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Methods of Challenge in Arbitration.

Posted on 16/10/2016 · Posted in Arbitration

There are a number of possibilities for challenge in arbitration, with most arising at the beginning of the arbitration proceedings, some arising during the arbitration, and those arising once the award has been made.

Challenging the Arbitrator

In some cases a party may wish to challenge the arbitrator’s jurisdiction, and this can either be comprehensive or partial; a comprehensive challenge relates to the arbitrator’s authority to decide all aspects of the dispute between the parties, whereas a partial challenge refers to the arbitrator’s authority to decide a particular claim or point. The majority of rules and laws relating to arbitration challenge state that a party who wishes to make such a challenge should raise their concerns at the outset of the arbitration. Challenges to the arbitrator by nature, are often levelled before the arbitration proceedings have begun under sections 31 or 32 of the 1996 English Arbitration Act.

Under section 24 of the English Arbitration Act 1996 a party is also able to challenge the arbitrator if there is reason to doubt the arbitrator’s impartiality, stating a party may “apply to the court to remove an arbitrator on [the grounds that] circumstances exist that give rise to justifiable doubts as to his impartiality.” Other grounds on which an arbitrator could be challenged are lack of necessary qualifications to pull together the arbitration agreement, physical or mental incapacity, or a refusal or failure to conduct proceedings properly or to make an award. As might be expected, successful challenges against arbitrators are relatively rare in English arbitration proceedings, and challenges are sometimes made with tactical aims in mind rather than in a genuine attempt to remove the arbitrator.

The ultimate measure of a man is not where he stands in moments of comfort and convenience, but where he stands at times of challenge and controversy”
Martin Luther King, Jr.

Challenging an Award

In most countries across the globe, arbitration rules will stipulate that the awards resulting from an arbitration proceeding are final and binding, and this is one of the key draws of arbitration as a means of dispute resolution for many corporations and individuals. However, unless otherwise agreed at the start of an arbitration proceeding, an award may be appealed before the courts on a question of English law. The three grounds on which an award might be challenged are jurisdiction, serious irregularity, or on a point of law. Before applying to a court, a party must first explore all possible options with the arbitrator to amend or add to the award.

As explained above, a jurisdictional based challenge comes under section 67 of the 1996 Arbitration Act. This challenge puts into question the arbitrator’s authority to hear and decide a case.

Jurisdictional challenges in practice may relate firstly to the existence of the arbitration agreement, secondly to the validity of the arbitration agreement, or finally whether some ruling on the part of the arbiter(s) falls outside of the scope of the arbitration agreement. These challenges might address part or the entirety of the arbitration agreement. Appropriate jurisdictional challenges may be for example doubts raised that the tribunal of arbiters was not properly constituted or perhaps that relevant foreign law was not properly taken into account during the proceedings.

Challenge on the ground of serious irregularity, under section 68 of the 1996 Arbitration Act, may be because a party feels the arbitrator did not act fairly, was the cause of undue delay or expense, or in cases where the award was obtained fraudulently or against public policy. Confidentiality falls under this section. As client confidentiality is one of the pillars of alternative dispute resolution, section 68 gives the opportunity for parties to question the enforceability of their award on the grounds that their private information was mishandled. Although section 68 challenges are often deployed, in the history of arbitration, they have rarely been successful.

Challenge on a point of law, under section 69 of the 1996 Arbitration Act, can be made with the agreement of all the parties taking part in the arbitration or with permission of the court, and must be proven to be essential to proceedings. Unlike sections 67 and 68 parties can determine to leave out section 69 when their arbitration agreement is drafted, as many do, meaning that the arbiter’s decision is binding and final. However, some disputes simply do fair better in a court of law. It is both time and cost effective to realise what type of dispute resolution, be it alternative or traditional, best tends to the needs of your case at the outset, so as not to eventually require a costly section 69 challenge.

Upon an award being challenged, the court may confirm the award, amend the award, ask the arbitrator to reconsider the award either in whole or in part, or even set the award aside altogether. It must be noted that successful challenges under sections 67-69 of the 1996 Arbitration Act are rare, due to the courts interest in upholding arbitration as a viable, alternative to litigation. However, challenging jurisdiction earlier under sections 31 or 32, before the arbitration agreement has been finalised, is often met with greater understanding.

Expert Evidence is a professional firm concentrating on the four main areas of dispute resolution; acting as expert witnesses in financial litigation, mediation, arbitration and adjudication. The firm has a civil, criminal and international practice and has advised in many recent cases. Areas of specialisation include banking, lending, regulation, investment, and tax.

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