Unlike the U.S. Federal Arbitration Act, the English arbitration regime, set forth in the Arbitration Act of 1996 (the “Arbitration Act”), allows a party under certain circumstances to appeal a question of law arising out of an arbitral award. The right is found in Section 69 of the Arbitration Act.1 This provision applies to arbitrations where the seat of the arbitration is in England and Wales (or Northern Ireland)2 and questions of the law of England and Wales (or for a court in Northern Ireland, the law of Northern Ireland).3
The Arbitration Act embodies within its express guiding principles the modern policy of non-interventionism of courts in the arbitral process. 4 The English courts will only intervene in order to support the arbitral process (this policy was clearly stated in the Departmental Advisory Committee Report on Arbitration (the “DAC Report”) which reported on the consultation prior to the enactment of the Arbitration Act.5 On the question whether the rights of appeal should be abolished, the DAC Report concluded that a limited right of appeal was consistent with the parties’ choice of arbitration.6 It was an important safeguard of the arbitral process to ensure that English law was properly applied. Having chosen to submit their disputes to arbitration subject to an express choice of law, “the parties have agreed that that law will be properly applied by the arbitral tribunal” and “if the tribunal fail[s] to do this, it is not reaching the result contemplated by the arbitration agreement”.7
While as the DAC Report noted the right of appeal is consistent with the choice of arbitration, Section 69 is not a mandatory provision of the Arbitration Act. Parties to an arbitration agreement can agree to exclude the right of appeal to the courts on a question of law.8 Parties will be deemed to have agreed to exclude the right if they have dispensed with a reasoned award.9 Parties often waive this right when they agree to refer their arbitration disputes to institutions with international arbitration rules which expressly exclude the right to appeal a point of law.10 Since the choice of an English sited arbitration brings with it this right of appeal, parties may consider at the time of contracting whether court intervention as a means of appeal on law may be desirable and, if not, to ensure that it is effectively excluded.11
If not excluded or waived, an appeal on a point of law may only be brought with the agreement of all the other parties to the proceedings or, if the parties do not agree, with the leave of the court.12 The applicant must in any event have first exhausted any available arbitral process of appeal or review, and any available recourse for correction of an award.13
The threshold criteria that need to be satisfied, before the courts will grant permission to appeal, are set high so that the scope for such appeals is limited.14 The court will only grant leave if (a) the rights of one or more parties to the arbitration will be substantially affected by the determination of the question of law, (b) the question must be one that the tribunal was asked to determine, (c) on the basis of the findings of fact in the award, the tribunal’s decision on the question was obviously wrong or is a question of general public importance and the decision of the tribunal is at least open to serious doubt, and (d) that, despite the agreement of the parties to resolve the matter by arbitration, it is just and proper in all the circumstances for the court to determine the question.
The courts strictly apply these statutory tests, and “as a matter of general principle English Courts strive to uphold awards”.15 Firstly, it is essential that the question is truly a question of law. This requirement focuses on the question whether the tribunal misdirected itself or reached a decision on the question which no reasonable arbitrator could have reached.16 This requirement will not be satisfied if the decision was “within the permissible range of solutions” open to the tribunal.17 The appeal will also not apply to decisions based on other considerations such as equity or fairness principles applied by arbitrators.18 The tribunal’s findings of fact in the award are considered the “immutable basis” for the courts’ exercise of the power to grant leave to appeal, so the courts strictly will not revisit the facts, including evidential issues (admissibility, relevance or weight of any material). 19 The courts robustly reject attempts by “a disappointed party trying to dress up an appeal against findings of fact as one which turns on questions of law” thereby reaffirming the policy of the Arbitration Act to prevent “illegitimate attempts to go behind a tribunal's findings of fact”. 20
As regards the first criterion for leave that the question of law is one substantially impacting the rights of one or more of the parties, this will be determined on a case-by-case basis considering whether that question of law will substantially affect the rights of the parties not whether it may do so, so for instance the courts have indicated that they will not consider appeals on points of law which would be academic or have low monetary value.21
The second criterion requires that the question of law is one that the tribunal has been asked to determine. If this is not the case, the appeal process is not the proper time to do so and leave will likely be refused.22
The third criterion establishes different tests depending on the nature of the question. Where the question of law is one of general public importance, the test is whether the tribunal’s decision is open to serious doubt. A difference of view between experienced arbitrators would, of itself, be grounds for arguing that the majority’s decision is “at least open to serious doubt”.23 In other cases, the test is higher being whether the tribunal’s decision is obviously wrong. “Obviously wrong” requires that the error should be clear and obvious on the face of the award itself.24 As one judge put it, it would be on the level of “a major intellectual aberration”. 25 As expressed by another judge, it is the “test of being unarguable or making a false leap in logic or reaching a result for which there was no reasonable explanation”.26
However, demonstrating a question of general public importance is likely to be challenging. For instance, an issue as to whether a cause of action arose in respect of claims for interim and final payment under construction contracts was a matter of contractual construction of great significance to the construction industry,27 while the construction of the term charterers’ “agents” in an off-hire clause in a charter party was a point of general public importance in particular to the shipping sector where this term is found in both standard form and other clauses.28 Conversely, an issue of construction in respect of a one-off contract which is not in standard form and not in regular or widespread use, 29 an issue as to whether a sublease had taken effect as an assignment of the lease in rare and unusual circumstances,30 and an issue as to the interrelation of "best endeavours" and "diligence" clauses in a development and/or construction agreement in a highly unusual one-off situation31 did not constitute questions of law of general public importance.
The final criterion is whether it is just and proper in all the circumstances for the court to determine the question notwithstanding that the parties have referred the dispute to arbitration. The courts have indicated that the qualifications of the arbitrator may be a relevant factor, for instance if the matter was determined by distinguished and experienced arbitrators, or it was a one-off contract, as well as the presumption of finality of the decision which underscores the arbitral process but if all the other criteria are satisfied then it would be just and proper for the court to determine the question.32
The provisions allowing an appeal on a point of law are unusual in international arbitration regimes where finality and certainty – hence limited scope for appeal of arbitral awards – are cornerstones of the arbitral process. As expressed by one judge, however, the established “philosophy and purpose underlying s. 69 requires the achievement of finality of awards consistently with the on-going judicial development of English commercial law”.33 The scope for s. 69 appeals is tightly framed and appeals are in consequence relatively rare. However, by way of a closing note, the Lord Chief Justice, Lord Thomas, gave a lecture early in 2016 calling for reform of the law on arbitral appeals arguing that it represented a serious impediment to the development of English commercial law, in particular the finality embedded within s. 69,34 albeit this call for reform has been in turn robustly refuted as a “retrograde step”.35 Where one of the main reasons that parties seek arbitration over litigation is finality of arbitral awards, having defined parameters to judicial review of an arbitrator’s application of law is of paramount importance. The parties using English arbitration have a considerable degree of certainty as to the finality of the arbitral process.