Out-Law / Your Daily Need-To-Know

Expert welcomes court's refusal to overturn arbitration award

Out-Law Analysis | 17 Nov 2011 | 10:23 am | 2 min. read

OPINION: Companies can breathe a sigh of relief that the UK courts have underlined the integrity of international arbitration cases which are heard in the UK. Courts have confirmed that, largely, they will refuse to overturn arbitration awards.

The result is a boost to the use of London as a seat of arbitration because it means that courts will interfere less with the results of arbitration here than in other places, such as Paris.

Companies can continue to use international arbitration with confidence, secure in the knowledge that if they use London as the seat of arbitration they are unlikely to be tied up in years' worth of appeal and counter-appeal.

One of the main reasons companies use international arbitration is because decisions tend to be final. You can appeal in some places under some circumstances, but rights of appeal are limited. This is especially true in England.

The Court of Appeal has just underlined that fact. It has refused leave for a company to appeal an arbitration ruling because it found it was very unlikely there was an error of law in the ruling. This is good news for international arbitration cases heard in the UK and the companies in the construction, technology and other industries that rely on them because it increases the degree to which they can rely on international arbitration.

Retailer HMV had a rent review dispute with landlord Propinvest that went to international arbitration. The Arbitration Act says that appeals on points of law will only be allowed if the court is satisfied that the decision of the tribunal is obviously wrong on a question of law.

HMV appealed against the arbitrator's decision in this case but leave to appeal was refused. The Court of Appeal was asked to rule on whether leave to appeal should be given. It said it shouldn't.

The judges said that for an appeal to be heard it must be clear that the arbitrator was obviously wrong, so much so that the decision could be classified as a major intellectual aberration. The error should be obvious from the award itself, they said, without the need to go into any other background or information. 

If the arbitrator might be right, leave should be refused, they said.

What is interesting is the basis on which they made the decision. They saw that the arbitrator was a specialist in landlord and tenant law and rent review clauses – and that this was exactly why he had been chosen by HMV and Propinvest – and decided that on the basis of his experience he was unlikely to have got the law wrong.

This is quite a low burden of proof and demonstrates how eager the UK courts are to avoid overturning an arbitrator's decision. They will only entertain an appeal in the most extreme circumstances.

Companies choose international arbitration to settle disputes because of the certainty it brings – they have now been assured that, in the UK, that certainty is here to stay.

Mark Roe is an international arbitration specialist at Pinsent Masons, the law firm behind Out-Law.com

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