Case No: 2010 Folio 1549
Royal Courts of Justice
Strand, London, WC2A 2LL
Before :
MRS JUSTICE GLOSTER DBE
Between :
SOEXIMEX SAS | Claimant/Buyers |
- and - | |
AGROCORP INTERNATIONAL PTE LIMITED | Defendant/Sellers |
Timothy Young Esq, QC (instructed by Elborne Mitchell LLP) for the Claimant
John Russell Esq (instructed by Hill Dickinson LLP) for the Defendant
Hearing dates: 1 July 2011
Judgment
Mrs Justice Gloster:
Introduction
This is an application by the claimant, Soeximex SAS (“the Buyers”), a company registered under the laws of France, pursuant to s68 of the Arbitration Act 1996 (“the Act”) for an order that an award of the GAFTA (Footnote: 1) Board of Appeal (“the Board”) in Appeal No.4195 dated 6 December 2010 (“the Award”) be remitted to the Board for reconsideration of the arguments presented by the Buyers in relation to (a) the operation of the US Burmese Sanctions Regulations (31 CFR Part 5) paragraph 537.202 (“the US Regulations”); and (b) Article 14 of Council Regulation (EC) No 194/2008, as amended by Commission Regulation 385/2008 (“the EU Regulations”).
Background facts and procedural history
The Buyers entered into a contract (“the Contract”) for the purchase of 15,000 metric tonnes of (Burmese) “Myanmar Long Grain White Rice EMATA -25% CNF FO Conakry, Benin in Bulk” from the Defendant, Agrocorp International Pte Limited (“the Sellers”), a company registered under the laws of Singapore. The origin of the rice was expressly described as “Myanmar”. Payment by the Buyers for the rice was to be by an irrevocable letter of credit in the terms set out in paragraph 3.2 of the Award. These included an express requirement in the following terms:
“L/c to allow TT reimbursement from New York bank with account number details; third party documents and to be freely negotiable in Singapore for 30 days from ...”.
It was common ground that, in the event, the letter of credit had to be opened by 10th October 2008 and that the Buyers never did so. The Sellers treated that as a repudiatory breach and claimed damages.
The original GAFTA Award No 13-833 was dated 7 August 2009. The Board held two hearings of the appeal, on 8 December 2009 and on 24 and 25 February 2010. The Award was made available to the parties (subject to payment of its fees) on 18 November 2010. It provided for the Buyers to pay US$375,000 by way of damages, plus interest and costs.
The Buyers’ first argument before the Board was that the Sellers had committed a repudiatory breach of the Contract before they, the Buyers, were in breach and that that breach had been accepted by the Buyers. That argument was rejected by the Board (Footnote: 2) and the Board’s decision in relation to that argument is not challenged by the Buyers.
The Buyers’ second argument was that they were relieved from performance because it would have been illegal for them to have opened a letter of credit:
under the US Regulations (which they alleged were relevant because the letter of credit was to allow reimbursement from a New York bank; and/or
under the EU Regulations (which they alleged were relevant because English law was the law of the contract).
The Board found, against the Sellers, that both the US Regulations and the EU Regulations applied to the Contract (Footnote: 3). However, the Board rejected the Buyers’ arguments that the Contract was, as a result, void for illegality. The Board’s reasoning was as follows (Footnote: 4):
“7.9 The fact that the US and EU Regulations relied on by Buyers applied does not, however, of itself drive the Buyers’ argument home. For them to succeed, Buyers would need to prove not only that the Regulations applied but that, on a balance of probabilities, the opening of the letter of credit required by the Subject Contract would indeed violate those Regulations. It is only such putative violation which would allow Buyers to escape from what would otherwise be a breach by Buyers of the payment clause under the Subject Contract.
7.10 For Buyers to be home and dry on the US Regulation, they would need to prove that the money payable through reimbursement under the letters of credit was payable to Burmese persons. For them to succeed on the EU Regulation, Buyers would need to prove that the moneys payable under the letters of credit was payable to the persons listed in Annex VI of the EU Regulation. The question for the Board was whether Buyers had succeeded in proving these two things on a balance of probabilities.
7.11 Buyers sought to establish that a Schedule of Shipments from Myanmar late in 2008 after the dispute had arisen between the parties to the Subject Contract was proof positive that the original suppliers of the goods destined for the performance of the Subject Contract were Burmese (for the purposes of the USA Regulation) and were listed persons (for the purposes of the EU Regulation) - and that moneys paid under the Subject Contract were eventually destined for Burma and/or for Burmese listed persons.
7.12 Looking at the evidence as carefully as we might, however, we took the view that the evidence relied upon by Buyers fell far short of what they needed to prove to establish the defence of illegality to an action for breach. In our view, all that was proven by the Schedule of Shipments was that after the dispute had arisen between Sellers and Buyers, Sellers had sold to third party buyers in Bangladesh goods which had originated in Burma with listed persons. It did not, however, prove that the goods sold to buyers in Bangladesh were the same physical parcels of goods which Sellers had intended to sell Buyers under the Subject Contract. Neither were we presented with any evidence of an actual contract of purchase upstream from the Subject Contract between Sellers and listed Burmese persons. Neither, indeed, were we presented with any evidence that Sellers intended to pay sums payable under the Subject Contract to listed Burmese persons - much less that they had paid such persons for the same goods destined for delivery under the Subject Contract. In our view, the evidence simply did not stack up to support Buyers’ contentions in this regard.
7.13 Before we leave the issue of the link between the goods sold by Sellers to Bangladeshi buyers against Buyers and the goods which had been purchased by Sellers to satisfy the Subject Contract, we need to deal with a pleading point raised by Buyers. In quantifying the losses said by Sellers to have been caused by Buyers’ failure to open a letter of credit, a matter with which we shall presently deal more specifically, Sellers had suggested, at paragraph 24.4 of their Statement of Case before this Board, and as one of two alternative measures of loss, ‘damages based on its actual re-sale price of the cargo [emphasis added] at USD348’. Buyers’ pleading point was that this short sentence on quantum precluded Sellers from now denying that the goods they sold to Bangladeshi buyers were indeed the goods purchased from Burmese listed persons.
7.14 We took the view that this pleading point, unsupported in any way by any evidence (as we have seen) to prove a necessary linkage between goods purchased upstream and goods sold against default, was an extremely unmeritorious and technical argument, based on an unjustifiably narrow interpretation of a phrase, i.e. ‘the cargo’ in a short paragraph, namely paragraph 24 in Sellers’ Appeal Submissions.
7.15 For these reasons we find that Buyers did not establish, on a balance of probabilities, that the opening of the letter of credit required by the Subject Contract would violate the applicable USA and EU Regulations, such that performance of the Subject Contract would become illegal.
7.16 It follows from our findings so far - and from the fact that it was never denied by Buyers that they had failed to open a letter of credit - that, bereft of the defences which they had failed to establish (namely, the Sellers’ alleged renunciation of the Subject Contract and illegality), Buyers were clearly in breach of contract by failing to open a letter of credit - and we so find.”
The Buyers’ arguments
Mr. Timothy Young QC, who appeared on behalf of the Buyers before this Court (but not before the Board), submitted that the Board failed to deal with two substantial and important arguments addressed by the Buyers. He submitted that this had caused the Buyers substantial injustice, since there was a high probability that the outcome of the Award would have been materially different and in the Buyers’ favour, if the omitted points had been considered. Alternatively, even if the Board, having properly addressed the issues, had erred in its conclusions of law in relation thereto, and had found in the Sellers’ favour, that would have afforded the Buyers the possibility of an appeal to this Court under s69 of the Act and/or a reference to the Court of Justice of the European Union.
He submitted that the basis of the Board’s decision that the defence of illegality was unavailable to the Buyers, was that the Buyers had failed to prove as a matter of fact that the suppliers were “listed Burmese persons” (Footnote: 5). He said that the Buyers accepted that that finding of fact had been made against them and that it disposed of one issue or two distinct issues in relation to the EU Regulations. But, he submitted, that finding did not address:
a different and distinct argument, which had been advanced by the Buyers at the hearing of the appeal, in relation to the US Regulations, and which was not dependent on the “listed Burmese persons” argument; and
an analytically distinct and substantially different point in relation to the EU Regulations, which was based on a “mistaken, but acting in good faith” defence, afforded by Article 14 of the EU Regulations.
In other words, he contended that the Board of Appeal overlooked the fact that the “Listed Persons” point was only one of the issues arising in relation to the defence of illegality and that it failed to address the above two points.
In relation to the argument based on the US Regulations, Mr. Young submitted as follows:
The relevant provision of the US Regulations was in the following terms:
“paragraph 537.202 Prohibited exportation or reexportation of financial services to Burma.
Except as authorized, and notwithstanding any contracts entered into or any license or permit granted prior to July 29, 2003, the exportation or reexportation of financial services to Burma, directly or indirectly, from the United States or by a U.S. person, wherever located, is prohibited.”
The term “exportation or reexportation of financial services to Burma” was defined in 31 CFR paragraph 537.305 as follows:
“(a) The transfer of funds, directly or indirectly, from the United States or by a U.S. person, wherever located, to Burma; or
(b) The provision, directly or indirectly, to persons in Burma of … banking services, … letters of credit or other extensions of credit;...”
In evidence before the Board (Footnote: 6) was the undisputed expert evidence of Mr. R. Richard Newcomb, a partner in DLA Piper LLP, New York. This was to the effect that, if a US Bank:
“… were to issue confirm or advise a L/C opened by a buyer of Burmese goods or if it were to send US Dollars to reimburse a foreign bank/s funding of any L/C issued for the purpose of paying for Burmese goods ....”
it would be subject to the prohibition in the relevant US Regulation. In other words, his expert opinion was that:
“… a New York bank would be exporting financial services indirectly to Burma in violation of [the Regulation] if it reimbursed the buyer’s issuing bank [or the seller’s bank (Footnote: 7)] in the manner contemplated by the Payment term of the Contract. In my experience, New York banks do not issue, confirm, advise or otherwise support L/Cs opened by buyers of Burmese goods because paragraph 537.202 prohibits them from so doing in the absence of an OFAC license. Similarly, if a buyer’s bank wished to make a payment in U.S. dollars to the seller’s bank for the purchase of Burmese goods (whether under a L/C or otherwise) then any correspondent bank in the United States instructed to effect such a payment would be prohibited by the Regulations from knowingly processing that payment.”
That argument was specifically made in paragraphs 24(b)(ii) and (iii) of the Buyers’ written Statement of Case and specifically developed by the Buyers’ representative at the hearing (Footnote: 8). Those statements were expressly endorsed as correct by Mr. Newcomb as a matter of United States law. He said:
“The [US Regulations] generally prohibit ‘U.S. persons’ as defined above from transacting most business involving Burma (a/k/a Myanmar) unless OFAC has issued a license authorising the business in question.”
For this issue, the identity of the specific Burmese beneficiaries was irrelevant. It was enough if there was an “indirect supply of financial services to Burma”. However, this issue was not dealt with by the Board in the Award. The Board appear to have overlooked the issue as a separate issue altogether, and concentrated on the identity of the specific suppliers; it was its finding of fact in paragraph 7.12 of the Award that seems to have led the Board of Appeal to hold that illegality presented no defence.
That was a grave oversight, given that the Board had concluded that the US Regulations did indeed apply to the contract (Footnote: 9) and thus rejected the Sellers’ only argument in relation to them, namely that they were “simply irrelevant” as a matter of English law. The Board considered that the US Regulations were relevant but then did not deal with the above discrete issue as advanced by the Buyers, notwithstanding the conclusion in paragraph 7.5 of the Award that the paragraphs of the “USA Regulation relied upon by Buyers are wide enough to cover TT reimbursement by a New York Bank in US Dollars”.
If the Board had considered this separate issue, it was at least highly likely that it would, or at least should, have addressed the unchallenged evidence of Mr. Newcomb and accepted it; the issue of “listed persons” was irrelevant to this limb of the case presented and was not dispositive of the argument.
Whilst a tribunal was entitled not to accept evidence, even if that evidence was not disputed, in an Award where the issue had been properly considered by the tribunal, one would normally expect a reference to the evidence and an express statement to the effect that such evidence had not been accepted, and the reasons for such rejection. Where, as here, however, there was no reference to such evidence at all, the natural inference was that the issue and the evidence simply did not appear on the Board’s “radar screen” when they were writing their award. The natural inference was that they forgot about it altogether or ignored it.
If the Board had considered the issue and the undisputed evidence, there was a strong case that it would, or should, have concluded that the express terms of the contract meant that the opening of the stipulated letter of credit involved an illegal act in the US as a place of performance of contractual obligations and thus subject to the rules of illegality. If the Board had done that, there was also a strong case that it would or should have concluded that the defence of illegality was made out. The oversight had therefore created the material risk of substantial injustice.
In relation to the argument based on the EU Regulations, Mr. Young submitted as follows:
Article 14 of the EU Regulation provides that:
“... the refusal to make funds or economic resources available, carried out in good faith on the basis that such action is in accordance with the Regulation, shall not give rise to liability of any kind on the part of the natural or legal person or entity implementing it, or its directors or employees, unless it is proved that the funds and economic resources were frozen as a result of negligence...”.
Thus, although the Board’s finding that the Buyers had failed to prove as a matter of fact that the suppliers were “listed Burmese persons” deprived the Buyers of any defence under Article 11 of the EU Regulation (which was accepted), nonetheless there was a separate and discrete argument that the Buyers were absolved from liability pursuant to Article 14. The argument was that, even if a party refusing to make economic resources available was wrong in his belief that there was going to be direct or indirect funding of a proscribed “listed person”, nonetheless, provided that he so acted in “good faith” in the belief that his act was in accordance with the Regulation, he was absolved from all liability.
That argument had been clearly presented in the Buyers’ Statement of Case and in their Oral Submissions. However the point did not appear to have been considered by the Board in the Award.
The Sellers did not seem actually to deny that the Board was in material error in failing to consider the “good faith” defence. The Sellers’ approach was to the effect that there was no substantial injustice under s68 because the Buyers were “bound to fail” on the Article 14 good faith issue; that was because
“… the Buyers did not ‘in good faith’ ‘refuse’ to make funds or economic resources available. It was the banks which refused to establish letters of credit. The article might arguably give the banks a defence to a claim against them by the Buyers. But it cannot help the Buyers themselves who simply do not fall within its terms.” (Footnote: 10)
But if the Board had dealt with the argument, it would have had to have considered: (a) the good faith of the Buyers; and (b) the operation of Article 14. The Board did neither of these things. There was no finding that the Buyers were not acting “in good faith”, even though the Board found they were mistaken. A finding of the want of good faith was not something which could or should be inferred from a tribunal’s failure to mention it in an award. The Buyers’ argument in this respect was not “over-meticulous”. If a finding of a want of good faith was to be made in an award, it should be made clearly and expressly. If the Board had considered the presence or absence of “good faith” on the part of the Buyers, there was a very good chance that they would have had to conclude that the Buyers were indeed in “good faith” (albeit mistaken) within the meaning of Article 14 and that Article 14 gave a defence to the Buyers. The failure altogether to consider the point had thus generated substantial injustice.
The Sellers’ arguments
Mr. John Russell, who appeared on behalf of the Sellers before this Court (but not before the Board), contended in summary that:
There was no serious irregularity, because the Board did deal with all the essential issues put to it. It clearly dealt with the specific argument now relied on in respect of the US Regulation (albeit that, in relation to the Article 14 argument its reasoning is not set out clearly).
The Article 14 argument as it was now put (namely that a failure to open the letter of credit could constitute a refusal for the purposes of the EU Regulations) was not an argument that was put to the Board.
The Buyers’ real complaints were:
That the Board had not set out its reasoning sufficiently. That did not give rise to a s68 challenge. It had its own remedy under s70(4) of the Act. However, the Buyers were not seeking any relief under that section.
That the Board’s decision was or might be wrong. That too did not give rise to a s68 challenge.
Any serious irregularity, if there was one, had caused no substantial injustice, since the Board’s decision (upholding that of the first tier tribunal) was right.
As the Buyers’ skeleton fairly accepted, there was a “high threshold” for s68 applications. According to the DAC Report, s68 was:
“… a long stop, only available in extreme cases where the tribunal has gone so wrong in its conduct of the arbitration that justice calls out for it to be corrected.”
It had been held in numerous cases in relation to s68(2)(d), that a clear distinction had to be drawn between a failure to deal with an essential issue (which may give rise to a s68 challenge) and a failure to set out the tribunal’s reasoning in relation to all the arguments advanced in the arbitration (which will not); see, by way of example: Fidelity Management v Myriad International [2005] 2 Lloyd’s Rep 508 paragraphs 7 to 10; Margulead v Exide Technologies [2005] 1 Lloyd’s Rep 324 paragraphs 39 to 45. The Buyers’ arguments failed to recognise this crucial distinction. Where a tribunal had addressed an issue, s68(2)(d) could not be used to challenge a decision that one party did not like, which what the Buyers were trying to do here.
The observation of Cresswell J in Petroships Pte Ltd v Petec Trading and Investment Corporation, The “Petro Ranger” [2001] 2 Lloyd’s Rep 348, 351 that there can be intervention only:
“… where it can be said that what has happened is so far removed from what could reasonably be expected of the arbitral process”
was particularly relevant to the present case.
In GAFTA Appeal Board awards, it was very much the style for conclusions to be stated shortly without detailed reasoning being set out. There was nothing in this case which was far removed from what could reasonably be expected of the GAFTA Appeal Board process.
Here the Award expressly recorded that the Board had considered the written submissions filed and the oral representations made. This should be taken at face value. The Board had expressly dealt with the essential issues. A failure to set out full reasoning (which is really the Buyers’ case, at its highest) could not justify a s68 challenge.
There is nothing in the Buyers’ speculation that the period between the oral hearing and the publication of the Award might have led to a serious irregularity.
In relation to the argument based on the US Regulations, Mr. Russell submitted as follows:
The wider argument, not related to listed persons, and the evidence of Mr. Newcomb in relation to that argument, was expressly referred to by the Board in its Award at paragraphs 4.16 and 4.18. Whilst it is fair to note that the language used by the Board in paragraph 7.12 of the Award (where it held that the evidence relied on by the Buyers fell far short of what was needed to establish illegality) may suggest a focus on listed Burmese persons as opposed to any Burmese persons, given the earlier reference to the US evidence, that was to scrutinise the Award with a, “meticulous legal eye endeavouring to pick holes, inconsistencies and faults,” which was precisely the approach which the courts have repeatedly deprecated in the context of s68 challenges.
The key point, given the Board’s interpretation of the US Regulations at paragraph 7.10, was that there was no evidence of any relevant upstream contract or of any payment by the Sellers to any Burmese persons. Thus, in relation to the US Regulations, not merely did the Board deal with the essential issue, on a fair reading of the Award it expressly dealt with the particular “point” now relied on by the Buyers.
In any event, absent any evidence of payment to Burmese persons, the Award was plainly right and Mr. Newcomb’s extreme case was wrong. There was no substantial injustice caused by the Award.
In relation to the argument based on the EU Regulations, Mr. Russell submitted as follows:
It was right that the Award did not expressly refer to Article 14. However, the essential issue in relation to the EU Regulations was identified and dealt with, so that a failure to refer to a sub-issue or argument does not lead to a s68 challenge.
Further, it was not surprising that the Award did not refer expressly to the Article (particularly given the concise (perhaps overly concise) drafting style typical of GAFTA awards). It was plainly a condition precedent for the operation of Article 14 that the party seeking to rely on it had refused in good faith to act in a particular way because of the EU Regulations. Section 4 of the Award sets out the relevant facts as found by the Board. There was nothing there to support the argument that the Buyer: (a) refused; (b) in good faith to make funds available because they feared they would fall foul of the EU Regulations. Absent the factual foundations, it was less surprising that the Article itself was not referred to. Thus there was no “material error” (still less a serious irregularity) in the Award just because Article 14 was not referred to expressly.
The Buyers’ attempt to argue that it was a question of law whether their failure to establish the letter of credit could constitute a “refusal” for the purposes of Article 14 - indeed a question of law which may, or perhaps must, require reference to the ECJ – did not justify a s68 application. They had launched no s69 application for permission to appeal on a point of law. They could not now try to shift their s68 application into a challenge to the Award on a point of law by arguing that the Board was wrong to proceed on the basis that the Buyers’ failure to provide the letter of credit did not constitute a “refusal” for the purposes of Article 14.
Accordingly, the application should be dismissed. Alternatively, if the court were to consider there was any mileage in the Buyers’ arguments, the proper approach, in the first instance, would be to order the Board pursuant to s70(4) of the Act to state the reasons for its award in sufficient detail to enable the court to determine whether in fact the Board had dealt with the “points” relied on by the Buyers.
Discussion and determination
Despite Mr. Russell’s submissions, I have concluded that, on proper analysis of the Award, this is indeed a case where s68(2)(d) is engaged. In my judgment, there was a failure by the Board “to deal with all the issues that were put to it” which, in the circumstances, amounted to a serious irregularity which has caused serious injustice to the Buyers. My reasons, which largely reflect Mr. Young’s submissions, may be shortly stated as follows.
The approach to an application under s68(2)(d) is helpfully set out in paragraphs 2-10 of Morison J’s judgment in Fidelity Management v Myriad International, supra, which I adopt.
So far as the US Regulations were concerned, there was clearly an entirely separate argument, based on the unchallenged expert evidence of Mr. Newcomb, to the effect that, if a US Bank were to issue, confirm or advise a letter of credit opened by a buyer of Burmese goods, or if it were to send US Dollars to reimburse a foreign bank’s funding of any letter of credit issued for the purpose of paying for Burmese goods, that would be subject to the prohibition in the relevant US Regulation. His statement of the effect of the relevant provisions was very wide:
“[The US Regulations] generally prohibit ‘U.S. persons’ as defined above from transacting most business involving Burma (a/k/a Myanmar) unless OFAC has issued a license authorising the business in question.”
In relation to that argument, the identity of the specific or listed Burmese beneficiaries was irrelevant. As Mr. Young submitted, it was enough if there was an “indirect supply of financial services to Burma”.
That argument clearly raised an important issue in relation to the Buyers’ case. It was specifically put to the Board; thus it appeared in paragraphs 24(b)(ii) and (iii) of the Buyers’ written Statement of Case and was specifically developed by the Buyers’ representative at the hearing. But, although the Board expressly referred to the evidence of Mr. Newcomb in its Award at paragraphs 4.16 and 4.18, there is no indication that it addressed what was clearly an important and discrete issue. Paragraph 7.12 of the Award (where the evidence and the Board’s conclusion in relation to listed persons is set out) does not address the point.
One cannot characterise the Board’s failure in this respect, as one where a tribunal has simply not given sufficient reasons for its decision, but has adequately expressed its conclusion on the arguments addressed. I reject Mr. Russell’s submission that this was a case on all fours with Margulead. As Mr. Young submitted, the Board appears to have overlooked the issue as a separate issue altogether, and concentrated on the identity of the specific suppliers; it was its finding of fact in paragraph 7.12 of the Award (in relation to specific suppliers) that seems to have led the Board to hold that illegality presented no defence. If the Board had indeed been addressing the wider argument, it is inconceivable that it would not have addressed its reasons for not accepting - or treating as irrelevant - Mr. Newcomb’s unchallenged evidence.
In the circumstances, and in particular, in the absence of any expert evidence to the contrary, it is not appropriate for me to address Mr. Russell’s submission to the effect that the Sellers’ arguments in relation to this discrete point on the US Regulations were in any event wrong. There was clearly a reasonable argument put forward on the Buyers’ behalf, which they were entitled to have considered by the Board.
Similarly, so far as the arguments based on the EU Regulations were concerned, it is clear that the Buyers’ argument under Article 14 was an entirely separate defence from their defence under Article 11. It was an important issue that had been clearly presented in the Buyers’ Statement of Case and in their Oral Submissions as a separate issue.
Mr. Russell’s submissions - to the effect that there was no substantial injustice under s68 because the Buyers were “bound to fail” on the Article 14/ good faith issue – were not persuasive. He suggested that there was an absence of any evidence that the Buyers had “refused” “in good faith” to make funds or economic resources available and that it was the banks which “refused” to establish letters of credit, rather than the Buyers, and accordingly Article 14 was not engaged. However, there was certainly prima facie evidence suggesting that the Buyers had acted in good faith in refusing to give instructions for the opening of letters of credit (Footnote: 11). And there was certainly a reasonable argument on the basis of the wording of Article 14 to the effect that it would operate: (a) to absolve a contracting party from liability for failing to open a letter of credit (not merely a bank or credit institution); and (b) would do so in circumstances where the Regulation would not in fact have been breached, if the letter of credit had been opened and utilised, but the contracting party in good faith and reasonably believed that it would have been so breached. I make it clear that I am not expressing a view on the correctness of either argument; I am simply stating my conclusion that both points are arguable.
It is clear that neither of these arguments was addressed, whether as a separate issue, or at all, by the Board in its Award. There was no finding that the Buyers were not acting “in good faith”, or indeed any consideration of that issue, even though the Board effectively found that they were mistaken in their view of the effect of the Regulation. Nor was there any consideration of the meaning of Article 14 and whether, in the circumstances, it afforded any defence to the Buyers.
The Commercial Court is very sensitive to the fact that parties have chosen to have their disputes resolved by an industry or trade arbitral tribunal, rather than by the Courts. As a matter of general approach, it tries to uphold arbitration awards and to read them in a sensible and commercial way. It is very mindful that the Court’s role on a s68 application is not to pick holes in an award, or to indulge in an over-nice analysis of what may be understandably brief reasons given by commercial men in areas with which they are far more familiar than the Court. However, in this case, there were clearly legal issues which had to be addressed and were not; the Award took some time to be produced, which may explain why some issues were overlooked. In all the circumstances, I conclude that there was indeed a failure by the Board to deal with all the issues that were put to it, and that, given the arguments which were available to the Buyers, this failure amounted to a serious irregularity which has caused the Buyers substantial injustice, since (absent a remission to the Board) they have been deprived of the opportunity of having their arguments on these important points resolved, whether by the Board, or on an appeal under s69.
In the light of my conclusion that the Board had not dealt with the relevant issues in relation to the US and EU Regulations, I see no merit in Mr. Russell’s suggestion that:
“… the correct approach, in the first instance, would be to order the Board pursuant to s70(4) of the Act to state the reasons for its award in sufficient detail to enable the court to determine whether in fact the Tribunal had dealt with the “points” relied on by the Buyers.”
In circumstances where the Board simply did not address the points, that course would be a waste of time.
Disposition
Accordingly, I consider that the appropriate course is to order that the Award be remitted to the Board of Appeal on both points.
I will hear argument from counsel as to any consequential orders arising, if these cannot be agreed.