Although procedures for court challenge of an award on the basis of procedural irregularity or jurisdictional error are widely available across jurisdictions, the ability to bring an appeal against the tribunal’s decision on the substantive issues in dispute is not. The principle of finality is enshrined in the rules of major arbitral institutions, and in the national arbitration laws of the majority of popular arbitration seats.
Arguments in favour of a right of appeal
A right of appeal against a court decision is an established feature of most judicial systems. The absence of such a protection in international arbitration may undermine its legitimacy and, as the volume of arbitration increases, become unacceptable.
In common law systems, the precedent value of appellate court decisions also aids the development of commercial law. The restrictions on appeals against an arbitral award contained in the English Arbitration Act 1996 were criticised in 2016 by the (then) Lord Chief Justice as “a danger… to the development of the common law as the framework to underpin the international markets, trade and commerce”.
From an arbitration user’s perspective, there may be cases where the desire for a correct decision outweighs all other considerations. The value of the dispute may be extremely high and the consequences of a bad decision may be very grave. In a 2015 survey by the Queen Mary School of International Arbitration, the lack of an appeal mechanism on the merits was the third “worst characteristic” of international arbitration most frequently selected by in-house counsel respondents.
Arguments in favour of finality
On the other hand, limited and exceptional control of awards by national courts has long been accepted as an important reason for the success and development of international arbitration.
For many parties, opting out of national court jurisdiction by agreeing to arbitrate is a positive choice. They wish to have their dispute resolved by means other than traditional court process, or they may want a neutral decision-maker independent of those national courts. Permitting a court to substitute its decision on the merits for that of the tribunal chosen by the parties undermines those choices.
Appeal procedures are also time consuming and expensive, a factor that may adversely affect business users’ perception of arbitration generally. As to the point that appellate decisions make better law, why should users of arbitration (a private dispute resolution process) pay to develop the law by funding appeals through national courts?
There appears to be some appetite for use of internal appellate procedures offered by arbitral institutions. Some sector-based arbitration regimes, such as GAFTA, have long-established two-tier regimes providing for a new hearing by a board of appeal. The Court of Arbitration for Sport permits an appeal to be filed if expressly provided for by the rules of the sports body concerned. The CPR has had an opt-in arbitration appeal procedure since 1999. Furthermore, the number of arbitral bodies offering an appeal procedure appears to be growing. For example, JAMS, the AAA, the ECA and the Spanish Court of Arbitration all now offer appeal procedures.
The BCLP survey
At the beginning of this month, Bryan Cave Leighton Paisner (BCLP) released the results of its annual international arbitration survey, this year focussing on the right to appeal a tribunal’s decision on the merits. Respondents to the survey included those working in all major geographical regions, and comprised arbitrators, corporate counsel, external lawyers, third party funders, academics and those working at arbitral institutions.
The divergent views of respondents to the survey reflect the lively debate that this topic generates among users of international arbitration.
An interesting starting point is that 50% of respondents had direct experience of a tribunal making an obviously wrong decision on the substance of the dispute.
However, despite that relatively high level of experience, there was significant consensus among respondents that a right of appeal makes international arbitration less attractive (71%), too long (62%) and too expensive (57%). 62% felt that an appeal to a national court is inconsistent with the parties’ choice of a private dispute resolution procedure.
However, 51% of respondents felt that, in some cases, the consequences of an incorrect decision are so serious as to make the lack of an appeal mechanism unacceptable. 47% of respondents felt that permitting appeals to national courts on the merits of a dispute may aid development of the law.
How to square the circle?
We asked respondents whether an “internal” right of appeal to a second tier tribunal under the rules of the supervising arbitral institution is preferable to a right of appeal to a national court. Although only 12% of respondents had direct experience of an internal appeal, 48% said that it would be preferable to a right of appeal to a national court.
On the question of whether such an internal appeal mechanism should be opt-in or opt-out, 70% of our respondents voted for an opt-in process. The timeline was also important: 88% felt that the appeal decision should be made within six months. A large percentage (58%) felt that the appeal tribunal should be appointed by the arbitral institution rather than with input from the parties. There was also a relatively large percentage (43%) in favour of the internal appeal process not being restricted to awards having a minimum monetary value, or to cases where the award was made by a sole arbitrator. Our respondents had more mixed views on other factors. For example, 48% felt that an appeal should be limited to issues of law, compared to 42% who felt it should also extend to incorrect findings of fact.
What we learned
The survey results confirm that many in the arbitration community remain committed to finality. However, substantial numbers of respondents said that a right of appeal may be justified, either to assist courts in development of the law, or to correct a bad decision. Appeals, at least in some restricted form supervised by arbitral institutions, may provide an acceptable degree of compromise. As always, the devil may lie in the detail and the need to take account of divergent views on the scope, timeline and constitution of the appellate process. We will have to watch and wait to see if more institutions move to include appellate procedures, how they grapple with these issues, and whether users are happy to make use of the procedures offered.