The enforcement of arbitration awards should be fairly straightforward in countries that are Contracting States to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the New York Convention), as it compels them to recognise and enforce awards made by each other.
There are 172 Contracting States, including the UK, so arbitration awards in those states should be recognised without complications.
However, there are circumstances (contained within Article V of the New York Convention) in which the recognition and enforcement of an award may be refused. They are:
- The arbitration agreement is invalid
- The party against whom arbitration was started was not given proper notice of the appointment of the arbitrator, or of the proceedings themselves.
- The award decides matters beyond the scope of the arbitration
- The composition of the arbitral tribunal was contrary to the parties’ agreement.
- The award has not yet become binding on the parties under the law of the country in which it was made, or the award has been set aside by a competent authority
- The subject matter is not capable of settlement by arbitration under the law of that country
- The recognition or enforcement of the award would be contrary to public policy
Some of these issues are reflected in UK law under the Arbitration Act 1996 (AA 1996). Under the AA 1996, the grounds for challenging an arbitral award are:
- s.67: the arbitral tribunal did not have substantive jurisdiction to decide the award
- s.68: there was a serious procedural irregularity affecting the tribunal, the proceedings or the award.
- s.69: appealing to court on a question of law arising out of an award.
When to Make a Challenge
A challenge to an arbitration award should be made as soon as possible and without delay.
In the case of challenging the jurisdiction of the arbitration tribunal, a party should raise their complaint during the statements of case, and not later than the submission of the statement of defence.
After the award, if a party wants to make a challenge, they should do so by way of application to the Commercial Court in the UK. The Commercial Court is the principal supervisory court for international arbitrations with a London seat.
An application to the Commercial Court in the UK to challenge an award under sections 67 or 68 of the AA 1996, or to appeal under section 69, must be brought within 28 days of the date of the award (section 79(3) AA 1996, and O.9.1 Commercial Court Guide).
The Court has the power to vary this period but any challenge must be pursued “without delay” and the Court will require cogent reasons for extending time.
Court Intervention
The Commercial Court, as far as possible, takes a non-interventionalist stance on arbitration.
The Court bears in mind that the major purpose of the AA 1996 is to ‘reduce drastically the extent of intervention of courts in the arbitral process.’[1] Too much intervention by the courts undermines the finality of arbitral decisions and dilutes international arbitration as a dispute resolution mechanism.
Instead the Court has a supervisory role in arbitration proceedings. It protect parties from breaches of due process, such as the tribunal exceeding its mandate.
That means that there is a high hurdle for these applications to succeed.
The success rate of challenges made to awards where the arbitral seat is London is low – around 11% of applications filed in 2019-2020, according to the Commercial Court.
In its annual report of 2022-2023 (published in February 2024) the Commercial Court shared statistics on the number of successful appeals and challenges.
- There were 46 appeals under section 69. Only nine of these had permission granted.
- There were 25 applications under section 68. This is down 37% from the previous year. None were successful at the time of the publication, but 11 were pending.
- There were eight applications filed under section 67, which was a 70% reduction from the previous year. Two were dismissed on the papers, one was discontinued, and five remained pending.
The decline in applications may reflect an understanding in the legal industry that the hurdles are very high to succeeding in challenges to arbitral awards. Only the strongest cases will advance to the Commercial Court, and even then the chances of success seem slight.
Guidance and Changes to Legislation to Minimise Appeals
There is guidance from the International Bar Association (IBA) that should help to reduce challenges to arbitral awards even further. Their Guidelines on Conflicts of Interest in International Arbitrations gives direction on what arbitrators are supposed to disclose to maintain their impartiality and independence.
This should result in fewer challenges on the grounds of alleged bias. In international arbitration, experienced arbitrators are selected time and again, particularly if they have subject matter expertise. As arbitrators are routinely instructed by the same lawyers and law firms, there could be allegations of an amicable relationship and preferential treatment. This guidance seeks to address that.
In addition, the UK’s updated Arbitration Act is expected to become law later this year. The Bill proposes to codify a duty of disclosure for arbitrators, which should achieve the same result of minimising allegations of bias.
Conclusion
Arbitration remains an attractive option for parties seeking to resolve a dispute, particularly in cross-border scenarios. The New York Convention makes enforcement relatively straightforward, and it’s often easier to enforce an arbitration award in a Contracting State than it is to carry out enforcement proceedings of a court order or judgment abroad.
Further, challenges and appeals to arbitration awards are only permitted in limited circumstances. Wherever possible, the Courts try not to intervene. That makes arbitration awards final in the most part, except where there has been a clear miscarriage of justice, and the challenge falls within one of the permitted statutory routes to challenge or appeal.
Source
- Lesotho Highlands Development Authority v Impregilo SpA [2005] UKHL 43
