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The Arbitration Bill’s changes clarify important aspects of English arbitral law, reinforcing London’s position as a leader in international arbitration.

By Charles Rae

On 21 November 2023, the UK government unveiled its long-awaited plans to update and modernise the legal framework applicable to arbitrations in England, Wales, and Northern Ireland through amendments to the Arbitration Act 1996. In line with the recommendations of the Law Commission in its September 2023 report (a summary of which can be found in Latham’s previous Client Alert), the government has opted for targeted reform over root-and-branch changes, focusing on clarifying a number of important aspects of arbitral law which have become contentious in recent years. The result is a suite of practical revisions (the Arbitration Bill 2023) that will provide greater certainty to parties and help maintain the UK’s position as a leading destination for international arbitration.

English law, courts and arbitral tribunals may become more relevant and popular after Brexit, not less.

By Oliver Browne, Sophie J. Lamb QC, Sanjev D. Warna-kula-suriya, and Tom Watret

Introduction

English law, courts, and arbitral tribunals may become more relevant and popular after Brexit, not less, and parties should continue to feel confident about including English governing law and jurisdiction clauses in their agreements.

In particular, the breadth of English common law jurisdiction and the powerful tools at the English courts’ disposal – notably, the anti-suit injunction and damages for breach of jurisdiction clauses – are likely to ensure that jurisdiction clauses in favour of English courts and tribunals are complied with.

Shijiazhuang Intermediate People’s Court declares arbitration agreement providing for ICC Rules arbitration seated in China invalid.

By Ing Loong Yang, Oliver Browne, and Isuru Devendra

In a dispute between Hebei Zhongxing Automobile Manufacturing Co., Ltd. (HZAM), a Chinese company, and Automotive Gate FZCO (FZCO), a UAE company, the Shijiazhuang Intermediate People’s Court declared invalid two related arbitration agreements that provided for arbitration in accordance with the Arbitration Rules of the International Chamber of Commerce (ICC) and to be held “in China”.

Four recent developments highlight the benefit of arbitration clauses amidst uncertainty about choice of court clauses.

By Oliver Browne and Tom Watret

Introduction

With the end of the Brexit transition period on 31 December 2020 fast approaching, four new important and interrelated developments have highlighted uncertainty about which courts will have jurisdiction in cross-border disputes and the enforcement of judgments from 1 January 2021:

  1. On 27 August 2020, the EU Commission published a revised Notice setting out its view of how various conflict of laws issues will be determined post-Brexit, including jurisdiction and the enforcement of judgments (the EU Notice).[1]
  2. On 28 September 2020, the UK deposited its instrument of accession to the Hague Convention on Choice of Court Agreements 2005 (Hague Convention 2005), ensuring continuity in application of the Hague Convention 2005 after the end of the Brexit transition period.[2]
  3. On 30 September 2020, the UK Ministry of Justice published “Cross-border civil and commercial legal cases: guidance for legal professionals from 1 January 2021” (the MoJ Guidance),[3] which is the UK equivalent to the EU Notice.
  4. On 1 October 2020, the deadline passed for the UK’s accession to the Lugano Convention 2007 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Lugano Convention 2007) to be approved in time for it to apply as of the end of the Brexit transition period, absent some work-around agreed at the time of any eventual Free Trade Agreement (FTA).

Decision confirms parties’ statutory right to challenge awards under s.67 and s.68.

By Oliver E. Browne

The Court of Appeal has overturned a High Court decision which granted a stay of an application challenging an award pending the determination of related further arbitrations (the Second Arbitration Proceedings), pursuant to s.67 and s.68 of the Arbitration Act 1997 (the Arbitration Act).

The Court’s decision in Minister of Finance (Inc) v International Petroleum Investment Co [2019] EWCA Civ 2080 is a helpful reminder that parties agreeing to an arbitration with a London seat cannot circumvent the mandatory provisions of the Arbitration Act. Parties have a statutory right to challenge an award under s.67 for lack of substantive jurisdiction and s.68 for serious irregularity and cannot contract out of these provisions, notwithstanding any written agreement to the contrary.

The Court recognised that challenges under the mandatory provisions often “lack merit and are nothing more than an attempt by the losing party to put off the day of reckoning”. In such cases, the courts have “adequate powers to bring the challenge to a prompt end”. Indeed, the requirement of proving serious irregularity and substantial injustice is a high hurdle to overcome.

The Court’s ruling supports the general principle that costs follow the event.

By Oliver E. Browne and Robert Price

In Andrew Martin, Nicholas Greene, Coban 2017 LLP (formerly named Strutt & Parker LLP) v. Michael Harris [2019] EWHC 2735 (Ch), the English High Court held that any arbitration award as to costs stood or fell with the substantive award. Therefore, if the substantive award was overturned by the court, the costs award would cease to have effect, regardless of whether the costs have been dealt with in separate award.

Sustainability, opportunity, and meeting the challenges of the future. 

By Sophie J. Lamb QC

Each year, Hong Kong Arbitration Week celebrates the triumphs and challenges of international arbitration while actively promoting the development of the practice in Asia. This year’s prestigious Harbour Litigation Funding Lecture, now a highlight of Arbitration Week, was delivered by Sophie Lamb QC, Co-Chair of Latham’s International Arbitration practice. She examined the question of whether international arbitration can keep pace with global change, concluding that the community must do more to address calls for greater diversity, transparency, environmental responsibility, and enhanced efficiency. Below are excerpted highlights from the speech.

In a geopolitically significant case, the English High Court opined on important provisions of the EU sanctions regime.

By Charles Claypoole, Robert Price, and Olivia Featherstone

The judgment of the English High Court in Ministry of Defence & Support for Armed Forces of the Islamic Republic of Iran v. International Military Services Limited [2019] EWHC 1994 (Comm) constitutes the latest decision in a long-running dispute between the Iranian Ministry of Defence, (MODSAF), and the UK Ministry of Defence (via its subsidiary, International Military Services (IMS) that has been litigated in various courts and tribunals since 1990.

This latest judgment concerns whether IMS is liable to pay interest on the amounts an arbitral tribunal awarded to MODSAF in 2001, or whether IMS is prohibited from paying such interest by EU sanctions laws (specifically, EU Regulation 267/2012 – as amended).

The judgment carries great legal importance, as judicial pronouncements on the interpretation, application, and operation of EU sanctions laws are relatively rare.

Parties should avoid uncertainties by stipulating the applicable law to the arbitration agreement.

By Eleanor M. Scogings and Robert Price

The decision in J (Lebanon) v. K (Kuwait)[i] provides a useful analysis of which law (i.e., the law of the arbitration agreement or the law of the seat) governs the issue of whether a non-party has become party to the arbitration agreement and, more broadly, how to determine which law governs the arbitration agreement if there is no express choice. While in this case there was an express choice, the judgment highlights the uncertainties that arise if the parties have made no express provision regarding the law of the arbitration agreement. Moreover, the case demonstrates the jurisdictional difficulties that arise when arbitration proceedings are brought against a non-party to an arbitration agreement.

The English High Court adjourned the claimant’s (J’s) application to enforce an arbitral award against a non-party to an arbitration agreement (K), pending the outcome of set aside proceedings at the seat of the arbitration in Paris. The Court overturned the tribunal’s decision that the law of the seat (French law) should determine whether K was bound by the arbitration agreement contained in a franchise development agreement (FDA). Rather, the court held that the question was one of English law, as the law governing the arbitration agreement. Applying English law, the Court held that K had not become party to the arbitration agreement in the FDA by novation or joinder, and accordingly adjourned the enforcement of the award pending the decision of the Paris Court of Appeal.

The English High Court held the tribunal lacked jurisdiction as the defendant ceased to exist.

By Eleanor M. Scogings

In Ga-Hyun Chung v. Silver Dry Bulk Co Ltd,[i] the English High Court upheld a challenge to an award under Section 67 of the Arbitration Act (the Act). The award was made in favour of Silver Dry Bulk Co Ltd (SDBC) against Homer Hulbert Maritime Co Ltd (HH). The claimant, Mr Chung (trustee of HH), successfully challenged the jurisdiction of the tribunal on the grounds that there was not a valid arbitration agreement, and the tribunal had therefore not been properly constituted, because HH had ceased to exist at the time the notice of arbitration was filed.

This case serves as a useful reminder of the importance of carrying out due diligence on defendants prior to commencing arbitration proceedings, especially if they are incorporated in a foreign jurisdiction. If one of the parties to an arbitration agreement has ceased to exist, then a tribunal cannot be properly constituted and the arbitration proceedings cannot produce a valid and enforceable award.