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David and Goliath: can an arbitration award be recognised and enforced against a UK consumer?

Posted: 02/10/2023

The English Commercial Court has recently considered whether an arbitration award relating to a cryptocurrency exchange contract is recognisable and enforceable against a UK consumer. In Payward, Inc and ors v Chechetkin [2023] EWHC 1780 (Comm), Mr Justice Bright refused to enforce a foreign-seated arbitration award against a UK consumer, because to do so would be contrary to public policy.

Exchanges, marketplaces and other payment service providers must therefore review their B2C terms and conditions to consider whether any arbitration clauses are effective against a UK consumer given this judgment, and the other similar judgment in Soleymani v Nifty Gateway LLC [2022] EWCA Civ 1297. In Nifty Gateway, the Court of Appeal lifted a stay (pending a New York arbitration) to consider whether an arbitration agreement was null and void, inoperative or incapable of being performed because it was properly arguable that one party was a UK consumer. Consequently, it was important for the domestic, English courts to consider the fairness of the arbitration clause under English law in an open forum.


The defendant, Mr Chechetkin, is a lawyer. At all material times in the dispute, Mr Chechetkin was employed full-time as in-house legal counsel. The claimants are a group of companies, the business of which is the operation of Kraken – a global digital online cryptoasset exchange. The group headquarters are in San Francisco, California, USA. The third claimant – Payward Limited – is incorporated in England and is the corporate entity of the Kraken group that provides the services of Kraken in the UK, to UK customers, including Mr Chechetkin.

Mr Chechetkin contracted with Kraken in March 2017 when he opened an online trading account via Kraken’s website. Because he was based in the UK when he opened the account, he contracted with the UK entity, Payward.

All of Kraken’s contracts are subject to the Payward terms of service, which are set out in a clickwrap agreement through the account sign-up page containing a hyperlink to the terms. Mr Chechetkin ticked a box which confirmed that he had read and agreed to the terms, which included a Judicial Arbitration and Mediation Services (JAMS) arbitration clause with disputes to be determined by a sole arbitrator seated in San Francisco.

The clause also stated that the state or federal courts in San Francisco would have exclusive jurisdiction over any appeals of any arbitration award and over any suit between the parties not subject to arbitration. Any dispute would be governed by the terms and the laws of the State of California and applicable US law, without giving effect to any conflict of laws principles that may provide for the application of the law of another jurisdiction.

Mr Chechetkin placed trades on the Kraken platform from March 2017 until October 2020, when he closed the account. The dispute between the parties related to deposits that Mr Chechetkin made from his UK bank account to Payward’s UK bank account between March and June 2020, totalling £613,000.

The dispute

Having sent a letter of claim to the claimants in July 2021, Mr Chechetkin issued proceedings against them in the English High Court in February 2022 alleging breaches of FSMA, because they were conducting activities without having the necessary authorisation. In response, the claimants indicated that they would launch a jurisdiction challenge.

The arbitration claim

In the meantime, in response to Mr Chechetkin’s initial assertion of rights, the claimants commenced a JAMS arbitration in January 2022. In the context of the FSMA claim, they also applied for an injunction pursuant to s44(2)(e) of the Arbitration Act 1996 and under s37(1) of the Senior Courts Act 1981, that Mr Chechetkin should not take any further steps within the FSMA claim until a final determination of the arbitration claim, or alternatively that the jurisdiction challenge hearing be adjourned until after the determination of the arbitration claim.

Following a substantive merits hearing in early October 2022 and post-hearing submissions, the arbitrator issued the final award on 18 October 2022. The award declared that Payward was under no liability to Mr Chechetkin. It was determined that:

  • (i) Mr Chechetkin’s challenges to arbitrability and jurisdiction were denied; 
  • (ii) he was bound to arbitrate his disputes with Payward, and was enjoined from filing or prosecuting a claim against Payward in court, whether in the UK or another jurisdiction; 
  • (iii) he anticipatorily breached the terms when he threatened suit in the UK; 
  • (iv) he breached the terms when he filed an action against Payward in the UK; 
  • (v) he assumed the risk of trading on the platform – Payward had adequately disclosed the risks of margin trading; 
  • (vi) Mr Chechetkin is a consumer for the purposes of the JAMS consumer arbitration minimum standards; and 
  • (vii) his assertion that Payward should repay the £613,000 deposited into his account was denied – he engaged in risky margin trading, assumed the risk, and caused his own losses. 

The arbitrator was critical of Mr Chechetkin for bringing the FSMA claim, stating that his actions ‘caused delay and unnecessary expense’ in forcing Payward to hire its own counsel in the UK and incurring the costs of doing so.

Recognition and enforcement of the final award

Kraken sought to enforce the final award in the English High Court pursuant to ss101 to 103 of the Arbitration Act 1996 (given that the award was a New York Convention award). Mr Chechetkin however sought to avoid recognition and enforcement by relying on s103(3), on the basis that enforcement would be contrary to public policy. The court therefore had to decide (a) whether Mr Chechetkin was a consumer for the purposes of the Consumer Rights Act (CRA); (b) whether the English court was bound by the determinations made by the arbitrator; (c) whether the CRA and FSMA were matters of public policy; and (d) whether enforcement of the final award would be contrary to public policy under the CRA and/or FSMA. 

Was Mr Chechetkin a ‘consumer’ under the CRA?
The main ground on which Mr Chechetkin relied was that he was a ‘consumer’ under CRA, ie he is an individual that was acting for purposes that were wholly or mainly outside his trade, business, craft or profession. He gave evidence to confirm that (i) his sole profession was as a lawyer, which was his full-time job; (ii) when he applied for the account, he made it clear that his employment as a lawyer was his source of income; and (iii) he gave no details of any experience of cryptocurrency trading, suggesting that he did not have any.

Further, the judge noted that Kraken assessed him as a customer because he did not have any experience in trading, and he did not work in crypto or fintech; and, if he had said that he was acting on behalf of a third party, or that he intended to resell, he would have had to open a corporate account, but he answered ‘no’ to both such questions, such that he opened an individual customer account.

The defendants however argued that Mr Chechetkin was not a consumer – he used his account regularly and invested reasonably large sums which, they argued, demonstrated that his trading was knowledgeable, experienced and sophisticated, and that he entered into the trades to generate an income stream to support him and his family.

The court found that Mr Chechetkin was a consumer for the purpose of the CRA – his trading history was largely unexceptionable and there was no evidence before the court that any of the transactions which Mr Chechetkin entered into were wholly, mainly or at all for the purposes within his trade, business, craft or profession. 

Was the English court bound by the determinations of the arbitrator?
It was held that the court was not bound by any of the arbitrator’s determinations because a tribunal’s decision on its own jurisdiction does not bind a different enforcement court . It was also said that regardless, the English court should not be obliged to enforce an award that is contrary to English public policy based on a contrary arbitrator’s decision. 

Were the CRA and/or FSMA matters of public policy and, if so, would enforcement be contrary to such a policy?
Taking into account Mr Chechetkin’s consumer rights and whether the terms were fair to him as a UK consumer, the court found that enforcement of the final award would be contrary to the specific public policy that is embodied in the CRA (specifically s74). The policy holds that where a consumer contract has a close connection with the UK, the consumer rights issues that fall under the legislation should be dealt with under that UK statute, rather than any foreign law.

Mr Justice Bright ruled that there was a close connection with the UK in this instance – Mr Chechetkin is a UK national, domiciled in England; Payward Limited is a UK company; the services were paid for in GBP sterling; and under transactions to and from English bank accounts. As such, the final award which applied only the laws of California, and which was issued by an arbitrator who took no account of the CRA or any other element of English or UK law, would be contrary to the public policy objective of s74 CRA.

The court held that enforcement of the final award would be contrary to the public policy of s62 CRA, which requires contract terms and notices to be fair. It was found that not only did the terms provide a technical disadvantage to Mr Chechetkin because the English courts did not have a supervisory role under the Arbitration Act 1996 (which meant that there could not be an appeal on the basis of an error of (English) law), but it also meant that US courts had such a role, despite the fact that they are not competent to supervise disputes that are concerned with English law and UK statutes.

It also held that, aside from the technical disadvantages, there were more practical problems for Mr Chechetkin which made the clause unfair, including the geographical location of the seat of the arbitration (although the arbitrator overcame this by arranging for remote hearings), and the fact that he had to engage US attorneys which was both expensive and inconvenient. The court did not consider it appropriate for a US arbitrator, in the context of a US arbitration system, to be a suitable tribunal for the issues raised by Mr Chechetkin’s case: ‘She had no experience of English law, let alone the English regulation of financial services markets and she was not receptive to submissions that focused on this area.’

Further, the court found that enforcement of the final award would stifle the FSMA claim, such that the terms must be unfair within the meaning of the CRA, and therefore contrary to public policy considerations underlying the CRA, as well as those underlying FSMA.

The court therefore declined to recognise or enforce the final award and the claimants’ arbitration claim failed.


This case is a rare but stellar example of when the English courts will refuse to enforce a foreign arbitration award due to public policy and should encourage UK consumers to maintain and apply their rights under domestic UK law when dealing with often faceless, cross-border corporations. It should act as a shot across the bows to crypto exchanges, marketplaces and other payment service providers that continue to include onerous arbitration and jurisdiction clauses in B2C contracts with UK consumers. If they are not already doing so, it should be used by such organisations to review their terms and conditions and to ensure that the dispute resolution provisions are tailored to the circumstances, particularly when dealing with individuals and consumers, which may include considering the jurisdiction in which their counterparts are located.  

This article was originally published in the New Law Journal. 

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