GN challenged the arbitration award, using s. 68 of the Arbitration Act 1996, by arguing that the arbitrators had failed to address several critical issues and defences which ultimately caused GN a substantial injustice. Section 68 of the Act allows a party to an arbitration to challenge an award if there was a serious irregularity affecting the tribunal, the proceedings or the award. In this case, Mr Justice Christopher Clarke explained that the power to set aside such an award was not available simply because of a mistake or because the arbitrators did not deal with all the points made or arguments advanced or did not explain each step they took to reach their conclusions. However, the court will act if the tribunal acted unfairly and caused substantial injustice.
Mr Justice Christopher Clarke found that in this case there had been irregularity and unfairness in certain areas. For example, the judge found that the arbitrators’ award of 10% interest was irregular as it was a rate higher than any claimed or argued in submissions. As a consequence, the paying party was not given the opportunity to argue about the appropriateness of such a rate. In addition, the arbitrators had given no reasons as to why this higher rate was imposed. In the judge’s opinion, the awarded interest rate caused substantial injustice as it resulted in an extra €1million liability for the paying party. The judge also found that the arbitrators, in failing to address certain defences and agreed positions of the parties, had caused further irregularity and unfairness. As a result, the judge set aside the unfair portions of the award.
The judgment shows how important it is for arbitrators to discuss all substantive submissions in their awards. A failure to do so may mean that the award is set aside in whole or in part. In addition, if the arbitrators stray from the submissions in their award, as with the award of interest in this case, they should fully explain in the award why they have reached such a conclusion.
