITRATION CLAUSE: NEW YORK GOVERNING LAW CLAUSE: RIGHT TO CHALLENGE A PARTIAL AWARD MADE IN LONDON BY APPLICATION TO NEW YORK COURT
Where the parties had agreed to London arbitration under the provisions of the UK Arbitration Act 1996, in circumstances where there was a governing law clause referring to the "internal laws of the State of New York", one party could not seek to challenge in the New York courts a partial award of the tribunal
DMC Category Rating: Confirmed
This case note is based on an Article in the July 2007 Edition of the ‘Re(insurance) Bulletin’, published by the Insurance & Reinsurance team at the international firm of lawyers,DLA Piper. DLA Piper is an International Contributor to this website.
"Any dispute arising under this Policy shall be finally and fully determined in London, England under the provisions of the English Arbitration Act 1950 as amended…In case the Board fails to meet a unanimous decision, the decision of the majority of the members of the Board shall be deemed to be the decision of the Board and the same shall be final and binding on the parties thereto, and such decision shall be a complete defence to any attempted appeal or litigation of such decision in the absence of fraud or collusion." The clause also provided for application to a Judge of the English High Court in the event that one party did not appoint an arbitrator.
The Governing Law and Interpretation Clause provided that:
The Reference to Arbitration and the Award
The tribunal heard a number of defences to the claims but determined that C succeeded in full on its claim under the policy. D then applied to the tribunal for it to correct the award, alleging that its findings constituted a "manifest disregard of New York law" and that the award fell outside the scope of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 10 June 1958 ("the 1958 Convention") and as such could be reviewed for error by any US Federal District Court.
=Consequently, C sought an injunction to stop D’s proposed challenge to the award in the New York court.
By contrast, D focused on New York law, as the governing law of the insurance policy, and argued that that law entitled D to a minimum standard of review of arbitration awards, when such arbitrations take place between US corporations in relationships without a significant international element. D also contended that the award was a non-Convention award in that it was made between US corporations, with the effect that it did not fall to be enforced under the 1958 Convention. Finally, D submitted that the arbitrators had made fundamental errors of New York law in their award.
Non-mandatory provisions would also be applied except where the parties had agreed otherwise. In this case, the parties had effectively excluded the non-mandatory appeal provisions by agreeing in the arbitration clause that the arbitrators’ decision would be "a complete defence to any attempted appeal or litigation of such decision in the absence of fraud or collusion" (neither of which was alleged).
The judge’s findings on this topic were supported by previous authority, which indicated that agreement as to the seat of arbitration is akin to agreement to exclusive jurisdiction. By agreeing to the seat, the parties also agree that any challenge to an award is to be made in the place designated as the seat. Here, the parties had gone out of their way to agree that the award should be final and binding, subject only to challenge on the basis of the mandatory provisions of the 1996 Act or on the basis of fraud or collusion.
In response to the point that, apart from agreeing English law as the procedural law of the arbitration, the parties had also agreed New York law as the substantive law on insurance policy issues, the judge could not accept that the parties would agree to a limitation on the right of appeal (the "complete defence" referred to above) if that limitation would not be effective under New York law, as D contended. Accordingly, the parties’ agreement to New York law as the substantive law of the policy could not dislodge the conclusion that the procedural law of the arbitration and any challenge to it was English law as embodied in the 1996 Act.
The attempt by D to challenge the award in New York was, therefore, a breach of its obligations under the arbitration agreement.
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It would have been a pity if that agreement had in effect been torn up by the judge just because one party found itself dissatisfied with the award that the tribunal had reached. It is not uncommon for contracts to contain different procedural and substantive law provisions but that does not mean that the latter should override the former when questions of appeal or challenge arise.
As with the recent decision in West Tankers v Ras Unione, in which the House of Lords indicated their preferred view that anti-suit injunctions should be available in support of voluntary arbitrations between commercial parties, this decision reinforces the belief of the English court in the need for protection of the arbitration regime.
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