In the absence of any right of appeal awards are increasingly challenged on the basis of serious irregularity, under section 68 of the Arbitration Act 1996. In order to challenge an award under section 68, the irregularity has to be one which has caused or will cause substantial injustice to the applicant, and the irregularity has to be of a certain kind. These are set out in section 68(2), and include:
- Failure by the arbitrator to comply with the general duties under section 33 of the 1996 Act.
- Failure to deal with all the issues that were put to the arbitrator.
Section 33 provides that the tribunal is under a duty to act fairly and impartially as between the parties. The tribunal must give each party a reasonable opportunity to put its case and to respond to its opponent’s case.
In Arduina Holdings BV v Celtic Resources Holdings plc,  the court considered the extent to which a tribunal may have failed to properly evaluate evidence as a basis for a complaint under section 68:
“The assertion that the arbitrator failed to take any or proper consider (sic) of the evidence could in an exceptional case, give rise to a challenge under section 68, based on the general duty of an arbitrator under section 33 if, for example, an arbitrator genuinely overlooked evidence that really mattered, or got the wrong end of the stick in misunderstanding it. But there is all the difference in the world between such cases and an arbitrator evaluating evidence but reaching factual conclusions on it (as will happen in most arbitrations) which one party does not like. That cannot be the basis of a complaint under section 68.”
If it is not clear from the award whether or not the tribunal has dealt with an essential issue, the parties and the court should not have to guess whether the tribunal has failed to deal with it, or considered it and dismissed it on the grounds that it was totally devoid of merit as not worth mentioning. The award should inform whether or not an essential issue has been dealt with. However, the presence or absence of merit may be relevant to the question of whether substantial injustice has been caused to the applicant (Buyuk Camlica Shipping Trading & Industry Co Inc v Progress Bulk Carriers Ltd  ).
In Petrochemical Industries Company (KSC) v The Dow Chemical Company  a dispute arose as to whether the claimant (PIC) had failed to enter into a joint venture with Dow. PIC had been obliged to pay US$7.5 billion for a 50% interest in certain assets of Dow. The dispute arose because shortly before the parties entered into contract, Dow had agreed to purchase another business and Dow asserted that it had intended to use the sums payable by PIC towards the acquisition of that business and that following PIC’s failure to pay, Dow was forced to re-finance the acquisition, and suffered losses as a consequence.
The dispute was referred to ICC arbitration and the tribunal issued a partial award. The tribunal found that PIC was in breach of contract in failing to pay US$7.5 billion. It also held that Dow had established that it was entitled to damages for consequential losses of just over US$2 million.
PIC challenged the award on the basis that the tribunal had not dealt with PIC’s argument that it was not enough for Dow to show that the loss was one which the parties had contemplated: Dow also had to show that PIC had assumed responsibility for that loss (the assumption of responsibility issue).
The question of whether there was a serious irregularity within sub-section 68(2)(d) raised three specific questions:
- Whether the assumption of responsibility question was an “issue” within the meaning of that sub-section.
- If so, whether it was “put to” the tribunal.
- Whether the tribunal failed to “deal with” it.
The Court referred to the distinction drawn in the authorities between “issues” on the one hand, and matters often referred to as “arguments”, “points”, “lines of reasoning” or “steps” in an argument. The decisions demonstrate a consistent concern to maintain the “high threshold” that has been said to be required for establishing a serious irregularity, and this concern has sometimes been emphasised by references to “essential”, “key” or “crucial” issues. However, these adjectives were not intended to import a definitional gloss on the wording in section 68, but simply to allude to the requirement that the serious irregularity must result in substantial injustice.
The Court said it would not attempt the “impossible task” of defining what is an “issue”, but he rejected three “suggested yardsticks” put forward in the authorities, which rely, to a certain extent, on the formulation of issues in the “list of issues” in the arbitration. The question should be approached by considering the ordinary and natural meaning of the word “issue”, and accepted PIC’s submission that the assumption of responsibility question was an issue within the meaning of section 68(2)(d). Although it could be difficult to decide where the line demarking issues from arguments falls, on the facts, almost the whole of Dow’s claim could have depended upon how the assumption of responsibility question was resolved.
On the question of whether that issue was “put to” the tribunal, PIC had put the issue about assumption of responsibility to the tribunal in its second pre-hearing memorial, which contained a sub-section headed “PIC did not assume responsibility for Dow’s losses”. The Court rejected Dow’s argument that PIC had withdrawn or qualified the issue, either through its list of issues or closing remarks made by counsel.
As regards the question of whether the tribunal had dealt with the issue under section 68(2)(d), the authorities show that:
- This depends upon a consideration of the award.
- The tribunal does not have to set out every step by which they reach their conclusion, or deal with every point made by the parties.
- The tribunal does not fail to deal with an issue that it decides without giving reasons.
The Court identified the following further considerations:
- A tribunal does not fail to deal with issues if it does not answer every question that qualifies as an “issue”. It can deal with an issue by making clear that it does not arise in view of its decisions on the facts or their legal conclusions. Moreover, a tribunal may deal with an issue by deciding a logically anterior point in such a way that the issue does not arise.
- A tribunal is not required to deal with each issue seriatim: it can sometimes deal with a number of issues in a composite disposal of them.
- The court’s approach when considering an award is to read it in a “reasonable and commercial way, expecting, as is usually the case, that there will be no substantial fault that can be found with it” (Zermalt Holdings SA v Nu-Life Upholstery Repairs Ltd, (1985)).
- This approach may involve taking account of the parties’ submissions when deciding whether, properly understood, an award deals with an issue. Although submissions do not dictate how a tribunal is to structure the disposal of a dispute, awards (like judgments) often do respond to the parties’ submissions and should not be interpreted in a vacuum.
The Court concluded that the tribunal dealt with the issue, admittedly succinctly. To the extent that the tribunal may have conflated the forseeability question and the assumption of responsibility question, PIC could not complain about the composite disposal of these questions, provided they were both dealt with (which they were).
Accordingly, it was not necessary to decide whether substantial justice would be caused. Nevertheless, the Court commented that no single test for deciding whether substantial injustice has been, or will be, caused had been found. Moreover, to the extent that the relevant part of the award was directed to the issue, but fell short of dealing with it, then no substantial injustice was or would be caused.
If the matter was “free from authority” the Court would not regard a tribunal as being in breach of the duty in section 33(1)(a) or (b) if it overlooked evidence, genuinely or otherwise and would have interpreted that section as being concerned with the even-handed conduct of the arbitral proceedings, and not with mistakes in evaluating the evidence by oversight or otherwise. However, the authorities indicated that the tribunal’s failure to properly consider the evidence could, in exceptional cases, give rise to a challenge under section 68, based on the general duty of an arbitrator under section 33 (Arduina).