Believing In Father Christmas: Another Section 68 Challenge

Arbitration awards are meant to be final and binding. Under the rules of many of the leading arbitral institutions such as the ICC and the LCIA, the parties give up any right to appeal the award on the merits. But parties do retain a right to challenge an award if there has been a violation of due process. Under English law, a due process challenge is governed by Section 68 of the Arbitration Act 1996, which requires the challenging party to prove that there has been a 'serious irregularity'.

One of the examples of such an irregularity given in the statute is a 'failure by the tribunal to deal with all the issues put to it'. Unsuccessful parties have latched on to this, challenging awards on the basis that the tribunal forgot to discuss or expressly dismiss one of their arguments or simply preferred the other side's evidence without explaining why. Some challenges have steered close to asking the court to review the tribunal's reasoning. In UMS Holding Ltd v Great Station Properties SA [2017] EWHC 2398, the Commercial Court has set out very clear limits, which should discourage attempts to mount appeals on the merits disguised as Section 68 challenges.

A serious irregularity giving rise to substantial injustice under English law

The concept of a serious procedural irregularity was introduced into English law by the Arbitration Act 1996. The 1996 Act brought about a wholesale reform of English arbitration law and was a response to mounting criticism that the courts had shown too willing to interfere in the arbitral process. Setting aside awards is perhaps the most direct example of judicial interference. The Departmental Advisory Committee reported on the new law before it was enacted by Parliament and explained that Section 68 was meant to operate as a “longstop, only available in extreme cases where the tribunal has gone so wrong in its conduct of the arbitration that justice calls out for it to be corrected”. It was only concerned with due process. Ten years after Section 68 was enacted, the House of Lords reminded practitioners of the “radical nature” of the changes that it had introduced (Lesotho Highlands Development Authority v Impregilo SpA [2006] 1 AC 221).

Section 68 states an award may be challenged if there has been a serious irregularity affecting the tribunal, the proceedings or the award. But that is not sufficient by itself: the serious irregularity must also have caused substantial injustice. In Lesotho, the House of Lords explained that the requirement of substantial injustice was “designed to eliminate technical and unmeritorious challenges”. This additional requirement will be satisfied where the party challenging the award can show that the serious irregularity led the tribunal to reach an unfavourable conclusion, and where, had it not been for the irregularity, the tribunal might have come to a different view, provided that such an alternative view was at least reasonably arguable (Vee Networks v Econet Wireless International Limited [2004] EWHC 2909).

'Failure to deal with an issue put to the tribunal'

Section 68 also sets out an exhaustive list of categories of what can amount to an irregularity, one of which is a 'failure by the tribunal to deal with all the issues that were put to it' in Section 68(2)(d)). At first blush, this may seem to be concerned with a situation where the arbitrators have forgotten to decide a particular claim. For example, if the respondent alleges that the claimant's damages (if any) have to be halved because of the claimant's contributory negligence, then that would plainly be an 'issue'. If the tribunal awarded the claimant damages of £100 without deciding the contributory negligence point, it would have failed to deal with an issue that the respondent put to it. Where the tribunal has not dealt with an issue at all, that is likely to cause substantial injustice, as the Court of Appeal noted in Checkpoint Ltd v Strathclyde Pension Fund [2003] EWCA Civ 84.

The question is, however, whether Section 68(2)(d) was meant to be wider than that. Suppose the arbitrators had turned their mind to the contributory negligence point, overlooked the respondent's witness statement dealing with this entirely, and then dismissed the point stating that there was no evidence in support of the respondent's contention. Have they failed to 'deal with an issue'? They have decided the issue, that there was no contributory negligence, but they have done so without considering the material that had been 'put to them'. Does a serious irregularity include a failure to consider certain evidence, or give sufficient weight to it?

Another example of a serious irregularity in Section 68(2) is where the tribunal fails to deal with its overriding duty (found in Section 33 of the Arbitration Act 1996) toact fairly...

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