February 2021: Construction Litigation Update

Quinn Emanuel Urquhart & Sullivan, LLP
Contact

Quinn Emanuel Urquhart & Sullivan, LLP

Recent Decisions by English Courts on Provisions Allowing for the Correction of Arbitration Awards

It is widely recognised that parties who are dissatisfied with arbitration awards will generally have very limited rights to challenge those awards.  Indeed, the finality of arbitration awards is often one of the attractions of arbitration as a dispute resolution mechanism.

However, another (albeit limited) option that might be available to a party who considers that an award contains errors is to ask the tribunal that issued the award to correct or interpret the award, a procedure that is permitted under the rules of most arbitral institutions and the arbitration laws in many jurisdictions.  

In a recent construction case (in which Quinn Emanuel represented the successful party), the English Commercial Court reaffirmed the limited purpose of correction/interpretation applications and the fact that challenges arising from a tribunal’s decision to make corrections to an award will only be permitted in exceptional circumstances.  Another recent Commercial Court decision also provides insight into the circumstances in which courts will intervene to address inadequacies in an arbitration award when a tribunal has refused to interpret the award, and the time limits in which such challenges can be made.  

Corrections and Interpretations Applications: Background 

As stated above, the arbitration rules of most arbitral institutions permit the parties to seek corrections to or interpretation of an arbitration award in certain circumstances.  For example, Article 36 of the ICC Arbitration provides that the tribunal may, of its own initiative or on the application of a party, correct a “clerical, computational or typographical error, or any errors of similar nature.”  Article 27 of the LCIA Rules is to similar effect.

For arbitrations seated in England, Section 57 of the Arbitration Act 1996 provides that a party may apply to a tribunal “to remove any clerical mistake or error arising from an accidental slip or omission or clarify or remove any ambiguity in the award.”  However, this provision will only apply in the absence of an alternative provision agreed to by the parties.  As stated above, the arbitration laws in other jurisdictions contain provisions to similar effect.

A party who is dissatisfied with a tribunal’s decision to correct or interpret an award (or its refusal to do so) may apply to the Commercial Court to challenge the tribunal’s corrections or the original award.  The relevant provisions for such challenges are sections 67 (substantive jurisdiction), 68 (serious irregularity), or 69 (point of law) of the Arbitration Act (which were addressed in the firm’s December 2019 update).  Such challenges must be made “within 28 days of the date of the award or, if there has been any arbitral process of appeal or review, of the date when the applicant or appellant was notified of the result of that process” (section 70(3) of the Arbitration Act).  

Recent Decisions on Corrections and Interpretation Applications 

As set out in the firm’s December 2019 update, the firm acts for Qatar Foundation for Education, Science and Community Development (“QF”) in an ICC arbitration against two international construction contractors, Obrascon Huarte Lain SA and Contrack (Cyprus) Limited (part of the Orascom Construction group).  QF made a successful application to the tribunal for interpretation of one of its awards.  Following QF’s application, the tribunal issued an addendum award, confirming that findings made by the tribunal in the award did not preclude QF from raising a defence that had yet to be heard by the tribunal.  An addendum award was issued by the tribunal.  The arbitration respondents issued a challenge in the Commercial Court in respect of the addendum. It was argued that the tribunal had acted in excess of its jurisdiction or there had been a serious irregularity under sections 67 and 68 of the Arbitration Act because the addendum had limited the findings made in the original award and was alleged to have gone beyond the permissible scope of an interpretation application.  

In his judgment ([2020] EWHC 1643 (Comm)), Mr. Justice Butcher noted that the power of a tribunal to make corrections under the various rules is generally limited to uncontroversial matters, such as typographical errors.  The purpose of an interpretation of an award is to eliminate any ambiguities or uncertainties that might exist to ensure that the award is sufficiently clear to enable a party to enforce it.  Tribunals are typically not empowered to allow applications for interpretation that amount to attempted appeals aimed at altering the decision made by the tribunal in the award or raising a new argument.  

Butcher, J. found that the challenge could not succeed under Section 67, as this section only concerns challenges to the tribunal’s substantive jurisdiction to decide issues in the arbitration.  In rejecting the contractor’s section 68 challenge, Butcher, J. held that the power to correct errors of a “similar nature” to “clerical, computational or typographical errors” gave the tribunal a degree of latitude as to what errors may be corrected.  His Honour also found that no substantial injustice was caused by virtue of the corrections, as whether QF’s defence would succeed was still to be litigated and determined in the arbitration. 

The High Court also took a similar approach in the recent decision of Rees v. Windsor-Clive and Others [2020] EWHC 2986 (Ch).  In that decision, the Court refused the claimant’s challenge against a further award issued by the arbitral tribunal, which was rendered to correct mistakes made by the tribunal in the first award.  The tribunal’s mistakes, in this instance, arose out of a failure to properly consider evidence, which led to an incorrect finding in the first award. 

Also of note is the earlier case of Xstrara Coal v. Benxi Iron [2020] EWHC 324, in which (the same) Butcher, J. permitted Xstrata Coal to challenge an award (issued in September 2010) under Section 68 of the Arbitration Act.  This followed the arbitrator’s refusal to correct and clarify the award.  Xstrara Coal’s application before the Chinese courts to enforce the award had been refused on 25 April 2014 on the basis that the award did not clearly express how Xstrara Coal was said to be a party to the arbitration agreement.  Xstrara Coal then asked the original arbitrator to clarify the award in this regard.  The arbitrator refused to do so because he believed that such a clarification went beyond the limited powers bestowed upon him to clarify and correct awards.  

Butcher, J. agreed that the award was ambiguous to the extent that it resulted in serious irregularity.  His Honour accepted Xstrata Coal’s submission that its inability to enforce the award in China meant that this irregularity had caused it substantial injustice.  Butcher, J. also rejected Benxi Iron’s argument that the Section 68 challenge was made out of time as the 28-day time limit for such a challenge under Section 70 had expired, assuming that time began to run when the award was issued.  In effect, His Honour held that the time limit under Section 70 in such circumstances began to run when the arbitrator refused Xstrata Coal’s interpretation application.

Conclusion 

Although applications for corrections and/or interpretations ought only be granted by arbitrators on limited grounds, the English courts are unlikely to overturn corrections or interpretations that an arbitral tribunal considers necessary or appropriate.  However, the courts may intervene where an award contains a serious irregularity and such irregularity has not been or cannot be cured by way of correction or interpretation by the tribunal.  If a party makes a correction/interpretation application and the application is refused (and the party wishes to challenge that decision), the 28-day time limit for challenges to the award imposed by Section 70(3) of the Arbitration Act will not commence until the parties have been notified of the outcome of the correction/interpretation application. 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Quinn Emanuel Urquhart & Sullivan, LLP | Attorney Advertising

Written by:

Quinn Emanuel Urquhart & Sullivan, LLP
Contact
more
less

Quinn Emanuel Urquhart & Sullivan, LLP on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.