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27 May 2020

Righting arbitral wrongs: survey comes out against relaxing restrictions on arbitration appeals

Despite clear evidence of mistakes, there is little appetite for extending a right to appeal against the merits of arbitral awards

By Ben Rigby

Carol Mulcahy

Carol Mulcahy: 'Speed and finality of decisions remain important drivers for commercial parties.'

Should parties to arbitration have the right to appeal against an award on the merits? That was the central question of Bryan Cave Leighton Paisner’s (BCLP's) 2020 annual arbitration survey.  The answer was a resounding ‘no’ — despite clear experience from respondents of obvious mistakes made by tribunals. 

Fifty per cent of the 123 respondents from across the world had direct experience of a tribunal making an ‘obviously wrong decision’ on the substance of the dispute, a percentage which BCLP called ‘worryingly high’.

Just over half (51%) of these respondents felt that the consequences of getting the decision wrong were so serious as to make the lack of an appeal mechanism unacceptable, while 47% saw the benefits of assigning national courts the role of permitting appeals, helping them to develop the law.

Despite this, there was strong support for the status quo, which limits the review of awards to procedural errors, or jurisdictional challenges. Seventy-one percent of respondents said appeals would make international arbitration less attractive; others said appeals made arbitration too long (62%) and too expensive (57%).

Law firms and arbitrators were overwhelmingly in support of the status quo, although only 38% of clients said appeals would drag out the arbitral process. 

BCLP partner Carol Mulcahy said: “We were struck by the fact that while 50% had been on the receiving end of a ‘wrong’ decision, a very significant number of respondents (over 70%) remained against a right of appeal. Speed and finality of decisions remain important drivers for commercial parties.”

She added while there would be cases where the importance of getting the right decision would make the lack of an appeal mechanism unacceptable, if institutions were able to offer an efficient and speedy appeal process, parties may want to keep an open mind about adopting it.

Gordon Nardell QC, of Twenty Essex, agreed, saying the findings “tell us just how deeply seated in the profession's conviction that finality is worth the trade-off against the possibility of correcting errors - even obvious ones".

He noted that, while the survey predated the pandemic, associated pressures on court capacity could be a fresh factor tilting the scales in favour of allowing appeal rights.

Nardell said: “Much has been written about the potential attractions of arbitration to parties who currently opt to litigate their disputes - including parties with cases currently before the courts. The safety valve of an appeal may well be more attractive to parties contemplating a shift from litigation to arbitration.”

That, he noted, may benefit English-seated arbitrations, where section 69 of the Arbitration Act allows appeals under narrow grounds, leaving it in a stronger position to attract such work, post-Brexit, than seats with no right of appeal.

John Judge, an arbitrator at the International Arbitration Centre (IAC) in London, called the findings unsurprising, as “most losing parties and good counsel believe an adverse award or decision is wrong”.

However, he said it was unclear whether the wrong in question was a finding in law, fact, or both; he added, citing Canadian precedent, that it was 'wishful thinking' that a right of appeal would solve such issues.

There was support for existing arbitration bodies that permitted appeals in certain industry sectors, such as sports and commodities; but 62% of respondents felt that allowing appeals to national courts was inconsistent with arbitration as a form of private alternative dispute resolution.

David Cairns, another IAC arbitrator, noted “party autonomy should be the key". Judge said: “Given the prospect of delays in national courts, it is not surprising that a faster opt-in appeal process through an arbitral institution [is favoured] over national courts.”

He added that “the lack of any consensus on the limited grounds for appeal reinforces the reluctance of most arbitral institutions to create appeal rules for commercial disputes”.

Cairns agreed, saying there was no room for complacency, but the benefits of arbitration could not be compromised in pursuit of speculative or marginal improvements, calling the survey “intriguing, but ultimately the case for the expansion of arbitral appeals has not been made out”.

BCLP surveyed 123 respondents, from arbitrators and in-house counsel, through to expert witnesses and litigation funders, spanning the globe.

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