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Arbitration appeal? Don’t delay

28.06.2018 Energy & infrastructure, Maritime, Commodities & trade

Will Marshall

Will Marshall Partner and Global Head of Trade

Ben Moon

Ben Moon Legal Director

Appeals to the English court from an arbitration award must be brought within 28 days of the date of the award. Time can be extended if the award requires correction to enable an appeal but minor corrections using the “slips rule” cannot be relied upon to extend the strict 28 day period (and nor do uncorrected minor typos create a bar to seeking an appeal), as was confirmed by Daewoo Shipbuilding & Marine Engineering Company Limited v Songa Offshore Equinox and another [2018] EWHC 538 (Comm).

Background

DSME sought to appeal two arbitration awards issued on 18 July 2017 (in connection with disputes arising from the construction of four semi-submersible drilling rigs) but DSME did not make its application until 8 September 2017, well outside the 28 day limit.  Songa applied to strike out DSME’s application on the basis it was made out of time. 

DSME in turn relied upon corrections to the awards as restarting the 28 day period for pursuing an appeal.  On 4 August 2017, DSME had applied to the tribunal to correct four clerical errors in the awards.  The errors were dealt with in two memoranda of correction issued by the tribunal on 14 August 2017, which was 27 days after the awards had been issued.  DSME applied for permission to appeal a further 25 days after that.

How could correction of an award extend the 28 day limit?

Section 70(3) of the Arbitration Act 1996 (the “Act”) requires that any application to appeal must be brought within 28 days of:

(i) the date of the award; or

(ii) the date of notification of the result of “any arbitral process of appeal or review”.

Section70(2), however, provides that an application may not be brought if the applicant has not exhausted:

(a) “any available arbitral process of appeal or review”; or

(b) “any available recourse under section 57”.

Section 57 provides that the tribunal (by itself or on application from the parties) may “correct an award so as to remove any clerical mistake or error arising from an accidental slip or omission or clarify or remove any ambiguity in the award”.    

Section 70(3), however, does not state whether the “date of the award” means the date of the original award or the date of the corrected award.  This seemingly creates a paradox if you can’t appeal before a correction has been issued and the time limit expires before any correction is issued.  This has led some to say that only the corrected award starts the 28 day time limit running, whether as the relevant date of the award or the date of notification of an arbitral process of appeal or review, the argument being that the tribunal has to “review” the award to correct errors. 

The consequence is that seeking an 11th hour correction, no matter how trivial the typo, could extend the period within which to bring an appeal from one month to three months (or longer, if the correction was unclear or if there was no response to a request for a correction).

That sounds incredible but that possibility was seemingly left open by an inconsistency between two cases on the point, Surefire Systems Limited v Guardian ECL Limited [2005] EWHC 1860 (TCC) and K v S [2015] EWHC 1945 (Comm).

In Surefire an appeal was sought out of time but within 28 days of corrections to an award. Mr Justice Jackson stated: 

“In my view, the arbitrator’s clarification issued on 2nd May 2005 constitutes ‘an arbitral process of ... review’ for the purposes of section 70(3) of the Act. Accordingly, no extension of time is necessary.”

Jackson, however, did not discuss the nature of the corrections nor the rationale for his decision.

Materiality of corrections is the relevant test

In K v S, a party pursued an appeal out of time but within 28 days of corrections to an award.  In that case, Teare J disagreed with Surefire and instead held that:

(i) The application for clarifications was not an arbitral process of appeal or review within section 70(3) such that the time limit was not restarted.

(ii) The process of appeal or review meant appeal or review by a higher arbitral body, where available, and not a review by the original tribunal by way of corrections under section 57.

(iii) The position under section 70(2)(b) – which directly refers to recourse under section 57 –  was different but only insofar as the correction of the award was necessary to enable the party to know whether he has grounds to challenge the award.  Where so, the correction would postpone the running of the 28 day period until the date of the corrected award.

DSME v Songa cements the position.  In agreeing with K v S, Mr Justice Bryan ruled that:

  1. Minor corrections did not restart the time limit.
  2. Were it otherwise, parties could use corrections as a tactical opportunity to frustrate the procedure for speedy dispute resolution.  It would, he said, be “contrary to the whole ethos of the Act” and that the “principles of speed and finality of arbitration … would be undermined if the effect of making any application for a correction is that time for appealing runs from the date the appellant is notified of the outcome of that request.”
  3. Section 70(2)(b) was a requirement to exhaust only those remedies that were material to the proposed challenge such that if there was an error that was relevant to the attempt to appeal that first had to be clarified with the tribunal.  
  4. A material correction would postpone the running of the 28 day period.
  5. The 28 day period would not stop running if the basis of the challenge was already known.
  6. If there is doubt as to the materiality of a correction, an application (whether for permission to appeal or for an extension of time) should be made within 28 days of the original date of the arbitral award.

In short, if the corrections are not material to the grounds of appeal, section 70(2) does not allow a party to delay an appeal simply because there are uncorrected, but immaterial (to the basis of challenge), errors in the award. Minor, immaterial slips or typos do not, therefore, postpone or interrupt the strict 28 day time limit.

Will Marshall and Ben Moon acted for Songa.

Article authors:

Will Marshall Ben Moon