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January 15, 2020

Arbitration Case Law Update: Court of Appeal Reinforces Court's Supervisory Jurisdiction

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Arbitration case law update: Court of Appeal reinforces court’s supervisory jurisdiction

Minister of Finance (Incorporated), 1 Malaysia Development Berhad v International Petroleum Investment Company, Aabar Investments PJS [2019] EWCA Civ 2080

The Court of Appeal (“CoA”) has recently issued a rare and significant decision on an arbitration-related claim in the English court.  Notably, it reversed a decision of the High Court to stay parties’ applications to challenge an arbitral award under sections 67 and 68 of the Arbitration Act 1996 (the “Act”) and, in doing so, has emphasised the important public function underlying the court’s mandatory supervisory jurisdiction over arbitrations seated in England and Wales.

In broad summary, and as detailed further below:

  • The High Court had granted a stay of the claimants’ applications under sections 67 and 68 of the Act. It did so in order to avoid the risk of delay, cost, disorder and uncertainty arising from concurrent arbitration proceedings that had been commenced by the defendants shortly after the claimants’ applications were served, which addressed materially similar issues to those set out in the claimants’ applications (regarding the enforceability of settlement deeds between the parties).
  • The CoA removed the stay, explaining that, in light of the principle of party autonomy and the public interest in the court’s supervisory function when an arbitration award is challenged for lack of substantive jurisdiction or serious irregularity, compelling grounds are required to stay such proceedings. The CoA held that this test was not met in circumstances where the defendants’ actions (in starting new arbitration proceedings) were deemed to have been taken in order to frustrate the claimants’ applications to challenge the award.
  • The CoA also granted an injunction restraining the defendants from pursuing their new arbitration claims until final determination of the claimants’ applications (reversing the High Court’s decision on that point). In doing so, the CoA confirmed that arbitration proceedings may be injuncted in exceptional circumstances and reaffirmed the applicable three-stage test laid down in Claxton.[1]

 

[1] Claxton Engineering Services Ltd. v TXM Olaj-Es Gazkutato Kft (No 2) [2011] EWHC 345 (Comm), [2011] 2 All ER (Comm) 128 at [34] (“Claxton”).

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