Setting aside arbitral awards for serious irregularity: Secretary of State for the Home Department vs Raytheon Systems Ltd
In the case of Secretary of State for the Home Department vs Raytheon Systems Ltd  EWHC 311 (TCC) an arbitral award was set aside on the ground of’ serious irregularity’ under the Arbitration Act 1996 s.68(2)(d), on the basis that the Tribunal had not dealt with all the issues put to it. The dispute arose from the UK Home Office terminating a contract with Raytheon Systems Ltd. The Home Office terminated the contract to design and deliver IT technology for collecting information on those entering and leaving Britain on the grounds of delays, poor performance and unsatisfactory levels of service. In August 2014, the LCIA Tribunal found that the Home Office had unlawfully terminated the contract by failing to take the required process steps to termination. The Tribunal awarded Raytheon Systems £49.98 million in damages; £9.6 million for disputed contract change notices; £126 million for assets acquired by the Home Office during the contract; interest and costs. Akenhead J delivered two judgments dated 19 December 2014 and 17 February 2015, both made public on 17 February 2015, upholding the Home Secretary’s challenge, setting aside the whole award and remitting the case to a different arbitral tribunal.
He held that the Tribunal had not properly considered whether Raytheon Systems could be at all responsible for the delay, and without due consideration to this issue, it was possible that the Home Office could not be criticised for not complying with termination process requirements. In the Judge’s words, the substantial injustice arose not simply from the fact that these issues were not clearly dealt with but also because they arose in the context where both parties spent a large amount of time, resources and indeed money in presenting their cases and evidence as to responsibility for the delays, disruption and inefficiencies  EWHC 4375, para. 51).
The decision sits uneasily with the widely accepted belief that section 68 is a long stop only available in extreme cases, and Akenhead J has held as much himself in Schwebel v Wolf Schwebel  EWHC 3280 (TCC) only four years earlier. As he put it in that case, It will be a very rare and exceptional case for the Court to interfere pursuant to section 68 on the grounds that the arbitrator reached the wrong findings of fact, should have reached different factual conclusions, given greater weight to some evidence or failed to explain why weight or importance was not given to some evidence. It will be an even rarer case for the Court to find that even if there was some serious irregularity with regard to a failure to take into account evidence that there was substantial injustice, which is of course a precondition to the involvement of the court under Section 68, along with the need for there to be a serious irregularity. (Paragraph 23 (e)) Too broader supervision of arbitral awards by the Courts of England & Wales, is always a controversial issue with dispute resolution practitioners in London.
Finality of arbitration is key for the world commercial community presented with a choice of international arbitration centres. It is not surprising therefore that Secretary of State for the Home Department vs Raytheon Systems Ltd has attracted scrutiny from the legal commentators. At the time of writing, the case is subject to an appeal.
This Blog was Co-Authored by Lauren Benson during her work experience placement with Peters & Peters.
Vlad Meerovich is an Associate in the Commercial Litigation, Civil Fraud and Asset Recovery department. Contact details: email@example.com or 0207 822 7762.