There is an important distinction between an arbitral award and other decisions made by an arbitral tribunal during the course of an arbitration. A decision that has the status of an award can be challenged or appealed to a national court and can be enforced under the relevant international conventions. In contrast, a decision that has the status of a procedural order cannot.
Given the significance of the distinction, it’s perhaps surprising that there is no internationally accepted definition of the term “award”.
Arbitration laws and institutional rules may prescribe the formal requirements for an award (for example, requiring the decision to be in writing, to contain reasons, to be dated and signed by the tribunal), but they do not address the substantive requirements of an award.
One point that is generally accepted is that the term “award” should be reserved for decisions that finally determine a substantive issue, as opposed to decisions made in relation to procedural or evidential matters.
However, it’s not always easy to draw that distinction, particularly in cases where the decision relates to a procedural or evidential issue that may have a determinative effect of the outcome of the dispute; for example, a decision on a strike out application or on a point of procedure that has jurisdictional aspects.
The recent decision in K v S highlights the problems that can arise and illustrates the English courts approach the question of what constitutes an award.
K v S: the facts
The case involved a section 68 of the English Arbitration Act 1996 (AA 1996) challenge to a decision made by a tribunal in an LCIA arbitration which was seated in England to disallow an expert report.
The procedural rules approved by the tribunal provided that the parties would set out a full statement of case and indicate in their written submission the nature of the evidence relied on “in a specific manner”, and provide “reasonable specific references to such evidence”.
K served a schedule of loss. S objected on the grounds that it went beyond K’s pleaded case. K then served an expert’s report which assessed those losses.
S applied to have the expert report struck out on the basis that (among other things) the report was based on entirely new legal and factual allegations which had not been known or accepted by S.
The tribunal disallowed the report. It found that the expert report advanced a new claim which was not pleaded, or sufficiently pleaded, so should not be allowed in evidence.
The decision was made in the form of what was termed Procedural Order 5. The decision ran to seven pages of description of the arguments of the parties on the points at issues, two pages of reasoning for the decision made, and a conclusion.
K argued that the decision to exclude the expert report was not a legitimate exercise of a tribunal’s case management function under section 34 of the AA 1996 (the tribunal’s power to decide all procedural and evidential matters) but was, instead, an improper exclusion of material evidence and contrary to the tribunal’s duties under section 33 (duty to act fairly and impartially as between the parties by giving each party a reasonable opportunity of putting its case).
There was no suggestion of any lack of due process in the way in which the tribunal reached its decision; K was simply dissatisfied with the decision. So, perhaps unsurprisingly, the section 68 challenge failed. The court reiterated that applications under section 68 are not the place for appeals on points of law or fact, nor is there any room for appeals against procedural or case management decisions where there has been no procedural unfairness in reaching those decisions.
However, a further ground for dismissing the application was the fact that section 68 provides only for a challenge to an award on the ground of serious irregularity. The court held that the tribunal’s decision to disallow the expert’s report was a procedural order and not an award and, as such, could not be challenged under section 68.
Order or award?
So how did the court approach the question of what constitutes an award? With little guidance to be derived from the AA 1996 or the LCIA Rules, the court turned to past authorities. Specifically, it turned to the points extracted from past authorities which are helpfully summarised in ZCCM Investments Holdings Plc v Kansanshi Holdings PLC and Kansanshi Mining PLC.
Those points can be summarised as follows:
- Substance is a key issue. The court will give real weight to the question of substance and not merely form.
- Is it a final decision? A key factor in favour of the conclusion that a decision is an award is if the decision is final, in the sense that it disposes of the matters submitted to arbitration so as to render the tribunal functus officio, either entirely or in relation to that issue or claim.
- Does it determine a substantive issue? The nature of the issues with which the decision deals is significant. The substantive rights and liabilities of parties are likely to be dealt with in the form of an award whereas a decision relating purely to procedural issues is more likely not to be an award.
- There is a role for form. Whilst more weight will be given to the actual substance of the decision as opposed to the form it takes, there is still a role for form. The tribunal’s own description of the decision (as a procedural order or as an award) is a relevant consideration, but not necessarily conclusive in determining the status of the decision.
- Perception of the recipient. It may also be relevant to consider how a reasonable recipient of the tribunal’s decision would have viewed it. A reasonable recipient is likely to take into account the objective attributes of the decision. These include the description of the decision by the tribunal, the formality of the language used and the level of detail in which the tribunal has expressed its reasoning. In ZCCM, the judge took the view that a reasonable recipient would also consider whether the decision complies with any formal requirements of an award under any applicable rules and that the background or context in which the decision was made is likely to be relevant, including whether the tribunal intended to make an award.
The decision in K v S
In K v S, the court accorded the most weight to two of these principles:
- Whether or nor there was a final determination.
- Whether the decision related to a substantive issue in the arbitration.
The court took the view that the decision to disallow the expert’s report did not result in a final determination on a substantive point in issue, namely the recoverability of the specific losses assessed in the report.
The tribunal did not make a final determination of that issue, nor were the arbitrators functus in respect of it as it remained possible for the claim to be pursued. For example, it remained open to K, after the exclusion of the expert’s report, to apply to amend its case, if necessary to seek an adjournment of the hearing, and to seek orders allowing for S to be given the opportunity to respond to the new case.
In K v S, the court had little trouble, on the facts, in determining that the tribunal’s decision was a procedural order and not an award. But distinguishing between an award and an order is not always that straightforward, particularly where the tribunal’s decision has the practical effect of determining a claim. What K v S does illustrate, though, is that there are now some very clear guidelines as to how the English courts will approach the question of what constitutes an award.