TENKE FUNGURUME MINING S.A. v KATANGA CONTRACTING SERVICES S.A.S.

The Claimant (“TFM”) brings a challenge under section 68 of the Arbitration Act 1996 (the “Act”) to an award dated 26 August 2021 issued by an ICC Tribunal comprising Mr Charles Kaplan, Mr Jeffrey Gruder QC and Dr Achille Ngwanza (the “Final Award”). By the Final Award, TFM was ordered to pay all sums claimed to the Defendant (“KCS”) and TFM’s counterclaims were dismissed.

I understood it not to be contested by TFM that this judgment pertaining to a section 68 application should be published. KCS referred the court to the decision of the Court of Appeal in Manchester City Football Club Limited v The Football Association Premier League Limited[2021] EWCA Civ 1110 and the observations of Males LJ at [65] that:

TFM originally sought to have its identity withheld in this judgment as well as “any pricing information concerning the agreements at issue”. At the hearing KCS submitted that no such anonymity order should be made on the basis that TFM has made an application in the Democratic Republic of the Congo (“DRC”) linked to the enforcement of the Award where it has referred publicly to the names of the parties and the underlying dispute. In response to an invitation from the court to make written submissions in response to that evidence, TFM has now accepted in light of the fact that the summons in the DRC is a public record, that it would not be appropriate to seek anonymisation of the parties in this judgment but it maintains its submission that “commercially important or sensitive information” should be redacted. In my view this judgment does not contain commercially sensitive information and the issue does not arise. I am not persuaded that the subject matter of the contracts in issue or the amounts awarded in the arbitration are sufficiently commercially sensitive to outweigh the public interest in understanding the judgment in context. Further to the extent that the proposed anonymity which is sought applies not to the identity of TFM but to details concerning its business and the arbitration such that the test in CPR 39.2(4) is engaged as discussed below, in my view the test of necessity with regard to the redactions is not satisfied. Accordingly I refuse to make any redactions as sought by the Claimant.

However one of the grounds of the appeal relates to the unavailability of leading counsel who became ill in the course of the arbitration and was unable to participate in the merits hearing. Counsel on both sides have proposed that the identity of that counsel should not be disclosed.

CPR 39.2 provides:

CPR 39.2(4) does not extend to the identity of the particular counsel who is neither a party or a witness. However the anonymisation of this individual potentially engages the principle of open justice and as such the court has a general discretion to withhold the identity of another person only if satisfied that the test of necessity is met (Brearley v Higgins & Sons (A Firm)[2021] EWHC 1342 (Ch) at [13]-[14]). The counsel concerned is not involved in the application before this court as a party or a witness and I do not see that it is necessary in order to satisfy the principle of open justice in the circumstances of this case that his health should be placed in the public domain: his state of heath is a personal matter which he is entitled to regard as confidential and although I have no evidence on the point, it seems to be self-evident that knowledge of any health difficulties suffered could impact on his professional life. Accordingly, assuming the test is one of “necessity”, I find that the test of necessity is met in order to protect his interests and I propose not to identify the counsel concerned.

In opposition to the claim now brought by TFM the court has a witness statement of Mr Charles Fussell of the firm Charles Fussell & Co LLP, which represents KCS in these proceedings dated 8 October 2021.

In response the court has a witness statement dated 25 October 2021 of Mr Peter Mantas of Fasken Martineau DuMoulin LLP, the Ontario incorporated branch of the international law firm operating under the global name “Fasken”, which represented TFM in the arbitration.

In accordance with the current practice of the Commercial Court, the hearing was held remotely. Both parties were represented at the hearing by leading counsel and filed skeleton arguments in advance of the hearing. As the appeal related to an arbitration and issues of confidentiality were raised, the court agreed to hold the hearing in private but without deciding the issue of publication of the judgment which it has now decided should be published as referred to above.

The dispute relates to a mine in the DRC operated by TFM. TFM agreed various contracts with KCS, including contracts for the construction of tailing storage facilities ("Tailing Services Agreement") dated 1 March 2018 and removal of scats ("Scats Agreement") dated 18 April 2018.

Both the Tailing Services Agreement and the Scats Agreement contained an arbitration clause in similar form. The contracts and the arbitration clauses were subject to English law and the arbitration was to be governed by ICC Rules with its seat in London.

On 13 January 2020 KCS commenced two arbitrations, later consolidated, for US$13.666m.

On 11 January 2021 TFM asked for a pre-hearing conference to apply for an adjournment of the hearing, on the basis that COVID-19 restrictions had prevented the parties' mining experts from visiting the site.

A telephone conference took place on 25 January 2021. The Tribunal issued Procedural Order No. 3 the next day. The Tribunal refused to adjourn the hearing, and declined to rule on whether there should be a site visit prior to consideration of the counterclaims.

On 4 February 2021 TFM wrote to the Tribunal notifying it of the illness of its leading counsel (COVID-19) and asking for an adjournment of two months until May 2021. On 9 February 2021, the Tribunal issued Procedural Order No. 4, ruling that the hearing should go ahead.

On 28 February 2021, the day before the hearing started, Fasken advised the Tribunal and KCS that following its review of the evidence it had been decided that the allegations of bribery and corruption against KCS should be withdrawn.

The merits hearing then took place from 1 March to 8 March 2021.

On the final day of the hearing, the Tribunal asked for submissions on costs and interest prior to the issue of an award on the merits. The parties exchanged submissions on 26 March 2021. KCS submitted two witness statements from Mr Fussell and Mr Fourie.

TFM asked the Tribunal for permission to cross examine the witnesses on the new statements produced by KCS and on 8 April 2021 the Tribunal issued Procedural Order No. 5 refusing any cross examination but ordering disclosure of certain documents.

On 26 August 2021 the Tribunal issued the Final Award. KCS was awarded all sums claimed; the counterclaims were all dismissed; TFM was obliged to pay KCS's legal and expert costs of just under US$1.4m, plus US$1.7m for the litigation funding advanced by way of a shareholder loan; plus compound interest at 9% already accrued to about US$2m and continuing until payment.

On 23 September 2021 TFM made this application by way of Arbitration Claim Form.

TFM challenges the Final Award under Section 68 of the Act on the grounds of serious irregularity affecting the Tribunal, the proceedings or the award, that has caused or will cause substantial injustice to TFM.

TFM advances four grounds:

Ground 1: Failure to adjourn the arbitration to allow a visit to the construction site;

Ground 2: Failure to adjourn the arbitration notwithstanding the illness of TFM's leading counsel;

Ground 3: Costs award;

Ground 4: Compound interest.

TFM also seek to raise a further challenge to the uplift to the costs award (the “success fee”). This was not made in the Arbitration Claim Form and no formal application has been made to advance this challenge. It is opposed by KCS as out of time and on the basis that no explanation has been provided for the late challenge. This is dealt with below.

TFM counterclaimed in the arbitration for defective construction work performed by KCS. A site visit at the location of the work in the DRC was sought but it is TFM’s case that a site visit could not be conducted due to the COVID-19 pandemic and its expert, Deloitte, was not prepared to visit the site due to the pandemic restrictions and conditions. TFM therefore requested that the arbitral proceedings be adjourned until a site visit could take place. The Tribunal refused an adjournment and in the Final Award dismissed the counterclaim.

TFM submitted that the Tribunal's decision not to adjourn the arbitration was a serious irregularity in that its decision failed to comply with Section 33 of the Act (which therefore amounts to an irregularity under Section 68(2)(a) of the Act):

By not adjourning the arbitration, the Tribunal failed to give TFM a reasonable opportunity to put its case; and

The Tribunal also failed thereby to adopt procedures suitable to the circumstances of the case before it.

TFM's English barrister, leading counsel for the hearing, contracted COVID-19 in January 2021. His illness was such that he could not appear at the merits hearing. TFM informed the Tribunal of counsel’s circumstances and requested that the hearing be adjourned for two months subject to the availability of the Tribunal and KCS. The Tribunal denied the adjournment request and ruled that the hearing should proceed.

TFM submitted that the Tribunal's decision not to adjourn the hearing was a serious irregularity in that its decision failed to comply with Section 33 of the Act (which therefore amounts to an irregularity under Section 68(2)(a) of the Act):

The Tribunal thereby failed to give TFM a fair and reasonable opportunity to put its case and meet the case of KCS. The case was a substantial and complicated one; leading counsel had been involved in the proceedings from the very beginning and had a detailed knowledge of the case. A late replacement could never be regarded as satisfactory.

There was no sufficiently serious countervailing prejudice to KCS in a short adjournment.

The Tribunal also thereby failed to adopt procedures suitable to the circumstances of the case before it.

During the cost submissions stage, which occurred after the hearing, KCS revealed for the first time that it had obtained a shareholder loan which it described as a "litigation funding agreement".

Despite TFM's request, the Tribunal did not allow TFM to cross-examine KCS on the funding arrangement and only permitted document disclosure in relation to the loan.

The Tribunal granted KCS more than $1m in costs relating to the litigation funding agreement.

It was submitted for TFM that the Tribunal’s decision to award costs arising out of the shareholder loan, and not to allow cross-examination and full disclosure was a serious irregularity. It was submitted for TFM that the decision also failed to comply with Sections 61, 62 and 63 of the Act as well as Section 33 of the Act (which therefore amounts to an irregularity under Section 68(2)(a) of the Act) in that:

The Tribunal failed to give TFM a reasonable opportunity to meet KCS’ costs case. This severely prejudiced TFM.

The Tribunal also thereby failed to adopt procedures suitable to the circumstances of the case before it.

By awarding costs arising out of the funding arrangement, the Tribunal committed a serious irregularity that caused substantial injustice to TFM. The Tribunal also failed to comply with its general duty to act fairly and impartially in conducting the arbitral proceedings, in its decisions on matters of procedure and evidence and in the exercise of all other powers conferred on it

The Tribunal’s award of costs is contrary to public policy, pursuant to Section 68(2)(g) of the Act.

The Tribunal awarded compound interest at 9% with monthly rests. It was submitted that the amount awarded constitutes a serious irregularity in that it failed to comply with Section 33 of the Act (which therefore amounts to an irregularity under Section 68(2)(a) of the Act) and caused substantial injustice to TFM. Further, it was submitted that the Tribunal’s interest award is contrary to public policy, pursuant to Section 68(2)(g) of the Act.

The relevant provisions of Section 68 of the Act are as follows:

Section 33, referred to in Section 68 (2)(a) and relied upon by TFM in its claim, provides:

Section 73 (Loss of right to object) referred to in Section 68(1) and relied upon by KCS in its defence of this claim provides:

It was accepted for TFM that only in those cases where it can be said that what has happened is so far removed from what could reasonably be expected of the arbitral process, will the Court allow an application under section 68. Section 68 is designed as “a longstop, only available in extreme cases, where the tribunal has gone so wrong in its conduct of the arbitration in one of the respects listed in section 68, that justice calls out for it to be corrected”: RAV Bahamas Ltd and another v Therapy Beach Club Inc[2021] UKPC 8; [2021] A.C. 907 at [30].

It was further accepted for TFM that the applicant must establish that had the procedural irregularity not occurred, the outcome might well have been different, unless substantial injustice is obvious from the particular irregularity: RAV Bahamas at [34]-[37].

As to section 68(2)(a) (failure to comply with section 33), the court was referred to the principle that the court should be extremely slow to interfere with these discretionary procedural decisions - Kalmneft v Glencore International AG and another[2002] 1 All ER 76 at [85]:

In relation to section 68(2)(b) (excess of powers) it was common ground that TFM must show that the Tribunal exercised a power which it did not have as distinct from the erroneous exercise of an available power: Lesotho Highlands v Impreglio SpA[2005] UKHL 43, [2006] 1 AC 221, as further discussed below.

In relation to waiver KCS referred the court to Russell on Arbitration at [8-123]:

On 26 January 2021, following a hearing on 25 January 2021, the Tribunal issued Procedural Order No. 3 (“PO3”). This dealt with the issue of the Site visit as follows:

In the Final Award the Tribunal dealt with the issue as follows (so far as relevant):

It was submitted for TFM in summary that:

TFM always said that a site visit was needed and was a "fundamental right of due process" ( TFM’s letter of 11 January 2021 to the Tribunal);

After PO3 left the position uncertain as to whether the counterclaims would be addressed at the substantive hearing, TFM made it clear in its skeleton for the hearing that a site visit was “needed” and “industry standard”;

The counterclaims were dismissed summarily – it was not TFM's case that it could establish its case on the documents and the Tribunal did not consider for example that some form of opening up of the works could have been carried out;

TFM was not permitted to adduce evidence that it wanted to adduce and the counterclaims were not fairly considered;

There was a real chance that the result of the counterclaims might have been different and thus a substantial injustice;

TFM did not waive its right to object – it maintained its position in oral closing submissions that a site visit should be made.

The starting point is that TFM has to show that the Tribunal has gone so wrong in its conduct of the arbitration that “justice calls out for it to be corrected”.

In my view the relevant paragraphs of the Final Award show that the Tribunal considered whether a site visit was necessary or useful and concluded in the circumstances that it was not. There were five alleged defects. The experts agreed in relation to three of the issues ((i) (ii) and (iv)) that a site visit was not necessary and Mr Legg was of the view that even if it might have been useful, it was no longer useful because a site visit would not allow a visual inspection of the areas of work concerned. In relation to (iii) Mr Chirisa agreed a site visit would be of no practical utility and with regard to (v) he said that once the liner had been placed it would no longer be possible to inspect the earthworks. The utility of the visit was said by Mr Chirisa to be face to face interviews but the Tribunal took the view that an adjournment for this purpose was not reasonable or fair.

The issue raised by TFM in its submissions to this court of whether a site visit would have permitted exploratory works to examine the work which had been covered up was explored during the merits hearing and the likelihood of sonic drilling identifying voids was said by Mr Legg during his evidence to be “very unlikely”.

In my view the Tribunal exercised its discretion having regard to the evidence of the experts as to the utility of a site visit and weighed this evidence against the effect of an adjournment. There is no basis to conclude that this decision surmounted the high hurdle of a successful challenge under section 68 as being a conclusion which no reasonable arbitrator could have arrived at.

In my view there is no need to consider the further arguments of “substantial injustice” and waiver. However had I needed to decide the point in my view TFM has not shown that the outcome of the counterclaim “might well have been different”. I note that the Tribunal stated (as set out above) that:

The Final Award in my view makes the position concerning the counterclaim clear. It failed not because of a lack of a site visit but because the Respondent failed to adduce evidence regarding the remedial works which it alleged were necessary by reason of defective work. TFM have therefore failed to show that a site visit might have made a difference to the outcome of the counterclaim.

As referred to above, a pre-hearing conference was held on 25 January 2021. At the conference TFM indicated that leading counsel was recovering from COVID-19 and would not be taking an active part in the conference. It was hoped that he would have sufficiently recovered in order to take part in the merits hearing, if necessary, at the originally scheduled date.

By letter dated 4 February 2021 TFM informed the Tribunal that its leading counsel had not sufficiently recovered from COVID-19 and was unable to prepare for the hearing. TFM accordingly requested that the hearing be adjourned until May, subject to the availability of the Tribunal and KCS. By letter of the same date, KCS objected to TFM’s application, pointing out that leading counsel’s ill-health and therefore potential unavailability for the hearing had been known at least since the pre-hearing conference of 25 January and quite probably before then.

On 9 February 2021, the Tribunal issued Procedural Order No. 4, rejecting TFM’s application for an adjournment of the hearing.

In his witness statement Mr Mantas stated that Fasken was informed on 12 January 2021 that leading counsel had contracted COVID-19. He states that at this stage, there was no reason for Fasken to anticipate that this would impact his ability to continue to represent TFM in the lead up to and during the merits hearing, although it did have an impact on his involvement in the pre-hearing conference that took place on 25 January 2021.

On the day following the conference on 25 January 2021, Mr Mantas was contacted by leading counsel who advised him that he would be unable to prepare for or attend the merits hearing as scheduled due to his increasingly poor health as a result of COVID-19. He was further informed that his doctor had advised him that he should take several months off work to recover from the illness. TFM’s lawyers believed that counsel might be able to recover within several months, but not before the scheduled hearing date at the beginning of March.

Mr Mantas states that new leading counsel was engaged on 27 January 2021 but then was unable to proceed. The evidence is that Mr. Paul Wright was then engaged on 6 February 2021 but it is the evidence of Mr Mantas that due to the insufficient time and the thousands of pages of materials to become familiar with prior to the hearing, he was able to conduct only a portion of the case, with the rest of the case having to be divided up and prepared by two Canadian (not English) qualified lawyers, one of whom, Mr. Gavin Cameron (based in the Vancouver office), had also only very belatedly been brought to the team as a direct consequence of counsel’s illness and withdrawal.

It was submitted for TFM that:

Leading counsel was involved in advising and representing TFM in the Arbitration from the very outset and his participation was vital to TFM.

TFM in its letter to the Tribunal of 4 February 2021 requested an adjournment and pointed out that it had a bearing on the “fundamental right of due process”.

TFM could not have done anything to find an alternative counsel prior to 25 January 2021 as no counsel will take a booking on a provisional basis and from 26 January 2021 TFM looked for a replacement. The order of 9 February 2021 refusing an adjournment was only 10 working days before the hearing.

There comes a time when fairness demands an adjournment. Most tribunals would have adjourned in the circumstances.

As to whether the decision not to adjourn was a serious irregularity where the outcome might have been different, TFM might not have lost on the estoppel argument or the adjournment to obtain expert evidence.

In Procedural Order No. 4 the reasons given by the Tribunal for refusing an adjournment were as follows:

the Parties’ agreement to arbitrate expressed their intention that “any arbitral proceedings [be] concluded as expeditiously as possible” and provides that such proceedings should result, if possible, in the issue of an award “within 90 days” after the “first meeting” of the Arbitral Tribunal. Recognising the impossibility of issuing an award within 90 days, the Parties and the Tribunal nonetheless established a timetable in this arbitration intended to be as expeditious as possible, including a hearing scheduled to last for up to 2 weeks, beginning on 1 March 2021.

TFM raised a “potential health issue” affecting its leading counsel, at the pre‐hearing conference held on 25 January 2021. TFM indicated that counsel was suffering from COVID-19, but that he was “out of isolation” and that, although he was still not well enough to participate actively in the pre‐hearing conference, he would attend it. TFM wished to inform the Tribunal of the risk that counsel might nonetheless not recover in sufficient time to be available for the hearing. It follows from this conversation that TFM must have been aware of counsel’s potential unavailability at some time prior to 25 January 2021.

Had TFM taken the view then that it must in any event have the assistance of English leading counsel at the hearing, it could have taken steps at that point to ensure counsel’s replacement, if necessary. It should, at any rate, have done so without delay after the procedural conference of 25 January 2021, when the Tribunal made clear that it did not wish to adjourn the hearing.

TFM was assisted in the proceedings by a highly‐qualified legal team from a reputed international law firm, including a senior partner with considerable experience as counsel in international arbitration. It was also advised by junior counsel at the English Bar.

If TFM nonetheless considered it necessary to have the assistance of leading English counsel, it was still in a position to obtain such assistance, provided it acted promptly.

As referred to above, to succeed on Ground 2, TFM needs to show that this was a decision which no reasonable tribunal could have reached and that the Tribunal had gone so wrong in its conduct of the arbitration that justice calls out for it to be corrected.

The Tribunal was required to consider all the circumstances and did so: TFM may not have been able to instruct alternative counsel before 25 January 2021 but as at 25 January it was aware of the risk that counsel might not recover in time for the merits hearing and by 26 January (some 4½ weeks before the merits hearing) TFM knew counsel would not be able to attend. (TFM did not raise with the Tribunal that the initial replacement which TFM appointed subsequently withdrew.) Further the Tribunal had to weigh up the delay which would be caused by an adjournment against the fact that TFM could still appoint someone to act and they would have the support of a highly experienced team of arbitration lawyers. Further in considering the delay caused by any adjournment the Tribunal was entitled to take into account the provision in the arbitration agreement which required the arbitration to be conducted as expeditiously as possible.

The evidence before this court of Mr Fussell confirms that the Tribunal was entitled to take the view that TFM was assisted in the proceedings by a highly‐qualified legal team from a reputed international law firm, including a senior partner with considerable experience as counsel in international arbitration (that is Mr Mantas). The evidence of Mr Fussell in this regard is as follows:

The duty of the Tribunal is to adopt procedures suitable to the circumstances of the case avoiding unnecessary delay or expense so as to provide a fair means for the resolution of the matters to be determined. As stated in Kalmneft, “the court’s powers to interfere with an arbitrator’s discretionary decision …should not be engaged unless it is clear that he has failed to have regard to the relevant facts and to his duty under section 33”. The fact that a different tribunal may have arrived at a different decision is not sufficient to interfere: it has to be a “conclusion which no reasonable arbitrator could have arrived at in the case in question having regard to his duties under s33”. That threshold has not been met on this Ground for the reasons discussed above.

There were 2 bases on which this ground was advanced:

a challenge under section 68(2)(a) arising out of the refusal of the Tribunal to allow TFM to cross examine the witnesses, Mr Fourie, the chief financial officer of KCS and Mr Fussell; and

a challenge under section 68(2)(b) asserting an excess of power.

In Procedural Order No. 5 (“PO5”) the Tribunal stated:

However the Tribunal did make an order (in PO5) entitling TFM to request disclosure of documents relevant to the following issues:

the financial and commercial position of KCS in 2020 and 2021;

the availability to KCS of sources and modes of financing, including sources other than those mentioned by the Claimant in its submissions and evidence; and

the terms and negotiation of funding KCS’s claims by Logos Agvet Limited, including copies of any relevant agreement(s).

It was submitted for TFM that:

In P v D[2019] EWHC 1277 (Comm); [2019] 2 Lloyd's Rep. 150, Sir Michael Burton held that arbitrators had breached their duty under s.33 of the Act to act fairly and impartially as between the parties by reaching a decision on a core issue without the losing party's main witness being cross-examined on that issue.

Here, the issue of the lending fee was a core issue on costs. Factual testimony had been given by way of witness statements which were problematic. There was a real and unexplained tension between KCS's assertions of financial difficulty, and the warranty given in the funding agreement that it was solvent. These issues were also relevant to the very high rates of interest sought and awarded. There was no clarity about why the loan agreement had been taken out, or why it had been advanced by Logos. There would have been no further delay caused by a short hearing for cross examination on this subject.

It was submitted for KCS that it is clear from the evidence of the correspondence that when TFM first raised the need for cross examination, KCS asked TFM to identify the questions that would be put to the witnesses. TFM stated in its submissions to the Tribunal in support of its application to cross-examine the witnesses, that the witness statement of Mr Fourie:

The Tribunal set out the issue and its reasoning in the following extracts from the Final Award:

The court was not taken to the authority of P v D in oral submissions. However it is clear that the factual situation was very different. In that case the credibility of the witness was a core issue and the Tribunal had reached its conclusion on credibility in the absence of any cross examination. That is not the position here.

I do not accept the relevance of the “unexplained tension” between the assertions of financial difficulty and the warranty of solvency: the financial difficulties of KCS were not disputed (paragraph 412 of the Final Award) and it was acknowledged that the funder Logos Agvet Limited was controlled by a shareholder of KCS and that the funding transaction was therefore not considered as an arms' length transaction (paragraph 413 of the Final Award).

The issue for the Tribunal was whether the recourse to this kind of funding was reasonable in the circumstances, not whether KCS could have obtained funding from other sources. The Tribunal was entitled to reach the conclusion that cross examination was not necessary having regard to the stage of the proceedings and the disclosure. TFM has not shown that the refusal to allow cross examination was a decision which no arbitrator could reasonably have reached in the circumstances of the case.

The power to award costs is in Section 61 of the Act:

Section 59 of the Act provides:

The relevant sections of the Final Award dealing with the costs of funding obtained by KCS from its ultimate shareholder and the power to award such costs are as follows:

As set out above the Tribunal accepted the argument that as a matter of English Law the funding costs claimed are to be considered as “other costs” of the parties for the purpose of the arbitration by virtue of section 59(1) of the Act. Essar Oilfields Services v. Norscot Rig Management[2016] EWHC 2361 (Comm), [2017] Bus LR 227 was cited by KCS as authority for the proposition that funding costs are “other costs” of the parties within the meaning of the Act.

TFM submitted that:

Any power of the Tribunal to award costs could only have come from the Act. By s.61(1), the Tribunal was entitled to make an award allocating the “costs of the arbitration” as between the parties. By s.59, costs of the arbitration meant, among other things, "the legal or other costs of the parties".

The power is limited to a power to order the "costs of the arbitration" and that the definition of that term "costs of the arbitration" which extends to "legal costs and other costs" must be read as subject to the phrase "costs of the arbitration" and thus costs which "relate to" the arbitration are not within the power to award the "costs of the arbitration".

When the Act was passed, no one could reasonably have thought that Parliament intended that either "costs of the arbitration" or the "legal or other costs of the parties" could possibly have encompassed any of (a) a fee paid to a litigation funder, (b) costs relating to a loan taken out to pay for legal costs.

As to (a), it was clear in 1996 and has remained clear that a fee payable to a litigation funder is not recoverable in litigation, and there is no reason to think Parliament intended any different for arbitrations. It is not a cost "of the arbitration", but a cost payable to a funder if the arbitration is successful. As to (b), costs relating to a loan taken out to pay for legal costs were in 1996 and remain irrecoverable.

The decision in Essar Oilfields is wrong and has been met with surprise and concern in the field of international arbitration. This case, however, is much worse than Essar Oilfields. This is not a case where litigation funding was provided by a regulated third party funder. This is a case where the funding came from a related company owned by one of KCS's shareholders. There was no finding that KCS needed the funding in order to pursue the arbitration – in the loan agreement it warranted its solvency (which must have included its ability to pay the legal fees already accrued). If this Award is permitted to stand, it will encourage claimants to take out shareholder loans, so that shareholders can try to recover further "fees", safe in the knowledge that, unlike third party funders in the world of litigation, they are beyond the reach of the arbitral tribunal and the Courts if they fund arbitrations which fail.

It was submitted for KCS that:

TFM seeks to dress up an alleged error of law as an excess of powers; an error of law is not an excess of power;

There is power to award legal and other costs under s.59(1)(c); the meaning and scope of that term was for the Tribunal – if there had been an error in construction that would be error of law under s.69 (any challenge to which was excluded by agreement);

A court should "generally follow a decision of a court of co-ordinate jurisdiction unless there is a powerful reason for not doing so": Willers v Joyce (No 2)[2016] UKSC 44, [2018] AC 843 at [9]. TFM has not identified any powerful reason not to follow Essar. The Court's reasoning in Essar at [41]-[47] is detailed and compelling. Further, TFM has not identified any case (in any jurisdiction) where this element of Essar has been doubted.

TFM waived its right to object; TFM did not argue in the arbitration that Essar was wrongly decided and did not object at the time that the Tribunal lacked power to award funding costs.

It was common ground that it is not sufficient for TFM to show that either the Award or the decision in Essar Oilfields is merely wrong as a matter of law. TFM must show that amounted to an excess of powers for the purposes of section 68(2)(b) of the Act.

The starting point is the House of Lords decision in Lesotho Highlands Development Authority v Impregilo SpA[2005] UKHL 43, [2006] 1 AC 221. In that case Lord Steyn had to consider the relationship between section 69 and section 68 in relation to the interpretation of the underlying contract.

At [3] he said:

The issue in that case was whether there was a power to make an award in different currencies. The arbitrators relied on section 48(4) of the Act:

The arbitrators stated:

The Court of Appeal held that Section 48(4) does not create a free-standing power to choose whatever currency arbitrators might think appropriate when the terms of a contract are clear.

The issues were formulated by Lord Steyn at [16] as:

Lord Steyn noted at [18] the “ethos” behind the Act as expressed by Lord Wilberforce:

Lord Steyn continued at [22]-[32]:

In Essar essentially the same arguments as were advanced by TFM before this court were rejected by HHJ Waksman QC. HHJ Waksman considered the authorities including Lesotho and Lord Steyn's judgment at [24], [31] and [32]. HHJ Waksman’s reasoning for rejecting the proposition that this was an excess of powers within s.68(2)(b) is essentially at [41] and [42] of the judgment:

HHJ Waksman concluded at [45] that the case was "analogous to Lesotho" and there was no serious irregularity.

HHJ Waksman then went onto consider the construction of "other costs" although in light of his finding it was not necessary to his decision. HHJ Waksman held that a litigation funding agreement was within the scope of the section as falling within "other costs".

TFM submitted that HHJ Waksman was wrong to find at [53] that ""costs of arbitration" is not some prior limiting definition" and at [58] to ask whether the costs "relate to the arbitration".

TFM's submissions focussed on the decision in Essar and submitted that its conclusion that a litigation funding agreement was within the scope of the relevant provision as "costs of the arbitration" has led to an undesirable distinction between the position in proceedings before the courts where such costs are not recoverable and the position in arbitration. It was submitted for TFM that the decision in Essar was wrong and should not be followed.

In light of Willers v Joyce this court should "generally follow a decision of a court of co-ordinate jurisdiction unless there is a powerful reason for not doing so". In my view the decision of HHJ Waksman on section 68 was an application of the approach laid down by Lord Steyn in Lesotho and I concur with his view.

Whilst I note the submissions for TFM of the effect of HHJ Waksman’s judgment on the construction of the section, this does not go to the issue of whether there was an excess of power which is within section 68 or merely the erroneous exercise of an available power. In my view the submissions for TFM before this court as to what constitutes an excess of power were considered and rejected by Lord Steyn in Lesotho having regard to “the radical nature of the alteration of our arbitration law brought about by the 1996 Act”. In Essar HHJ Waksman then applied those principles to section 61 and litigation funding agreements.

I decline to depart from the finding of HHJ Waksman in Essar on the ambit of section 68; in my view he was correct to conclude that at its highest this was an erroneous exercise of an available power and not susceptible to challenge under section 68.

It was submitted for TFM that the Tribunal has purported to award as costs, costs which are not “costs of the arbitration” and that requires a remedy. If there was such an error of law there is a remedy under section 69. However in the present case that remedy is excluded by agreement. Having reached such an agreement it is not open to a party to circumvent it by characterising an alleged error of law as an excess of power.

As to the public policy ground this was not pursued in written or oral submissions for TFM. In order for the challenge under Ground 3 to succeed on public policy grounds it has to be shown that:

Further, in considering whether there should be a refusal of enforcement of an award on the grounds of public policy:

In my view having regard to the relevant legal principles in the circumstances the challenge on Ground 3 on the basis of public policy must fail.

It was submitted for TFM that the Tribunal decided not to give TFM an opportunity to cross-examine KCS’s witness (Mr Fourie) about the very limited evidence that had been put forward by KCS to support its claim for compound interest (notwithstanding that PO5 makes it clear that it was the Tribunal’s view that KCS’s “claim for pre and post-award compound interest at a rate of 9.5%, with monthly rests, allegedly based on KCS’s actual cost of borrowing, also gives rise to factual and evidentiary issues regarding KCS’s choice of finance providers and the forms and terms of the financing to which it had recourse”), and instead TFM was left to rely on documents produced by KCS and its written submissions based on those documents to raise its concerns which was not an effective or adequate substitute.

PO5 is set out above in relation to the procedural challenge on Ground 3. Under section 49(3) of the Act the power to award interest is at such rates and with such rests as the tribunal considers meets the justice of the case. The decision not to allow cross examination is a procedural matter within the discretion of the Tribunal. As referred to above, in the exercise of its discretion the Tribunal ordered disclosure of certain documents but was of the view that cross examination was not “vital”. Again P v D can be distinguished on its facts. TFM has not established that in the circumstances this was a decision that no reasonable arbitrator could have reached.

Further in my view TFM has not established that had cross examination been permitted the outcome might well have been different. The Tribunal held as follows:

The Tribunal had evidence as to the rates of interest under KCS’s outstanding credit facilities. It was of the view that the interest rate awarded should reflect the cost of borrowing. It was able to form a view as to the cost of borrowing from the evidence. TFM have not established that cross examination might have led to a different outcome on the award of compound interest at 9%. TFM raised no objection at the time as to the disclosure.

As to the ground of public policy this was not pursued in written or oral submissions for TFM. In my view TFM has not met the test set out in Process & Industrial Developments referred to above. This basis for the challenge under Ground 4 falls to be dismissed.

CPR 62.9 provides for an extension of the period of 28 days for challenging an award under section 68 but requires an application to be made stating the grounds on which the application is made.

The principles to be applied by the court were set out by Popplewell J in Terna Bahrain v Bin Kamil [2012] EWHC 3283 (Comm) at [27]:

The length of the delay in this case is significant at 69 days. No reasons have been given for the application being made out of time. I note that Popplewell J stated at [29] that:

It is merely submitted for TFM that KCS did not identify the issue at the time.

However I also note that Popplewell J was of the view at [32]-[33] that the court should have regard to the merits of the challenge where it has heard the substantive application:

It was submitted for TFM that a success fee payable to a solicitor or barrister is not within the intended meaning of “costs of the arbitration” or “legal or other costs of the parties”. It was further submitted for TFM that a success fee was not recoverable in 1996 and although it was recoverable between 2000 and 2015 such a fee is no longer recoverable by virtue of statute.

For the reasons discussed above in relation to Ground 3, this challenge goes to the construction of the relevant sections and could only be brought under section 69 and is not an excess of power. It is not therefore necessary for this court to decide whether as a matter of construction “other costs” would include a CFA.

Accordingly even if the court were to grant an extension of time, this additional ground would fail under section 68.

The application by TFM falls to be dismissed for the reasons set out above on all grounds.