English High Court evaluates fraud/public policy challenge (s.68(2)(g) Arbitration Act)

Yesterday, the English High Court dismissed an application to amend an arbitration claim to bring a section 68 application. In doing so, it provided further guidance on the fraud and public policy ground at section 68(2)(g) of the Arbitration Act 1996 (as amended) (the "Act"), as well as enforcement pursuant to section 66.

In this Legal Update, we highlight the key aspects of the decision by Mr Justice Knowles, which partly clarifies an area of continuing uncertainty.

SECTION S.68(2)(G) OF THE ACT

The Claimants sought to set aside a London-seated LCIA award on the basis that the letter of engagement in dispute was "a contract for fraud" as it was "a contract for provision of services to "obtain information from targets by deception", and was performed in that way".

The Claimants submitted that an Award in support of such a contract could be challenged as a matter of serious irregularity under s68(2)(g) – in particular, due to: "the award being obtained by fraud or the award or the way in which it was procured being contrary to public policy."

This allegation had not been raised in the arbitration and so the tribunal had not dealt with the issue.

Mr Justice Robin Knowles CBE rejected the Claimants' submission on the basis that their case was made on the merits of a contractual claim – and therefore, on a matter which "the parties had agreed should be for the Tribunal to decide". Citing his own judgment in Nigeria v PI&D [2023] EWHC 2638, he asserted that "the focus of the section 68 is [instead] on the parties' conduct in the arbitration and the process by which the award is obtained", and noted "In the present case there is no suggestion that the arbitration process was interfered with".

On this basis, Mr Justice Robin Knowles CBE suggested that accepting that this case falls within section 68 "would be very substantial for the relationship between the Courts and arbitration".

Counsel for the Claimants noted that the wording in s68(2)(g) allows for the possibility that there may be an objection "which is not procedural in nature", and where “although everything was fine in the arbitration, the resultant award is objectionable on grounds of public policy”.

In dismissing the application, Mr Justice Robin Knowles CBE acknowledged the existence of such a category, however he concluded that this case did not fall within it. Instead, he held that an example of such a case would be a situation wherein "the parties entered into a contract, and the intention of a party was "not to perform it but simply to use it as a device to get an award or settlement.""

THE QUESTION OF ENFORCEMENT

As part of submissions, and without conceding the Claimants' position on enforcement, Claimants' counsel suggested that section 68 should be available to the Claimants as the Claimants' challenge was the Court's last opportunity to invoke public policy in respect of a domestic award (in contrast with a foreign, New York Convention award, in respect of which s103 provides an express statutory basis for invoking public policy on enforcement). 

In response to this submission, Mr Justice Robin Knowles CBE made a point of stating, obiter, that he "respectfully doubt[ed] that the Court is required to enforce an award if enforcement would be contrary to public policy", referencing Soleimany v Soleimany [1999] EWCA 285; [1999] QB 785 at page 798. 

KEY TAKEAWAYS

The key takeaways from this decision appear to be that, at the present time:

1. for an award to be challenged under section 68(2)(g) of the Act, on the basis that it is contrary to public policy, but does not result from a procedure that is contrary to public policy, the award in question may well need to be the object of an overall fraudulent enterprise or plan. This appears to render the wording “award […] contrary to public policy” in s.68(2)(g) extremely narrow (at least for now); and
2. enforcement of domestic awards should be capable of resistance on public policy grounds, even though that is not set out in the language of section 66 of the Act.