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Arbitral award published after “inordinate delay” upheld

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Fisher Louise
Louise Fisher

Senior Associate

London

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27 July 2015

​Delay in publishing an award (in this case, B.V. Scheepswerf Damen Gorinchem v Marine Institute sub nom The Celtic Explorer [2015] EWHC 1810 (Comm), by almost a year) can amount to an “irregularity” but is not in itself enough to establish “serious irregularity” under s68 Arbitration Act 1996. To prove the additional requirement of “substantial injustice”, the applicant must also show, for example, that the tribunal failed to deal with all of the issues that were put to it. Delay is therefore likely to form the background to a s68 challenge, rather than its substance. The mere fact of delay does not permit an applicant to bend the applicable legal principles and examine how the issues were dealt with by the tribunal. 

Arbitration award severely delayed 

A dispute for breach of contract was submitted to a single arbitrator in London under the terms of the LMAA, by a claimant (T) seeking damages of approximately EUR 2 million. Following a three-day hearing, the arbitrator took one year and 11 days to publish the award (contrary to clause 20 of the LMAA Terms (2012), which suggests that the award “should normally be available within not more than six weeks ‘from the close of the proceedings’”).

Despite numerous updates from the arbitrator on the status of the draft, no explanation for the delay was provided, although the pressure of other work and holiday were both alluded to. Neither party chased the award or complained about the delay.

The arbitrator found in favour of T and provided 30 pages of reasons supporting his conclusion. The respondent (D) asked the arbitrator to correct the award and provide further reasons in respect of various issues it believed had not been dealt with. The arbitrator rejected D’s criticisms and its application. D brought an application to set aside the award under s68, for “serious irregularity”.

Section 68 challenge – a high threshold

Section 68 provides that a party to arbitral proceedings may apply to the court to challenge an award for “serious irregularity” affecting the tribunal, the proceedings or the award. An applicant has to pass the two-pronged test of “irregularity” (which must be of a kind set out in s68(2)) and “substantial injustice” (undefined, but understood to include the benefits which the other party receives as a result of the irregularity). The test was described by the House of Lords in Lesotho Highlands Development Authority v Impreglio SpA [2005] UKHL 43 as a “high threshold”.

D claimed “irregularity” under the following heads: s68(2)(a) failure by the arbitrator to comply with his general duties (occasioned by the delay); s68(2)(c) failure by the arbitrator to conduct proceedings in accordance with the agreed procedure (also occasioned by the delay); s68(2)(d) failure by the arbitrator to deal with all the issues put to him.

D argued that those irregularities had caused the arbitrator to reach a conclusion, unfavourable to D, which he may not otherwise have reached – thus causing “substantial injustice” (Vee Networks Ltd v Econet Wireless International Ltd [2004] EWHC 2909 (Comm)). 

Court upholds award 

Acknowledging the lack of authority as to whether delay can amount to “serious irregularity” under s68, Flaux J rejected D’s challenge to the award. His reasoning was as follows: 

Right to complain: Just because D had not complained to the arbitrator or issued a s24 application (used to remove an arbitrator who has failed to use all reasonable despatch in making an award), it had not lost the right to complain about the delay after the award was produced. 

What was the “irregularity”?
  •  s68(2)(a): Inordinate delay in publishing the award was capable of amounting to an “irregularity” because it was a breach of the arbitrator’s general duty to avoid unnecessary delay (s33(1)(b)), which includes delay in publishing an award.
  • s68(2)(c): It was unlikely that the delay was a failure by the arbitrator to conduct the proceedings in accordance with the agreed procedure, and thus a s68(2)(c) irregularity, but it could be seen as such.
  • s68(2)(d): D had failed to demonstrate that the arbitrator had not dealt with all the issues put to him, thus no irregularity was found on this count.

Delay on its own does not amount to “serious irregularity”: The “irregularity” (here, the delay) must have caused “substantial injustice” to amount to a “serious irregularity” under s68. However, the “but for” test in Vee Networks Ltd v Econet Wireless International Ltd is “impossible” to satisfy unless there was a failure by the arbitrator to deal with all the issues put to it. Accordingly, if all issues were dealt with, delay producing the award makes no difference because D “cannot show that it has caused or will cause injustice”.

Delay does not allow greater scrutiny of reasoning: Whilst the court might be more likely – in cases of delay – to subject the tribunal’s reasons to a close analysis to check that all the issues have been dealt with, how it has dealt with them is entirely irrelevant to a s68 application. There remains “no principled basis” for examining the tribunal’s findings of fact in a s68 application – even in cases of “inordinate delay” – and challenges to the arbitrator’s findings remain impermissible.

Substantial injustice: even if the arbitrator had failed to deal with an issue, it was clear that he would have reached the same ultimate conclusion such that the “but for” test would remain unsatisfied.

Comment: Unfortunately this judgment does little but confirm that whilst delay is certainly considered a procedural “irregularity”, it is exceedingly difficult to elevate it to a “serious irregularity” when the Tribunal has dealt with all the issues put to it. Something more is needed to provide the required element of “substantial injustice”.

Flaux J was stern in his criticism of the arbitrator’s delay, condemning it as “inexcusable” even in light of the pressures of other work. This should be of no surprise, given the expectation on both commercial and Court of Appeal judges to produce judgments in a matter of months, if not weeks.

The frustration of the judiciary about the length of time in rendering awards is often shared in the arbitration community. It will be noted by users of arbitration and practitioners alike that no practical solutions were offered in this instance. In reality there is little to deter arbitrators from taking an excessive number of appointments unless there is some financial disincentive for doing so, and to date we have not seen this done successfully. It remains for the arbitration community – perhaps led by the institutions – to spur change in this regard, so as to maintain the integrity of this form of dispute resolution.

Further information

This case summary is part of the Allen & Overy Litigation Review, a monthly update on interesting new cases and legislation in commercial dispute resolution.  For more information please contact Sarah Garvey sarah.garvey@allenovery.com, or tel +44 20 3088 3710.