The recent decision in Xstrata Coal Queensland Pty Ltd v Benxi Iron & Steel (Group) International Economic & Trading Co Ltd provides useful guidance on when a court may extend time to allow an arbitral tribunal to clarify or remove ambiguity in their award by issuing a memorandum pursuant to Article 27.1 of the London Court of Arbitration Rules 1998 (LCIA Rules).
In this case, the Chinese Shenyang Intermediate People’s Court had refused enforcement of a $27.8 million arbitration award because it found that one of the claimants (ICRA OC Pty Ltd) was not a party to the underlying contract. This matter had not been explained in the award, but the Chinese court’s ruling was contrary to the tribunal’s conclusions. Accordingly, the claimants sought to address the situation by requesting that the tribunal use its powers under Article 27.1.
LCIA Rules
Article 27.1 of the LCIA Rules provides:
“Within 30 days of receipt of any award, or such lesser period as may be agreed in writing by the parties, a party may by written notice to the Registrar (copied to all other parties) request the Arbitral Tribunal to correct in the award any errors in computation, clerical or typographical errors or any errors of a similar nature. If the Arbitral Tribunal considers the request to be justified, it shall make the corrections within 30 days of receipt of the request. Any correction shall take the form of a separate memorandum dated and signed by the Arbitral Tribunal or (if three arbitrators) those of its members assenting to it; and such memorandum shall become part of the award for all purposes.”
Pursuant to section 79 of the Arbitration Act 1996 (AA 1996), the court has power to extend the 30 day deadline imposed by Article 27.1 of the LCIA Rules:
“[U]nless the parties otherwise agree, the court may by order extend any time limit agreed by them in relation to any matter relating to the arbitral proceedings…”
Relevant facts
The dispute concerned the sale of coking coal by a joint venture to the defendant (a Chinese company) pursuant to an agreement known as “the Oaky Contract”. The Oaky Contract described the seller twice. First, as “the Oaky Creek Joint Venturers”, and second, as “Oaky Creek Joint Venturers (being Sumisho Coal Australia Pty Ltd, Xstrata Coal Queensland Pty Ltd, Itochu Coal Resources Australia Pty Limited and ICRA NCA Pty Limited)” (emphasis added).
By a separate agreement (Oaky Creek Joint Venture Agreement) Sumisho Coal Australia Pty Ltd, Xstrata Coal Queensland Pty Ltd, Itochu Coal Resources Australia Pty Limited and ICRA OC Pty Ltd (rather than ICRA NCA Pty Limited) formed an unincorporated joint venture.
A dispute arose and was referred to arbitration under the LCIA Rules. The claimants were those named in the Oaky Creek Joint Venture Agreement (ICRA OC Pty Ltd was a party and not ICRA NCA Pty Ltd).
On 23 August 2010, the tribunal issued the award requiring the defendant to pay the claimants $27.8 million. The defendant did not pay and the claimants applied for recognition and enforcement of the award in the People’s Republic of China under the 1958 New York Convention.
During the enforcement hearing, the Shenyang Intermediate People’s Court observed that there was “a critical flaw” in the arbitral process because the award was silent on why ICRA OC Pty Ltd was a party to the arbitration but ICRA NCA Pty Limited was named in the contract. On 25 April 2014, the Chinese court issued its decision in which it concluded that the award should not be enforced because ICRA OC Pty Ltd was not a party to the Oaky Contract, including the agreement to arbitration.
On 30 May 2014, the claimants applied to the tribunal under Article 27. This was refused on 11 June 2014 on the basis that the time limit had expired and, unsurprisingly, the defendant was not prepared to agree to extend time. Accordingly, the claimants applied to the Commercial Court to extend the deadline, using its powers under section 79 of the AA 1996.
The decision
As to whether the court should act, Knowles J found that:
- There was no material difference in the language of Article 27 of the LCIA Rules and section 57(3)(b) of the AA 1996. Accordingly, the decision in Torch Offshore LLC v Cable Shipping Inc regarding the application of section 57(3)(b) was instructive. In this case, Cooke J compared cases in which “there was unarguably a clear failure to deal with an issue” (and so no ambiguity and no power under section 57(3)(b) to request further reasons from the tribunal) and cases in which “an award contains inadequate rational or incomplete reasons”.
- The words “any errors of a similar nature” in Article 27 could include clarifying or removing ambiguity.
On the facts, it was clear that section 79(3)(a) of the AA 1996 had been satisfied; the claimants had contacted the LCIA and the time limit had expired. As to (b), this was a clear case where substantial injustice would be done if the court did not extend time. The absence of any explanation from the tribunal left uncertainty in the award and impeded the arbitral process. The opportunity for correction by the tribunal still had some value as it was reasonable to assume that the defendant would make the same type of challenge if enforcement was sought elsewhere in the world.
Thoughts
This decision suggests that Article 27 of the LCIA Rules extends well beyond a mere slip rule. Here, by the court’s granting of an extension of time, Article 27 permitted the tribunal to re-form six years after the initial award was handed down to provide detailed reasons on a substantive legal issue. Whilst the court cautioned that Article 27 would not permit anything like a “full blown jurisdiction hearing”, it certainly takes the power further than the correction of typographical errors. In this regard, the decision exemplifies the pro-arbitration stance of the Commercial Court in recent years.
