Males J has today dismissed an appeal against an LCIA arbitration award worth almost $1 billion. The arbitration concerned the sale by Raga Establishment Limited of the privatised Ukrainian telecoms company, Ukrtelecom, to SCM, a company controlled by Ukrainian oligarch Rinat Akhmetov. The Judge ordered that his judgment should be made public and not anonymised.
The arbitral tribunal of 3 QCs found after a week’s long arbitration that SCM had failed to prove its case that Raga and/or Ukrtelecom had acted illegally in the course of the privatisation, noting that the allegations made against them after the fall of President Yanukovych may have been politically motivated. It therefore awarded Raga the outstanding purchase price of the shares, amounting to more than $800 million.
Several months after the award was published, a Ukrainian court handed down a judgment which reached different conclusions on certain questions of Ukrainian law. As a result of those findings, it ordered that the Ukrtelecom shares be returned to State ownership.
SCM argued that the Tribunal had committed a serious procedural irregularity by refusing to delay its award until the conclusion of the Ukrainian proceedings, resulting in SCM having been ordered by the arbitral tribunal to pay more than $800 million for shares which where taken away from it shortly afterwards.
Males J rejected SCM’s s.68 challenge. He held that, whilst the Ukraine court’s judgment might have affected the Tribunal’s decision, SCM had in particular failed to produce any evidence as to the likely length of the Ukrainian proceedings. In those circumstances, the arbitrators’ decision to make their award on the evidence before it rather than staying the proceedings for a potentially indefinite period was within its wide procedural discretion. The judgment contains helpful guidance for future s.68 challenges, including a recognition of the fact that “it is a risk inherent in the choice of arbitration that a party choosing to arbitrate is at risk of inconsistent decisions” and that “in general arbitrators are not bound to defer to the decisions of other tribunals” (-).