In the latest decision in the Sumukan v Commonwealth Secretariat case, the Court of Appeal has overturned a first instance decision and set aside an award because the Commonwealth failed to follow correct procedures in appointing its panel.

The Commonwealth has its own arbitration scheme, the statutes of which provide for a panel of arbitrators to be appointed after consultation with certain bodies. In this case, when a dispute arose with Sumukan under a consultancy agreement, the Commonwealth governments were not consulted before the appointment of the President. Moreover, the appropriate steps were not taken when that appointment expired.

Following an unfavourable award, Sumukan challenged the President's appointment for lack of substantive jurisdiction (under section 67 of the Arbitration Act 1996). The Court of Appeal held that since the statutory scheme applied between the parties as a matter of contract, the improperly constituted tribunal in fact lacked jurisdiction. The consultation process was not simply administrative but was designed to safeguard the independence of the tribunal, particularly given that the tribunal in this case was appointed solely by one party. Therefore, the defects in the process could not be dismissed as inconsequential.

The importance of this decision lies in its recognition of a party's right to insist on compliance with the arbitration agreement. Although the decision is a rare example of a successful challenge to an award, by upholding the parties' agreement the decision reinforces England's position as an arbitration "friendly" jurisdiction. It also highlights the importance of close compliance with any applicable technicalities when appointing a tribunal. (Sumukan Ltd v Commonwealth Secretariat [2007] EWCA Civ 1148).