English Commercial High Court (QBD): Applicable Principles For Granting Extension Of Time To Challenge The Award Under The English Arbitration Act, 1996

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In Ali Allawi v. The Islamic Republic of Pakistan, [2019] EWHC 430 (Comm), the English Commercial High Court has restated the principles drawn from a series of authorities applicable for granting an extension of time pursuant to CPR rule 62.9 to the time fixed by Section 70(3) of the English Arbitration Act, 1996 (Act) to bring a Section 68 challenge. While refusing to grant the extension sought, the Court considered and emphasized on seven factors which determine whether to grant an extension in such cases. In the peculiar facts of this case, the application seeking extension was moved a year after the expiry of prescribed time limit under Section 70(3) of the Act. Detailed case analysis given below:

Factual Matrix

Mr Allawi, a UK/Iraqi dual citizen, made investments in Progas Pakistan Limited (PPL), an LPG company in Pakistan. PPL became insolvent and was acquired by another company named SSGC in which Pakistan was majority shareholder. Allawi triggered a London seated arbitration against Pakistan under the UK-Pakistan bilateral investment treaty under the 2010 UNCITRAL Rules contending breach of fair and equitable treatment and national treatment obligations under BIT on the part of Pakistan.

A similar arbitration was invoked by Progas group of companies against Pakistan which was later combined with Allawi arbitration by consent. The Tribunal held in favour of Pakistan since Mr Allawi had not established causation of legally relevant damage for the purposes of the BIT. The Tribunal also ruled that Pakistan was entitled to all of its costs.

The time prescribed for challenging the award under Section 70(3) of the Act lapsed and Mr Allawi did not challenged the award. Pakistan applied for permission to enforce the Allawi award pursuant to section 66 of the Act.

The award was challenged by Mr Allawi a year from expiry of the normal time limit along with an application seeking extension of time prescribed under Section 70(3) of the Act to challenge the award. He contended that he deliberately chose to waive his right to challenge the award based on assurances given by a Minister of Pakistan, Mr Abbasi during a meeting which held through a common friend Ms Imam in London. As per Mr Allawi, in this meeting, he was assured by Mr Abbasi that the costs award would not be enforced against him.

In the present case, the issue before the Court was whether to grant an extension of time to Mr Allawi to challenge the award which was made beyond one year after the expiry of prescribed time limit.

Applicable Legal Principles

The relevant principles on such an application were helpfully summarised by Popplewell J in Terna Bahrain Holding Company WLL v Bin Kamil Al Shamsi [2012] EWHC 3283 (Comm), [2013] 1 Lloyd’s Reports, as follows:

  1. The length of delay;
  2. Whether the party who permitted the time limit to expire and was subsequently delayed did so reasonably in the circumstances;
  3. Whether the respondent to the application caused or contributed to the delay;
  4. Whether the respondent would by reason of the delay suffer irremediable prejudice in addition to the mere loss of time if the application were to proceed;
  5. Whether the arbitration has continued during the period of the delay;
  6. The strength of the application
  7. Whether in the broadest sense it would be unfair to the applicant for him to be denied the opportunity of having the application determined.

Judgement

The Court applied the principles enunciated in Tera and held as under

On length of Delay

The Court held that in present case the delay which is measurable in many weeks or in months is substantial.

On whether Mr Allawi reasonably permitted the prescribed time to expire causing delay in filing the application for extension

The Court found that it is more likely that, as Mr Abbasi said, no promises were made but that he did say that he would see what if anything he could do for Mr Allawi but he could not make any promises. Mr Allawi therefore appears to have interpreted Mr Abbasi’s words incorrectly as a categoric assurance and since he did so, it was unreasonable.

On whether Pakistan caused or contributed to the delay

The Court held that it cannot be said that Pakistan through its relevant minister Mr Abbasi materially caused or contributed to the delay in question.

On whether Pakistan by reason of the delay suffer irremediable prejudice in addition to the mere loss of time if the application were to proceed

The Court held that given Mr Allawi’s financial position there would be meaningful irremediable prejudice to Pakistan since Pakistan would in all probability be put to further costs which it would not recover. Any award of security for costs would be unlikely fully to cover Pakistan’s costs, nor would an award of interest compensate for delay if Mr Allawi is impecunious;

On whether the arbitration has continued during the period of the delay

The Court found that this factor has no bearing in this case, since the arbitration has not continued.

On the strength of the application

The Court held that Mr Allawi’s application seeking extension is not strong and rather it is weak which is a factor militating against the granting of the extension sought.

On whether in the broadest sense it would be unfair for Mr Allawi to be denied the opportunity of having the application determined

The Court held that since there has been excessive delay without good reason it would not in the broadest sense be unfair to Mr Allawi were he to be denied the opportunity of bringing a section 68 challenge. On the contrary, there would be prejudice beyond delay to Pakistan were the extension to be granted.

Position in India

Section 34 of the Arbitration and Conciliation Act, 1996 of India provides that recourse to a court against an arbitral award may be made only by an application for setting aside such award “in accordance with” Sub-section (2) and Sub-section (3). Sub-section (2) relates to the grounds for setting aside an award. An application filed beyond the period mentioned in Sub-section 3 of Section 34, would not be an application “in accordance with” that Sub-section.

By virtue of Section 34(3), recourse to the court against an arbitral award cannot be beyond the period prescribed. Sub-section (3) of Section 34, read with the proviso, makes it abundantly clear that the application for setting aside the award on one of the grounds mentioned in Sub-section (2) will have to be made within a period of three months from the date on which the party making that application receives the arbitral award. The proviso allows this period to be further extended by another period of thirty days on sufficient cause being shown by the party for filing an application.

The intent of the legislature is evinced by the use of the words “but not thereafter” in the proviso. These words make it abundantly clear that as far as the limitation for filing an application for setting aside an arbitral award is concerned, the statutory period prescribed is three months which is extendable by another period of upto thirty days (and no more) subject to the satisfaction of the court that sufficient reasons were provided for the delay.

Position in Singapore

Article 34(3) of the UNCITRAL Model Law on International Commercial Arbitration, which has the force of law in Singapore through the International Arbitration Act of Singapore, did not confer power on the court to extend time beyond the prescribed three months for filing an application to set aside an international arbitration award. An important observation on this aspect made by Judith Prakash J in ABC Co v XYZ Co Ltd [2003] 3 SLR(R) 546 is reproduced below:

The starting point of this discussion must be the Model Law itself. On the aspect of time, art 34(3) is brief. All it says is that the application may not be made after the lapse of three months from a specified date. Although the words used are “may not” these must be interpreted as “cannot” as it is clear that the intention is to limit the time during which an award may be challenged. This interpretation is supported by material relating to the discussions amongst the drafters of the Model Law. It appears to me that the court would not be able to entertain any application lodged after the expiry of the three-month period as art 34 has been drafted as the all-encompassing, and only, basis for challenging an award in court. It does not provide for any extension of the time period and, as the court derives its jurisdiction to hear the application from the article alone, the absence of such a provision means the court has not been conferred with the power to extend time.

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