Section 67 And 68 Challenges To LCIA Award Dismissed

In the highly complex and contentious case of Filatona Trading Ltd and another v Navigator Equities Ltd and others [2019] EWHC 173 (Comm), the English High Court dismissed an attempted challenge to an LCIA award brought on the grounds of jurisdiction (s.67 Arbitration Act 1996) and serious irregularity (s.68 Arbitration Act 1996).

In particular, the Court held that an LCIA arbitral tribunal did not exceed the scope of its powers in ordering relief that was not available to an English court.

Background

The dispute arose under a shareholder agreement (SHA) concerning land in central Moscow. Ms Danilina and Mr Deripaska were named as parties to the SHA. Ms Danilina's former partner, Mr Chernukhin, was not. Mr Chernukhin's position was that Ms Danilina was acting as his nominee or agent and that, consequently, he was the true party to the SHA by virtue of being Ms Danilina's disclosed principal and the beneficial owner of Ms Danilina's shares. Ms Danilina and Mr Deripaska disputed this.

In arbitration proceedings between Mr Chernukhin and Mr Deripaska, an arbitral tribunal held that Mr Chernukhin was a party to the SHA and ordered Mr Deripaska to pay $95 million to "buy out" Mr Chernukhin's shareholding in the relevant Cypriot company.

Mr Deripaska sought to challenge the award. Mr Deripaska contended (as he had done before the tribunal) that Mr Cherunkhin was not a party to the SHA and the arbitration agreement in it, and thus challenged the Award under s.67 on the basis that the tribunal did not have jurisdiction to make it (Section 67 Challenge). Mr Deripaska also argued that the award should be set aside on the grounds of serious irregularity under s.68, alleging that the tribunal had acted ultra-vires by ordering buy-out (Section 68 Challenge).

Ms Danilina was not party to the arbitration and so was not bound by the award. Shortly after the award had been rendered, she entered into an agreement to transfer the beneficial interest in her shares to Mr Deripaska. She then began litigation in England seeking a declaration from the court that she was the true party to the SHA and the owner of the shares, and not Mr Chernukhin.

Given the related nature of Ms Danilina's claim in litigation and Mr Deripaska's challenge in arbitration, the Court heard both cases together.

Section 67 Challenge

The Court acknowledged that the key factual issue of whether Mr Chernukhin was a party to the SHA, and the related legal issue of whether Mr Chernukhin was...