Leigh Crestohl, William Rees and Paridhi Dixit secure judgment and costs for a Russian shipping client. The client obtained an arbitration award under the LMAA rules arising out of the breakdown of a vessel. The award was subsequently challenged in the high court by arbitration claim by the counterparty to the contract (whom an unfavourable LMAA award was made against), an owner of a fleet of vessels based in Turkey. Zaiwalla secured the strike-out of the opponent’s arbitration claim and challenge to the arbitration award made pursuant to section 68 Arbitration Act 1996 (the “Arbitration Act”), followed by a judgment and various costs order in the client’s favour, allowing the client to proceed to enforce its award under the New York Convention.
This article briefly considers:
- the mechanisms to challenge an arbitration award by arbitration claim provided for by the law of England & Wales (s67 to s69 Arbitration Act);
- key points to be aware of when bringing a challenge; and
- enforcement of arbitration awards utilising the New York Convention.
International parties to cross border trade, particularly in the shipping sector, often select an arbitration clause governed by the law of England & Wales as a mode to resolve contractual disputes. The law of England & Wales offers a well-developed and commercially minded body of contract law, a predictable approach to contractual interpretation, and a supportive court system that generally respects party autonomy and the arbitral process. Arbitration offers expert adjudicators (constituting the tribunal), ability to enforce with relative simplicity pursuant to the New York Convention (addressed further below), confidentiality and party autonomy to shape a flexible process often utilising rules tailored by institutions for specific sectors.
Challenging an arbitration award: sections 67-69 Arbitration Act
The Arbitration Act permits only limited routes to challenge an arbitration award through the courts, balancing important (and competing) principles of preserving the finality of arbitral awards with preventing potential injustices by allowing a mechanism for the court to review a decision made by arbitration:
- Section 67 (substantive jurisdiction): A party may challenge an arbitration award on the basis that the tribunal lacked substantive jurisdiction—for example because there was no valid arbitration agreement. Being a mandatory provision in Schedule 1 of the Arbitration Act, the parties cannot exclude by agreement a party’s right to bring an arbitration claim, challenging an arbitration award, via the s67 route.
- Section 68 (serious irregularity): Various “serious irregularities” affecting the tribunal, the proceedings, or the award causing substantial injustice to the applicant can constitute grounds to challenge an arbitration award by way of arbitration claim. For example, a failure by the Tribunal to comply with its general duty under s33 Arbitration Act (to act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting his case and dealing with that of his opponent). Per the requirement for a “serious” irregularity and a “substantial” injustice, the threshold to succeed is deliberately high. This ground is also a mandatory provision in the Arbitration Act.
- Section 69 (appeal on a point of law): This is a right to appeal on a question of law arising out of the arbitration award. Unlike sections 67 & 68, s67 is not a mandatory provision which applies notwithstanding agreement to the contrary. It is frequently excluded by agreement (either expressly by the parties or by adopting institutional rules that exclude it). Even where the route is available it requires permission and must meet strict criteria (including that the decision is obviously wrong or involves a question of general public importance).
- If successful, challenges under all above sections can result in the
award (or part of it) being set aside or remitted to the arbitral tribunal for reconsideration. Further specific idiosyncrasies on remedy apply within each ground.
Key procedural considerations if bringing a challenge
- A challenge is a remedy of last resort: other potential remedies must be utilised before turning to an arbitration challenge through the courts. For example, the Tribunal can clarify an ambiguity in its award in certain circumstances under s57 Arbitration Act. Issuing an arbitration claim to challenge the award in the high court without utilising relevant other remedies first may prove fatal to an arbitration claim.
- Be wary of the short limitation period to act: A challenge must be brought within 28 days of the date of the arbitration award elsewise it faces an uphill battle to obtain relief from sanctions and an extension of time for the period of service of the arbitration claim.
- Serve your documents correctly: arbitration often involves international parties based in different countries and service out of the jurisdiction of England & Wales. Even if parties have agreed to serve documents by email, good service of an arbitration claim form may require additional formalities including giving notice of service of claim documents out of the jurisdiction where the permission of the court is not required (see court form n510). Non-compliance with these formalities may render purported service of the arbitration claim form void, meaning the claimant must re-serve and may then be outside of the 28 day limitation period (engaging limitation issues mentioned above in point 2.)
The New York Convention and enforcement of the award
The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958) is a global treaty which enables an arbitral award made in one Convention state to be recognised and enforced in other Convention states, subject only to limited defences (such as invalidity of the arbitration agreement, lack of proper notice, excess of jurisdiction, procedural unfairness, or public policy). 172 states across the globe are contracting parties to the New York Convention. Further, judicial comment in various jurisdictions interprets Article 3 of the New York Convention (that each contracting state shall recognize arbitral awards as binding and enforce them…) as an on its face right to enforcement, making it a powerful tool to enforce arbitration awards.
Zaiwalla & Co are experts in conducting arbitrations under all major rules and in acting for either Claimants or Defendants in High Court arbitration claims challenging underlying arbitration awards.
