For those not familiar with the relevant rules, the calculation of the time limit for challenging an English arbitral award before the English courts may come as a surprise. In two recent High Court decisions, the court has emphasised that the 28 day time limit for challenging an award commences on the date the award is made and not the date it is received by the parties. In both cases, despite the fact the parties only received the award after the deadline for bringing any challenge had expired, the court refused to grant an extension of time in order to allow a challenge to the awards to be brought. These decisions act as an important reminder that parties should take all possible steps to ensure that an award can be released as soon as it is made in order to preserve the limited rights of challenge to an arbitral award under English law.
2. Background to the High Court Decisions
Rollitt v Ballard
In Rollitt v Ballard the arbitrator made his award on 12 May 2016. On the same date the arbitrator informed the parties that an award would be published on the payment of his outstanding fees (£4,052.88 plus VAT). A subsequent dispute ensued between the claimant and the respondent as to the payment of the arbitrator’s fees. As a consequence, the arbitrator did not immediately release the award to the parties when it was made, but rather withheld it until his outstanding fees were paid (by the claimant) on 8 August 2016. Section 56 of the Arbitration Act 1996 (the “Act“) gives a tribunal the express power to withhold an award until full payment of the fees and expenses of the arbitrators has been made.
The statutory 28 day period to apply for permission to appeal an award under section 70(3) of the Act runs from the date the award is made and not from the date the award is received by the parties. As such, the period for challenging the award had expired on 9 June 2016 (being 28 days after the award was made), and nearly two months before the parties eventually received the award. Accordingly, the claimant was required to seek an extension of time under section 79 of the Act to bring a challenge against the award (88 days late) on the basis that the arbitrator lacked substantive jurisdiction.
Squibb Group v Pole 2 Pole Scaffolding
The background to the decision in Squibb Group v Pole 2 Pole Scaffolding was almost identical to that in Rollitt. Again, there was a dispute between the parties as to the payment of the arbitrator’s fees which resulted in the award being published long after the expiry of the deadline for filing a challenge to the award. The claimant in this case sought an extension of time (of 84 days) to bring a challenge against the award.
In both cases, without an extension of time to challenge the award, the claimants would be barred from challenging the awards despite the fact that the 28 day statutory time limit expired before the claimants had even received their respective awards.
3. Judgments of the High Court
In both cases, Mrs Justice O’Farrell determined the matter in the High Court and in both cases she refused to grant an extension of time.
The court noted that there were strict time limits for any challenge to arbitral awards. In both cases the judge referred to Popplewell J’s judgment in Terna Bahrain which summarised the principles applicable to the court’s discretion to extend time limits. Terna Bahrain emphasised that the delay must be judged against the yardstick of the 28 day time limit under the Act and that the main factors to be considered were the length of the delay, the reasonableness of the applicant’s actions in allowing the time limit to expire and whether there were other contributions to the delay.
In Rollitt, the judge found that the delay of 88 days was substantial. Further, as the arbitrator’s fees were modest, it was the responsibility of the claimant to take appropriate steps to ensure that it preserved the right to challenge the award, despite the fact that the outstanding fees should have been paid by the defendant. There was no reasonable explanation for such a delay. A further factor against granting an extension of time was the fact that the claimant waited 28 days from receipt of the award to bring its challenge and seek an extension of time, rather than doing so as soon as practical after publication of the award.
Similarly, in Squibb Group the judge determined the delay of 84 days to be substantial and found that a failure to pay the arbitrator’s fees, without reasonable excuse, is not a justifiable reason for delay in seeking to challenge an award. A further factor against granting an extension of time was the fact that any delay in receiving payment of the sum awarded under the award would place considerable financial strain on the defendant, potentially causing irredeemable harm.
These decisions are an important reminder that counting time for the purposes of challenging an arbitral award begins from date the award is made and not the date on which it is received by the parties. Furthermore, parties should not assume that the fact they received the award after the expiry of the deadline for challenging the award will constitute good grounds for seeking an extension of time to bring a challenge. The court will look at whether the party seeking to bring a challenge contributed to the delay and whether there were steps that they could have reasonably have taken to avoid the delay.
While it might seem unfair to prevent a party from challenging an award in circumstances where the statutory time limit expired before the party had even received the award (and therefore the party was not in a position to challenge the award in time), the court will focus on the reasons why there was a delay in publishing the award. If there are good reasons for the delay that are not attributable to, or could not be reasonably resolved by, the party seeking to challenge the award, then there will be a strong basis for successfully seeking an extension of time.
5. Practical Tips
- In order to avoid the issue of the tribunal’s fees delaying the release of an award, parties should ensure sufficient monies are paid on account of these fees long before the award might be made (as is the general approach under many institutional arbitrations).
- If there are tribunal fees outstanding when an award is made which is preventing the award’s publication, a party should pay these fees promptly (including, if necessary, the fees payable by the other side (with an appropriate reservation to recover the same)).
- If there are other reasons for the delay in the publication of the award or other causes of delay to a party being able to bring a challenge against an award, that party should (and should be seen to) take all reasonable steps to resolve the cause of the delay and to minimise the delay.
- If, for whatever reason, the award is published more than 28 days after it was made, a party should bring its challenge and seek an extension of time as soon as practical after publication of the award. Any further period of delay is likely to be prejudicial to an application for an extension of time.
- Request the Tribunal to provide its award in draft form – some Tribunals may be willing to do so (for instance, pending receipt of submissions relating to costs).