RTI Ltd & Anor v OWH SE iL

Factual and Procedural Background

The Respondent ("OWH"), a German financial institution and subsidiary of a sanctioned Russian entity, and the Claimants, comprising a Jersey subsidiary ("RTI") of a Russian incorporated company ("Rusal"), were parties to an agreement governed by a 2002 ISDA Master Agreement and related currency transactions. Following the 2022 Russian invasion of Ukraine and subsequent sanctions causing currency depreciation, OWH issued a margin call which RTI did not satisfy. OWH served Default Notices by email and subsequently issued a Notice of Early Termination and a demand for payment of a Termination Amount, which RTI and Rusal did not pay. The dispute was referred to arbitration under LCIA rules, resulting in an Award in favor of OWH for over €213 million. The Claimants challenged the validity of the Default Notices and the Termination Notice, but the Tribunal rejected these challenges, finding a common assumption between parties regarding the validity of the notices.

The Claimants made a late application under section 68 of the Arbitration Act 1996, alleging serious irregularities including fraud in the arbitration process based on alleged non-disclosure of documents by OWH. OWH applied for summary dismissal of this application. The court considered whether the application was timely and whether an extension of time should be granted, before assessing the merits of the Claimants' allegations.

Legal Issues Presented

1. Whether the Claimants' application under section 68 of the Arbitration Act 1996 was brought within the statutory time limit or whether an extension of time should be granted.
2. Whether the Tribunal should admit an irregularity under section 68(2)(i) relating to a textual error in the Award.
3. Whether the Award was obtained by fraud or procured in a manner contrary to public policy under section 68(2)(g) of the Arbitration Act 1996.
4. Whether the serious irregularity alleged caused or will cause substantial injustice to the Claimants.

Arguments of the Parties

Claimants' Arguments

• The Claimants argued that the Tribunal failed to address an issue that would have invalidated the Termination Notice and that the Award was obtained by fraud due to OWH's alleged deliberate non-disclosure of documents related to the service of Margin Calls and Notices.
• They relied on testimony from an OWH witness indicating multiple individuals were involved in the service process and that communications about this existed, implying undisclosed documents must exist.
• The Claimants submitted that their initial application to the Tribunal for admission of irregularities postponed the running of the statutory time limit for bringing their s. 68 challenge.
• They recognized the seriousness of the fraud allegation but contended they could not prove it without access to the undisclosed documents.

Respondent's Arguments

• OWH contended the Claimants' fraud allegation was improper and unparticularized, relying on hypothetical undisclosed documents without evidence.
• OWH argued the s. 68 application was out of time and that no extension should be granted.
• They submitted the application was weak and should be summarily dismissed.

Table of Precedents Cited

Court's Reasoning and Analysis

The court first addressed the timeliness of the Claimants' s. 68 application. It rejected the Claimants' contention that their prior application to the Tribunal for admission of irregularity postponed the statutory 28-day limitation period, reasoning that such an application does not constitute an "arbitral process of appeal or review" under the Arbitration Act 1996. The court emphasized that allowing such postponement would undermine the Act’s policy of speedy finality.

Next, the court considered whether to grant an extension of time. Applying established principles, it found the delay substantial and unexplained, with no causative fault attributable to the Respondent or Tribunal. The court also found the Claimants’ challenge weak, further weighing against an extension. It concluded that denying the extension would not be unfair given the circumstances and the nature of the allegations.

On the merits, the court applied the high threshold for serious irregularity under s. 68, focusing on due process rather than the correctness of the Tribunal’s decision. The Claimants’ fraud allegation rested on an inference from witness evidence suggesting undisclosed documents existed. The court found this inference speculative and unsupported by evidence of deliberate non-disclosure or fraud, noting that no fraudulent conduct was attributed to OWH’s legal representatives and no identification of who might have committed fraud was made.

The court also determined that even if non-disclosure occurred, the Claimants failed to show that this would likely have altered the outcome of the arbitration. Consequently, the application lacked a realistic prospect of success.

Holding and Implications

The court GRANTED the Respondent's application for summary dismissal of the Claimants' section 68 application under the Arbitration Act 1996.

The Claimants’ application was dismissed primarily because it was brought out of time and no extension of time was warranted. Additionally, the application was intrinsically weak, lacking evidence of fraud or serious irregularity that would cause substantial injustice. The decision upholds the principle of finality in arbitration proceedings and clarifies that applications to arbitral tribunals to admit irregularities do not extend statutory time limits for court challenges. No new legal precedent was established beyond the application of existing principles to the facts of this case.