In a recent decision of the Chancery Division of the High Court of Justice, the court reinforced the pro-arbitration stance of English courts to back arbitral awards made by a Tribunal.
In Tang & Lee v GTIL et al (14 November 2012), the English Court confirmed that the Tribunal had jurisdiction to determine the issue before it and dismissed the Claimants’ application to challenge the Tribunal’s jurisdiction under section 67 of the Arbitration Act 1996 (the “Act”).
Section 67 of the Act
Section 67 allows a person to seek to set aside an arbitration award (either a preliminary or interim award) on the grounds that the Tribunal lacked substantive jurisdiction, within 28 days from the award. Under s. 30(1) and s. 82 of the Act, “substantive jurisdiction” refers to:
- Whether there is a valid arbitration agreement; or
- Whether the tribunal is properly constituted; or
- Whether the matters submitted to arbitration are in accordance with the arbitration agreement.
If the application is successful, the court may (i) declare the award, in whole or in part, to be of no effect, or (ii) order the award (in whole or in part), to be set aside.
By the way of background, under s.31 of the Act a tribunal is entitled to rule on its own jurisdiction. The Tang decision concerned a challenge under s. 67 of an arbitral award in which the Tribunal ruled that it had jurisdiction, pursuant to s.31.
The arbitration clause, the subject of the reference, set out certain steps that were to be taken prior to any arbitral process. Those steps were not taken before the dispute went for arbitration. The Claimants sought to have the award set aside on the ground that the requisite steps were conditions precedent before an arbitral reference could be commenced. The argument put forward was that because such steps had not been fulfilled prior to the commencement of arbitration, the Tribunal did not have jurisdiction to determine the dispute in issue. Therefore, the Tribunal was wrong to determine that it had jurisdiction and the award should be set aside.
In determining that it had jurisdiction, the Tribunal decided that the steps prescribed did not constitute a detailed process which was sufficiently certain to be legally enforceable, and that the steps stipulated merely provided a mechanism to keep the dispute “in-house” for a period of time before it is brought for binding settlement before objective third parties in an arbitration. The Tribunal also suggested that for a mediation or conciliation provision to be binding, it ought to include a process which involved reference to a third independent party.
Mr. Justice Hildyard upheld the award, deciding the issue in favour of the Defendants and dismissing the Claimants’ application. The s.67 challenge was rejected on the basis that the provisions containing the steps lacked sufficient definition and certainty to constitute enforceable conditions precedent to the commencement of arbitration. The Court thus decided that the conclusion reached by the Tribunal as to the true effect of the provisions stipulating steps to be taken prior to any arbitral process was correct.
The Claimants then sought permission to appeal the decision of Mr. Justice Hildyard to the Court of Appeal, which was refused. In refusing leave Mr. Justice Hildyard noted that there was no recourse to the Court of Appeal in this matter. It was further noted that the policy of the Act was not to encourage extended processes of appeal or uncertainties in the appeal process, and issues which might be permitted generally to go forward to the Court of Appeal should be discouraged in the context of an arbitral process or of an appeal from an arbitral process. The decision was therefore, final.
Mr. Justice Hildyard’s decision reinforces the supportive and pro-arbitration attitude of the English courts, something which should be kept in mind when drafting arbitration clauses in contracts. Challenges to an arbitration award in the UK should also not be made lightly, and are unlikely to succeed except in extreme cases. The judgement should increase the confidence of parties, whom awards had been made in their favour, as it provides another example of the unwillingness of English courts to allow challenges under s. 67 of the Act.