Challenges and determinations — overviewChallenging the validity of an arbitration agreement

Arbitration agreements are distinct and separate agreements to the main agreement between the parties - the 'doctrine of separability'. An arbitration agreement may therefore still be valid even when the main agreement is not.

Claims as to the validity of the arbitration agreement may be dealt with by the courts (as provided for in the Arbitration Act 1996 (the Act) and the CPR) or by the tribunal. A challenge should be made as soon as possible; a party may lose the right to challenge if it delays doing so.

The ICC rules have specific provisions enabling the ICC Court to decide whether arbitration proceedings should continue when there is an issue as to the validity of the arbitration agreement.

Determining a preliminary point of law

The court can determine any question of law arising in the course of the proceedings, unless otherwise agreed by the parties. Certain criteria under the Arbitration Act 1996 (the Act) must be adhered to.

The CPR sets out the documents required to make such an application to the court and the procedural requirements; which vary depending on the court in which the application is made.

Determining a preliminary point of substantive jurisdiction

A court has the power to determine any question as to the substantive jurisdiction of the tribunal; certain criteria under the Arbitration Act 1996 (the Act) must be adhered to.

The CPR sets out the documents required to make such an application to the court and the procedural requirements, which vary depending on the court in which the application is made. There are strict time limits in place for such applications, in particular for evidence in response and in reply. Determination is generally made on the documents without a hearing.

Challenging the award — general

This may take place in the national court, where the award was made, or at the enforcement stage.

Under the Arbitration Act 1996 (the Act), an award can only be challenged on limited grounds. These are:

• lack of substantive jurisdiction of the tribunal (mandatory): section 67

• a serious irregularity which has or will cause a substantial injustice to the applicant (mandatory): section 68

• an appeal on a point of law (not mandatory): section 69

Challenges are generally heard in private to retain the confidential nature of arbitration. The court has a number of options available to it following its hearing of the challenge, for example, it may confirm the award, set it aside, or remit it back to the tribunal.

Courts have the power to grant security for costs on appeal.

Challenging the award — no substantive jurisdiction (section 67)

The court's power to hear such an appeal is mandatory. A party may challenge an award on the grounds that the tribunal lacked substantive jurisdiction. This power is exercised sparingly and applications are generally unsuccessful. Applications may be brought where the tribunal has declined jurisdiction.

The appeal is a full rehearing. The procedure for the application to appeal is set out in the CPR.

Challenging the award — serious irregularity (section 68)

The court's power to hear such an appeal is mandatory. To make such a challenge, an applicant must show (with supporting evidence) that:

• a serious irregularity affected the tribunal, proceedings or award; and

• the serious irregularity has or will cause a substantial injustice to the applicant

There are various categories of serious irregularity, for example:

• the tribunal exceeds its power

• failure by the tribunal to deal with all the issues

• uncertainty or ambiguity

Such challenges are only for use in exceptional cases and there is a high burden of proof for these appeals. An appeal of this nature must be brought within 28 days of the award.

The procedure for the appeal is set out in the CPR.

Challenging the award — categories of serious irregularity (section 68)

There are nine categories of serious irregularity under which a party may seek to challenge an arbitration award. These are listed in section 68(2) of the Arbitration Act 1996 and include:

• the tribunal exceeding its power

• the tribunal failing to deal with all the issues

Challenging the award — serious irregularity by fraud and public policy (section 68)

One of the nine categories of serious irregularity under which a party may seek to challenge an arbitration award under section 68(2) of the Arbitration Act 1996 is that of fraud and public policy. There are different basis on which such a challenge may be brought for example:

• the deliberate withholding of documents

• unconscionable conduct

It is important to understand that a substantial injustice caused by the fraud or breach of public policy will also need to be established.

Challenging the award — appeal on a point of law (section 69)

The court's power to hear such an appeal is not mandatory under the Arbitration Act 1996 (the Act); parties may contract out of this right. Leave to appeal is required and the procedure to obtain this is set out in the CPR. If permission is granted then an appeal will need to be made.

Appeals are only permitted in relation to a question of English law. A court will consider the definition of a permissible point of law and what documents can be referred to in such an appeal.

Challenging the award — leave to appeal (section 69)

The procedure for the application to appeal is set out in the CPR. The guidance set out in the practice direction was updated on 1 October 2010 so as to limit the extent of the documentation which could be put before the court during such an appeal. it is important to be aware of the new provisions.

Court discretion to extend the 28 day time limit for challenges and appeals

There is a 28 day time limit in which a party is able to bring an challenge or an appeal under sections 67, 68 and 69 of the Act. The court has a discretion to extend the time for making such an application but it will not be made lightly. Whilst each case will be considered on its facts the court will also consider specific factors which were set out in Kalmneft JSC v Glencore International AG and another. However, in international arbitrations, it should be noted that the considerations will also be balanced against the general considerations which apply to international arbitrations.