A recent decision in the Commercial Court considered the extent to which the words "final, conclusive and binding" can be construed as excluding a right of appeal on a point of law under section 69 of the Arbitration Act 1996 ("the 1996 Act").
Section 69(1) of the 1996 Act provides that:
"Unless otherwise agreed by the parties, a party to arbitral proceedings may (upon notice to the other parties and to the tribunal) appeal to the court on a question of law arising out of an award made in the proceedings."
Mrs Justice Gloster, in her judgment in Shell Egypt West Manzala GmbH v Dana Gas Egypt Limited, agreed with Mr Justice Ramsey's stance in Essex County Council v Premier Recycling Ltd that the words "final and binding" are not sufficient to exclude a right of appeal on a point of law. Her judgment reinforces the need for parties to use clear and unequivocal drafting in their arbitration agreements when seeking to exclude a right of appeal.
In Shell Egypt West Manzala GmbH v Dana Gas Egypt Limited, Mrs Justice Gloster considered the effect of an arbitration clause which included the following:
"The dispute shall be submitted to the arbitrators in such manner as they shall deem appropriate and the decision of the majority of the arbitrators, rendered in writing, shall be final, conclusive and binding on the parties, and the judgment upon such decision may be entered in any court of a country having jurisdiction." (Emphasis added)
A dispute had arisen between the parties which had been submitted to arbitration in accordance with the above clause. An award was subsequently made by the tribunal in favour of Dana Gas. Shell then applied to the court for permission to appeal the award under section 69 on points of law arising in it. Dana Gas cross-applied for an order that the court had no jurisdiction to hear such an appeal as the parties had expressly excluded the right to appeal in their arbitration agreement.
While it was not in dispute that section 69 permitted the parties to an arbitration agreement to exclude any right of appeal to the court under that section, the argument focused on whether the underlined words in the arbitration clause above excluded that right of appeal.
Dana Gas submitted that the combination of words "final, conclusive and binding" showed that the parties had agreed in unequivocal terms that there should be no ability to appeal against the Award. It made the following main submissions:
- The plain intent and meaning of that wording was that any award should be final and binding on the parties, and conclude all matters in issue between them without further argument or recourse.
- Notwithstanding the decision in Essex County Council v Premier Recycling Ltd that the words "final and binding" were insufficient by themselves to amount to an exclusion of the right of appeal, the addition of the word "conclusive" was intended to supplement the words "final and binding" and was therefore intended to exclude a right of appeal so far as the parties were contractually able to do so.
- The parties in this case had gone out of their way to modify the usual provisions of the UNCITRAL Rules (which refer to an award being final and binding, but do not state that it is "conclusive") by inserting the word "conclusive" into the arbitration provisions. It was therefore particularly important to ensure that the word "conclusive" was given meaningful effect. The word could not be dismissed as merely boiler-plate. The parties must be taken to have intended to provide for the arbitral process to conclude all matters in issue without recourse to the court.
Shell contended that Dana Gas' submissions should be rejected and made the following main submissions:
- Section 58(1) of the 1996 Act provides that, unless otherwise agreed by the parties, an award made by a tribunal pursuant to an arbitration agreement was "final and binding" on the parties. Section 58(2) expressly provides that this does not affect the right of a person to challenge the award in accordance with the provisions of Pt 1 of the Act (which includes section 69). The arbitration clause in issue went no further than this and therefore did not exclude any rights of appeal.
- Use of the words "final, conclusive and binding" merely indicated that an award made by an arbitral tribunal should be res judicata between the parties. The words said nothing about whether a party had a right of appeal or a right to seek permission to appeal.
- In Essex County Council v Premier Recycling Ltd, Ramsey J held that the words "final and binding decision" did not exclude the parties' rights under section 69 and that, for the purposes of section 69(1), any agreement to exclude the effect of that section had to be clear. The word "conclusive" added nothing to "final" or "binding" and fell far short of the clear words that would be needed to exclude the parties' statutory rights.
- It was not difficult to draft a clear agreement to exclude a party's statutory rights under section 69. Examples that achieved such a result can be found in the Rules of the London Court of International Arbitration (LCIA) (r 26.9):
"All awards shall be final and binding on the parties. By agreeing to arbitration under these Rules, the parties undertake to carry out any award immediately and without any delay . . .; and the parties also waive irrevocably their right to any form of appeal, review or recourse to any state court or other judicial authority, insofar as such waiver may be validly made."; and
the International Chamber of Commerce (ICC) Rules (art 28.6):
"Every Award shall be binding on the parties. By submitting the dispute to arbitration under these Rules, the parties undertake to carry out any Award without delay and shall be deemed to have waived their right to any form of recourse insofar as such waiver can validly be made."
- By way of contrast, the UNCITRAL Rules simply provide (by art 32(2)) that "The award shall be made in writing and shall be final and binding on the parties. The parties undertake to carry out the award without delay". It had never been suggested that the effect of this provision in the UNCITRAL Rules was to exclude the parties' rights under section 69.
The judge held that the phrase "final, conclusive and binding" is not to be construed as an agreement excluding the parties' rights of appeal under section 69 of the 1996 Act.
The judge concluded that:
- In order to amount to an agreement as envisaged by section 69(1) of the 1996 Act, sufficiently clear wording is necessary, albeit that no express reference to section 69 is required.
- In the context of a fairly standard arbitration clause, the use of the words "final, conclusive and binding" in isolation would not convey to a reasonable person that the parties had agreed to exclude all rights of appeal on points of law under section 69.
- Although, on their face, the words "final, conclusive and binding" are words of considerable width, the reality is that the expression "final and binding", in the context of arbitration and arbitration agreements, has long been used to state the well-recognised rule that an award is final and binding in the traditional sense and creates a res judicata and issue estoppel between the parties.
- The conclusion reached by Ramsey J in Essex County Council v Premier Recycling Ltd is correct, namely that:
"...the use of the words 'final and binding', in terms of reference of the arbitration are of themselves insufficient to amount to an exclusion of appeal."
- By adding the word "conclusive", the parties should not be taken to have gone out of their way to modify the usual provision of the UNCITRAL Rules, so as to exclude any statutory right of appeal on a point of law under section 69.
The Commercial Court's judgment makes it clear that the words "final, conclusive and binding", or similar words in an arbitration agreement, simply restate the general rule that an award creates a res judicata and issue estoppel.
If the parties wish to exclude a right of appeal from an arbitral award, clear words to that effect are required - either by adopting the LCIA or ICC Rules (referred to in the judgment and quoted above) or by making an unequivocal statement to that effect in the arbitration clause.