When do challenges for serious irregularity in arbitration succeed and what can you do to avoid them?



An arbitration award can be challenged under section 68 of the English Arbitration Act 1996 (s.68) if there has been a serious irregularity that has caused or will cause substantial injustice to the applicant. It is no secret that successful s.68 challenges are rare. This article will provide an overview of the successful challenges in the past five years and also outline the ways in which the parties can assist the Tribunal in procedural matters that can minimise the chances of Tribunals’ awards being challenged for serious irregularity.

1. Trends in the statistics for s.68 challenges over the past five years

There has been a slight increase in both the number of successful challenges, and the percentage success rate of successful s.68 challenges over the past five years.1 One reason for this may be that fewer spurious challenges are being brought by parties.

Trends in the statistics for s.68 challenges over the past five years

2. Successful s.68 challenges over the past three years

Successful s.68 challenges in 2019

i. P v D [2019] EWHC 1277 (Comm)

In this case the Court set aside an arbitral award on the basis that the Tribunal had reached a finding of fact on a core issue that had not properly been put to a witness in cross-examination. The Court also held that the Tribunal had based its decision on a case not properly argued by the parties.

It was found that if the witness had been properly cross-examined and given the opportunity to deal with what were considered to be weaknesses in his case and to deal with the alternative case which the Defendant’s counsel did not run, the Tribunal might have reached a different conclusion. This constituted a serious irregularity under s.68(2)(a) because it was found to be a failure by the Tribunal to comply with its general duty.

ii. K v P [2019] EWHC 589 (Comm)

The Court held that the Tribunal had failed to give the Claimants an opportunity to counter the Respondent’s new argument or adduce expert evidence on the valuation of shares since the post-hearing submissions were the last substantive submissions in the arbitration. If the Claimants had been given such opportunity, the Tribunal might have reached a different conclusion on the breach of warranty claim. The Tribunal had therefore failed to act fairly in breach of s.68(2)(a).

A serious irregularity causing substantial injustice due to the Tribunal’s failure to conduct the arbitration according to the procedure agreed by the parties under s.68(2)(c) was also found because the Tribunal had reached a ruling on an issue on the basis of arguments that had not been made by either party. The award stated that claims for breach of warranty in relation to undisclosed debts could only be pursued through a “Net Debt Adjustment mechanism” in the agreement, despite the fact that this had not been part of the Respondent’s case.

The Court also found a serious irregularity causing substantial injustice under s.68(2)(d) because the Tribunal had failed to deal with a pleaded issue. The Tribunal’s award failed to expressly address the Respondent’s argument that payment of the purchase price under the agreement might constitute “payment out”.

Successful s.68 challenges in 2018

iii. RJ and another v HB [2018] EWHC 2833 (Comm)

The Court’s reasoning in this case relied on the principle that a Tribunal should request parties’ views when introducing a novel point in a dispute.

It was found that the Tribunal in this case had dealt with the dispute on a significantly different basis to the way the parties had pleaded their cases, had failed to bring the new point to the parties’ attention and had, as a result, failed to allow them to make submissions on the new point. This constituted a serious irregularity under s.68(2)(a).

iv. Reliance Industries Limited & Ors v The Union of India [2018] EWHC 822 (Comm)

In the arbitration the Claimants had argued that some categories of “development costs” were recoverable on the basis that the Defendant had specifically agreed to them (the Agreements Case). However, having reached its conclusion on estoppel, the Tribunal stated that the Agreements Case “no longer falls for determination”. The Claimants argued that the estoppel case was not dispositive of its Agreements Case and that this failure by the Tribunal to address it amounted to a serious irregularity under s.68(2)(d).

Out of the nine challenges raised before the Court, this was the only one to succeed. The Court held that the natural meaning of the words “no longer falls for determination” was that the issue was not being addressed and decided, rather than that it was being decided by reference to other findings of fact. The Tribunal’s failure to address this issue therefore constituted a serious irregularity giving rise to a substantial injustice. The Court also held that the Claimants had successfully shown that the Tribunal might have reached a decision in their favour had it actually addressed the point and therefore satisfied the requirement for substantial injustice.

v. Fleetwood Wanderers Ltd (t/a Fleetwood Town Football Club) v AFC Fylde Ltd [2018] EWHC 3318 (Comm)

The Claimant issued proceedings claiming that the arbitrator lacked substantive jurisdiction to make the award under s.67(1)(a) or had exceeded his powers under s.68(2)(b). However, it later obtained permission to amend the claim after its attention was drawn to an exchange of emails between the arbitrator and the Football Association (the FA) shortly before the award was made. The emails related to issues in the arbitration as to whether the Regulations on the Status and Transfer of Players (the RSTP) were incorporated into the FA’s Rules, but the arbitrator had not notified the parties of his communications with the FA, or given them an opportunity to make representations.

The Court concluded that the arbitrator had failed to comply with his section 33 of the English Arbitration Act 1996 (s.33) duties by eliciting information from the FA without at least sharing the information with the parties and giving them an opportunity to make representations. Had the parties been given such an opportunity, it was possible that the Claimant would have been able to adduce evidence to persuade the arbitrator to reach a different conclusion in relation to the incorporation of the RSTP into the FA Rules. Accordingly, this constituted a serious irregularity causing substantial injustice within the meaning of s.68(2)(a).

Successful s.68 challenges in 2017

vi. A v B2 [2017]

The arbitrator’s decisions on costs were challenged on grounds of serious irregularity on the basis that the applicant had been denied the opportunity to make submissions.

The s.33 duty of the arbitrator included giving each party the possibility to address the issue of costs. The Court held that the Claimant had been deprived of any fair opportunity to advance his arguments on which party should bear the costs because the arbitrator had issued his decision before the Claimant was able to present his arguments on costs. This constituted a breach of the arbitrator’s duty under s.33. This, in turn, constituted a serious irregularity under s.68(2)(a), especially in circumstances where the Claimant was acting as a litigant in person who claimed financial difficulties.

vii. P v D [2017] EWHC 3273 (Comm)

The Tribunal ordered the Claimant to pay the first Defendant US$11 million in respect of the counterclaim and dismissed all other claims and counterclaims. The Claimant argued that the Tribunal had failed to deal with its contribution claim against the second Defendant.

The Court decided that the claim for contribution was live and required to be determined. There was nothing in the submissions that amounted to a withdrawal of the claim. Furthermore, an examination of the award showed that, at the time it was made, the Tribunal was alive to the claim, but then erroneously dismissed it without giving it any conscious consideration in the award. The Court therefore found that the Tribunal had failed to deal with all the issues (a serious irregularity under s.68(2)(d)) and remitted the issue to the Tribunal.

3. Common themes amongst these successful s.68 challenges

As the table below shows, five of the seven successful s.68 challenges in the past three years fell under s.68(2)(a) and three out of the seven fell under s.68(2)(d).

Aside from one successful challenge under s.68(2)(c), there have been no successful challenges under the other s.68(2) subsections.

Five of the seven successful s.68 challenges in the past three years fell under s.68(2)(a) and three out of the seven fell under s.68(2)(d) 

4. Lessons to be learnt - party conduct that can minimise the chances of an award being challenged

S.68 cases are by definition challenges dealing with procedural failings by the Tribunal. In some cases, the parties are powerless to prevent this (see, for example, the Fleetwood case). However, in other cases there may be ways in which the parties can assist the Tribunal in procedural matters that can minimise the chances of Tribunals' awards being challenged for serious irregularity. For example:

  • Where there is a challenge to a witness on a core issue as to credibility, the witness should be cross-examined on that issue. If this is not done, there is a risk of serious irregularity if the Tribunal subsequently bases its decision on that issue, without it having properly been tested with the witness (P v D [2019] EWHC 1277 (Comm)).
  • Parties should make clear in their pleadings which issues need to be addressed and how those issues relate to each other, to avoid any confusion as to which issues need to be determined by the Tribunal. The clearer the pleadings, the less likely a Tribunal is to be confused as to, for example, whether the determination of one issue is dispositive of another (not least because often a Tribunal will use parties’ pleadings in its award to set out their respective arguments) (Reliance Industries Limited & Ors v The Union of India [2018] EWHC 822 (Comm)).
  • Parties should assist the Tribunal to allow fair opportunity for all parties to advance their arguments and deal with arguments raised by the other party. Attempts to “ambush” the other party by raising new arguments late in the day may backfire if the Tribunal subsequently bases its award on such arguments without giving the other party the opportunity to address them. (K v P [2019] EWHC 589 (Comm))).
  • Parties should assist the Tribunal to ensure that all live issues are determined. Over the course of a case, the issues to be determined may change, as parties’ cases evolve and some issues may fall away. Drawing up a list of issues which is then returned to prior to the award being issued may assist with this and avoid live issues being overlooked or dismissed without due attention (P v D [2017] EWHC 3273 (Comm)).

It should, however, be noted that successful challenges on the basis of Tribunals’ deficiencies in case management are extremely rare. Tribunals are still afforded a large amount of flexibility in the way they manage cases and the Courts are rightly reluctant to allow successful s.68 challenges except in the most extreme cases, where there is both serious irregularity and substantial injustice. To do otherwise would undermine one of the key benefits of arbitration – the finality of arbitration awards. As the small number of successful s.68 challenges show, arbitrators should not be unduly fearful that their case management decisions will expose them to successful s.68 challenges, as long as in making them they remain procedurally fair.

  1. The statistics below are based on Westlaw searches for s.68 challenges. The figures are correct to the best of our knowledge as of November 2019.
  2. The parties' names have been anonymised by Dentons.

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.

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