In A v B  EWHC 3302 (Comm), the Applicant had been successful in a FOSFA arbitration against the Respondent. In the arbitration proceedings, the Applicant alleged that it had entered, as buyer, into two contracts with the Respondent as seller. The Applicant claimed damages for non-delivery under these contracts, while the Respondent argued that no binding contracts had been concluded. The Respondent also argued that the tribunal lacked substantive jurisdiction, and asked the tribunal to rule on its own jurisdiction. The first-tier arbitrators found in favour of the Respondent, while the FOSFA Board of Appeal held that the arbitrators did have jurisdiction and found that the Applicant’s claim for damages succeeded.
The Respondent applied to the Court for orders under s.67 Arbitration Act 1996 (the “Act”) that the awards of the Board of Appeal were of no effect because the tribunal did not have substantive jurisdiction. In the alternative, the Respondent sought permission to appeal under s.69 of the Act. Pending the determination of these applications, the Applicant applied for security under s.70(7) of the Act for the sums awarded to it by the FOSFA Board of Appeal.
The Court noted that it should be cautious in making orders under s.70(7) where a party was challenging the jurisdiction of the tribunal under s.67. Generally, there would be a “threshold requirement” that the party resisting the jurisdictional challenge (in this case the Applicant) prove that the challenge was flimsy or otherwise lacking in substance. As regards the matters relied on by the Applicant to prove this, the Court could only consider the various points raised to see if the threshold requirement had been met. It was not for the Court at this stage to consider the merits in too much detail, as there would be a full rehearing on the s.67 application and it would be for the judge at that hearing to determine the merits.
In this case, the Respondent’s argument that there were no binding contracts was neither flimsy nor lacking in substance. The Applicant had therefore not met the threshold requirement, and the application for security failed.
Generally, it will not be appropriate to order security under s.70(7) unless an applicant can demonstrate that the challenge to the award will prejudice its ability to enforce that award. This will often involve an applicant proving a risk of dissipation of assets.