Wael Buheiry and VistaJet Limited – The English High Court’s Guidance on the Application of Section 67 and 68 of the Arbitration Act

As first published in published in Mealey’s International Arbitration Report, the recent decision of the High Court in Wael Buheiry v VistaJet Limited [2022] EWHC 2998 (Comm) provided a valuable reminder of the dangers of clothing an appeal on the merits of an arbitral award as a challenge under sections 67 (appeal for a lack of jurisdiction) and 68 (appeal for serious irregularity) of the Arbitration Act 1996, which are limited in application. As well as confirming that the substantive jurisdiction of a tribunal is determined by reference to section 30 of the Arbitration Act 1996, the judgment also provided helpful guidance on the meaning of subsidiary and parent companies under section 1159 of the Companies Act 2006.

Factual background

In April 2014, VistaJet Luftfarhtunternehman GmbH ("VJLU") and the Claimant (“Mr Buheiry”) entered into an agreement (the “2014 Agreement”) whereby VJLU agreed to provide private aircraft hire services for Mr Buheiry. Mr Buheiry, VJLU and the Defendant (“VistaJet Limited”, another VistaJet group company) negotiated and executed an addendum to the 2014 Agreement (the “2015 Agreement”), confirming, among other terms, that all disputes would be resolved by LCIA arbitration. Mr Buheiry made partial payments towards the services being provided by VJLU before defaulting on payments. On 14 July 2020, VJLU assigned its rights under the 2014 Agreement to VistaJet Limited.  Shortly thereafter and as a result of Mr Buheiry’s default, VistaJet Limited initiated LCIA proceedings and obtained an LCIA award on 9 September 2021, in which VistaJet Limited was awarded €1,050,653.86 plus interest (the “Award”).

Claimant’s challenges to the Award

Mr Buheiry issued proceedings in the High Court and sought to appeal the Award on two grounds. First, Mr Buheiry argued that the tribunal lacked substantive jurisdiction under section 67 of the Arbitration Act, because he alleged that the assignment of the 2014 Agreement was invalid. Mr Buheiry argued that the agreement permitted VJLU to assign the 2014 Agreement to a parent company, a subsidiary or a subsidiary of its parent company as defined in section 1159 of the Companies Act 2006, which he argued only encompassed immediate subsidiaries or parent companies. In other words, Mr Buheiry argued that a subsidiary A of company B should not be deemed a subsidiary of company B’s parent, company C, according to section 1159; similarly, company C is only a parent to company B and not company A. Therefore, the assignment was invalid, and as VistaJet limited lacked locus standi to bring the claim, the tribunal did not have jurisdiction to consider the claim.  
On the second ground, Mr Buheiry argued that, under both sections 67 and 68, VistaJet Limited failed to provide appropriate notice of arbitration proceedings to Mr Buheiry. Mr Buheiry argued that the 2014 Agreement required written notices to be posted or faxed, whereas the Request for Arbitration was initially sent via email and only subsequently was a hard copy sent by post.  Consequently, it was argued, the arbitration had not been validly commenced, meaning that the tribunal lacked jurisdiction and/or by continuing the arbitration to render an award, the tribunal had committed a serious procedural irregularity.

VistaJet’s response

VistaJet Limited argued that neither of the two grounds advanced by Mr Buheiry went to the tribunal’s substantive jurisdiction, and hence fell outside of section 67 of the Arbitration Act. Section 30 of the Arbitration Act 1996 sets out (exhaustively) the matters which impact a tribunal’s substantive jurisdiction, namely:

a)    Whether there is a valid arbitration agreement;
b)    Whether the tribunal is properly constituted; and 
c)    Whether matters have been submitted to arbitration in accordance with the arbitration agreement.

In responding to the first ground, VistaJet Limited submitted that the Tribunal did in fact have jurisdiction by virtue of the 2015 Arbitration Agreement. VistaJet Limited was a party to the 2015 Agreement and in particular its (separable) arbitration clause, and so the validity of the assignment of the 2014 Agreement would not have an impact an arbitral tribunal’s jurisdiction. Mr Buheiry’s issue was not that the tribunal lacked substantive jurisdiction, but rather that VistaJet Limited lacked title to sue. The LCIA tribunal was entitled to determine whether VistaJet Limited has title to sue. Therefore, the purported invalid assignment would not allow Mr Buheiry to file an appeal under section 67 of the Arbitration Act, but rather, the assignment issue – which had been decided by the tribunal in VistaJet’s favour - could only give rise to a challenge under section 69 of the Arbitration Act 1996 (appeal on a point of law). Such challenge was not issued by Mr Buheiry. 

In any event, Vistaet submitted that (as the tribunal had found) the assignment was valid and Mr Buheiry’s interpretation of section 1159 of the Companies Act 2006 was incorrect. The wording at the end of section 1159(1) “or if it is a subsidiary of a company that is itself a subsidiary of that other company” expressly confirms that subsidiary A of company B is a subsidiary of company B’s parent, company C.

On the second ground, VistaJet Limited sought to rely on the fact that service by e-mail was permissible, because the 2014 Agreement and 2015 Agreement’s notice provisions (a) were not prescriptive of the manner of service; (b) even if they were, they did not apply to service of statements of case in an arbitration commenced under the arbitration clause, which incorporated the LCIA Rules and their provisions regarding service; and (c) in any event, VistaJet Limited complied with the notice provisions in the 2014 and 2015 Agreements by also serving the documents by registered post in February 2021, despite the documents being returned as undeliverable. In any event, a failure to serve the Request for Arbitration did not fall within the three issues specified in section 30 of the Arbitration Act 1996 as going to the tribunal’s substantive jurisdiction.

The High Court’s Judgment

The High Court dismissed Mr Buheiry’s appeal on several grounds. First, the Court agreed with VistaJet Limited and found that Mr Buheiry’s challenge under section 67 did not in fact concern the LCIA tribunal’s jurisdiction. The Court agreed with VistaJet Limited’s argument that section 30 of the Arbitration Act 1996 sets out the matters which impact a tribunal’s substantive jurisdiction, and hence a challenge under section 67 of the Arbitration Act 1996 must pertain to those matters.

The Court found, in respect of limb (a) of section 30 of the Arbitration Act 1996, that there was a valid arbitration agreement between Mr Buheiry and VistaJet Limited by virtue of the 2015 Agreement; regarding limb (b), the assignment was irrelevant to the tribunal being properly constituted; and with respect to limb (c), Mr Buheiry’s argument clearly did not concern the scope of the arbitration agreement. Therefore, none of the grounds raised by Mr Buheiry fell within the scope of section 30 and in turn did not compromise the LCIA tribunal’s jurisdiction to hear disputes arising out of the 2015 Agreement. Since the arguments did not concern jurisdiction, it was incorrect to bring an appeal under section 67. 

The Court also found in favour of VistaJet Limited on the service of notices during the LCIA proceedings. Since the parties agreed to the LCIA Rules, the notice provisions included in those rules would apply and may override the notice provisions include in the 2014 and 2015 Agreements. the LCIA rules do not prescribe a single method of service. 

The Court also rejected Mr Buheiry’s interpretation of ‘subsidiary’ and ‘parent company’ in section 1159 of the Companies Act 2006. The Court held that the wording was clear in that ‘subsidiary’ can also include a subsidiary of another subsidiary. Similarly, a ‘parent company’ can be a parent of another parent company. 

Significance of the Judgment 

The Judgment provides valuable guidance on arbitration appeals. The Judgment showcases that an arbitral award obtained by a party without title to sue does not impact a tribunal’s jurisdiction and cannot be appealed under section 67 of the Arbitration Act 1996. In determining whether a matter concerns a tribunal’s jurisdiction, the Court will turn to section 30 of the Arbitration Act 1996, which sets out the matters which impact on a tribunal’s jurisdiction. 

The Judgment also confirms that the section 1159 of the Companies Act 2006 definitions of subsidiary and parent company are not limited to an immediate subsidiary or immediate parent company. 

Finally, the Judgment provides useful commentary on the notice provisions in the LCIA rules, which are likely to override general notice provisions in the parties’ contract. The Court also made clear that issues with service of documents such as in this case would not compromise a tribunal’s substantive jurisdiction

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Clyde & Co LLP represented VistaJet Limited in the arbitration against Mr Buheiry and in responding to Mr Buheiry’s s67 and s68 challenges to the Award.