17/12/2010
A v B [2010] EWHC 3302 (Comm)
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Flaux J has given helpful clarification of the principles applicable to applications for sums payable under arbitration awards to be secured under section 70(7) of the Arbitration Act 1996 pending determination of a challenge to the jurisdiction of the tribunal under section 67 of the Act.
There was a conflict between the decision of Tomlinson J in Peterson Farms v C & M Farming Ltd [2004] 1 Lloyd’s Rep. 614 and the decision of Morison J in Tajik Aluminium Plant v. Hydro Aluminium [2006] EWHC 1125 (Comm). Flaux J doubted the decision in Tajik Aluminium insofar as it applied to challenges under section 67, on the grounds that its analysis of the legislative origins of section 70(7) should be treated with caution, its approach was influenced by the Judge’s view that section 67 challenges should not involve a complete rehearing (contrary to the decision of the Supreme Court in Dallah Real Estate v The Government of Pakistan [2010] UKSC 46), and its rejection of the distinction between section 67 and other challenges was not well founded.
Flaux J therefore held that: (1) In most cases there will be a threshold requirement that the party making the section 70(7) application demonstrates that the challenge to the jurisdiction is flimsy or otherwise lacks substance; (2) as a general principle, the Court should not order security unless the applicant can demonstrate that the challenge to the award (whether under section 67 or otherwise) will prejudice its ability to enforce the award. Often this will entail the applicant demonstrating some risk of dissipation of assets, although there may be other ways in which enforcement could be prejudiced.
Michael Collett, instructed by Clyde & Co, appeared for A, the party which successfully resisted the application for security in respect of the awards.
