Arbitration

Arbitration agreements

What are the formal requirements for an enforceable arbitration agreement?

Under the Arbitration Act, consistent with the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), there must be an agreement in writing to submit present or future disputes (whether contractual or not) to arbitration. The term ‘agreement in writing’ has a very wide meaning; for example, the agreement can be found in an exchange of written communications.

An arbitration agreement is generally separable from the contract in which it is found as it is regarded as an agreement independent from the main contract and will remain operable after the expiry of the contract or where it is alleged that the contract itself is voidable (see National Iranian Oil Company v Crescent Petroleum Company International Ltd [2016] EWHC 510 (Comm)). This includes where the contract itself is alleged to have been obtained by fraud (see Fiona Trust & Holding Corporation v Privalov [2007] EWCA Civ 20).

Courts in England and Wales will stay litigation proceedings in favour of arbitration if there is prima facie evidence of an arbitration agreement between the parties.

Moreover, the English court may grant an anti-suit injunction to prevent parties from pursuing litigation proceedings in the courts of another country that is not a member state of the EU or European Free Trade Area (EFTA) in breach of an arbitration agreement.

The English courts cannot, however, grant anti-suit injunctions to restrain litigation proceedings brought in the courts of another member state of the EU or EFTA in breach of an arbitration agreement where the substantive action relates to a ‘civil and commercial’ matter falling within Council Regulation (EC) No. 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (the Brussels Regulation), following the European Court of Justice (ECJ) decision in Allianz SpA (formerly Riunione Adriatica di Sicurta SpA) v West Tankers Inc (Case C-185/07) [2009] 1 AC 1138.

The Brussels Regulation (Recast), which has replaced the Brussels Regulation for cases initiated on or after 10 January 2015, does not explicitly address the courts’ power to grant anti-suit injunctions. In Gazprom OAO (Case C-536/13), the Advocate General’s Opinion argued that anti-suit injunctions in support of arbitration are permitted by the Brussels Regulation (Recast), specifically paragraph 4 of recital 12. However, this argument was not addressed by the ECJ in its judgment. There have not been any subsequent decisions by the ECJ on the subject.

However, the English courts have held that anti-suit injunctions in the EU context remain impermissible under the Brussels Regulation (Recast). In Nori Holdings Ltd v Bank Otkritie Financial Corporation [2018] EWHC 1343 (Comm), the Commercial Court held that West Tankers also applied to cases under the Brussels Regulation (Recast) and therefore declined to grant an anti-suit injunction to restrain proceedings in Cyprus. Therefore, pending a further determination by the European or English courts on the subject, anti-suit injunctions to restrain litigation proceedings in the courts of another member state of the EU or EFTA are impermissible. This may of course change when the UK leaves the EU.

The English courts have further held that the Brussels Regulation (Recast) also precludes the English courts from making declarations on the validity of an arbitration clause once it has been ruled upon by the courts of another EU or EFTA member state: see Endesa Generacion SA v National Navigation Company [2009] EWCA Civ 1397.

Oral arbitration agreements are recognised by English law, but fall outside the scope of the Arbitration Act and the New York Convention.

The Brussels Regulation (Recast) states explicitly that the New York Convention will take precedence over the Brussels Regulation (Recast).

Arbitral procedure

Does the domestic law contain substantive requirements for the procedure to be followed?

Party autonomy is the overriding objective of the Arbitration Act. It is therefore up to the parties to select the rules of procedure that will govern the arbitration.

However, if no express provision is made in the arbitration agreement, it is for the arbitrator to decide procedural and evidential matters.

The tribunal is at all times bound by the mandatory provisions of due process and duty to act fairly and impartially between the parties.

Award

When and in what form must the award be delivered?

The parties are free to agree on the form of the award. If there is no agreement, the award must at a minimum be in writing and signed by all the arbitrators, contain the reasons for the award and state the seat of the arbitration and the date it is made.

Unless otherwise agreed by the parties, the tribunal may decide the date on which the award is to be made, and must notify the parties without delay after the award is made.

The court can order an extension of time for an award to be made (although this is done only after available arbitral processes have been exhausted and when the court is satisfied that a substantial injustice would otherwise be done).

Appeal

On what grounds can an award be appealed to the court?

There are limited grounds for an appeal of an award to the court.

A party may challenge an award on the grounds of the tribunal’s lack of jurisdiction or because of a serious irregularity in the proceedings that has caused substantial injustice to the aggrieved party. These provisions are mandatory, and cannot be excluded by agreement between the parties.

Section 68(2) of the Arbitration Act 1996 lists the forms of serious irregularity that the court will recognise. The test for what constitutes serious irregularity is quite onerous, and an award will only be set aside in rare cases (eg, Terna Bahrain Holding Company v Ali Marzook Al Bin Kamil Al Shamsi and others [2012] EWHC 3283 (Comm), as applied in S v A [2016] EWHC 846 (Comm)). The court in Gujarat NRE Coke Ltd v Coeclerici Asia (Pte) Ltd [2013] EWHC 1987 (Comm) confirmed and summarised the position succinctly. Once the applicant has demonstrated that there has been a serious irregularity falling within section 68(2), it must also show that the serious irregularity has caused substantial injustice.

In limited circumstances, a party may also challenge an award on a point of law. Only appeals on English law are permitted.

An appeal on a point of law must concern an issue of English law, and requires the agreement of all the other parties to the proceedings or the leave of the court. For leave to appeal, the appellant must satisfy four conditions:

  • the determination of the appeal will substantially affect the rights of one or more parties;
  • the question of law was put to the tribunal;
  • the decision of the tribunal was obviously wrong or is a point of general public importance and is at least open to serious doubt; and
  • the court is satisfied it is just and proper in all the circumstances to hear the appeal.

Following the hearing of the appeal, the court may confirm, vary, or set aside the award, or remit the award to the tribunal for reconsideration.

If the application for leave to appeal is dismissed, the general rule is that only the judge who made the decision can grant leave to appeal to the Court of Appeal.

Parties may - and often do - exclude the right to appeal to the court on any question of law arising out of the award. An agreement to exclude the right to appeal on a question of law is contained in most arbitral rules.

Where the agreement to this effect is included in the arbitration clause, sufficiently clear wording is required: see Shell Egypt West Manzala GmbH v Dana Gas Egypt Ltd (formerly Centurion Petroleum Corp) [2009] EWHC 2097 (Comm).

An agreement that the arbitrator need not give reasons for his or her decision is treated as an agreement to exclude the right of appeal. Further, there is no right to appeal to the court on a question of fact: see Guangzhou Dockyards Co Ltd v ENE Aegiali I [2010] EWHC 2826 (Comm). The leading case on what amounts to a ‘question of law’ is Vinava Shipping Co Ltd v Finelvet AG (The Chrysalis) [1983] 1 QB 503. In that case, the court distinguished between (i) the ascertainment of the facts in dispute and (ii) the ascertainment of the law, which includes the identification of all material rules of statute and common law, of the relevant parts of the contract, and of the facts which must be taken into account when the decision is reached. It is only the second category that may be appealed as a ‘question of law’. Such an appeal may arise from the arbitrator’s statement of the law, or an incorrect application of the law to the facts (Dyfrig Elvet Davies v AHP Land Ltd and another [2014] EWHC 1000 (Ch)).

Enforcement

What procedures exist for enforcement of foreign and domestic awards?

Awards made in a contracting state to the New York Convention will be recognised and enforced in England and Wales following an application by the debtor for an order to give permission to enforce and subject to the limited exceptions set out in the New York Convention as implemented by section 103 of the Arbitration Act. Similarly, awards issued under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the Washington Convention) will be recognised and enforced in England and Wales pursuant to the Arbitration (International Investment Disputes) Act 1966, which implements the Washington Convention.

A defendant has the right to apply to set aside the enforcement order. However, case law (for example, Honeywell International Middle East Ltd v Meydan Group LLC [2014] EWHC 1344) has re-emphasised that refusals to enforce will only take place in clear cases where the grounds of section 103(2) of the Arbitration Act are met.

Commercial arbitration awards made in countries that have not acceded to the New York Convention may also be recognised and enforced in England and Wales at common law.

Partial awards disposing of part but not all of the issues are enforceable in the same way as final awards.

The enforcement of arbitral awards in England and Wales as well as the enforcement of awards issued by tribunals seated in England and Wales will not be affected by Brexit as the UK will remain a party to the New York Convention.