Court of Appeal upheld the validity of the arbitral award – the opponent’s claim was dismissed

Our Dispute Resolution team is pleased to have achieved an important victory before the Lithuanian Court of Appeal. The court dismissed the opponent’s claim seeking to annul the arbitral award.

One of the main arguments raised in the claim was that the arbitral tribunal, by its decision, allegedly ruled on the rights and obligations of a person who was not a party to the arbitration proceedings and extended the scope of the arbitration agreement. The arbitral proceedings concerned whether our client – the respondent – had the right to suspend the performance of its obligation under an option agreement, relying on a breach committed by a third party, who was not involved in the arbitration, of a broader arrangement involving both the parties to the arbitration and that third person.

The Lithuanian Court of Appeal held that the arbitral award did not create any rights or obligations for the third party not participating in the proceedings. The court emphasized that the mere reference to this person in the arbitral award as part of a particular legal relationship does not alter their legal status or create, modify, or extinguish any of their rights or obligations.

With this ruling, the Lithuanian Court of Appeal prevented an overly broad interpretation of Article 50(3)(3) of the Law on Commercial Arbitration and reaffirmed the principle of party autonomy in arbitration.