Livian On A Prayer: Claimant's Last Hope S68 Challenge Is Firmly Rejected By The Commercial Court

• Published date: 05 May 2022
• Subject Matter: Litigation, Mediation & Arbitration, Arbitration & Dispute Resolution
• Law Firm: Herbert Smith Freehills
• Author: Mr Chris Parker and Jake Savile-Tucker

The Commercial Court has rejected an attempt to challenge an LCIA award on grounds of serious irregularity under section 68(2)(a) of the Arbitration Act 1996: Livian GmbH v Elektra Ltd and another [2022] EWHC 757 (Comm). The Court held that the contention that the Tribunal had overlooked undisputed witness testimony could not form the basis of an allegation of serious irregularity and, in any event, the Claimant had failed to demonstrate that evidence was overlooked or that any alleged omission would have had a significant impact on the outcome.

This judgment is another example of the robustness of the English Courts when faced with challenges to arbitral awards and their continued deference to tribunal decision-making.

Background

The parties were developers and manufacturers of healthcare electronic equipment. In October 2011, the parties entered into a German-law governed agreement pursuant to which the Defendant was granted rights to develop, market and distribute the Claimant's Product.

A dispute arose between the parties which concerned an allegation that the Defendant had failed to promote, market and sell the Product in compliance with its contractual obligations. In accordance with the Agreement, the dispute was referred to LCIA arbitration proceedings.

The dispute before the Tribunal turned upon the construction of the contract. Under German law, it is necessary to have regard to the content of pre-contractual negotiations and the subjective intentions of the parties. The Tribunal (at its own insistence) questioned one of the Defendant's employees (Mr Prosser) who had been engaged in the contractual negotiations. Mr Prosser's evidence was contrary to the Claimant's construction of the Agreement. The Tribunal decided the issue against the Claimant but did not refer to any of Mr Prosser's evidence in its Award.

The Claimant brought a challenge to the Award under section 68(2)(a) of the Arbitration Act 1996 on the sole basis that "... ignoring and/or overlooking the undisputed evidence of its own witness, the Tribunal committed a serious irregularity which affected the Final Award and caused substantial injustice to the Claimant".

Decision

Judge Pelling QC rejected the Claimant's application and reaffirmed that a s68 challenge will only be allowed in exceptional cases.

The first question the Court considered was whether the Claimant had demonstrated that the Tribunal had failed to act fairly and impartially between the parties by ignoring and/or...