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Fortior Arbitration Guide - Lecture 8 - Appeals and Enforcement

This lecture explains the most common grounds upon which arbitral awards may be appealed and upon which their enforcement may be opposed in local courts. 


In this lecture, I will discuss how arbitration awards may be appealed and how to oppose their enforcement. For those of you who are new to the arbitration, the award means the Tribunal’s final ruling on the parties’ dispute. Appeal means a challenge to the awards in the Court of the Seat of the arbitration, as a result of which the Court of the Seat may either modify the award or set aside the award. And enforcement is a process whereby the winning party seeks to implement the award, usually by collecting upon the losing party’s assets or property in order to satisfy the award.


Law Applicable To Appeals And Enforcement


Appeals are governed by the Law of the Seat of the arbitration. If your arbitration seat in England, you will be subject to the Arbitration Act 1996 and the applicable case law. Enforcement is governed by the law of the country where you seek to enforce the award. But the laws of the different countries normally have the same grounds upon which the enforcement may be opposed. These are the grounds set out in the New York Convention on Recognition Enforcement of Foreign Arbitral Awards. There are 159 signatories to the Convention and most countries follow the rules set out in the Convention insofar as enforcement is concerned. Both the Convention and national laws have three broad grounds upon which awards may be appealed and upon which the enforcement may be opposed.


The grounds are:

  • Lack of jurisdiction

  • Serious irregularity in the proceedings

  • Tribunal getting the law wrong or acting against public policy

Appeal On Points Of Law And Public Policy Grounds

I will first cover appeal on points of law and public policy grounds. If your arbitration is seated in England’s appeals and points of law will be governed by Section 69 of Arbitration Act 1996. Such appeals are relatively rare and most of them do not go very far. Some arbitration rules, for example, Article 26(8) of LCIA Rules exclude rights to appeal to the extent that this is permitted by the applicable law. Section 69 of Arbitration Act permits such exclusion, therefore, if your arbitration is seated in England and you are subject to the LCIA Rules, it is normally not possible to appeal on the point of law. Even if you are not subject to the LCIA Rules, appeals and points of law are subject to very serious obstacles. Section 69 of the Arbitration Act provides that appeal on the point of law is possible if all parties agree, but winning parties do not normally agree. If the parties do not agree, then appeal is only possible with the leave of the Court, but the Court will normally grant the leave unless the question of law is one of general public importance or the Tribunal obviously got the law wrong. This is a very difficult test to satisfy.

Opposing Enforcement On Public Policy Grounds


It is not normally possible to oppose enforcement on the basis that the foreign Tribunal got the law wrong. However, it may be possible to do so if the foreign award is contrary to the law or public policy of the country where enforcement is sought. Public policy is one of the grounds upon which enforcement may be denied pursuant to Article 5 of the New York Convention, but such arguments succeed very rarely. Examples of cases where they have succeeded include Telenor Mobile and Stone LLC, where the Ukrainian Court refused recognition of a nuke award on the basis that prior to the award being issued, another Ukrainian Court had issued a final judgement on the same issues. The award was therefore contrary to the judgement and also the public policy of Ukraine. Another example is Subway and Leitch, where a Canadian Court refused recognition of an award made in favour of subway, on basis that this would lead to double recovery. Bottom line, if you are the losing party and want to appeal, try to think of an argument other than that the Tribunal got the law wrong. Appeals and points of law, as well as attempts to oppose enforcement and public policy grounds succeed very rarely and therefore, your arguments must be very strong indeed.

Appeals And Opposing Enforcement On Jurisdictional Grounds

Another grounds upon which arbitral awards may be challenged is lack of jurisdiction. Arbitral Tribunals have the power to rule in their own jurisdiction. Therefore, jurisdictional challenges must in the first instance be made to the Tribunal itself. They must be made as soon as possible, because failure to make a challenge promptly might be treated as a submission to the Tribunal jurisdiction. Jurisdictional challenges are usually made on one of the following 3 grounds. Firstly, the respondent did not agree to arbitration. Secondly, the respondent agreed to arbitration but not to the sort of arbitration which the Claimant commenced. Thirdly, the Tribunal is ruling or has ruled on issues which are not covered by the arbitration agreement. If the challenge is made to the Tribunal, but the Tribunal dismisses it, the Tribunal’s decision may be challenged before the Courts of the Seat of the Arbitration and the enforcement of the Tribunal’s award may be opposed on jurisdictional grounds. Similarly, to challenges to the Tribunal, appeals to Court must be made as soon as possible after the tribunal’s award. National laws often prescribe strict time limits for challenging awards, some as short as four weeks.


Three Types Of Jurisdictional Issues: 1. Absence of an agreement to arbitrate.

I will now cover three broad grounds upon which the Tribunal’s jurisdiction may be challenged. I should note that, unlike the right to appeal on a point of law, it is not possible to exclude the right to appeal on jurisdictional grounds. The first ground is the absence of a valid agreement to arbitrate. A valid agreement to arbitrate is essential in any arbitration, it is not possible to enforce an award under the New York Convention, if there is no valid agreement to arbitrate. If there is no valid arbitration agreement, national Courts can set aside the Tribunal’s award, for example, under Section 67 of the Arbitration Act 1996. In some cases, it is obvious that there is no valid agreement to arbitrate or that the agreements are unenforceable. For example, an agreement to arbitrate may be forged or it may be that the person who signed it obviously had no authority to do so, but other cases may be less straightforward. For example, two parties may have concluded a sale contract and the third party may have guaranteed the obligations of one of them. If there is no arbitration clause under the guarantee, then the guarantor could argue that he is not obliged to arbitrate. Some similar examples are covered in our Arbitration Guide.


Three Types Of Jurisdictional Issues: 2. The Tribunal does not comply with the arbitration clause.

The second ground upon which jurisdiction may be challenged is that the Tribunal does not comply with a party’s arbitration agreement. Article 5 of the New York Convention provides that enforcement may be refused if the Tribunal was not appointed in accordance with the arbitration agreement, or the arbitral procedure was not as provided for in the arbitration agreement. For example, if the parties agreed to arbitrate in London, the Tribunal seat in Stockholm will have no jurisdiction. If the parties agree on a Tribunal consisting of one arbitrator, a Tribunal consisting of three arbitrators will have no jurisdiction. If the parties agree on ad-hoc arbitration, that is arbitration not supervised by any institution, like LCIA, then a Tribunal acting under the LCIA Rules and with the involvement of the LCIA will have no jurisdiction.


Three Types Of Jurisdictional Issues: 3. The Tribunal rules on matters outside of the scope of the arbitration clause.


Finally, a Tribunal’s jurisdiction may be challenged on the basis that the rules on matters not covered by the arbitration agreement. Article 5 of the New York Convention permits local Courts to refuse enforcement of foreign awards on the basis that the foreign award deal with matters not contemplated in the arbitration agreements. Such awards may likewise be appealed in the Courts of a Seat of the Arbitration, for example, under Section 67 of the English Arbitration Act 1996. Imagine, you and I have two contracts, one for the sale of oranges, providing for arbitration in London and the other for the sale of apples providing for arbitration in Stockholm. In such a situation a Stockholm Tribunal will have no jurisdiction in relation to our dispute about oranges. But there may be situations, which are less straightforward, for example, I could deliver you all the oranges under our London contract and then deliver you another parcel of oranges, not specifically envisaged in the London contract. If you don’t pay me for the oranges, I could commence arbitration in London, but you could argue that the London Tribunal has no jurisdiction because our disputes in relation to the second parcel of oranges are not covered by the London arbitration clause.

Appeals And Opposing Enforcement On The Basis Of A Serious Irregularity In The Proceedings


In England, an arbitration award may be appealed pursuant to Section 68 of Arbitration Act 1996, on the basis of serious irregularity in the proceeding. The relevant irregularities are divided into 3 broad categories: irregularity is affecting the Tribunal; irregularities affecting the proceedings; and the irregularity affecting the award. Irregularities affecting the Tribunal are circumstances such as where the Tribunal fails to act impartially. Tribunals duty to act impartially is dealt with in our prior lectures. Irregularities affecting the proceeding are circumstances such as where the Tribunal fails to give one of the parties a proper opportunity to present its case. Irregularities affecting the awards are circumstances such as where the Tribunal’s award is unclear, the award is obtained by fraud, all the awards deal with issues, which have never been put to the Tribunal. Article 5 of the Convention likewise permits local courts to refuse enforcement on the basis of serious irregularities. Examples of such irregularities include the situations where the respondent was not given the proper notice of the arbitration or appointment the Tribunal, the composition of the Tribunal or the arbitration procedure was not as envisaged in the arbitration agreements, or the award dealing with issues which fall outside of the scope of the arbitration agreements. There is a very substantial body of case law dealing with these grounds and some of it is covered in our Arbitration Guide.

Practical Advice On Appeals: 1. Read the procedure carefully and do not miss deadlines

If you want to appeal an award, here are 3 practical points which you should bear in mind. Firstly, Courts and especially English Courts are often overloaded. If you give them an opportunity to dismiss your appeal on procedural grounds, they will do so. Therefore, you must read and comply with applicable rules very carefully. The easiest way for the Court to dismiss your appeal is if you miss a deadline for filing it. Deadlines may be very short, for example, Section 70 of AA 1996 provides that any appeal to an award must be filed within 28 days of the date when the award is issued.


Practical Advice On Appeals: 2. Think if you need to apply to suspend enforcement


Secondly, an appeal against an award does not at least in England automatically suspend the effect of the award. Therefore, the winning party might seek to enforce the award whether or not there is an appeal. This might lead to some unpleasant consequences for losing party such as freezing of accounts. If you are serious about your appeal, then it might make sense to apply to Courts to suspend enforcement of the awards. It is in the Court’s discretion whether or not to suspend enforcement and it will look at things such as whether the appellant has the means to pay the awards. If the appellant is a shell company with no assets, then the Court will not normally suspend enforcement unless the appellant provides security both for the award and the cost of the appeal. If on the other hand the appellant is a substantial company and there is no doubt that they pay both the awards and the course of the appeal, then will make it easier for it to obtain a suspension.

Practical Advice On Appeal: 3. Order a transcript of the hearing


Particularly if you are complaining about Tribunal’s impartiality or the irregularities in the proceedings it is important to have the full record of what was said and done during the proceedings, including the final hearing. The course of the proceedings will normally be reflected in correspondents, but hearings may be long, and in some jurisdictions, it is illegal to make an audio recording at hearings and the party’s notes may differ. It is, therefore, crucial to have full transcript hearing prepare by the professional third parties’ stenographer. Things that may be reflected in the transcript, including the Tribunal being rude to one of the parties or the Tribunal suggesting arguments to one of the parties. This might help establish whether the Tribunal was impartial. The transcripts will also reflect precisely which issues were submitted to the Tribunal for determination.


I hope this lecture was useful. If you require more information, please download our Arbitration Guide at www.fortiorlaw.com. Our Arbitration Guide provides more information as to how to commence the arbitration proceedings and it contains template notice of arbitration and the template response to the notice. Alternatively, get in touch with one of our lawyers at info@fortiorlaw.com.

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