Earlier this year, the procedure to be followed in conducting cross-examinations in London-seated arbitrations was considered in BPY v MXV, a challenge to an arbitral award under Section 68 of the Arbitration Act 1996 (“AA”). CYK acted for the successful Defendant.
In the arbitration, the Claimant sought payments under three agreements (the “PSAs”). The tribunal found that the PSAs were shams and rejected the Claimant’s claims. The Claimant subsequently sought to challenge the award in the High Court on four grounds. The Claimant’s first ground was that this allegation (that the PSAs were shams) had not been properly put to the Claimant’s witnesses in the arbitration, allegedly because the Claimant’s witnesses were not cross-examined as to their motive for creating the shams. The Claimant alleged that this was a contravention of the so-called “rule in Browne v Dunn”.
The Browne v Dunn rule
The Browne v Dunn rule requires a witness to be specifically challenged (in cross-examination) on a specific factual matter before they can be disbelieved, in order to enable the witness to comment. Importantly, in P v D, an award rendered in a London-seated arbitration was set aside because that rule was not complied with.
BPY v MXV
The Claimant’s challenge in BPY v MXV failed for several reasons, including:
- Firstly, the Court held that the legal test for a sham adopted by the tribunal did not require a finding of motive; there was therefore no need to cross-examine the witnesses as to that motive.
- Secondly, the Court held that the rule in Browne v Dunn is not an inflexible one, and there are cases where it will not apply because, “looked at more generally, the procedures adopted in the litigation mean that a party and the relevant witness(es) … had ample opportunity to comment on the other side’s case.”
The High Court considered the decision in P v D and found that the facts in that case were distinguishable from those in BPY v MXV. For example, in P v D there had been no cross-examination at all on the core issue in circumstances where the Tribunal itself had suggested that such cross-examination would be appropriate, whereas in BPY v MXV the core issue was subject to extensive cross-examination, and BPY’s witnesses were found to be unreliable.
Furthermore, given that the Arbitrator had to deal with a case where some 30 witnesses had to give evidence in the course of 6 days, the Arbitrator directed that she did not expect all points of witness evidence to be expressly challenged in cross-examination and it would be for her to decide what weight to accord to evidence before her, regardless of whether it had been expressly dealt with in cross-examination. The Court held that the Arbitrator’s direction was legitimate, and given the constraints of time, there was no irregularity in the witnesses not being cross examined more than they were about the motives for executing the PSAs.
Finally, there was no reason to believe that the outcome would have been different if further cross-examination was conducted.
The other grounds for challenge:
BPY alleged that the Arbitrator failed to comply with her duty under s.33 AA, as a fair minded and informed observer would conclude that the Arbitrator’s findings in the Merits Award in the absence of the cross-examination of BPY’s witnesses (as alleged in the first ground above) and the Arbitrator’s decision on costs meant there was a real possibility that the Arbitrator was biased. BPY relied on the fact that MXV had been awarded 50% of its legal costs and 75% of the arbitration costs for the Preliminary Issue Award (which had been made prior to the Merits Award), even though BPY had won the Preliminary Issue Award. The High Court held that there was no sustainable case that the Arbitrator failed to comply with the s.33 AA duty and there was no appearance of bias, as the Arbitrator’s decision on costs had been well reasoned, and the Arbitrator was well within her discretion to award costs in the manner that she did.
ii. Unlawfully obtained documents
BPY alleged that the Arbitrator failed to deal with an issue put to her, namely whether certain documents had been unlawfully obtained and should not have been admitted in evidence and the admission of those documents meant that the award procured was contrary to public policy. The Court found that this ground was “hopeless” as the Arbitrator was not asked to consider whether these documents should be excluded by reason of the alleged unlawfulness. The Judge also noted that in any event it was not shown that there was any substantial injustice caused by the admission of the allegedly unlawfully obtained documents; it could not be said that had these documents been excluded, the Arbitrator may have reached different conclusions.
The Court’s analysis of the relationship between the Tribunal’s (typically broad) discretion as to procedural and evidential matters, on the one hand, and the rule in Browne v Dunn, on the other, are likely to be of particular interest to international arbitration practitioners. The Court’s endorsement of the Tribunal’s exercise of its discretion is likely to be welcomed.