The second defendant, who was employed by a company within the claimants’ haulage and logistics group to perform senior managerial functions, was granted an option to acquire an ownership stake in the third claimant. The call option deed was governed by English law and contained an LCIA arbitration clause with a London seat. Following a falling out between the parties, the second defendant was excluded from the claimants’ group. The second defendant and the first defendant related company commenced an arbitration seeking a declaration that the call option deed had been validly terminated, along with damages for its breach. The claimants admitted repudiation and termination of the call option deed, such that the only issue for determination in the arbitration was quantification of the defendants’ loss. The tribunal issued an award, assessing damages at US$58m. In doing so, the tribunal made a computational error, adding rather than subtracting an adjustment in relation to the business’s historic tax liabilities, contrary to the common ground between the parties and contrary to what the tribunal had intended to do. Had the amount been subtracted, the damages figure would instead have been US$4m. The claimants requested the tribunal to correct the mistake under rule 27.1 of the LCIA Rules. In its response to the claimants’ request, the tribunal conceded that it had made a computational error but refused to amend the award, on the grounds that to do so would depart from what it regarded as a reasonable and fair assessment of the loss. The claimants brought a claim under section 68 of the Arbitration Act 1996, contending, inter alia, that the tribunal’s mistake was a serious irregularity that had been admitted by the tribunal under section 68(2)(i), which had caused substantial injustice, and that the award should be remitted to the tribunal for correction.
On the claim—
Held, claim allowed. Although a response to a request to correct an error to an arbitral award under rule 27.1 of the LCIA Rules was not part of the award, contained no further reasons for the award, was not binding, and had no status under the Arbitration Act 1996 or article 27.1, it could be relied on to establish an admitted irregularity under section 68(2)(i) of the 1996 Act. It could also constitute admissible evidence from the tribunal not only about the mistake but also the mistake’s consequences for the award. However, it could not function to rewrite the award, and was inadmissible in as much as it sought to contradict, reinterpret or supplement the reasoning of the award. As a matter of statutory interpretation, the plain words of section 68(2)(i) applied to an irregularity in an award which was admitted by the tribunal, and there was nothing to indicate that the type of irregularity in the sub-section was confined to a due process breach. In the instant case, the tribunal’s response could therefore be used to identify its admitted mistake and also its conclusion that the consequences of simply correcting the mistake would undermine rather than give effect to its true intentions. Further, the tribunal’s error having been admitted and being one of implementation, not fact or law, it fell within section 68(2)(i) and was a serious irregularity. Even though the tribunal had made clear that, despite the computational mistake, the award did not depart materially from its underlying intentions as to what damages the defendants should recover, the award was one enforceable in other jurisdictions containing a computational mistake which, on its face, led to a significant difference in the damages payable, and if the tribunal had had an opportunity to correct the mistake, it might well have produced a significantly different award and outcome. As such, the serious irregularity was one which under section 68(2) had caused or would cause substantial injustice to the claimants. Since some issues had already been conclusively decided by the tribunal, it was not open to the court to remit to the tribunal the entire quantum analysis, but the award would be remitted to the tribunal for it to correct the computational error and reconsider other paragraphs potentially affected by the error, and to produce a corrected final award (paras 52, 53, 54, 58, 60, 64, 65–66, 73, 77–79).
Graham Dunning QC and Paul Stanley QC (instructed by instructed by Herbert Smith Freehills LLP) for the claimants.
Christopher Harris QC and Dominic Kennelly (instructed by Three Crowns LLP) for the defendants.