Is the right to appeal in the English Arbitration Act anachronistic?

Published: 24/5/2016

The purpose of this article is to summarily highlight the current importance of section 69 of the English Arbitration Act (s.69 hereafter) even though it has been described as anachronistic (See, Alan.S Reid, “The UNCITRAL Model Law on International Commercial Arbitration and the English Arbitration Act: Are the Two Systems Poles Apart”).

International Arbitration now is more complex; therefore there is now a stronger argument than before on the relevance of an appeal on a point of law.  Appeals on a point of law add to the procedural sophistication of arbitration; therefore what may have looked like an anachronistic mechanism some years ago may arguably look less so today. One of the reasons arbitration is attractive is because of the principle of finality, i.e an award given by an arbitrator(s) should be final and binding.  However, with the increase of high value and complex arbitrations, an option to appeal under s.69 may become more attractive to ensure a dispute is settled fairly.   As discussed below the safeguards provided by the 1996 English Arbitration Act case law make it difficult for parties to prove their case on appeal to a requisite standard (which in essence protects the finality of an award). However, it also has enough wiggle room to allow justice to be seen and not heard. 

A. The safeguards of the limited right to appeal under s.69

Recent case law on s.  69 makes it even harder for party to succeed on a s.69 appeal application. In Sylvia Shipping Co. Limited v Progress Bulk Carriers Ltd. [2010] EWHC 542 (Comm) and Great Western Trains Company Ltd. v Network Rail Infrastructure Ltd [2010] EWHC 117 (Comm), Gross J and Hamblen J made comments suggesting that, in general, the only documents that would be admissible in a s. 69 appeal would be the award and the contract governing the dispute between the parties. The safeguard of strict admissibility of evidence required by case law in s.69 appeals demonstrates that confidentiality which is an underlying cornerstone of international arbitration proceedings remains somewhat protected. [See Kate Davies - In Defence of Section 69 of the English Arbitration Act].   

The recent case of Glencore International AG v PT Tera Logistic Indonesia, PT Arpeni Pra [2016] [2016] EWHC 82 (Comm) (Glencore dispute hereafter) show that even with three arbitrators points of law are not always agreed upon. In this case the majority of the tribunal incorrectly applied a point of law relating to limitation periods for claims under the contracts, which was critical to the dispute. On a s.69 appeal on a point of law by the appellants; Justice Knowles disagreed with the decision of the majority of the tribunal and upheld the appeal. 

It seems in the last twenty years, the procedural hurdles of s.69 have meant that there have been very few successful applications in which awards were appealed [see Mathew Marshall, “Section 69 almost 20 years on....”. Mr Marshall also argues: 

… with increasing competition for international arbitration work, the concern (theoretical of otherwise) might be dismissed by varying section 69 from an “opt-out” to an “opt-in” provision, leaving a mechanism available for parties who consider the proper application of their choice of law to be paramount, but otherwise reinforcing the perception that English law respects the parties’ choice of arbitration over litigation.

As discussed below the growing complexity of arbitration, it would seem that an opt-in mechanism (compared to the current opt-out regime) to appeal gives parties the added surety that any errors in awards can been fairly dealt with. 

B. Evidence of the growing complexity of arbitration

The following are data from an analysis conducted by Dr Remy Gerbay (collected from institutional records) that can be viewed as evidence to support the notion that international arbitration has become more complex (and high in value):

  1. in ICC arbitrations there was a significant decrease in sole arbitrators in proportion to three member tribunals from 24% to 16.5% between 2002 and 2012;
  2. the rise in complex arbitrations can be characterised by the frequency/rise in bifurcations in proceedings. Bifurcation is the ability of arbitrators to divide the arbitration proceeding into two parts so as to render a decision on a set of legal issues without looking at all aspects;
  3. the rise in globalization has rendered cross border transactions more complex and ultimately disputes arising out of those transactions.  These cross border transactions have cultivated new categories of disputes (for example M&A, Energy and Finance) referred to arbitration for settlement. M&A, finance and energy disputes are said to give rise to more complex and high value disputes than the traditional trade transactions (see David J.McLean’s article “Toward a new international dispute resolution paradigm: assessing a congruent evolution of globalization and international arbitration”). The data from the ICC supports this; for example in the years from 2002 to 2014 there was an increase in multi-party and multi-contract arbitrations. The Glencore dispute is a perfect example of an arbitration that involved multiple contracts;  
  4. the values of disputes have increased significantly in the last 20 plus years. In 1989 3.6% of ICC cases were valued above US $50 million. In 2012, the ICC’s data highlighted the percentage of cases of that size had doubled to 8%.  Of course not all high-value disputes are complicated and not all low value disputes are simple.  

The Glencore dispute supports the argument that international arbitrations are becoming more complex and higher in value than in the past. One can argue that if cross border disputes are relatively more complex then there is the potential for errors to made by tribunals in awards which may be costly and unfair on the losing party. Appeal mechanisms should therefore be viewed as an optional benefit to the arbitration process. It is arguable that the more complex an arbitration the more it is open to human error either substantively or procedurally. The former is where the s.69 appeal mechanism gives balanced safeguard in protecting the confidentiality of the arbitration and ensuring fairness.  

Conclusion

It is the contention of this blog that s.69 is not anachronistic but rather, more so than ever before, reflects the increasing sophistication of the arbitration process; particularly in complex and high value disputes where the parties have a lot to lose financially if and when errors are made by a tribunal.  S.69 serves an important function in that it has enough safeguards to protect fairness and legitimate expectations of its commercial users. Such safeguards are necessary because international commercial arbitration is a relatively autonomous and delocalised system that operates within commercial law. Some jurisdictions like England do not have a completely delocalised approach to international commercial arbitration. For England this has not completely been a detriment to its attractiveness as an arbitration venue because party autonomy is still upheld by s. 69 of the 1996 English Arbitration Act.

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