Islamic Republic of Pakistan & Anor v Broadsheet LLC

This is the judgment on the claimants’ application to challenge part of the Part Final

In support of their application, the claimants rely on the first and second witness statements of Ms Limond, a solicitor with Allen & Overy LLP, acting for the claimants, dated 28 January 2019 and 20 March 2019.

The first claimant is the State of Pakistan and the second claimant is the National Accountability Bureau which came into existence to combat white-collar crime and corruption-related offences.

The defendant, a company incorporated in the Isle of Man, is currently in liquidation.

The defendant was engaged pursuant to an asset recovery agreement dated 20 June

By a letter dated 28 October 2003, the second claimant gave notice to rescind the ARA to the defendant and stated that the defendant had committed repudiatory breaches of contract.

The defendant commenced arbitration proceedings against the claimants between 2009 and 2011.

The liability phase of the proceedings was heard in January 2016 and an award on liability was issued in favour of the defendant dated 1 August 2016.

The quantum hearing took place on 16 – 19 July 2018 and the Quantum Award was issued on 20 December 2018.

The tribunal awarded the defendant US$21,589,460 plus interest as damages for the breach and repudiation of the ARA by the claimants.

The majority of the claim related to the defendant’s loss of the chance claim in relation to the Sharif family, namely the value of the chance it lost to receive payment under the ARA in respect of recoveries made from Mr Sharif and his family.

These proceedings were commenced on 28January 2019. The proceedings were originally brought primarily pursuant to section 68 (2)(d) of the Act which relates to a failure by the tribunal to deal with all issues that were put to it; namely an alleged failure by the tribunal to apply a “loss of chance” discount to the damages awarded in respect of the “Sharif Family Other Assets”.

On 14 January 2019 the claimants made an application to the tribunal under Section 57 of the Act for certain corrections to the Quantum Award including the correction of the omission in relation to the application of the “loss of chance discount” in respect of the Sharif Family Other Assets. The tribunal made a ruling dated 19

In the light of the Section 57 ruling, part of the claimants’ challenge in these proceedings was withdrawn and the challenge was narrowed to a challenge under Section 68 (2)(c) and/or (h) of the Act.

Section 68 provides (so far as material):

“(1)

A party to arbitral proceedings may (upon notice to the other parties and to the tribunal) apply to the court challenging an award in the proceedings on the ground of serious irregularity affecting the tribunal, the proceedings or the award. A party may lose the right to object (see section 73) and the right to apply is subject to the restrictions in section 70(2) and (3).

(2)

Serious irregularity means an irregularity of one or more ofthe following kinds which the court considers has caused orwill cause substantial injustice to the applicant—

(a)

failure by the tribunal to comply with section 33 (general duty of tribunal);

(b)

the tribunal exceeding its powers (otherwise than by exceeding its substantive jurisdiction: see section 67);

(c)

failure by the tribunal to conduct the proceedings inaccordance with the procedure agreed by the parties;

(d)

failure by the tribunal to deal with all the issues that were put to it;

(e)

any arbitral or other institution or person vested by the parties with powers in relation to the proceedings or the award exceeding its powers;

(f)

uncertainty or ambiguity as to the effect of the award;

(g)

the award being obtained by fraud or the award or the way in which it was procured being contrary to public policy;

(h)

failure to comply with the requirements as to the form ofthe award; or

(i)

any irregularity in the conduct of the proceedings or in the award which is admitted by the tribunal or by any arbitral or other institution or person vested by the parties with powers in relation to the proceedings or the award.

“(3)

If there is shown to be serious irregularity affecting the tribunal, the proceedings or the award, the court may—”

(a)

remit the award to the tribunal, in whole or in part, for reconsideration,

(b)

set the award aside in whole or in part, or

(c)

declare the award to be of no effect, in whole or in part.

The court shall not exercise its power to set aside or to declare an award to be of no effect, in whole or in part, unless it is satisfied that it would be inappropriate to remit the matters in question to the tribunal for reconsideration.

(4)

The leave of the court is required for any appeal from a decision of the court under this section.” [emphasis added]

Section 70 provides (so far as relevant):

“(1)

The following provisions apply to an application or appeal under section 67, 68 or 69.

(2)

An application or appeal may not be brought if the applicant or appellant has not first exhausted— (a) any available arbitral process of appeal or review, and

(b)

any available recourse under section 57 (correction of award or additional award).

(3)

Any application or appeal must be brought within 28 days of the date of the award or, if there has been any arbitral process of appeal or review, of the date when the applicant or appellant was notified of the result of that process.

(4)

If on an application or appeal it appears to the court that the award—

(a)

does not contain the tribunal's reasons, or

(b)

does not set out the tribunal's reasons in sufficient detail to enable the court properly to consider the application or appeal, the court may order the tribunal to state the reasons for its award in sufficient detail for that purpose.”

The following principles relevant to a challenge under Section 68 were common ground:

It was submitted for the claimants that:

It was submitted for the defendant that:

The issues for this court are therefore:

The claimants relied on Compton at [36] and [51]:

“[36]…There is a difference between a failure to deal with an essential issue, which is an irregularity within section 68(2)(d) , and some other failure of reasoning, which is not. A failure of reasoning might in some cases allow a party to seek clarification under section 57(3) or might allow a party to seek an order from the court under section 70(4) . Further, a failureof reasoning may give rise to an irregularity within section68(2)(f) or may mean that the form of the award does not comply with section 52(4) , thereby enabling a party to contend that there is an irregularity within section 68(2)(h) . I will, later in this judgment, consider in detail the scope of the duty of an arbitrator to give reasons for his award.”

“[51] It is clear from the above citations that an arbitratorshould explain why he has decided the essential issues in theway in which he has. An award which did not contain suchreasoning would not comply with section 52(4) of the 1996 Actand that would give rise to an irregularity within section68(2)(h) of the 1996 Act. However, there will only be a “serious irregularity” if the failure of reasoning has caused or will cause substantial injustice to a party…” [emphasis added]

In Margulead it was submitted that contrary to Section 68(2)(d) in preparing his Final Award the arbitrator failed to consider or even refer to an argument advanced by Margulead that Exide had affirmed the contract in dispute and therefore could not rely on the allegation that the contract had been entered into by mutual mistake. Colman J said:

“[39] The essence of Margulead's complaint is that the arbitrator made no reference in his Award to the argument that Exide could not rely on mutual mistake as a defence because it had affirmed the agreement.

[40]

Margulead had specifically raised the affirmation and election point in its post-hearing brief. Exide also dealt with the point in its post-hearing brief. The arbitrator stated in his Correction Award in response to Margulead's application that he had given full consideration to all Margulead's arguments....

[41]

A deficiency of reasons in a reasoned award is not capableof amounting to a serious irregularity within the meaning ofSection 68 of 1996 Act unless it amounts to a "failure by thetribunal to deal with all the issues that were put to it" withinSection 68(2)(d).In construing the meaning of (d) one musthave regard to Section 70(4). This provides:

"(4)

If on an application or appeal it appears to the court that the award

(a)

does not contain the tribunal's reasons, or

(b)

does not set out the tribunal's reasons in sufficient detail to enable the court properly to consider the application or appeal,

the court may order the tribunal to state the reasons for its award in sufficient detail for that purpose."

[42] Deficiency of reasoning in an award is therefore thesubject of a specific remedy under the 1996 Act. It is accordingly self-evident that:

i)

failure to deal with an "issue" under Section 68(2)(d) is not equivalent to failure to deal with an argument that had been advanced at the hearing and therefore to have omitted the reasons for rejecting it;

ii)

Parliament cannot have intended to create co-extensiveremedies for deficiency of reasons one of which ( Section 68 )was a general remedy which might involve setting aside orremitting the award in a case of serious injustice and one ofwhich (Section 70(4)) was designed to provide a specificremedy for a specific problem;

iii)

the court's powers under Section 68(2) being engaged only in a case where the serious irregularity has caused substantial injustice, the availability of the facility to apply for reasons or further reasons under section 70(4) would make it impossible to contend that any "substantial injustice" had been caused by deficiency of reasons.

43.. The meaning of "failure to deal with all the issues" must therefore refer to a failure to deal with a claim or a distinct defence to a claim advanced before the tribunal and not merely to an omission to give reasons for the tribunal's conclusion in respect of such claim or defence. It is in those cases in which the award expresses no conclusion as to a specific claim or a specific defence that the Award can be said to have failed to deal with an issue.” [emphasis added]

Whilst Margulead was dealing with section 68(2)(d), the reasoning in [41] and [42] appears to be of wider application, in particular in relation to the conclusion that a deficiency of reasons was not capable of amounting to a serious irregularity under section 68 having regard to what the judge described as the “specific remedy” undersection 70(4).

In Czarnikow Sugar Colman J said at [9]:

“ In this connection [an application under section 57], it is clear that arbitrators are not in general required to set out in their reasons an explanation for each step taken by them in arriving at their evaluation of the evidence and in particular for their attaching more weight to some evidence than to other evidence or for attaching no weight at all to such other evidence.”

Czarnikow Sugar was a case dealing with section 68(2)(d) as is clear from the following passages:

“[45] On analysis, these criticisms are all directed to asserting that the arbitrators misdirected themselves on the facts or drew from the primary facts unjustified inferences. Those facts are said to be material to an “issue”, namely what were the terms of the oral agreement. However, each stage of the evidential analysis directed to the resolution of that issue was not an

“issue” within Section 68(2)(d). It was merely a step in the evaluation of the evidence. That the arbitrators failed to take into account evidence or a document said to be relevant to that issue is not properly to be regarded as a failure to deal with an issue. It is, in truth, a criticism which goes no further than asserting that the arbitrators made mistakes in their findings of primary fact or drew from the primary facts unsustainable inferences.

[46] Accordingly, even assuming that each of the criticisms of the arbitrators' reasoning advanced on behalf of WTC was wellfounded, such mistakes and omissions could not fall within Section 68(2)(d).”

No other basis under Section 68 was relied upon and the decision is therefore of little assistance in the present case.

In ABB one of the grounds of challenge under Section 68 was that the tribunal failed to decide or even to refer to the “Greek law issue”. The court found:

“77.

By the time the arbitrators reached paragraph 174 of theiraward the dispute was already resolved in favour of HTA. Thearbitrators had no formal need to set out their conclusions onthe remaining matters argued…

80.

Accordingly the attack on paragraph 174 of the award is inmy judgment in substance a criticism of the adequacy of thereasons rather than an assertion of an irregularity such as iscontemplated by s.68 . The points which each side were taking were fully canvassed in evidence and argument. Even if there was lingering uncertainty as to the extent of HTA’s case on Greek law, which I do not think there was, still acceptance by the tribunal of ABB’s case as to the restricted ambit of the nemo auditur doctrine would be sufficient to render its own bad faith completely irrelevant, whether as conduct debarring it from complaining of another’s bad faith or as conduct rendering that which would otherwise be bad faith good faith. In presenting its argument ABB sought to establish that the foundation upon which either way of putting the point depended simply did not exist. ABB was not deprived of the opportunity fairly to deal with the point. The tribunal did not fail to deal with an issue that was put to it. The issue here was whether HTA was in breach of its duty of good faith in refusing to accept Horizon’s unilateral declaration. The tribunal dealt with that submission by rejecting it. The reasoning set out insupport thereof may be unsatisfactory but that is not of itself aserious irregularity such as is mentioned in s.68 .It is suggestedthat if the arbitrators did not apply Greek law in coming to theirconclusion then they exceeded their powers, an irregularityunder s.68(2)(b) . It is however in my judgment inconceivablethat the arbitrators did not apply Greek law in coming to theirconclusion. There are references to Greek law at paragraphs 154, 173 and 175 of the award and it is plain to me that the arbitrators fully understood that they were applying the provisions of Greek law to the relevant parts of the dispute. The bulk of the third day of the arbitration hearing was taken up with cross-examination of expert witnesses, including vigorous questioning by the tribunal, as to the law of Greece relevant to these issues. It would of course have been happier had thearbitrators made some overt reference, in however summaryform, to the issue of Greek law upon which they had heard suchextensive argument. But it is not for this court to tell aninternational commercial tribunal how to set out its award orthe reasons therefor. Furthermore, strictly speaking the arbitrators did not need to address this issue at all as they had already conclusively decided the dispute in HTA’s favour on the Article 37.8 point. In reality, looked at in the light of all the material now before the court, ABB’s complaint is that the tribunal reached an erroneous conclusion as to the content of Greek law. That is not a serious irregularity even if it were made out.” [emphasis added]

It was submitted for the claimants that in ABB the court was influenced by the fact that the tribunal had already decided the dispute before it reached the “Greek law issue” and had no formal need to set out their conclusions on the remaining matters argued. It was submitted that this is not the case here as the Sharif Family Other Assets were a “key part” of the Quantum Award and the insufficient reasons therefore give rise to a serious irregularity for the purposes of section 68 (2)(c) and (h) of the Act.

The defendant relied on [67] of the judgment in ABB where Tomlinson J stated:

“67.

All of these authorities and judicial observationsemphasise the restricted ambit of the jurisdiction under s.68 . Itis not a ground for intervention that the court considers that itmight have done things differently or expressed its conclusionson the essential issues at greater length. Furthermore it is particularly to be borne in mind in the context of international arbitrations that the arbitrators may not all have been brought up in the same legal tradition. In order to express the reasons for their award they must find language with which each is comfortable. Directing myself in accordance with these principles I turn to consider ABB’s challenge to this award under each head.” [emphasis added]

It is true that the court in ABB was not concerned with a challenge under subsection (c) or (h) and the observations at [67] should be read in that context. However, in my view, paragraph [80] of the judgment is support for the view that “inadequate” reasons do not amount to a serious irregularity within the meaning of section 68.

That view was the approach taken by Field J in The Ojars Vacietis [2012] EWHC 1412 (Comm) at [30]:

“30.

The authorities on s. 68 of the Act were extensively reviewed by Tomlinson J in ABB AG v Hochtief Airport GmbH [2006] 2 Lloyd's Rep 1. I agree with the conclusions TomlinsonJ came to on the basis of these decisions. He held that theireffect is that an applicant under s.68 has a high hurdle toovercome: there will only be a serious irregularity if what hasoccurred is far removed from what could reasonably beexpected from the arbitral process (p. 17). If the issues in question have been “put into the arena”, there is no serious irregularity in extracting an alternative case from the submissions of the parties (p. 18, citing Warborough Investments v Robinson [2003] EGLR 149 ). It is not a groundfor intervention that the court considers that it might have donethings differently or expressed its conclusions on the essentialissues at greater length (p.19). If a party had a fair opportunity to address its arguments on all of the essential building blocks in the Tribunal's conclusion, the fact that the Tribunal did not refer back to the parties its analysis of the material before it and the conclusion it reached on it does not constitute a serious irregularity resulting in substantial injustice (p.21).” [emphasis added]

The most recent decision is that of Teare J in UMS. In UMS the alleged serious irregularities were said to be either within section 68(2)(a), a breach of the Tribunal’s duty to act fairly pursuant to section 33 of the Act, or within section 68(2)(d), a failure by the Tribunal to deal with the issues that were put to it. It is clear from the judgment in UMS thatsection 68 is not concerned with whether the decision of the tribunal is right or wrong and that a tribunal’s reasons may be “unsatisfactory” but that is not a serious irregularity within section 68. Teare J said:

“[28] Having considered these authorities my understanding of the law regarding allegations that an arbitral tribunal has overlooked evidence is as follows. A contention that the tribunal has ignored or failed to have regard to evidence relied upon by one of the parties cannot be the subject matter of an allegation of a serious irregularity within section 68(2)(a) or (d), for several reasons. First, the tribunal’s duty is to decide theessential issues put to it for decision and to give its reasons fordoing so. It does not have to deal in its reasons with each pointmade by a party in relation to those essential issues or refer toall the relevant evidence. Second, the assessment and evaluation of such evidence is a matter exclusively for the tribunal. The court has no role in that regard. Third, where a tribunal in its reasons has not referred to a piece of evidence which one party says is crucial the tribunal may have (i) considered it, but regarded it as not determinative, (ii) considered it, but assessed it as coming from an unreliable source, (iii) considered it, but misunderstood it or (iv) overlooked it. There may be other possibilities. Were the courtto seek to determine why the tribunal had not referred to certainevidence it would have to consider the entirety of the evidencewhich was before the tribunal and which was relevant to thedecision under challenge. Such evidence would include not only documentary evidence but also the transcripts of factual and expert evidence. Such an enquiry (in addition to being lengthy, as it certainly would be in the present case) would bean impermissible exercise for the court to undertake because itis the tribunal, not the court, that assesses the evidence adducedby the parties. Further, for the court to decide that the tribunal had overlooked certain evidence the court would have to conclude that the only inference to be drawn from the tribunal’s failure to mention such evidence was that the tribunal had overlooked it. But the tribunal may have had a different view of the importance, relevance or reliability of the evidence from that of the court and so the required inference cannot be drawn. Fourth, section 68 is concerned with due process. Section 68 isnot concerned with whether the tribunal has made the “right”finding of fact, any more than it is concerned with whether thetribunal has made the “right” decision in law. The suggestionthat it is a serious irregularity to fail to deal with certainevidence ignores that principle. By choosing to resolve disputesby arbitration the parties clothe the tribunal with jurisdiction tomake a “wrong” finding of fact.” [emphasis added]

Teare J, having considered the individual complaints of serious irregularities, then returned to the submission that this was an exceptional case of failing to dealing with key evidence such as to amount to a breach of a tribunal’s duty to deal with the losing party’s case fairly.

The submissions for the claimants were in effect that the arbitrator had overlooked evidence or failed to deal with it in his reasons; counsel for the claimants referred to the four expert reports that were before the arbitrator on the issue of the assets and their valuation and the time devoted to such evidence in the hearing. In the claimants’ skeleton argument for the hearing before this court it was submitted that:

“[22] The damages awarded in respect of the Sharif family Other Assets… was… the most important part of the dispute to the parties… It is not just an “essential issue”… It is the essential issue.”

“[30] There is.… no explanation in the Quantum Award as to the “discount” that has been applied, or the method by which this was reached, or what net figure it was applied to. The Tribunal has therefore failed to give any reason… as to how, or why, it reached its award of US$19 million in relation to the Sharif Family Other Assets.”

“[33]… The tribunal has given no explanation at all as to how it reached the “overall assessment”… There is no way the partiescan understand how the decision was reached or on the basis ofwhat evidence.” [emphasis added]

As was made clear by Teare J in UMS firstly, the tribunal does not have to deal in its reasons with each point made by a party in relation to the essential issues or refer to all the relevant evidence. Secondly, the assessment and evaluation of such evidence is a matter exclusively for the tribunal.

Counsel for the defendant accepted that the Commercial Court authorities relied on by the defendant were irreconcilable with Compton. In that judgment the judge stated:

“42.

There is no shortage of reported cases which discuss the issue as to what reasons ought to be provided for a judicial decision. These cases can be grouped as follows: (1) reasons to be given by a court (particularly in cases involving disputes between experts) ( Flannery v Halifax Estate Agencies Ltd [2000] 1 WLR 377 and English v Emery Reimbold Strick Ltd

[2002] 1 WLR 2409) ; (2) reasons by arbitrators ( Re Poyser &

Mills’ Arbitration [1964] 2 QB 467 and Bremer

Handelgessellschaft v Westzucker (No. 2) [1981] 2 Lloyd’sRep 130 ); (3) reasons by statutory tribunals ( Mountview Court Properties Ltd v Devlin (1970) 21 P&CR 689 and Curtis v London Rent Assessment Committee [1997] 4 All ER 842 ); and (4) reasons for planning decisions ( Save Britain’s Heritage v Number 1 Poultry Ltd [1991] 1 WLR 153 and South Bucks DC v Porter (No. 2) [2004] 1 WLR 1953 ). It is also relevant to single out cases which discuss the giving of reasons in relation to valuation disputes: see Mountview and Curtis…” [emphasis added]

It is noteworthy that Re Poyser & Mills’ Arbitration referred to in this context concerned an arbitration under the Agricultural Holdings Act 1948 and Section 12(1) of the Tribunals and Inquiries Act 1958. In relation to the other arbitration case, Bremer Handelsgessellschaft, the judge observed:

“45.

In Bremer Handelgessellschaft v Westzucker (No. 2) , at pages 132–133, Donaldson LJ described what was required for a reasoned award in the context of the Arbitration Act 1979 , in these terms:

“All that is necessary is that the arbitrators should set out what, on their view of the evidence, did or did not happen and should explain succinctly why, in the light of what happened, they have reached their decision and what that decision is. That is all that is meant by a ‘reasoned award’.”

Having reviewed the authorities identified at [42] of the judgment (and notwithstanding the dicta of Donaldson LJ cited above) the judgeconcluded at [50] and [51]:

“50.

It was said in Curtis that the duty on the tribunal in that case to give reasons for its decision was less onerous than the duty on a court to give reasons for its decision. The same is sometimes said about the duty of an arbitrator to give reasons. Whatever the precise difference between the duties, I consider that the duty on an arbitrator to provide a reasoned award under section 52(4) of the 1996 Act is not less than the duty as described in the above cases dealing, in broadly similar ways, with arbitrators, tribunals and planning inspectors. The two cases which I have cited dealing with reasons to be given for court decisions (Flannery and English) involved the need to give reasons in relation to disputes as to expert evidence. In a case like the present, where the arbitrator is chosen for his experience in the relevant expert discipline, I do not see any particular reason why the duty on such an arbitrator to explain why he has preferred one expert to another should be fundamentally different from the duty on a court in such a case.

[51] It is clear from the above citations that an arbitrator shouldexplain why he has decided the essential issues in the way inwhich he has. An award which did not contain such reasoningwould not comply with section 52(4) of the 1996 Act and thatwould give rise to an irregularity within section 68(2)(h) of the1996 Act. However, there will only be a “serious irregularity” if the failure of reasoning has caused or will cause substantial injustice to a party…”

It would seem that only the claimant appeared in Compton, although written submissions had been provided by both parties. As a strict matter therefore, it should not be cited pursuant to the terms of the Practice Direction (Citation of Authorities)

Mr Peters did not refer in his skeleton argument to anyauthorities as to the standard which an arbitrator should beexpected to achieve in relation to giving reasons for an award.Mr Batstone’s written submissions in opposition to this claimdid not refer to any such authorities either, although he had referred to some relevant authorities as to the need to give reasons when seeking further reasons pursuant to section 57 of the 1996 Act. At the end of the hearing, I asked Mr Peters toprovide me with the principal authorities on the subject ofadequacy of reasons and, in particular, authorities dealing withreasons in awards or other decisions determining disputes as tovaluation or involving expert evidence. After the hearing, Mr Peters promptly provided me with copies of a number of authorities which have indeed been very helpful to me in the course of considering this judgment. Those acting for the Defendant were informed of the further authorities which Mr Peters provided to me.” [emphasis added]

I note that in the light of the way the case evolved and the request in particular for authorities determining disputes as to valuation or involving expert evidence, it is perhaps not surprising that the Commercial Court authorities relied upon by the defendant in these proceedings were not before the court in Compton.

The most recent decision is that in UMS where the authorities (other than Compton) on Section 68 were fully considered. Although UMS was dealing with a challenge under Section 68(2)(a) and (d), as is clear from the extracts of the judgment set out above, the reasoning is of broader application. In particular the following principles referred to by Teare J are equally applicable to a challenge under section 68(2) (c) and (h) of the Act:

Since the authorities which relate to Section 68 challenges under the Act (other than the Benaim and Bremer Handelgessellschaft) were not cited to the court in Compton, and in the light of the more recent decision in UMS, it seems to me that it must be doubtful that Compton reflects the correct approach in relation to a challenge for inadequate reasons under Section 68. In the circumstances it is open to this court to decline to follow the decision in Compton, being a decision of another puisne judge. For the reasons discussed it seems to me that, in relation to a challenge for inadequate reasons under section 68, the decision in UMS which reflects and endorses the approach of the courts in the earlier decisions on section 68 (other than Compton) should be followed rather than Compton.

It was submitted for the claimants that the authorities do not deal with the fact that section 70 does not provide a remedy.It was submitted for the claimants that since it was not open to an applicant to bring an application under section 70(4) but only a power for the court, this would mean that there was “no sanction” if an arbitrator failed to provide reasons. However, it is clear that the interrelationship with section 70 was considered by Colman J in Margulead and assumed by Teare J (at [133]) to complement the remedy under section 68. The claimants appear to assume that an applicant should have a self-standing right of appeal in this regard. However it seems to me that the Act sets down the limited circumstances in which the courts can intervene in an arbitration award and in order to make such intervention effective, has given the right for the courts to require the arbitrator to provide further reasons in conjunction with an application under section 67, 68 or 69. As referred to above, a

In my view for the reasons discussed, it is not open to the claimants to assert that there has been a failure to conduct the proceedings in accordance with the procedure agreed by the parties amounting to a “serious irregularity” by reason of a failure to provide a more detailed explanation on how the arbitrator reached his conclusions on the evidence in relation to the US$ 19 million: the award contains reasonsfor its conclusion on the issues and the parties have agreed that the tribunal should determine matters of fact.By requiring a further explanation of how aspects of the evidence

Accordingly, for the reasons discussed I find that “inadequate” reasons (as such term is advanced by the claimants) cannot amount to a serious irregularity under section 68(2)(c) or (h).

If I am wrong on that I will address whether “adequate” or “sufficient” reasons were given in this case.

A challenge in the courts to an alleged failure in an arbitration to comply with the requirement to give reasons for an award under section 52(4) of the Act and to give “sufficient reasons” under the CIArb rules must be considered in the light of the general approach of the courts in reviewing arbitration awards referred to above. In particular:

I do not accept the submission that the approach of the courts should in any way be modified merely because one of the parties is a state and therefore funded by its citizens. No authority was provided to support this submission. In circumstances where the parties have voluntarily chosen to submit their disputes to arbitration rather than the courts, the parties have elected to abide by the rules which pertain to that arbitration and must be taken as a consequence to have accepted the limited supervisory role afforded to the courts by the law.

The court was referred to passages in the liability award, the Quantum Award and the section 57 ruling (which under section 57(7) forms part of the award).

Paragraphs 18-22 of the Ruling on the Section 57 application stated:

“Respondents contend that there is an “apparent omission” in the valuation of the potential recovery from the Sharif family in paragraph Q6 .10 (xii) of the Quantum Award:

“Q6 .10 (xii) Having regard to all of the evidence I find that the appropriate valuation of the potential recovery from the Sharif family is US$100 million to be realised at some future date.”

They say that this figure should have been reduced to take account of the “loss of chance discount” “to reflect the percentage chance of success of making a recovery”…

[19] The Quantum Award applied that discount expressly in the cases of…Sherpao and …Ansari… where the approach was, as respondents admit, first value the relevant asset, secondly work out the net recovery that was likely, before applying the “loss of chance discount”.

[20]…

[21]

In the [Sherpao and …Ansari] cases it was necessary to assess what net recovery the respondent would have made after deducting costs that would have been incurred as fees, expenses etc. and then apply an appropriate “loss of chance discount” to the net figure. The situation in relation to the Sharif familyassets was wholly different although some factors werecommon to both.The assets had first to be identified, then avalue established for them, and the costs of recovery orrealisation estimated, before an overall “loss of chancediscount” could be applied. There was a lack of specificevidence enabling this to be done for many and even all of thespecific items in the list, and some form of overall assessmentwas inevitable. The purpose of the exercise was to assess the potential net recovery by respondents after taking account of all relevant factors.

[22]

The figure of US$100 million was my assessment of thepotential net recovery for the relevant assets, based on theevidence available to me, and bearing in mind claimant’sburden of proving loss of a “real or substantial chance”… It was my finding as to the appropriate valuation of the potential recovery from the Sharif family, at some future date,… No further discount is necessary or would be appropriate.” [emphasis added]

It was submitted for the claimants that the tribunal has not explained how it has quantified a loss of chance discount within its “overall assessment” (paragraph 25 2^nd Limond witness statement), whether the tribunal disagreed with the claimants’ case that reductions of 72% and 90% may be appropriate discounts and on what basis the tribunal rejected the claimants’ expert evidence as to the prospects of net recovery.

To the extent that it was necessary for the arbitrator to explain his conclusion on the valuation of the potential recovery which in turn led to the figure of US$19 million, he has done so in the section 57 ruling. The arbitrator explained why his approach was different in relation to the Sharif Family Other Assets from the approach in relation to Sherpao and Ansari, namely that there was a lack of specific evidence enabling this to be done for many and even all of the specific items in the list, and some form of overall assessment was inevitable.

In my view it is clear that the award (read with the section 57 ruling which forms part of the award) does contain reasons to show why the arbitrator reached his decision on the “essential issue”. The requirement to provide “sufficient” reasons does not require the arbitrator to provide further explanation as to how he assessed the evidence and arrived at his conclusion.

For the reasons discussed, there was no failure in this case to provide “adequate” or “sufficient” reasons.

If I am wrong and there was a failure to give “adequate” reasons in this case and this did amount to a serious irregularity within the meaning of section 68 (2)(c) and/or (h), I will consider whether this would amount to a substantial injustice in this case.

Counsel for the defendant observed that in her original witness statement (at paragraph 72) Ms Limond for the claimant stated that an order under section 70(4) for further reasons, might then identify a substantial injustice and that would therefore enable the claimants to determine whether a substantial injustice had occurred.

This position was maintained in her second witness statement at paragraph 28 but in the claimants’ skeleton in response to the summary dismissal application the substantial injustice was expressed as being that, if reasons were required to be given, there was a reasonable chance that the tribunal may apply a different loss of chance.

In the skeleton for this hearing at paragraphs 40 and 41, counsel for the claimants asserted that there would be a substantial injustice if inadequate reasoning related to something important: Compton at [55]:

“…I can accept that in many cases there will be substantial injustice where a party does not know the reasons for an award but I would not be prepared to hold that every failure of reasoning which amounts to an irregularity for the purposes of section 68(2)(h) will automatically give rise to substantial injustice. An obvious example is where the point in relation to which the reasoning is inadequate is a point of very little substance, even though it is relevant to the outcome. That might give rise to a case of some injustice but not substantial injustice. Further, in Lesotho Development at [35], Lord Steyn explained that the burden is squarely on an applicant relying on section 68 to secure (if he can) findings of fact which can establish the precondition of substantial injustice.”

It was submitted for the claimants that a failure to give reasons may be capable of giving rise to a substantial injustice, otherwise there would be no recourse if reasons were not given. It was submitted that in this case the tribunal had not explained a substantial issue relating to the bulk of the award in financial terms and that it was an essential part of the bargain in arbitration that a party should be given reasons, particularly when it was a state funded by the taxpayers.

It was further submitted that the claimants were not required to show that the result would necessarily or even probably have been different: Terna Bahrain Holding Co at [85(vii)]:

“(7)

In determining whether there has been substantial injustice, the Court is not required to decide for itself what would have happened in the arbitration had there been no irregularity. The applicant does not need to show that the result would necessarily or even probably have been different. What the applicant is required to show is that had he had an opportunity to address the point, the tribunal might well have reached a different view and produced a significantly different outcome.”

It was submitted for the claimants that had the tribunal given sufficient reasons to explain how it reached the figure of US$19 million the tribunal might well have found that different valuation or assets or further discount should be applied to this figure. Therefore, the lack of sufficient reasons has caused substantial injustice to the claimants.

It was submitted for the defendant that;

As has been stated above, the complaint in this case is that the decision called for a further explanation as to how it was arrived at on the evidence. In my view even if that were a “serious irregularity” there is no substantial injustice in the light of the clear statement in the section 57 ruling (paragraph 22 cited above), in my view there is no possibility that the tribunal might well have reached a different view and produced a significantly different outcome.

It was submitted for the claimants that even if the court held that a challenge could not be brought under section 68(2) (c) and/or (h) for inadequate reasons the court should request further reasons under section 70(4) so that the section 68 application can remain on foot. It seems to me that the section 57 application resolved any doubt as to the reasoning of the tribunal and the claimants are not entitled to seek (and accordingly it is not appropriate for the court to require), any further explanation as to how the conclusions were arrived at.

For all these reasons the claimants’ application is dismissed.