UK: Challenging Arbitration Awards Under The Arbitration Act 1996

Last Updated: 26 November 1997
Article by: Peter J. Rees, Head of Litigation at Norton Rose, a Fellow of the Chartered Institute of Arbitrators and editor of "Civil Jurisdiction and Judgments" (Briggs & Rees 1997, 2nd Edition, Lloyds of London Press)

Background

When the Skinners and the Taylors had a dispute just over 500 years ago they decided to arbitrate, although that decision was not reached until after there had been some blood letting between them. They were Craftsman's Guilds, not neighbours, and were arguing as to seniority. The arbitration award subsequently rendered (and which is still in force today) requires the Guilds to take it in turn to have precedence. They alternate between sixth and seventh in rank amongst the Guilds and this alternation gives rise to the common expression used to describe being confused and not knowing where you are, of being "all at sixes and sevens".

I do not believe there is any truth in the rumour that the same dispute also gave rise to the expressions being "skinned" by your opponent or being "stitched up"!

Until relatively recently parties to arbitration in this country, particularly parties from overseas often felt all at sixes and sevens, in that since 1484, when the Skinners and the Taylors went to arbitration, there has been a similar dispute about precedence in this country between arbitration and the courts.

At first it was arbitration that had the upper hand and the courts did not interfere in the process at all, but the first chink in the armour came with the inaugural Arbitration Act in 1698 which allowed review by the courts if the arbitration had been

"Procured by corruption or undue means".

Since then things have gone first one way, and then the other, and certainly during the course of the last 20 or 30 years England has begun to decline in popularity as a centre for international arbitration because it was felt that the courts were interfering too much. Part of the rationale for the Arbitration Act 1979 was to dispel that fear but it didn't seem to work. Thus in 1989 a committee of the Department of Trade and Industry led by Lord Mustill produced a report which made a number of recommendations for reform. It took a long time for those recommendations to reach fruition and, indeed, the first draft Bill was not produced until 1994. This was greeted with such a chorus of disapproval that the whole thing was re-drafted from scratch.

In late Autumn 1994 Lord Justice Saville took over chairmanship of the Committee and, as he said in his own words

"What I was faced with was the fact that competitor nations had gone a long way towards improving their own arbitral procedures in the light of the [UNICTRAL] Model Law, while here no progress was apparent despite the years that had passed by. In these circumstances it seemed to me that while what had to be done was obvious, it had to be done as fast as possible."

Court intervention clearly had to be tackled if England was not to become even more unpopular as a venue for arbitration. In addition, competition as a venue for international arbitration was hotting up. It had been said by one commentator that

"It is unlikely that the Model Law will be embraced by any major arbitration centre."

In fact, the Model Law was adopted into the law of Scotland in 1990 and has been accepted in Hong Kong and in over 30 other countries and territories. Not England though.

The Arbitration Act 1996 was to be England's response and the backbone of its attempt to reinstate itself as the premier venue for international arbitration. But it didn't get rid of court interference.

Assurance that local courts will not involve themselves in an arbitration is especially important to international parties and is often a key factor in their choice of a place of arbitration. Excessive court involvement defeats the goals and purposes of the parties' initial decision to arbitrate their differences. They lose the advantage of confidentiality. The extra proceedings result in greater costs. Most importantly, parties who sought to avoid the courts by entering into an arbitration agreement are required to deal with a foreign legal system and rules of procedure with which they are not familiar.

The UNCITRAL Model Law covers all this and makes it clear that there are a set number of grounds for setting aside an award and that this is the only recourse against an arbitration award where the Model Law applies. The grounds are taken from the New York Convention on Recognition and Enforcement of Arbitral Awards and are obvious things like lack of capacity of the parties to conclude an arbitration agreement, lack of a valid arbitration agreement, failure to give proper notice to a party, matters being dealt with outside the arbitration clause or conflict with the public policy of the State.

There is no appeal on a matter of law.

Some of these grounds for an application to set aside an award have been reflected in the Arbitration Act 1996 but the Act does not go the whole way and retains a right of appeal on a matter of law.

Challenges

A party who is unhappy with an arbitral award made under the new Act can challenge it in a number of ways. It may seek to challenge the substantive jurisdiction of the tribunal, to attack the award by alleging serious irregularity or, as has been mentioned earlier, to appeal on a point of law. The stated aim of the new Act has been greatly to reduce the possibility for court intervention and the chances of a successful challenge.

"Our basic principle has been to provide the Court only with powers than can properly be said to be supportive of the arbitral process; and to exclude others." (Lord Justice Saville)

This has been achieved by limiting the grounds for challenges, by raising the threshold of error reviewable by a court, by prohibiting the parties from raising objections at the challenge stage that were not raised before the arbitral tribunal and by limiting the time in which a party might raise objections after which they will be deemed to have lost any rights to rely on them. The overall effect of such changes is to increase the finality of arbitral awards in this country. However challenges are still possible.

Substantive Jurisdiction

It is often said that in England there is no possibility of appeal to the courts on questions of fact. This is not quite true and the question of substantive jurisdiction of the tribunal is one particular area where the courts sometimes get a shot at ruling on the facts as well as the law. The new Act recognises what is called the doctrine of "Kompetenz-Kompetenz" by adopting provisions of the Model Law and allowing the arbitral tribunal to rule on its own substantive jurisdiction on things such as whether there is a valid arbitration agreement, whether the tribunal is properly constituted and what matters have been submitted to arbitration (Section 30). However, the Act specifically allows a party to go off to court to challenge this. He must do it quickly though, and it can no longer be used as a delaying tactic as it often was. Unless the parties agree otherwise (and it is unlikely, in most cases the other party will agree), the arbitration continues whilst the application to court is pending.

Substantive jurisdiction is not just a question of law and this is clearly recognised by the Departmental Advisory Committee Report on the Arbitration Bill of February 1996 which stated:

"A challenge to jurisdiction may well involve questions of fact as well as questions of law. Since the arbitral tribunal cannot rule finally on its own jurisdiction, it follows that both its findings of fact and its holdings of law may be challenged".

Any challenge to jurisdiction must be made before taking part in the arbitral proceedings or, if the grounds for the application arise later, without taking further part. In addition, the application to the court cannot be brought if the applicant has not first exhausted any available arbitral process of appeal, review or correction of award and in any event the application must be made within 28 days of the date of the arbitration award.

Serious Irregularity

Before the new Act, it was possible to attack awards for "misconduct" by an arbitrator. This test has now been changed to "serious irregularity". In addition to being a more difficult criterion to satisfy than "misconduct", "serious irregularity" has been exhaustively defined by the Act in order to reduce unpredictability. The court no longer has a general supervisory jurisdiction over this area. The serious irregularity must be one of those in the list. It is not open to the court to extend the list and even if the alleged irregularity is on the list, the court must be satisfied that it "has caused or will cause substantial injustice to the applicant" before it will do anything about it.

Serious irregularity is essentially concerned with ensuring procedural fairness. It covers any failure by the tribunal to comply with its duties and the list which is in Section 68 includes the fair and impartial treatment of the parties, the duty to allow each party a reasonable opportunity to be heard and the adoption of procedure suitable to the circumstances of the particular case.

A tribunal which exceeds its powers or which fails to conduct the proceedings in accordance with the agreed procedure may be held to have committed a serious irregularity. An award may even be challenged on the grounds that the arbitration institution, under whose auspices the proceedings are organised, exceeded its powers. A failure by a tribunal to deal with any issue put to it or the rendering of an award that is ambiguous or uncertain or which does not comply with requirements of form may likewise be grounds for a challenge under Section 68.

Serious irregularity also means that an award must not be obtained by fraud or other means contrary to public policy. It will encompass as well any irregularity admitted by the tribunal or by the administering institution.

The test is undoubtedly stricter than it was and will not, for instance, now permit the court to remit an award to an arbitral tribunal because the lawyers acting for one party failed (or decided not) to put a particular point to the tribunal. However it is likely to encompass such things as the Arbitrator, without proper notice to both parties, giving audience to one in the absence of the other, or wrongly rejecting relevant evidence. There is still, therefore, plenty of scope to involve the court.

Appeal on a Point of Law

There was a lot of support amongst practitioners for the abolition of any right of appeal on substantive issues in the arbitration. After all if the parties have agreed to arbitrate their dispute and agreed to abide by the decision of their chosen tribunal (and not the court) it should be irrelevant whether or not the court would have reached the same conclusion. Substituting a court decision wholly subverts the agreement the parties made.

These arguments were rejected by the drafters of the Bill even though they are accepted in many other countries.

The argument which was put forward in support of rejection is that many arbitration agreements contain an express choice of law which is intended to govern the rights and obligations arising out of the bargain made between the parties and, therefore, if the parties have agreed upon a law they ought to have it properly applied by the arbitral tribunal. If the arbitral tribunal don't do this then they have not achieved what was contemplated by the arbitration agreement.

What this argument does not address is the fact that, in their agreement to arbitrate, as well as choosing the law they also usually choose the arbitral tribunal themselves or, at least, agree on who should choose it for them. It is perfectly arguable, therefore, that that is the manner in which the parties sought to seek to ensure that their chosen law was properly applied.

Nevertheless Section 69 of the new Act retains a right of appeal to the courts on questions of law, but severely restricts the circumstances in which such an appeal might be allowed. The right arises only with respect to arbitrations where the seat is in England and Wales or Northern Ireland and only where English law is applicable to the merits. This right to appeal will not be available to parties to an arbitration in a foreign jurisdiction even where the law applicable to the merits is English law.

It is not going to be as easy as it used to be to get an appeal heard as again, the Act uses a list of conditions which must be met for a successful challenge. The conditions are fairly restrictive. The point of law must be considered to have a substantial effect (note substantial) on the rights of at least one of the parties; it must be a point that was previously raised before the arbitral tribunal; and the court must be satisfied that the point of law has obviously been wrongly decided by the arbitral tribunal on the basis of findings of fact made by the arbitral tribunal.

This mechanism "on the basis of the findings of fact" is the mechanism the Act uses to try and avoid the prevalent previous practice of dressing up questions of fact as questions of law. It will be interesting to see if it works. The test of obviously wrong is watered down where the issue raised is one of general public importance. Then the test is "serious doubt" about whether the point of law was decided correctly. In addition to all of these considerations, the court must be convinced that it is "just and proper" to intervene. Quite what this will be construed to mean is open to debate. The only guidance from the Departmental Advisory Committee Report is:

"The Court should be satisfied that justice dictates that there should be an appeal; and in considering what justice requires, the fact that the parties have agreed to arbitrate rather than litigate is an important and powerful factor".

Not a lot of help.

The provisions for appeals on a point of law are not mandatory. Rights to appeal under Section 69 can be excluded by the parties in an arbitration clause. In fact, where the parties instruct the arbitral tribunal not to give reasons for its award, or where they ask the tribunal to decide the matter as amiable compositor or according to its own best judgement of what is fair, rather than in accordance with the letter of the law, they will be considered to have waived their rights to appeal on questions of law.

Strict conditions are imposed for the exercise of any such appeal. The appeal must be brought within 28 days of the award and, in addition, the applicant must also show that it has exhausted all appeal processes available pursuant to the arbitration agreement and all recourse under Section 57 of the Act for correction of the award or for any additional award.

Conclusion

Thus the courts still have a finger in the arbitration pie in England but, at least, their ability to interfere is significantly reduced. Nevertheless there are still a number of opportunities for the courts to impose their own view of law or appropriate procedure on a dispute notwithstanding that the parties have agreed that somebody else should resolve the problem for them. There is still plenty of scope for unwary arbitrators to find their awards up for judicial consideration and for dissatisfied parties and imaginative lawyers to make challenges of the sort which would not have been contemplated when the arbitration agreement was entered into.

In 1484 the Skinners and the Taylors did not want the courts to sort out their problem and those views are held by many commercial men today. The new Act is being marketed as putting England back in the forefront of arbitration venues and it is to be hoped the courts will be very sparing indeed in their wish to interfere. When parties go to arbitration they look for privacy, certainty and finality. The last thing they want is to be "all at sixes and sevens" as to how their dispute will be dealt with.

This note is intended to provide general information about some recent and anticipated developments which may be of interest. It is not intended to be comprehensive nor to provide any specific legal advice and should not be acted or relied upon as doing so. Professional advice appropriate to the specific situation should always be obtained.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.