The parties to a contract containing an arbitration clause are allowed to appeal arbitration awards in limited circumstances. According to the Arbitration Act 1996, if the High Court grants permission to appeal and one of the parties subsequently wishes to bring proceedings against the High Court’s judgment, it must apply to the High Court Judge for permission to appeal to the Court of Appeal. If the Judge refuses to grant leave to appeal against the High Court’s judgment, the unsuccessful party may only rely to the Court of Appeal’s residual jurisdiction which can only be exercised if the High Court’s decision is considered to be so unfair or improper that it cannot be a decision at all.

The above mentioned principle was recently applied to the Kyla shipping case Kyla Shipping Company Ltd v Bunge SA [2013] EWCA which involved a dispute arising from a charterparty between the shipowners and the charterers. The charterparty incorporated a continuing warranty that the owners would maintain insurance cover for the vessel at a stipulated level for the duration of the charterparty. The vessel was involved in a collision and the owners argued that the cost of repairing the vessel was uneconomical and that, as a result, the charterparty was frustrated. In the arbitration proceedings, the arbitrator held that the charterparty was frustrated as the cost of repair exceeded the value of the vessel.

Following action brought by the charterers to challenge the arbitration award, under section 69 of the Act, Mr Justice Hamblen gave permission to appeal, stating that the question of law raised was one of general public importance. Mr Justice Flaux, who heard the substantive appeal, held that the contract had not been frustrated. In particular, he found that the parties had allocated risk in the charterparty such that, where the vessel was damaged and the cost of repair was within the insured value, as it was in this case, the cost of repair was to be borne by the owners, albeit using the insurance proceeds. The vessel owners sought to challenge the Court’s judgment to the Court of Appeal. However, Mr Justice Flaux refused permission to do so because the case was not one of general public importance and he was not convinced that there was a real prospect of success if permission to appeal was given.

The owners sought to challenge Mr Justice Flaux’s refusal of permission to appeal directly to the Court of Appeal. The Court held that the owners did not manage to justify that there was such a substantial defect in the fairness of the process as to invalidate the decision or that something had gone fundamentally wrong with the process.

This case demonstrates that the opportunities for challenging arbitration awards in English Courts are more limited than in cases where the dispute is dealt with by English Courts from the outset.

Source: Jonathan Elvey and Reema Shour, Limits to appealing arbitration awards to Court of Appeal, Lexology