Arbitration – Challenging Awards

A common question raised by parties dissatisfied with an arbitral award is, “Can I challenge this?”

Broadly, an arbitral award is final and binding. This is a key feature of arbitration, which aims to provide a conclusive resolution to disputes. However, there are limited grounds on which a party may challenge an award. These grounds, which rarely involve revisiting the tribunal’s decision on law or facts, are usually governed by the law of the arbitration seat.

If a challenge is successful, the award (or the part challenged) may be declared null and void.

Grounds of Challenge in England & Wales

If the issues of a losing party cannot be resolved through correction or interpretation of the award and there is no process for internal review, they may seek to challenge the award in the national court of the arbitration seat, referred to as the “competent state court”.

In England and Wales, the Arbitration Act 1996 (AA96) sets out three broad grounds for challenge:

1. Section 67 of the AA96: Substantive jurisdiction

This includes challenges based on issues such as the validity of the arbitration agreement, the tribunal’s jurisdiction, or whether the tribunal exceeded its powers. A challenge under Section 67 focuses on whether the tribunal had the authority to make the award in question.

1. Section 68 of the AA96: Serious irregularity

This applies when there is a procedural failure that causes substantial injustice, such as a failure to follow due process or the tribunal exceeding its powers.

1. Section 69 of the AA96: Appeal on a point of law

In certain circumstances, parties can appeal an arbitral award on the grounds that the tribunal made an error in law. However, the threshold for such appeals is high, and parties can agree to exclude this right.

Challenging Substantive Jurisdiction (Section 67)

Section 67 provides that:

“A party to arbitral proceedings may….apply to the court

1. Challenging any award of the arbitral tribunal as to its substantive jurisdiction or
2. For an order declaring an award made by the tribunal on the merits to be of no effect, in whole or in part, because the tribunal did not have substantive jurisdiction.”

Under Section 67, a party can apply to the court to challenge an arbitral award on the basis of the tribunal’s substantive jurisdiction. This includes questions about the validity of the arbitration agreement, the scope of the agreement, and the proper constitution of the tribunal. Notably, parties cannot contract out of Section 67. However, if a party participates in the arbitration despite being aware of a jurisdictional objection, they may lose the right to challenge under this section.

Challenging Serious Irregularity (Section 68)

Section 68 of the AA96 provides that:

“A party to arbitral proceedings may…apply to the court challenging an award in the proceedings on the round of serious irregularity affecting the tribunal, the proceedings or the award…

Serious irregularity means….

1. Failure by the tribunal to comply with section 33 (general duty of tribunal);
2. The tribunal exceeding its powers…;
3. Failure by the tribunal to conduct the proceedings in accordance with the procedure agreed by the parties;
4. Failure by the tribunal to deal with all the issues that were put to it;
5. Any arbitral or other institution or person vested by the parties with powers in relation to the proceedings or the award exceeding its powers;
6. Uncertainty or ambiguity as to the effect of the award;
7. The award being obtained by fraud or the award or the way in which it was procured being contrary to public policy;
8. Failure to comply with the requirements as to the form of the award; or
9. Any irregularity in the conduct of the proceedings or in the award which is admitted by the tribunal or by any arbitral or other institution or person vested by the parties with powers in relation to the proceedings or the award.”

Section 68 allows a party to challenge an award based on serious procedural irregularities that affect the tribunal, the proceedings, or the award itself.

The irregularities must cause substantial injustice and may include failures to comply with the tribunal’s duties, improper procedure, or issues like ambiguity in the award. Like Section 67, parties cannot opt out of this provision, and they risk losing the right to challenge if they do not object to an irregularity when it arises during arbitration.

Appealing on a Point of Law (Section 69)

Section 69 provides that:

“(1) Unless otherwise agreed by the parties, a party to arbitral proceedings may (upon notice to the other parties and to the tribunal) appeal to the court on a question of law arising out of an award made in the proceedings.

An agreement to dispense with reasons for the tribunal’s award shall be considered an agreement to exclude the court’s jurisdiction under this section.”

Section 69 permits an appeal to the court on a question of law arising from the arbitral award. Before appealing, parties must confirm their rights to do so, as they may have agreed to opt out of this process. If no opt-out exists, the court will only grant permission to appeal if it is satisfied that the legal question significantly affects the parties’ rights, was part of the tribunal’s determination, and meets one of the following criteria:

1. The tribunal’s decision is clearly wrong, or
2. The issue is of public importance, and the tribunal’s decision is open to serious doubt.
   These criteria set a high bar for appeals, and without meeting them, permission will not be granted.

Procedural Requirements and Time Limits

When the arbitration seat is in a neutral country, the lawyers involved may not be qualified to file a challenge in the local court. For example, an English lawyer handling arbitration seated in New York may not be qualified to argue a challenge before the US District Court under its procedural law. In such cases, the challenging party must engage local counsel with relevant expertise. In England and Wales, challenges are made using “Form N8: Claim Form (arbitration)”.

Challenges under Sections 67, 68, and 69 must be filed within 28 days of the award date, or from the notification date of an appeal or review result. However, courts may extend this deadline in certain cases.

Contact Us

Edwin Coe specialises in both domestic and international arbitration. For guidance on challenging arbitral awards, please contact David Greene and Thomas Johnson of our commercial disputes team.