Annulment Of Award Possible If Based On Invalid Terms Of Reference Or An Arbitration Agreement Which Has Expired By Time Prescription Cassation 246 2011 Commercial

Legal Principle

It is possible to request annulment of arbitration award if it was based on invalid terms of reference or an agreement which has expired by time prescription as per article 216/A of the civil procedure law.

Facts

The claimant in the case filed a case in court requesting for the appointment of a single arbitrator in accordance with the contract he had entered into with the respondent. It was agreed between them that the claimant shall invest money in various commercial projects belonging to the respondent, and the profits arising from such investments shall be distributed as 41% for the respondent and 17% for the claimant. However the claimant alleged that the respondent did not honor its contractual obligation and failed to provide the claimant its share for many years. It was further submitted by the claimant that the Respondent had invested the profit in many other companies during this time.

Amicable settlement attempt

However the respondent challenged the request and submitted that it was not given enough time to settle matter amicably as required under the arbitration contract. The Court of First Instance accepted respondent's submission and dismissed the case.

The claimant appealed the judgment and submitted to the Court of Appeal that it had tried to settle the matter amicably and had requested court appointment of arbitrator since all attempts at an amicable settlement had been exhausted. The Court of Appeal directed the claimant to substantiate its submissions by bringing witnesses to testify in their favor. After witness depositions the Court of Appeal agreed that the claimant had attempted for an amicable settlement as required contractually and accordingly appointed the sole arbitrator and gave the arbitrator a period of 6 months from date of court notice to issue award.

Appeal

The respondent, not being pleased with the Court of Appeal judgment, appealed its ruling at the Court of Cassation. The Court of Cassation however dismissed the petition.

Since the case was in still in appeal the court appointed arbitrator did not finish the arbitration proceedings within the above mentioned 6 month period which the court had tasked it with. The respondent then requested the court to void the arbitration award and proceedings on grounds of expiry of the prescribed time to issue the award.

The Court of Appeal dismissed the request as the matter had already been decided by appointing the arbitrator.

Court of Cassation judgment

Respondent appealed the lower court's decision and brought the proceedings to the court of Cassation. The court dismissed the appeal and ruled that the request put forward by the respondent is a new request. The court observed that the case has not been tried by the Court of First, the matter is already in appeal stage, and that the issue was not raised before in any lower court.

The Court of Cassation reconfirmed the position that it is legal to request annulment of arbitration award if period mentioned for arbitration, through a court order or the arbitration agreement, has expired. However the court ruled that such a request should be made to the court of first instance and not the appeal courts.

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