Konkola Copper Mines vs U&M Mining Zambia Ltd,  EWCH 2374 (Comm)
On 15 July 2014, the Commercial Court of the High Court of Justice in London rejected applications made under Sections 67 and 68 of the Arbitration Act to challenge an award rendered in an arbitration between U&M Mining Zambia Ltd (“U&M”) and Konkola Copper Mines plc (“KCM”) under the LCIA Rules, deciding notably that an award could be “complete and final on its own terms, albeit conditional”.
The facts of this case are as follows. KCM operates several copper mines in Zambia. U&M provided KCM with open pit mining and related services at some of its mines. A dispute arose between the parties, which led to the conclusion of a settlement agreement. Thereafter, KCM sought to rescind the settlement agreement, which brought U&M to initiate arbitration proceedings under the LCIA rules.
The arbitral tribunal held that the settlement agreement’s rescission was unlawful and issued a preliminary award granting U&M US$ 14.6 million in damages. It then held a final hearing. However, the day prior to this hearing, KCM’s counsel ceased to represent it and KCM thus requested to have the hearing postponed. The arbitral tribunal refused to postpone the hearing, which took place as scheduled.
The arbitral tribunal then rendered a second award ordering KCM to pay the amount of the invoices unless it “showed cause” within 14 days from the issuance of said award that the amounts were not due. KCM responded 22 days after the issuance of the award. In accordance with the terms it had fixed, the arbitral tribunal held that the award had already become final.
KCM challenged the second award on several bases, including that a “conditional” award was not “a creature known to the law” and “legally defective and not truly an award” and, as a result, unenforceable. The High Court first pointed out that the object of arbitration is to “obtain the fair resolution of disputes… without unnecessary delay and expense”, which the form of the second award was “plainly designed to do so”. It further stated that “similar forms of order giving an absent party one final opportunity to apply to reverse an order made against it in the Courts is well recognized as part of the armoury of judicial orders”.
KCM also argued that the award was not final. Noting that there is no statutory definition of a “final” award under English law, the Court referred to the definition of an award provided by scholars and concluded that the word “final” “is used in a number of different ways”. However, in the case at hand, the Court found that the arbitral tribunal had “reached conclusions which were binding upon the parties and had concluded their deliberation on the material before them” and stated that it did “not see why, as a matter of principle, (…) an award cannot be final and conclusive in its terms where it clearly provides for specific relief, (…) which only bites at a point in the future, in the absence of submission and evidence from an absent party to the contrary” since no further decision on the tribunal’s part was necessary “unless a specified contingency occurs”. Therefore, it concluded that the award was “complete and final on its own terms, albeit conditional”.
In conclusion, not only is the Court’s stance very pragmatic and contributes to the promotion of expeditious arbitration procedures without detracting its fairness, but the construction of the award challenged is also to be remembered: making an award conditional upon the realization of an event or the provision of further information within a set time-limit may permit circumventing stalling dilatory tactics by bad faith parties trying to delay the procedure or disappearing at some point during the arbitration to avoid being condemned.
However, in the case at hand, the facts were circumstantial: KCM failed, as the arbitral tribunal had directed in the award, to show cause that the disputed invoices were not due within the set time limit. If KCM had shown cause as required, it is doubtful the High Court would have characterized the arbitral tribunal’s decision as an award.
French courts have not, to our knowledge, been faced with a conditional award to date. As the Arbitration Act, the French Arbitration law does not define the term “award”, but the French Court of cassation has decided that it is a “decision, from the arbitrators, which definitely resolves the whole or part of the dispute, whether on the merits, jurisdiction or procedure” (1st Civil Chamber, 12 October 2011, JCP G 2011, I, 1432 no 8, obs. J. ORTSCHEIDT ; Rev. arb. 2012, p. 86, note F.-X. TRAIN ). Therefore, one could submit that the High Court’s reasoning could be transposed into French law.
The decision is available here.