OVERVIEW

CVLC Three Carrier Corp v Arab Maritime Petroleum Transport Company [2021] EWHC 551 (Comm)

Overview: Second bites at s.69(3) - Round the course again

The English statutory regime for appeals against arbitration awards on questions of law under s.69 of the Arbitration Act 1996, as is well known, applies a two stage process: (i) the application of permission to appeal and, (ii), if permission is granted the appeal itself.

Section 69(3) sets out the matters on which the Court is required to be satisfied as pre-conditions for granting permission to appeal. Where a party unsuccessfully resists permission on the basis that some or all of the requirements are not met, can it nevertheless reargue the point or points all over again on the appeal proper?

And where one of those matters is: was the question of law "one which the Tribunal was asked to determine" (section 69(3)(b)), is the position different? How does the Court identify "the question" when granting permission?

The Commercial Court gave important guidance on these issues in CVLC Three Carrier Corp v Arab Maritime Petroleum Transport Company [2021] EWHC 551 (Comm), in allowing an appeal under section 69 on an important guarantee issue.

The welcome (and very firmly expressed) answer from the Court is that there must "highly unusual" circumstances before it will ever be permissible to ask the Court to revisit the component parts of the section 69(3) decision giving permission to appeal. That goes for the identification of the question of law (69(3)(b)), as much as for any other component.

Simon Rainey QC appeared for the successful appellant, leading Gavin Geary and instructed by Reed Smith (Nick Austin and Charles Weller).

How the issue arose

The claimant CVLC sought permission to appeal against an arbitration award on a question of law arising from the Award. The defendant AMPTC opposed permission on various grounds including a submission that the tribunal had not been asked to decide the relevant question (and therefore that the threshold requirement of s.69(3)(b) of the Arbitration Act were not met).

The issue as to the question of law came up in the context of an urgent application by AMPTC, as guarantor, for a declaration to prevent CVLC from maintaining an arrest of AMPTC's vessel in support of a claim by CVLC for breach of the guarantee. AMPTC argued that it was an implied term of the guarantee that beyond the issuance of the guarantee itself, CVLC impliedly promised that it would seek no other security in any circumstances. The arbitrator found that there was a term as alleged. AMPTC had sought to bolster the term by relying (a) on the wording of the guarantee and (b) various factual matters. The arbitrator declined to make any findings on the facts, given that these were contested and it was an urgent documents only hearing, but found for the implied term solely on the basis of the wording.

AMPTC said that the question of law framed by CVLC (as a general question of law potentially applicable to all guarantees) was not the question determined by the arbitrator (which was tied to the particular facts). The Judge granting permission disagreed but felt that the question of law in fact addressed in the Award was different from that formulated by CVLCC and reformulated the question which in her view had been determined and which gave rise to the question of law. Permission was granted on this basis.

On the hearing of the appeal (which, unusually, was heard by the Judge who granted permission), AMPTC sought to re-open the issue and re-argue its submission that the CVLC question had not been the question left to the arbitrator and also to argue that, contrary to what the Court had ordered in granting permission, the Judge's reformulated question had not been left to him either; therefore, the Court had no jurisdiction to entertain the appeal.

The Commercial Court's decision: (1) 'Re-opening' Section 69(3) issues

On the s69(3)(b) point, AMPTC argued that the judge's decision on all matters at the permission stage is purely "provisional" and therefore one which can be revisited at the main hearing "with the benefit of the "Socratic dialogue" provided by oral argument" (as it was put).

While the Judge accepted that the judge's decision at the permission was not in law necessarily finally binding, she rejected the suggestion that this meant that it was always open to respondent to seek to go back over what it had lost on at the permission stage. As she put it, that argument "is a novel one, and one which is not reflected in the way in which appeals have been conducted in this Court for the last 25 years" [33].

She held that:

  1. the permission stage is intended to be a qualifying hurdle which is not revisited;
  2. while it may not be impossible to revisit the various component parts of the permission decision, "there will have to be highly unusual circumstances justifying this course";
  3. the reason for this was that were the course for which AMPTC contended to be adopted, appeals would become much longer and more expensive, with all or most of the questions being relitigated in written and oral argument. "This would be consistent neither with the policy of the 1996 Act, nor with the overriding objective."

In doing so, she endorsed a previous decision grappling with the same issue and dismissing a similar attempt to re-open a debate at the permission stage as to whether section 69(3)(b) had been satisfied: see the judgment of HHJ Waksman in Agile Holdings v Essar ("The Maria") [2018] EWHC 1055 (Comm), which deserved much wider recognition.

Cockerill J. found that there were no "highly unusual circumstances". However, like HHJ Waksman in Agile, she nevertheless went on to consider the (re-) argument of AMPTC on the merits and to dismiss it as plainly wrong, the relevant question of law on the appeal having been one which the arbitrator was asked to determine.

The Commercial Court's decision: (2) Identifying the "question of law" under s.69(3)(b)

In doing so, Cockerill J set out a useful summary of the principles to be applied in identifying for the purposes of section 69(3)(b) whether "the question [of law] is one which the tribunal was asked to determine".

The Court adopted a pragmatic and sensible approach, contrary to the extremely technical approach adopted by AMPTC. AMPTC's argument drew a purported distinction between (i) its original argument for an implied term based on (a) the wording of the guarantees and (b) various factual matters which, in its view, alone was "the question of law" put to the arbitrator, and (ii) the decision of the arbitrator that there was an implied term, based on (a) alone and without (b), which, while an award in AMPTC's favour, was not the question of law but a different question and therefore one which could not be appealed.

Cockerill J. in rejecting that argument held as follows (at [36]):

  1. The question on appeal has to be one arising out of the award and it has to be one which the arbitrator was asked to determine.
  2. However it is not the case that the question must have been asked in exactly the form in which it is now posed at the section 69 stage. As she put it "Were that the case almost no applications for permission would succeed."
  3. She gave a useful practical test: "What is necessary is that the question of law is inherent in the issues for decision by the tribunal. It is often necessary to strip away the accretions of case specific drafting to arrive at the real issue of law."
  4. By the end of the procedure before the Award, the actual question being asked and being left to the arbitrator was whether, even without the factual matters, there was an implied term preventing arrest or not. That was the "macro question" and that is what mattered.

Comment

Appeals under section 69 of the Arbitration Act 1996 are frequently depicted in international arbitral circles as undesirable and as undermining arbitral finality. While this is misplaced (as the Commercial Court statistics show that number of challenges is small and successful challenges are very far and few between), the Commercial Court in this decision (as before in Agile) makes it plain that attempts to undermine the streamlined two stage system instituted by the Act, which was designed to deal with proposed appeals (especially at the permission hurdle stage on the papers) in a straightforward way will not be welcomed.

It is to be hoped that this robust approach will discourage defendants who are unsuccessful at the permission stage from re-opening such points thereby rendering the s.69 process more time-consuming and more costly.

However, one parting thought. If there are no "highly unusual circumstances" meriting the re-opening of the section 69(3) matters, then perhaps the Court should simply state that, with brief reasons and end the matter there, i.e. without going on to deal with the argument for completeness' sake (somewhat defeating the purpose of the summary dismissal). Similarly, the Court should seek wherever possible to short-circuit oral argument on the appeal dealing with the attempt to re-open, confining it (in the first instance) to the respondent explaining why there are "highly unusual circumstances".

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