Casefile: RJ v. HB [2018] EWHC 2833 (Comm)

Does section 68 of the Arbitration Act 1996 allow the court to remove an arbitrator?

Section 68 of the English Arbitration Act 1996 (s.68) allows the English courts to set aside an award on grounds of serious irregularity. In a rare example of a successful challenge under s.68, the Commercial Court in the recent case of RJ v. HB [2018] EWHC 2833 (Comm) partially set aside an ICC award in a US$75 million banking dispute. However, the judge (Mr Justice Andrew Baker) decided the court has no power under s.68 to remove an arbitrator. To remove an arbitrator, a party must make a separate application under section 24 of the Arbitration Act 1996 (s.24).

Facts of case

The claimant in the arbitration was a businessman (HB) who owned a controlling interest in a bank (Bank A) and wanted to buy a controlling interest in another bank (Bank B).

The respondents were another businessman (RJ) and an investment company he controlled (L Co). RJ agreed to give HB US$75 million (through L Co) so HB could buy Bank B. Under that agreement, it was possible that RJ would receive a 25 per cent interest in Bank B from HB after Bank A and Bank B merged. HB did not transfer the 25 per cent interest in Bank B to RJ and said he did not have to do so.

The premise of HB's position was that RJ had decided not to take the 25 per cent interest and had, therefore, breached his obligation to get the necessary permissions to do so. RJ and L Co agreed they had not taken the 25 per cent interest but said their failure to do so had not involved any breach of any obligation.

The sole arbitrator found that RJ had breached the agreement. Nonetheless, his award declared that RJ was the beneficial owner of the shares HB had bought in Bank 2 with RJ's US$75 million, stating that those shares referred to the 25 per cent interest envisaged by the agreement. No party had sought such a declaration or relief during the arbitration.

Serious irregularity

The judge found that nothing during the arbitration suggested the arbitrator was considering making an award in the terms he did. For an arbitrator to decide a dispute on a basis significantly different to anything raised by or with the parties during the arbitration did amount to a serious irregularity if it would cause substantial injustice. Therefore, the judge further decided the award should be set aside. That left the question - should the original arbitrator be the person to consider the issue afresh?

Removal of an arbitrator

Previously...