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

Section 67 of the Act provides as follows:

“(1)

A party to arbitral proceedings may (upon notice to the other parties and to the tribunal) apply to the court—

(a)

challenging any award of the arbitral tribunal as to its substantive jurisdiction; or

(b)

for an order declaring an award made by the tribunal on the merits to be of no effect, in whole or in part, because the tribunal did not have substantive jurisdiction.

A party may lose the right to object (see section 73) and the right to apply is subject to the restrictions in section 70(2) and (3).”

The alleged repudiatory breach by the Tribunal (referred to in paragraph 8 above) arose, according to the Claimants in the original Claim Form filed on 5 September 2024, by reason of the fact that the arbitration between the parties was said to have been conducted without impartiality, being tainted by actual or apparent bias (in the Claim Form (Continuation Sheet) filed on 7 October 2024, allegations of actual bias were, however, abandoned) (Footnote: ¹). This allegation was based solely upon the alleged fact that the Tribunal demonstrated apparent bias in its procedural decisions given in the arbitration, it is said, in favour of K: see the Claimants’ skeleton argument at paragraphs 55-59 and 90 (Footnote: ²). Having accepted the repudiatory breach on 1 February 2024, it is said that the Tribunal ceased to have substantive jurisdiction over the parties’ dispute thereafter, and it made its Award without jurisdiction, within the meaning of section 67(1) of the Act.

Section 68 of the Act provides as follows:

“(1)

A party to arbitral proceedings may (upon notice to the other parties and to the tribunal) apply to the court challenging an award in the proceedings on the ground of serious irregularity affecting the tribunal, the proceedings or the award.

A party may lose the right to object (see section 73) and the right to apply is subject to the restrictions in section 70(2) and (3).

(2)

Serious irregularity means an irregularity of one or more of the following kinds which the court considers has caused or will cause substantial injustice to the applicant—

(a)

failure by the tribunal to comply with section 33 (general duty of tribunal).”

Section 33 provides as follows:

“(1)

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.”

It is common ground that actual or apparent bias on the part of the tribunal would, if established, amount to a breach of this general duty and a serious irregularity under section 68(2)(a).

The Claimants’ grounds of challenge under section 68 of the Act are set out in the Claim Form (Continuation Sheet) and paragraphs 9 and 84 of the first witness statement of Leigh Crestohl dated 5 September 2024 and paragraphs 7 and 61 of the second witness statement of Leigh Crestohl, dated 7 October 2024. They are alleged to be as follows:

However, at the start of the morning of the second day of this hearing, I asked Mr. Chirag Karia KC (counsel for the Claimants together with Mr. Jacob Turner) precisely which of these grounds of apparent bias he was relying upon for his grounds of challenge under sections 67and68 because in his submissions he had focussed upon ground (a), namely the alleged lack of candour by K’s party-appointed arbitrator, Mr. H, in allegedly misrepresenting the nature and extent of his relationships with Zaiwalla, the Claimants’ solicitors, and with Reed Smith. Mr. Karia’s answer was that ground (a) was now the only ground that the Claimants were relying upon, and the other matters were provided “by way of context”, but they were not pursued by way of “freestanding, separate grounds”.

This concession kills off the challenge under section 67. As I explain below, the section 67challenge, based upon the alleged apparent bias of the Tribunal in the making of its procedural decisions and referred to in paragraphs 55-59 of the Claimants’ skeleton argument, was always hopeless in any event. It leaves the challenge under section 68 standing only in so far as the allegation of apparent bias against Mr. H is concerned. It is troubling that the Claimants have seen fit to advance the serious accusation that the Tribunal is guilty of apparent bias in respect of all six of these grounds throughout this arbitration claim and indeed during the arbitral process itself, only to abandon five of those six grounds at the hearing of its claim when pressed by the court.

In any event, when one analyses the decisions of the Tribunal throughout the arbitration process (including those decisions taken before Mr. S was appointed as presiding arbitrator) and in particular the approach taken by it in respect of the matters referred to in paragraphs 16 (b)-(e) above, it is clear that it behaved throughout with nothing but impeccable fairness.

Accordingly, if the Tribunal’s decisions provide “context” to the Claimants’ challenge under ground (a), that context makes it less likely, not more likely, that the fair minded and informed observer would conclude that there was a real possibility of bias on the part of Mr. H. The context shows how the Tribunal, including Mr. H, was nothing but impartial in the conduct of the arbitration; and I accordingly turn to that next.

The Tribunal’s decision of 13 June 2023 (Claimant’s skeleton argument, paragraph 56): As I have mentioned, K served its Claim Submissions in the arbitration on 27 April 2023. On 17 May 2023, Zaiwalla emailed Reed Smith seeking a 4-week extension of time for service of the Claimants’ Defence until 21 June 2023. On 18 May 2023 Reed Smith replied, offering a 2-week extension of time for service of the Claimant's Defence, namely until 8 June 2023. On 26 May 2023 at 14.15 hrs Zaiwalla reverted, rather dismissively stating that they would serve their Defence and Counterclaim “as soon as they are ready”. Reed Smith replied almost immediately at 15.52 hrs, stating that Zaiwalla would accordingly need to make an application for an extension of time and that if they failed to do so by 30 May 2023, K would apply to the Tribunal. On the very last day of this period, 30 May, Zaiwalla emailed Reed Smith stating that the agreed date for service of the Defence was 8 June 2023.

Despite this, on 7 June 2023, just one day before that deadline, Zaiwalla wrote to Reed Smith seeking a yet further 2-week extension of time for service of the Claimants’ Defence to 22 June 2023. On 8 June 2023 Reed Smith responded by reasonably stating that K would agree to the extension until 22 June 2023 provided it was treated as an order of the Tribunal. Zaiwalla responded on the same day and stated that it was not possible for them to agree to this. On the same day, Reed Smith once again told Zaiwalla that it would accordingly be necessary for the Claimants to make an application to the Tribunal. On 9 June 2023 Zaiwalla again refused to do so.

The agreed date for service of the Claimants’ Defence, of 8 June 2023, had now passed. K accordingly applied to the Tribunal (at this stage comprising only Mr. H and Mr. B) for an order requiring service of the Defence forthwith.

On 12 June 2023 Zaiwalla wrote to the Tribunal opposing K’s application, wrongly suggesting that the parties had “effectively agreed” to service of the Defence on 22 June 2023.

On 13 June 2023, the Tribunal nonetheless agreed, very fairly, to allow the Claimants until 22 June 2023 to serve their Defence, with costs reserved. Despite this, the Claimants criticise this ruling in paragraphs 23-25 of Mr. Crestohl’s second witness statement and paragraph 56 of their skeleton argument. They unreasonably state that this was when “the concerns began to manifest [themselves]”. They suggest that K sought a peremptory order from the Tribunal and that the Tribunal did not provide any reasoning for the shortness of time afforded to the Claimants. Yet, as can be seen, the Tribunal (a) did not make a peremptory order and (b) awarded the Claimants the precise extension of time that they sought. The criticism is accordingly completely unfounded and should not have been made. Rather, this episode shows how tolerant the Tribunal (consisting at this stage of Mr. H and Mr. B) was of the Claimants’ repeated failures to serve its Defence as promised.

The Tribunal’s decision of 5 September 2023 (Claimants’ skeleton argument, paragraph 57): On 18 August 2023 K applied for an order from the Tribunal (still comprised at this stage of Mr. H and Mr. B) requiring the exchange of LMAA Questionnaires by 1 September 2023. On the same day, the Claimants responded to K’s application by Mr. Zaiwalla of Zaiwalla (“Mr. Zaiwalla”) sending an email to Mr. B (copied in to Mr. H and Reed Smith), asking the Tribunal to make no order. Mr. Zaiwalla ended his email by stating as follows:

“We would also respectfully ask the arbitrators to complete the Tribunal by appointment of the third arbitrator before proceeding any further in this reference. In any case as this is a holiday period and the undersigned is away this arbitration might well be suited to remain on ice until 10th September 2023.

Finally as the origin of this dispute involves a large professional negligence claim against solicitors Reed Smith we feel compelled to ask [Mr. H] to disclose all his previous connections, if any, with Reed Smith or Mr. Weller personally. Many thanks.”

It follows that the Claimants asked the Tribunal to delay exchange of LMAA Questionnaires for their solicitors’ convenience until 10 September 2023. That is then precisely what the Tribunal agreed to do by its ruling on 5 September 2023. Again, therefore, the way in which this decision is presented in the Claimants’ skeleton argument is misleading. They say:

“57.1

On 18 August 2023, K sought a direction for the LMAA Questionnaire (“LMAAQ”) to be exchanged by no later than 1 September 2023 (the original deadline having fallen in August, when the Claimants’ key solicitors were travelling. The Claimants requested that no order be made given the complex background to the claim and noting out that there was no urgency for matters to proceed at pace.

57.2

On Tuesday, 5 September 2023, though it accepted there was no urgency or haste, the Tribunal nonetheless accepted K’s request and ordered the exchange of LMAAQs by 10 September 2023 (which was a Sunday). The Tribunal’s order therefore gave the Claimants only 3 business days to prepare and exchange their LMAAQ.”

This is simply wrong. The Tribunal acceded to Zaiwalla’s request on 18 August, not K’s request, for exchange of these documents on 10 September, being (as it had specifically requested) after the holiday period. Accordingly, the Claimants had had over 3 weeks to prepare its LMAA Questionnaire, not 3 business days.

Zaiwalla’s reference to a “large professional negligence claim against solicitors Reed Smith” was a reference to the Claimants’ allegation (ultimately rejected by the Tribunal) that the conduct of Reed Smith in instructing its bank, Barclays Bank PLC, to “block all amounts received from [V]” was unlawful and resulted in the freezing of both the Deposit and the balance of the purchase price; and that this was the true cause of the failure of the sale of the Vessel (see further below). But it was a non-sequitur to link that fact to Zaiwalla allegedly “feel[ing] compelled to ask Mr. H to disclose all his previous connections, if any, with Reed Smith or Mr. Weller personally.” The fact that the Claimants were intending to bring a High Court claim against Reed Smith did not, of itself, afford any logical reason why Mr. H should have to disclose all of his previous “connections” with Reed Smith or with Mr. Weller, a partner in Reed Smith.

The Tribunal’s decision of 13 September 2023 (Claimants’ skeleton argument, paragraph 58): Despite the deadline of 10 September 2023 being the Claimants’ own requested deadline, they failed to file their Questionnaire as ordered on that date. Instead, one day later, on 11 September, they applied (out of time) for an extension of time for the exchange of the LMAA Questionnaires by an entire 4 weeks. On 12 September 2023 Reed Smith wrote to the Tribunal opposing the Claimants’ application for an extension of time and submitting that time should be extended only until 14 September 2023 and then on a peremptory basis. K’s frustration with the Claimants’ failure, once again, to meet its own deadline is readily understandable.

On 13 September 2023 the Tribunal (still consisting only of Mr. H and Mr. B) extended time for the exchange of the LMAA Questionnaires to 18 September 2023 by way of a final order and indicated that it would proceed with the appointment of a third arbitrator. This decision, in view of the Claimants’ behaviour referred to in paragraphs 26-30 above, was entirely reasonable. It is plain that a final order was necessary to put an end to the Claimants’ constant prevarication.

In not referring in paragraph 58 of their skeleton argument to the fact that the Claimants had themselves originally proposed exchange of Questionnaires on 10 September which deadline they then ignored, the Claimants put forward a misleading case. The making of a final order by the Tribunal for exchange by 18 September 2023 was (and is) both entirely reasonable and readily understandable in the circumstances.

It is plain that the suggestion that these procedural rulings evidence a “very high number of occasions where the Tribunal simply complied with the requests of the Defendant, ignoring the submissions of the Claimants and, in most cases, failing to give reasons for their decisions”, such that this resulted in the reference “proceeding with extreme haste when no proper reasons had been given by the Defendant for seeking that haste” (Footnote: ³), is an unjustified and grossly misleading summary of the relevant events. Likewise, the Claimants’ assertions in correspondence with the Tribunal that the Tribunal had, by its rulings, appeared consistently to favour Reed Smith (and thereby its client, K) and had thereby shown unconscious, apparent (or even actual) bias (Footnote: ⁴), were wholly unjust and a gross misrepresentation of what actually occurred.

To make matters worse, Zaiwalla emailed the Tribunal on 29 November 2023 going so far as to suggest that it should step down as a result of these innocuous and transparently fair rulings:

“For the above reasons, it is clear that the Tribunal has misdirected itself. The proper course is for the Tribunal now to step down, or alternatively in the interest of fairness and justice stay the arbitration pending the trial of the relevant issues by the High Court in the proceedings commenced by the Respondents against Reed Smith on the basis of the negligence we describe above.”

It is perfectly clear that this was opportunistic and tactical behaviour on the part of the Claimants. It appears that the Claimants were searching for any reason, no matter how spurious, to derail the arbitration so that they could focus first on their claim against Reed Smith in the High Court action.

The Tribunal itself fully and fairly addressed the procedural history of the arbitration in paragraphs 9-56 of its Partial Final Award. It can be seen from the Tribunal’s summary of the procedural history that instead of engaging with the substantive issues in the arbitration, the Claimants chose repeatedly to accuse the Tribunal of actual or apparent bias, adopting an obstructive stance throughout (which included seeking a stay of the arbitration at a Procedural Hearing on 9 January 2024). It is hardly surprising that against that background the Tribunal was keen to move the arbitration forward without undue delay.

The only other complaint of the Claimants concerning the Tribunal’s handling of the arbitrations is its alleged “approach to Reed Smith’s own interest conflict” (paragraph 59 of the Claimants’ skeleton argument). This was another attempt by the Claimants to derail the arbitration by arguing that the Tribunal ought to order K to seek alternative representation in the arbitration or alternatively ought to stay the arbitration in favour of the High Court claim which the Claimants were threatening to bring against Reed Smith (as a party). Zaiwalla maintained that there should only be one set of proceedings on foot, consisting of either the High Court proceedings against Reed Smith or the arbitration, but if it were to be the latter then it asserted that Reed Smith had to be joined as a party to it. It is clear that the Claimants’ tactical approach was to seek to join Reed Smith squarely into either the court or arbitral proceedings.

The Tribunal, however, correctly pointed out to the Claimants that this was not a matter for it to determine. The Claimants complain that as a result (Footnote: ⁵)

“the Tribunal ignored the Claimants’ request and failed to reach any decision as to the application that [K] be required to obtain alternative representation. To the contrary, the Tribunal acted to protect Reed Smith. On 14 November 2023, [Mr. S] alleged that the Claimants had made “serious allegations of professional misconduct” against Reed Smith and required that these be “properly particularised”. In fact, no such “serious allegations of professional misconduct” had been made. Rather, the Claimants’ case was, and remains, that Reed Smith was professionally negligent and breached other contractual and fiduciary duties.”

This complaint is also without merit and seeks to re-write the relevant events. As the Tribunal painstakingly explained in its Procedural Order and Accompanying Reasons dated 16 January 2024, at paragraphs 8, 10 (in particular), 15 and 18, the Claimants themselves deleted the “own interest” allegation from their pleaded case on 29 November 2023, with the Claimants informing the Tribunal as follows:

“The [Claimants] maintain their position that Reed Smith is in an ‘own interest’ conflict and cannot properly continue to represent [K] in this Arbitration. Indeed the continued involvement of Reed Smith as legal representatives has serious consequences as regards the fairness and procedural regularity of the proceedings, as to which all of the Respondents’ rights are reserved. Notwithstanding the foregoing, since the conflict of Reed Smith has now been brought to the attention of the Tribunal, the [Claimants] are content for the proposed amendment to paragraph 10 of the Defence to be removed (Footnote: ⁶). The [Claimants] have taken this position not as any admission that it was inappropriate to have sought to make such an amendment but rather in the interests of minimising costs through argument on the point.”  (emphasis added)

Accordingly, as the Tribunal had rightly recorded in its Ruling on the Claimants’ application for a preliminary issue dated 7 October 2023 at paragraph 10, it was not for the Tribunal “to express any view, still less to adjudicate, upon any allegation of breach of any professional or other duty on the part of ReedSmith”, not least because no such allegation formed any part of the pleaded issues in the arbitration and was specifically withdrawn by the Claimants. Mr. Crestohl’s suggestion in paragraphs 50-51 of his third witness statement of 8 November 2024 that the voluntary withdrawal of this allegation by the Claimants from their pleaded case on 29 November 2023 was merely “peripheral” to the discharge of the Tribunal’s duty of fairness, so as not to affect that duty, is unfair to the Tribunal and unsustainable.

It follows that the Tribunal did not “ignore” the Claimants’ request or “fail to reach any decision” concerning an application that K be required to obtain alternative representation by reason of the own-interest conflict argument. There was no failure of duty on the part of the Tribunal. As it stated, the argument was not one for the Tribunal to address and indeed the Claimants themselves voluntarily deleted it from their pleaded case.

The Claimants further saw fit to suggest that the Tribunal had acted to “protect” Reed Smith, which was supposedly evidenced by the fact that on 14 November 2023 Mr. S alleged that the Claimants had made “serious allegations of professional misconduct” against Reed Smith and the Tribunal required that these be “properly particularised”.

In an email to the Tribunal dated 16 November 2023, despite the terms of their proposed amendments to their claim, the Claimants sought to suggest that no “serious allegations of professional misconduct” was being made by them against Reed Smith but that rather, the Claimants’ case was that Reed Smith were professionally negligent and breached other contractual and fiduciary duties. The Claimants say that it can be inferred from this that the Tribunal appeared inclined to “protect” the position of Reed Smith by casting any criticism of its conduct as being a matter of “serious allegations of professional misconduct” and hence subject to a higher standard than actually needed to be demonstrated on the Claimants’ case as properly understood.

This, too, is simply false. From 12 October 2023 onwards in a series of proposed amendments to their pleaded case, the Claimants did indeed make, or seek to make, serious allegations of professional conduct against Reed Smith, as is explained in the Tribunal’s Procedural Order and Accompanying Reasons dated 16 January 2024 at paragraphs 10 (referring to the Claimants’ allegation that Reed Smith had exercised undue influence over them), 28 (Claimants’ allegation of criminal conduct by Reed Smith), 32(1) and 41 (Claimants’ allegation of undue influence); 32(3) (Claimants’ allegation of criminal acts); and 35 (Claimants’ allegation of undue influence and criminal conduct). The Tribunal refused permission to make the undue influence amendments at that Procedural Hearing (see paragraphs 46-48) although it allowed the criminal acts amendments (paragraph 53).

As I have outlined above, the Claimants’ argument in the arbitration was that K was not entitled to terminate the MOA, as by the time of V’s designation as an SDN (Footnote: ⁷) by OFAC, it had been replaced as Buyer under the MOA by its nominee N, which was not subject to any sanctions; and furthermore, that the allegedly criminal conduct of Reed Smith in instructing its bank, Barclays Bank PLC, to “block all amounts received from V” (“the Freezing Decision”) resulted in the freezing of both the Deposit and the balance of the purchase price, and that was the true cause of the failure of the sale of the Vessel. This was a causation issue.

The Tribunal carefully considered and rejected that causation argument in its Partial Final Award at paragraphs 123-149, concluding at paragraph 149 as follows:

“For all the foregoing reasons, the Tribunal rejects the [Claimants]’ case that [K] was not entitled to terminate the MOA because of the Freezing Decision. Irrespective of what capacity Reed Smith was acting in when it sent the Freezing Decision email, and of what, if any, action Barclays took on or following receipt of that email, [K] was entitled to terminate the MOA pursuant to clause 19 thereof on 30 September 2022, by reason of the designation of [V] as an SDN, and the consequent imposition on [V] of secondary sanctions, on 29 September 2022. It was that designation of [V] that caused the transaction to fail, not the Freezing Decision.”

It follows that in all the circumstances there is no basis for contending that a fair-minded and informed observer would consider that the Tribunal’s conduct in its handling of the arbitration (in particular its procedural decisions (Footnote: ⁸)) gives rise to any possibility that it was biased; nor that it amounted to a repudiatory breach of contract. I consider that the Claimants’ suggestion to the contrary, advanced repeatedly by the Claimants right up to the hearing of this claim until it was rightly abandoned by Mr. Karia KC on day 2, was purely tactical, had and has no merit whatsoever, and indeed should never have been made. It afforded no ground whatsoever for a section 67 or a section 68 challenge.

Against that background, I turn next to consider the merits of the sole remaining ground of appeal relied upon by the Claimants to support the section 68 challenge, namely that the fair minded and informed observer would consider that there was a real possibility of bias on the part of Mr. H in failing to disclose his previous connections with his appointing solicitors, Reed Smith and Mr. Weller in particular, and in answering as he did the enquiries made by the Claimants about his previous connections with Reed Smith and Mr. Weller.

This requires first, consideration of the Supreme Court’s decision in Halliburton v Chubb, followed by an analysis of the exchanges between Mr. H and Zaiwalla, before considering whether on the facts of this case the test of apparent bias is met.