In V and another v K [2025] EWHC 1704 (Comm), the Commercial Court rejected permission to appeal a decision dismissing challenges to an arbitral award on the papers and awarded indemnity costs against the applicants. The decision highlights the potential costs consequences of challenging arbitration awards.
Background
The underlying dispute arose from a London Maritime Arbitrators Association (LMAA) arbitration. The claimants brought two challenges to the partial final award under section 67 (jurisdiction) and section 68 (serious irregularities) of the Arbitration Act 1996 (the Act). Both challenges were dismissed by Justice Bright on the papers (without a hearing).
The claimant then sought permission to appeal Justice Bright's decision.
Decision
Mr Justice Calver rejected the claimants' application to appeal the court's decision to dismiss the claimants' challenge to the partial award and awarded indemnity costs against the claimant.
The court found that the claimants' challenge under section 67 should not have been made as it was"hopeless"and"effectively abandoned at the hearing". Moreover, it noted that numerous grounds under the section 68 challenge relating to alleged apparent bias had been abandoned during the hearing, leaving only one ground standing.
The court held that it was these factors that brought this case "out of the norm" and justified an order of indemnity costs against the claimants. The claimants were ordered to pay 100% of the defendant's costs, 70% of which it awarded on an indemnity basis due to the claimants' pursuit of a clearly meritless section 67 challenge and the late withdrawal of the multiple bias allegations under section 68. The remaining 30% were awarded on the standard basis. The court summarily assessed costs and directed the claimants to pay £200,000 within 14 days.
Comment
This decision repeats the English court's long-standing message: speculative challenges to arbitral awards are strongly discouraged.
It reflects the application of section O of the Commercial Court Guide, which aims to deter parties from pursing weak claims of serious irregularity under section 68 (see our blog post here).
Section O.7.8 allows an applicant to seek directions for a hearing where the challenge was initially dismissed on the papers, but if that application fails, the applicant may be left with a hefty bill for indemnity costs.
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