The Commercial Court has given useful guidance on when discretion might be exercised to extend the 28 day period for challenging arbitration awards in the English Courts, in a recent decision in Terna Bahrain Holding Company WLL v Bin Kamil Al Shamsi and ors [ 2012] EWHC 3283.
Popplewell J. emphasised that the relatively short 28 day period for any application or appeal against an award in the Arbitration Act 1996, section 70(3) reflects the principle of speedy finality which underpins the Act. The party seeking an extension must show that the interests of justice require an exceptional departure from the timetable laid down by the Act.
From recent caselaw, the judge identified three primary factors for the court in deciding whether or not to exercise its discretion to grant an extension:
- Length of delay
This is to be judged against the yardstick of the 28 days provided for in the Act. Thus a delay measured even in days is significant; a delay measured in many weeks or in months is substantial.
- Whether the party who permitted the time limit to expire, and subsequently delayed, acted reasonably in the circumstances in doing so
This involves an investigation into the reasons for the delay. Those reasons should be dealt with explicitly (or by necessary implication) in the applicant's evidence. On the facts, the judge was very critical of the applicant's lack of evidence on the reasons for the delay.
Where the evidence is consistent both with laxity, incompetence or honest mistake on the one hand, and a deliberate informed choice on the other, an applicant's failure to adduce evidence that the true explanation is the former can legitimately give rise to inference that it is the latter.
The question whether the non-compliance was intentional or not is important. In cases of intentional non-compliance with prescribed time limits, a public interest is engaged which is distinct from the private rights of the parties.
- Whether the respondent to the application and/or the arbitrator caused or contributed to the delay
Whilst this did not arise on the facts (and it is difficult to find examples of this in the case law), the judge nevertheless identified this as a primary factor. One situation where it might arise is where it is alleged that the decision has been procured by a fraud of the other party which could not have been discovered within the 28 day period.
Other relevant factors
- Whether the respondent to the challenge application would, by reason of the delay, suffer irremediable prejudice in addition to mere loss of time if the application was permitted to proceed.
- Whether the arbitration has continued in the period of delay and, if so, what impact on the progress of the arbitration, or the costs incurred in it, determination of the challenge application by the court might now have.
- The strength of the challenge application. Whilst the court will not normally conduct a substantial investigation into the merits of the challenge at this stage, if the court can readily see on brief perusal of the grounds that the challenge involves an intrinsically weak or apparently strong case, that will weigh in the balance.
- Whether in the broadest sense it would be unfair to the applicant for him to be denied the opportunity of having the challenge application determined. This must, however, always be viewed in the particular context that Parliament and the courts have repeatedly emphasised the importance of finality and time limits for any court intervention in the arbitration process.
Postponing application for extension of time to the hearing of the appeal
Whilst strength of the challenge is only a 'relevant' factor and not a 'primary' factor, once the Court has determined that the appeal would otherwise succeed, Popplewell J. considered that may then be “a powerful factor” in favour of extension.
There could therefore be significant advantage to applicants if they can persuade the court to hear the application for an extension of time at the same time as the substantive challenge.
However, Popplewell J. did emphasise that "it should be the exception, rather than the norm, for the extension of time application to be postponed to a full hearing of the challenge application". Thus the court is likely to take some persuading to hear the two applications together.
On the facts, the judge refused extension because he concluded that the challenge application would fail in any event; but, even if he had concluded that the challenge would have succeeded, would have exercised discretion to refuse extension in view of substantial delay which resulted from deliberate choice for perceived tactical advantage.