In an English seated arbitration, s.69 Arbitration Act 1996 permits, albeit under certain limited circumstances, an appeal to the court on a question of English law arising from an arbitral award. The High Court’s recent decision in The CV Stealth” [2017] EWHC 2808 illustrates the need to think carefully about such a course of action.

An introduction to s.69 Arbitration Act 1996 (the “Act”)

In an English seated arbitration, s.69 of the Act provides one potential basis upon which an aggrieved party may seek to challenge an eventual award – specifically on the basis of an appeal to the court on a question of English law arising from the award.  The availability of s.69 is, however, subject to several restrictions. Importantly it is a non-mandatory section of the Act, so parties can contract out of it. This, in the interests of finality of the award, they often do (whether explicitly in their arbitration clause or through the use of institutional rules insofar as they contain an appropriately worded exclusion, e.g. LCIA Rules Article 26.8, ICC Rules 35.6 (which have, in England, been held to be effective for such purposes)).

But even if the parties have not opted out of its application, s.69 is subject to several other limitations and restrictions. One of these is that the appeal must involve a question of English law arising out of the award. As Popplewell J’s decision in “The CV Stealth” illustrates, this will not extend, for example, to the arbitrator’s application of facts to the (correct) law, or legitimate procedural decisions – howsoever dressed up by an applicant. 

The facts of the “CV Stealth” and the ruling of Popplewell J

The “CV Stealth” was a ship detained in Venezuela. Its charterers had ordered it into a Venezuelan port to pick up crude oil for a third party. Unbeknown to the charterers, this cargo was part of an attempt to unlawfully export oil from Venezuela. This plan came to light whilst the ship was in port and led to the local authorities ordering it to remain there (an order which remained despite numerous attempts on the part of the owners, and the charterers, to get it released).  

The owners (who, like the charterers, were not involved in the unlawful plan) claimed compensation from the charterers for losses arising out of the detention of the ship. In a partial award of September 2015 the arbitrator held that the charterers were liable for these on the basis of certain indemnities, and breach of a term concerning exposure of the ship to such risks, in the relevant charter-party. The arbitrator also found that the charterer’s instruction was an effective cause of the detention of the ship (a decision upheld by Popplewell J in earlier proceedings in the case: [2016] EWHC 880).

Following that award, the ship remained detained in Venezuela. The attempts on the part of the owners, and the charterers, to persuade the local court to release the ship continued. The arbitrator then made a further award, in May 2017, against the charterers including the owner’s expenses of detention since the first award. In those proceedings, the charterers sought to rely on what it saw as an increasingly retractable refusal of the Venezuelan courts, since the first award, to release the vessel. This, in its view, had accordingly become the sole effective cause of the ship’s detention. The arbitrator disagreed, seeing such conduct simply “of a piece” with what had been experienced prior to the 2015 award.

The charterers sought to challenge this conclusion under s.69 of the Act. In particular, they asserted that the arbitrator had made an error of law because he was obliged to consider the cumulative effect of the local court’s acts as a matter of the law of causation. Popplewell J, however, rejected this. He considered the appropriate test and the relevant authorities in the shipping context and then asked the question whether the arbitrator had misunderstood or misapplied the same; it was clear from his award, which referred to the correct test, that he had not done and that he was plainly aware of the relevant test. That being the case, there was no question of law raised by the appeal; the arbitrators’ findings as the relevance of the local court’s conduct simply being a factual conclusion being applied in the context of that test.

An attempt by the owners to invoke s.69 also failed for similar reasons. They attempted to challenge a decision of the arbitrator to deduct sums from its award for saved drydocking expenses. The owners claimed this involved the application of strict legal principles which, in their view, had not been applied. Popplewell J disagreed holding that this decision had been taken as part of a legitimate “wait and see” approach in line with principles established for the assessment of loss dependent upon future contingencies. That being the case, the complaint was correctly categorised as an attempt to challenge a legitimate case management decision – and did not involve a question of law.

Conclusions

The court’s decision shows that it will forensically examine appeals brought under the auspices of s.69 as to whether they are truly an appeal concerning a point of English law. As ever, even where the section is potentially available, applicants looking to challenge an award will need to think carefully about whether this is really an appropriate basis for doing so.

Stephen Lacey

Counsel PSL
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