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21 November 2013
English arbitration law allows a party to arbitral proceedings to apply to the court to challenge an award on the grounds of serious irregularity affecting the tribunal, the proceedings or the award. For this purpose, Section 68(2) of the Arbitration Act 1996 sets out the meaning of 'serious irregularity', which includes a failure by the tribunal to deal with all issues that were put to it. If there is shown to be a serious irregularity, the court may remit the award to the tribunal, set the award aside or declare the award to be of no effect (each in whole or part).
In Primera Maritime (Hellas) Limited v Jiangsu Eastern Heavy Industry Co Ltd(1) the High Court recently dealt with such an application, finding that a serious irregularity had not occurred. The court emphasised that Section 68 is concerned with whether due process has been observed, not whether the tribunal "got it right".
The case reiterates the high threshold that must be met to establish a serious irregularity and the reluctance of the courts to set aside an award on such grounds.
The claimants agreed to purchase several bulk carriers to be built at the defendants' shipyard in China. Disputes arising under the two sales contracts were referred to arbitration in London. The claimants alleged that the defendants had been in anticipatory breach of contract by refusing to perform the contracts in accordance with their terms.
The tribunal dismissed the claims, holding that although the defendants had renounced the contracts in October and November 2007, the claimants thereafter had affirmed the contracts.
The claimants applied under Section 68 of the Arbitration Act to set aside the award and remit it to the tribunal. Section 68(1) allows a party to arbitral proceedings to apply to the court to challenge an award on the grounds of serious irregularity affecting the tribunal, the proceedings or the award.
The claimants submitted that the tribunal failed to deal with two issues that had been put to it:
The court confirmed that in order to succeed under Section 68, an applicant must show a serious irregularity that falls within the closed list of categories in Section 68(2), and that caused or will cause the party substantial injustice.
Where it is alleged that the tribunal failed to deal with all of the issues that were put to it, the court should consider four questions:
The court reiterated earlier authorities stating that a "high threshold" is required to establish a serious irregularity. Reference was made to the guidance in the Departmental Advisory Committee on Arbitration report(2) and numerous subsequent cases that Section 68 is 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 for it to be corrected.
The court found that the claimants' real complaint was that the tribunal had reached the wrong result. Such a belief is not a matter in relation to which an arbitral award is susceptible to challenge under Section 68. The court criticised the claimants for subjecting the relevant sections of the tribunal's award to a minute textual analysis with a view to demonstrating a failure to deal with the question of continuing renunciation. A number of cases have emphasised that the court should read the award in a reasonable and commercial way, and not by looking for inconsistencies and faults.
The court restated the function of Section 68 as a last resort in circumstances where a party to proceedings considers that a serious irregularity affected an arbitral award. This decision again highlights the pro-arbitration stance of the English courts and their unwillingness to set aside an award simply where a party is dissatisfied with its findings.
For further information on this topic please contact Marie Berard or Benjamin Barrat at Clifford Chance LLP by telephone (+44 20 7006 1000), fax (+44 20 7006 5555) or email (firstname.lastname@example.org or email@example.com). The Clifford Chance website can be accessed at www.cliffordchance.com.
(1)  EWHC 3066 (Comm).
(2) Departmental Advisory Committee on Arbitration Report on Arbitration Bill 1996.
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