| ARBITRATION — Arbitrator — Jurisdiction — Dispute between parties referred to tribunal established under defendant’s rules — Whether president of tribunal validly appointed — Whether tribunal lacking substantive jurisdiction — Whether failure to raise objections before tribunal precluding their being raised before court — Arbitration Act 1996, ss 67, 73
Sumukan Ltd v Commonwealth Secretariat (No 2) [2007] EWCA Civ 1148
CA (Sir Anthony Clarke MR, Waller and Sedley LJJ): 15 November 2007
Where a contract contained a clause expressly providing for arbitration before a tribunal established according to the defendant’s rules, and one of the arbitrators was not validly appointed under those rules, the non-compliance rendered that arbitrator’s participation unlawful and the award a nullity. If the claimant could not with reasonable diligence have discovered the lack of validity within s 73 of the Arbitration Act 1996, the arbitrators lacked substantive jurisdiction under s 67 of the 1996 Act and the award would be set aside.
The Court of Appeal so held, allowing the appeal of the claimant, Sumukan Ltd, against the dismissal by Toulson J on 14 February 2007 of their applications under ss 67 and 68 of the Arbitration Act 1996 challenging the validity of an arbitration award on 25 April 2005 by the Commonwealth Secretariat Arbitral Tribunal to the defendant, the Commonwealth Secretariat, on title to software developed by the claimant for the defendant.
WALLER LJ said that the arbitrators ruled in favour of the defendant that on the proper construction of a contract between the defendant and the claimant, the title in certain software had become that of the defendant. The claimant attacked the validity of that award. Colman J ruled that the contract excluded a right of appeal to the courts under s 69 of the Arbitration Act 1996. The Court of Appeal dismissed the claimant’s appeal ([2007] Bus LR 1075). The applications, attacking the substantive jurisdiction of the arbitrators under s 67, and attacking the award on the basis of irregularity under s 68 of the 1996 Act, came before Toulson J who dismissed them. His Lordship said that the claimant was bound by the contract it made. The most difficult part of the case was a degree of non-compliance with the relevant statute in the appointment of the member who presided over the tribunal. The key issues on the appeal were (1) whether any non-compliance with the relevant statute affected the substantive jurisdiction under s 67 of the panel that sat and made its award; and (2) if so, whether any failures were cured, or the failures could with reasonable diligence have been discovered by the claimant so as to preclude reliance on them by virtue of s 73. There was non-compliance with the relevant statute in the appointment of the president of the tribunal. The claimant was entitled to rely on compliance by the defendant with any measure which might protect even to a small degree the independence of the panel or the president. The failure to comply had not been cured. The de facto concept did not apply in the arbitration context. Toulson J held that it would be wrong to construe s 73 so as to hold that the claimant could with reasonable diligence have discovered facts which it neither knew nor believed nor had grounds to suspect. Indeed since the defendant was under the statute to be instrumental in carrying out the requisite procedures and the defendant appreciated that the procedures had not been gone through, it could be said that it was for the defendant to draw the matters to the claimant’s attention and seek a waiver. The claimant was entitled to rely on the fact that the defendant would not be suggesting a particular tribunal unless the procedures had been complied with. It followed that the award had to be set aside and the matter remitted to a differently and properly constituted tribunal.
Sir Anthony Clarke MR and Sedley LJ delivered concurring judgments.
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