Court allows a challenge under section 68 of the Arbitration Act 1996/confirms the correct test

This case is a rare example of a successful challenge to an arbitration award under section 68 of the Arbitration Act 1996. Smith J found that the arbitrator had failed to act fairly when he decided the challenge to his jurisdiction without giving notice to the parties that he would not adhere to a prior agreed procedure. That led to the question of whether this irregularity has or will cause substantive prejudice to the claimant. The judge rejected an argument that the claimant must show on the balance of probabilities that an opportunity to develop his challenge to jurisdiction would have affected the arbitrator's decision.

Instead, the judge said that the correct test was that stated in the textbook Arbitration Law by Professor Merkin: "if it is realistically possible that the arbitrator could have reached the opposite conclusion had he acted properly in that the argument was better than hopeless, there is potentially substantial injustice". It was clear that the claimant, had he been given a proper opportunity, would have presented further submissions about the jurisdictional challenge and it was "realistically possible" that the arbitrator would have accepted those submissions, which the judge considered to be "reasonably arguable". Accordingly, the judge exercised his discretion under section 68 to grant relief.