Enter to open, tab to navigate, enter to select
No appeal from arbitration award on a question of fact (High Court)
Practical Law UK Legal Update Case Report 3-503-8614 (Approx. 5 pages)
No appeal from arbitration award on a question of fact (High Court)
by PLC Arbitration
| Published on 10 Nov 2010 • England, Wales |
The High Court has considered whether parties could agree to appeals from arbitration awards on questions of fact in Guangzhou Dockyards Co Ltd v ENE Aegiali 1 [2010] EWHC 2826 (Comm).
Speedread
The High Court has considered an application by the defendant to strike out part of an appeal against an arbitration award made by the claimant on a question of fact. Blair J ordered that the relevant part of the appeal be struck out. In doing so, he considered the scope and nature of the court's jurisdiction to allow an appeal on an issue of fact, and the construction of the underlying arbitration agreement.
The court's jurisdiction to hear an appeal on a question of law arises from section 69 of the Arbitration Act 1996 (AA 1996). The claimant argued that the parties had agreed to appeals on issues of fact as well as law, and that the principle of party autonomy required the court to give effect to that agreement by accepting jurisdiction to determine the appeal. The judge rejected this argument, holding that, on a true construction of the agreement, the parties did not intend to agree to an appeal of any issue arising out of the award. Given that, in practice, arbitrators' factual findings are not subject to an appeal, clear provision should be made in the contract before it could be concluded that the parties had reached such an agreement. There was nothing in the language of the clause to warrant a wider construction.
Furthermore, concurring with the defendant, the judge concluded that the opening words of section 69 ("unless otherwise agreed by the parties") referred to agreements relating to appeals on a question of law, and should not be construed as permitting the parties to agree to appeals on a question of fact. It was "very doubtful" whether the English court had any jurisdiction to entertain an appeal on a factual issue, even if the parties had agreed to it.
The case contains an interesting analysis of the court's jurisdiction in relation to an appeal under section 69 of the AA 1996, and demonstrates the tension between party autonomy on the one hand, and the scope of the court's powers of intervention, as set out in section 1(c) of the AA 1996. The judge's conclusions regarding the scope of the court's jurisdiction in relation to appeals is consistent with international case law, including, in particular, US authorities. (Guangzhou Dockyards Co Ltd v ENE Aegiali 1 [2010] EWHC 2826 (Comm) (5 November 2010).)
Background
Section 1 of the Arbitration Act 1996 (AA 1996) sets out general principles and provides:
"(b) The parties should be free to agree how their disputes are resolved, subject only to such safeguards as are necessary in the public interest
(c) in matters governed by this Part the court should not interfere except as provided by this Part."
Appealing an award
Section 69 of the AA 1996 provides:
"Unless otherwise agreed by the parties, a party to arbitral proceedings may (upon notice to the other parties and to the tribunal) appeal to the court on a question of law arising out of an award made in the proceedings".
Section 81(2) of the AA 1996 provides:
"Nothing in this Act shall be construed as reviving any jurisdiction of the court to set aside or remit an award on the ground of errors of fact or law on the face of the award".
In The Chrysalis [1983] 1 Lloyds Rep 503, the question arose as to the proper scope of an appeal on a question of law. Mustill J referred to three stages in the arbitrator's reasoning:
- Ascertaining the facts.
- Ascertaining the law.
- In the light of the facts and law so ascertained, reaching a decision.
He went on to explain that it is the second stage of the process that is the proper subject matter of an appeal. Although the case did not relate to an attempt to appeal an arbitration award on issues of fact, he concluded (obiter) that the court would not have had jurisdiction had the parties agreed to a wider review:
"The Court has no jurisdiction to review the arbitrator's decision otherwise than by an 'appeal' on a 'question of law'".
In The Baleares [1993] 1 Lloyds Rep 215, an attempt to appeal the arbitrators' findings on foreseeability and remoteness was held to be illegitimate because these were issues of fact (or mixed fact and law) and were not appealable. Steyn LJ noted that:
"The principle of party autonomy decrees that a Court ought never to question the arbitrators' findings of fact."
An issue of foreign law is classified as an issue of fact for the purposes of appeals under section 69 of the AA 1996.
Facts
The defendant ship owners entered into a contract with the claimant dockyard company relating to conversion of a carrier ship. The contract was governed by English law and the parties agreed to LMAA arbitration in London.
Article 22 of the contract provided that:
"The Parties agree that either Party may appeal to the English High Court on any issue arising out of any award. The Parties agree that any final unappealable judgment of the English High Court ... shall be referred back to the arbitrators and the arbitrators shall issue a final unappealable award in the form of the said judgment".
A dispute arose and an arbitration award was issued in the defendant's favour. The claimants issued two claims in the Commercial Court, one being an appeal on issues of law, and the second being an appeal on a questions of fact (namely, Chinese law).
Claimant's submissions
The claimant accepted that this was not an appeal on a question of law under section 69 of the AA 1996, nor a procedural challenge under section 68. It put its case on the basis of party autonomy, arguing that the most important feature of the arbitral process was that it gave the parties the opportunity to choose the manner in which their disputes were resolved. Everything is permitted, it argued, unless prohibited by statute.
By section 4 of the AA 1996, the mandatory provisions of the AA 1996 were limited to those listed in Schedule 1 to the AA 1996. All other provisions (that is, the non-mandatory provisions) allowed the parties to make their own arrangements by agreement. Section 69 was a non-mandatory provision and although only concerned with appeals on a question of law, the words at the beginning of section 69 ("unless otherwise agreed by the parties") expressly contemplated that the parties could agree something different.
Alternatively, the claim fell within the inherent jurisdiction of the court. There was no general principle that the parties could not confer jurisdiction on a court which the court did not otherwise possess. An appeal on the facts was not expressly prohibited by the AA 1996 and was consistent with party autonomy.
Defendant's submissions
The defendant argued that the court's power to entertain an appeal is statutory and only appeals on a point of law are permitted under the AA 1996. The parties cannot, by agreement, confer jurisdiction where none exists and therefore, this part of the appeal should be struck out. The words "unless otherwise agreed by the parties" at the beginning of section 69 simply enable the parties to exclude an appeal altogether if they wish to do so. Further, on a true construction of the agreement, the parties had not agreed to an appeal on the facts.
Decision
Blair J ordered that the claimant's appeal on the Chinese law issues be struck out.
There were two issues to be considered. First, whether the court had jurisdiction to consider an appeal from an arbitration award on a question of fact. Secondly, on a construction of the arbitration clause in the contract, whether the parties had actually agreed to an appeal on the facts in this case.
Jurisdiction of the court
Referring to The Baleares case, Blair J noted that the court's jurisdiction to hear an appeal on a question of law arises from section 69 of the AA 1996. The claimant's primary position was that its appeal here was a section 69 appeal, albeit it was an appeal on the facts, because section 69 is a non-mandatory provision and is expressly stated to be subject to contrary agreement. However, the difficulty with this argument is that section 69 is expressly limited to appeals on a point of law. Concurring with the defendant, the judge concluded that the opening words of section 69 must refer to an agreement by the parties in the context of an appeal on a question of law, and should not be construed as permitting the parties to expand the court's jurisdiction to include an appeal on a question of fact.
Alternatively, the claimant had argued that the court could deal with an appeal on the facts under its inherent jurisdiction. However, Blair J concluded that any appeal to the court would be an "intervention" in the arbitration process, as referred to in section 1(c) of the AA 1996. The effect of section 1(c) was that the court's powers of intervention were limited to those given by the AA 1996. There was no inherent jurisdiction to hear an appeal from an award outside the terms of the AA 1996 and the parties could not, by agreement, confer such jurisdiction on the court.
Mustill J's obiter remarks in The Chrysalis, supported this view. Further, section 81(2) of the AA 1996, although non-mandatory, supports the view that the AA 1996 contains a complete account of the court's powers of intervention in the arbitral process.
Accordingly, Blair J concluded that it is very doubtful that the court has jurisdiction to hear an arbitral appeal on a question of fact, even if the parties were to agree to such an appeal.
Construction of the arbitration clause
The question of whether the parties had, in fact, agreed to an appeal on the facts depended on the construction of Article 22 of the contract. The claimant had argued that, since Article 22 did not expressly limit any appeal to a question of law, and referred to "issue" rather than "question", the parties had agreed that an award could be appealed on any issue including a factual one, and that it was not for the courts to substitute a different bargain. Blair J concluded the parties did not intend to agree to an appeal of any issue arising out of the award. Given that, in practice, arbitrators' factual findings are not subject to an appeal, clear words would be required before it could be concluded that the parties had reached such an agreement. His view was that, here, the parties intended to dispense with the need for permission to appeal on a point of law, and that there was nothing in the language of the clause to warrant a wider construction.
Comment
Although the judge's decision turned, ultimately, on the construction of the arbitration clause, the case sets out an interesting analysis of the court's jurisdiction in relation to an appeal from an arbitration award, in particular, in its discussion of its inherent jurisdiction. Had the construction of the relevant contractual provision pointed more firmly towards an intention by the parties to agree to an appeal on a question of fact, it appears that the judge would have refused to recognise the parties' agreement, despite the principle of party autonomy. The judge's views are in line with those of commentators. As noted by the judge in this case, in Arbitration Law (Informa Law), Professor Merkin comments:
"it remains the case that the conditions which apply to an appeal must be satisfied. First the Arbitration Act 1996, s 69 applies only to appeals on points of law. It is not, therefore, open to the parties who have agreed that an appeal is to be permitted without the need for permission of the court to be obtained, to seek to extend that right of appeal to other matters".
The judge's approach is also consistent with overseas case law, in particular, Hall Street Assoc v Mattel, 552 US 576 (2008), in which the US Supreme Court held that certain grounds for vacating and modifying an arbitral award (Federal Arbitration Act (9 USC §§ 10-11)) could not be expanded by the parties' agreement.