Arbitration Award or procedural decision: spot the difference?

22 Jul 2019
desupra div-ului
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<h2 style="color: #505559; background-color: #ffffff; margin: 12px 0px;"><span style="background-color: #ffffff; color: #4a4a4a;">International arbitration lawyers have often debated the difference between a decision of an arbitral tribunal which is an "award" and a decision which is merely an "order" or other lesser species of creature. The English Commercial Courts have provided fresh guidance.</span></h2> <p style="color: #505559; background-color: #ffffff; margin: 12px 0px;"><br /></p> <p style="margin-bottom: 8pt;">The English High Court has recently considered the issue in a novel context, providing more guidance for parties involved in arbitrations.</p> <p style="margin-bottom: 8pt;">This distinction between an award and other types of decision is important for a number of reasons. The primary reason for it to be debated is usually that, under the New York Convention, Article III, courts will enforce "arbitral awards" on the conditions set out in the Convention. This has prompted lengthy discussions about what amounts to an "arbitral award" for these purposes. For example, what about the decision of an emergency tribunal formed only to consider granting interim relief, which is by its nature temporary and will be reconsidered by the tribunal appointed to hear the arbitration? Is that an "arbitral award"?&nbsp;</p> <p style="margin-bottom: 8pt;">But that is not the only significance of whether a decision is an award or not. This is illustrated by the recent decision of the English Commercial Court (Mrs Justice Cockerill) in the case of <em>ZCCM Investment Holdings plc v Kansanshi Holdings plc </em>[2019] EWHC 1285 (Comm).</p> <p style="margin-bottom: 8pt;">ZCCM had brought an arbitration claim seeking to act on behalf of Kansanshi Mining plc ("KMP") in suing Kanashi Holdings plc ("KMP") for fraudulent misrepresentation and deceit. KMP was controlled by KHP, so that ZCCM could only achieve this by being permitted to bring a derivative action in the name of KMP even though KMP would not consent to it.</p> <p style="margin-bottom: 8pt;">Ordinarily, to bring a derivative claim on behalf of a company incorporated in England, the permission of the English court is required. As the parties had agreed to resolve any disputes through arbitration, and to Zambian governing law, the derivative claim and the question of whether ZCCM should be permitted to bring it on behalf of KMP, had to be resolved by an arbitral tribunal following Zambian law. Fortunately, it was agreed that Zambian law incorporated the English common law principles on derivative claims.</p> <p style="margin-bottom: 8pt;">ZCCM asked an arbitral tribunal (operating under the UNCITRAL Arbitration Rules) consisting of Michael Collins QC, Glen Davis QC and J William Rowley QC to grant permission for the derivative claim to be brought. In order to establish a case for permission to be granted, ZCCM had to show that the claim it wished to bring had a realistic prospect of success, on a prima facie basis. ZCCM asserted that there was a prima facie case that KHL had falsely represented that a related company to KHL was holding monies for KMP, on deposit with financial institutions, when in fact KHL's related company was using the monies to earn profits and putting the monies at risk.</p> <p style="margin-bottom: 8pt;">The arbitral tribunal agreed that ZCCM had shown a prima facie case that there had been a representation. However it found that no prima facie case had been shown that the representation was false as alleged or that any loss had ben suffered by KMP as a result.</p> <p style="margin-bottom: 8pt;">On that basis, the arbitral tribunal refused to grant permission for ZCCM to bring a derivative claim on behalf of KMP.</p> <p style="margin-bottom: 8pt;">The significance of the nature of that decision was that ZCCM sought to challenge the decision of the tribunal under section 68(1) of the Arbitration Act 1996 ("the Act") on the grounds that there had been a serious irregularity. Section 68 allows a party to challenge "an award".</p> <p style="margin-bottom: 8pt;">Cockerill J followed a case from 1997 in which Walker LJ explained that there is no power to challenge a decision which is not an award. He identified that "interlocutory decisions" would not be awards, consistent with the principle that the court does not have the power to supervise the arbitrator's procedural decisions in the arbitration and review them. If a party believes that an arbitrator's procedural handling of the case is so improper as to justify intervention, they might be able to apply for an order removing the arbitrator under section 24 of the Act.</p> <p style="margin-bottom: 8pt;">In arguing that the decision was an award, when properly analysed, ZCCM relied on several cases which indicate that a ruling will be considered as an award if it is a final determination of a particular issue, or claim. ZCCM argued, perhaps understandably, that the tribunal had found the claim not to have a realistic prospect of success, and had decided not to permit ZCCM to pursue it any further. That, said ZCCM, must have been a final determination of the issue on the merits, and of the entire ability of ZCCM to pursue its claim.</p> <p style="margin-bottom: 8pt;">KHL argued that the arbitral tribunal had not determined KMP's claim, which ZCCM wanted to pursue on its behalf. The tribunal had only decided not to give permission to ZCCM to pursue it. KMP, in theory, still had a cause of action and would not be prevented by the decision from bringing its own claim – although it probably would be prevented from doing so by the practical difficulty that KMP was controlled by the Respondents.</p> <p style="margin-bottom: 8pt;">Cockerill J accepted KHL's submissions, finding that the decision of the arbitral tribunal was not an award. In doing so, she set out a list of considerations which may be relevant when considering whether the decision of an arbitral tribunal is an award (and can therefore be challenged under section 68 of the Act) or a procedural or other decision not qualifying as an award.</p> <p style="margin-bottom: 8pt;">The points were (in summary):</p> <ol> <li style="margin-bottom: 8pt;">The Court will give real weight to the question of substance and not merely to form.</li> <li style="margin-bottom: 8pt;"><span> </span>One factor in favour of the conclusion that a decision is an award is if the decision is final in the sense that it disposes of the matters submitted to arbitration so as to render the tribunal functus officio, either entirely or in relation to that issue or claim.</li> <li style="margin-bottom: 8pt;">The decision is more likely to be an award if it deals with the substantive rights and liabilities of parties whereas a decision relating purely to procedural issues is more likely not to be an award.</li> <li style="margin-bottom: 8pt;">The arbitral tribunal's own description of the decision is relevant, although it will not be conclusive in determining its status.</li> <li style="margin-bottom: 8pt;">It may also be relevant to consider how a reasonable recipient of the tribunal's decision would have viewed it.</li> <li style="margin-bottom: 8pt;"><span> </span>A reasonable recipient is likely to consider the objective attributes of the decision relevant. These include the description of the decision by the tribunal, the formality of the language used, the level of detail in which the tribunal has expressed its reasoning.</li> </ol> <p style="margin-bottom: 8pt;">And, in Cockerill J's view, the following points could be added:</p> <p style="margin-bottom: 8pt;">i.<span>&nbsp;</span>A reasonable recipient would also consider such matters as whether the decision complies with the formal requirements for an award under any applicable rules.</p> <p style="margin-bottom: 8pt;">ii.<span>&nbsp;</span>The focus must be on a reasonable recipient with all the information that would have been available to the parties and to the tribunal when the decision was made. It follows that the background or context in the proceedings in which the decision was made is also likely to be relevant. This may include whether the arbitral tribunal intended to make an award.</p> <p style="margin-bottom: 8pt;">Cockerill's clear exposition of the factors which influence whether a Tribunal's decision is an award or not is a helpful and comprehensive guide to the issue. Few would disagree with the list of factors which the Judge set out.</p> <p style="margin-bottom: 8pt;">However, the conclusion itself may attract some debate. Whilst the tribunal had not considered and dismissed a claim by ZCCM, it had refused an application by ZCCM for permission to pursue a claim at all, and based that decision upon an assessment of the merits of the claim which ZCCM sought permission to bring.</p> <p style="margin-bottom: 8pt;">It may be said that the long list of factors, which influence whether a decision should be considered as an award, exists to deal with difficult cases like this one. It is not merely a question of whether the decision describes itself as an award (or even whether the tribunal believed that it was making an award, or not) but rather it is also a question of substance.</p> <p style="margin-bottom: 8pt;">Here, it does seem that the tribunal's decision resolved, substantively, that ZCCM would not be given permission to bring a derivative claim. The right to apply for permission to do so (which right ZCCM had by virtue of being a shareholder) was therefore substantively affected by the decision. Furthermore, even if the tribunal was not <em>functus officio </em>in the arbitration as a whole after the decision, because in theory ZHP could have pursued the claim, it is arguable that the tribunal was <em>functus</em> with regard to ZCCM, as the only standing that ZCCM had to participate in the arbitration had been resolved.</p> <p style="margin-bottom: 8pt;">The case demonstrates that the form of an award remains important to the decision as to whether it may be challenged under the Arbitration Act 1996. Even if the decision has a profound or even determinative effect on the dispute, it may not be an award - particularly if it is not expressed as such.</p> <p style="margin-bottom: 8pt;">The decision also demonstrates that the arbitral tribunal has significant influence over whether its own decisions can be challenged in the court – because the way the tribunal frames and labels the decision will influence whether the court sees the decision as an award or not.</p> <p style="margin-bottom: 8pt;">Parties to an arbitration should therefore consider carefully whether they want a decision to be expressed as an award or not, and make a relevant request to the Tribunal to label the decision accordingly.</p>

International arbitration lawyers have often debated the difference between a decision of an arbitral tribunal which is an "award" and a decision which is merely an "order" or other lesser species of creature. The English Commercial Courts have provided fresh guidance.


The English High Court has recently considered the issue in a novel context, providing more guidance for parties involved in arbitrations.

This distinction between an award and other types of decision is important for a number of reasons. The primary reason for it to be debated is usually that, under the New York Convention, Article III, courts will enforce "arbitral awards" on the conditions set out in the Convention. This has prompted lengthy discussions about what amounts to an "arbitral award" for these purposes. For example, what about the decision of an emergency tribunal formed only to consider granting interim relief, which is by its nature temporary and will be reconsidered by the tribunal appointed to hear the arbitration? Is that an "arbitral award"? 

But that is not the only significance of whether a decision is an award or not. This is illustrated by the recent decision of the English Commercial Court (Mrs Justice Cockerill) in the case of ZCCM Investment Holdings plc v Kansanshi Holdings plc [2019] EWHC 1285 (Comm).

ZCCM had brought an arbitration claim seeking to act on behalf of Kansanshi Mining plc ("KMP") in suing Kanashi Holdings plc ("KMP") for fraudulent misrepresentation and deceit. KMP was controlled by KHP, so that ZCCM could only achieve this by being permitted to bring a derivative action in the name of KMP even though KMP would not consent to it.

Ordinarily, to bring a derivative claim on behalf of a company incorporated in England, the permission of the English court is required. As the parties had agreed to resolve any disputes through arbitration, and to Zambian governing law, the derivative claim and the question of whether ZCCM should be permitted to bring it on behalf of KMP, had to be resolved by an arbitral tribunal following Zambian law. Fortunately, it was agreed that Zambian law incorporated the English common law principles on derivative claims.

ZCCM asked an arbitral tribunal (operating under the UNCITRAL Arbitration Rules) consisting of Michael Collins QC, Glen Davis QC and J William Rowley QC to grant permission for the derivative claim to be brought. In order to establish a case for permission to be granted, ZCCM had to show that the claim it wished to bring had a realistic prospect of success, on a prima facie basis. ZCCM asserted that there was a prima facie case that KHL had falsely represented that a related company to KHL was holding monies for KMP, on deposit with financial institutions, when in fact KHL's related company was using the monies to earn profits and putting the monies at risk.

The arbitral tribunal agreed that ZCCM had shown a prima facie case that there had been a representation. However it found that no prima facie case had been shown that the representation was false as alleged or that any loss had ben suffered by KMP as a result.

On that basis, the arbitral tribunal refused to grant permission for ZCCM to bring a derivative claim on behalf of KMP.

The significance of the nature of that decision was that ZCCM sought to challenge the decision of the tribunal under section 68(1) of the Arbitration Act 1996 ("the Act") on the grounds that there had been a serious irregularity. Section 68 allows a party to challenge "an award".

Cockerill J followed a case from 1997 in which Walker LJ explained that there is no power to challenge a decision which is not an award. He identified that "interlocutory decisions" would not be awards, consistent with the principle that the court does not have the power to supervise the arbitrator's procedural decisions in the arbitration and review them. If a party believes that an arbitrator's procedural handling of the case is so improper as to justify intervention, they might be able to apply for an order removing the arbitrator under section 24 of the Act.

In arguing that the decision was an award, when properly analysed, ZCCM relied on several cases which indicate that a ruling will be considered as an award if it is a final determination of a particular issue, or claim. ZCCM argued, perhaps understandably, that the tribunal had found the claim not to have a realistic prospect of success, and had decided not to permit ZCCM to pursue it any further. That, said ZCCM, must have been a final determination of the issue on the merits, and of the entire ability of ZCCM to pursue its claim.

KHL argued that the arbitral tribunal had not determined KMP's claim, which ZCCM wanted to pursue on its behalf. The tribunal had only decided not to give permission to ZCCM to pursue it. KMP, in theory, still had a cause of action and would not be prevented by the decision from bringing its own claim – although it probably would be prevented from doing so by the practical difficulty that KMP was controlled by the Respondents.

Cockerill J accepted KHL's submissions, finding that the decision of the arbitral tribunal was not an award. In doing so, she set out a list of considerations which may be relevant when considering whether the decision of an arbitral tribunal is an award (and can therefore be challenged under section 68 of the Act) or a procedural or other decision not qualifying as an award.

The points were (in summary):

  1. The Court will give real weight to the question of substance and not merely to form.
  2. One factor in favour of the conclusion that a decision is an award is if the decision is final in the sense that it disposes of the matters submitted to arbitration so as to render the tribunal functus officio, either entirely or in relation to that issue or claim.
  3. The decision is more likely to be an award if it deals with the substantive rights and liabilities of parties whereas a decision relating purely to procedural issues is more likely not to be an award.
  4. The arbitral tribunal's own description of the decision is relevant, although it will not be conclusive in determining its status.
  5. It may also be relevant to consider how a reasonable recipient of the tribunal's decision would have viewed it.
  6. A reasonable recipient is likely to consider the objective attributes of the decision relevant. These include the description of the decision by the tribunal, the formality of the language used, the level of detail in which the tribunal has expressed its reasoning.

And, in Cockerill J's view, the following points could be added:

i. A reasonable recipient would also consider such matters as whether the decision complies with the formal requirements for an award under any applicable rules.

ii. The focus must be on a reasonable recipient with all the information that would have been available to the parties and to the tribunal when the decision was made. It follows that the background or context in the proceedings in which the decision was made is also likely to be relevant. This may include whether the arbitral tribunal intended to make an award.

Cockerill's clear exposition of the factors which influence whether a Tribunal's decision is an award or not is a helpful and comprehensive guide to the issue. Few would disagree with the list of factors which the Judge set out.

However, the conclusion itself may attract some debate. Whilst the tribunal had not considered and dismissed a claim by ZCCM, it had refused an application by ZCCM for permission to pursue a claim at all, and based that decision upon an assessment of the merits of the claim which ZCCM sought permission to bring.

It may be said that the long list of factors, which influence whether a decision should be considered as an award, exists to deal with difficult cases like this one. It is not merely a question of whether the decision describes itself as an award (or even whether the tribunal believed that it was making an award, or not) but rather it is also a question of substance.

Here, it does seem that the tribunal's decision resolved, substantively, that ZCCM would not be given permission to bring a derivative claim. The right to apply for permission to do so (which right ZCCM had by virtue of being a shareholder) was therefore substantively affected by the decision. Furthermore, even if the tribunal was not functus officio in the arbitration as a whole after the decision, because in theory ZHP could have pursued the claim, it is arguable that the tribunal was functus with regard to ZCCM, as the only standing that ZCCM had to participate in the arbitration had been resolved.

The case demonstrates that the form of an award remains important to the decision as to whether it may be challenged under the Arbitration Act 1996. Even if the decision has a profound or even determinative effect on the dispute, it may not be an award - particularly if it is not expressed as such.

The decision also demonstrates that the arbitral tribunal has significant influence over whether its own decisions can be challenged in the court – because the way the tribunal frames and labels the decision will influence whether the court sees the decision as an award or not.

Parties to an arbitration should therefore consider carefully whether they want a decision to be expressed as an award or not, and make a relevant request to the Tribunal to label the decision accordingly.

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