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Arbitration Gone Awry? Challenging Awards

Date: 27/11/2023 Type: Articles Topic: Private Client | Trusts | Wills and Estates | Inheritance | Next Generation Wealth | Investment and HNWI’s | Tax |

Challenging arbitral awards

Family law arbitration is currently experiencing a burst in popularity. Whilst it has been available for financial cases in England and Wales since 2012, and for children cases since 2016, its use became far more prevalent during the pandemic. Since then, seeing the numerous benefits, practitioners have gladly added it to their toolbox to try to help resolve matters efficiently and effectively for their clients. Arbitration allows proceedings to be ended in a timely and cost-efficient manner, with multiple issues able to be resolved in one forum. Given the current delay in the court system, and the associated costs this delay can generate, arbitration is becoming a popular alternative.  This also means the number of reported cases involving arbitration is gradually increasing as well, resulting in helpful guidance for those making their first forays into this evolving area.

Generally, clients’ main concerns about arbitration have been what they can do if the arbitrator makes what they regard as being a “wrong” decision. The bases upon which an arbitral award can be challenged under the Arbitration Act 1996 are indeed limited. However, the case of Haley v Haley [2020] EWCA Civ 1369 confirmed that arbitral awards can in practice be challenged in family cases, thereby encouraging far more clients to use the process. 

The test the court must apply

How then does the court determine when to depart from the decision made by the arbitrator? As financial orders in the Family Court are made under the Matrimonial Causes Act 1973, not the Arbitration Act 1996, in Haley King LJ held that a challenge to a financial remedy arbitral award should be dealt with in the same way as a financial remedy appeal in the Family Court from a district judge to a circuit judge. Therefore, the Court of Appeal decided that the court will substitute its own order if the judge decides that the arbitrator’s award was wrong; not seriously, or obviously wrong, or so wrong that it leaps off the page, but just wrong.

The result of this decision means that the court retains its supervisory jurisdiction. This has provided substantial comfort to practitioners, who are now more likely to encourage their clients to consider arbitration, knowing that there is an avenue for relief if things go awry.

Practice and procedure in financial cases

Following the decision of Haley, the judgment in A v A (arbitration: guidance) [2021] EWHC 1889 set out the procedure to be followed when challenging a financial arbitral award.  The person wishing to challenge the award should take the following steps:

  • A Form A should be filed. As an arbitral award falls within FPR PD 3A 13(2)(b), the parties do not need to attend a MIAM; they are exempt.
  • An application in Form D11 should be filed within 21 days of the date of the arbitral award in its final form, following the Part 18 procedure.
  • The grounds of challenge should be annexed to the Form D11. They should succinctly set out the complaints about the arbitral award and in respect of each ground, must state whether it raises a challenge against a point of law, a challenge against a finding of fact, or an allegation of procedural irregularity (as per PD 30A, para 3.2(b) of the FPR).
  • In addition, the following should be filed alongside the Form D11:
    • A skeleton argument not exceeding 20 pages;
    • The award itself; and
    • A draft of the initial gatekeeper’s order. (There is a pro forma order within the standard order compendium.)
  • Upon the issue of the Form D11, the gatekeeper should immediately issue an order (i) disapplying the procedural requirements to file a Form E or attend a first appointment, (ii) providing that the respondent may, within 14 days of being served, file a short skeleton argument in response with their suggested draft order, (iii) lifting any stay on an existing Form A and (iv) directing that the application will be considered by a circuit judge without a hearing not sooner than 21 days after issue of the application.
  • The circuit judge will then decide whether the permission to appeal test has been passed. If not, an order will be made in the terms sought by the respondent – with a likely costs’ penalty for the applicant.
  • If the permission to appeal test has been passed, directions will be given for the application to be heard inter partes.
  • If, following the inter partes hearing, the judge is satisfied that the arbitral award is wrong, the circuit/High Court judge will make different provision. Costs generally follow the event.

Practice and procedure in private children cases

More recently, in G v G [2022] EWFC 151, Peel J provided further guidance on the procedure to be adopted when challenging an arbitral determination, this time in children proceedings.  The individual who wishes to challenge the arbitral award must take the following steps:

  • A Form C100 should be filed. As with financial cases, the requirement to attend a MIAM does not apply.
  • A Form C2 must be filed within 21 days of the arbitral determination in its final form, annexing the grounds of challenge. Again, this is done in the same way as grounds of appeal. Each ground should specify whether it raises a challenge against a point of law, finding of fact, or an allegation of procedural irregularity.
  • The following should be filed alongside the Form C2:
    • A skeleton argument not exceeding 20 pages;
    • The award itself; and
    • A draft of the initial gatekeeper’s order. (A suggested draft is appended to Peel J’s judgment in G v G.)
  • The gatekeeper will issue an order (i) disapplying the usual procedure, (ii) providing that the respondent may file a short skeleton argument and in response and their proposed draft order within 14 days and (iii) directing that the application will be considered by a circuit judge without a hearing not sooner than 21 days after issue of the application.
  • The circuit judge will conduct a paper exercise and decide whether the permission to appeal test has been passed. If either party considers that the application should be allocated to a High Court Judge, a written request must be made at the outset to be considered by the gatekeeper.
  • If the permission to appeal test has been passed, directions will be given for the application to be heard inter partes.

Following A v A and G v G, it is now clear how courts will determine challenges to arbitral determinations, and what procedure should be followed. Clients can be much more comfortable entering into arbitration knowing that there is a clearer path for of challenging the award should something go awry. Positively, this is leading to more clients entering into arbitration, thereby helping them to choose their judge, avoid the long delays and the resulting costs implications of court proceedings while also taking pressure off the already over-burdened court system. 

 

Author

Claire Gordon & Suzanna Eames - Farrer & Co.
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