UK: English Commercial Court Holds That Arbitrators Are Not Empowered To Express Interim Relief In The Form Of An Award In UNCITRAL Arbitration

On 16 September 2022, the English Commercial Court delivered its judgment in EGF v HVF, HWG, TOM, DCK, HRY [2022] EWHC 2470 (Comm) in respect of a London-seated arbitration under UNCITRAL Rules, dismissing a challenge to a partial award. The challenge was made partly under section 68 of the English Arbitration Act 1996 (the "Act"). Mr Justice Baker dismissed the challenge on the basis that substantive injustice had not been proven – but held, obiter, that the arbitrators had exceeded their powers in making an interim payment order in the form of an award.

Background

In October 2021, the Defendants (the claimants in the arbitration) made an application for urgent post-hearing relief, requesting a partial award for a sum of money owed by the Claimant. In December 2021, a hearing took place addressing the application, and the Tribunal made a "December Ruling", ordering the Claimant to pay US$250 million by 31 January 2022 by way of "Interim Payment Order". On 17 January 2022, the Tribunal followed up with a document entitled "Partial Award", which was expressed to be made pursuant to Article 34 of the UNCITRAL Rules and stated "By way of Interim Payment Order, [the claimant] shall pay [the first defendant] the sum of US$250 million... by 31 January 2022."

The Claimant subsequently commenced proceedings in the Commercial Court seeking to set aside the interim payment order or obtain a declaration of no-effect. The Claimant argued that the arbitrators lacked power to make the order under section 68(2)(b) of the Act because (i) Article 26 of the UNCITRAL Rules does not empower arbitrators to make interim payment orders and/or (ii) Article 34 of the UNCITRAL Rules does not empower arbitrators to issue an interim remedy in the form of an award. The Claimant alleged that the Partial Award caused it to suffer a substantial injustice.

The Claimant also sought the removal of the arbitrators pursuant to section 24 of the Act and, further or alternatively, to set aside the award based on the arbitrators' alleged lack of jurisdiction to make the order.

Decision

The judge dismissed the totality of the Claimant's challenge, holding, in respect of section 68 of the Act, that the Claimant did not and would not suffer substantial injustice, even if the arbitrators had exceeded their powers. The judge found that the Claimant had not complied with the order and there was no threat or real prospect of meaningful enforcement before the arbitrators' final award which was only three months away.

Nonetheless, the judge considered the Claimant's arguments concerning interim measures on an obiter basis, given that they raised issues of more general interest and importance.

Was the Tribunal empowered to order the interim measure?

Baker J first considered whether the arbitrators were empowered to make an interim payment order under Article 26 of the UNCITRAL Rules. Article 26.1 of the UNCITRAL Rules states that "[t]he arbitral tribunal may at the request of a party grant interim measures". Article 26.2 describes interim measures as "temporary" and provides some non-exhaustive examples.

The question, then, was whether the arbitrators' measure for payment on account of a money claim was "temporary". The Claimant argued that unless the relief was articulated "in the language of temporariness" (i.e. by using the words like 'until' or 'pending'), it could not qualify as an interim measure for the purposes of the UNCITRAL Rules. The judge held that the interim payment order was temporary by nature because "it is an adjustment of the financial position between the parties pending, and subject to adjustment as may be appropriate by reference to final decisions." Therefore, Article 26 did empower the Tribunal to make an order for provisional payment by way of interim measure.

Was the Tribunal empowered to grant an award?

The judge then considered whether the Tribunal was empowered to grant an interim payment order in the form of an award under Article 34 of the UNCITRAL Rules. In referring to sections 39 and 58 of the Act, the judge confirmed that in English-seated arbitrations, absent party agreement, arbitrators have no power to issue awards granting provisional relief.

Baker J then held that the UNCITRAL Rules contained no such power. Article 34.2 of the UNCITRAL Rules provides that "[a]ll awards shall be made in writing and shall be final and binding on the parties. The parties shall carry out all awards without delay." The judge considered whether the fact that the Partial Award was subject to revision meant that it was not "final and binding" as required by Article 34.2, and thus should have instead been issued as an interim remedy. The judge concluded that the relief was, by its nature, interim because the Tribunal had reserved their jurisdiction to revisit it pending final determination. Therefore, had the judge found that the Claimant had suffered substantial injustice, the section 68 challenge would have succeeded on the basis that the Tribunal exceeded its powers by making an award for a merely interim remedy.

Comment

This decision constitutes another example of the high threshold for section 68 challenges in England. Even though the Tribunal was found to have exceeded its powers, the challenge was unsuccessful as the requirement for substantial injustice was not satisfied.

This decision also provides some interesting guidance on interim remedies in arbitration, and the interaction between the Act and the procedural rules chosen by the parties. Here, even though the arbitrators were empowered to grant provisional relief in the form of an award under the Act, Article 34 of the UNCITRAL rules trumped the language of the Act.

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