UK: The Three Musketeers: "Final, Conclusive And Binding"

Last Updated: 17 August 2009
Article by Csaba Kovacs and Guy Pendell

In a judgment underlining the mantra of clearly worded arbitration clauses, the Commercial Court granted leave to appeal an arbitral award under the UNCITRAL Arbitration Rules (the "UNCITRAL Rules") on question of law. In doing so, the court dismissed a challenge to its jurisdiction that the parties' arbitration agreement excluded a right to appeal on question of law because it provided that the decision of the arbitrators to be "final, conclusive and binding".

National arbitration laws generally permit challenges of arbitral awards based on jurisdictional grounds or on certain limited grounds deemed to represent serious irregularities in the arbitral process. England is one of the few jurisdictions where the parties to an arbitration agreement may, under certain conditions, submit the award to a review on the merits by appealing the arbitration award on point of law only.

Section 69(1) of the Arbitration Act 1996 (the "Act") permits the parties to an arbitration agreement to exclude any right of appeal on a point of law. The waiver can be stipulated expressly in the arbitration agreement or be expressed indirectly by adopting arbitration rules excluding such an appeal. Unlike the LCIA or ICC arbitration rules, which provide a clear waiver of recourse to courts (insofar as a waiver is permitted), the UNCITRAL Rules do not have such a waiver. Although the parties added the term "conclusive" in their arbitration agreement, the Commercial Court held that this extended wording did no more than restate the well-recognised rule that an award is final, conclusive and binding in the traditional sense, in that it creates res judicata between the parties, subject to judicial review by the court. The court held that, whilst no express reference to Section 69 is required for a valid waiver of appeal, sufficiently clear wording is necessary to convey to a reasonable person having all the background knowledge that the parties agreed to waive their statutory right of appeal on points of law.

The case

The claimants, Shell Egypt West Manzala GmbH and Shell Egypt West Qantara GmbH (together "Shell") entered into an agreement with the defendant, Dana Gas Egypt Limited ("Dana") in relation to concessions for crude oil and gas exploration in the Nile Delta in Egypt. The parties agreed to submit their disputes to arbitration in London under the UNCITRAL Rules. The arbitration agreement provided that "the dispute shall be submitted to the arbitrators in such manner as they shall deem appropriate and the decision of the majority of the arbitrators, rendered in writing, shall be final, conclusive and binding on the parties, and the judgment upon such decision may be entered in any court of a country having jurisdiction."

A dispute arose and Shell commenced arbitration proceedings against Dana. In its award, the arbitral tribunal rejected the claims and Shell sought permission to appeal, pursuant to Section 69 of the Act, on points of law arising out of the award. Dana applied for an order that the court lacked jurisdiction to hear the application arguing that the parties had agreed, by virtue of the words "final, conclusive and binding", to exclude the jurisdiction of the court under Section 69.

The court held that the phrase "final, conclusive and binding", in the context of the parties' agreement, is not to be construed as an agreement excluding the parties' statutory right of appeal. The judge reasoned that all three words, in context, express the effect of a valid arbitral award on the parties: "binding" in that each party promises to abide by the award and to perform it, "final" in that the successful claimant is barred by the award from bringing the same claim again in a fresh arbitration or action, and "conclusive" in that the award disposes of issues of fact and law, preventing a party in a subsequent arbitration or claim from disputing for a second time those issues. Thus, "final, conclusive and binding" merely restates the res judicata effect of an arbitral award without ousting the jurisdiction of the court to perform its review under Section 69 of the Act.

Comment

The judgment reinforces the importance of clearly worded arbitration clauses, particularly where the parties refer their disputes to ad-hoc arbitration.

In this case the three musketeers "final, conclusive and binding" did not exclude the right of appeal on point of law under Section 69 of the Act. The missing link, (or, if you wish, D'Artagnan) can be found in wording similar to that in Article 26.9 of the LCIA Rules or Article 28.6 of the ICC Rules stating that the parties agree to waive their right to any form of appeal, review or recourse to any state court or other judicial authority, insofar as such waiver may be validly made.

You can download the full judgment by clicking here.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 14/08/2009.

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