Case Alert ‐ [2017] EWHC 2396 ﴾Comm﴿

Court rules that a decision from the FOS is not an arbitral award

The applicant made an application for permission to appeal under section 69 of the Arbitration Act 1996. The decision in question was that of an Ombudsman of the Financial Ombudsman Service ("the FOS"). Section 6 of the Act defines an arbitration agreement as "an agreement to submit to arbitration present or future disputes".

Teare J held that the agreement between the applicant and the other party to the dispute did not meet that definition because the decision of the Ombudsman only becomes binding on the respondent to the complaint when the complainant accepts the decision (and if he chooses not to do so, he can instead bring a claim before the courts). That meant that the FOS "was not clothed with authority to determine the dispute …that suggests that the agreement they reached was not an arbitration agreement".

Nor was the applicant able to rely on section 58 of the Act, which provides that "Unless otherwise agreed by the parties, an award made by the tribunal pursuant to an arbitration agreement is final and binding both on the parties and on any persons claiming through or under them". That did not mean that it was not necessary for the agreement between the parties to clothe the arbitrator with authority to determine the dispute.

The words "unless otherwise agreed" were designed to encompass within the meaning of "arbitration agreement" those agreements, such as the one found in the Lloyd's Open Form of Salvage Agreement, which provide for a first tier arbitration panel and an appellate arbitration panel: "The first tier arbitrator cannot finally determine the dispute between the parties in the event that the appeal process is properly invoked. But the agreement remains an arbitration agreement because the dispute will be resolved by arbitration, either by the first tier arbitrator, in the event that there is no appeal, or by the appellate arbitrator, in the event of an appeal".