Challenges to Arbitral Awards: Landmark Privy Council Decision

Adam Greaves

On 19 April 2021, the Judicial Committee of the Privy Council handed down its judgment in RAV Bahamas Ltd & Bimini Bay Resort Management Limited v Therapy Beach Club Incorporated [2021] UKPC 8, a landmark case in law on challenges to arbitral awards. The appeal concerned a challenge to an award for serious irregularity.

This appeal concerned the proper interpretation of section 90 of the Bahamas Arbitration Act 2009 (“the 2009 Act”) under which challenges to an arbitration award may be made on the ground of serious irregularity. Section 90 is modelled on and is materially identical to section 68 of the English Arbitration Act 1996 (“the 1996 Act”).

Following a six day hearing the arbitrator made an award on 21st August 2017. The total sum awarded was $9,670,000.00 plus interest from 18 July 2013 and costs.

RAV applied to challenge the arbitration award in the Supreme Court of the Bahamas (the first instance court) on the basis of, inter alia, section 90 “serious irregularity” as follows:

  • They complained that the arbitrator had failed to deal with important issues put to her concerning the period for which damages could be awarded.
  • Further, RAV complained that she had failed to give them a fair opportunity to address certain adjustments she had made to the respondent’s calculation of damages for consequential losses: (i) to reflect the failure of aspects of its claim, which had previously been presented on a global basis; and (ii) the fact that the evidence of its quantum expert was based on memory and unsupported by documents.

Both complaints succeeded in the first instance court in the Bahamas. However, by a majority, the Bahamas Court of Appeal reversed that decision, on the basis that the appellants had failed separately to allege, and the first instance court had failed separately to find, that the irregularities complained of had caused substantial injustice to the appellants.

The key issue of principle on the appeal to the Privy Council was whether, in order to uphold a challenge to an arbitral award for serious irregularity, there must in every case be: (i) a separate and express allegation of substantial injustice by the applicant; and (ii) separate and express consideration by the Court of whether the irregularity complained of has caused or will cause substantial injustice and a separate and express finding to that effect.

The judgment of the Judicial Committee was given by Lords Hamblen and Burrows. The judgment is here.

The Bahamas Arbitration Act 2009 is similar in structure and content to the UK’s 1996 Act and many of its provisions are materially identical. It was common ground that the policy underlying the two Acts was similar and that it was appropriate to have regard to the English law authorities when interpreting materially identical provisions.

Section 90 provides as follows: “90. Challenging the award: serious irregularity. A party to arbitral proceedings may (upon notice to the other parties and to the tribunal) apply to the court challenging an award in the proceedings on the ground of serious irregularity affecting the tribunal, the proceedings or the award. Serious irregularity means an irregularity of one or more of the following kinds which the court considers has caused or will cause substantial injustice to the applicant —

(a) failure by the tribunal to comply with section 44;

(b) the tribunal exceeding its powers (otherwise than by exceeding its substantive jurisdiction);

(c) failure by the tribunal to conduct the proceedings in accordance with the procedure agreed by the parties;

(d) failure by the tribunal to deal with all the issues that were put to it;

(e) any arbitral or other institution or person vested by the parties with powers in relation to the proceedings or the award exceeding its powers;

(f) uncertainty or ambiguity as to the effect of the award;

(g) the award being obtained by fraud or the award or the way in which it was procured being contrary to public policy;

(h) failure to comply with the requirements as to the form of the award;

(i) any irregularity in the conduct of the proceedings or in the award which is admitted by the tribunal or by any arbitral or other institution or person vested by the parties with powers in relation to the proceedings or the award.

On the main issue of law, the Privy Council held while it is good practice and should be encouraged, it is not a requirement of a serious irregularity challenge that there be a separate and express allegation, consideration and finding of substantial injustice. In arriving at this conclusion, their Lordships reviewed a number of the key authorities on challenges to arbitral awards for failures to deal with issues put to the tribunal and failures to give the parties a fair opportunity to present their case.

Even if a case is shown to fall within one or more of the kinds of irregularities listed in section 90 this will only amount to a serious irregularity if the court considers that it “has caused or will cause substantial injustice”. This means more than some injustice.

In relation to the first ground of challenge to the award in this case, the appeal was allowed in its entirety. Lord Hamblen and Lord Burrows held that the period for which damages could be awarded was an issue which had been put to the arbitrator and which she had failed to deal with in her award. Further, the nature of that irregularity was such that it was inherently likely to cause substantial injustice, and in substance, the first instance court had found that substantial injustice had been caused. The requirement of serious irregularity was, therefore, established, and the majority of the Court of Appeal had erred in holding otherwise.

In relation to the second ground of challenge, the appeal was allowed in part. Lords Hamblen and Burrows held that the arbitrator had failed to give the appellants a fair opportunity to address the adjustments she had made to reflect the failure of aspects of the Respondent’s claim, because the parties had previously addressed that claim on a global basis, and the first time the Appellants had learned of her deductions in that respect had been in the award. This was another irregularity the substantial injustice of which was self-evident, and in substance the first instance court had found it to be established. By contrast, the failure of the respondent’s expert to rely on documents in support of his evidence was obvious, and the appellants had a fair opportunity to address that point. There was, therefore, no unfairness or irregularity in the deduction made by the arbitrator to reflect that.

This judgment is therefore useful guidance for practitioners on how UK and Commonwealth courts with similar arbitration provisions to the UK will deal with challenges to arbitration awards which are based on serious irregularity.

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