Sidley has successfully represented an affiliate of Tecnicas Reunidas in a rare and significant victory before the High Court, which set aside an International Chamber of Commerce (ICC) arbitration award on jurisdictional grounds under section 67 of the Arbitration Act 1996.
The judgment, delivered by Mr. Justice Bryan, represented a complete victory for Tecnicas Reunidas on both procedural and substantive grounds. It is one of the very few instances in which the English courts have set aside an award for lack of jurisdiction of the arbitral tribunal. The ruling is also novel for its detailed analysis of the applicable legal framework under the Arbitration Act 1996 and its emphasis on the substantive differences between ad hoc and institutional arbitration.
Central to the Court’s reasoning was the application of orthodox principles of contractual interpretation. The Court concluded that the parties’ arbitration agreement clearly provided for ad hoc arbitration, rather than ICC arbitration. The judgment reinforces the importance of interpreting arbitration clauses in their full commercial and documentary context. The judgment will be closely studied by practitioners and parties, particularly in instances of complex contractual architecture involving various interrelated instruments with inconsistent provisions, which are common in Engineering, Procurement, and Construction contracts and subcontracts.
Relief from Sanctions Denied
The Court rejected the Defendant’s application for relief from sanctions arising from its failure to acknowledge service of the Claimant’s section 67 claim. Mr. Justice Bryan rejected the Defendant’s argument that this was a mere “technical” oversight, emphasising the seriousness, consequences, and length of the breach. The Court noted that the breach was all the more serious given that “expedition and speedy finality” are especially important in the context of arbitration.
The Court found no justification for the failure, noting that the Defendant had legal representation and had received reminders from both the Court and Sidley. The Judge characterized timely service as “page one, line one for any solicitor,” and allowed the Defendant to attend the hearing only on a de bene esse basis as a non-party.
Application of Diag and Timeliness of Jurisdictional Challenge
In assessing whether Tecnicas Reunidas had preserved its right to bring a section 67 challenge, the Court applied the Court of Appeal’s reasoning in Czech Republic v. Diag Human SE & Anor [2024] EWHC 2102 (Comm) (Diag). Mr. Justice Bryan confirmed that, under Diag, a tribunal’s treatment of a jurisdictional objection on the merits can validate a later objection as timely under sections 31 and 73 of the Act.
The Court rejected the Defendant’s submission that the challenge was out of time or estopped by nomination of an arbitrator by Tecnicas Reunidas. The Court reaffirmed that such nomination does not bar a jurisdictional challenge under section 67, especially in circumstances where the Claimant had expressly reserved its rights to challenge jurisdiction and made clear that its participation in the ICC arbitral process was contingent on its jurisdictional challenge.
Jurisdictional Grounds under Section 30
The Court undertook a detailed examination of the meaning of “substantive jurisdiction” under section 30, and held that all three requirements were met: the challenge related to the arbitration agreement, the constitution of the tribunal, and the matters submitted to the tribunal. The Court rejected as a “bad point” the Defendant’s suggestion that the issue was merely procedural and that it should instead be brought under section 68.
In particular, the Court held that whether an arbitration was to be conducted ad hoc or under ICC rules went to the heart of the issue of “substantive jurisdiction,” given the “substantial” and even “fundamental” differences between the two.
Section 67 Hearing is De Novo
Reaffirming the nature of a section 67 challenge, the Court made clear that it is a de novo hearing of jurisdictional issues and, as such, the English courts re-examine for themselves the jurisdiction of the arbitrators. The arbitration award under challenge, therefore, was not entitled to “any particular status or weight.”
ICC Tribunal Had No Jurisdiction
The Court was in “no doubt whatsoever” that the arbitration agreement called for ad hoc arbitration and that the ICC Tribunal lacked jurisdiction, as argued by the Claimant. The Court held that the purchase order – one of the contractual instruments at issue, which expressly provided for ad hoc arbitration – took precedence over other documents in the event of inconsistency. The Defendant’s attempt to synthesize provisions across multiple documents to support ICC arbitration was firmly rejected as an “inappropriate” “pick and mix” approach.
Mr. Justice Bryan further underlined the stark differences between ad hoc and ICC arbitration, describing them as “fundamentally different beasts” with “fundamentally different contractual consequences.”
The decision is likely to be closely studied by practitioners and parties navigating the procedural and jurisdictional nuances of international arbitration, particularly in instances of complex contractual architecture involving various inter-related instruments.
The Sidley team was led by partners Simon Navarro (New York) and Andrew Fox (London), associate Daniel Wagner (London), and foreign temporary associate Ana Sofía Sapiña Errecart (New York).
