English Commercial Court Takes Rare Decision To Refuse Enforcement Of Arbitration Award On Public Policy Grounds In Crypto Case

• Published date: 18 July 2023
• Subject Matter: Consumer Protection, Litigation, Mediation & Arbitration, Technology, Consumer Law, Arbitration & Dispute Resolution, Fin Tech
• Law Firm: Herbert Smith Freehills
• Author: Mr Charlie Morgan and Elizabeth Kantor

The English Commercial Court has refused to enforce a foreign-seated arbitration award on the grounds that to do so would be contrary to public policy. The case concerned a dispute between Mr Chechetkin and the Payward group, which operates the Kraken cryptoasset trading platform. Payward received a favourable arbitration award in California which it sought to enforce in England.

Whilst emphasising that mandatory B2C arbitration is not in itself unfair, the English Court concluded that in the particular circumstances of the case, enforcement of the JAMS arbitration award would be contrary to public policy, because the specific public policy embodied in UK consumer legislation and the Financial Services and Markets Act 2000 (FSMA) required the issues in this case to be governed by English law and not to be decided overseas.

Background

As set out in further detail in our blogpost here, Mr Chechetkin, a UK-based lawyer by profession, undertook various trading activities on Payward's Kraken cryptocurrency trading exchange in 2020 and lost more than '600,000. Payward's terms of service (Terms) were set out in a clickwrap agreement and contained a Judicial Arbitration and Mediation Service Rules (JAMS) arbitration clause with disputes to be determined by sole arbitrator seated in San Francisco. The Terms were governed by California law and specified that effect would not be given to any conflict of laws principles that may provide for the application of the law of another jurisdiction.

Payward commenced JAMS arbitration in 2022. In response, Mr Chechetkin brought a jurisdictional objection and challenged the arbitrability of the dispute, on the basis that Payward had breached FSMA because it was conducting activities for which it did not have the necessary authorisation. The sole arbitrator ruled that the arbitration clause was enforceable under California law and that Mr Chechetkin could not properly advance claims based on English statute. The final award...