Arbitration: what’s the appeal?

Supreme Court London
Arbitration remains the principal contractual means by which parties resolve reinsurance disputes. The confidentiality of the process is perhaps cited as its most important benefit, yet a number of appeals of arbitration awards render the confidentiality of the process rather moot (as the issues and parties’ names are disclosed in the open court appeal process). And what weight should one give to the appellate court’s review of the arbitration award?

There are in fact only three grounds on which an arbitration award can be challenged in the courts:

(1) a challenge to the tribunal’s jurisdiction;

(2) a challenge on the ground of serious irregularity affecting the tribunal, the proceedings or the award; and

(3) an appeal on a point of law.

A recent decision of the Commercial Court (Great Station Properties SA v UMS Holding Ltd) illustrates just how limited a party’s options are. The case arose from a dispute under a joint venture agreement and related option agreement. The defendants sought to challenge the award on the ground of serious irregularity, arguing that the tribunal had made findings without making any attempt to reconcile them with the countervailing evidence and arguments put forward by the defendants. They also argued that the tribunal’s conclusions were illogical.

The Court, however, was having none of it. Dismissing the appeal, it held that the serious irregularity ‘weapon’ was available only in extreme cases and an allegation that the tribunal had failed to consider a piece of evidence (or failed to give it sufficient weight) did not constitute serious irregularity. It also held that all arbitration awards should be read in a reasonable and commercial way, expecting that no substantial fault will be found with them. This raises an important point that is often forgotten or misunderstood: the principle that the English courts will not interfere with an arbitration award unless there is an extremely clear basis for doing so. It is not the court’s role to consider the evidence afresh and impose its own conclusion.

In a further decision in the Great Station Properties litigation, the Commercial Court held that the award was in the public domain because the challenge hearing (during which the award had been referred to extensively) had been public. Troubled, however, by the suggestion that the claimant could now do what it wished with the award, the court went on to grant an order prohibiting its disclosure.

Arbitration will remain at the forefront of resolving reinsurance disputes. There is, however, a clear need for the market to understand and recognise the appeal process (and what it means and does not mean) when reviewing court appeals of arbitration awards.

Kiran Soar