In April 2013 the Admiralty and Commercial Court announced amendments to the procedure to be followed in that court. Those amendments included a new procedure for summary dismissal of challenges to arbitral awards under section 68 of the Arbitration Act 1996 (the Act).
Section 68 of the Act permits parties to arbitration to challenge an arbitral award on the basis that there had been a serious irregularity affecting the tribunal, the arbitral proceedings or the award. Whilst the threshold for bringing a successful section 68 challenge has been set very high by the English court, this does not always deter parties from bringing (unmeritorious) challenges. This has resulted in challenges being brought purely for delaying enforcement of the award.
Paragraph O8.8 of the Admiralty and Commercial Court Guide allows the court to exercise its powers under the Civil Procedure Rules to dismiss an application under section 68 of the Act without a hearing, if the court considers that the challenge has no real prospect of success. The respondent to the challenge can also request the court to deal with the challenge on paper. If the court does dismiss the challenge, the applicant has the right to apply to the court to request a hearing of the application. In such circumstances, however, the applicant is at risk of being liable for costs on an indemnity basis if it losses at the hearing. The adverse cost consequences should be a deterrent against parties pursuing unmeritorious challenges once dismissed on paper.
Having just successfully used this new procedure (and are likely to have been the first to do so) we are pleased to report that it is effective. Advantages of this new procedure include the relatively quick response time from the court and the ability to avoid the costs of an oral hearing. This is particularly useful where a challenge is brought for the purposes of seeking to delay the enforcement of an award either in England and Wales or elsewhere in accordance with the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention), which provides for a potentially efficient enforcement procedure.
There may be initial teething problems with this new procedure. For example, there does not appear to be a time limit within which a party can request a hearing once the application has been dismissed on paper. Otherwise, the procedure is a good example of the English court’s innovation and continued support for arbitration.