An award cannot be set aside once converted into a judgment for enforcement purposes

The Commercial Court has dismissed an application to set aside two arbitration awards under section 72 of the Arbitration Act 1996. The court found that there was no basis for the application in circumstances where the awards had been merged into English judgments two years earlier.

Background

Ashapura Minechem Ltd v Armada (Singapore) Pte Ltd [2018] EWHC 3056 (Comm), concerned a dispute under two contracts between a major Indian mining company and a Singaporean marine transportation company. Both contracts contained arbitration clauses. However, Ashapura commenced court proceedings in India. Armada therefore obtained an anti-suit injunction from the English court and referred both disputes to arbitration. Ashapura disregarded the injunction and wrote to the arbitrator arguingthat there was no valid arbitration agreement because the contracts had been novated or transferred. Thereafter, it took no part in the arbitrations. The arbitrator rendered awards in favour of Armada in both arbitrations in 2010. In the same year, Cook J granted Armada an order for summary enforcement of the awards, and in 2016, an application to convert the awards into judgments was granted by Teare J.

Ashapura then applied to set aside both awards under section 72(1) of the 1996 Act on the ground that the arbitrator lacked substantive jurisdiction. Armada opposed the application on four main grounds:

• The effect of the order converting the awards into judgments was that the awards merged into the judgments and could no longer be set aside under section 72(1) of the Act;
• The application was out of time, and a retrospective extension of time would cause material prejudice to Armada; and
• Ashapura had participated in at least one of the arbitrations, with the result that section 72(1) was not available to it;
• Ashapura was estopped from bringing an argument based on novation or transfer because that issue had been decided against it by an interim decision in the Indian court, where the proceedings were still pending at the time of the hearing before the Commercial Court.

The Commercial Court decision

The court noted that Ashapura’s ongoing disregard for the anti-suit injunction meant it was in contempt of court, which would ordinarily mean that the court would refuse to hear its application. However, at the request of Armada, Cockerill J agreed to proceed so that finality could be achieved.

The court dismissed Ashapura’s application on the ground that both arbitration awards had merged into the 2016 judgments. As a matter of English law an arbitration award created a cause of action in contract, arising out of the parties’ implied agreement to comply with an award under their contract. That cause of action was extinguished once judgment had been given, and therefore section 72 of the Act no longer applied. Ashapura had made no application to set aside the orders converting the awards into judgments and had shown no good reason why, after what Cockerill J described as a “huge delay”, it should now be allowed an extension of time to do so.

The court also found that Ashapura had participated in the arbitration proceedings. Its letter to the arbitrator had crossed the line between notifying the arbitrator that it objected to his jurisdiction and making submissions for his consideration. Even if that was not correct, Cockerill J held that Dallah Real Estate and Tourism Holding Company v The Ministry of Religious Affairs, Government of Pakistan [2011] 1 AC 763 established that section 72 could not be triggered after a successful application to enforce an award.

Finally, there was no adequate evidence of the alleged novation or transfer, and there was a strong argument that Ashapura was estopped from raising it by the interim decision in the Indian proceedings.

Comment

This decision is a reminder of the importance of taking prompt steps to set aside an order for enforcement of an award that a party considers was rendered without jurisdiction. Once the award has been merged into a judgment, it will be too late to bring a jurisdictional challenge. It also provides a helpful reminder of the status of an arbitration award.

For further information, please email the authors or your usual CMS contact.

The authors would like to acknowledge the assistance of Sara Freitas, intern at CMS London, in preparing this article.