K v S [2019] EWHC 2386 (Comm) – Section 68, Due Process And The Exclusion Of Expert Evidence

Clyde & Co successfully defended a challenge brought by the Applicant ("K") under section 68 of the Arbitration Act 1996 (the "Act"), which had the potential to expose the Defendant ("S") to a claim for EUR 1.3 billion in the underlying arbitration. In this recently published Commercial Court decision, Sir Jeremy Cooke (sitting as a Judge of the High Court) confirmed that section 68 is concerned solely with due process and it represents an exhaustive list of what constitutes "serious irregularity" under the Act, without exceptions. The judgment also considered the issue of what constitutes an "award" for the purposes of section 68.

Background

The underlying LCIA arbitration arose out of a dispute between the parties concerning the termination of an EPC subcontract in the Middle East, in respect of which S commenced arbitration proceedings against K.

A few months before the evidentiary hearing was set to commence, K sought to introduce a new loss of profit claim against S by way of an expert report from a forensic accountant, Mr N. Through this report K alleged that S was responsible for the decline of K's construction activity from 2014 and the collapse of K's business in 2016 (the "Business Collapse Claim"). Mr N's report assessed K's losses at KWD 459 million (equivalent to approx. EUR 1.3 billion).

S objected to the introduction of Mr N's report in the proceedings on the basis that the Business Collapse Claim was new to the arbitration and involved wholly new and unpleaded facts. S argued that K had no permission to introduce that report in the proceedings, and that there was insufficient time for the report to be properly addressed in advance of the evidentiary hearing.

In response to K's refusal to withdrawn the report, S applied to the Tribunal to have the report struck out from the record. K provided written submissions in response, arguing that the Business Collapse Claim had been pleaded in its statement of defence and counterclaim and in its schedule of loss, and that it was within the scope of the list of topics for expert determination. Further written submissions were then filed by each party, after which a hearing was held before the Tribunal to determine the application.

The Tribunal decided "not to admit Mr N's report in [the arbitration] proceedings" and this decision was recorded in the Tribunal's Procedural Order No. 5. K challenged the Tribunal's decision by way of an application to the Commercial Court pursuant to...

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