Court makes bold step to set aside international arbitration award

The Commercial Court in London has set aside a London Court of International Arbitration (LCIA) arbitration award, an unusual decision in the recent case of A v B [2017]. The award was annulled because the Request for Arbitration raised two distinct disputes arising under two separate contracts so the LCIA tribunal did not have proper jurisdiction over both claims.

The case concerns a sale of two consignments of crude oil by “B” to “A”, each consignment formalised under separate contracts but incorporating the same terms and conditions. Both contracts contained an identical LCIA arbitration agreement. B filed a Request for Arbitration when A failed to make required payments under both contracts, asserting claims made under both contracts in one Request. A later denied liability and issued a challenge to the validity of the Request, arguing that B had failed to identify the “dispute” between the parties by referring both claims to a single arbitration. The LCIA Tribunal dismissed the jurisdictional challenge, prompting A to commence High Court proceedings shortly after.

It is very unusual for the English commercial courts, which are known for being arbitration-friendly, to set aside any arbitral award. However, Mr Justice Phillips found that the procedure for commencing arbitration under the LCIA Rules were entirely clear and do not envisage several arbitrations being commenced under a single request.

The case serves as essential reading for any party commencing an LCIA arbitration in relation to a dispute governed by more than one arbitration agreement. The decision is a reminder of the importance of complying with the provisions of any applicable arbitration rules and to take advice before commencing arbitration.