News

Senior Associate Ryan Cable and Associate Alasdair Marshall examine the recent English Commercial Court decision in Ovsyankin v Angophora which re-affirmed the high bar for successfully challenging arbitration awards in the English Courts.

Ryan and Alasdair’s article was first published in LexisPSL on 20 December 2021 and can be found here.

Arbitration analysis

Sir Andrew Smith (sitting as a High Court Judge in the Commercial Court) rejected two challenges under the Arbitration Act 1996 (AA 1996) seeking to overturn the award and remove the arbitrators on the basis of: (1) the tribunal having invited evidence on a non-pleaded issue (AA 1996, s 68); and (2) the tribunal’s failure to act impartially (AA 1996, s 24). Of note is the court’s wide interpretation of the pleadings to find that the ‘new’ issue was in fact a live one for the tribunal to query; thereby indicating that practitioners should argue fully any ‘new’ issues raised by a tribunal in proceedings, instead of (or in addition to) relying on subsequent challenges to the tribunal’s decision. Further, the court provided useful clarification on various issues of impartiality, including a tribunal’s capacity to determine multiple related arbitrations.

What are the practical implications of this case?

This judgment provides useful clarification to challenges against arbitrators in relation to: (1) a tribunal’s power to invite evidence on (allegedly) non-pleaded issues; and, (2) the impartiality of a tribunal deciding related arbitral proceedings.

With regard to a tribunal’s power to ask for evidence on non-pleaded issues, the judgment makes clear that the courts will be reluctant to hold that a tribunal has erred. As well as noting that a tribunal has the power to decide a case on a non-pleaded basis, the court based its rejection of the application on a wide interpretation of the pleadings which entitled the tribunal to invite as much evidence as it pleased on the issue in question. Accordingly, practitioners faced with a tribunal inviting evidence on an issue they believe has not been properly pleaded should engage with the ‘new’ issue with full vigour, rather than (or in addition to) relying on contemporaneous and subsequent challenges to the tribunal’s conduct.

The court rejected several challenges to the impartiality of the tribunal. Practitioners may wish to take note of, and avoid basing challenges on, the following principles highlighted by the court:

• the fact a tribunal invites evidence on a measure of damages which had not previously been directly argued for, and then concludes that measure of damages is correct, does not mean the tribunal had pre-determined the appropriate measure of damages;
• the fact that a tribunal makes a decision in one set of overlapping arbitral proceedings in which there is the same tribunal, does not in itself provide a basis for concluding the tribunal was biased. This is particularly the case where the parties which selected the tribunal for the related proceedings are the same, and so were aware of the likelihood that such a situation would arise although the question of bias is judged at the time of the hearing to remove an arbitrator, the fact of earlier, unsuccessful challenges to which the arbitrator responded does not render the arbitrator partial.

What was the background?

In November 2012, Angophora Holdings Ltd (Angophora) and Retemmy Finance Ltd (Retemmy), a bank partially owned by Mr Andrei Mikhailovich Ovsyankin, entered into a Shareholders Agreement (the ‘SHA) in relation to a joint venture. Mr Ovsyankin agreed to guarantee certain of Retemmy’s obligations under the SHA (the Guarantee’). The parties also entered a Non-Compete Agreement.

In 2018, Angophora brought three separate London Court of International Arbitration (LCIA) arbitration proceedings against Retemmy and Mr Ovsyankin under the SHA, the Guarantee and the Non-Compete Agreement. The parties agreed to the same three arbitrators for each arbitration (the tribunal) and that one arbitration should be decided first—it was determined this should be the arbitration in relation to the Guarantee (the Guarantee Arbitration).

The Guarantee Arbitration was heard in February 2020, and in December 2020 the tribunal issued an award in favour of Angophora of US$43.2m (the Award). Mr Ovsyankin brought two applications following the issuing of the award, as follows:

• challenging the Award in the Guarantee Arbitration under AA 1996, s 68 on the basis of a ‘serious irregularity affecting the tribunal, the proceedings or the award’ and;
• in relation to all three of the related arbitrations, seeking to challenge the Award under AA 1996, s 68 and contending that the tribunal be removed under AA 1996, s 24(a) on the basis that the tribunal had failed to act impartially.

What did the court decide?

The court rejected both applications, upholding the award and retaining the tribunal in the two outstanding arbitrations.

‘Serious irregularities’ under AA 1996, s 68(2)(a), (c) and (d)

The ‘serious irregularities’ alleged by Mr Ovsyankin largely concerned the tribunal’s invitation for evidence on an issue of quantum which (allegedly) had not been pleaded by Angophora. Mr Ovsyankin challenged the Award on the basis that, inter alia, the tribunal failed to act fairly, in accordance with AA 1996, s 33 and the LCIA Arbitration Rules. The court rejected all of these arguments holding that a tribunal can sometimes properly decide a case on a basis that has not been pleaded (citing RAV Bahamas v Therapy Beach Club Inc [2021] PC 8), the court went on to hold that, in fact, the issue had been pleaded, it was open to the tribunal to ask for further evidence in relation to it, and Mr Ovsyankin did have a proper opportunity to respond.

Alleged failure to act impartially under AA 1996, ss 68(2)(a) and 24(a)

Mr Ovsyankin’s challenge to the Award under AA 1996, s 68(2)(a) included an argument that the tribunal had pre-determined questions of quantum before hearing the full argument. While reiterating its rejection of arguments that the quantum issue had not been pleaded, the court notably commented that just because the tribunal had asked for evidence on a measure of damages, and then decided in accordance with that measure, did not demonstrate a pre-determined state. Rather, the court presumed that the tribunal requested evidence because it thought this might provide the proper measure of damages, but a ‘reasonably and fair-minded observer’ would recognise this is different from having a closed mind.

With regards the challenge to the tribunal itself under AA 1996, s 24(a), the court accepted that the tribunal had made decisions on issues that also arise in the SHA and Non-Compete arbitrations. However, in itself this provides no basis for concluding the tribunal was biased. In particular, the court noted that, firstly, the parties agreed to having the same tribunal in each arbitration when they knew that this situation was highly likely to arise and, secondly, it is well-established that the English Courts do not consider that a judge should recuse themselves from a case on the grounds that they have made adverse findings against a party, in other proceedings or at a different stage of the same proceedings (citing Okritie International Investment Management Ltd v Urumov [2014] EWCA Civ 1315).

Mr Ovsyankin made one further notable argument: since the question of whether there is an appearance of bias is judged at the time of the hearing to remove the arbitrator, the fact that the tribunal had been challenged by Mr Ovsyankin and made arguments adverse to his interests rendered them no longer impartial. The court commented that it would be strange if a party who unsuccessfully challenged a tribunal could, by virtue of that unsuccessful challenge, then succeed under AA 1996, s 24(a).