This was a challenge under s 68 and s 69 of the Arbitration Act 1996 ('the 1996 Act') brought by the Indian Government against an arbitral award published in January 2021 and rendered in long-running arbitration proceedings.
The underlying arbitration arose out of two production sharing contracts concerning offshore oil fields in India, whereby the Respondent, the Union of India ('the Government'), granted the Claimant oil companies ('Reliance/BG') exclusive rights to exploit the fields for 25 years.
Both contracts were governed by Indian law, save that the arbitration agreement in each contract was governed by English law and provided that the seat of arbitration was London.
In December 2010, Reliance/BG commenced arbitration proceedings seeking inter alia to recover the costs of developing the fields from the Government. One aspect of their case was that the Government had agreed certain development costs could be recovered ('the Agreements Case'). A complex set of proceedings ensued, with eight Final Partial Awards rendered by the arbitral Tribunal between 2012 and the time of the present application; and various challenges before the courts resulting in two remissions to the Tribunal.
In 2018, Reliance/BG successfully challenged the Final Partial Award dated 12 October 2016 ('the 2016 Award') pursuant to s 68 of the 1996 Act on the grounds that the Tribunal had failed to address the Agreements Case. The matter was remitted to the Tribunal.
In October 2018, the Tribunal issued a Final Partial Award on the Agreements Case ('the 2018 Award'), finding in favour of Reliance/BG and allowing them to recover approximately USD 177m of its development costs. However, the Tribunal denied Reliance/BG some USD 259m of development costs (referred to as the 'EPOD Agreements Case') on the basis it lacked jurisdiction to consider the evidence put forward in respect of this sum. Although that evidence had been on the record prior to the 2016 Award, it had not been relied upon by Reliance/BG in its Agreements Case.
In 2020, Reliance/BG successfully challenged the 2018 Award pursuant to s 67 of the 1996 Act. Knowles J held that the Tribunal had erred in deciding that it did not have jurisdiction to consider evidence referred to above. He remitted the matter to the Tribunal, having varied the 2018 Award by a provision that the Tribunal did have jurisdiction to:
"take into account (a) documentary and other evidence which had not previously been referred to by [Reliance/BG] in the context of the EPOD Agreements Case before the [2016 Award], provided that it was evidence which was already on the record in the arbitration prior to the release of the [2016 Award], and (b) submissions in respect of such evidence".
Accordingly, the Tribunal issued directions for pleadings to be filed for a hearing. In June 2020, the Government duly filed a submission with its defence in which it not only addressed the documents on which Reliance/BG relied, but further pleaded objections to the EPOD Agreements Case under Indian substantive constitutional law (the 'threshold matters/objections'). These revolved around Articles 297 and 299 of the Indian Constitution which, in summary, respectively provide: that natural resources in Indian waters vest in the Union and are held for the purposes of the Union; for formalities in the execution of Government contracts.
In January 2021, the Tribunal issued an award in favour of reliance/BG in the further amount of USD 111m ('the 2021 Award'). The Tribunal concluded it could not consider the Government's threshold matters/objections on the basis of the well-known principle of English law established in Henderson v Henderson (1843) 3 Hare 100, 67 ER 313. At paragraph 4.9 of its Award (cited at ), the Tribunal reasoned:
"... whilst it could be said that the threshold matters/objections [the Government] now seeks to raise apply to 'such evidence', they apply equally to the entire Agreements Case [Reliance/BG] had raised prior to the release of the [2016 Award] and which the Tribunal has already determined in the Agreements Case Award . Whilst [the Government] had referred to Articles 297 and 299 of the Constitution of India, [.] in the course of these arbitral proceedings, it is clear that it did not do so in respect of or in response to the Agreements Case. No good explanation has been provided - and there cannot be any justification - for [its] failure [.]: the same threshold matters/objections [it] now seeks to rely on, at the stage of remission, solely in respect of the Balance EPOD Agreements Case could have been raised prior to the release of the [2016 Award] and the Agreements Case Award. And they should have been raised prior to the release of the [2016 Award] and the Agreements Case Award. This much is clear from the Henderson v Henderson rule which has been cited, with approval, by the UK Supreme Court in Virgin Atlantic."
By the present application, the Government sought to challenge the 2021 Award, relying on ss 68 and 69 of the 1996 Act. The application was heard before Sir Ross Cranston, sitting as a Judge of the High Court ('the Judge').
The Appeal under s 69
The two questions of law on which the Government sought permission to appeal under s 69 of the 1996 Act were:
- Was the Tribunal correct to determine that the specific questions of res judicata with which it was concerned should be decided according to English law, merely because the seat of arbitration is London?
- If the answer to Question 1 is yes, is the doctrine applicable to earlier phases in the same arbitration proceedings (as opposed to separate proceedings)?
The Government contended: (i) the Henderson principle was one of substantive law, and its application in an arbitration pursuant to a contract governed by Indian law could amount to an error of law; and (ii) alternatively, that, in contrast to court proceedings, the Henderson principle had limited application in arbitration owing to arbitration being a procedure based on consent between the parties. The Judge rejected both arguments.
First, the Judge considered it clear from the opinion of Lord Sumption in both Virgin Atlantic Airways Limited v Zodiac Seats UK Limited  UKSC 46 and Takhar v Gracefield Developments Ltd  UKSC 13 that the Henderson principle is one of English procedural law. As such, its application in an arbitration seated in London had to be correct.
Second, the purpose of the Henderson principle, namely, to protect against wasteful and potentially oppressive duplicative proceedings, was equally appliable to the conduct of arbitral and court proceedings. At -, the Judge recognised that the two procedures differed, and that the consensual nature of arbitration "may impose some limits." However:
... in both there is a need for a procedural power to guard against abusive and duplicative proceedings. That power might derive from procedural rules or be inherent in the nature of the process. Under the 1996 Act it has a basis in the duty of a tribunal in section 33(1)(a) to act fairly by giving the parties a "reasonable" opportunity to put their case and to deal with that of their opponent, and section 33(1)(b) to adopt procedures avoiding unnecessary delay or expense. The principle of Henderson v Henderson is encapsulated in the section, especially the second limb, section 33(1)(b). It could well be a breach of that duty for a tribunal to allow a party to advance a claim, a defence or an argument that could have and should have been argued at an earlier phase of an arbitration or in an earlier proceeding.
Further, the Judge considered there was ample authority for the proposition that the Henderson principle applies to arbitration. In Nomihold Securities Inc v Mobile Telesystems Finance SA  EWHC 130 (Comm), Andrew Smith J recognised a similar principle applicable to arbitration proceedings, based on the rule of abandonment, which could be traced to Smith v Johnson (1812) 15 East 213 (which predated Henderson itself). He also referred to Daewoo Shipbuilding and Marine Engineering Company Ltd v Songa Offshore Equinox Ltd  EWHC 2353 (TCC) and Merkin and Flannery on The Arbitration Act 1966, 6th ed.
While he accepted that was no binding precedent as to whether Henderson applied to different stages of the same arbitral proceedings, as opposed to proceedings based on separate references, the Judge found substantial judicial support for that proposition in respect of claimants and respondents alike.
Further, the Judge could see no unfairness to the Government specifically as the respondent to on-going arbitral proceedings in debarring it from raising arguable defences, merely because it could and should have raised those defences at an earlier stage of proceedings. Reliance/BG's Agreements Case had been set out between 2014 and 2016 complete with documentary and witness evidence as one of many issues before the Tribunal. The Government was, therefore, not in a position at the 2020 hearing of having to defend a claim it did not think it would have to face.
Accordingly, the Judge dismissed the application under s 69.
The Challenge Under s 68
The Government advanced three main submissions relating to serious irregularity; all of which were rejected by the Judge.
First, the Judge disagreed that there had been unfairness within the meaning of s 68(2)(a) in that the Tribunal's application of the Henderson principle shut out defences not previously run in the context of the Agreements Case, whilst permitting reliance on documents not used in that case. The Judge considered that the remission following Knowles J's judgment was narrow, and the Tribunal had properly interpreted the 2020 Order to mean it was limited the consideration of the evidence specified and submissions relating to that evidence, and not submissions generally. As such, it left the findings and principles of the 2018 Award in place. In addition, the Government had been precluded by Henderson in the 2020 hearing from raising its threshold matters/objections, which could not, in any event, be characterised as defences as contended by the Government.
Second, the Judge considered the Tribunal had not failed to deal with essential issues such that s 68(2)(d), with its very high threshold, was engaged. The Tribunal had addressed the issues raised by the Government, including those relating to the Indian Constitution, by setting out the arguments before proceeding to reject them. Notwithstanding that the Tribunal had addressed these issues briefly, there was no basis to argue that the Tribunal had failed to deal with them such that there was a serious irregularity.
Finally, the Judge rejected the Government's argument under s.68(2)(g) that the 2021 Award was contrary to Indian public policy. Highlighting the difference between errors of foreign law and matters engaging English public policy, as noted by Sir Jeremey Cooke in PT Transportasi Gas Indonesia v Conocophillips (Grissik) Ltd  EWHC 2834, , the Judge considered that an appeal under s 68(2)(g) does not lie on the ground that the Tribunal erred on points of Indian public policy as enshrined in the Indian Constitution, and expressed the view that the provision is not "an avenue to reargue the merits." The Judge further saw merit in Reliance/BG's submission that the sub-section was "never intended to allow parties to attack the conclusions of arbitration tribunals on matters of foreign law under the auspices of public policy, since to do so might open the floodgates to challenges."
The challenge under s 68 was, accordingly, dismissed.
This is a useful case that confirms the applicability of Henderson principles in arbitral proceedings and, in particular, to difference stages of the same arbitration. It is noteworthy, however, that the court also acknowledged that the consensual nature of arbitration narrowed the scope of Henderson principles (endorsing the comments of Andrew Smith J in Nomihold Securities Inc v Mobile Telesystems Finance SA  EWHC 130 (Comm) at ). It remains, however, to be seen, the precise extent to which the consensual nature of arbitration narrows such application of the Henderson principles in arbitral proceedings, and the relevant factors to be taken into account when contending for a narrower application.
More generally, this case illustrates Court's pro-arbitration stances, and its willingness to ensure that arbitrations seated in England and Wales are an effective means of dispute resolution. Here, the Court's decision ensures that arbitral tribunals can avoid unnecessary expense and delay (by applying Henderson principles) and give finality to disputes (by shielding them from foreign law/public policy challenges).
As a practical matter, this case highlights the importance of pleadings in arbitration, and of parties set out their case at an early stage.
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.