English Commercial Court's approach to arbitral award challenges in last 4 years

The Judiciary of England & Wales publishes every year its annual report providing updated information and statistics relating to challenges to arbitral awards under Section 67 (jurisdiction), Section 68 (irregularity) and Section 69 (appeal on point of law) of the English Arbitration Act, 1996 (“Act”). The statistics provide a concrete view of how English Commercial Courts ensure that England remains an arbitration-friendly jurisdiction. The most recent report on statistics of the commercial court from the year 2021-22 has been released in April this year.

This Article endeavours through graphical representations to combine the statistics on arbitral award challenges provided by the English Commercial Courts [1] in its reports over the last four years i.e., 2021-22, 2020-21, 2019-20, and 2018-19. As an arbitration case will sometimes span over a year, a more complete picture is offered by looking also at previous years in comparison to the current year. Looking at the combined statistics over the last four years through graphical representations would provide a bird’s eye view of the English Court’s robust approach towards the arbitral award challenges.

A common trend over the last four years is that the matters arising from arbitration have continued to make up a significant proportion of the claims issued in the Commercial Court (average of 25%). This reflects London’s continued status as an important centre for international arbitration and London is still holding its position as a popular choice of seat.

Section 67 Applications (Jurisdiction)

A party may file an application in Court under Section 67 of the Act contesting an arbitral award on the grounds that the arbitral tribunal lacks substantive authority to hear the dispute. Section 67 challenges applications concerning arbitral awards where the seat of the arbitration is in England and Wales. A successful challenge will involve the award being set aside for a tribunal lacking the jurisdiction to hear the dispute in the first place.

In 2019-20 and 2020-21, the number of jurisdictional challenge applications hovered around the range of 17 to 19. However, in the latest statistics released, there was a spurt in the number with 27 jurisdictional challenge applications being filed until October 2022. This marks a 59% increase from the 17 applications filed the previous year. This increase is presumably predicated on the renewed understanding of the parties to have a De Novo trial under the current scope of Section 67.

This increase in the number of jurisdictional challenges to awards is subdued by the decreasing number of successful challenges. In the year 2019-20, only 2 jurisdictional challenge applications were successful. This number was further reduced to 1 successful application in the following year 2020-21. In the latest statistics for 2021-22, there is not even a single jurisdictional challenge application that has been successful yet. This echoes the point that English Court shall only overturn a decision in an extraordinary situation. It also demonstrates a high threshold set by the English Courts which a party must cross for successfully challenging the award on jurisdiction. It would be interesting to see the parties' approach going forward in the light of the Second Consultative Paper of Law Commission, where the intention is to reduce the scope of the Court’s review of the arbitral award under Section 67 challenge applications. ?

Section 68 applications (irregularity)

Section 68 of the Act permits a party to challenge an award issued by a tribunal seated in England and Wales for "serious irregularity" causing substantial injustice. The most common examples include the tribunal failing to meet its general duties under Section 33 of the Act (e.g., the duty to act fairly and impartially between the parties); and the tribunal failing to deal with all the issues that were put to it. A successful challenge will result in an award being sent back to the tribunal for reconsideration (where appropriate) or set aside in whole or in part.

?Commensurate with challenges on Jurisdiction, challenges filed for irregularity, have witnessed an abrupt uptick in the recently released statistics. Over the last three years, an average of 26 claims were recorded being filed to challenge arbitral awards for irregularity. This figure shows a steep jump to as many as 68 irregularity challenge applications being filed in the latest report from the year 2021-22. This jump of 54% is reflective of the party’s belief that they can successfully challenge the award on grounds of irregularity given that the jurisdictional challenge (discussed earlier) presents them with a high threshold. However, this myth is demystified through falling numbers of successful appeals and an overall fall in the percentage of successful appeals. In the year 2018-19, there were only 2 successful appeals in irregularity challenge applications. This figure fell to 1 in both 2019-20 and 2020-21. The low success rate of these applications is a testament to the non-interventionist approach of English Courts. In the year 2021-22, (till October 2022), there wasn’t a single successful appeal on the grounds of irregularity.

Section 69 Applications (Appeal on point of law)

Section 69 of the Act permits appealing the award on a question of law arising out of it. However, bringing a challenge under Section 69 is not as straightforward as bringing a challenge under Section 67 or Section 68. It is because parties are free to exclude the application of Section 69 and they often do either by adopting institutional rules (such as LCIA or ICC) or by explicitly including such inclusion in their arbitration contract. In speculation, if an appeal under Section 69 was not excluded somehow, the party wishing to appeal must either obtain all other parties’ consent before making an appeal or make an application for leave to appeal to the Court under Section 69(2). These preconditions almost act as stumbling blocks before the party is successfully able to launch an appeal under Section 69. Henceforth, this option of challenge has been less appealing to the parties which is mirrored in the numbers.

Since the year 2018-19, when 54 point of law challenge applications were filed, since then this number has considerably plummeted. Both years of 2019-20 and 2020-21 clocked, 37 point of law challenge applications being filed. This was only slightly increased in the year 2021-22 to 40 applications being filed till October 2022.

The success rate of point-of-law challenge applications continues to remain low. The year 2018-19 saw only 2 point of law challenge applications being successful. However, in the year 2019-20, there was a slight uptick to 4 point of law challenge applications being successful before coming down again to 2 successful applications in the year 2020-21. In the latest statistics for 2021-22, there hasn’t been a single successful point of law challenge application yet, while 13 applications had been granted permission to appeal, with a final decision pending and 11 were awaiting permission to appeal the decision.

Section 69 Applications – Completion Times

?The English Courts have carried the legacy for speedy disposal of cases without comprising due process. This is reflected through the consistency in the average number of days it takes for the Commercial Court to give the decision to grant or refuse permission to appeal in a Section 69 Application. We can witness a considerable decrease in this number from the year 2018-19 when it took an average of 124 days to give a decision on permission to appeal. This number has been oscillating between 100 days and 111 days, with the latest 2021-22 report stating this number to be 111 days.

On the other hand, we can observe a slight rise in the average number of days it takes for the completion of the application when permission to appeal was granted. In 2019-20, it took almost 231 days for a Section 69 application granted permission in 2018-19 to be completed. This number saw an upsurge with an average of 244 days being taken by an application to be completed in 2020-21 for the application granted permission in 2019-20. This figure has only slightly come down to 240 days for the application granted permission in 2020-21 and were completed in 2021-22. It is difficult to predict the reasons behind this increase in the number of days for completion of the application after permission has been granted. One possibility which might be attributed to this delay is the impact of Covid-19. Its impact certainly created a case backlog with re-scheduling of hearings and shifting physical hearings to online.

Conclusion

When parties choose England as their seat of arbitration, they entrust English Courts with the responsibility to maintain the sanctity of arbitral awards irrespective of the outcome of the arbitration. The low success rate of the arbitral award challenges is the epitome English Court’s endeavour to uphold such sanctity and reluctance to intervene in the arbitral process. In addition, these statistics come as a reliable source for the parties in their decision-making to challenge an arbitral award. It acts as a reminder for them that given the time and cost involved in challenging arbitral awards, with low success rates, these challenges are to be well thought for before being launched.

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Vishal Aggarwal?is a Dual Qualified Lawyer who practices International Arbitration and Commercial Litigation. (*Views in this article are personal views of the author and are not representative of any organisation he is associated with)

[1] This Article is restricted to Commercial Court Statistics and does not include Circuit Commercial Court Statistics or Admiralty Court Statistics.