March 08 2012
In Abuja International Hotels Limited v Meridien SAS the High Court confirmed the high threshold that must be overcome before the court will consider a challenge under Section 67 (on substantive jurisdiction) or Section 68 (on serious irregularity) of the Arbitration Act 1996. In the process, the court confirmed the principle that the law governing the arbitration agreement follows the law of the place of arbitration.
Abuja, the claimant, was a hotel owner. It challenged an International Chamber of Commerce arbitral award that had been made in London in favour of the defendant, Meridien. The tribunal had upheld Meridien's claims that Abuja was in breach of a Nigerian law hotel management agreement in respect of the Nicon Luxury Hotel (formerly Le Meridien Abuja). From about 2007, Abuja unilaterally assumed management of the hotel. The tribunal ordered Abuja to pay Meridien around $7.2 million, plus interest and costs.
The hotel management agreement contained a clause which stated that in the event of the parties' failure to resolve a dispute amicably, "arbitration proceedings shall take place in London before the International Chamber of Commerce". The terms of reference signed by both parties and the tribunal confirmed that the "curial law" was English law.
Abuja had challenged the validity of the arbitration agreement in the arbitration, to no avail. It now challenged the award under Sections 67 and 68 of the act.
Abuja challenged the substantive jurisdiction of the tribunal under Section 67, on the grounds that the arbitration agreement was:
The court rejected the challenge. It found that Nigerian law was irrelevant to the issues to be decided under Section 67. Although the hotel management agreement provided that the governing law was Nigerian law, the arbitration clause stated that the seat of the arbitration was London. The court relied on previous decisions to confirm that the law governing the arbitration agreement follows the law of the seat, and thus it was English law in this case. The parties had confirmed that understanding in the terms of reference. There were no grounds under English law to suggest that the arbitration agreement was invalid or unenforceable, and Abuja did not contend otherwise. Abuja's argument that the arbitration agreement was contrary to Nigerian public policy was irrelevant, as was its claim that force majeure in respect of the hotel management agreement would impair the validity of the arbitration agreement.
The court also rejected Abuja's challenge that the tribunal's conduct amounted to serious irregularity under Section 68. Abuja submitted that the tribunal's decision was contrary to the evidence and that no reasonable tribunal could have reached it. However, Abuja did not demonstrate that the tribunal had exceeded its powers - many of Abuja's arguments were simply criticisms of the tribunal's decisions. Accordingly, Abuja's various arguments that the basis for the tribunal's calculation of damages, including damages for future losses, amounted to an excess of power or irregularity were irrelevant. Having set out the necessary legal criteria, the judge concluded that Abuja had failed to establish "any irregularity" within Section 68, still less a "serious" irregularity which had caused or would cause "substantial injustice".
The judge's decision reinforces the supportive approach of the English courts to arbitration in two respects.
First, it underpins the presumption that the law governing the arbitration agreement is the law of the place of arbitration. If there is no indication to the contrary, the tribunal's jurisdiction in an arbitration taking place in London is to be governed by English law, rather than the law governing the underlying contract (if that is different). Likewise, English law applies to any challenge under Section 67.
Second, the judge stressed the high threshold for a challenge under Section 68, summarising the key legal considerations for determining whether that threshold has been met. This summary will be a useful description of the principles that must be applied in subsequent challenges to arbitral awards in the English courts.
For further information on this topic please contact Robert Lambert or Jo Delaney at Clifford Chance LLP by telephone (+44 20 7006 1000), fax (+44 20 7006 5555) or email (email@example.com or firstname.lastname@example.org).
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