Agreements to appeal arbitral awards

This article was produced by Nabarro LLP, which joined CMS on 1 May 2017.

Summary and implications

In the recent Commercial Court decision in St Shipping and Transport Pte Ltd v Space Shipping Ltd [2016] EWHC 880 (Comm), the court refused permission to appeal an arbitration award where the parties had entered into an agreement under which points of law could be appealed.

The dispute was between the owners and the charterers of a shipping vessel, CV Stealth. Whilst stationed in Puerto La Cruz, the charterers received an authorisation for the exportation of oil which turned out to be a forgery. Neither the charterers nor the owners were involved in the forgery. However, to assist with their investigation, the local Venezuelan court made a precautionary order prohibiting the vessel from sailing from Puerto La Cruz. The vessel has been detained in the port ever since.

The arbitration award

At the arbitral tribunal, it was determined that the charterers were liable to the owners for the financial loss they had incurred as a result of the detention of the vessel.

The charterers sought to appeal the award. An issue arose as to whether they required permission to appeal.

Appeal on a point of law

Under section 69 of the Arbitration Act 1996 (the Act), unless otherwise agreed by the parties, a party to tribunal proceedings may appeal to the court on a question of law arising out of an award made in the proceedings. An appeal can only be brought under this section with the agreement of the parties or with permission of the court. When considering whether to grant permission to appeal, the court should be satisfied (inter alia) that the determination of the question of law will substantially affect the rights of one or more of the parties (section 69(3)(a)).

By clause 41 of an agreement between the charterers and the owners, it was agreed that either party may appeal to the High Court on any question of law arising out of an award. The charterers argued that clause 41 fulfilled section 69(2)(a) of the Act, which provided that the parties could agree that an appeal could be brought on a question of law arising out of an award made in the proceedings. Accordingly, the charterers argued that they did not require the permission of the court to appeal the award.

In response, the owners argued that clause 41 did not apply to the issues the charterers wanted to appeal and that permission from the court was therefore required.

The question of whether permission to appeal was necessary was addressed at an oral hearing. The judge found that permission to appeal was required and refused permission on all grounds. The reasons given were as follows:

(a) Clause 41 was drafted with section 69 of the Act in mind and its scope was limited to questions of law. One of the issues the charterers sought to appeal was a question of fact and, therefore, did not come within the scope of clause 41 or section 69 of the Act.

(b) Because clause 41 was drafted with section 69 in mind, the parties could only agree to bring an appeal under clause 41 if and to the extent that the question of law would substantially affect the rights of the parties. This reflected the statutory test set out at section 69(3)(a) of the Act. The judge found that the questions of law the charterers wanted to appeal were largely academic and their determination would not substantially affect the rights of either of the parties.

(c) Furthermore, the issue was not whether the question of law "may" substantially affect the rights of the parties. The wording of section 69 provided that the court would grant permission to appeal if the determination of the question of law "will" substantially affect the rights of one or more of the parties. The charterers were not able to fulfill these criteria.

(d) Finally, the onus was on the charterers, as the party asserting that they did not need the court's permission to appeal, to establish this fact by adducing evidence in support of it. The judge was not satisfied that the charterers had done enough to convince him of this.

Conclusion

This decision sheds light on the interpretation of section 69 of the Act and, in particular, highlights the fact that a provision in the underlying agreement between the parties that an appeal may be made on a question of law will not necessarily fulfill section 69(2)(a) of the Act, which provides that the parties may agree to an appeal on a question of law. Whether such a provision is effective will depend on the issues the party wishes to appeal and the context of the underlying agreement. This decision also suggests that the court will not interfere with the decision of an arbitral tribunal unless it is satisfied it is permitted to do so.