In (1) Obrascon Huarte Lain S.A (trading as OHL Internacional) and (2) Contrack (Cyprus) Limited v Qatar Foundation for Education, Science and Community Development  EWHC 1643 (Comm), the High Court of Justice in London considered an arbitration claim. The claimants brought applications under sections 67 and 68 of the Arbitration Act 1996 for the setting aside of an amended arbitral award that had been revised by the Tribunal pursuant to its powers under Article 35 of the ICC Rules.
The Underlying Dispute
Obrascon Huarte Lain S.A., a Spanish construction company, entered into a joint venture with Contrack (Cyprus) Limited, a Qatari based contractor (the Joint Venture). The Joint Venture was appointed by the Qatar Foundation for Education, Science and Community Development (the Foundation) to construct a new hospital project in Doha for a contract price of around £1.8
Various disputes arose between the parties, culminating in the Foundation terminating the contract with the Joint Venture. The Foundation swiftly referred those disputes to an ICC arbitration for determination. The particular disputes that prompted this set of proceedings in the High Court of Justice in London, concerned (1) the Joint Venture’s claim for an extension of time together with associated prolongation costs and (2) the lawfulness of the Foundation’s termination.
Following a five week hearing, the Tribunal decided that the JV was entitled to an extension of time. The JV was also entitled to recover its prolongation costs for certain “windows” of time during the period of delay. In response to the Award, both the Foundation and the Joint Venture served applications pursuant to Article 35 of the ICC Rules.
The ICC Article 35 Application
Article 35 of the ICC rules allows the Tribunal to “correct a clerical, computational or typographical error, or any errors of similar nature contained in an award.” Such correction may be made on the Tribunal’s own initiative or upon application by a party.
The thrust of the Foundation’s Article 35 argument was that in making the Award, the Tribunal failed to take into account its arguments concerning the contractual notification provisions for extension of time and prolongation claims. In particular, the Foundation said that notification by the Joint Venture “was a prerequisite to an entitlement to an extension of time” and to prolongation costs. In addition, the Foundation argued that the extent of prolongation costs recoverable by the Joint Venture were limited 0to those costs arising as a result of a “change” instructed by the Foundation.
The Foundation therefore asked the Tribunal to correct the Award under Article 35 and either (1) dismiss the Joint Venture’s claim for prolongation costs in its entirety or (2) to make the Award subject to the Tribunal properly addressing the Foundation’s notification arguments.
The Tribunal laid down the principles applicable to Article 35 applications and they can be summarised as follows:
- Article 35 should not be used for correcting “substantive matters or at dealing with an interpretation of the award”.
- Plainly, “errors affecting the expression of the Tribunal’s thought” can be corrected. However, “errors in the Tribunal’s thought process” cannot be corrected.
- The power of interpretation exists to “permit the clarification of an award so as to allow its correct execution by the parties.”
- Interpreting an award might “eliminate any ambiguities or uncertainties” in an award but it will not modify the decision itself.
- Article 35 does not entitle parties to request a re-examination of the issues.
- Based on the above, valid Article 35 applications will be rare.
The Tribunal proceeded to issue an addendum, amending its original decision. The Tribunal accepted the Foundation’s submission that it did not rule on the issues of contractual notification requirements or preconditions to the Joint Venture’s claims for extension of time and prolongation. However, the Tribunal said that it never intended to make any such ruling in that decision because “whether there were any applicable contractual preconditions to the JV’s rights to extensions of time and prolongation costs and, if so, whether they were complied with are issues remaining to be determined by the Tribunal” (emphasis added).
Under the original award, the Tribunal found that the Joint Venture was entitled to an extension of time and prolongation costs for various aspects of the project and for certain “windows” of time. That entitlement was unqualified. It was not subject to any conditions or caveats. The Joint Venture’s entitlement to claim was independent of its other obligations under the contract. The award used language such as:
“…in respect of Window 1, the JV is entitled to an extension of time 225 days and to recovery of prolongation costs.”
However, on review, the Tribunal decided that the award as drafted did not properly reflect the decisions reached by the Tribunal.
Where the award previously confirmed the Joint Venture’s entitlement, those paragraphs were amended to insert the text “subject to compliance with any contractual preconditions”. The example above was therefore amended as follows:
“…in respect of Window 1, subject to compliance with any contractual preconditions, the JV is entitled to an extension of time 225 days and to recovery of prolongation costs.”
The practical effect of those amendments was that the Joint Venture’s entitlement to the extension of time and prolongation now became conditional upon compliance with the contractual notification provisions (the issue of compliance to be determined in due course).
The English High Court Proceedings
The Joint Venture challenged the Tribunal’s amendments made under Article 35 of the ICC rules, in the English High Court pursuant to sections 67 and 68 of the Arbitration Act 1996.
The Joint Venture argued that the Foundation did not have jurisdiction to make the amendments to the original decision and that the addendum should therefore be set aside in accordance with section 67 of the Arbitration Act (Challenging the award: substantive jurisdiction). The basis of this argument was that Article 35 of the ICC Rules only gave the Tribunal the power to amend typographical or clerical errors in the award. Having already made a decision that the Joint Venture was entitled to an unqualified right to an extension of time and prolongation costs, the Tribunal was functus officio on that issue and could not subsequently make the changes that it did under Article 35.
In the current proceedings, Mr Justice Butcher did not agree with the Joint Venture’s submission and decided that this was not a matter which falls within the remit of a section 67 challenge. Section 67 is intended to apply to substantive jurisdictional challenges that concern whether the issues have been referred to arbitration in accordance with the arbitration agreement. Section 67 was therefore not the correct provision for the Joint Venture to mount its challenge to the amended award. The Tribunal did have the power to amend the decision and that power was granted under Article 35 of the ICC Rules. The question as to whether the Tribunal exercised that power correctly was a different question and could not be determined under section 67 of the Arbitration Act.
The Joint Venture also argued that in amending the original award in the way that it did, the Tribunal exceeded its powers such that this constituted a serious irregularity causing substantial injustice. This argument was brought by the Joint Venture pursuant to section 68 of the Arbitration Act (Challenging the award: serious irregularity).
Mr Justice Butcher did not accept the Joint Venture’s position. In his judgment, he decided “I would not consider it accurate to describe the changes made as the correction of ‘clerical, computational or typographical errors’. But on the other hand, I would find it difficult to say that they could not be reasonably regarded as the correction of errors ‘of a similar nature’, in circumstances where it is apparent that the Tribunal had not given consideration to the notification arguments and the text of the Fourth Partial Award therefore did not reflect its original intention.” The Judge further concluded that the Tribunal was entitled to interpret the Award by the changes it made in the addendum. Accordingly, it was held that the Tribunal had not exceeded its power in making the amendments.
As to the second limb of the section 68 argument and whether or not the amendments resulted in substantial injustice to the Joint Venture, the court held that no such injustice had been caused. Ultimately, the Tribunal’s Award did not consider (and indeed never intended to consider) the contractual notification requirements because those issues were parked for determination at a later date. In essence, that is all that the amendments to the original award said. The Joint Venture’s applications were therefore dismissed.
There will invariably be instances where an arbitral tribunal will be required to correct what might be collectively termed obvious slips, errors and omissions in the award. The relevant arbitral rules, such as the ICC Rules in this case, will prescribe specifically the circumstances where a tribunal can ’correct a clerical, computational or typographical error…’ The intent of these rules is to allow corrections in limited circumstances only. They are not a means for a party to seek to substantively amend a decision or award in circumstances where that award might be unpalatable or unsatisfactory for a party. In short, what is not intended is for a Tribunal to have a ‘second bite of the cherry’ once the Award is published. The case was fact specific, but it is arguable that the Tribunal made an Award X (making unqualified declarations as to entitlements to extensions of time), and then changed it to Award Y (making those entitlements subject to compliance with contractual preconditions, and turning those unqualified declarations into conditional rights). Arguably, is this a bit of a stretch on what is intended as a correction under such provisions? The added difference was the court relied upon the specific words of article 35, ‘…or any errors of a similar nature contained in an award’ as a basis upon which to allow the arguably broader changes to be made. The court considered that the inclusion of the amended wording was necessary to prevent substantial injustice to the Defendant under the original award.
Absent specific wording of the type to appear in Article 35 of the ICC rules ‘…or any errors of a similar nature…’, we will have to wait and see whether a court faced with similar arbitral award applications, or potentially UK adjudications, may follow this broader interpretation of allowing corrections that are more than the obvious slips 0and errors, but considered necessary to make the award/decision work.
Republished by permission.