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It is not just named parties that can sue under a contract

In Filatona Trading Ltd & Another v Navigator Equities Ltd & Others the Court held that an LCIA arbitral tribunal did not exceed the scope of its powers in ordering relief that was not available to an English court.

In Filatona [1] the Court rejected challenges to an arbitration award and upheld the decision that a Russian businessman was entitled to have his shares in a joint venture vehicle purchased for $95million despite not being a named party to the shareholders agreement.

The dispute concerned a valuable site in Central Moscow, which was indirectly the subject of a shareholders agreement (SHA). Oleg Deripaska, a Russian aluminium tycoon, and Lolita Danilina, a Russian businesswoman, were named parties to the SHA. The SHA provided for disputes to be referred to arbitration under the LCIA Rules.

Vladimir Chernukhin, a Russian businessman who was not a named party, commenced arbitration against Mr Deripaska under the SHA for an order that Mr Deripaska purchase his shares in the joint venture company which owned the site. Ms Danilina and Mr Chernukhin had been in a long term relationship; Mr Chernukhin claimed that Ms Danilina was a named party acting as his nominee or agent. The tribunal determined that on the facts, Mr Chernukhin was the true joint venture partner and made the buy-out order.

Mr Deripaska challenged the arbitration award under section 67 (no substantive jurisdiction) and 68 (serious irregularity) of the Arbitration Act 1996 on the basis that Mr Chernukhin was not a party to the SHA and the tribunal did not have jurisdiction to order a buy-out in respect of a foreign company (the JV vehicle being Cypriot). Separately, Ms Danilina issued proceedings for a declaration that she was not acting as an agent or nominee. The proceedings were heard together.

One of the key issues before the Court was whether Mr Chernukhin, although not a named party to the SHA, was a party as a disclosed principal of Ms Danilina and entitled to sue under the SHA for a buy-out order. The High Court upheld the tribunal’s decision that he was. The evidence showed at all material times, the parties had acted as if Mr Chernukhin was the actual joint venture partner and Ms Danilina was merely his nominee. The Court said that “very clear words” would be required to show that only the named party rather than his principal was intended to have the right to perform the contract. Despite containing an entire agreement clause, there was no evidence that the terms of the SHA precluded unnamed parties from enforcing its terms.

With regards to the tribunal making a buy-out order in relation to a foreign company, the Court held that the parties had provided the tribunal with the necessary power under the dispute resolution clause of the SHA. Under section 48(1) of the Arbitration Act “parties are free to agree on the powers exercisable by the arbitral tribunal as regards remedies”. The Cypriot court would have had power to make the buy-out order. However, the SHA referred all disputes to arbitration. The Court applied the presumption of a “one-stop” dispute resolution clause holding the tribunal had the substantive jurisdiction to order the buy-out order.

[1] [2019] EWHC 173 (Comm)

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