Add a bookmark to get started

31 July 202336 minute read

Crypto, consumers, and arbitration: English public policy grounds for refusing enforcement of arbitral awards

In a rare decision, the English High Court refused to enforce a Californian-seated arbitral award for contravening English public policy (Payward v Chechetkin)1.

The claim, brought against a British citizen resident in England, under section 101 of the Arbitration Act 1996 (AA 1996), sought enforcement of a New York Convention arbitral award made in relation to a dispute over cryptocurrency trading losses. The High Court refused enforcement, deciding that the presence of an arbitration clause in the agreement providing for foreign-seated arbitration and for disputes to be governed by foreign law cannot prevent the English court from adjudicating on matters concerning UK consumer protection rights. 

Given the popularity of arbitration provisions in the standard terms of crypto exchanges, due to the perceived ease of international enforcement of arbitral awards under the New York Convention (among other matters), the decision is of broad significance for the industry and how it resolves consumer disputes.

Key takeaways

This judgement serves as a reminder that:

  • All terms contained in a contract with a UK consumer, including arbitration provisions, may be subject to scrutiny by the English courts as to their fairness.
  • The courts will apply an objective test to what is to be considered fair: what would a reasonable consumer in the position of this consumer have agreed?
  • Arbitration provisions in consumer contracts are not inherently unfair, but it is likely that any arbitration involving CRA issues seated outside of the UK and applying foreign law will be viewed as unfair.
  • A provision excluding “conflict of laws” principles within a consumer contract may not be effective under English law.
  • Companies should properly tailor their dispute resolution clauses:
    • Not only should companies consider which arbitral seat and governing law may be most advantageous or convenient to them, but they should also consider the location of any consumers and whether their services have a close connection to other locations, as this may affect the enforceability of any arbitration award.
    • This is especially important for cryptocurrency exchanges, and other international companies operating online and with consumers in different locations, who may now wish to consider tailoring their dispute resolution provisions depending upon the location of their consumer counterparties.

Mr Chechetkin, the Defendant in these enforcement proceedings, made a series of trades on the crypto-asset exchange “Kraken” owned by the Claimants, the Payward group, which resulted in over GBP600,000 of losses. The trades were subject to Payward’s terms and conditions (Terms) which provided for disputes to be referred to arbitration seated in San Francisco pursuant to the Judicial Arbitration and Mediation Service Rules (JAMS) and governed by the laws of the State of California. The Terms also provided that California law and US law applied to any disputes between the parties.

In February 2022, Mr Chechetkin commenced proceedings in the English High Court, arguing that various trades between the parties involved breaches by Payward of the Financial Services and Markets Act 2000 (FSMA). Mr Chechetkin argued that Payward were conducting regulated activities for which it did not have the necessary authorisation. Payward made an application to dismiss the proceedings for lack of jurisdiction, citing the arbitration clause within their Terms.

In October 2022, Payward simultaneously commenced a JAMS arbitration in San Francisco and applied for an injunction in the English High Court to prevent Mr Chechetkin taking any further steps in the English FSMA claim until the arbitration was determined.

The High Court dismissed both of Payward’s applications and found in favour of Mr Chechetkin, determining that the FSMA proceedings concerned a contract with a UK domiciled consumer2 and as such, the English courts must have jurisdiction3.

The JAMS arbitration continued in parallel. Mr Chechetkin contested the tribunal’s jurisdiction and the arbitrability of the dispute, however his arguments were rejected by the sole arbitrator who issued a final award in favour of Payward (the Award). The arbitrator held that Payward was not liable to repay Mr Chechetkin’s losses and that Mr Chechetkin was “enjoined from filing or prosecuting a claim against Payward in court, whether in the U.K. or other jurisdiction.”


Payward then brought its own claim in the English courts, seeking enforcement of the Award pursuant to AA 1996, s 101, which provides that a New York Convention award may enforced in the same manner as a judgment or order to the same effect. Mr Chechetkin resisted enforcement of the Award, relying on the exception at AA 1996, s 103(3), which applies where enforcement would be contrary to public policy. In this regard, Mr Chechetkin relied on the Consumer Rights Act 2015 (CRA) and FSMA as expressions of public policy.

In determining the issue, the court had to consider the following key questions:


Was Mr Chechetkin a consumer?

The court concluded that Mr Chechetkin was a consumer for the purposes of the CRA and as such, could rely on the protections of the statue. The judge cited that Mr Chechetkin’s sole profession was as a lawyer, he did not work in crypto or fintech, and he made clear when he set up his Kraken account that his employment was his source of income and that he was acting on his own behalf.


Should the FSMA claim have been brought in the JAMS arbitration? Was the court bound by the Award?

Payward argued that Mr Chechetkin should have raised his FSMA claim in the arbitration. The court held however that there was no scope for Mr Chechetkin to raise an argument under UK statute given the arbitrator’s early-stage indications and rulings that only Californian law applied.

The court was clear that a tribunal’s decision on its own jurisdiction does not bind the courts of a different country when they are asked to enforce the award4. The judge also noted that, regardless of the issue of the tribunal’s ruling on its own jurisdiction, the English court must still form its own view of whether the Award is consistent with English public policy when considering enforcement.


Are the CRA and FSMA expressions of public policy?

The court held that there was no doubt that the CRA constituted public policy. The CRA was enacted in part as a re-visitation of the Unfair Contract Terms Act 1977 and the enactment in the UK of EU Directive 93/13 on unfair terms in consumer contracts (UTCCD), the latter having already been established as public policy following several CJEU decisions5. It followed that the sections of the CRA enacting the UTCCD must be public policy. Moreover, as the CRA is a UK-wide statute, it expresses the policy of the UK as a whole, which was seen as significant in this context.

FSMA was also held to constitute public policy as the statue is clearly concerned with regulatory objectives which Parliament have identified as matters of public policy.


Would enforcement of the arbitral be award be contrary to public policy?

Significantly, the court held that enforcement of the Award would be contrary to public policy by virtue of it contravening provisions of the CRA.

Section 74 of the CRA provides that where a consumer contract has a close connection with the UK, the CRA will apply regardless of the parties’ choice of a non-UK governing law. A close connection could easily be established as Mr Chechetkin was domiciled in the UK, the contracting Payward entity, Payward Ltd, was incorporated in the UK, and the services were paid for in British sterling.

The judge held that because the arbitrator had failed to consider the CRA and only applied Californian law, it would be against public policy to enforce the Award. The judge concluded that “the UK Parliament has decided that the protection of consumers domiciled in the UK should be governed by the Consumer Rights Act 2015, not by foreign laws or standards.

The court also held that enforcement of the award would be contrary to section 62 of the CRA which provides a requirement for contractual terms to be fair. The court held that a clause in a consumer contract providing for disputes to be resolved by arbitration is not by itself unfair and that it is a question for the court to determine in each case.

However, the judge determined that while a reasonable consumer may have agreed to arbitration in the UK, they would not have agreed to arbitration in California under the JAMS Rules and subject to the US Federal Arbitration Act. This would result in significant disadvantages for the consumer, including excluding the supervisory jurisdiction of the English courts, the inability to appeal on a matter of English law and the need to hire US attorneys. The judge also noted that a US arbitrator, in the context of a US arbitration system, was not an appropriate tribunal to deal with the issues in this case, having no experience of English law. 

The judge also noted that while the merits of the FSMA claim did not fall to be determined in this action, enforcement of the Award would prevent the FSMA claim from ever being determined. The stifling of such claims, through confining them to confidential arbitration processes in other jurisdictions, would result in fewer claims being investigated and prosecuted and as such, represented a further reason why enforcement would be contrary to public policy.


To illustrate how rare a decision of this kind is, the same judge, Mr Justice Bright, has since made the opposite finding, in Eternity Sky Investment Ltd v Zhang.6 In that case, the judge refused to set aside an order enforcing a Hong Kong arbitral award on the basis of the public policy exemption. The judge determined that while Ms Zhang was a consumer under the CRA, the personal guarantee given by Ms Zhang was much more closely connected with Hong Kong than the UK and that the terms providing for a Hong Kong arbitration and governing law were not unfair in the context of the transaction.

Subscribe to our Arbitration Matters newsletter.

1 Payward Ltd and others v Chechetkin [2023] EWHC 1780 (Comm).
2 Within the meaning of section 15B of the Civil Jurisdiction and Judgments Act 1982.
3 Chechetkin v Payward Ltd and others [2022] EWHC 3057 (Ch).
4 Relying on Dallah Co v Ministry of Religious Affairs of Pakistan [2011] AC 763.
5 C-168/05 Mostaza Claro [2007] 1 CMLR 22 [35]-[38] and C-40/08 Asturcom Telecomunicaciones SL [2010] 1 CMLR 29.
6 [2023] EWHC 1964 (Comm).