In B v A [2010] EWHC 1626 (Comm), Mr Justice Tomlinson was asked to determine a preliminary issue concerning whether the claimant (B) had a realistic prospect of challenging an arbitration award (the Award) under sections 67 and 68 of the Arbitration Act 1996 (the Act).

The dispute arose following the sale by B to A of 100% of the share capital in C and the debt owed by C to B. A, B and C were all Spanish companies and the Share Purchase Agreement (the SPA) was written in English but governed by Spanish law. The SPA provided that disputes were to be referred to arbitration under the Rules of Arbitration of the International Chamber of Commerce (the ICC) with the seat of the arbitration in London and proceedings in English. Neither the parties nor the dispute had any connection with England or English law. A sought from B sums exceeding €54m (in excess of the original purchase price) alleging “dolo” (fraud) and breach of the express representations and warranties in the SPA. The Award, made by a majority, ordered B to indemnify A pursuant to an express indemnity provision in the SPA (Article 10.1).

The dissenting arbitrator, issuing an opinion of some 19 pages, stated that the majority of the arbitration panel had ignored the parties’ agreement to submit the SPA to Spanish law and had decided the dispute “ex aequo et bono” (dispensing with the law and deciding the matter in a manner which they considered to be fair and equitable). She concluded that the Award was illegal as a matter of public order under Spanish law. It was, in the opinion of Tomlinson J, this dissenting opinion that led B to challenge the Award under sections 67 and 68 of the Act for lack of substantive jurisdiction (section 67) and/or serious irregularity (section 68).

B alleged that the lack of jurisdiction and/or serious irregularity had arisen because, in contravention of section 46 of the Act, the tribunal failed to decide the dispute “in accordance with the law chosen by the parties as applicable to the substance of the dispute“.

A submitted, and it was accepted by the judge, that “for a challenge of this sort to have any prospect of success, a conscious disregard of the provisions of the chosen law is a necessary but not a sufficient requirement.” The judge considered that any suggestion of “conscious disregard” was unsustainable in this case as the arbitrators had carefully considered the provisions of Spanish law. B led expert evidence on Spanish law which disagreed with the interpretation of Article 10 of the SPA as adopted by the majority arbitrators. The judge held that even if the evidence of the expert was right, the arbitrators would at most be shown to have made an error of law. Applying the House of Lords decision in Lesotho Highlands Development Authority v Impregilo SpA [2005] UKHL 43, Tomlinson J held that an error of law does not involve an excess of power under section 68(2)(b) of the Act.

Turning to B’s reliance upon section 67 of the Act (which was abandoned in the Lesotho case), the judge held that it was “plain” that it could not be invoked and that “an error in the application of the chosen law does not involve a lack of substantive jurisdiction as it is defined in the Act. If demonstrated, which here it is not, a breach of section 46 can as I see it be addressed only under section 68(2)(b).” He therefore dismissed B’s challenge of the Award.

In this case, the claimant sought to rely on the views of the dissenting arbitrator. Of note is the finding by Tomlinson J regarding the status of a dissenting opinion. He held that it does not formally form part of the award made by a tribunal and was comforted by the findings of a large majority of a Working Party of the ICC Commission on International Arbitration in their Final Report on Dissenting and Separate Opinions (adopted in 1988), who reached the same conclusion. He did however hold, citing F Limited v M Limited [2009] 1 Lloyd’s Rep. 537 at 543, that a dissenting opinion “might be admissible as evidence in relation to procedural matters, as where for example it is alleged that some aspect of the procedures adopted in the arbitration worked unfairly to the disadvantage of one party“.

To view the judgment in full please click here http://www.bailii.org/ew/cases/EWHC/Comm/2010/1626.html