The Convention, which entered into force this month, should allow courts in certain jurisdictions to recognize and enforce settlement agreements directly.

By Oliver E. Browne and Philip Clifford QC

Settling a dispute via mediation is one of the most time- and cost-effective approaches a party can take to resolve contentious issues. Mediation — a confidential amicable negotiation process facilitated by a third-party independent mediator — can be a very useful tool in the right circumstances.

Mediation’s effectiveness as a dispute

High Court holds that English law legal advice privilege can extend to such communications regardless of whether or not the lawyers are in-house practitioners.

By George Schurr

In PJSC Tatneft v Gennady Bogolyubov & Ors.,[i] the English High Court held that legal advice privilege can apply to communications with foreign lawyers in certain circumstances. Specifically, privilege can extend to such communications if:

  • The communications are between a client and its lawyers (whether or not they are acting “in-house”).
  • Such communications are made in connection with the provision of legal advice.
  • The lawyers with whom the client is communicating are acting in their professional capacity.

The English courts will not look into whether the foreign lawyers are “appropriately qualified” or recognized / regulated as “professional lawyers” as a matter of local law.

The decision overturns a series of cases deemed to have over-expanded a principle preventing shareholders from claiming against third parties for falls in a company’s value.

By Oliver Middleton and Thomas F. Lane

On 15 July 2020, the UK Supreme Court unanimously overturned a Court of Appeal decision that had barred a creditor of companies owned and directed by an individual from bringing tort claims against him for allegedly asset-stripping the companies in order to prevent them paying a court-ordered debt to that creditor. In Sevilleja v. Marex Financial Ltd,[1] the Supreme Court ruled that the “reflective loss” principle — restricting third parties from suing persons alleged to have harmed a company in a manner that caused “reflective loss” — should be narrowed so as only to apply to situations involving shareholders claiming for diminutions in value.

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.

English Supreme Court rules that there is no reasonable diligence requirement barring a fresh action to set aside a judgment obtained by fraud.

Oliver E. Browne and Alex Cox

Introduction

In Takhar v Gracefield Developments Limited and others [2019] UKSC 13, the English Supreme Court considered whether a party applying to set aside an earlier judgment on the basis of fraud is required to show that it could not have discovered the fraud by the exercise of reasonable diligence. The court unanimously ruled that there is no reasonable diligence requirement barring fresh actions based on fraud, and allowed the appeal.

Background

The appellant, Mrs. Takhar, acquired a number of properties in Coventry as part of a separation from her husband in 1999. She subsequently suffered personal and financial problems, largely as a result of the poor condition of the properties. In 2004, she became reacquainted with her cousin, Mrs. Krishan, whom she had not seen for many years. Mrs. Krishan and her husband, Dr. Krishan, agreed to provide financial help and practical assistance to Mrs. Takhar.

A rare example of the English High Court varying an arbitral award.

By Oliver E. Browne and Eleanor M. Scogings

In Dakshu Patel v. Kesha Patel [2019] EWHC 298 (Ch), the English High Court upheld an appeal under section 69 of the Arbitration Act 1996 (the Act) against an arbitral award. The court concluded that the tribunal had erred in law in finding that there had been a variation of the profit-sharing provisions of two partnership agreements. The court also indicated that a related section 68 challenge would have succeeded (had it been necessary to decide the point). The court varied the award and held that the parties were entitled to share the profits and losses equally under the partnership agreements.

The case highlights the very high threshold for permission to appeal an award, and is a rare example of an appeal under section 69 succeeding in the English courts. On the facts, there was no conduct or agreement that could be interpreted as a variation. While courts do not usually interfere in the arbitration process, the tribunal had reached what the court described as a “very surprising conclusion” that warranted intervention.

Non-parties are entitled to obtain documents related to an arbitration if the case falls within the “interests of justice” exception.

By Eleanor M. Scogings

In The Chartered Institute of Arbitrators v B, C and D,[1] the English High Court granted the Chartered Institute of Arbitrators (Institute) access to documents related to an arbitration for use in disciplinary proceedings. Applying CPR 5.4C(2), the court balanced the Institute’s legitimate interests in obtaining copies of the documents with the duty of confidentiality in arbitration proceedings. The court held that the general public interest “in maintaining the quality of and standards of arbitrators” outweighed the need to preserve confidentiality of the arbitration.

The case highlights the tension between the public interest in accessing documents related to an arbitration and the confidentiality of the proceedings. On the facts, the quality and standard of arbitrators was of public importance, and minimal harm, if any, would be caused by allowing the Institute access to the documents.

The decision clarifies how lawyer-client privilege applies in the context of transactions.

By Daniel Smith and James Fagan

The recent English High Court decision Raiffeisen Bank International AG v Asia Coal Energy Ventures Limited and Ashurst provides guidance on the application of legal advice privilege in a transaction context, confirming that confidential client instructions can be privileged even if the legal adviser has been instructed to provide a third party with confirmations based on those instructions.

This case offers a useful overview of the application of privilege to communications between lawyers and clients during transactions. The decision sets out a number of useful principles regarding privilege and client instructions:

  • For lawyer-client communications to benefit from privilege they must take place in a legal context.
  • Confidentiality is necessary for privilege to apply to communications, but it is not determinative.
  • Communications that do not contain legal advice can still be covered by legal advice privilege provided they form part of a continuum of communications between lawyer and client.
  • When instructing a legal adviser to disclose confidential information to third parties, clients must take care to ensure that underlying communications remain privileged.

Parties must draft arbitration agreements with Chinese parties clearly and precisely to ensure validity and avoid unwanted litigation.

By Oliver E. Browne and Isuru Devendra

A Beijing court recently adopted a pro-arbitration approach in upholding the validity of an arbitration agreement designating a non-existent arbitral institution. While the decision reflects the increasingly pro-arbitration attitude of Chinese courts, the case also highlights the importance of drafting arbitration agreements involving Chinese parties clearly and precisely.

Background and decision

In Chinalight International Trade Co. Ltd v Tata International Metals (Asia) Ltd, the Beijing No. 4 Intermediate People’s Court was asked to determine the validity of an arbitration agreement designating a non-existent arbitral institution to administer disputes submitted to arbitration under the agreement.