Every year, large numbers of disappointed parties come out of U.K.-seated arbitrations and try to seek whatever redress or remedies they can find in the English courts. But the U.K. Supreme Court's May decision in Sharp Corp. Ltd. v. Viterra BV is a reminder of the strict limits on the scope of such appeals.

Background

The Arbitration Act 1996 imposes limits on a party's ability to appeal arbitral awards, but this does not stop the attempts.

The most recent annual report for the Commercial Court in London — one of the two courts where such applications can be filed — states that in the one-year period ending in October 2023, a total of 46 applications to appeal an arbitral award were filed.[1] 

Such applications are brought under Section 69 of the Arbitration Act, which can be excluded or varied by parties. For example, the Rule 26.8 of the London Court of International Arbitration rules excludes the right of appeal, while Article 15 of the London Maritime Arbitrators Association limits appeals to instances where the tribunal has certified that the legal issue in question is either of general interest or of importance to the particular trade or industry.

The precise scope of what can and cannot be appealed has long been fought over. Section 69(1) of the act states that a party can "appeal to the court on a question of law," and Section 82(1) then clarifies that in a court in England and Wales, a "question of law" means "a question of the law of England and Wales."

Even this seeming clarity has left room for argument. For example, in 2002, the Commercial Court in Reliance Industries Ltd. v Enron Oil and Gas India Ltd. held that questions of foreign law were not susceptible to appeals under the act, even in situations where the foreign law is identical to English law.[2]

The Supreme Court Clarifies Limits on Appeals 

Two issues relevant to the operation of appeals under the act were considered by the Supreme Court in Sharp Corp. v. Viterra.[3]

The first was the extent to which an English court, when hearing an appeal on a question of law, can make its own findings of fact. The second was whether an English court can decide a question of law that had not been put to the arbitral tribunal. Both questions were answered in the negative, and unanimously, by the Supreme Court.

The case now serves as a timely reminder of the strict limits on the scope of an appeal under the act. Parties considering a possible future appeal need to be mindful of exactly which legal points are being put to a tribunal and exactly which factual findings the tribunal is being asked to make.

The Court of Appeal of England and Wales had earlier made factual findings in the case that the contract in question had been varied by the parties and in relation to the manner of the discharge against the bills of lading. These were not factual findings made by the tribunal and indeed had not even been put to the tribunal.

The Court of Appeal had then proceeded to determine the legal issue of the quantum of damages based on the variation in its November 2023 decision, which again meant that those legal issues determined by the Court of Appeal had not been before the tribunal.

As stated by the Supreme Court,

it was never argued before the Board [i.e., the tribunal] that whether the contract had been varied was relevant to the issue of damages, still less how the contracts had been so varied. … The question of whether and, if so, how the contracts had been varied was neither argued before nor addressed by the … Board. They were not asked to consider it, still less to determine it.[4]

On whether an English court can hear an appeal on a point of law not put to the tribunal, the Supreme Court noted that the act states that the question must be one "which the tribunal was asked to determine." The Supreme Court then adopted the High Court of Justice's approach in its 2004 decision in Safeway Stores v. Legal and General Assurance Society Ltd. that

the tribunal must have been asked to determine the question, but I do not think that the question needs to have been raised with the precision of a construction summons. All that is needed, in my judgment, is that the point was fairly and squarely before the arbitrator, whether or not it was actually articulated as a question of law.[5]

Accordingly, the Supreme Court held that the question of law that the Court of Appeal had set for itself was not one for which permission to appeal could be given and that the "Court of Appeal did err in deciding a question of law which the … Board were not asked to determine."

On the question of whether the Court of Appeal could make its own findings of fact, the Supreme Court was unusually brusque, stating:

The court's jurisdiction under section 69 of the Act is limited to appeals on questions of law. It has no jurisdiction in relation to errors of fact and no power to make its own findings of fact. … I conclude that the Court of Appeal did err in making a finding of fact on a matter on which the Appeal Board had made no finding and this is a further reason why it was not open to them to conclude that the contracts had been varied.[6]

The Supreme Court acknowledged that there can be cases where the tribunal has not made an express finding of fact but that such a finding can be identified by necessary implication based on another finding. An example would be a finding that a contract had been formed being a necessary implication from a finding that the same contract had subsequently been breached. Even so, the Supreme Court held that this was not such a case.

It can also be noted that the argument was run that the construction of a contract was an appeal on a point of law and not one of fact. However, the Supreme Court decided that it was not "necessary to reach a conclusion on this issue."

Considering the above, the decision is a reminder of the limits to the right of appeal under the Arbitration Act and that these are usually — with the unusual exception of the Court of Appeal itself in this case — strictly policed by the English courts.

References

[1] Published on March 14, 2024, and available at https://www.judiciary.uk/guidance-and-resources/commercial-court-annual-report-2022-2023-published/.

[2] Reliance Industries Ltd. v Enron Oil and Gas India Ltd. [2002] 1 Ll Rep 645.

[3] Sharp Corp. Ltd. v. Viterra BV [2024] UKSC 14, https://www.supremecourt.uk/cases/docs/uksc-2023-0029-judgment.pdf.

[4] Sharp Corp. Ltd. v. Viterra BV, at [66] and [68].

[5] Safeway Stores v Legal and General Assurance Society Ltd [2004] EWHC 415 (Ch).

[6] Sharp Corp. Ltd. v. Viterra BV, at [71] and [79].

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Reprinted with permission of Law360.