The Court of Session reinforced its support of the arbitration process in Scotland in the latest arbitration decision issued on 9 May 2014 by Lord Woolman: Arbitration Application 1 of 2013 [2014] CSOH 83.

The case arose from a rent review arbitration following which the unsuccessful tenant made a serious irregularity appeal under Rule 68 of the Scottish Arbitration Rules and sought the court’s leave to bring an error of law appeal under Rule 69.

General Principles

Lord Woolman restated that as the Arbitration (Scotland) Act 2010 is modelled on the English Arbitration Act 1996, English decisions provide helpful guidance. He made reference to the general principles including:

  • As a matter of general principle the courts strive to uphold arbitration awards. The approach is to read an award in a reasonable and commercial way.
  • A distinguishing feature of arbitration is the breadth of discretion it leaves the parties and the arbitrator to structure the process for resolution of the dispute.

Serious Irregularity

In rejecting the serious irregularity appeal, three general points were made in terms of the “high test” to be applied:

  • Such appeals are designed as “a long stop available only in extreme cases where the tribunal has gone so wrong in its conduct of the arbitration that justice calls out for it to be corrected.”
  • The court will not intervene on the basis that it would have done things differently.
  • The appeal can only succeed if there has been substantial injustice. If the result of the arbitration would likely have been the same or similar there is no basis to overturn the award.

In response to the criticism that the arbitrator’s reasoning was deficient or absent, it was said that the nature and length of reasons to be given will depend on the whole context within which the decision is given. An arbitrator is only required to deal with the essential issues, not every point that is raised. An award may be upheld even if the reasoning is poor and unimpressive. One approach was to ask if the award made sense. In this case it was thought that it did, even though the reasoning was brief. It was regarded as an exercise of professional judgment which was “not readily susceptible to elaborate reasons”.

Error of Law

Leave to make a legal error appeal can be given if the court is satisfied (a) that deciding the point will substantially affect a party's rights, (b) that the tribunal was asked to decide the point, and (c) that, on the basis of the findings of fact in the award, the tribunal's decision on the point (i) was obviously wrong, or (ii) where the court considers the point to be of general importance, is open to serious doubt. (Rule 70(3))

The error of law appeal had been made on the same basis as the serious irregularity appeal which was considered surprising.

It was said that for a decision to be obviously wrong “it must involve something in the nature of a major intellectual aberration” or “making a false leap in logic or reaching a result for which there was no reasonable explanation”.

On the facts, leave to appeal was refused.

Comment

While the outcome of the case turned on its own facts, it is useful in setting out the approach of the Scottish Courts in handling appeals from arbitrations.

Again, it has been made clear that English authority provides helpful guidance and indeed a number of English authorities were cited in the opinion. This is helpful in providing clarity and consistency of approach across the UK, notwithstanding the separate arbitration regimes in play.

The case also maintains the high bar set both to establish that there has been a serious irregularity and to persuade a court to allow an error of law appeal, providing support for parties’ choice of arbitration as the forum for determination of their disputes.