Court Rejects Fraud Amendment Proposal, Dismisses Arbitration Dispute
In a recent ruling, the High Court in London reinforced the strict standards required for allegations of fraud in challenges to arbitral awards. This was evident in the case of A&N Seaways and Projects vs Allianz Bulk Carriers.
The dispute centres around the time-trip charter of the MV Bharadwaj, documented in a fixture note and amended New York Produce Exchange 1946 form dated 5 July 2023. The charterer, A&N Seaways, issued a claim on 6 August 2024 under section 72(2)(a) of the Arbitration Act 1996, contending that the charterparty was void because it had been signed by one director without the authority of the board.
However, the English courts require that allegations of fraud in challenges to arbitral awards be pleaded and evidenced very clearly, squarely, and precisely. The proposed amendment by A&N Seaways, alleging fraud, was found to be speculative, weak, opportunistic, and thin, with the facts sought to be pleaded lacking coherence and not justifying an inference of fraud.
The judge, in his ruling, emphasized the exacting standards for pleading fraud, citing the case of Playboy Club London v Banca Nazionale Del Lavoro [2018]. He noted that the respondent, Allianz, entered the charterparty in good faith and with the due diligence that was commercially reasonable in the circumstances.
The court agreed that the charterer had taken part in the proceedings within the meaning of section 72. This was evident when no additional submissions were made by the charterer after the interim response, and the arbitrator issued a peremptory order stating that, if no further defence were received, the interim response would be treated as the charterer’s defence.
The judge also found the arbitrator to have been right to find strong indicators of apparent authority, including the use of the company stamp, Mr Puria's role as one of only two directors, and official port authorisations in the charterer's name.
In a significant development, the judge ordered A&N Seaways to pay Allianz's costs of and incidental to both applications and the claim. This was due to the unamended claim having no real prospect of success and even if the evidence of the other director, James Samuel, were admitted, it would go no further than suggesting a lack of actual authority.
This strict standard aligns with the principle that fraud allegations are serious and must be clearly proved, not just asserted on suspicion or weak inference. For instance, in a similar context, courts have emphasized that fraud claims must not only meet a high pleading standard but also be supported by evidence indicating a "clear basis" for the allegations before permitting a challenge to arbitral awards on public policy grounds [1].
This approach reflects the courts’ intent to prevent frivolous or unsubstantiated attempts to undermine arbitration awards which are generally favoured for enforcement under English law.
In summary, in challenges to arbitral awards in English courts, including the A&N Seaways case, the courts maintain that fraud must be pleaded strictly and with clear supporting evidence to proceed [4][1].
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