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Sections 67 and 68 challenges under the Arbitration Act 1996: getting the claim form right

In the recent case of Orascom TMT Investments SARL v VEON Ltd, Mr Justice Andrew Baker provides guidance in relation to the content of an arbitration claim form and witness statements made in support of section 67 and 68 challenges under the Arbitration Act 1996 (AA 1996).

The judge essentially criticises what he identifies as being the “common-practice” for the arbitration claim form merely to “identify the bare statutory essentials” and then state that “reference should be made to the supporting witness evidence“.

Andrew Baker J also provides useful guidance at paragraphs 26-28 of his judgment on how the word “issue” in section 68 (2)(d) of the AA 1996 should be interpreted, but this falls outside the scope of this blog.

Section 67 and 68 challenges

Sections 67 and 68 of the AA 1996 allow parties to challenge English-seated arbitral awards on the narrow grounds of “substantive jurisdiction” and “serious irregularity”, respectively.

The dangers of a “lazy” claim form

For Part 7 claim forms, guidance may be found in CPR 16.2 and Practice Direction (PD) 16 as to what must be included in the Part 7 Form and particulars of claim. For example, PD 16.3.1 states that, “where practicable, the particulars of claim should be set out in the claim form”. In practice however, this is rarely the case, with most claimants preferring to advance the particulars of claim separately, arguing that that is more practicable.

However, applications under sections 67 and 68 of the AA 1996 are governed by CPR 62 and PD 62 and are considered arbitration claims (that is, any claim brought under the AA 1996). It is a curiosity of such claims that they do not entail an exchange of statements of case, unless otherwise ordered. Consequently, the arbitration claim form and supporting witness evidence would be an indispensable source of information for the defendant(s) and the court.

In Orascom, the claimant’s claim form merely stated that the tribunal “…failed to address a fundamental issue as to the impact of Italian law on the defendants’ obligations under the contractual indemnity that was the subject of the parties dispute”, without identifying what this “issue” was.

The judge observed that Orascom’s claim form “in substance did no more than recite, by reference to the particular award in this case, the other statutory requirements” and that “…although ultimately this claim will not turn on it, that that is not a satisfactory approach to challenges under section 68.”

The court clearly did not consider that CPR 62.4 had been satisfied in this case, as in the judge’s view the purpose of the arbitration claim form issued under section 67 or 68 extends beyond merely identifying that “it is a claim under section 68(2), or which particular sub-paragraph is invoked” but rather to:

“…stand as a sufficiently detailed and particularised statement of case to enable, in the first place, the defendant to the challenge, and then, ultimately, the judge dealing with the matter, to see precisely the nature of the challenge, the grounds upon which it is said to arise and, as a result, the particular questions that will need, or may need, to be dealt with at any hearing.” (Emphasis added.)

Andrew Baker J suggests that where an exchange of statements of case is not ordered, the arbitration claim form essentially serves the purpose of a statement of claim.

The witness statement: a vehicle to advance fact not argument

The judge set out what needed to be included in the arbitration claim form, namely, an extensive particularisation of both:

  • The remedy claimed.
  • The grounds on which the claim is made.

What then is the purpose of the witness statement?

Andrew Baker J added that witness statements made in support of section 67 or 68 claims are not the proper place to argue a case. In particular, he stated that witness statements “should contain evidence, not comment or argument. They are not the proper vehicle for setting out the analytical case to be advanced before the court; that should properly be done by way of statement of case.” (Emphasis added.)

In practice, one often encounters legal arguments being rehearsed in a witness statement. Indeed, there are many examples of witnesses with no legal background suddenly being able to offer detailed legal analysis. The case of Alex Lawrie Factors Limited v Morgan (The Times, August 18, 1999) demonstrated the pitfalls of doing this where the claimant, who had difficulties with basic literacy, went into great detail on the case law that she believed applied to her case. Brooke LJ dismissed her claim and commented:

“This case is a very good warning of the grave dangers which may occur when lawyers put into witnesses’ mouths, in the affidavits which they settle for them, a sophisticated legal argument which in effect represent the lawyer’s arguments in the case to which the witnesses themselves would not be readily able to speak if cross-examined on their affidavits.”

The purpose of a witness statement is to set out the facts. Legal argument is for the skeleton argument, which is expanded upon in oral argument at the substantive hearing.

Comment

The common practice of issuing arbitration claim forms with little or no detail, and conversely, analysis-packed witness statements in support of sections 67 and 68 challenges could be optimistically blamed on confusion. However, the judge’s comments in Orascom have helpfully set down the marker, meaning that lawyers can no longer plead ignorance as to what is expected.

In Orascom, the decision did not turn on the insufficient detail contained in the arbitration claim form. Nevertheless, a judge is likely to base his or her decision on the facts presented in front of them. Consequently, failing to present the right amount of detail and facts in the correct document could have costs implications.

The observations of Andrew Baker J are a reminder of the importance of maintaining a balance between placing the client in an advantageous position, whilst still giving both the defendant and the court an opportunity to evaluate properly the merits of the claim.

Whilst the decision in Orascom was initially delivered ex tempore in private, the court obviously found that publishing the judgment would be of use to practitioners within the London arbitration field.

Stephenson Harwood Salah Malas

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