REUTERS | Susana Vera

Challenging procedural decisions

A procedural order can strike the killing blow in arbitration. Are there potential avenues for challenge?

There are three grounds of challenge against arbitral awards made under the Arbitration Act 1996 (AA 1996): substantive jurisdiction (section 67); serious irregularity (section 68), and appeal on a point of law (section 69) (if this ground has not been excluded). To mount a challenge under any of these grounds, however, a party must first establish that an award has been made which relates either to the claim, to a certain part of the AA 1996 (section 47), or (if jurisdiction is challenged) to jurisdiction per se. It is this process of discernment which is discussed below.

A misconception

At first glance, it might be thought that a procedural decision cannot be an award, either because it has not been expressed as such, or because it does not purport finally to determine the dispute. That is not the position under the current law: see Brake v Patley Wood Farm LLP; Enterprise Insurance Company Plc v U-Drive Solutions; and ZCCM v Kansanshi Holdings. Although these kinds of factors can influence whether a procedural decision is considered by the English court to be an award (see below), they are not in themselves determinative. To say otherwise would undermine the objective of the AA 1996 in “safeguarding” the public interest: clearly, it is not in the public interest for a tribunal to escape the AA 1996’s limited oversight by disguising an award.

The key principles

The question of whether a procedural decision constitutes an award has been addressed in recent years, but, until recently, the relevant principles had not been comprehensively catalogued. Fortunately, the recent decision of the English Commercial Court in ZCCM has filled this void. In it, Cockerill J set out five key principles:

  • The court will give “real weight” to the substance of the decision, over the form in which it was made.
  • A decision is more likely to be an award if it is final (in that it renders the tribunal functus officio either entirely or in relation to a certain issue).
  • A decision which concerns the parties’ substantive rights and liabilities is more likely to be dealt with by an award, as opposed to a decision relating to “purely” procedural issues.
  • The tribunal’s own description of the decision is “relevant”.
  • How a reasonable recipient would have perceived the decision “may” also be relevant. In this regard, the decision’s description may be relevant, as will its language, level of detail, and (in Cockerill J’s view) whether the decision complies with the formal requirements for an award under the applicable rules.

At face value, these principles provide parties with the means to argue that procedural decisions should be considered to be awards where they have the obvious or practical effect of determining a claim. In practice, however, the application of these principles has proven to be stricter. For example, in ZCCM, the tribunal made a ruling refusing to grant the claimant permission to pursue its derivative claim. Although Cockerill J recognised that the ruling was “final to its subject matter” and that it was “obviously unlikely” that the claim would not be pursued, she concluded that the tribunal’s ruling was not an award, given that:

  • It was not a “final decision on the merits of any of the claims”.
  • It was a decision on a procedural issue which had a discretionary element (a derivative claim being itself a procedural device).
  • The tribunal was not functus, because it was theoretically possible for a claim to be pursued by the party on whose behalf it was originally brought.

Strategy

The impact of ZCCM is that, outside the context of striking out, it is difficult to envisage circumstances in which a procedural decision will be considered to be an award. However, there are still broader lessons to be learned:

  • Where appropriate, parties may wish to request that the tribunal make a formal award on the relevant issue.
  • Parties should consider carefully the language they use to frame issues, and whether they are framed as procedural or substantive issues.
  • Finally, caution should be exercised in making submissions before the tribunal as to the form of ruling appropriate: at the hearing of ZCCM, the claimant asked to have the ruling made by way of a procedural order. This was considered by Cockerill J in her judgment when applying the reasonable recipient test.

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