CL-2024-000510 - [2025] EWHC 1523 (Comm)

The factual background to this challenge is informative. It is as follows.

On 14 February 2023, K commenced an LMAA arbitration, seated in London (the “Arbitration”). On 27 April 2023 it served Claim Submissions in the arbitration, together with a bundle of supporting documents. K’s case was that, as seller of a MT vessel ("the Vessel") to V or their guaranteed Nominee, N, in the sum of US$13,100,000 under a Memorandum of Agreement dated 14 July 2022 (“the MOA”), it had been entitled to terminate the MOA under clause 19 thereof, which K had purported to do on 30 September 2022. That was because on 29 September 2022, being after 22 September 2022 on which date V had nominated N under clause 22 of the MOA for the purpose of accepting and taking delivery of title to the Vessel, the US Office of Foreign Assets Control ("OFAC") had imposed sanctions on V. K claims that as a result it was lawfully entitled to terminate the MOA, which also entitled it to the release of a US$1,965,000 Deposit ("the Deposit") which had been paid into escrow with the Defendant’s solicitors Reed Smith LLP (“Reed Smith”) under the terms of the MOA.

The Claimants served Defence and Counterclaim Submissions on 22 June 2023. Their primary pleaded defence (amongst other defences) was that as a result of V's nomination of N, the MOA had been novated to N. The Claimants maintained that N was not itself subject to any sanctions; that V had thereby ceased to be a party to the MOA, instead guaranteeing the performance of N as Buyer; and that as a result K had not been entitled to terminate the MOA, such termination being a repudiatory breach, which N accepted. N, which has not been subject to any sanctions, counterclaimed that as a result it (or V) was entitled to release of the Deposit, and damages, calculated by reference to an alleged increase in the market value of the Vessel.

So far as the composition of the arbitral tribunal is concerned (“the Tribunal”), on 14 February 2023 K appointed Mr. H as arbitrator. On 21 February 2023 the Claimants appointed Mr. B. Later, on 21 September 2023 Mr. B and Mr. H jointly nominated Mr. S as the presiding arbitrator (“the members of the Tribunal”). All three members of the Tribunal are and were eminent KCs.

On 1 February 2024 Zaiwalla & Co, solicitors for the Claimants (“Zaiwalla”), wrote to the Tribunal suggesting that the members of the Tribunal were in repudiatory breach of their contractual agreements with the parties and that their breach was accepted by the Claimants. From the date of that letter onwards the Claimants ceased to participate in the Arbitration, as is apparent from the Tribunal’s summary of the procedural history set out in its Partial Final Award at paragraphs 24-56. This forms the basis of the Claimants’ section 67 challenge.

A hearing in the Arbitration took place on 16-17 July 2024. Consistently with their letter of 1 February 2024 noted above, the Claimants did not attend and nor did they adduce evidence or make any submissions.

A reasoned Partial Final Award was published by the Tribunal on 12 August 2024. The Tribunal declared that K was entitled to the amount of the Deposit (together with interest) and subject to permission for release being granted by OFAC, K was entitled to the return of the Deposit. All of the Claimants’ counterclaims were dismissed.