UK: The Status Of Interim Arbitration Awards: Are They "Provisional" Or "Partial"?

Nicola Rotenberg v Sucafina SA [2011] EWHC 901 (Comm)

The issue in this case was whether the Claimant could rely on s.79 of the Arbitration Act 1996 (the "Act") to extend a time limit under the arbitration rules of the Coffee Trade Federation Limited (the "CTF"). The Court also considered whether the "interim" awards made by the arbitration appeal panel on these issues should stand. Eder J., did not think that an extension was justified in the circumstances and provided some useful insight into the status of "interim" awards, where the Act applies.

Background Facts

The appellant, Mr. Rotenberg, was the co-managing director and shareholder of a general trading company ILFEC, based in the Democratic Republic of Congo, and which was affiliated to a company known as CAFECA in the Central African Republic. In September 2002, the respondents, Sucafina, a Swiss company, commenced arbitration in London against Mr Rotenberg in relation to 64 contracts for the supply of coffee. The principal issue between the parties was whether the contracts were concluded by Mr Rotenberg personally or with ILFEC or CAFECA.

The award of the Arbitrators ("Original Award") held Mr Rotenberg liable to pay Sucafina damages together with interest and costs. On appeal, the appeal board appointed by the CTF made several "interim appeal awards" pursuant to the arbitration rules of the CTF (the "CTF Rules") including a decision that only 9 of the 65 contracts in question were made with Mr Rotenberg personally and, in fact, Sucafina was liable to Mr Rotenberg under those nine contracts.

Before publishing its Final Award, the CTF called for payment of its fees and expenses. The parties failed to meet the deadline imposed by the CTF for payment of such fees and although payment was later made, the CTF refused to publish this Final Award as it was entitled to do under the CTF Rules. Mr Rotenberg appealed to the Commercial Court seeking an order under s.79 of the Act, for an extension of the time limit under the CTF Rules.

The Commercial Court Decision

The Declaration

Eder J. granted a declaration that the Interim Awards should be considered final and binding. Whilst the word "interim" was ambiguous, the best construction of the CTF Rules 48 was that the tribunal had the power to make a partial award (as opposed to a provisional award) which was final and binding. The CTF Rules provided for the "Original Award" to be binding in the event that the appeal award was not taken up within a specific time. Eder J. held that where there was one or more partial awards which was intended to be final and binding subject only to an appeal, the Rule would apply such that that partial award(s) would stand if the appeal award was not taken up in time.

The order for an extension of the time limit

Section 79 of the Act provides that a court may extend any time limit in an arbitration proceedings, with the exception of time limits to commence arbitral proceedings. Before making such an order, the Court must be satisfied that all other recourse has been exhausted and, that a substantial injustice would otherwise be done. After considering the factual circumstances, the Court declined to grant an order. It was accepted by the Court that although the first test of lack of alternative recourse had been satisfied, the second test of "substantial injustice" was a more stringent one which, on the facts, had not been fulfilled.

The "substantial injustice" test is intended to prevent parties from circumventing the agreed arbitral process. Accordingly, such an order should rarely be made by the Court. Although the Court accepted that there would be no disruption of the arbitral process (as the arbitration had come to a close) it was unimpressed by Mr Rotenberg's reasons for the delay in payment ,which were described as "...at best, sketchy and unpersuasive". Mr Rotenberg was represented throughout by English solicitors and counsel with whom he was in regular contact during the period in question; the CTF arbitral process was not a new one and the deadline was clearly set out and notified to all parties; the Court had reason to believe that Mr Rotenberg was aware that there would be serious consequences of missing the deadline; and it was clear that Mr Rotenberg would have had no difficulty in meeting the payment which was relatively minor in comparison to the amounts in dispute. The Court further declined to exercise its discretion to grant the order on the basis that the appellant took almost a year from the date of the deadline for payment to bring a claim in the Commercial Court.

Comment

This decision assists in showing where an "interim award" can be understood to be a "partial" award rather than a "provisional" award. Further, the decision in this case reflected the general trend of the Courts to dismiss applications for extensions of time in arbitration proceedings (see e.g SOS Corporacion Alimentaria SA and another v Inerco Trade SA [2010] EWHC 162 (Comm), in the context of a request under s.12 of the Arbitration Act 1996 to extend time for commencement of proceedings). It appears that, in order to overcome the "stringent hurdle" that is the substantial injustice test, the appellant would have to have an extremely persuasive argument as to its reasons for failing to comply with the time limit in question.

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