English Court Refuses To Set Aside Arbitral Award On Grounds Of 'Inadequate Reasons'

Overview

The England and Wales High Court (Commercial Court) recently disposed of an application by a party to an arbitration to set aside the arbitral award on the grounds of inadequate reasons.

The Court dismissed the application in Islamic Republic of Pakistan & Anor v Broadsheet LLC 1, finding that this was not a sufficient basis to set aside an arbitral award pursuant to the Arbitration Act1996 [the "Act"].2

In short, inadequate reasons do not rise to the level of a "serious irregularity" in an arbitral award.

This decision is further evidence of the primacy of arbitration and courts' reluctance to interfere in arbitral awards, specifically where the grounds to set aside those awards are narrowly constructed in the governing legislation.

Background

Broadsheet LLC ["Broadsheet"], a company incorporated in the Isle of Man, commenced an arbitration against the State of Pakistan ["Pakistan"] and the National Accountability Bureau ["Anor"], alleging a breach of contract

In 2016 the arbitral tribunal released its award on liability. Two years later, it released its award on damages.

The tribunal awarded Broadsheet US $21,589,460 plus interest as damages for the breach and repudiation of contract.

Pakistan and Anor commenced an application to set aside the arbitral award under Section 68(2)(d) of the Act, alleging inadequate reasons amounted to a "serious irregularity" that resulted in a substantial injustice.

The Outcome

The Court addressed whether "inadequate reasons" were a ground to set aside an award, and when "inadequate reasons" amounted to a serious irregularity and a substantial injustice.3

Section 68 of the Act states that a party to an arbitration may apply to the Court to set aside an award on the ground of "serious irregularity affecting the tribunal, the proceedings or the award."4

Section 68 imposes a high hurdle for applicants. There will only be a "serious irregularity" if what has occurred is "far removed from what could reasonably be expected from the arbitral process", and that the requirement of "substantial injustice" is additional to that of serious irregularity.5 Furthermore, courts have repeatedly stressed the importance of upholding arbitral awards.

Regarding whether inadequate reasons were grounds to challenge an arbitral award under Sections 68(2)(c) and/or (h), the Court agreed with UMS Holding Ltd v Great Station Properties SA ["UMS"], which held that:

[...] section 68 is concerned with due process. Section 68 is...