UK: Section 67 And 68 Challenges To LCIA Award Dismissed

Last Updated: 13 March 2019
Article by Nicholas Peacock and Natalie Yarrow

In the highly complex and contentious case of Filatona Trading Ltd and another v Navigator Equities Ltd and others [2019] EWHC 173 (Comm), the English High Court dismissed an attempted challenge to an LCIA award brought on the grounds of jurisdiction (s.67 Arbitration Act 1996) and serious irregularity (s.68 Arbitration Act 1996).

In particular, the Court held that an LCIA arbitral tribunal did not exceed the scope of its powers in ordering relief that was not available to an English court.


The dispute arose under a shareholder agreement (SHA) concerning land in central Moscow. Ms Danilina and Mr Deripaska were named as parties to the SHA. Ms Danilina's former partner, Mr Chernukhin, was not. Mr Chernukhin's position was that Ms Danilina was acting as his nominee or agent and that, consequently, he was the true party to the SHA by virtue of being Ms Danilina's disclosed principal and the beneficial owner of Ms Danilina's shares. Ms Danilina and Mr Deripaska disputed this.

In arbitration proceedings between Mr Chernukhin and Mr Deripaska, an arbitral tribunal held that Mr Chernukhin was a party to the SHA and ordered Mr Deripaska to pay $95 million to "buy out" Mr Chernukhin's shareholding in the relevant Cypriot company.

Mr Deripaska sought to challenge the award. Mr Deripaska contended (as he had done before the tribunal) that Mr Cherunkhin was not a party to the SHA and the arbitration agreement in it, and thus challenged the Award under s.67 on the basis that the tribunal did not have jurisdiction to make it (Section 67 Challenge). Mr Deripaska also argued that the award should be set aside on the grounds of serious irregularity under s.68, alleging that the tribunal had acted ultra-vires by ordering buy-out (Section 68 Challenge).

Ms Danilina was not party to the arbitration and so was not bound by the award. Shortly after the award had been rendered, she entered into an agreement to transfer the beneficial interest in her shares to Mr Deripaska. She then began litigation in England seeking a declaration from the court that she was the true party to the SHA and the owner of the shares, and not Mr Chernukhin.

Given the related nature of Ms Danilina's claim in litigation and Mr Deripaska's challenge in arbitration, the Court heard both cases together.

Section 67 Challenge

The Court acknowledged that the key factual issue of whether Mr Chernukhin was a party to the SHA, and the related legal issue of whether Mr Chernukhin was precluded from suing under the SHA, was common to both Ms Danilina's request for a declaration and the Section 67 Challenge. It followed that this required consideration of the same issue that was at the heart of the arbitration. The Court emphasised, however, that the challenge was "not an appeal from the decision of the arbitration tribunal" but a "re-hearing".

The Court concluded that it agreed with the tribunal's finding, holding that Mr Chernukhin was indeed the true party to the SHA and not Ms Danilina, and that the SHA did not exclude Mr Chernukhin's ability to sue under it as the disclosed principal of Ms Danilina. The Court accordingly dismissed the Section 67 Challenge.

Section 68 Challenge

The award ordered Mr Deripaska to buy out Mr Chernukhin's shareholding in the Cypriot entity, by reference to Cypriot company law concerning relief in circumstances of shareholder oppression. By contrast, under English law, the English court does not have the power to order the buy-out of shares in a foreign company. Mr Deripaska consequently argued that the Tribunal did not have the power to make such a buy-out order, whether under s.48 of the Arbitration Act 1996 (as the procedural law of the LCIA arbitration) or under the SHA. Therefore, he argued that the award should be set aside on the ground of serious irregularity.

Under s.48(5) an arbitral tribunal seated in England has the same powers as the English court to order a party to do or refrain from doing anything, and to order specific performance of a contract. It was common ground between the parties that the tribunal did not have power to make the buy-out award pursuant to s.48(5), because an English court would not have that power in relation to a foreign company. However, the Court also noted s.48(1), which provides that the parties are free to agree on the powers exercisable by the tribunal as regards remedies. The correct question for the Court to determine, therefore, was whether the SHA, properly construed, provided the tribunal with the relevant power.

The SHA provided the Tribunal with the power to settle "all disputes and disagreements arising from this Agreement or in connection herewith". The Court noted that a Cypriot court would have the power to make a buy-out order in respect of a Cypriot company. However, given that the parties had chosen to refer all disputes and agreements to arbitration, a dispute concerning shareholder oppression in the Cypriot company to which the SHA relates and requiring a buy-out order would not come before the Cypriot court but an arbitral tribunal. The Court concluded that a reasonable person would not understand the parties to have intended that all disputes would be resolved by an arbitral tribunal, except those concerning shareholder oppression requiring a buy-out order which would need to be brought before a Cypriot court. Rather, a reasonable person would understand the parties to have intended the SHA to provide a 'one-stop shop' for dispute resolution. On that basis, the Court found that the SHA did grant the tribunal the necessary power to make the buy-out order. Consequently, the Section 68 Challenge was dismissed, as there was no serious irregularity.


This is a prominent example of the English court hearing a challenge to an arbitral award at the same time as a related, yet separate, claim in litigation in order to ensure consistent decisions on the same points. The reasoning and dismissal of the challenges highlights the Court's continued non-interventionist approach to arbitration and its considered yet robust approach towards applications to set aside awards.

In this case, the Court's conclusion that the tribunal had not exceeded its powers was based on the facts of the case and contractual interpretation of the SHA. It is unclear from the judgment which version of the LCIA Rules (1998 or 2014) was applicable here. However, it is possible that the English court could, in future cases with similar facts, base a similar decision on Article 22.1(vii) of the LCIA Rules (2014), which bestows upon an arbitral tribunal the power to "order compliance with any legal obligation, payment of compensation for breach of any legal obligation and specific performance of any agreement".

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Sign Up
Gain free access to lawyers expertise from more than 250 countries.
Email Address
Company Name
Confirm Password
Mondaq Newsalert
Select Topics
Select Regions
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions