English Court Rejects Section 68 Challenge On The Primary Ground That The Tribunal's Decision Was A Procedural Order And Not An Award

In the recent case of ZCCM Investments Holdings PLC v Kansanshi Holdings PLC & Anor [2019] EWHC 1285 (Comm), the English Court (the Court) rejected a challenge under s.68 of the English Arbitration Act 1996 (the Act) and provided useful guidance on the test for determining whether a tribunal's decision qualifies as an award for the purpose of a s.68 challenge.

Background

The case related to funds owned by a mining company, Kansanshi Mining PLC (KMP). KMP was owned by ZCCM Investments Holdings PLC (ZCCM) and Kansanshi Holdings Limited (KHL), who respectively hold 20% and 80% of KMP's share capital. KHL controls the management of KMP and KHL is indirectly wholly owned by FQM Finance Limited (FQMF). ZCCM, on the other hand, is owned by the Republic of Zambia.

KMP made very significant transfers between 2006 and 2014 to FQMF (the Transfers), ultimately totalling US$2.238 Bn. The transfers were subsequently repaid to KMP in 2014-2015 with interest at 30-day LIBOR. ZCCM initiated an ad hoc arbitration on behalf of KMP against KHL under the UNCITRAL Arbitration Rules 2010, claiming that in making the Transfers, KPM acted in breach of an Amended and Restated Shareholders' Agreement and of its fiduciary duties. ZCCM also made a claim in deceit, based on KHL's alleged dishonest misrepresentations to ZCCM from 2007 onwards as to the nature of the Transfers. The applicable law was Zambian law (which incorporates the English common law principles which governed derivative claims before the English Companies Act 2006).

The Tribunal's Ruling

In view of KHL's control of KMP, ZCCM initiated the arbitration, making the claims on behalf of KMP. The claim was therefore brought as a derivative claim and it was common ground between the parties that ZCCM was required to seek the tribunal's permission to pursue the derivative claim.

The tribunal determined that in order to bring the derivative claim ZCCM was required to demonstrate that the derivative claim had a realistic prospect of success. Following a hearing, the tribunal issued a decision that ZCCM had not established that its derivative claim did in fact have a realistic prospect of success (the Ruling).

ZCCM's applications

ZCCM challenged the Ruling under s.68(2)(d) of the Act, arguing that there were serious irregularities due to the tribunal's failure to deal with five key issues, and under s.68(2(a), on the basis that the tribunal failed to comply with its general duty under s.33, by wrongly proceeding...