UK: Dishonest But Not Disowned: Despite The High Court Finding One Party Guilty Of Fraudulent Conduct In An Arbitration, The Arbitral Award Was Allowed To Stand

Last Updated: 1 June 2012
Article by Simon Hems and Shawn Kirby

Chantiers de l'Atlantique SA v. Gaztransport et Technigaz SAS [2011] EWHC 3383

In this recent case, the Commercial Court held that despite Gaztransport et Technigaz SAS ("GTT") committing fraud in the underlying arbitration, the arbitral award should not be set aside as the fraud probably did not affect the result of the arbitration.

The background facts

The arbitration arose out of a licence agreement between Chantiers de l'Atlantique SA ("CAT") and GTT for the use by CAT of a new LNG containment system on LNG carriers being built by CAT. The arbitration was subject to French law and ICC Rules and heard in Paris. However, as the licence agreement provided for the place of arbitration to be London, the English courts retained supervisory jurisdiction.

Issues arose between the parties as to whether the cause of apparent defects in the first vessel constructed by CAT under the licence agreement was the workmanship of CAT or the design of GTT. Because of the terms of the licence agreement, CAT had to allege and prove "gross fault" as a matter of French law.

In an award dated 3 February 2009, the tribunal dismissed all of CAT's claims. Some were dismissed on the grounds that they were factually misconceived but, in respect of those where there was some factual foundation, they were denied on the ground that CAT could not establish "gross fault" as a matter of French law. In particular, the tribunal decided that even if CAT could establish the design fault or economic fault which it alleged, CAT could not satisfy the test imposed by French law as to the circumstances in which a licensor will be liable to a licensee for a design fault or an economic fault.

In considering the parties' allegations, the tribunal was presented with technical evidence by both parties, including analysis of tests conducted by GTT.

A few weeks after the issuance of the tribunal's award, CAT received a tip off from a whistleblower at GTT that CAT should look at the results of various tests carried out and that GAT had been the victim of a fraud. Then, in late 2010, another whistleblower provided CAT with a GTT internal email which referred to the results of tests carried out by GTT which had not been disclosed to CAT.

The Arbitration Act 1996 requires an application seeking leave to appeal an arbitration award to be made within 28 days of the award. However, in this case, CAT did not make such an application until six months after the award, during which time it had investigated the tip off from the first whistleblower at GTT. In the circumstances, the court found it entirely proper for CAT to take time to investigate the tip off before launching an application and granted CAT an extension of time to do so.

The essence of CAT's case was that the tribunal was misled by GTT and, in particular, by a Mr. M Chapot, who was employed by GTT and acted as a quasi-expert at the hearing and who CAT alleged gave deliberately misleading evidence to the tribunal.

The Commercial Court decision

In unusually strong language, the court held that Mr. Chapot's evidence "both before the Tribunal and before this court was dishonest". In particular, the court found that in his expert report and in oral evidence before the tribunal "he deliberately and dishonestly" concealed the existence of certain tests carried out and the results of those tests, as well as the nature of other tests, and that his evidence before the court "represented a masterclass in evasion and obfuscation and not the evidence of an honest witness".

However, to succeed in its appeal, CAT had to satisfy the court that the disclosure of the true position "would probably have affected the result of the arbitration". This it was not able to do, as the court found that if the true position had been known to the tribunal, it would not in all probability have made any difference to its decision. This was because the tests which were concealed or misrepresented were followed by further comprehensive tests which were disclosed and analysed by experts for both parties and also because the tribunal had decided that even if CAT could establish the design fault or economic fault which it alleged, CAT could not satisfy the test imposed by French law as to the circumstances in which a licensor will be liable to a licensee for a design fault or economic fault.


In refusing to set aside the tribunal's award, the court has reaffirmed the position that even where an innocent party can show some fraud by the other party to an arbitration, that will not automatically mean that the award shall be set aside. The fraud perpetrated by the other party must have some causal link with the tribunal's decision. If there is no causal link, then the fraudulent conduct is for all practical purposes irrelevant (although in some jurisdictions it might give rise to criminal prosecution).

This might seem unfair to many, as it might be argued that if the fraud had been uncovered during the course of the arbitration, the tribunal may have formed different views as to the strength of GTT's case and evidence. However, given the clear wording of the tribunal's award regarding the relevant French law test, the court was not willing to interfere with the overall result. If the tribunal's award had been dependent on the factual position, then the court may have been more willing to set aside the award.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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