As the team gathered round the 1CL bonfire, eyes cast heavenwards watching the 1CL liveried fireworks, we mused on the turning of another year. In no time at all Christmas will be upon us, with the traditional squabbling over the TV remote control and point-blank refusal, on the part of some members of chambers, to eat their sprouts. Soon it will be a year since Exit Day, and jurisdictional challenges arising out of Brexit are starting to filter through the courts, along with decisions on Covid-19 and cancellation of holidays due to the pandemic. We anticipate that the latter will keep us busy for some time to come; the decision reported in this week’s Weekly Roundup may signpost the approach likely to be taken by the courts at first instance. Then again, it might not. We’ll find out in the coming months.
Single Ignition: High Court finds that arbitration enforcement proceedings cannot be used as a back door to bring counterclaims
In Selevision Saudi Co v BeIN Media Group LLC  EWHC 2802 (Comm), the High Court held that it did not have the power to grant permission to bring a counterclaim in a claim for enforcement of an arbitration award, and that even if it did have such a power, it would not have exercised it in this case. The Court acknowledged that the relevant section of the CPR was poorly phrased, and so focused on the purpose and nature of enforcement proceedings. It found that the CPR could not have intended to allow such summary and simple proceedings to be hijacked and used to bring potentially complex claims that could not have been made in the original arbitration. It went on to find that, even if it did have the power, it would not have exercised it in this case. Again, it focused on the straightforward nature of enforcement proceedings, as well as the lack of connexion that the proposed counterclaim had to the jurisdiction.
BMG is broadcasting company incorporated in Qatar, and Selevision Saudi provided broadcasting related services in the Kingdom of Saudi Arabia (“KSA”). BMG and Selevision Saudi were parties to a Distributor Agreement (“the Agreement”) pursuant to which BMG retained Selevision Saudi as a non-exclusive distributor of set top boxes that allowed customers to watch BMG media channels.
Certain disputes arose, which were referred to arbitration pursuant to the Agreement. The disputes concerned claims and counterclaims by Selevision Saudi and BMG respectively that the other had breached of the terms of the Agreement. The arbitration clause provided for arbitration in DIFC, Dubai, and the Final Arbitration Award (“the Award”) concluded that BMG had been in breach of the Agreement, dismissed BMG’s counterclaim, and ordered BMG to pay Selevision Saudi sums totalling over $8million.
Following an application for BMG to set aside the Award, the DIFC Court granted Selevision Saudi’s cross-application seeking recognition and enforcement of the Award in the same manner as a judgment of the DIFC Court.
Proceedings in the English Courts
The Award was not honoured, and so Selevision Saudi commenced proceedings in England for permission to enforce the Award under s.101 of the Arbitration Act 1996, in accordance with CPR 62.18, as BMG held assets in the jurisdiction. That application was granted, and after being served with the Claim Form, BMG filed an acknowledgement of service indicating that it would contest the claim. BMG then issued an application for permission under CPR 8.7 to bring a counterclaim, and to serve a Part 20 claim on an additional defendant, together with a stay of enforcement of the Award pending the final determination of the dispute. BMG’s counterclaim was essentially that Selevision Saudi was responsible for a large-scale piracy of BMG’s broadcasting rights in KSA and elsewhere, and was supported by a significant amount of evidence.
CPR 62.18(3) provides:
‘The parties on whom the arbitration claim form is served must acknowledge service and the enforcement proceedings will continue as if they were an arbitration claim under Part I of this Part’.
It was BMG’s case that this meant CPR 62.18(3) imported Part 8, and so CPR 8.7 applied and it could bring a counterclaim.
High Court decision
The Court found that, while the rules were regrettably lacking in clarity, there was no reference to the ongoing application of Part 8, and that even if CPR 62.18(3) were interpreted as providing for the application of some parts of Part 8, there were grounds for doubting it intended to import all provisions, and in particular CPR 8.7 [26 – 27]. It reasoned that:
- Applications under CPR 62.18 are intended to be a simple method of enforcement of an award already made .
- There appears to be no need for a power to allow a process to bring counterclaims for matters which, almost by definition, would have to relate to a matter outside the scope of the arbitration, or against parties that were not involved in the arbitration .
- There is no good reason why any power to allow Part 20 proceedings within a CPR 62.18 application should depend simply on whether the claim form, as opposed to an order giving permission to enforce the award, is served on the defendant .
The court there held that CPR 8.7 is not part of the procedure for applications for enforcement of awards under CPR 62.18, and Part 20 claims may not be brought within them .
It went on to find that, even if it did have jurisdiction to allow counterclaims, that it would not have done so in this case. In coming to that conclusion, it rejected both of the arguments put forward by Selevision Saudi. First, it did not accept that there was no longer an extant claim for BMG to defend and counterclaim against, as the claim form itself referred to the possibility that Selevision Saudi would claim further or other relief in addition to leave to enforce the Award [33 – 34]. Secondly, it rejected the argument that the proposed counterclaim did not raise a serious issue to be tried, as it considered the evidence submitted showed strenuous attempts to cover up the identity of the perpetrators of the piracy [35 – 36].
In concluding it would not have exercised any discretion it may have had, the Court found the following factors to be of importance:
- Even in ordinary Part 8 proceedings, the CPR envisage that Part 20 proceedings will be the exception rather than the norm, and so in relation to arbitration claims, if Part 20 proceedings are permissible at all, it would be highly exceptional for them to be permitted .
- Enforcement proceedings are intended to be summary and essentially quasi-administrative proceedings, and to permit counterclaims or other additional claims is likely to thwart or complicate enforcement .
- To allow a counterclaim or the addition of a party, there needs to be consideration of the degree of connexion between the proposed counterclaim or additional claim and the existing claim, the effect of admission on proceedings, and the appropriateness of the court as the forum . These factors weighed against allowing the claim in this case :
- To allow it risked the practical inhibition of enforcement of the Award.
- The counterclaim is essentially unrelated to the subject matter of the Award.
- Admitting the counterclaim would entirely transform the action, and would require the full procedures appropriate for a significantly contested Part 7 claim.
- Other than as a counterclaim, there would be no basis for BMG to bring the proposed claim in this jurisdiction.
The court also found that, even if BMG might not be capable of getting its claim tried fairly in its ‘natural’ forum, KSA, that does not mean that it should be tried here [45 – 46].
The court also went on to hold that, even had the counterclaim been permitted, it would not have granted a stay of enforcement, which is rarely, if ever, appropriate .
About the Author
Kerry Nicholson is a probationary tenant. She undertook pupillage with the Government Legal Department and on secondment at Henderson Chambers and is looking forward to working within the team at 1CL on travel related and other claims.
Mines for Tour Operators and Travel Agents, Bangers for Consumers: FCDO Advice and Cancellations
Practitioners will be interested to learn of the result in a claim brought by a disgruntled would-be holidaymaker, Nick Braithwaite, against the tour operator Loveholidays. Mr Braithwaite and his partner had booked a holiday in Croatia in July 2020, at a time when the destination was on the UK government’s green list. They were due to depart on 22nd August 2020, but on 20th August the Foreign, Commonwealth and Development Office advised against all but essential travel, and they decided to cancel, seeking a full refund in the sum of £2,065.
Loveholidays denied that they were entitled to a refund on the basis that the holiday purchased was not a package to which the Package Travel and Linked Travel Arrangements Regulations 2018 applied; consequently, they relied on their terms and conditions, which provided that the sums paid for the holiday components were non-refundable. Furthermore, so it was argued, FCDO advice given at place of departure does not constitute ‘unavoidable and extraordinary circumstances’ within the meaning of Regulation 12(7), which reads:
“in the event of unavoidable and extraordinary circumstances occurring at the place of destination or its immediate vicinity and which significantly affect—
(a) the performance of the package, or
(b) the carriage of passengers to the destination,
the traveller may terminate the package travel contract before the start of the package without paying any termination fee.
This then triggers Regulation 12(8):
“(8) Where the package travel contract is terminated under paragraph (7), the traveller is entitled to a full refund of any payments made for the package but is not entitled to additional compensation.”
The court disagreed with Loveholidays’ interpretation of these provisions, and found for the Claimant, refusing permission to appeal on the basis that it had got it right the first time around.
The decision is of interest in that the judge considered and rejected Loveholidays’ interpretation of their business model as not falling within the Regulations, but it also has wider implications. The court’s finding that Regulation 12(8) is triggered by cancellation due to FCDO advice given at place of departure but relating to conditions at place of destination is an interesting one. One possible reading of Regulation 12(7), that contended for by Loveholidays, is that cancellation must be directly due to something happening (or not happening) at the destination; the other, more consumer-friendly, reading is that if cancellation is either directly or indirectly due to such conditions, Regulation 12(7) applies.
Attentive readers will appreciate that this is an argument reminiscent of the parties’ respective positions in the recent decision of the Supreme Court in FS Cairo (Nile Plaza) LLC v Brownlie  UKSC 45. As such, it is perhaps surprising that the court at first instance refused permission to appeal; it is to be expected, and hoped, that the higher courts will consider the matter within the next few months, and a more authoritative judgment provided. In the meantime, practitioners advising clients in these cases can only relay to them the uncertainty currently surrounding the interpretation of Regulation 12(7) and the courts’ apparent willingness to adopt a purposive approach to the Regulations as a piece of consumer protective legislation (as best illustrated, of course, in the reasoning in the decisions of the CJEU and Supreme Court in X v Kuoni Travel Limited  UKSC 34).
About the Author
Called to the Bar in 1997, Sarah Prager has been listed in the legal directories as a Band 1 practitioner in travel law for many years. Together with her colleagues at 1 Chancery Lane, Matthew Chapman QC and Jack Harding, she co-writes the leading legal textbook in the area, and has been involved in most of the leading cases in the field in the last decade. Last year she was named Best Lawyers’ Travel Lawyer of the Year 2020/2021 and the Lawyer Monthly Women in Law Awards 2020: Personal Injury, and she has recently completed work for the UNWTO on an International Code for the Protection of Tourists. She is a member of the Admiralty Court Users’ Committee. She undertakes purely domestic high value personal injury work as well as cross border work and has a wealth of experience of difficult and sensitive cases.
Regular readers know that we at 1CL like a challenge. But we’re starting to wonder whether we’ve bitten off more than even we can chew with the title of the latest in our 1CL series of webinars. Anyone wanting to see Sarah Prager and Ian Clarke gamely trying to demonstrate the fun side of data processing on Thursday 11th at noon should follow this link to register for what we are sure will be a rollercoaster of a talk, crammed with all manner of fizzbangs and firecrackers.