In this third article considering how parties can challenge awards under the Arbitration Act 1996, we look at recent developments relating to section 69. Under s69, a party to arbitral proceedings may appeal to the court on a point of English law arising out of an award. The question is, will this third way prove any easier to navigate than its statutory brethren?

APPEAL ON A QUESTION OF LAW

Unlike sections 67 and 68, s69 is not a mandatory provision. It is open to parties to exclude the section 69 right to appeal by providing for this in the arbitration agreement or using a set of rules (eg the ICC rules) which expressly exclude any right of appeal. Parties considering a s69 challenge should start by checking the terms of the arbitration agreement and the relevant rules. It should be noted that agreement to dispense with reasons for the tribunal’s award will also constitute an exclusion of s69. 

In order to bring a s69 challenge, parties will need either the agreement of all parties to the appeal or the leave of the court (s69(2)). If all the parties agree, and the parties follow the correct procedure, the court must hear a consensual appeal under s69. By contrast, leave to appeal will only be given if certain conditions are satisfied, as set out in s69(3) below:

SECTION 69(3) ARBITRATION ACT 1996

Leave to appeal shall be given only if the court is satisfied:

  • that the determination of the question will substantially affect the rights of one or more of the parties 
  • that the question is one which the tribunal was asked to determine 
  • that, on the basis of the findings of fact in the award 
  1.  the decision of the tribunal on the question is obviously wrong, or
  2. the question is one of general public importance and the decision of the tribunal is at least open to serious doubt, and 
  • that, despite the agreement of the parties to resolve the matter by arbitration, it is just and proper in all the circumstances for the court to determine the question.

Parties considering a s69 challenge would be wise to seek the other parties’ agreement as a first step, to avoid the need to apply for leave from the court. Seeking agreement from all parties may at least narrow the issues in dispute. In Morris Homes (West Midlands) Ltd v Keay [2013] EWHC 932 (TCC)) it was common ground that two of the four criteria under s69(3) were engaged, so the court could focus on the remaining two where agreement could not be reached.

QUESTION OF LAW NOT FACT

By contrast, in Geden Operations Ltd v Dry Bulk Handy Holdings Inc, M/V “Bulk Uruguay” [2014] EWHC 885 (Comm), Popplewell J dismissed an application under s69 on the basis that the issue in question was in reality one of fact, not law. The parties agreed that the tribunal had identified the correct test in deciding whether or not the defendants were in anticipatory breach, but the claimant argued that the tribunal had interpreted or applied the test incorrectly. Popplewell J gave the application short shrift, commenting “Resort to basic principles reveals this to be an attempt to appeal a finding of fact by dressing it up as an issue of law.”

This theme runs through several of the more recent cases, including Sun United Maritime Ltd v Kasteli Marine Inc [2014] EWHC 1476 (Comm) (already considered in the first article of this series in the context of a s67 challenge). Having found that the tribunal had jurisdiction to deal with the costs of the arbitration, Hamblen J dismissed the claimant’s alternative application for permission to appeal under s69. Again, the issue in dispute was one of fact rather than law, and consequently the court had no jurisdiction to grant permission to appeal. 

In the high profile case of Kaneria v England and Wales Cricket Board Ltd (ECB) [2014] EWHC 1348, the claimant sought leave to appeal against the decision of the arbitral panel which upheld the lifetime ban and costs order made against him by the ECB’s Cricket Discipline Commission for spot-fixing. The court rejected his application. 

Hamblen J found that the complaints made by the claimant on which he sought permission to appeal did not disclose an error of law. He observed that the arbitral panel had an “absolute discretion to impose any penalty within its general powers” and “the grounds relied upon do not show an arguable error of law in the exercise of that absolute discretion.” The arbitral panel’s decision turned on its particular facts, and this was a challenge to findings of fact in relation to which the court had no jurisdiction to grant permission to appeal.

IS THE TRIBUNAL’S DECISION OBVIOUSLY WRONG?

The court appears equally reluctant to find an arbitral tribunal’s decision to be “obviously wrong” for the purposes of section 69. In AMEC Group Ltd v Secretary of State for Defence [2013] EWHC 110 (TCC), Coulson J reviewed the case law and applied the ’major intellectual aberration’ test. The gist of this test is that any error which you ask the court to consider must be an obvious one. In the words of Grant J in Morris Homes, the court will need to be satisfied that the decision of the arbitrator was obviously wrong, “in the sense that the error in question must be transparent and/or clear”.

Having held that the majority's decision in Amec was not obviously wrong, Coulson J went on to suggest another way of approaching the question: namely considering whether or not the view of the dissenting arbitrator(s) is at least seriously arguable. Parties appealing a s69 challenge should therefore consider whether any dissenting views can be used to bolster their argument. However, hopes should not be raised too high – Coulson J was not convinced by the dissenting minority’s view.

IS THERE A QUESTION OF GENERAL PUBLIC IMPORTANCE?

Where the question is one of general public importance, the challenging party need only prove that the decision of the tribunal is “at least open to serious doubt” rather than being “obviously wrong”. This is an important difference, and one which, in theory at least, should make it easier to bring a s69 challenge.

However, in Morris Homes the parties agreed that there was a public interest in the court considering the interrelation of "best endeavours" and "diligence" clauses in development and/or construction agreements. Even so, Grant J found that facts of the case were highly unusual, and the events in question were “one-offs”. The issue was not therefore one of general public importance.

CAN A S69 CHALLENGE EVER SUCCEED?

Martrade Shipping GmbH v United Enterprises Corporation [2014] EWHC 1884 (Comm) is a rare example of a successful s69 challenge. In this case, Popplewell J overturned the tribunal’s decision to award interest under the Late Payment of Commercial Debts (Interest) Act 1998 (the Late Payment Act) to the defendant. He also took the opportunity to clarify when its provisions will apply in international arbitration where the contract provides for English law to apply and for arbitration in London. 

Where the parties to an international contract have chosen English law or to arbitrate in London, these factors of themselves are not sufficient for the Late Payment Act to apply. Section 12(1)(a) requires the contract to have a significant connection to England.  Popplewell J held that a significant connection “must connect the substantive transaction itself to England” and “provide a real connection between the contract and the effect of prompt payment of debts on the economic life of the United Kingdom.”

Alternatively (and either test can be used) it must be demonstrated under s12(1)(b) that English law would apply to the contract even if the parties had not chosen English law. This requires an application of the test under Article 4 of the Rome Convention (applicable law in the absence of choice). The parties’ choice of law must be ignored in applying that test.

As the defendant failed to establish that English law applied on either the 12(1)(a) or 12(1)(b) tests, the claimant succeeded and the appeal was allowed.

PRACTICAL POINTERS

Section 69 appeals are not common, and successful appeals even less so. The courts remain reluctant to interfere in tribunals’ substantive decisions, including the decisions of specialist tribunals such as sports disciplinary bodies. As with s68 challenges, the courts also remain particularly and resolutely critical of attempts to challenge findings of fact dressed up as points of English law. Any attempt to challenge an arbitration award under s69 will need to be specific and compelling in order to stand a chance of succeeding.

This article was published in New Law Journal in March 2015.