Is an interim decision by an arbitral tribunal capable of giving rise to a challenge?

In ZCCM Investments Holdings v Kanasanshi Holdings Plc & another [2019] EWHC 1285 (Comm), the Commercial Court found that a procedural ruling made in an arbitration was not an award, and therefore not capable of giving rise to a challenge under section 68 of the Arbitration Act (the Act).

Background

ZCCM, a Zambian investment entity, applied to the tribunal for permission to pursue a derivative claim in the name of a company, KHL, in which it was a shareholder. The tribunal refused permission, finding that ZCCM had failed to make out a prima facie case.

Substance v procedure: an award or a ruling?

ZCCM applied under s.68 of the Act to challenge the decision on the grounds of serious irregularity or lack of fairness. This required the court to examine whether the decision constituted an award, since only an award can be challenged under s.68. Cockerill J noted that the authorities on the subject were highly fact-specific and did not establish any clear set of principles by which to make this determination.

ZCCM suggested that the test was whether or not the decision finally determined a particular issue or claim. Since the tribunal’s ruling brought ZCCM’s claim to an end, it constituted an award. In addition, the ruling had several formal attributes that suggested it was an award, including that it had been signed by all three arbitrators and specified the location of the seat.

KHL argued that the application for permission was an intrinsically procedural device; the cause of action belonged to KHL and was not brought to an end by the ruling. In addition, at the end of the hearing KHL had expressly asked the tribunal to make an award rather than a procedural ruling, and the tribunal had declined.

The decision

Cockerill J set out the following criteria:

• The court will give weight to the substance of the decision and not merely its form.
• A decision dealing purely with procedural issues is unlikely to be an award.
• If the decision deals with substantive rights and liabilities, it is more likely to be an award.
• If the decision finally disposes of an issue or claim, that is a factor pointing to the decision being an award.
• The tribunal’s own description of the decision is relevant, but not conclusive.
• It may be relevant to consider how a reasonable recipient of the decision would have viewed it. In this regard:
  • A reasonable recipient is likely to consider objective attributes such as the tribunal’s description of the decision, the formality of the language and the level of detail of the reasoning.
  • A reasonable recipient will also consider whether the decision complies with any formal requirements for an award under the applicable rules.
  • The reasonable recipient should be taken to have all the information that was available to the parties and the tribunal, including the procedural context.

Applying these principles to the facts, the judge concluded that the decision in this case was an interlocutory ruling and not an award. It was in essence procedural and did not bring the arbitration to an end, since KHL could pursue the claim if it wished. At 22 pages, it was shorter than would be expected for a final award in a multi-million-pound claim and dealt with the issues in a “compressed” form that was more suitable to a procedural ruling. Finally, given the discussion at the hearing about whether or not the decision should be in the form of an award:

The court therefore dismissed ZCCM’s challenge.

Comment

This case will be useful both to arbitrators and to arbitration practitioners, given that it appears to provide for the first time a coherent set of criteria for determining whether a decision is an interlocutory ruling or a final award that can be the subject of a s.68 challenge.

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