LM-2024-000175 - [2025] EWHC 2497 (Comm)

The Departmental Advisory Committee report on Clause 68 of the draft bill is often cited in the authorities in this area of the law as giving a helpful guide to the intended effect of the section (see, for example, Torch Offshore (above), per Cooke J at [21] and Fidelity Management SA v Myriad International Holdings [2005] EWHC 1193 (Comm), [2005] 2 All ER (Comm) 312, per Morison J at [5]):

“280.

Irregularities stand on a different footing. Here we consider that is appropriate, indeed essential, that these have to pass the test of causing ‘substantial injustice’ before the Court can act. The Court does not have a general supervisory jurisdiction over arbitrations. We have listed the specific cases where a challenge can be made under this Clause. The test of ‘substantial injustice’ is intended to be applied by way of support for the arbitral process, not by way of interference with that process. Thus it is only in those cases where it can be said that what has happened is so far removed from what could reasonably be expected of the arbitral process that we would expect the Court to take action. The test is not what would have happened had the matter been litigated. To apply such a test would be to ignore the fact that the parties have agreed to arbitrate, not litigate. Having chosen arbitration, the parties cannot validly complain of substantial injustice unless what has happened simply cannot on any view be defended as an acceptable consequence of that choice. In short, Clause 68 is really designed as a long stop, only available in extreme cases where the tribunal has gone so wrong in its conduct of the arbitration that justice calls out for it to be corrected.”

As is clear from the wording of Section 68(2), an irregularity can take a number of forms; and it is only serious if it has caused or will cause substantial injustice to the applicant. It was common ground before me that the threshold to be surmounted to establish serious irregularity within the meaning of Section 68 generally was a very high one.

The first irregularity identified by the LLP is an alleged failure by the Arbitrator to comply with the general duty imposed on him by Section 33 of the Act. That section provides:

In Terna Bahrain Holding Company v Bin Kamil Al Shamsi [2012] EWHC 3283 (Comm), [2013] 1 All ER (Comm) 580, Popplewell J, as he then was, distilled from the authorities the following principles regarding irregularities of the type referred to in Section 68(2)(a):

“(1)

In order to make out a case for the Court's intervention under s. 68(2)(a), the applicant must show:

(a)

a breach of s. 33 of the Act; i.e. that the tribunal has failed to act fairly and impartially between the parties, giving each a reasonable opportunity of putting his case and dealing with that of his opponent, adopting procedures so as to provide a fair means for the resolution of the matters falling to be determined;

(b)

amounting to a serious irregularity;

(c)

giving rise to substantial injustice

(2)

The test of a serious irregularity giving rise to substantial injustice involves a high threshold. The threshold is deliberately high because a major purpose of the 1996 Act was to reduce drastically the extent of intervention by the courts in the arbitral process.

(3)

A balance has to be drawn between the need for finality of the award and the need to protect parties against the unfair conduct of the arbitration. In striking this balance, only an extreme case will justify the Court's intervention. Relief under s. 68 will only be appropriate where the tribunal has gone so wrong in its conduct of the arbitration, and where its conduct is so far removed from what could be reasonably be expected from the arbitral process, that justice calls out for it to be corrected.

(4)

There will generally be a breach of s.33 where a tribunal decides the case on the basis of a point which one party has not had a fair opportunity to deal with. If the tribunal thinks that the parties have missed the real point, which has not been raised as an issue, it must warn the parties and give them an opportunity to address the point.

(5)

There is, however, an important distinction between, on the one hand, a party having no opportunity to address a point, or his opponent's case, and, on the other hand, a party failing to recognise or take the opportunity which exists. The latter will not involve a breach of s. 33 or a serious irregularity.

(6)

The requirement of substantial injustice is additional to that of a serious irregularity, and the applicant must establish both.

(7)

In determining whether there has been substantial injustice, the Court is not required to decide for itself what would have happened in the arbitration had there been no irregularity. The applicant does not need to show that the result would necessarily or even probably have been different. What the applicant is required to show is that had he had an opportunity to address the point, the tribunal might well have reached a different view and produced a significantly different outcome”

The second irregularity identified by the LLP was that identified in Section 68(2)(d) of the Act, covering a situation where a tribunal has failed to “deal with all the issues that were put to it”. In Fidelity Management SA (above), at [9], Morison J provided the following summary of propositions extracted from an earlier decision of Colman J, World Trade Corp Limited v C Czarnikow Sugar Ltd [2004] EWHC 2332 (Comm), [2004] 2 All ER (Comm) 813. Morison J’s summary of Colman J’s judgment has since been adopted by Ramsey J in London Underground Limited v Citylink Telecommunications Limited [2007] EWHC 1749 (TCC), [2007] 2 All ER (Comm) 694 at [42], and I too respectfully adopt the summary as setting out the relevant considerations:

“(1)

Section 68(2)(d) is ‘designed to cover those issues the determination of which is essential to a decision on the claims or specific defences raised in the course of the reference’.

(2)

HH Judge Humphrey Lloyd was correct in Weldon Plant Ltd v The Commission for New Towns [2001] 1 All ER (Comm) 264 to state that –

‘s 68(2)(d)… is not to be used as a means of launching a detailed enquiry into the manner in which the tribunal considered the various issues. It is concerned with a failure, that is to say where the arbitral tribunal has not dealt at all with the case of a party so that substantial injustice has resulted, eg where a claim has been overlooked or where the decision cannot be justified as a particular key issue has not been decided that is crucial to the result. It is not concerned with a failure to arrive at the right answer to an issue’. 

(3)

Arbitrators do not have to deal with every argument on every point raised; they should deal with essential issues.

(4)

‘Deficiency of reasoning in an award is … the subject of a specific remedy under the 1996 Act [see s 70(4) of the Act]. It is accordingly self-evident that: (i) failure to deal with an “issue” under s 68(2)(d) is not equivalent to failure to deal with an argument that had been advanced at the hearing and therefore to have omitted the reasons for rejecting it; (ii) Parliament cannot have intended to create co-extensive remedies for deficiencies of reasons one of which (s 68) was a general remedy which might involve setting aside or remitting the award in a case of serious injustice and one of which (s 70(4)) was designed to provide a specific remedy for a specific problem; (iii) the court's powers under section 68(2) being engaged only in a case where the serious irregularity has caused substantial injustice, the availability of the facility to apply for reasons or further reasons under section 70(4) would make it impossible to contend that any ‘substantial injustice’ has been caused by deficiency of reasons.’ (See [2004] 2 All ER (Comm) 813 at [19]).

(5)

Accordingly, s 68(2)(d) is confined in its application to essential issues, as distinct from the reasons for determining them.

(6)

‘If one simply approaches that provision by asking whether that which has not been dealt with is capable of being formulated as an essential issue of the nature of what would be included in an agreed list of issues prepared for the purpose of a case management conference if instead of an arbitration the matters were to be determined in court, the answer should normally be obvious.’ (See [2004] 2 All ER (Comm) 813 at [20].)”