PRIVILEGED AND CONFIDENTIAL — ATTORNEY WORK PRODUCT — NOT FOR DISCLOSURE TO CLIENT WITHOUT PARTNER APPROVAL
CALDERWOOD & HARKNESS LLP Barristers & Solicitors 45 Moorgate, London EC2R 6AR, United Kingdom Tel: +44 (0)20 7946 0100
25 August 2024
INTERNAL MEMORANDUM
TO: Samuel Eklund, Responsible Partner, Litigation Linda Osei, Billing Partner, Litigation
FROM: Hannah Brinkley, Lead Associate, Litigation Patrick Gallagher, Working Associate, Litigation
RE: Risk Assessment — Korinthian Maritime Holdings Ltd.'s Application to Set Aside LCIA Award No. 224718 under Sections 68 and 69 of the Arbitration Act 1996
MATTER: Thalassa Shipping & Logistics SA v. Korinthian Maritime Holdings Ltd. — Enforcement of LCIA Award
COURT REFERENCE: Commercial Court, Claim No. CL-2024-000487
This memorandum is prepared for the sole use of Calderwood & Harkness LLP partners and associates working on the above-referenced matter. It constitutes attorney work product and is protected by legal professional privilege. It is not to be disclosed to the client or any third party without the express prior approval of Samuel Eklund, Responsible Partner. This memorandum reflects the views of the authors only and does not constitute a final opinion of the firm.
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1. Executive Summary
This memorandum provides our assessment of the risk posed by the application filed on 19 August 2024 by Korinthian Maritime Holdings Ltd. ("KMH") to set aside LCIA Award No. 224718 (the "Award" or the "Final Award"), which was rendered on 28 June 2024 in favour of our client, Thalassa Shipping & Logistics SA ("TSL"). The application was filed in the Commercial Court under Claim No. CL-2024-000487 and is represented by Harkness Whitford & Co. (Catherine Whitford, Partner; James Thornbury, Associate; SRA No. 614823; 12 Fetter Lane, London EC4A 1JP). The matter is before Mr. Justice Ashworth.
The set-aside application is brought under two statutory provisions of the Arbitration Act 1996 (the "Act"): Section 68, on the ground of alleged serious irregularity causing substantial injustice, and Section 69, purporting to appeal the Award on points of law. KMH advances four discrete grounds under Section 68 and three grounds under Section 69.
The Final Award, issued by a highly experienced tribunal comprising Presiding Arbitrator Sir Malcolm Fenton-Clarke (appointed by the LCIA Court), Co-Arbitrator Professor Athena Drakopoulos (claimant-nominated), and Co-Arbitrator Dr. Henrik Dalmqvist (respondent-nominated), with Ms. Fiona Beckett serving as Tribunal Secretary, ordered KMH to pay TSL a total of £96,450,000 in damages, together with £12,150,000 in costs (allocated 85% to KMH), for a grand total of £108,600,000. The Award arose from KMH's breaches of three time charter-party agreements for the dry-bulk carriers M/V Aegean Fortuna, M/V Crimson Horizon, and M/V Volga Spirit.
Our overall assessment is that the risk of the set-aside application succeeding is low, estimated at less than 10% across all grounds combined. Each of the Section 68 grounds faces a risk of success of less than 5%, and the Section 69 appeal faces a risk of less than 2%, principally because the LCIA Rules (2020) at Article 26.8 constitute an agreement to exclude appeals on points of law, a position that is firmly established in English case law.
We recommend that TSL vigorously oppose both limbs of the application while continuing enforcement proceedings in all parallel jurisdictions — namely England (where the Section 66 permission to enforce has already been granted and a Worldwide Freezing Order is in place), Cyprus (Case No. 2247/2024), Singapore (OS No. 872/2024), and the UAE (Case No. 1893/2024) — without pause. The set-aside application bears the hallmarks of a tactical delay strategy, consistent with KMH's broader pattern of post-award conduct, including evidence of asset transfers identified in Hartwell Pemberton LLP's preliminary asset tracing report. TSL's enforcement posture should remain aggressive and multi-jurisdictional.
The balance of this memorandum sets out the relevant background, the applicable legal framework, a ground-by-ground analysis of KMH's application, our assessment of the substantial injustice requirement, strategic considerations, an overall risk summary, and our detailed recommendations.
2. Background
2.1 The Underlying Dispute
The dispute between TSL and KMH arises out of three time charter-party agreements for dry-bulk carriers, each governed by English law and containing LCIA arbitration clauses designating London as the seat of arbitration. The three charters, their key terms, and the vessels to which they relate are summarised below.
M/V *Aegean Fortuna* Charter-Party (signed 15 March 2019). The first charter concerned the M/V Aegean Fortuna (IMO 9784521), a Supramax Bulk Carrier of 58,200 DWT, flying the marshall Islands flag and owned by Dnepr Shipholding Inc. The charter was for a firm period of five years from delivery, with hire payable monthly in advance. KMH wrongfully redelivered the vessel on 18 June 2022, some fourteen months before the expiry of the minimum charter period. KMH purported to exercise a contractual option for early redelivery, but the tribunal found that no such option existed on the proper construction of the charter-party, and that the purported early redelivery constituted a repudiatory breach which TSL accepted on 25 June 2022. The early redelivery resulted in TSL losing fourteen months of charter hire at contractual rates during a period in which prevailing market rates were significantly depressed.
M/V *Crimson Horizon* Charter-Party (signed 22 January 2020). The second charter concerned the M/V Crimson Horizon (IMO 9801334), a Handymax Bulk Carrier of 37,500 DWT, flying the Liberian flag and owned by Korinthian Bulkers (Singapore) Pte. Ltd. The charter was for a firm period of four years from delivery, with hire payable semi-monthly in advance. From 1 July 2022, KMH ceased making hire payments entirely, offering no lawful justification for the cessation. Arrears accumulated to £4,280,000 over more than two months. On 15 September 2022, having issued the requisite anti-technicality notice and received no response, TSL withdrew the vessel from KMH's service and accepted KMH's repudiatory breach. The tribunal upheld TSL's withdrawal as lawful and awarded outstanding hire as well as loss-of-bargain damages for the remainder of the charter period, net of mitigation.
M/V *Volga Spirit* Charter-Party (signed 10 June 2021). The third charter concerned the M/V Volga Spirit (IMO 9756892), a Panamax Bulk Carrier of 76,400 DWT, flying the Cyprus flag and owned by Dnepr Shipholding Inc. The charter was for a firm period of three years from delivery, with hire payable monthly in advance. Between approximately March 2022 and August 2022, KMH made a series of deductions from hire payments totalling approximately £2,740,000, asserting that the vessel was off-hire during various periods due to alleged mechanical deficiencies. The tribunal found, based on the contemporaneous documentary record, the vessel's maintenance logs, the evidence of the vessel's Chief Engineer, and the expert evidence of marine surveyor Captain Elias Sotiropoulos, that the off-hire claims were fabricated. In particular, the tribunal found that certain machinery breakdowns relied upon by KMH either did not occur at all or were of such trivial and brief duration as not to engage the off-hire clause. The tribunal ordered restitution of the full £2,740,000 in fabricated deductions.
The three charter-parties were negotiated and entered into during a period of relative strength in the dry-bulk freight market. KMH's breaches were concentrated in the period from mid-2022 onwards, coinciding with a downturn in freight rates which made the charter-party rates increasingly above market. The tribunal found that KMH's breaches were motivated by a desire to extricate itself from unfavourable charter commitments, a finding supported by contemporaneous internal communications disclosed during the arbitration.
2.2 The LCIA Arbitration
TSL commenced LCIA arbitration on 14 November 2022 by filing its Request for Arbitration with the LCIA (LCIA Case Reference No. 224718). The arbitration was conducted under the LCIA Arbitration Rules (2020) (the "LCIA Rules"). The key procedural milestones of the arbitration were as follows:
• Request for Arbitration filed: 14 November 2022
• KMH's Response filed: 15 December 2022
• Tribunal constituted: 8 February 2023. The tribunal comprised Sir Malcolm Fenton-Clarke as Presiding Arbitrator (appointed by the LCIA Court pursuant to Article 5.8 of the LCIA Rules), Professor Athena Drakopoulos as Co-Arbitrator (nominated by TSL), and Dr. Henrik Dalmqvist as Co-Arbitrator (nominated by KMH). Ms. Fiona Beckett was appointed as Tribunal Secretary.
• Procedural Order No. 1 (procedural timetable): 1 March 2023
• Procedural Orders Nos. 2–7: Various dates between March and September 2023, addressing document production, witness statements, expert evidence, and pre-hearing logistics.
• Evidentiary hearing: 11 September 2023 through 22 September 2023 (10 hearing days at the International Dispute Resolution Centre ("IDRC"), London). Both parties were fully represented by counsel and had the opportunity to present opening and closing submissions, call factual witnesses, and adduce and cross-examine expert evidence on quantum and market conditions.
• Post-hearing briefs filed: October 2023
• Final Award issued: 28 June 2024
The Award was comprehensive, running to 247 pages including appendices. It addressed each of TSL's claims and each of KMH's defences in detail. The damages awarded by the tribunal are summarised below:
In addition, the tribunal allocated costs 85% to KMH, ordering KMH to pay:
The grand total payable by KMH under the Award is therefore £108,600,000.
The tribunal's costs allocation was based on its assessment that KMH's defences, while actively pursued, ultimately failed on all fronts and that certain defences — particularly the fabricated off-hire deductions relating to M/V Volga Spirit — were advanced in bad faith. The tribunal expressly found that KMH's conduct in fabricating documentation to support the off-hire claims was a factor warranting a higher costs allocation than would otherwise be appropriate.
2.3 Enforcement Proceedings to Date
Following the issuance of the Award, TSL moved promptly to enforce across multiple jurisdictions, reflecting both the quantum of the Award and the assessed risk of asset dissipation by KMH and its related entities. The enforcement proceedings to date are as follows:
England and Wales:
• Section 66 Application: TSL filed its application to enforce the Award as a judgment of the Commercial Court under Section 66 of the Act on 15 July 2024 (Claim No. CL-2024-000487).
• Worldwide Freezing Order ("WFO"): A Worldwide Freezing Order was granted on an ex parte basis on 16 July 2024 by Mr. Justice Ashworth. The WFO was continued with modifications on the return date of 30 July 2024, following a contested inter partes hearing at which KMH appeared by counsel.
• Permission to Enforce: Permission to enforce the Award as a judgment was granted on 2 August 2024 by Mr. Justice Ashworth, no application to set aside having been made at that stage.
• Third-Party Debt Order ("TPDO"): An interim TPDO was granted on 5 August 2024 against Meridian Trust Bank Ltd. (50 Lombard Street, London EC3V 9EA), where KMH maintains significant sterling and US dollar accounts. The interim TPDO freezes the amounts standing to KMH's credit at that institution pending the final order hearing.
Cyprus:
• Enforcement Application: TSL filed enforcement proceedings in the Nicosia District Court on 9 August 2024 (Case No. 2247/2024), seeking recognition and enforcement of the Award under the New York Convention (1958) as implemented in Cypriot law.
• Freezing Injunction: A freezing injunction was granted by the Nicosia District Court on 12 August 2024, covering the shares held by KMH (directly or through related entities) in Oceangate Ventures Ltd. (HE 401293), a Cypriot-registered company believed to hold significant real property and investment assets, as well as KMH's Cyprus bank accounts.
• Local Counsel: Kyprianos Makrides & Partners (Andreas Kyprianos, Partner; Nadia Makrides, Senior Associate).
Singapore:
• Enforcement Application: TSL filed an originating summons for leave to enforce the Award in the Singapore High Court on 14 August 2024 (OS No. 872/2024), under the International Arbitration Act (Cap. 143A).
• Vessel Arrest: On 20 August 2024, the M/V Crimson Horizon was arrested in Singapore waters pursuant to an admiralty arrest warrant obtained by TSL. The vessel is owned by Korinthian Bulkers (Singapore) Pte. Ltd., a wholly-owned subsidiary of KMH, and was identified as one of the most valuable assets within the KMH corporate group accessible in Singapore.
• Local Counsel: Straits Meridian LLP (David Teo Wei Lin, Partner; Priya Subramaniam, Senior Associate).
United Arab Emirates:
• Enforcement Application: TSL filed enforcement proceedings in the Dubai Courts on 22 August 2024 (Case No. 1893/2024), seeking recognition and enforcement of the Award under the New York Convention as implemented in UAE Federal Law.
• Precautionary Attachment: A precautionary attachment was granted on 28 August 2024 over the accounts of Korinthian DMCC (a Dubai-registered group entity) held at Emirates Gulf Commercial Bank PJSC.
• Local Counsel: Al-Rashid Hatem & Associates (Tariq Al-Rashid, Managing Partner; Leila Hatem, Senior Associate).
The multi-jurisdictional enforcement strategy was designed to maximise recovery prospects by targeting assets across the dispersed KMH corporate group before assets could be moved or dissipated. The speed with which freezing and attachment orders were obtained across four jurisdictions within approximately six weeks of the Award reflects both the preparedness of the enforcement team and the willingness of courts in each jurisdiction to grant interim relief.
2.4 The Set-Aside Application
On 19 August 2024, Harkness Whitford & Co. filed an application on behalf of KMH in the Commercial Court to set aside the Award. The application is brought under both Section 68 (serious irregularity causing substantial injustice) and Section 69 (appeal on a point of law) of the Act. The application was filed within the 28-day time limit prescribed by Section 70(3) of the Act, the Award having been issued on 28 June 2024.
The application is supported by the first witness statement of Andrei Volkov (described as a director and principal of KMH) and exhibits. KMH advances four grounds under Section 68 and three grounds under Section 69, each of which is analysed in detail in Sections 4 and 5 of this memorandum.
At the outset, we note a critical threshold issue with respect to the Section 69 appeal. The LCIA Rules (2020), under which the arbitration was conducted, contain at Article 26.8 a provision by which the parties waive irrevocably their right to any form of appeal, review, or recourse to any state court or other judicial authority, insofar as such waiver can validly be made under applicable law. Under English law, Section 69(1) of the Act expressly permits such exclusion agreements. It is well established in the case law that the LCIA Rules constitute an agreement to exclude appeals under Section 69. Accordingly, the Section 69 challenge should fail at the threshold — a point that may dispose of half of KMH's application without any consideration of the merits.
The set-aside application has been listed before Mr. Justice Ashworth, who has had conduct of the enforcement proceedings since the outset and is therefore familiar with both the factual background and the post-award procedural history.
3. Legal Framework for Challenge of Arbitral Awards
3.1 Section 68 — Serious Irregularity
Section 68 of the Arbitration Act 1996 provides the mechanism by which a party may challenge an arbitral award on the ground of "serious irregularity affecting the tribunal, the proceedings or the award." The statutory test is demanding and is structured in two stages. First, the applicant must establish that a serious irregularity falling within the closed list of categories set out in Section 68(2)(a) through (i) has occurred. Second, the applicant must show that the irregularity "has caused or will cause substantial injustice" to the applicant.
The categories of irregularity enumerated in Section 68(2) which are relevant to KMH's application are the following:
(a) failure by the tribunal to comply with Section 33 (general duty of the tribunal), which requires the tribunal to act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting its case and dealing with that of its opponent, and to adopt procedures suitable to the circumstances of the particular case, avoiding unnecessary delay or expense;
(c) failure by the tribunal to conduct the proceedings in accordance with the procedure agreed by the parties;
(d) failure by the tribunal to deal with all the issues that were put to it.
The threshold for establishing serious irregularity under Section 68 is deliberately and exceptionally high. The provision is designed as a "long stop" safety valve, available only in extreme cases where the tribunal's conduct has fallen so far below the acceptable minimum standard as to justify the court's intervention. As the Court of Appeal held in Lesotho Highlands Development Authority v. Impregilo SpA [2005] UKHL 43 at [28], Section 68 is "designed as a long stop, available only in extreme cases where the tribunal has gone so wrong in its conduct of the arbitration that justice calls out for it to be corrected." This formulation was endorsed and applied in RAV Bahamas Ltd v. Therapy Beach Club Inc. [2021] UKPC 8 and has been consistently followed in the Commercial Court.
Crucially, Section 68 is not a mechanism for appealing against the tribunal's findings of fact or its evaluation of evidence. As Colman J. held in Petrochemical Industries Co. (KSC) v. The Dow Chemical Company [2012] EWHC 2739 (Comm), the court must guard against attempts to use Section 68 as a "backdoor" appeal on the merits. The line between a legitimate complaint about procedural unfairness and an impermissible challenge to the tribunal's substantive conclusions is one which the courts have drawn firmly and consistently in favour of the finality of arbitral awards.
The requirement of "substantial injustice" is a separate and independent hurdle. It is not enough for the applicant to show that a procedural irregularity occurred, or even that it affected the proceedings in some abstract sense. The applicant must demonstrate that the irregularity caused or will cause substantial injustice — that is, that it made a material difference to the outcome. As Popplewell J. (as he then was) held in Terna Bahrain Holding Company WLL v. Al Shamsi [2012] EWHC 3283 (Comm) at [85], the applicant must show that, but for the irregularity, "the tribunal might well have reached a different conclusion." This is a test of causation and materiality, not merely of procedural propriety.
The Departmental Advisory Committee on Arbitration Law, in its 1996 Report on the Arbitration Bill (the "DAC Report"), explained the policy rationale at paragraph 280: "The test of 'substantial injustice' is intended to be applied by way of support for the arbitral process, not by way of interference with that process. It is only in those cases where it can be said that what has happened is so far removed from what could reasonably be expected of the arbitral process that we would expect the court to take action."
3.2 Section 69 — Appeal on a Point of Law
Section 69 of the Act provides for a right of appeal to the court on a question of law arising out of an award made in the proceedings. However, this right is expressly subject to two critical limitations.
First, Section 69(1) provides that an appeal may be brought only "unless otherwise agreed by the parties." This provision gives effect to the principle of party autonomy which underpins the Act, permitting parties to exclude the right of appeal by agreement. Such exclusion agreements are common in institutional arbitration rules, and the English courts have consistently upheld them.
In the present case, the LCIA Rules (2020) at Article 26.8 provide:
"By agreeing to arbitration under these Rules, the parties undertake to carry out any award immediately and without any delay (subject only to Article 27); and the parties also waive irrevocably their right to any form of appeal, review or recourse to any state court or other judicial authority, insofar as such waiver may be validly made under any applicable law."
It is well established in English case law that this provision constitutes an effective agreement to exclude appeals under Section 69. In Essex County Council v. Premier Recycling Ltd [2006] EWHC 3594 (TCC), HHJ Thornton QC held that the LCIA Rules constitute an exclusion agreement within the meaning of Section 69(1). This position has been consistently followed and is not in doubt. Both the Request for Arbitration and KMH's Response to the Request confirmed that the arbitration was conducted under the LCIA Rules; the arbitration clause in each of the three charter-parties specified LCIA arbitration in London. There is no basis for KMH to contend that the exclusion does not apply.
Second, even where there is no exclusion agreement and the court is asked to grant leave to appeal, Section 69(3) imposes strict conditions. The court shall not grant leave unless it is satisfied that:
(a) the determination of the question will substantially affect the rights of one or more of the parties;
(b) the question is one which the tribunal was asked to determine;
(c) on the basis of the findings of fact in the award, the decision of the tribunal on the question is either obviously wrong, or the question is one of general public importance and the decision of the tribunal is at least open to serious doubt; and
(d) despite the agreement of the parties to resolve the matter by arbitration, it is just and proper in all the circumstances for the court to determine the question.
An appeal under Section 69, even where leave is granted, is an appeal on a point of law only. The court does not re-examine or disturb the tribunal's findings of fact, and it proceeds on the basis of those findings as set out in the award. This is a fundamental limitation which prevents Section 69 from being used as a vehicle for re-litigating the merits of the dispute.
3.3 Practical Significance
The English courts have consistently adopted a strongly pro-arbitration stance, particularly in the context of London-seated arbitrations conducted under the rules of established international institutions such as the LCIA. The policy of the Act, as articulated in Section 1, is to minimise judicial intervention in the arbitral process, and the courts have given effect to that policy with vigour.
In practice, LCIA awards challenged in the Commercial Court have a very high survival rate. Successful challenges under Section 68 are rare, and successful appeals under Section 69 are infrequent even where the exclusion agreement does not apply. The combination of a well-established institutional framework, experienced arbitrators, and the high thresholds imposed by the Act means that the overwhelming majority of challenge applications are dismissed.
The composition of the tribunal in this case reinforces this assessment. Sir Malcolm Fenton-Clarke is a retired High Court judge and one of the most experienced international arbitrators practising in London. Professor Athena Drakopoulos is a leading academic and practitioner in international commercial and shipping law. Dr. Henrik Dalmqvist is a highly regarded shipping arbitrator with over thirty years of experience. The court is likely to note the calibre of the tribunal and to be correspondingly reluctant to interfere with its findings, particularly on matters of procedural discretion, evidence evaluation, and contractual construction.
4. Analysis of KMH's Section 68 Grounds
KMH advances four grounds under Section 68 of the Act. Each is analysed below.
4.1 Ground 1: Alleged Failure to Give KMH a Fair Opportunity to Present Its Case (Section 68(2)(a))
KMH's Argument. KMH contends that the tribunal unfairly curtailed its cross-examination of TSL's quantum expert, Mr. Andrew Prescott of Harborline Advisors, and refused to admit certain late-filed evidence relating to market conditions in the dry-bulk freight market during the relevant period. KMH argues that these procedural decisions denied it a fair opportunity to present its defence on quantum, in breach of the tribunal's general duty under Section 33 of the Act, and that this constitutes a serious irregularity under Section 68(2)(a).
Our Assessment. We consider this ground to be without merit for the following reasons.
First, the procedural record demonstrates that KMH was afforded a full and fair hearing. The evidentiary hearing ran for ten full hearing days, from 11 September 2023 to 22 September 2023, at the IDRC in London. Both parties were represented by experienced counsel throughout. KMH had substantial time for cross-examination of TSL's witnesses, including its quantum expert. The timetable for the hearing — including the allocation of time between the parties for opening and closing submissions, examination-in-chief, cross-examination, and re-examination — was agreed at the pre-hearing conference held on 30 August 2023 and recorded in Procedural Order No. 6. The time limits applied equally to both parties and reflected the agreed procedural framework. KMH did not object to the timetable at the time it was agreed, nor did it seek additional time during the hearing itself.
Second, the refusal to admit late-filed evidence was the subject of a reasoned procedural order — Procedural Order No. 7, dated 8 September 2023. KMH sought to introduce a supplementary market report prepared by a third-party consultancy, Adriatic Advisory Group, which had been obtained after the close of the evidentiary phase and the deadline for expert evidence. TSL objected on the grounds of lateness and unfairness, arguing that it would have no opportunity to respond to the new material before the hearing. The tribunal considered the application and refused it, finding that (a) the material was available prior to the deadline and could have been obtained with reasonable diligence; (b) its late introduction would cause prejudice to TSL; and (c) KMH's own expert, Dr. Klaus Richter of Quillon & Co., had already addressed market conditions in his reports and oral testimony. The tribunal's reasoning was sound, and the exercise of case management discretion in this regard was well within the range of reasonable procedural decisions available to an arbitral tribunal.
Third, the Award itself demonstrates that the tribunal fully engaged with KMH's arguments on quantum. Paragraphs 312 through 408 of the Award contain a detailed analysis of both parties' expert evidence on market rates, damages calculation methodologies, and the appropriate quantum for each head of claim. The tribunal compared the competing approaches of Mr. Prescott and Dr. Richter, identified specific areas of agreement and disagreement, and explained its reasoning for preferring one approach over the other on each disputed issue. This level of engagement is wholly inconsistent with a complaint that KMH was denied a fair opportunity to present its case on quantum.
Fourth, the relevant case law establishes conclusively that case management decisions by the tribunal — including decisions on time allocation for cross-examination, the admissibility of late-filed evidence, and the conduct of the evidentiary hearing — are matters of procedural discretion that do not give rise to a serious irregularity absent truly exceptional circumstances. In Westvale & Co. AG v. Vorchmeld Airport GmbH [2006] EWHC 388 (Comm), Tomlinson J. held that the tribunal's exercise of case management powers, even if the court might have exercised them differently, does not constitute a serious irregularity. Similarly, in Bandwidth Shipping Corporation v. Intaari [2007] EWCA Civ 998, the Court of Appeal confirmed that the tribunal has a wide discretion in managing the proceedings and that the court will not second-guess that discretion under Section 68 unless the tribunal's conduct falls below the acceptable minimum standard of fairness.
This ground does not come close to the threshold of "serious irregularity" under Section 68(2)(a). It amounts, in substance, to an expression of dissatisfaction with the tribunal's procedural rulings — a complaint that belongs in the category of impermissible challenges to the tribunal's case management discretion.
Risk Level: Very low (less than 5%).
4.2 Ground 2: Alleged Failure to Deal with All Issues (Section 68(2)(d))
KMH's Argument. KMH contends that the tribunal failed to address two defences raised by KMH: (i) that TSL's withdrawal of M/V Crimson Horizon on 15 September 2022 was premature and itself constituted a repudiatory breach by TSL, disentitling TSL to loss-of-bargain damages; and (ii) that the tribunal failed to properly consider KMH's off-hire defence in respect of M/V Volga Spirit, including the evidence of Captain Stavros Andreou (KMH's marine surveyor) regarding the vessel's mechanical condition. KMH argues that these failures constitute a failure to deal with "all the issues that were put to it" under Section 68(2)(d).
Our Assessment. We consider this ground to be without merit for the following reasons.
First, the scope of Section 68(2)(d) must be properly understood. The duty to deal with "all the issues that were put to it" refers to the essential issues in the case — the key questions which the tribunal was required to determine in order to resolve the dispute. It does not require the tribunal to address every argument, sub-argument, or evidential point raised by the parties. As Akenhead J. held in Weldon Plant Ltd v. Commission for the New Towns [2000] BLR 496 at [31], the requirement is that the tribunal deal with the "essential issues" and not that it address "each point made by a party in its submissions." The Court of Appeal endorsed this approach in Hussman (Europe) Ltd v. Al Ameen Development & Trade Co. [2000] 2 Lloyd's Rep 83, holding that Section 68(2)(d) requires only that the tribunal deal with the "essential issues" and not with "every argument."
Second, the Award addresses both of KMH's defences in terms. With respect to the withdrawal of M/V Crimson Horizon, the tribunal devoted paragraphs 178 through 214 of the Award to a detailed analysis of the events leading to TSL's withdrawal. The tribunal found, as a matter of fact, that KMH had failed to pay hire from 1 July 2022 onwards without lawful justification; that arrears of £4,280,000 had accumulated over a period of more than two months; that TSL had issued the requisite anti-technicality notice on 1 September 2022 in compliance with Clause 11(b) of the charter-party; that no payment was forthcoming within the notice period; and that TSL was entitled, both as a matter of contractual right under the withdrawal clause and as a matter of the general law of contract by acceptance of KMH's repudiatory breach, to withdraw the vessel and terminate the charter. The tribunal expressly rejected KMH's argument that the withdrawal was premature, finding that two and a half months of complete non-payment, following proper notice, was more than sufficient to justify withdrawal. This is a comprehensive treatment of the issue, not a failure to address it.
Third, with respect to M/V Volga Spirit, the tribunal addressed KMH's off-hire defence at paragraphs 247 through 289 of the Award. The tribunal found, based on the contemporaneous documentary record — including voyage reports, engine room logs, classification society records, and the vessel's planned maintenance system data — as well as the expert evidence of Captain Elias Sotiropoulos (TSL's marine surveyor) and Captain Stavros Andreou (KMH's marine surveyor), that the off-hire deductions were fabricated. The tribunal made specific findings regarding each of the alleged off-hire events, concluding that: (a) two of the five claimed events did not occur at all; (b) two were of such trivial duration (measured in hours, not days) as not to engage the off-hire clause; and (c) one was attributable to KMH's own failure to provide bunkers of adequate quality. The tribunal awarded full restitution of the £2,740,000 in fabricated deductions. The fact that the tribunal rejected KMH's evidence, including that of Captain Andreou, is a finding on the merits, not a failure to address the issue.
Fourth, KMH's complaint conflates a finding against it on the merits with a failure to address the relevant issues. This is precisely the type of complaint which the courts have held is impermissible under Section 68(2)(d). As Thomas J. (as he then was) stated in Fidelity Management SA v. Myriad International Holdings BV [2005] EWHC 1193 (Comm), Section 68(2)(d) "does not apply if the tribunal has dealt with the issue, even if the tribunal has dealt with it in a way that the dissatisfied party disagrees with." The tribunal clearly engaged with both defences, heard the evidence and submissions on both, and made reasoned findings. That the findings went against KMH does not establish a serious irregularity.
Risk Level: Very low (less than 5%).
4.3 Ground 3: Alleged Irregularity in Tribunal's Treatment of Expert Evidence on Damages (Section 68(2)(a)/(c))
KMH's Argument. KMH contends that the tribunal adopted TSL's expert's (Mr. Prescott's) market-rate projections for calculating loss of profit and market differential damages across all three charters (totalling £16,480,000) without adequately testing or engaging with KMH's competing expert evidence (Dr. Richter's analysis), thereby constituting a failure to comply with the general duty under Section 33 of the Act (falling under Section 68(2)(a)) and/or a failure to conduct proceedings in accordance with agreed procedure (Section 68(2)(c)).
Our Assessment. We consider this ground to be without merit for the following reasons.
First, the procedural record demonstrates that both experts were given a full hearing. Mr. Prescott and Dr. Richter each prepared two written reports (an initial report and a reply report) and a joint statement identifying areas of agreement and disagreement. Both experts were called to give oral evidence during the evidentiary hearing and were cross-examined extensively by opposing counsel. The hearing timetable allocated a full day and a half to expert evidence, and both parties made use of the allocated time. There is no basis for the contention that the tribunal failed to "test" KMH's expert evidence.
Second, the Award contains a detailed and reasoned analysis of the competing expert evidence on market rates and damages. At paragraphs 358 through 408, the tribunal sets out and compares the methodologies employed by Mr. Prescott and Dr. Richter, identifies the key assumptions underlying each approach, and explains why it preferred Mr. Prescott's methodology in certain respects and Dr. Richter's in others. For example, the tribunal accepted Dr. Richter's Baltic Dry Index forward curve projections for the first twelve months of the loss period but preferred Mr. Prescott's analysis for the remaining period, finding that Mr. Prescott's approach was better supported by the historical correlation data and more consistent with the prevailing consensus among market analysts. The suggestion that the tribunal "adopted" TSL's expert's analysis wholesale is factually inaccurate — the Award demonstrates a nuanced and selective engagement with both experts' evidence.
Third, the tribunal's preference for one expert's evidence over another, or for aspects of one expert's methodology over the other, is a classic finding of fact and evaluation of evidence. It is precisely the kind of determination that Section 68 is not designed to disturb. As the Court of Appeal held in Checkpoint Ltd v. Strathclyde Pension Fund [2003] EWCA Civ 84, the tribunal's evaluation of expert evidence is a matter of weight and credibility which falls squarely within the tribunal's fact-finding function. There is no requirement for the tribunal to adopt a midpoint between competing expert positions, to accept each element of each party's evidence, or to explain in forensic detail why it rejected every aspect of the unsuccessful party's case. The tribunal is entitled to prefer one expert's approach wholesale on any given issue, provided it has given both sides a fair hearing and engaged with the evidence — both of which occurred here.
Fourth, the loss of profit and market differential figure of £16,480,000 across three charters, calculated over the remaining charter periods and based on the differential between contractual and prevailing market rates, is well within the range supported by the evidence. Both experts' analyses produced figures in a broadly comparable range (Mr. Prescott: £16,480,000; Dr. Richter: £11,920,000), and the tribunal's adoption of Mr. Prescott's figure reflected its assessment of the relative merits of the competing methodologies on specific points. The difference between the two figures is explained in the Award by reference to specific methodological choices on which the tribunal made reasoned findings. There is nothing in the quantum outcome that suggests arbitrariness, failure of engagement, or procedural unfairness.
Fifth, the invocation of Section 68(2)(c) (failure to follow agreed procedure) adds nothing to this ground. KMH does not identify any specific procedural agreement that the tribunal failed to follow in its treatment of expert evidence. The expert evidence was adduced and tested in accordance with the procedural timetable, the LCIA Rules, and the IBA Rules on the Taking of Evidence (to the extent adopted by the tribunal). The real complaint is that the tribunal found against KMH on quantum, which is a merits challenge masquerading as a procedural one.
Risk Level: Very low (less than 5%).
4.4 Ground 4: Alleged Failure to Follow Agreed Procedure Regarding Document Production (Section 68(2)(c))
KMH's Argument. KMH contends that the tribunal failed to enforce a document production order against TSL requiring disclosure of TSL's internal chartering strategy documents, including board papers and internal memoranda relating to TSL's decision-making regarding the re-chartering of M/V Aegean Fortuna following KMH's early redelivery. KMH argues that these documents would have supported its defence on the quantum of TSL's loss arising from the wrongful early redelivery (the largest single head of claim at £42,300,000), and that the tribunal's failure to enforce the production order constituted a failure to conduct the proceedings in accordance with the agreed procedure under Section 68(2)(c).
Our Assessment. We consider this ground to be without merit for the following reasons.
First, the procedural history on document production must be understood in context. The tribunal issued multiple procedural orders on document production during the course of the arbitration, applying the IBA Rules on the Taking of Evidence in International Arbitration (2020 Revision), which had been adopted by the parties as the applicable framework for document production in Procedural Order No. 1. KMH submitted a Redfern Schedule containing requests for production of various categories of documents, including TSL's internal chartering strategy documents. TSL objected to several of these requests on grounds of relevance, materiality, proportionality, and legal professional privilege. The tribunal considered the competing positions and issued a detailed ruling in Procedural Order No. 4, dated 12 June 2023, which granted some requests in full, granted others in modified form, and rejected others. With respect to the internal chartering strategy documents, the tribunal found that TSL's objections on relevance and privilege were well-founded in certain respects and ordered partial production, excluding documents subject to legal privilege and documents relating to TSL's general commercial strategy (as opposed to the specific re-chartering of M/V Aegean Fortuna).
Second, TSL complied with the tribunal's production order as modified. TSL produced the non-privileged documents relating to the re-chartering of M/V Aegean Fortuna, including correspondence with brokers, heads of terms for substitute fixtures, and internal approval documents for the substitute charters. KMH's complaint is not that TSL failed to comply with the tribunal's order, but that the tribunal did not order broader production — in other words, that the tribunal's exercise of discretion in defining the scope of the production order was insufficient. This is, again, a challenge to the tribunal's case management discretion.
Third, and critically, KMH did not raise a formal challenge to the tribunal's procedural ruling at the time. Following Procedural Order No. 4, KMH did not apply for reconsideration, seek further orders, or invoke any procedure under the LCIA Rules to challenge the ruling. KMH proceeded to the evidentiary hearing without objection and cross-examined TSL's witnesses on quantum (including on mitigation) on the basis of the documents that had been produced. It is well established that a failure to pursue available procedural remedies during the arbitration undermines any subsequent challenge under Section 68. As the Court of Appeal held in Thyssen Canada Ltd v. Mariana Maritime SA [2005] EWHC 219 (Comm), a party which does not object at the time to a procedural ruling and allows the arbitration to continue cannot subsequently rely on that ruling as a ground for setting aside the award. Section 73 of the Act codifies this principle, providing that a party who continues to take part in arbitral proceedings without timely objection loses the right to object.
Fourth, the M/V Aegean Fortuna damages of £42,300,000 were calculated by reference to the remaining charter period (14 months), the contractual hire rate, and the prevailing market rate at which a substitute charter could be and was obtained. These figures were based on the contractual terms of the charter-party (which were not in dispute) and independently verifiable market data (Baltic Exchange assessments, broker reports, and the substitute fixture terms). TSL's internal chartering strategy documents — to the extent they exist beyond what was produced — would not have affected the calculation, which was a function of the contractual rate, the market rate, and the remaining charter period. KMH has not identified any specific document or category of document that, if produced, would have altered the tribunal's quantum analysis.
Fifth, KMH's argument that the documents "would have supported its defence" is speculative. KMH does not point to any specific evidence, even by way of inference, suggesting that TSL's internal documents would have undermined the damages calculation or revealed that TSL obtained higher substitute charter rates than those credited in the Award. The tribunal already credited substitute charter income in its calculation, reducing the gross loss figure to the net figure of £42,300,000. KMH's complaint is in substance an invitation to speculate that undisclosed documents might have assisted its case — a basis that falls far short of establishing serious irregularity.
Risk Level: Very low (less than 5%).
5. Analysis of KMH's Section 69 Grounds
5.1 Threshold Issue: Exclusion of Section 69 by Agreement
Before addressing the substantive grounds of KMH's purported Section 69 appeal, it is necessary to address the threshold issue which, in our assessment, is dispositive of the entire Section 69 challenge.
The LCIA Rules (2020), under which the arbitration was conducted, contain at Article 26.8 a waiver provision which reads as follows:
"By agreeing to arbitration under these Rules, the parties undertake to carry out any award immediately and without any delay (subject only to Article 27); and the parties also waive irrevocably their right to any form of appeal, review or recourse to any state court or other judicial authority, insofar as such waiver may be validly made under any applicable law."
Under Section 69(1) of the Act, an appeal on a question of law is available only "unless otherwise agreed by the parties." Section 69 is a non-mandatory provision of the Act (as listed in Schedule 1) and can therefore be excluded by agreement pursuant to Section 4(3).
It is well established in English case law that the LCIA Rules constitute an effective agreement to exclude appeals under Section 69. In Essex County Council v. Premier Recycling Ltd [2006] EWHC 3594 (TCC), HHJ Thornton QC held squarely that the LCIA Rules waiver constitutes such an exclusion agreement. This position has been consistently followed in subsequent decisions and is not in doubt. The same principle applies to waiver provisions in other leading institutional rules, including the ICC Rules (Article 34(6)) and the SIAC Rules (Rule 32.11), confirming that the approach is one of settled law rather than a matter open to argument.
In the present case, the arbitration agreement in each of the three charter-parties specified that "any dispute arising out of or in connection with this Charter shall be referred to and finally resolved by arbitration under the LCIA Rules, which Rules are deemed to be incorporated by reference into this clause." Both the Request for Arbitration and KMH's own Response to the Request confirmed that the arbitration was to be conducted under the LCIA Rules. The tribunal was constituted under those Rules, the procedural orders were made under those Rules, and the Award was rendered under those Rules. At no stage during the arbitration did either party suggest that the LCIA Rules did not apply or that their provisions, including Article 26.8, had been modified or disapplied.
Accordingly, the Section 69 appeal should be dismissed at the threshold without any consideration of the merits. KMH has agreed, by the incorporation of the LCIA Rules, to exclude appeals on points of law. That agreement is valid and enforceable under English law. There is no basis on which the court could or should entertain the appeal.
We note that KMH's application notice does not address this threshold issue or explain on what basis it contends that the LCIA Rules exclusion does not apply. This omission is itself significant and may inform the court's assessment of the good faith of the Section 69 challenge.
Risk Level: Very low — near zero that the court will entertain the Section 69 appeal given the LCIA Rules exclusion.
5.2 Substantive Grounds (Addressed in the Alternative)
Although we consider the Section 69 challenge to be barred at the threshold, we address KMH's three substantive grounds in the alternative for completeness and to ensure that TSL's skeleton argument addresses all contingencies.
Ground A: Construction of the Early Redelivery Clause.
KMH argues that the tribunal erred in law in its construction of the charter-party redelivery provisions relating to M/V Aegean Fortuna. Specifically, KMH contends that Clause 4(c) of the charter-party, which provides for the charterer to redeliver the vessel "upon payment of a cancellation fee equal to six months' hire," created a contractual option for early redelivery upon payment of the stipulated fee, and that the tribunal's construction — which held that Clause 4(c) applied only in the event of a specific trigger event (total loss, requisition, or force majeure lasting more than 180 consecutive days, as defined in Clause 4(a)) — was erroneous as a matter of law.
Our assessment is that this ground would not satisfy the leave requirements of Section 69(3), even if the exclusion agreement did not apply. The question raised is one of construction of a specific contract, not a question of general public importance. The tribunal's construction is supported by the plain language of the charter-party, read as a whole. Clause 4(a) defines the trigger events; Clause 4(b) sets out the notice requirements; and Clause 4(c) sets out the consequences, including the cancellation fee. The three sub-clauses form an integrated provision, and the tribunal's reading — that the cancellation fee mechanism was available only in the context of the trigger events specified in Clause 4(a) — is the natural and ordinary meaning of the contractual language. KMH's reading, which would treat Clause 4(c) as a standalone option exercisable at will, is inconsistent with the structure of Clause 4 as a whole, requires the words "upon the occurrence of any of the events specified in Clause 4(a)" in the introductory paragraph to be ignored, and would produce a commercially absurd result by allowing the charterer to terminate a five-year charter at any time upon payment of six months' hire. The tribunal's construction is not "obviously wrong" and is not "open to serious doubt." It is, in our assessment, correct.
Ground B: Application of the Duty to Mitigate.
KMH argues that the tribunal erred in law by not reducing TSL's damages for M/V Crimson Horizon by the full substitute charter income earned by TSL after withdrawal of the vessel. KMH contends that the tribunal failed to apply the duty to mitigate properly, arguing that TSL could and should have obtained a higher substitute charter rate than the rate at which it actually re-chartered the vessel.
Our assessment is that this ground is misconceived. The tribunal's Award addresses mitigation in considerable detail at paragraphs 215 through 246. The tribunal made specific factual findings regarding TSL's efforts to re-charter the vessel, including the steps taken by TSL's broking department, the number of brokers instructed, the inquiries received, the terms offered by potential charterers, and the state of the market at the time of re-chartering. The tribunal found, as a matter of fact, that:
(a) TSL took reasonable steps to mitigate its loss, instructing three independent brokers and actively marketing the vessel within days of withdrawal;
(b) the dry-bulk freight market was significantly depressed during the period following withdrawal, with Supramax/Handymax rates at or near multi-year lows;
(c) TSL obtained a substitute charter within a commercially reasonable period (approximately six weeks) at the best rate available in the market at the time;
(d) the substitute charter income was credited against TSL's loss-of-bargain claim in full, reducing the gross loss figure to the net loss of bargain figure of £23,870,000.
The outstanding hire component of the M/V Crimson Horizon claim (£4,280,000) was entirely separate from the loss-of-bargain component and represented hire which fell due and remained unpaid during the charter period — no question of mitigation arises in respect of unpaid hire that had already accrued. The loss-of-bargain figure of £23,870,000 was net of full mitigation credits. KMH's argument that TSL should have obtained a higher substitute rate is a challenge to the tribunal's factual findings regarding market conditions and the reasonableness of TSL's mitigation efforts. These are findings of fact, not questions of law, and are not susceptible to appeal under Section 69.
To the extent that the application of the duty to mitigate involves a mixed question of fact and law, the legal principles applied by the tribunal are conventional and uncontroversial. The tribunal correctly articulated the burden of proof (on KMH as the party alleging failure to mitigate) and the standard of reasonableness (TSL was required to take reasonable steps, not extraordinary ones), citing British Westinghouse Electric & Manufacturing Co. Ltd v. Underground Electric Railways Co. of London Ltd [1912] AC 673 and Payzu Ltd v. Saunders [1919] 2 KB 581. No error of law is apparent.
Ground C: Calculation of Pre-Award Interest.
KMH argues that the tribunal erred in law in applying interest at 5.25% per annum simple from the dates of the respective breaches rather than from the date of TSL's formal demand for payment.
Our assessment is that this ground is without merit. The rate of pre-award interest and the period from which it runs were matters within the tribunal's discretion under Section 49(3) of the Act and Rule 22.4 of the LCIA Rules, which confer a broad discretion on the tribunal to award simple or compound interest at such rate and for such period as it considers appropriate. The tribunal's approach — applying 5.25% per annum simple interest from the dates of breach — is conventional and consistent with established practice in London shipping arbitration. The rate of 5.25% is the Bank of England base rate plus a margin, which is the standard approach in English commercial arbitration. The commencement date of interest running from the date of breach (rather than from the date of demand or the date of the award) reflects the compensatory principle and is supported by well-established authority, including Sempra Metals Ltd v. IRC [2007] UKHL 34. There is no error of law.
Overall Assessment of Substantive Section 69 Grounds. Even if the court were to consider any of these grounds on the merits — which is extremely unlikely given the exclusion agreement — leave would not be granted because the tribunal's decisions are not obviously wrong, are not open to serious doubt, and the questions raised are not of general public importance. They relate to the construction of specific contractual provisions and the application of well-settled legal principles to the facts of this case.
Overall Section 69 Risk Level: Near zero (less than 2%).
6. Assessment of "Substantial Injustice" Requirement (Section 68)
Even if KMH could establish that a serious irregularity falling within one of the categories of Section 68(2) had occurred — which, for the reasons set out in Section 4 above, we do not consider to be the case — KMH would need separately to demonstrate that the irregularity "has caused or will cause substantial injustice" to it. This is an independent and additional requirement under Section 68(1), and it imposes a significant further hurdle.
The standard of "substantial injustice" requires the applicant to show that the irregularity made a material difference to the outcome — that is, that but for the irregularity, the tribunal might well have reached a different conclusion on the relevant issue. As Popplewell J. held in Terna Bahrain Holding Company WLL v. Al Shamsi [2012] EWHC 3283 (Comm), this is a test of causation: "the applicant must show that had the irregularity not occurred, the tribunal might well have reached a materially different conclusion." The test is not merely whether the irregularity affected the fairness of the proceedings in some abstract or theoretical sense, but whether it had a concrete impact on the result.
For each of KMH's Section 68 grounds, the connection between the alleged irregularity and the outcome of the Award is tenuous at best:
Ground 1 (curtailment of cross-examination and exclusion of late evidence). The tribunal's core findings on liability — that KMH wrongfully redelivered M/V Aegean Fortuna, that KMH's failure to pay hire on M/V Crimson Horizon constituted a repudiatory breach, and that KMH's off-hire deductions on M/V Volga Spirit were fabricated — were based primarily on the contemporaneous documentary record, including the charter-parties themselves, correspondence between the parties, voyage reports, classification society records, and KMH's own internal communications and admissions. The additional time for cross-examination of TSL's quantum expert, or the admission of a supplementary market report, would not have altered these liability findings. On quantum, the tribunal had before it extensive expert evidence from both sides, the contractual terms, independently verifiable market data, and the substitute fixture documentation. The marginal additional cross-examination or the late-filed Drewry report would not have had a material impact on the tribunal's quantum analysis. KMH cannot demonstrate that the outcome might well have been different.
Ground 2 (alleged failure to address issues). This ground is factually unfounded. As set out in Section 4.2 above, the Award engages in detail with both the premature withdrawal defence on M/V Crimson Horizon and the off-hire defence on M/V Volga Spirit. There is no irregularity, and therefore no question of substantial injustice arises. Even if there were an irregularity (which there is not), KMH cannot show that a more detailed engagement with these defences would have produced a different outcome, given the strength of the evidence against KMH on both points.
Ground 3 (preference for TSL's quantum expert). The tribunal's preference for Mr. Prescott's methodology over Dr. Richter's on certain aspects of the damages calculation is a finding of fact supported by the evidence. Even if the tribunal's approach could be characterised as an irregularity (which it cannot), KMH cannot show substantial injustice. The tribunal's figure of £16,480,000 for loss of profit and market differential damages was within the range of both experts' analyses (Mr. Prescott: £16,480,000; Dr. Richter: £11,920,000). Even on Dr. Richter's lower figure, the total Award (substituting Dr. Richter's figure for Mr. Prescott's) would have been approximately £91,890,000 plus costs — a reduction of less than 5% of the total. The tribunal was entitled to prefer Mr. Prescott's analysis, and the difference between the two experts' figures does not constitute "substantial injustice."
Ground 4 (document production ruling). KMH failed to exhaust its procedural remedies during the arbitration by not challenging the tribunal's production ruling at the time. Moreover, KMH cannot identify any specific document that, if produced, would have altered the tribunal's quantum analysis on M/V Aegean Fortuna, which was based on contractual rates, market data, and the substitute fixture terms — all of which were in evidence. The alleged irregularity, even if established, did not deprive KMH of any material evidence, and KMH cannot show that the outcome would or might well have been different.
Conclusion on substantial injustice. The substantial injustice requirement cannot be made out on any of the grounds advanced by KMH. Each ground fails not only at the first stage (establishing a serious irregularity) but also at the second stage (demonstrating that the irregularity caused or will cause substantial injustice). KMH's application under Section 68, viewed in the round, amounts to a disappointed litigant's attempt to re-argue the merits of the case before the Commercial Court. The Act does not permit this, and the court should have no difficulty in dismissing the application.
7. Strategic Considerations
7.1 Impact on Enforcement Timetable
The filing of the set-aside application does not operate as an automatic stay of enforcement under English law. Section 70(4) of the Act provides that the court may order the applicant to provide security for the amount of the award as a condition of making an order under Section 67, 68, or 69, but it does not impose an automatic stay. The enforcement proceedings under Section 66 have already progressed significantly: permission to enforce the Award as a judgment was granted by Mr. Justice Ashworth on 2 August 2024; the Worldwide Freezing Order is in place and has been contin