The right to challenge an arbitral tribunal’s award under sections 67 and 68 of the Arbitration Act 1996 (the “1996 Act”) (substantive jurisdiction and serious irregularity respectively), is subject to certain restrictions. One such restriction is that a party must first exhaust any available appeal process. A recent case has considered when an appeal process is ‘exhausted’.
An overseas trading company, “B”, claimed that another overseas trading company, “A”, had entered into two contracts to buy cotton and had made no payment under the contracts. The alleged contracts provided for International Cotton Association (“ICA”) rules and arbitration. A denied making the contracts and thus denied its agreement to ICA arbitration. A participated in the arbitration and disputed the Tribunal’s jurisdiction. The Tribunal concluded it did have jurisdiction and upheld B’s claim.
In accordance with the parties’ right under the 2011 edition of the ICA rules to appeal to a Technical Appeal Committee (“TAC”), A sent a notice of appeal to the ICA. The ICA requested payment of fees and other costs. Without making the payments A submitted its grounds of appeal to the ICA. Four days later the ICA chased payment giving the next day as the deadline. When payment was not received, the ICA notified A of the appeal’s dismissal because of A’s failure to pay fees and costs. A made payment of all sums ten days later with a request for extension for time on the basis of oversight and public holidays. The ICA refused the extension and so a TAC appeal or review never took place.
The Commercial Court determined two questions in relation to section 70(2) of the 1996 Act: (i) whether in these proceedings an “arbitral process of appeal or review” was available; and (ii) if so, whether A had exhausted that process.
The court held that an appeal process was available to A despite A’s contention that it was not a party to the arbitration agreement. In the circumstances it would be difficult to see how the TAC process would not qualify as an appeal process under section 70(2).
Having initiated that appeal process, the court held that the meaning of ‘exhausted’ could include the refusal of an application to extend time to pay a fee for the appeal where there is substance to the appellant’s reason for an extension. Once the application was refused, the process was deemed exhausted. What mattered was that the process was completely used up, not how it was used up. It was conceded, however, that the test was flexible and fact-specific.
To avoid uncertainty, any arbitral appeal process should be diligently pursued, complying fully with all administrative steps in a timely manner. Flexibility has been allowed as to what ‘exhausting a process’ may look like in different cases. Whilst the decision illustrates that it is not essential to have concluded a whole arbitral appeal process to meet the threshold of ‘exhausted’ under section 70(2), the appellant must go beyond merely invoking the process so as to ‘use up’ all possibilities in a given process.
To read the judgment, please click here.