W12: Recourse Against Arbitral Awards Flashcards
Types of recourse 1. Challenge and appeal: main principles 2. Challenge on grounds of lack of substantive jurisdiction: s 67 3. Challenge on grounds of serious irregularity: s 68 4. Appeal on point of law: s 69 5. Effects of successful challenge 6. Challenge in some other legal systems
Intro: How to Appeal
Depends on whether the relevant rules of arbitration establish any internal appeal procedure (e.g. Maritime and Commodity Arbitration Systems)
*most rules do not provide for such appeal - “an award is final and binding”
ADVANTAGE of Arb.:
- Intended result is the final determination of the dispute.
- Parties CHOOSE finality.
* Compromise Solution: Mediation
* Fight (Appeals): Litigation
“Pro-Enforcement Bias” - US Federal Courts: while possible to challenge an arb. award, available options are likely to be ltd. - intentionally so.
This ‘advantage’ may be a disadvantage for the losing party.
Challenge: Law of the Seat
Contains ltd. provisions for challenging award.
Principally focused on:
- Ensuring conduct of arb. w basic rules of Due Process
- Respecting parties’ equal rights to be heard, before an independent and impartial tribunal
- Within the boundaries of their arb. agreement
Rarely concerned w the merits of the decision, thus distinguishing CHALLENGE from an APPEAL.
Challenge/Set-Aside v Opposing Enforcement
Challenge:
- Courts of Seat
- Attempt by losing party to invalidate award on basis of STATUTORY grounds available u/law of Seat
Opposing Enforcement:
- Any Jurisdiction (where winning party seeks to enforce) Signatory to NYC
- Losing party has opportunity to rely on ltd. exceptions in Art. V to block such enforcement
- Two Available Methods:
a) Affirmatively CHALLENGE the validity @ Courts of Seat
b) Attempt to thwart party seeking enforcement u/NYC - the former almost always ensures success in the latter
Purpose of Challenge
To have that court declare all, or part, of the award NULL and VOID.
If set-aside/annulled - treated as INVALID, and UNENFORCEABLE - not only by Courts @ Seat, but also national courts elsewhere.
NYC & Model Law: a competent court may refuse R&E of an award set-aside by Court @ Seat.
Following Complete Annulment, claimant can commence proceedings because award simple does not exist - i.e. status quo ante restored.
Reviewing Court: cannot alter terms of an award, nor can it decide the dispute based on its own vision of the merits.
- Unless it has power to REMIT the fault to the original tribunal, any new submission of the dispute to arb. AFTER annulment has to be undertaken by commencement of a NEW arb. w/NEW tribunal
Preconditions to Challenge
Necessary to consider other available remedies:
- Any available process of APPEAL/REVIEW u/applicable rules of law; and
- Any available provision for the CORRECTION/ADDITIONAL award.
Appeal/Review and Correction/Additional
- Appeal/Review:
Certain arb. rules and agreements provide for APPEALS to ‘second-tier’ tribunals.
- Sub: applicable rules, Award of Superior Tribunal (not earlier award) = Final and Binding - Correction/Additional:
Rules of Arb. and National Legislation: provide for some mechanism for correction of award by the (original) tribunal itself.
ICC Rules Art.35:
(1) At request/suo motu: CORRECT - clerical, computational or typographical errors, or those of a similar nature
(2) At request: INTERPRETATION
UNCITRAL Arb. Rules:
- Interpretation Rule
- ‘Slip Rule’
- ADDITIONAL Award - ‘claims presented in the arb. proceedings but committed from the award’…
- Tribunal may do this when claim is justified, and ‘considers that the omission can be rectified w/out further hearings or evidence’.
Time Limits for Challenge
Likely to be short and strictly enforced - depend on the relevant rules/legislator:
- UNCITRAL Arb. Rules: Requests for interpretation/correction, or additional award - w/in 30 days after receipt of award
- Model Law:-
a) Challenge: w/in 3 months of receiving award
b) Interpretation/Correction/Additional: w/in 3 months for disposal of that request by tribunal
Methods of Challenge
- Internal Challenge
- Correction and Interpretation; Additional; Remission
- Recourse to Courts
Internal Challenge
Review (e.g. Maritime, Commodity, Trade Assn. Arbitrations)
- ICSID Arbitration Rules:
Dissatisfied party - apply for interpretation, revision, or annulment
Grounds:
- Tribunal not properly constituted
- Tribunal manifestly exceeded its powers
- Serious departure from fundamental rule of procedure
- Award failed to state reasons
* v. similar to grounds u/national arb. systems for judicial challenge of awards.
* ICSID is a self-contained system - does NOT permit judicial challenge of awards.
- Internal Review mechanism effectively replaces the system of judicial challenge
ICSID: Annulment
Art. 52, ICSID Convention
- Ad Hoc Committee (3 members)
- Upon Annulment, either party may ask for dispute to be submitted to a NEW tribunal, hears dispute again - delivers NEW award
Historically rare, but growing in frequency since:
*Fraport v Phillipines (ICSID)
Correction and Interpretation of Awards; Additional Awards; Remission of Awards
- Correction: Clerical Slips
e. g., ICC Rules, Art. 35 - Interpretation: Resolve uncertainty as to precise meaning, method of performance. (No Review of Merits)
- Additional: Claims presented during proceedings, but omitted from award.
- Revision: Evidence produced later, of Fraud, Forgery, or Concealment of Evidence.
e. g., Fraud - French & Swiss Law
- Remission: Send back disputes requiring Tribunal to revisit some/all of its findings; in context of party’s application to the courts @ Seat, e.g. Challenge
- Powers derived form National Arb. Statutes (vary widely):
EAA 1996 S. 68(3) - ‘the court shall not exercise power to set-aside/declare award of no effect (wholly or partly), unless it s satisfied that it would be inappropriate to REMIT matters to tribunal for reconsideration’. - Powers derived from Case Law: US
- Powers derived from int’l statutes: ICC Rules
Recourse to the Courts
Two Preliminary Issues:
- Place of Challenge
- Exclusion and Waiver of Challenge
Recourse to the Courts: Place of Challenge
Addressed to the designated competent court @ Seat
- Switzerland: Swiss Federal Tribunal (BUT parties may agree to Court of the Canton in which arb. took place)
- France: Paris Cour d’Appel
- England: Commercial Court of the QB Div. in the HC of Justice
- US: District Court (Federal First-Instance Court) of the Seat
Theoretical EXCEPTION:
NYC: R&E of an award may be refused - ‘set aside/suspended by competent authority of the country in which, OR U/THE LAW OF WHICH, award was made’
*also interpreted as ‘the country u/whose law the award was made (substantive law governing award) as a licence to set-aside award NOT made in their own country.
Case Law:
India:-
1. 1980 and 1990 - Set aside awards rendered in other states on the basis that the SUBSTANCE of the dispute was governed by Indian law.
2. 2002 - Bhatia International v Bulk Trading SA
3. 2008 - Venture Global v Satyam Trading (English Award)
[[BUT]]
- 2012 - Bharat Aluminum Co. (Balco) v Kaiser Aluminium Techncial Services: OVERTURNED Venture Global case - CONFIRMED int’l practice that ‘the power to set aside is ltd. to courts @ Seat’
Exclusion and Waiver of Challenge
In some jurisdictions: Parties can expressly WAIVE rights to challenge award
- General waivers by incorporation (ICC Rules) will not suffice
ICC Secretariat: ICC Rules Art. 34(6) - unlikely to de deemed sufficient to constitute a waiver, even in such jurisdictions where such waiver is possible.
- Switzerland and Belgium: If all parties are foreign
- France: 2011 French Arbitration Law - Any party
Failure to Challenge Award on Jurisdiction DURING proceedings = Waiver
- England, France, US
- UNCITRAL Rules, Model Law
Failure to Challenge Award w/Sufficient Force and Clarity
- Swiss SC: Rejecting challenge to ICC Arb., held: challenging party had not made a ‘sufficiently clear complaint’ during the original arbitration, thus WAIVING right to challenge.
Grounds for Challenge
Each State- diff. concepts of measures of control over arbitral processes in its territory; and whether it wishes to distinguish b/w ‘domestic’ and ‘international’ arb.
Three Broad Areas:
- Jurisdictional Grounds: non-existence of valid and binding arb. agreement/admissibility of claim
- Procedural Grounds: Failure to give Equal Opportunity to be heard
- Substantive Grounds (RARE): Mistake of Law
THEREFORE:
- Under Model Law
- Adjudicability (incapacity, invalidity, excess of powers, arbitrability)
- Procedural (composition)
- Substantive (mistakes of law/fact, public policy)
Grounds: Under Model Law
SYMMETRICAL:
- NYC Art. V: Grounds for Refusal for R&E of Int’l Awards
- Model Law Art. 34: Grounds for Setting-Aside
GROUNDS:
- Lack of Capacity/Valid Arb. Agreement
- Lack of Proper Notice (to the aggrieved party) of Appointment of Tribunal/Arbitral Proceedings/Otherwise Unable to Present Case
- Matters Not Contemplated by/Out of Scope of the Arb. Agreement
- Composition NOT in accordance w Agreement/Mandatory Provisions of Model Law
- Subject-Matter NOT Arbitrable u/Law of Seat
- Award (incl. any decision w/in it) Conflicts w/Public Policy of the State of Seat.
LIMITATION:
W/in 3 months from receipt of award (aggrieved party) sub: extended time where corrections, interpretations, or additional awards issued u/Ar. 33
PROCEDURE:
- Designated court will est. its own procedure for application to be made; or
- Remit back to original tribunal for reconsideration
Grounds: Adjudicability
Interim Award on Jurisdiction - MAY BE referred to the Competent Court w/in 30 days - such decision = FINAL
- Incapacity/Invalidity
- Excess of Powers
- Arbitrability
Adjudicability: Incapacity/Invalidity
Model Law Art. 34(2)(a)(i): ‘a party to the arbitration agreement … was under some incapacity; or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of this State’
Adjudicability: Excess of Powers
Model Law Art. 34(2)(a)(iii):
‘the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside’
FRANCE:
*Paris Lapeyre v Sauvage [2001]: Paris Cour d’Appel found that a tribunal exceeded its mission by awarding a party damages in an amount that significantly exceeded the damages claimed
US:
- Republic of Argentina v BG Group PLC: US Appellete Court held that “an arbitrator’s decision on whether a condition precedent for arbitrability needed to be fulfilled was beyond the scope of the arbitrators’ powers”
- BG Group PLC v Republic of Argentina: “the arbitrators’ jurisdictional determinations [we]re lawful” — i.e., the arbitral panel had the authority to determine the issue of whether the local litigation requirement had been fulfilled (or was required to be fulfilled).
Adjudicability: Arbitrability
Matters Related to Public Policy:
- Insolvency
- Personal Status
- Certain IPR Disputes (e.g., validity of patents)
- Anti-Trust Disputes - NOW PERMITTED (US)
Model Law: Award can be challenged if “the subject matter of the dispute is not capable of settlement by arbitration.
US: Issue confused by two concepts -
- Procedural Arbitrability: Issues of Admissibility of a Claim
- Substantive Arbitrability: Subject Matter NOT Arbitrable (ref: law of Seat of arbitration)
Grounds: Procedural
- Lack of Due Process - Procedural Irregularity
2. Further Issues
Procedural: Lack of Due Process (Irregularity)
Due Process:
1. Ensure proper constitution of arbitration
2. Procedure in accordance w parties’ agreement (sub: mandatory provisions of applicable law)
3. Parties given proper notice of the proceedings, hearings, and awards
AIM: ensure parties are treated w equality, and given a fair hearing, w proper opportunity to present their respective cases
Exact procedure varies from State to State
Civil Law: Right of the parties to have a full opportunity to present their case — ‘droit de la defense’ — often incorporates the ‘principe du contradictoire’ - requires no evidence/argument should serve as a basis for a decision unless it has been subject to the possibility of comment and contradiction by the other parties.
*Mousaka v Golden Seagull Maritime (England)
Procedural: Further Issues
- Failure to comply w the agreement of parties wrt Appointment - Arbitrator does not meet the particular qualifications specified in the agreement
- Failure to comply w required procedure - Rendering award w/out reasons where such requirement is legally imposed
NO COMPLAINT IF NO AGREEMENT - may be disregarded even when in conflict w mandatory provision of the law @ Seat
- Tribunal should communicate and explain thus conflict to the parties to also them to comment before discarding any aspect of agreement
*Chantiers de l’Atlantique SA v Gaztransport & Technigaz SAS: Commercial Court in London HELD - even fraud in the arbitral proceedings would not necessarily justify setting the award aside because ‘even if the true position had been disclosed to the tribunal, that would, in all probability, not have affected the result of the arbitration’
Some Courts: Consider SERIOUS procedural irregularities = Violations of Public Policy; e.g. Japan (Tokyo District Court: treatment of disputed fact as undisputed = violation of Japanese Public Policy)
Grounds: Substantive
Few jurisdictions permit any form of appeal on law/facts from an award. If Tribunal has jurisdiction, due process is follows, correct formalities observed - good, bad, indifferent - final and binding on parties.
- Mistake of Law
- Mistake of Fact
- Public Policy