UMS Holding v Great Station: Court rules on confidentiality of an arbitral award
http://www.bailii.org/ew/cases/EWHC/Comm/2017/2473.html
The defendants' section 68 challenge to an arbitration award was (pursuant to the court's order) heard in public. The award was referred to during the hearing and in the judgment. The challenge failed and the claimants argued that the award was a public document and so they are free to make such use of it as they wish. The defendants countered that the claimants were bound by Article 30 of the LCIA Rules, which requires the parties "to keep confidential all awards in the arbitration, together with all materials in the arbitration created for the purpose of the arbitration and all other documents produced by another party in the proceedings not otherwise in the public domain, save to the extent that disclosure may be required ..by legal duty....or to enforce or challenge an award in legal proceedings...."
Teare J had no doubt that the award had entered the public domain. On a strict reading of Article 30, (because of the position of the commas in the sentence), the exemption for documents "not otherwise in the public domain" did not apply to the award, but the judge could not see why that should have been intended, and so he concluded that since the award is in the public domain, the express contractual obligation imposed by Article 30 to keep it confidential no longer existed.
However, he went on to say that "I am however troubled by the suggested conclusion that the Claimants should therefore be able to do with the Award as they wish; especially in circumstances where the court does not know what the Claimants intend to do with the Award. The Award was a confidential document and has only entered the public domain because the court considered, having regard to the principle of open justice, that the section 68 challenge should be heard in public".
Accordingly, the judge held that the claimants could not use the award as they wished. Instead, if the claimants have a particular use in mind (other than those expressly permitted in Article 30) they should apply to the court for an appropriate order: "I recognise that this leads to increased costs but that seems to be me to be inevitable if the court's order that the section 68 application be heard in public is not to be abused".
COMMENT: English law generally recognises the confidentiality of arbitration (there is nothing in the Arbitration Act 1996 to this effect, but it is implied for business efficacy). Furthermore, although this case concerned the LCIA rules, many arbitral institutions have similar confidentiality provisions in their rules. However, the limits of, and exceptions to, the principle of confidentiality in English law are not entirely clear. Various exceptions were referred to in the case of Ali Shipping v Shipyard Trogir [1997] ie the parties give consent (express or implied), or a court orders or gives leave, or disclosure is reasonably necessary for the protection of the legitimate interests of an arbitrating party, or disclosure is necessary in the interests of justice.
Accordingly, this decision will give some comfort to parties who choose to arbitrate precisely because of the confidential nature of arbitration, because the judge held that the mere fact that the award has entered the public domain (and so fell within an exception to confidentiality) did not entitle a party to make any use at all of the award. However, the case does not provide any more detail on exactly what the award (and other arbitration documents) can (and cannot) be used for.
Brainbox Digital v Backboard: Court accepts that it can order an unlimited cross-undertaking in damages in return for a freezing order
http://www.bailii.org/ew/cases/EWHC/QB/2017/2465.html
The judge in this case agreed that a freezing injunction against one of the defendants should continue. However, that defendant asked that maintaining the injunction should be made conditional on a further unlimited undertaking (to meet any loss or damages which the defendant might suffer if it turns out that the injunction was wrongly granted). A cross-undertaking of £125,000 had already been provided by the claimant.
The judge accepted that it is possible for the court to order an unlimited undertaking in damages: "In my judgment the court may require, as a condition for granting or continuing an injunction, that the cross-undertaking given by the applicant is fortified by the provision by someone other than the applicant of an unlimited, or a limited, undertaking, or by the making of some other form of limited provision, to meet any loss that the injunction may cause: see Stephen Gee QC Commercial Injunctions 6th ed p347. Any fortification required is not necessarily limited in amount. The court has a wide discretion as to the conditions on which it may grant or continue an injunction. Discretions of that kind should not be fettered by rigid judge-made rules".
However, it was still necessary to make "an informed and realistic estimate" of the likely amount of loss which the defendant might suffer. There was a difference between a difficulty in quantifying loss and the absence of evidence of the likelihood of a significant loss.
On the facts of this case, the defendant had failed to adduce sufficient evidence on which to make an intelligent estimate of its future recoverable loss. For example, the freezing injunction may have caused damage to the defendant's reputation in the market and caused it to lose business opportunities, but it was not possible on the evidence to estimate how much revenue might have been lost by the injunction (and not the claim itself). Similarly, it might take some time for the defendant to recover from any disruption, but there was insufficient evidence to estimate the potential loss from that. Accordingly, the defendant had not shown a good arguable case that the existing amount of fortification was inadequate.
However, the judge did order security for the defendant's costs of £125,000, even though no defence had been served yet: "Applications for security for costs should normally be made promptly as soon as the facts justifying the order are known. There is no requirement that a defendant must first serve a defence before making such an application. Were there to be such a requirement, a defendant may find that an impecunious claimant discontinues having received the defence without any provision having been made for payment of its costs".
Sowden v Smyth-Tyrrell: Whether a party challenging an arbitral award should have first sought clarification from the arbitrator
http://www.bailii.org/ew/cases/EWHC/Ch/2017/2477.html
Section 70(2) of the Arbitration Act 1996 provides that an award cannot be challenged or appealed if the applicant/appellant has not "first exhausted... any available recourse under section 57". Section 57 in turn provides that a party can apply to the arbitrator to correct an award, remove any ambiguity in the award or make an additional award in respect of a claim not dealt with by the arbitrator.
In this case, the applicant applied under section 57 to ask the arbitrator to correct his award and/or make an additional award. The arbitrator eventually admitted an irregularity but declined to act further without the agreement of the parties or a court order.
The respondent sought to rely on the case of Torch Offshore v Cable Shipping [2004] in order to argue that the applicant should have asked for clarification as to the reasons why the arbitrator had made the determinations he had and failure to do so meant that it had not exhausted its recourse under section 57, and so the challenge to the award was now time-barred.
In Torch Offshore, the judge had held that section 57 can be used to request further reasons from the arbitrator (or reasons, where none exist), and an award which contains inadequate rationale or incomplete reasons is likely to need clarification. Failure to seek clarification, it was decided, could mean that the applicant had available recourse under section 57 which had not been exhausted (and so a section 68 application could not be brought in that case).
Here, the judge held that the applicant had exhausted his recourse under section 57: "It is not the law that, whatever a party to arbitration does in applying to the arbitrator under s 57, the other party can always argue that the first party should have asked for clarification of the reasons for the Award and therefore has not exhausted his recourse under that section. It all depends on what he asks for".
COMMENT: This decision addresses a concern which arose from the Torch Offshore case that applicants must always ask for clarification if the reasons for an award are unclear or inconsistent before making an application under section 68 (something that was called "a potential trap for unaware applicants" in Arbitration Law Monthly). This case confirms that whether or not an applicant must first seek clarification will depend on the circumstances of the case and exactly what the applicant believes is wrong with the award.
Bank Mellat v Her Majesty's Treasury: Court orders "sample" disclosure
https://www.lawtel.com/UK/FullText/AC9602003QBD(Comm).pdf
In 2013, a "menu" of disclosure order options was introduced into CPR 31.5. Anecdotal evidence suggests that the courts have been generally reluctant to depart from standard disclosure in most cases. However, in this case there was a dispute about some 2,500 transactions and the bank argued that disclosure relating to all of these transactions would be likely to take more than a year at a cost of more than £2 million. It therefore proposed that there should be a disclosure of 10 per cent of the transactions, to be selected on a random basis.
That sampling approach was accepted by Males J, on the basis that it was accepted that if that disclosure did not prove to be sufficient, the bank might be ordered to make full disclosure later on of all the transactions, even if that would put the 2018 trial date in jeopardy
Team Y&R v Ghossoub: Whether non-party bound by jurisdiction clause
http://www.bailii.org/ew/cases/EWHC/Comm/2017/2401.html
When construing exclusive jurisdiction clauses, there is a presumption under English law in favour of "one-stop shopping" for dispute resolution. The principle underlying that presumption is that reasonable businessmen who have agreed a regime for dispute resolution in connection with their contract are unlikely to have intended that some disputes, depending on their nature, might fall to be treated by different tribunals. However, in this case, the chosen forum (England) could not exercise jurisdiction over the claim as a whole, and so the judge held that the presumption did not assist.
The judge went on to consider whether the English jurisdiction clause could be enforced in relation to proceedings against persons who are not a party to the agreement. There is conflicting caselaw commentary on this point and the judge concluded that "Whether an exclusive jurisdiction clause should be understood to oblige a contractual party to bring claims relating to the contract in the chosen forum even if the claim is one against a non-contracting party, requires a consideration of the contract as a whole including not just the language used in the exclusive jurisdiction clause but also all other terms in the contract that may shed light on what the parties are likely to have intended".
The one-stop presumption cannot apply with the same force when considering claims brought by or against non-parties. In fact, absent "plain language to the contrary", the contracting parties are likely to have intended to neither benefit nor prejudice the non-parties. On the facts of the case, the scope of the exclusive jurisdiction clause here did not extend to claims against non-parties.
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