High Court Confirms that Arbitration Awards are Difficult to Challenge

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Commercial arbitration awards are meant to be final and, although they may not be as precisely correct in law as outcomes yielded by fully fledged litigation, judges will not intervene unless they are obviously wrong. The High Court made that point in the context of a landlord and tenant dispute.

The case concerned a lease in respect of an open-cast coal mine that required the tenant to pay additional rent, calculated by reference to the tonnage of coal yielded by the mine and the market price of coal. After a dispute arose in respect of the amount of additional rent due, the matter was referred for arbitration to a chartered surveyor with particular experience of the minerals industry.

After the arbitrator ruled in favour of the landlord and directed the tenant to pay more than £6 million in additional rent, the tenant sought permission to appeal against the award under Section 69 of the Arbitration Act 1996. It was submitted, amongst other things, that the fact that the arbitrator was not a lawyer had resulted in serious flaws in his interpretation of relevant provisions of the lease.

In refusing the application, however, the Court noted that the arbitrator's experience precisely accorded with the subject matter of the dispute and that there was no reason to believe that he had misconstrued the lease merely because he was not a lawyer. The parties had agreed to arbitrate rather than litigate and were entitled to select whomever they wished as arbitrator, legally qualified or not.

Even if there was room for a different interpretation of the lease, and even if the award might not have the precision of a court judgment, the tenant had failed to establish that the arbitrator's ruling was wrong, let alone obviously wrong. The tenant's further claim, under Section 68 of the Act, that the arbitration was infected by serious irregularity would be considered at a later date.

Merthyr (South Wales) Ltd. v Cwmbargoed Estates Ltd. and Another

Rex Cowell