English law offers three grounds to appeal against or challenge an arbitration award. The most frequently seen is an appeal based on error of law under section 69 of the Arbitration Act 1996 (as amended by the Arbitration Act 2025, the “Act”). But there are two other routes under section 67 of the Act (challenge based on the tribunal’s lack of substantive jurisdiction) and section 68 of the Act (challenge based on a serious irregularity affecting the tribunal, the proceedings or the award). Neither are easy, and many challenges under these sections fail.

Mare Nova Inc v Zhangjiagang Jiushun Ship Engineering Co Ltd [2025] EWHC 223 (Comm) (judgment handed down on 10 February 2025) is an unusual and interesting example of a successful challenge under section 68.

The key facts

In February 2021, the claimant shipowner contracted with the defendant’s shipyard to repair the vessel’s intermediate shaft bearing and complete other works. The claimant’s representative signed off the work on 30 March 2021 and the vessel left the shipyard the next day. Soon after the vessel left the shipyard, the crew noticed a burning smell from the intermediate shaft bearing, which it was later discovered had been damaged during the repair.

The claimant started arbitration, claiming around US$650,000 as damages for breach of contract, alternatively for negligence, alternatively as money due under a six-month guarantee clause).

The award

Although the Tribunal found that the root cause of the damage was the defendant’s misalignment of the intermediate shaft bearing, which constituted breach of contract, it rejected the claim on the basis that the defendant’s liability was discharged by the operation of clauses 2.1 and 6.3 of the repair contract in question. The Tribunal gave the following reasons:

• Under clause 2.1, “all work is to be done to the satisfaction of the Owner’s Representative and to the rules and requirements of the Classification Society concerned. Any dispute which may arise during the progress of the work as to quality of material or workmanship shall be left to the decision of the Owner’s Representative.”. According to clause 6.3, the defendant’s liability had ceased “when all of the work herein specified has been completed to the satisfaction of the Owners or their accredited representative, and all of the Contractors equipment and all rubbish have been removed from the vessel.”
• The claimant’s representative signed off the “Work-Done List” without requesting any sea trial or other test (as they were entitled to under clause 3.1). This evidenced his satisfaction with the work. Had any sea trial or test been carried out, the shipyard would have cooperated and the problem would have been revealed and rectified.

The Tribunal still awarded US$298,651, consisting of the repair costs and the tug/agency costs which it held fell within the scope of guarantee.

The defendant took no part in the arbitration save to dispute the Tribunal’s jurisdiction. The Tribunal made its decision on the basis of the claimant’s written submissions and evidence, together with the claimant’s detailed answers to the Tribunal’s specific questions.

The Section 68 challenge

The claimant challenged the award under section 68 of the Act on the grounds that the arguable discharge of liability under clause 6.3 was never raised as an issue in the arbitration, and it never had the opportunity to put its case on the point; had it been given this opportunity, there was a realistic prospect of successfully convincing the Tribunal that the defendant’s liability was in fact not discharged, thereby increasing the claimant’s recovery. In the claimant’s view, this was a serious irregularity that would cause it substantial injustice.

The Court agreed with the claimant and remitted the Award to the Tribunal for reconsideration.

The Court pointed out that when a decision rested on a matter that had not been raised in the proceedings, this constituted an irregularity because it amounts to a “failure by the tribunal to comply with section 33 (general duty of tribunal) [that ‘the tribunal shall… giving each party a reasonable opportunity of putting his case…’]”. Further, it caused substantial injustice to the claimant and was therefore serious, in that the claimant had “a realistic prospect of success” of establishing the contrary. On this point, the Court elected to deliver a lengthy obiter explaining why it considered that the Tribunal was obviously wrong in law when it concluded that the defendant’s liability was discharged.

The Section 69 appeal – Obiter

The claimant had also appealed the award under section 69 of the Act on the grounds that the Tribunal’s ruling on the discharge of liability point was wrong in law.

However, since the section 69 appeal asked the Court to determine an issue which the Tribunal was never asked to consider, the Court said that the most appropriate course of action was to remit the award to the Tribunal for reconsideration and dismiss this appeal, whilst cautioning that such reconsideration must follow the law as the Court had stated in its obiter.

The Court cited numerous authorities to restate the basic principle that the construction of a contract presumes that neither party intends to abandon its right or exclude the other’s obligation or exempt the other’s liability for breach, unless clear words are used. Notably, “the more valuable the right, the clearer the language will need to be”.

Clause 2.1 of the contract provided:

“2.1 All tasks herein specified shall be carried out and completed in all detail. All workmanship and materials are to be of the best quality throughout and confirm to those now on the Vessel unless otherwise specified. All work is to be done to the satisfaction of the Owners’ Representative and to the rules and requirements of the Classification Society concerned. Any dispute which may arise during the progress of the work as to quality of material or workmanship shall be left to the decision of the Owner’s Representative.”

In the Court’s view, the first and second sentences impose express obligations on the defendant; the third sentence does not derogate from those obligations, rather it grants an additional right to the claimant. The last sentence is irrelevant.

The Court drew on charterparty cases where, in one clause, the shipowner warranted that the vessel is seaworthy and fit to carry the intended cargo, and in another clause, the crew shall clean the cargo holds/tanks to the satisfaction of the charterer’s inspector (see Petrofina S.A. & Co. v. Compagnia Italiana Trasporto Olii Minerali (1937) 57 Ll.L.Rep. 247, and Sacor Maritima S.A. v Repsol Petroleo S.A. [1998] 1 Lloyd’s Rep 518).

In these circumstances, without clear words, approval by the charterer’s inspector does not relieve owners from their liability if the vessel is not in fact sea- and/or cargo-worthy and unfit for the voyage. The contract offers additional protection to charterers by requiring the approval of their inspector. It does not in any way cut down the scope of the other express term. Were it otherwise, the contract would have continued to say that “if… is done, that shall be treated as fulfilment of the obligations under Clause… and…”.

In addition, clause 6.3 of the contract provided:-

“6.3 The Contractor’s liability shall begin at the time when the vessel is delivered to Contractor’s yard, pier or other location designated by him, ready for repairs, and shall cease only when all of the work herein specified has been completed to the satisfaction of the Owners or their accredited representative, and all of the Contractors equipment and all rubbish have been removed from the vessel.”

Reading this in context, in particular alongside clause 6.1 making the defendant liable for negligence during its “period of liability”, the Court considered that clause 6.3 simply defines the defendant’s “period of liability” as bailee of the vessel, rather than setting a limitation period after which no claim can be brought. In short, clause 6.3 had nothing to do with discharge of an accrued liability for breach of contract or negligence.

Comments

In any arbitration, tribunals will actively seek submissions from the parties if a new issue or argument emerges. They are often reluctant to deny a party the opportunity to supplement or amend its case, or even adduce new evidence, and even if the arbitration are at an advanced stage. This flows from their general duty under section 33 of the Act, which will usually outweigh any delay. Although this is an unusual case of unusual circumstances, the principles are clear. Practitioners and arbitrators alike need to be alive to the requirement to ensure the parties have an opportunity to comment on all points raised in the arbitration, and that the decision is based on the issues raised in the arbitration which both parties have been allowed to address.

Meanwhile, the Court’s obiter serves as a helpful summary of the law on contract interpretation, notably in cases where the contract contains general clauses as well as clauses adding further protection.