Key takeaway

Challenging an arbitral award in England and Wales is difficult for an applicant. The pro-arbitration regime adopted in this jurisdiction ensures that only serious mistakes as to the tribunal’s jurisdiction, procedure, and application of English law result in setting aside an award.  However, the same pro-arbitration approach helps achieve recognition and enforcement. English courts are likely to recognise and enforce both domestic and international awards.

Therefore, parties to arbitration with assets in the United Kingdom should be aware that they are at risk of enforcement in case a tribunal decides against them. A challenge to such an award will be successful in very limited circumstances.

On what grounds can arbitral awards be challenged?

Arbitral awards can be challenged or appealed in the courts of England and Wales only on limited grounds prescribed by the Arbitration Act 1996.

1. Lack of substantive jurisdiction of the tribunal;

2. Serious irregularity that caused or will cause substantial injustice to the applicant;

3. An appeal on a point of law.

Lack of substantive jurisdiction and serious irregularity are mandatory and cannot be excluded by parties’ agreement. In contrast, an appeal on a point of law can be expressly excluded by party agreement.

Parties to arbitration must not delay in objecting to the tribunal’s jurisdiction. Under the Arbitration Act, a party can lose the right to object if it fails to raise the objection promptly after discovering the grounds for objecting to the tribunal’s jurisdiction.

Read our article on London arbitration and finality of arbitration awards for further analysis of the English courts’ restrained approach to post-award intervention.

What is lack of substantive jurisdiction?

Substantive jurisdiction is a tribunal’s authority to determine a particular matter in arbitration. For the tribunal to have substantive jurisdiction, three conditions must be met:

1. There is a valid arbitration agreement,

2. The tribunal is impartial, independent, and constituted in accordance with the requirements set out by the arbitration agreement and the law of the arbitration proceedings, and

3. The matters are being submitted to arbitration in accordance with the arbitration agreement.

Therefore, a tribunal which exceeds the authority conferred upon it by either the arbitration agreement or its procedural law will lack substantive jurisdiction. An award issued by such a tribunal can be challenged in the courts of England and Wales.

Read our article on section 67 jurisdiction challenges and implied authority for a recent example of how jurisdictional objections can arise.

What is serious irregularity in an arbitration award?

Serious irregularity is an irregularity in the way that the tribunal decided the matter before it which has caused or will cause substantial injustice to the applicant.

The law prescribes an exhaustive list of nine irregularities that can found a challenge. These focus, among other things, on the tribunal’s failure to act fairly and impartially, failure to rule on all issues put before it, uncertainty as to the award’s effect, and the tribunal exceeding its powers. These irregularities highlight shortcomings in the procedure by which the tribunal arrived at its decision. Therefore, an applicant cannot use this ground to challenge the factual and legal findings of the tribunal.

In addition to showing that the award is affected by one of the nine irregularities, the applicant must prove that an irregularity has caused or will cause substantial injustice to the applicant. This is a particularly high standard which will be satisfied where the applicant can demonstrate that the tribunal went so far in the conduct of the arbitration that justice calls out for it to be corrected. Therefore, applicants must note that only grave procedural errors which deprived or will have deprived a party of a fair trial will lead to a successful challenge on the ground of serious irregularity.

Can an arbitral award be appealed on a point of law?

In addition to challenges for lack of substantive jurisdiction and serious irregularity, the Arbitration Act 1996 provides that a party can appeal an arbitral award on a point of law. Such an appeal is limited to only a point of English law on which the tribunal ruled in its award, and which affects the rights of at least one of the parties. Thus, any points of foreign law or fact cannot be appealed under this mechanism.

The process of an appeal on a point of law is split into two stages: obtaining leave to appeal and the appeal itself.

Before a court can hear arguments on appeal, it must grant permission to appeal. The courts will only permit a party to appeal in limited circumstances where it finds the decision of the tribunal obviously wrong or open to serious doubt and of general public importance. Additionally, the court must find that it is just and proper for the court to determine the question despite the parties’ agreement to submit to arbitration.

Following the pro-arbitration approach, the test for a leave to appeal is very high and will only admit awards that have made serious mistakes of law or raise debatable points of law that are important to the law in general. Therefore, prospective appellants must make sure that their appeal is well-founded and passes the test.

Once the leave to appeal is granted, the High Court, as the first appellate court, will hear arguments and either allow or deny the appeal. Parties should expect these proceedings to lead to additional litigation costs. However, it is very rare that such an appeal will progress to the Court of Appeal and the Supreme Court.

Unlike with challenges for lack of substantive jurisdiction or serious irregularity, parties can contract out of the right to appeal a point of law. If parties to arbitral agreements wish to exclude the possibility of such an appeal, they should make sure that their contract expressly and unequivocally provides for such exclusion.

Read our article on appeals against arbitral awards and implied terms in commercial contracts for further discussion of section 69 appeals.

What is the time limit for challenging an arbitral award?

Under the Arbitration Act 1996, a challenge to an arbitral award must be brought within 28 days of the date of the award. In exceptional circumstances, this deadline can be extended by the court on application from the challenging party. However, the court will require cogent reasons for extending time. Therefore, special care must be taken to ensure that a challenge is filed within the 28 days period.

We covered this in more detail in our article on the Commercial Court’s refusal to extend time to appeal an arbitral award, which is a practical example of how strictly the time limit can operate.

What happens if an arbitral award challenge succeeds?

Where a challenge to an arbitral award is successful, the court which ruled on the challenge may set aside the award, remit it to the tribunal for reconsideration, or declare it of no effect.

These remedies can be a powerful tool in resisting an award by making it unenforceable in the jurisdiction of England and Wales. However, English courts have a pro-arbitration approach, meaning that they are likely to remit an award to the tribunal for reconsideration where appropriate.

As such, a party challenging an arbitral award must bear in mind that a challenge does not necessarily mean the end to the arbitral proceedings. One should also be aware that an arbitral award that was set aside in England and Wales may be enforceable in a different jurisdiction, depending on the circumstances.

How are arbitral awards recognised and enforced?

An arbitral award can be recognised and enforced in England and Wales by application to the court. There are several grounds for enforcement of an arbitral award. However, the list of available venues for enforcement is different for awards under domestic and international arbitration.

The difference between recognition and enforcement

Recognition is the process by which an arbitral award takes legal effect in the jurisdiction and can be relied on by way of defence in legal proceedings in that jurisdiction.

Enforcement, on the other hand, goes a step further and can lead to the right to claim compensation under the award directly in that jurisdiction. It follows that enforcement necessarily implies recognition, but an award can be recognised without being enforced.

How are domestic arbitral awards enforced?

Domestic awards are primarily enforced in the same manner as a judgment, a mechanism provided by the Arbitration Act 1996. This means that a party to an arbitral award can apply for the court’s permission to enforce their award. The court has discretion in deciding whether to permit the award to be enforced this way. Therefore, if an award is made by a tribunal without substantive jurisdiction, contrary to English public policy, or prejudices the rights of third parties, English courts may refuse to enforce it. However, the proceedings are usually dealt with summarily and will not go far beyond the evidence of the arbitration agreement and the original award.

Such an application results in an order from the court which will allow the applicant to enforce the award as if it were a court judgment. As such, a party to arbitration must be aware that both domestic and foreign awards may be subject to an enforcement order which can affect their UK assets.

How are international arbitration awards enforced?

Just like domestic awards, foreign awards can also be recognised and enforced with leave from the court. Moreover, the United Kingdom is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. An award from another state-signatory to the convention is automatically recognised in the UK.

Moreover, such an award can be enforced in the same way as a judgment by seeking leave from the court. Reflecting the pro-arbitration approach of English law, proceedings for enforcement of awards under the Convention are almost administrative. Once a party to an award provides the necessary documents, the courts will enforce the award unless one of the grounds for refusal applies. The list of these grounds is exhaustive and includes, among other things, awards contrary to public policy.

Parties with assets in the UK must hence consider the risks of engaging in arbitration in any of the 172 states which signed the New York Convention, as they can be subject to enforcement in the UK.

Read our article on challenging arbitration awards and the limits of the New York Convention for further analysis of Convention enforcement and challenges.

What is the procedure and time limit for enforcement?

The same procedure applies to enforcing an award in the same manner as a judgment and under the New York Convention. Applications must be made within six years of the date of the award to either the High Court or the County Court. An application must be supported by written evidence relevant to the award.

Therefore, parties to arbitration wishing to enforce their award should pay particular attention to time limits and providing the proper evidential basis to achieve recognition, especially in the context of long-lasting multi-jurisdictional enforcement of arbitral awards.

What steps should parties take when enforcing or challenging arbitral awards?

As a creditor under arbitral awards wishing to enforce them in England and Wales, consider whether you are in receipt of a domestic or foreign award. If your award is domestic, submit an application and support it with evidence of the arbitration agreement and arbitral award to receive leave from court to recognise and enforce an award in the jurisdiction. As a creditor under a foreign award, consider enforcement under the New York convention, while complying with the list of evidence required from the courts to obtain recognition.

As a debtor under an arbitral award, consider if there are any matters which indicate that the tribunal made serious mistakes as to the procedure or points of English law, or exceeded its authority. If it appears that it did at least one of these things, consider challenging the award and seeking to have it set aside by the English courts.

Barnes Law’s Arbitration team advises clients on enforcing arbitral awards, challenging arbitral awards, resisting enforcement, New York Convention issues, jurisdictional challenges and cross-border arbitration strategy.

For more information, please contact our Arbitration lawyers to discuss how we can support you.

Written by Barnes Law Managing Partner Yulia Barnes.