Court Refuses To Enforce Foreign Arbitration Award Against Cryptocurrency Exchange User

• Jurisdiction: United States,Federal
• Law Firm: Norton Rose Fulbright Hong Kong
• Subject Matter: Finance and Banking, Litigation, Mediation & Arbitration, Financial Services, Arbitration & Dispute Resolution
• Author: Adam Sanitt
• Published date: 02 October 2023

In 2020, Mr Chechetkin, a UK based lawyer, undertook various trading activities on a cryptocurrency exchange platform operated by Payward's UK subsidiary, Payward Ltd (Payward). To trade on the platform, Mr Chechetkin had to confirm the terms and conditions which governed the platform (the Payward Terms). One of the Payward Terms mandated that any disputes be resolved through Judicial Arbitration and Mediation Services (JAMS) arbitration, seated in San Francisco.

Mr Chechetkin incurred losses of over '600,000 on the platform, and sought to recover these funds by initiating proceedings in the English courts. He argued that Payward was undertaking regulated activities and, as it was not authorised, his contract with the company was unenforceable under s.19 of the FSMA and therefore his losses were recoverable.

In response, Payward initiated arbitration in California under the Payward Terms, seeking a declaration that it had no liability towards Mr Chechetkin. The arbitrator rejected the objections set out by Mr Chechetkin and ruled (in 2022) that Payward had no liability towards him. The arbitrator also held that Mr Chechetkin was required to arbitrate his disputes with Payward under clause 23 of Payward's Terms and therefore prohibited him from pursuing his FSMA claim in the English courts.

Payward then sought to enforce the arbitral award in England and Mr Chechetkin opposed the enforcement proceedings under section 103(3) of the AA 1996.

The parties' arguments

Payward sought to enforce its award in the English court on the basis that it was enforceable as a New York Convention award, and was therefore to be "recognised as binding on the persons as between whom it was made" and "enforce[able] in the same manner as a judgment or order of the court", pursuant to section 101 of the AA 1996.

Mr Chechetkin contended that enforcement of the award would have ended the FSMA litigation, as he would have been prohibited from continuing his claim before the English courts. He therefore opposed the enforcement proceedings under section 103(3) of the AA 1996, which enables the courts to exercise their discretion to refuse enforcement on 'public policy' grounds. The public policy grounds in question were the CRA and the FSMA.

Decision

In the enforcement proceedings, Mr Justice Bright considered three main issues: whether Mr Chechetkin had consumer status, the non-binding nature of arbitrator's determinations, and the public policy grounds.

First, the court had to...