The Lord Chief Justice’s BAILII lecture in March of this year again raised the old chestnut of whether English arbitration law has got it right in terms of appeals from arbitration awards. This has been an ongoing topic of debate for decades, and one which tends (in the words of Colman J in his 2006 lecture, “Arbitrations and Judges – how much interference should we tolerate?”) to get people “hot under the collar”.
The right of appeal from awards on a point of law is a unique feature of English law and seen by many as potentially inconsistent with party autonomy. When the English Arbitration Act 1996 was drafted, many consultees argued in favour of abolishing all rights of appeal. The Departmental Advisory Committee rejected this suggestion, however. They noted that, where parties had agreed to have their disputes determined in accordance with English law:
“… the parties have agreed that that law will be properly applied by the arbitral tribunal, with the consequences that if the tribunal fail to do this, it is not reaching the result contemplated by the arbitration agreement.”
On this basis, the existence of the appeal is characterised as consistent with, or perhaps even an aspect of, party autonomy.
The well-rehearsed counter-argument is that circumscribing rights of appeal deprives the English courts of the raw material with which to develop English commercial law: as Lord Devlin (ironically) put it, “…there must be an annual tribute of disputants to feed the minotaur” (Devlin, The Judge, (1979), page 106). English commercial law is a valuable asset that must be safeguarded and nurtured, particularly given the clear economic benefits flowing from the existence of a logical, responsive and predictable commercial legal system.
The Lord Chief Justice is the latest to argue for a “healthy diet of appellate cases”. In his BAILII speech, he suggested three ways this might be achieved: tinkering with the permission to appeal test, making greater use of section 45 of the 1996 Act (which permits the court to make pre-award rulings on points of law), and developing judicial procedures so that they become more attractive than arbitration. Before considering these further, though, a word about the underlying factual position.
It is certainly true that it is very rare for permission to appeal to be granted. Such statistical research as exists (and it is limited) suggests that there are perhaps around 50-60 applications per year, of which around a third succeed. It is noteworthy that a significant proportion of these appeals are concerned with maritime disputes. The vast majority of London maritime arbitration is conducted on London Maritime Arbitration Association (LMAA) terms which, unlike other key institutional rules, do not exclude rights of appeal on a point of law. In those circumstances, it is hardly surprising that most arbitration appeals are concerned with shipping law. But on any view, against the background of (for example) 553 LMAA awards issued in 2015, only a very small percentage are appealed.
It is instructive, at this stage, to reflect on the “two quite distinct fields of arbitration” highlighted by Colman J in his 2006 lecture: on the one hand, so-called “London market arbitration” such as shipping or commodities, and on the other hand, more truly “international” international arbitration in (for example) the energy, infrastructure or investment sectors. In the former situation, the contract would tend to be governed by English law, and appeals to the English court are embedded in the “system” and recognised and expected by parties. In the latter, the key focus is on neutrality, both in terms of venue, but also (perhaps, in some cases) in terms of governing law. Where governing law is concerned, there may be appeals to general lex mercatoria, or transnational principles or a neutral governing law may have been chosen. In such cases, the parties may well be taken to have wished to step away from all forms of court interference, preferring to take their chances with a neutral tribunal.
The perception of English-seated arbitration as forming two separate streams was echoed in discussions following the recent criticisms of the 2015 Queen Mary, University of London (QMUL)/White & Case International Arbitration survey. The LMAA has argued that the survey is unrepresentative because it focuses almost exclusively on institutional international arbitration (equating to the truly “international” disputes identified by Colman J), and ignores the substantial number of ad hoc (particularly LMAA) arbitrations that take place in London. It is reported that Loukas Mistelis of QMUL agrees that maritime and commodities arbitration exist in a “parallel universe”, with English-style procedure and different stakeholders and practitioners.
Assuming the existence of these two “parallel universes”, is it realistic to suggest (as the LCJ does) that tinkering with the permission to appeal test would result in a healthier diet of commercial appeals for the commercial court? In the case of the truly international arbitration, the chances are that any right of appeal is excluded in any event: parties to such disputes tend to prefer institutional to ad hoc arbitration, and most of the key arbitral institutional rules exclude rights of recourse. Furthermore, in such truly international arbitrations the parties are unlikely to have wished or contemplated any appeal: indeed, the 2014 and 2015 QMUL surveys make clear that appeals from awards are not valued aspects of arbitration. The other possibility suggested by the LCJ (making greater use of section 45 to obtain a ruling on a point of law) would face similar objections. That leaves the third option of improving court procedures so that they become more attractive to users. However, as the LCJ recognised, where there are potential enforcement issues, arbitration is always going to be an attractive option.
The LCJ’s speech drew a swift response from Lord Saville, writing in The Times, who argued strongly against altering the scope of the permission to appeal test. In his view, expanding rights of appeal would damage London’s standing as an arbitral seat and would be a “wholly retrograde step”. This appears to be the more orthodox position. It also appears to more closely reflect the interests of the parties, rather than the more diffuse interests engaged in the development of the English common law. On any view, this debate looks set to continue, particularly against the background of the increasing competition from other arbitral seats.