In two recent cases, the Commercial Court has looked at the question of serious irregularity under s.68 of the Arbitration Act 1996. In both instances the Court concluded that there was no serious irregularity and the Awards of the respective tribunals were upheld. Findings of serious irregularity are rare, not least as they require a finding, in addition to the irregular act or omission, that “substantial injustice” has been or will be caused to the applicant as a consequence. 

In Ameropa SA v Lithuanian Shipping Co. of Lithuania, the Court considered whether an arbitrator had decided a case on the basis of a point which had not been argued before him. The charterer of a vessel, who was appealing against the arbitration award, believed that there was a serious irregularity in the arbitrator’s finding that the charterer had “agreed” that additional costs should be paid to the vessel’s owner although, in fact, there was no express agreement. However, the Court decided that it was clear that the arbitrator simply thought that an implied contract existed, which required the charterer to pay the additional costs. As such, the arbitrator had not decided the case on the basis of a point not argued before him.

The Court held that the charterer knew the case that was being advanced and that it was the charterer’s own fault that it had not addressed all of the arguments that were being made by the owner. Section 68 was to be used as a last resort and was only available in situations where the conduct of a tribunal was so erroneous that justice required the decision to be rectified.

Similarly, in Larus Australia v Agrocrop International PTE Ltd, a charterer believed that there was a serious irregularity in the tribunal’s failure to invite the charterer to apply under s.41 of the Arbitration Act 1996 to argue that the vessel owner’s inordinate and inexcusable delay in bringing proceedings had caused the charterer to suffer serious prejudice.

The Court, however, found that the tribunal had dealt with the points raised before it and had identified that it was possible for the charterer to apply under s.41. Nevertheless, having assessed the facts of the case, the tribunal was entitled to conclude that such an application would not succeed and there was therefore no need to invite the charterer to make an application. The Court therefore held that the tribunal had done the best that it could in the circumstances and that there had been no serious irregularity.

Posted by Mark Everiss