English Court holds that the time limit for appeal of an award runs from the date of the award, unless there is a “material” correction to the award

In a decision dated 16 March 2018, the English Commercial Court (the “Court“) dismissed the application of appeal under s69 of the English Arbitration Act 1996 (the “Act“) by Daewoo Shipbuilding & Marine Engineering Company Limited (“DSME“) on the ground that the application was not made within the statutory time period provided by s70(3) of the Act and there was no reason to grant an extension to that period.

The key issue was whether the 28 day statutory period for appeal commenced on the date of the original award or the date of the correction of the award (to remedy clerical errors pursuant to s57(3) of the Act). The Court held the 28 day period commences on the date of the original award unless the correction was material to the challenge to the Award. This exception did not apply here so DSME’s application was out of time.

Background and Issues

On 18 July 2017, the tribunal issued the awards, which found against DSME. DSME applied to the tribunal under s57(3)(a) of the Act to correct what they described as four “clerical errors in the awards arising from accidental slips”. The tribunal issued two memoranda of correction on 14 August 2017. On 8 September 2017 DSME applied for permission to appeal under s69 of the Act on two questions of law arising out of the awards. On 28 September 2017 DSME applied for an extension of time for appealing the awards and for permission to amend the arbitration Claim Form.

Section 70(3) of the Act provides that “any application or appeal must be brought within 28 days of the date of the award or, if there has been any arbitral process of appeal or review, of the date when the applicant or appellant was notified of the result of that process.” If counted from the date of the original awards, the 28 day period expired on 15 August, before DSME filed its application.  DSME alleged that the statutory period began to run on 14 August (the date of the correction) or alternatively that the period should be extended under section 80(5) of the Act.

The commencement of the statutory period under s70

Section 70(3) is silent about whether “arbitral process of appeal or review” includes correction of an award issued pursuant to s57 of the Act.

The Court analysed a number of previous decisions in which these provisions of the Act have been construed. It concluded that:

  • any [available] arbitral process of appeal or review” in s70(2)(a) and s70(3) is a reference to a process by which an award is subject to an appeal or review by another arbitral tribunal. An application to the same tribunal for a correction of the award does not fall within the ordinary and natural meaning of such language.
  • The important principles of speed and finality of arbitration, recognised in s1(a) of the Act, would be undermined if the effect of making any application for a correction means that time for making an application for an appeal runs from notification of the decision on the correction application. The Court observed that this is “not simply a “concern”… rather it is contrary to the whole ethos of the Act.“[55]

Thus, the court made it clear that applicants do not obtain time extension by application for correction under s57 of the Act as a result of a straightforward interpretation of s70. However, the court recognised that applicants need more protection in some cases:

  • An application for a correction of an award may be “material” and necessary to enable a party to know whether he has grounds to challenge such an award.
  • If (and only if) the correction is “material”, the statutory period for appeal under section 70(3) will be calculated from the date the application for correction was notified to the parties. [62]
  • A test of materiality is supported by the language of s70 in the context of its statutory object and purpose. An applicant to challenge an award must comply with s70(2). Under s70(2) an applicant to challenge an award must first exhaust available avenues within the arbitral process (those avenues being any available arbitral process of appeal or review (s70(2)(a)) and any available recourse under s57 (s70(2)(b))). The purpose of this distinct requirement is “to ensure that before there is any challenge, any arbitral procedure that is relevant to that challenge has first been exhausted“. Thus if there is a material ambiguity that is relevant to the application or appeal, the applicant first has to go back to the tribunal in accordance with s70(2). In those circumstances it is necessary for time to begin to run under s70(3) after those available remedies have been exhausted. [63]

The Court held that the correction in this case related only to clerical errors and was not “material”. The 28 day period for appeal accordingly ran from the date of the original awards, such that DSME’s application was made too late.

Extension of time

The Court then considered whether the time limit should be extended. The effect of s80(5) is to give the court discretion, consistent with the rules of court, on how to deal with a party’s failure to apply within a specified time period, including to extend the time limit. Although the Act is silent about when the court should extend the time limit, the Court referred to Terna Bahrain Holding Company WLL v Bin Kamil Al Shamsi which held that “the party seeking an extension must… show that the interests of justice require an exceptional departure from the timetable laid down by the Act.” In Terna, the court held that the primary factors to be considered were: (i) the length of the delay; (ii) whether the party who permitted the time limit to expire and subsequently delayed was acting reasonably in the circumstances in doing so; and (iii) whether the respondent to the application or the arbitrator caused or contributed to the delay. The Court applied these principles to this case and concluded that no extension should be granted.

Comment

In this case there was considerable evidence of the truly clerical nature of the corrections sought by DSME, as well as an acknowledgement by DSME’s counsel that the statutory period was to expire 28 days from the original date of the awards. However, the vigorous expression of the Court – and, in particular the considerable emphasis placed on the ethos of the Act – suggests that an applicant will have to demonstrate a very clear link between the application for correction and the grounds of challenge for the correction to be regarded as material and for the 28 days to start running on the date of the correction.

The decision raises a question as to whether a party who is seeking a material correction nonetheless has to bring any unrelated challenge within 28 days of the original award, with time running once the tribunal has considered the requested correction only in relation to a challenge which rests on the correction itself. The Court accepted that, conceptually, an award may be treated as having more than one date for the purposes of s70. It also suggested that various parts of an award could be severed in order that a party makes various challenges at different times, consistent with the principles of speed and finality enshrined in the Act.

Interestingly, the UNCITRAL Model Law is much clearer on this point than the English Act. Article 34(3) provides that an application for setting aside an award must be made within three months from the date on which the party making that application had received the award or, if a request had been made for a correction of interpretation of the award under Article 33, from the date on which that request had been disposed of by the arbitral tribunal. The different time limits for challenging an award between the two regimes are a reminder that, despite the common ethos of providing an efficient process for final resolution of disputes, there are significant differences in the approach to fundamental issues.

For further information, contact Chris Parker, Partner, Hannah Ambrose, Professional Support Consultant, Noriaki Wakabayashi, Legal Assistant, or your usual Herbert Smith Freehills contact.

Chris Parker
Chris Parker
Partner
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+44 20 7466 2767
Hannah Ambrose
Hannah Ambrose
Professional Support Consultant
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+44 20 7466 7585
Noriaki Wakabayashi
Noriaki Wakabayashi
Legal Assistant, Bengoshi (On Secondment from Mori Hamada & Matsumoto)
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+44 20 7466 3312

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