Serious irregularity: a high hurdle for challenging arbitration awards

In a recent decision, the English Commercial Court held that the contention that an arbitral tribunal had ignored or failed to have regard to evidence relied on by one of the parties could not form the basis of an allegation of serious irregularity within section 68(2) of the Arbitration Act.

Section 68 – serious irregularity

Section 68 of the Arbitration Act 1996 (the Act) permits a party to challenge an arbitration award on grounds of serious irregularity. It provides:

“(1) A party to arbitration proceedings may (upon notice to the other parties and to the tribunal) apply to the court challenging an award in the proceedings on the ground of serious irregularity affecting the tribunal, the proceedings or the award…”

The serious irregularity complained of must be one which has caused, or will cause, substantial injustice to the applicant. The irregularity can relate to the tribunal, the proceedings or the award but must fall within one of the following grounds set out in section 68(2) of the Act:

• failure by the tribunal to comply with section 33 (general duty of tribunal [i.e. to act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting his case and dealing with that of his opponent])
• the tribunal exceeding its powers (otherwise than by exceeding its substantive jurisdiction, dealt with in section 67 of the Act)
• failure by the tribunal to conduct the proceedings in accordance with the procedure agreed by the parties
• failure by the tribunal to deal with all the issues that were put to it
• any arbitral or other institution or person vested by the parties with powers in relation to the proceedings or the award exceeding its powers
• uncertainty or ambiguity as to the effect of the award
• the award being obtained by fraud or the award or the way in which it was procured being contrary to public policy
• failure to comply with the requirements as to the form of the award
• 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.

According to the House of Lords in Lesotho Highlands Development Authority v Impregilo SpA and others [2006] 1 AC 221, section 68(2) is a “closed list”.  A Report by the Department Advisory Committee on Arbitration noted that the remedy is intended to be

“only available in extreme cases where the tribunal had gone so wrong in its conduct of the arbitration that justice calls out for it to be corrected”.

UMS Holding Limited v Great Station Properties SA

In this recent case, UMS applied to the Commercial Court to set aside an award made in favour of Great Station Properties. UMS alleged that the tribunal had failed to comply with its general duty to act fairly and impartially, and failed to deal with all the issues that were put to it.

A major part of UMS’ challenge centred on the tribunal’s perceived lack of reconciliation of its findings with the countervailing evidence and arguments and the fact that evidence that was supposedly favourable to UMS was not mentioned in the award. UMS did recognise that the tribunal is not compelled to refer to the competing evidence and arguments in its award, but argued that this was an exceptional case; there was a “wholesale failure” in this case for the tribunal to consider “large chunks of crucial evidence”.

The judgment

Following consideration of a wealth of case law in this area, Teare J found that “a contention that the tribunal has ignored or failed to have regard to evidence relied upon by one of the parties cannot be the subject matter of an allegation of a serious irregularity within section 68(2)(a) or (d)“. He gave four key reasons for this decision:

• the duty of the tribunal is to decide the essential issues and give its reasons for doing so, it does not have to refer to all the evidence in its award
• the assessment and evaluation of evidence is a matter for the tribunal, not the court
• it is impermissible for the court to determine why the tribunal has not referred to a piece of evidence. There may be many reasons why evidence is not referred to in an award, and it is for the tribunal, not the court, to assess the evidence
• section 68 is concerned with due process, not whether the tribunal has made the “right decision” in fact or in law.

Commentary

The decision in UMS is unsurprising but nevertheless a helpful reminder that the grounds for challenging an award under section 68 of the Act are narrow.  Interestingly, Teare J accepted that there might be circumstance where overlooked documents amount to a serious irregularity, for example in circumstances where a tribunal admits it has overlooked documents, but absent such an admission, it is not for the court to investigate the evidence to see whether it is so.

For more information, please contact Naomi Hall, Solicitor in the Commercial Disputes team, or Garbhan Shanks, Partner in the Commercial Disputes team.