A recent Supreme Court decision raises issues over the extent of court intervention in the arbitration process and reminds us of the importance of carefully selecting institutional rules so as to avoid (if necessary) the ability of parties to appeal against arbitral awards on points of law.
This decision also reinforces the finality of arbitral awards and makes it clear that it is difficult successfully to appeal an arbitral award. In many cases institutional rules of arbitration (such as the LCIA and ICC Rules) do not permit appeals on points of law and this highlights the importance of selecting institutional rules. Had the parties adopted the LCIA or ICC Rules, NYK would not have been able to make this section 69 appeal at all, saving time and money.
The Facts & Decision
In NYK Bulkship (Atlantic) NV v Cargill International SA1 the Supreme Court dismissed an appeal under section 69 of the Arbitration Act 1996 against an arbitral award issued under the London Maritime Arbitration Association (LMAA) Rules (which rules do not preclude an appeal on a point of law).
The contract between the parties provided that if a certain vessel were captured, seized, detained or arrested, hire payments would be suspended unless it was due to “any personal act or omission or default of the Charterers [Cargill] or their agents”. The vessel was arrested during a shipment of cement and Cargill withheld hire payments. A dispute then arose in which NYK claimed that the buyer and/or seller of cement was an agent of Cargill and therefore NYK was entitled to the hire payments. The arbitral tribunal rejected this claim and NYK appealed the award.
The High Court and the Court of Appeal both granted permission to NYK to bring the section 69 appeal. Both courts found (in favour of NYK) that the buyer of cement was an agent of Cargill, but deferred to the arbitral tribunal which was better placed to decide on causation (i.e., whether the agent had caused the arrest). However, the Supreme Court found that the buyer was not an agent and thus upheld the tribunal’s award in favour of Cargill.
Appeals under section 69 of the Arbitration Act
Section 69 appeals on a point of law can only be brought with the agreement of all parties or permission of the court. If the parties do not agree, the applicant must overcome four hurdles before the court will grant permission:
- the determination of the question must substantially affect the rights of at least one party;
- the question has to be one which the tribunal was asked to determine;
- the decision of the tribunal on that question has to be obviously wrong or one of general public importance, and the decision of the tribunal has to be open to serious doubt; and
- it has to be just and proper in all the circumstances to determine the question.
- This decision is timely due to the current debate concerning the relationship between the courts and arbitration. The Lord Chief Justice of England and Wales (Lord Thomas) recently argued that section 69 should be reformulated to provide a broader right of appeal to the courts. This has sparked a backlash from senior members of the arbitration community who oppose such reform. This case highlights this tension as the lower courts intervened but at the same time deferred to the tribunal by remitting questions to it, and the Supreme Court ultimately upheld the award.
- NYK Bulkship provides a rare example of a section 69 appeal proceeding to the Supreme Court. It is also an illustration of what the Supreme Court considers to be an arguable point of law of general public importance – on the facts, this was the interpretation of the term “agent.”