S.68 Challenge Not Available Where Inadequate Reasons In Awards

CMS review the decision in Pakistan v Broadsheet LLC [2019] EWHC 1832 (Comm), where the Court held that an arbitration tribunal’s failure to explain how it had valued a loss of chance claim did not of itself constitute a reason for the unsuccessful party to challenge the award under s.68 Arbitration Act 1996.  In doing so, the court indicated that a previous case on inadequate reasoning, Compton Beauchamp Estates Ltd v Spence [2013] EWHC 1101 (Ch), may have been wrongly decided because the judge in that case did not have all of the relevant authorities before him.

The Court set out the principles relevant to a challenge under Section 68:

  • Section 68 imposes a high hurdle for applicants – Lesotho Highlands Development Authority [2006] 1 AC 221 at [26]: “a major purpose of the new Act was to reduce drastically the extent of intervention of courts in the arbitral process”;
  • There will only be a serious irregularity if what has occurred is “far removed from what could reasonably be expected from the arbitral process”: Field J in The Ojars Vacietis [2012] 2 Lloyd’s Rep 181 at [30];
  • The importance of upholding arbitration awards has been repeatedly stressed: Bingham J in Zermalt Holdings SA v Nu Life Upholstery Repairs Ltd [1985] 2 EGLR 14 (cited in The Ojars Vacietis at [34]):

“as a matter of general approach the courts strive to uphold arbitration awards. They do not approach them with a meticulous legal eye endeavouring to pick holes, inconsistencies and faults on awards with the objective of upsetting or frustrating the process of arbitration. Far from it. The approach is to read an arbitration award in a reasonable and commercial way expecting, as is usually the case, that there will be no substantial fault that can be found with it.”

  • The requirement of “substantial injustice” in Section 68 is additional to that of a serious irregularity and an applicant must establish both: Terna Bahrain Holding Co YJJ v Bin Kamel Al Shamzi [2013] 1 Lloyds Rep 86 at [85 (vi)].

The Court concluded [48]:

“In my view for the reasons discussed, it is not open to the claimants to assert that there has been a failure to conduct the proceedings in accordance with the procedure agreed by the parties amounting to a “serious irregularity” by reason of a failure to provide a more detailed explanation on how the arbitrator reached his conclusions on the evidence… the award contains reasons for its conclusion on the issues and the parties have agreed that the tribunal should determine matters of fact. By requiring a further explanation of how aspects of the evidence were dealt with, the court would have to review the findings of fact and the evaluation of such evidence by the tribunal. On the authorities that is not a permissible approach and would be contrary to the limited role for the courts given by the Act. For these reasons, it is equally not open to the claimants to assert that there has been a failure to comply with the requirements as to the form of the award and thus a “serious irregularity” under section 68.”

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About Phillip Rompotis

Phillip practices as a barrister and arbitrator in Hong Kong. He has over 25 years’ litigation and arbitration experience in commercial disputes relating to construction & engineering, financial services, joint venture & shareholders agreements, technology, trusts, property and landlord & tenant. He is a Fellow of the Chartered Institute of Arbitrators, the Singapore Institute of Arbitrators, the Malaysian Institute of Arbitrators, and a member of various lists/panels of arbitrators.

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