Tribunal must give disputing parties chance to query legal approach neither party advocates, says High Court

Out-Law News | 10 Nov 2014 | 3:41 pm | 2 min. read

A Tribunal tasked with resolving a dispute that goes to arbitration should not decide the outcome of the case by adopting a legal approach neither of the parties to the dispute has put forward without allowing the parties to query that approach, the High Court has ruled.

Mr Justice Eder said that a tribunal that failed to consult on its intended approach to resolving a dispute could be classed as having engaged in a "serious irregularity" and have its ruling overturned.

"Where a Tribunal wishes to adopt a course not advocated by either party, it is generally incumbent upon the Tribunal to give the parties an opportunity to address it on that possible course before it is finally adopted," Mr Justice Eder said in a judgment issued late last month. "Depending on the circumstances, failure to do so will – or at least – may amount to a serious irregularity."

Litigation and arbitration expert Richard Dickman of Pinsent Masons, the law firm behind Out-Law.com, said: "Parties choose to refer their disputes to arbitration for many reasons, including the certainty and finality of the tribunal’s award. The grounds for appealing on a point of law or for challenging the award on the grounds of procedural irregularity are therefore very limited.  But where, as in this case, the tribunal has decided the dispute using its own approach, which it has not allowed the parties to question, the court will intervene and require the tribunal to reconsider its decision."

Under the Arbitration Act, any party that has been involved in "arbitral proceedings" can apply to court to challenge an award made in arbitration "on the ground of serious irregularity affecting the tribunal, the proceedings or the award".

'Serious irregularity' can be said to have occurred in a variety of circumstances, according to the Act, including where the tribunal fails to "conduct the proceedings in accordance with the procedure agreed by the parties" and where the court views this as having caused or as going to cause "substantial injustice to the applicant".

If a court finds there has been serious irregularity in tribunal proceedings, it can elect to "remit the award to the tribunal, in whole or in part, for reconsideration, set the award aside in whole or in part, or declare the award to be of no effect, in whole or in part", according to the Act.

In the case before it, the High Court decided that part of an award previously issued by a tribunal in a shipping dispute should be deemed to have no legal effect and that the case be re-heard by the tribunal.

Mr Justice Eder accepted arguments from a ship owner that the tribunal had engaged in serious irregularity that would cause the company substantial injustice. 

The ship owner had sued under a charterparty for $86,437.50 of demurrage, which is a type of loss that can be claimed in shipping disputes to account for delays in loading or discharging cargo.

The ship owner took issue with the tribunal's decision, however, because it had the effect of preventing it from bringing future indemnity claims against the charterer to account for damages claims it could face stemming from others for the delay in the cargo discharging and the alleged damage to the cargo which had been identified when the ship arrived in port.

The ship owner successfully argued that neither it nor the charterer had advocated the approach taken by the tribunal when it came to its decision in the case.