Overview of Arbitral Appeals on Questions of Law

Introduction

Section 69 of the UK Arbitration Act 1996 (1996 Act) provides parties to an arbitration seated in England and Wales with the opportunity to appeal against an award on a point of law. Such appeals are only permitted with the leave of court unless otherwise agreed by all parties.

While some critics take the view that the court’s interference would undermine the finality of arbitral awards, the statistics show that section 69 only ever poses a threat to the finality of awards in an extremely limited number of cases. According to the latest Commercial Court Report 2022-2023 published by the Judiciary of England and Wales, the number of section 69 applications received during the year was 40, compared to 37 in the previous year. Importantly, the Report shows that there were no successful section 69 appeals for both the 2021-2022 and 2022-2023 court years.

DLA Piper’s London and Hong Kong offices have recently worked together to successfully defend several section 69 applications before the English court, and resist corresponding applications to stay enforcement proceedings before the Hong Kong court. This article provides a brief overview of the appeals on points of law under section 69 of the 1996 Act, and their implications on award enforcement in Hong Kong.

 

An overview on the question of law appeals

The statutory regime for appeals under section 69 of the 1996 Act applies a two stage process: (i) the application for leave to appeal and, (ii) if leave is granted, the appeal itself.

Before granting leave to appeal, the court must be satisfied, among other things, that the decision of the tribunal on the question of law is “obviously wrong” (section 69(3)(c)(i)), or that the question is one of “general public importance” and the decision on this question is at least open to “serious doubt” (section 69(3)(c)(ii)).

The “obviously wrong” test is, self-evidently, a stringent one which will seldom be satisfied since the threshold is very much higher than the usual test of “real prospect of success”, which applies to applications for permission to appeal to the Court of Appeal.¹

Alternatively, an application may be proceeded through the “general public importance” gateway, which only requires that the decision be open to “serious doubt”. If the case involves a mixture of fact and law, it will ordinarily be treated as a “one-off” that is of no interest other than to the parties to the arbitration and therefore not one of “general public importance”. Although the “serious doubt” test is easier to satisfy compared to the “obviously wrong test”, case authority suggests that it remains a stringent hurdle, especially if the tribunal’s decision is based on fact findings that are subtle and complex in nature. ²

It is worth noting that section 69 is a non-mandatory section of the 1996 Act and can be excluded by parties’ agreement. This can be done by either explicitly excluding the application of section 69 in their arbitration agreement, or by adopting institutional rules that contain appropriately worded exclusions (such as article 26.8 of the LCIA Rules 2020).

 

The procedures

The leave to appeal stage

Any application for leave to appeal against an arbitral award must be brought within 28 days of the date of the award or, if there has been any arbitral process of appeal or review, of the date when the applicant was notified of the result of that process (section 70(3) of the 1996 Act). The 28-day period commences on the date of the original award unless the correction was material to the challenge to the award.

A respondent who wishes to oppose an application for permission to appeal must file and serve a respondent’s notice (§12.6 of Practice Direction 62 (PD62)) within 21 days after the date on which the respondent was required to acknowledge service, and this must be accompanied by a skeleton argument (PD62 at §12.7). The applicant then has 7 days to file and serve evidence or argument in reply (PD62 at §12.9).

Once the court has received all the evidence, the Listing Clerk will ask the parties to prepare and lodge a joint bundle. Most of the applications will be dealt with by the court on paper only. In the rare circumstances where the court considers that an oral hearing is required, it may give further directions such as are necessary (PD62 at §12.13).

In regard to timeframe, according to the latest Commercial Court Report, during the year 2022-2023, it took on average 93 days from the receipt of the arbitration claim, to the decision to grant or refuse permission to appeal. In DLA Piper’s experience, this very much depends on how busy the Commercial Court is at any one time, which only the Listing Officer, who has visibility on the judges’ availability to consider the application on paper, can predict. In one recent case, it took roughly 55 days from the date of the applicant’s filing of the arbitration claim for the Commercial Court to dismiss that application for leave to appeal.

Where the court refuses to grant permission to appeal

Where the court refuses an application for permission to appeal without an oral hearing, it will provide brief reasons (PD62 at §12.14). In that case, the appellant may write to the judge in the first instance to seek permission to appeal against the decision to the Court of Appeal. Although there is no fixed time frame for this, the appellant needs to do so promptly in writing (copied to all other parties).

There is no further process after this, and there is no right of reply to any such letter from the appellant to the judge. Such letters seeking permission to appeal are almost invariably refused by the judge. On receipt of such a refusal letter from the judge, the appeal process usually comes to an end, save for very exceptional circumstances where the appellant may apply directly to the Court of Appeal for permission to appeal to the decision.

Where the court grants permission to appeal

Where the judge in the first instance grants permission to appeal, the court will fix a date for the hearing of the substantive appeal. The decision made by the court is appealable as of right to the Court of Appeal.

It is noted that the first instance judge retains a discretion to set aside the order granting permission to appeal the award if it deems that it has been misled, or where a fundamental change of circumstances has destroyed the basis on which the order was made.

 

Implications on award enforcement in Hong Kong

Ex parte application and full and frank disclosure

In order to enforce an arbitral award in Hong Kong, an application must be made to the Hong Kong High Court for leave to enforce it. The application is made ex parte, supported by an affidavit. Once leave is obtained and the time for the respondent to apply to have it set aside lapses, the award is then enforceable in the same way as any judgment of the court.

Like other ex parte applications, the applicant has a duty of full and frank disclosure. This means that the applicant is obliged to disclose all facts and materials relevant to the determination of that application which are within the knowledge or reasonable contemplation of the applicant.

If at the time of the application, the applicant is already aware of any challenge or setting aside proceedings that have commenced at the seat of arbitration, then the applicant is obliged to disclose the same. Case authority also suggests that such obligation is a continuing one.³ Even if the applicant only becomes aware of such proceedings after filing the ex parte application, the applicant is still obliged to inform the court of the same as part of its continuing obligation to disclose any material change of circumstances. This is irrespective of the applicant’s view of the merits of the challenging proceedings at the seat of arbitration.

Practical recommendations

In light of the above, if at the time of the application for recognition and enforcement of English awards in Hong Kong, the applicant is already aware of any section 69 application filed before the English court, then the applicant is obliged to disclose the same to the Hong Kong court. The same applies to any challenge before the English court on the grounds of lack of substantive jurisdiction under section 67 of the 1996 Act or serious irregularity under section 68 of the 1996 Act.

Even if the applicant is not aware of any steps threatened and/or taken by the opposing party to challenge or appeal the award at the time of application for recognition and enforcement, it is still advisable for the applicant to include wording in the affirmation to address the award challenge and appeal regime in England, and the fact that the applicant is not aware of any such application.

It is also worth noting that the mere existence of proceedings to challenge an award in another jurisdiction does not by itself require the Hong Kong court to refuse enforcement for the time being and to adjourn the proceedings.⁴ When resisting an application to stay or set aside enforcement of an award subject to challenge or appeal in the seat of arbitration, in appropriate cases, the applicant may explore seeking an order that any adjournment be conditional upon provision of security for the award and/or costs.

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¹ National Trust for Places of Historic Interest or Natural Beauty v Fleming [2009] EWHC 1789 (Ch), §12.
² Morris Homes v Keay [2013] EWHC 932, §44.
³ Grant Thornton International Limited v JBPB & Co (A Partnership) [2013] HKEC 477.
⁴ Dana Shipping and Trading SA v Sino Channel Asia Ltd [2017] 1 HKC 281, §8.