Enforcing arbitral awards: where does the tribunal's jurisdiction end, and the Court's begin?

In A v B (Rev 1) [2020] EWHC 2790 (Comm), the English Commercial Court (the “Court”) granted an application made pursuant to s66(1) of the Arbitration Act 1996 (the “Act”) for permission to enforce an arbitral award made by consent. The judgment serves as a useful reminder that, while there may occasionally be an overlap between the jurisdiction of the courts and arbitral tribunals, the final decision regarding enforcement of arbitral awards lies with the relevant court, particularly where the tribunal is functus officio.

Factual Background

The parties entered into a settlement agreement in respect of two LCIA arbitrations (the “Settlement Agreement”). The Settlement Agreement contained an LCIA arbitration clause, which provided that the arbitral tribunal would be “functus officio” upon the making of an award. A consent award was entered into on 4 December 2018, largely reflecting the terms of the Settlement Agreement (the “Consent Award”).

The Consent Award provided that the defendant would make and procure certain payments to the claimant (the "Required Steps"), failing which the principal sum would become due and payable in full immediately and/or an acceleration event would occur.

On 1 October 2019, the claimant applied for and was granted leave to enforce the Consent Award pursuant to ss101(2) and 66(1) of the Act, alleging that the defendant had failed to undertake the Required Steps. The defendant then applied to set aside that permission. On 22 April 2020, Moulder J granted the defendant’s application, refusing to enforce the Consent Award (the “April Order”). With regards to the application under s66(1), Moulder J held that a further factual enquiry was required into whether the Required Steps had been complied with and therefore whether permission to enforce the Consent Award should be granted (the "Factual Issue"), and gave directions for a hearing to determine these matters.

Decision of Foxton J

Foxton J granted the claimant's application to enforce the award under s66(1).

Section 66 Application

S66(1) provides a summary procedure for the enforcement of awards, allowing a party to retain the arbitral award and receive a judgment on the same terms. The Court held that there was no reason why it could not, in the context of a s66 application, consider and determine the Factual Issue, which had been raised as a defence to that application, in the same way it has jurisdiction to determine such matters in the event of an action on an award.

Jurisdiction of the Court

The Court drew useful distinctions between the jurisdiction of the Court and arbitral tribunals. Although “it might be thought curious that these issues are being decided by the court” in circumstances where the Settlement Agreement contained an LCIA Arbitration clause, neither party had argued, at any stage, that the Factual Issue should be determined by arbitration. Further, the parties had both agreed that this issue was one which the Court could determine. Accordingly, Foxton J held that it was clear the Court had jurisdiction and "no one suggested otherwise".

Foxton J then went on to consider the position more generally. He referred to Sovarex S.A v Romero Alvarez S.A¹, which recognised that, when leave is sought to enforce an award as a judgment, the Court has a fact-finding jurisdiction in respect of matters concerning "the arbitration process or the jurisdiction of the arbitrators", such as "when an issue arises on enforcement as to whether a claim is arbitrable or whether proceedings have been conducted unfairly".

Here, the Court was not concerned with questions regarding the arbitration process or the jurisdiction of the arbitrators, but with whether the Required Steps had been complied with. The Court held that, where there is a final award (such as the Consent Award), the “interface between court and arbitration proceedings is very different to that which arises in relation to prospective or pending arbitration”.

• Firstly, and importantly, the Consent Award rendered the tribunal “functus officio”.
• Secondly, the Court reiterated that enforcement of an arbitral award is generally a matter for national courts rather than arbitral tribunals.

Foxton J noted that, under English law, the Consent Award gives rise to a cause of action enforceable in Court, and can be turned into a judgment of the Court or enforced as if it were. Therefore, disputes relating to enforcement of awards through national courts are matters for that court, not arbitral tribunals.

Finally, Foxton J found there was no reason to conclude that the Court is not able to resolve factual disputes of a type which might be brought as a defence to an action on an award, in the context of a s66 application for summary enforcement.

When does an arbitral tribunal retain jurisdiction?

Foxton J recognised that there are circumstances in which a tribunal will retain jurisdiction following the issue of a final award. For example: when (i) an award grants specific performance in favour of the claimant conditional upon the reciprocal performance of the claimant's obligations; and (ii) the tribunal expressly retains jurisdiction over issues regarding the carrying of its order into effect.

In such circumstances, both the Court (upon being asked to enforce a final award) and the arbitral tribunal may have jurisdiction. However, should an issue arise as to whether such conditions had been satisfied, there would be a “very compelling case” for the Court, in its discretion, to stay the proceedings (in the event of an action on the award) or to refuse the order (in the event of a s66 application).

Nonetheless, in circumstances where the tribunal is functus officio, as was the case here, Foxton J noted that he would have held that he had the jurisdiction to, and should, deal with any such issues.

Arbitral participants should therefore be mindful that the effect of the tribunal being functus officio upon issuance of a final award is likely to result in the court seized with the enforcement of that award having the jurisdiction to determine fact-finding issues raised in defence of enforcement.

Conclusion

This case reiterates that, where factual issues arise in the context of the enforcement of a final award, and the arbitral tribunal is “functus officio”, the Court dealing with the enforcement will have jurisdiction to determine those issues. However, there are circumstances in which a tribunal would retain jurisdiction, and parties should remain alive to these before considering steps to enforcing an award. Where the tribunal’s jurisdiction is expressly retained pending the fulfilment of certain conditions and obligations, it may be difficult to persuade the Court to enforce such an award in the English Courts in the event of a factual dispute as to the whether those conditions or obligations have been fulfilled.