COURT SETS ASIDE ARBITRAL AWARD FOR SERIOUS IRREGULARITY
By Gordon Bell and Christopher Richards
The recent Commercial Court decision in (1) RJ (2) L Ltd v HB provides a rare example of a party successfully challenging an arbitral award on grounds of serious irregularity. It also considered whether the English court has the power to remove an arbitrator where it makes a finding of serious irregularity. We look at how to challenge arbitral awards before the court, and how this challenge succeeded where many fail.
Challenging arbitral awards One of the basic principles of the (English) Arbitration Act 1996 (the Act) is that the court should only intervene in arbitration in limited circumstances. In accordance with this non-interventionist principle, the Act provides limited grounds on which arbitration awards can be challenged before the court. In short, they are: • Challenge on grounds that the tribunal lacked substantive jurisdiction (s.67 of the Act); • Challenge on grounds of serious irregularity (s.68 of the Act); and • Appeal on a point of law (s.69 of the Act) (unless the parties have excluded the right of appeal). Not only are the grounds of challenge limited, but successful challenges for serious irregularity are very rare. Statistics published by the Commercial Court earlier this year revealed that, of 122 serious irregularity challenges brought between 2015 and 2017, only one was successful. 2018 has however seen the number of successful s.68 challenges creep up. So what is serious irregularity, and what does a party have to show to succeed in challenging an award on this ground? Serious irregularity Under s.68 of the Act, a party can challenge an arbitral award on grounds of serious irregularity affecting the tribunal, the proceedings or the award. The applicant must demonstrate that: • The serious irregularity falls within one of the prescribed types in the Act. These include failure by the tribunal to comply with its duties or deal with all the issues put to it, the tribunal or any arbitral institution exceeding its powers, or the award being obtained by fraud; and • The serious irregularity has caused, or will cause, substantial injustice to the applicant - in short that the irregularity affected the outcome of the proceedings. If the court is satisfied that there has been a serious irregularity causing substantial injustice, then it can either remit the award to the tribunal for reconsideration or, if that is not appropriate, set the award aside or declare it to be of no effect. A successful s.68 challenge RJ & L Ltd v HB concerned a final award rendered by a sole arbitrator in ICC proceedings concerning an investment in the banking sector.