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Overturning Arbitration Awards Presents a Very High Hurdle

Contracting parties who submit their disputes to arbitration agree in advance to abide by the result. Such agreements do not oust the power of the High Court to intervene to put right any injustice, but obtaining such relief represents a very high hurdle, as one case involving a substantial distribution contract illustrated.

Company A was in dispute with company B in respect of a contract to distribute laboratory testing systems and other products. An arbitration panel was appointed which ruled largely in favour of company B. However, company A, which was also directed to pay more than £1 million in legal costs, mounted a challenge to the panel’s decision under Section 68 of the Arbitration Act 1996.

It was submitted that the panel had failed to act fairly and impartially, that it had not adopted procedures that provided a fair means of resolution and that it had failed to deal with certain important issues. The panel’s decision was said to be infected by serious irregularities which had caused substantial injustice.

In ruling on the case, the High Court noted that both companies had agreed prior to the arbitration that the panel’s findings would be final and binding. They had agreed to put the panel’s decisions into effect without delay and had purported irrevocably to waive their right to any form of appeal to any judicial authority.

In those circumstances, the Court observed that company A faced an uphill struggle. It found that the panel’s conclusions were understandable on the evidence and that no serious irregularity or substantial injustice had been established. Company A’s challenge to the panel’s findings on the face of it amounted to unreasonable litigation conduct and the Court would give consideration to ordering it to pay the costs of the case on the punitive indemnity basis.