[Editors Note: We are very pleased to host an excellent article by Olswang’s Katerina Maidment on whether the 2012 UK court statistics show that parties who have lost an arbitration have sought to abuse section 68 of the UK Arbitration Act 1996.]
The accusation: that section 68 of the Arbitration Act 1996 (which allows challenges to arbitral awards for serious irregularity) is relied on frequently and frivolously by parties which want to frustrate an award as long as possible, having “lost” the arbitration.
Do the 2012 statistics of challenges to arbitral awards in the English Courts negate or support this accusation?
No Court permission required for section 68
It is said that challenges to awards for serious irregularity under section 68 of the 1996 Act can be brought frivolously by the losing side of an arbitration which wants to have a last ditch attempt at scuppering the award.
This abuse of section 68 is attributed to the fact that a section 68 challenge can be brought without the need for the prior permission of the Court. Comparisons are made with section 69 of the 1996 Act (challenges to awards on a point of law) which do require the Court’s prior permission. The need to obtain the Court’s prior permission for a section 69 challenge, it is thought, acts as a type of filtering mechanism which weeds out frivolous challenges.
Section 68 – open to abuse?
This was the view expressed in 2010 by a QC and former judge of the Commercial Court at a conference in London to discuss the 1996 Act. He advocated the need to bring section 68 in line with section 69, that is, to require the Court’s prior permission in order to close the door on the abuse of section 68.
He produced stats from 2009 (the then most recent ones) but, rather than support his argument, they in fact contradicted it: of the 251 applications made to the English court under the 1996 Act, 12 were applications made under section 68, and 62 were made under section 69. He glossed over them as a “freak” year.
Our review of the 2012 decisions of the English courts on arbitration matters, however, also contradicts his argument. Section 68 challenges were again fewer (7) than section 69 challenges (11).
If section 68 challenges were again fewer than 69 challenges despite the absence of the hurdle of the Court’s prior permission, then another factor must be playing its part in containing the number of section 68 challenges.
The decisions in section 68 challenges over the past 15 years show that the English Courts intend section 68 to be used “as a long stop, only available in extreme cases where the tribunal has gone so wrong in its conduct of the arbitration that justice calls out for it to be corrected“, as indeed the draftsmen of the 1996 Act intended (paragraph 280 of the DAC report to the Arbitration Bill). It appears that this message is getting through to parties which might be considering their options for frustrating or delaying the enforcement of an award and is preventing them from going down the section 68 route.
Post-script: Were the 2012 decisions also in line with the draftsmen’s intention? Yes. All of the challenges to awards made last year under section 68 for serious irregularity, failed.