Herbert Smith Freehills review the case of ZCCM Investments Holdings PLC v Kansanshi Holdings PLC & Anor  EWHC 1285 (Comm), where the English Court rejected a challenge under s.68 of the English Arbitration Act 1996 and provided useful guidance on the test for determining whether a tribunal’s decision qualifies as an award for the purpose of a s.68 challenge. The case, involving significant funds transfers, concerned a derivative claim by ZCCM where it was common ground between the parties that ZCCM was required to seek the tribunal’s permission to pursue the derivative claim by establishing that the derivative claim had a realistic prospect of success.
Following the tribunals finding that ZCCM had not established that its derivative claim had a realistic prospect of success, ZCCM brought a s.68 challenge; to bring such a challenge ZCCM had to establish that the tribunal’s ruling was an award, as s.68 relates only to challenges to ‘an award in the proceedings’.
The Court acknowledged that the relevant authorities do not set out any firm governing principles for distinguishing a procedural order from an award and that there was no previous identical case. However, the Court outlined the following relevant factors:
- real weight is given to the substance and not merely the form of the decision;
- a decision is more likely to be an award if it finally disposes of the matters submitted to arbitration, making the tribunal functus officio either entirely, or in relation to the particular issue or claim;
- the nature of the issues considered in the decision is significant, as substantive rights and liabilities of parties are likely to be dealt with in the form of an award. A decision dealing purely with procedural issues is less likely to be an award;
- the tribunal’s description of the decision is relevant but not conclusive;
- the perception of a reasonable recipient of the tribunal’s decision is relevant; that reasonable recipient is likely to take into account the objective attributes of the decision, including the tribunal’s own description of the decision, the formality of the language and the level of detail in the reasoning and whether the decision complies with the formal requirements for an award under any applicable rules; and
- the reasonable recipient must be considered to have all the information the parties and tribunal would have had when the decision was made, including the background and context in the proceedings. This may include whether the tribunal intended to make an award.
Applying these factors, the Court decided that the Ruling was not an Award and therefore no s. 68 challenge could be made. It found that it was essentially procedural in substance and that, while it did not deal with the sort of issues commonly found in a procedural order and it was final, it did not decide an issue of substance in relation to the claim. A derivative claim was a procedural device and this was a discretionary decision on a procedural issue. Accordingly, the substantive arbitration was not over and the tribunal was not functus.
The authors note that the case is a reminder of the importance of the dividing line between procedural orders and awards; provides useful insight into how the English courts will approach questions of this kind; and demonstrates that, generally speaking, it remains difficult to show serious irregularity under s.68 of the Act.