English Court Upholds Point of Law Appeal Under s.69

Section 69 of the English Arbitration Act enables a party to arbitral proceedings to appeal to the court on a question of law arising out of an award.  Successful appeals are rare but in Alegrow SA v Yayla Argo Gida San ve Nak A.S [2020] EWHC 1845 (Comm), the High Court allowed an appeal, finding that an award of the GAFTA Appeal Board made an error of law in deciding that Alegrow had repudiated its contract with Yayla.

Facts

Alegrow agreed to sell a quantity of Russian paddy rice to Yayla, only part of which was shipped in accordance with the terms of the contract.  Correspondence ensued, and Yayla eventually informed Alegrow that the remaining shipment must be delivered by 30 March 2017.  The rice was not delivered and in April 2017, Yayla notified Alegrow of its intention to commence arbitral proceedings due to the non-fulfilment of the contractual obligation to ship the remaining goods within the delivery period settled in the subject sales contract.

GAFTA Award

The first tier GAFTA Tribunal held in Yayla’s favour.  Alegrow appeal the decision to the GAFTA Board which upheld the decision, holding that Alegrow as sellers were in breach of contract the day after the deadline for a shipment schedule.  Alegrow appealed to the High Court under s.69 of the Arbitration Act, arguing that the Board had made an error in law because the award was based on a finding that Alegrow had breached a contractual obligation to provide a shipment schedule by 30 March 2017, when no such contractual obligation existed.

The High Court

The Court allowed Alegrow’s appeal, finding that the Board failed to decide when Alegrow’s delivery should be made in order to fulfill its contractual obligations (at §60), noting that Yayla “was not contractually entitled to demand a shipment schedule on 29 March 2017 and [Alegrow] was not in repudiatory breach of the Contract in failing to provide such a schedule by the Buyer’s deadline of 30 March 2017” (at §64).  Accordingly:

  • the Award was wrongly based on a finding that Alegrow had repudiated the Contract;
  • the Board did not, and could not, have based the Award on a finding that Alegrow had renounced the Contract, and
  • Yayla had renounced the contract.

The Court remitted the Award to the Board to consider Alegrow’s counterclaim and for the award to be varied so as to conclude that Alegrow was not in repudiatory breach of the contract.

The court referred to the “guiding principles of fundamental importance” when considering applications brought under s.69, stating (at §48-49):

“Once leave has been granted, the general approach on a [section] 69 application is to be informed by what this Court has termed three “guiding principles of fundamental importance” (Bunge SA v. Nibulon Trading BV [2013] EWHC 3936 (Comm); [2014] 1 Lloyd’s Rep 393, §§ 35-36 per Walker J, referring to statements of the Court of Appeal in MRI Trading AG v Erdenet Mining Corporation LLC [2013] 1 Lloyd’s Rep 638):

First, as a matter of general approach, the English court strives to uphold arbitration awards (MRI Trading § 23 per Tomlinson LJ).

Secondly, in order to give effect to the first principle, the court should read an arbitration award in a reasonable and commercial way, expecting as is usually the case, that there will be no substantial fault that can be found with it. It should not approach awards “with a meticulous legal eye endeavouring to pick holes, inconsistencies and faults in awards and with the object of upsetting or frustrating the process of arbitration.” (ibid.)

Thirdly, in cases of uncertainty the court will, so far as possible, construe the award in such a way as to make it valid rather than invalid (ibid.)”

The court noted, however, that these principles “are not intended to, and do not, enable the court to give to an award a meaning which plainly was not intended by its authors” (§ 36).

See also the review of this case by Herbert Smith.

About Phillip Rompotis

Phillip practices as a barrister and arbitrator in Hong Kong. He has over 25 years’ litigation and arbitration experience in commercial disputes relating to construction & engineering, financial services, joint venture & shareholders agreements, technology, trusts, property and landlord & tenant. He is a Fellow of the Chartered Institute of Arbitrators, the Hong Kong Institute of Arbitrators, the Singapore Institute of Arbitrators, the Malaysian Institute of Arbitrators, and a member of various lists/panels of arbitrators.

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