"I realise that some of my criticisms may be mistaken; but to refuse to criticize judgements for fear of being mistaken is to abandon criticism altogether... If any of my criticisms are found to be correct, the cause is served; and if any are found to be incorrect the very process of finding out my mistakes must lead to the discovery of the right reasons, or better reasons than I have been able to give, and the cause is served just as well." -Mr. HM Seervai, Preface to the 1st ed., Constitutional Law of India.

Saturday, July 18, 2015

Undue Delay Per Se is Not a Ground for Setting Aside Award

Recently, the English High Court (Commercial Court) had the occasion to consider the question whether delay in publishing the award after completion of hearings was a ground for setting aside the arbitral award under Section 68 of the English Arbitration Act, 1996. In BV Scheepswerf Damen Gorinchem v. The Marine Institute [2015] EWHC 1810 (Comm)], the arbitrator passed the award 376 days after the completion of the hearings. The losing party in the arbitration (“Damen”) challenged the award for the reason that the arbitrator had committed serious irregularity as provided under Section 68 primarily on three counts:

(1) the tribunal failed to comply with its general duty of avoiding unnecessary delay,
(2) the tribunal’s delay led to breach of Clause 20 of the applicable arbitral rules which provided that the award should “normally be made available within not more than six weeks from the close of the proceedings”, and
(3) owing to the delay, the tribunal failed to deal with all the issues that were put to it.
The Commercial Court, after analyzing the legal principles involved held the following:
(a) Section 68 deals with serious failures by the tribunal to comply with due process which should result in substantial injustice to the applicant. This “higher threshold” eliminates technical and unmeritorious challenges.
(b) Unless, it is shown that such serious irregularity resulted in substantial injustice to the applicant, the award cannot be set aside.  Damen had to show that but for the undue delay, the arbitrator might have reached a different conclusion more favourable to Damen.
(c) Damen’s reliance on authorities dealing with delays in courts is inappropriate as the authorities related to findings of fact but in Section 68 cases, the applicant cannot attack the tribunal’s findings on facts.
(d) This restriction (bar on review of findings of fact) on a court does not cease to exist merely because there is an inordinate delay in passing the arbitral award.
(e) Closer scrutiny of awards on the basis of delay is problematic because there is no principled basis to judge delay. For instance, it is a question whether three months or four months would constitute delay. Further, if the arbitrator delayed the award due to illness which was recorded in the Award itself, would such an award also invite closer scrutiny?
(f) However, merely because a party does not complain about the delay of the arbitrator before the award is issued, such failure will not result in a waiver or the right to complain about the delay after the award is issued.
(g) If the award has dealt with all the issues and is therefore impeachable otherwise, it does not matter if it was passed twelve months after the hearing.
(h) Once the arbitrator has dealt with a particular issue, the award cannot be challenged for the quality of the tribunal’s reasoning.

On the basis of the aforesaid reasons, the court rejected the Application although it held that the delay in passing the award was “extremely regrettable”.
Comment:
Arbitrators are obligated to pass awards within a reasonable time after completion of the hearings.  Such an obligation stems from the universally recognized duties of the arbitrators to devote proper time for the arbitrations they accept and to conduct the arbitral proceedings efficiently without undue delay. In view of these general obligations, the arbitrators are expected to render their awards within such time as may be considered reasonable.  What is reasonable time primarily depends on the complexity of the dispute, the extent of pleadings and documentation in the arbitration.

We had argued in in Undue Delayin Passing Arbitral Award as a Ground for Challenge? Volume 2, Issue 1, Indian Journal of Law and Policy Review, pp. 185- 195 (2013) that delay per se should not be a ground for setting aside the arbitral award. The English Court has taken a similar stand. It is also pertinent to note that there is similarity in the English court’s approach and that of the Delhi High Court in Oil India Ltd. v. Essar Oil Ltd., 2012(3) Arb. L.R. 220 (Delhi): MANU/DE/3862/2012.

[Also see,  Peter Wilske, Legal Challenges to Delayed Arbitral Awards, Contemporary Asia Arbitration Journal Vol. 6 No.2 pp. 153-186, November 2013, for a detailed discussion on the topic.]

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