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Arbitration

Challenging the award

It is extremely difficult to challenge the award of an arbitrator. The provisions under which such a challenge may be made - ss68 and 69 of the Arbitration Act 1996 - are very limited. This is demonstrated by a number of cases although in some of them the challenge has been successful.

Checkpoint Ltd v Strathclyde Pension Fund
[2003] EWCA Civ 84

In fixing the new rent at twice the level of the passing rent the arbitrator partly relied upon his own personal knowledge and experience in the area. The lease required the arbitrator to be a surveyor experienced in letting and valuation of similar properties situated in the same region. The tenants application to set aside the award was dismissed.
    "The best that I can do to provide an acceptable test is to reformulate the question in this way: is the information upon which the arbitrator has relied information of the kind and within the range of knowledge one would reasonably expect the arbitrator to have acquired if, as required by the terms of this lease, he is experienced in the letting and/or valuation of property which is of a similar nature to the premises, is situate in the same region and used for purposes similar to those authorised under the lease. If he uses knowledge of that kind he acts fairly.." (Ward LJ, paras 31 and 32).

If an arbitrator draws on knowledge outside that field he is no longer assuming the role of an impartial arbitrator but that of an advocate.

Guardcliffe Properties Ltd v City & St James
[2003] EWHC 215 (Ch); [2003] 25 EG 143 (Ch D).

A case where the arbitrator's award was remitted to the arbitrator for reconsideration under s68 of the Arbitration Act 1996 because he made certain major assumptions without making those clear to the parties and without giving them the opportunity to comment. These were serious irregularities that would cause substantial injustice.

Warborough Investments Ltd v S Robinson & Sons (Holdings) Ltd
[2003] EWCA Civ 751.

A different conclusion was reached in this case where the parties surveyors conducted the arbitration on the basis of written reports. It was suggested that the procedure that was adopted in the case for the exchange of reports did not allow for sufficient comment on those reports in a number of particular respects. However, the court held that if any such point was to be taken it should have happened prior to the award and not afterwards. Nor was the court satisfied that allowing a further report would have led to any substantial difference in the evidence submitted. There was no "substantial injustice".

BLCT (913096) Ltd v J Sainsbury plc
[2003] EWCA Civ 884

The arbitrator had to consider a comparable that included a premium of £3,000,000. This capital payment was not paid for anything specific. L argued that the premium should be "decapitalised (or rentalised) and treated as part of the rent". The arbitrator disagreed. He held that the premium was a "key money payment with no evidence that it could at any time be converted into a rental payment or could be treated as a payment in lieu of rent". His opinion was that premiums should not be decapitalised as a matter of course. L sought permission to appeal on a point of law. The single judge refused on the papers. In his written reasons for refusal the judge stated that he could not see what the question of law was. He noted that the arbitrator did not exclude the possibility that such a premium might be rentalised but whether or not this should be done was, in the judge's view, a question of the method of valuation. He did not consider that the award was obviously wrong or that there was any issue of general public importance raised. The judge subsequently refused to hold an oral hearing. Section 69(5) of the Arbitration Act 1996 states that an application for leave should be determined "without a hearing unless it appears to the court that a hearing is required". L appealed against that refusal to hold an oral hearing arguing that it was a breach of art 6 of the European Convention on Human Rights. The appeal was dismissed. "Article 6 does not require an oral hearing of an application for leave to appeal against an arbitral award save in exceptional circumstances". (Arden LJ, para 37).

Marklands Ltd v Virgin Retail Ltd
[2003] EWHC 3428 (Ch); [2004] 27 EG 130

A case which shows the extreme difficulties of challenging an arbitrators decision under sections 68 and 69 of the Arbitration Act 1996.

St Georges Investment Co v Gemini Consulting
[2004] EWHC 2353 (Ch); [2005] 01 EG 96.

A rent review arbitration in which the arbitrator went off on a frolic of his own. The parties had agreed that the rent on the ground floor premises should be determined by reference to rent on a third floor in the same building. The parties agreed that the appropriate method of valuation was to take the reviewed rent for the third floor and apply a discount. The amount of the discount was to be determined by the arbitrator. L argued that the rent of the lower ground should be discounted by 30% and T argued by 65%. The arbitrator decided on 40% but then also went on to make a further discount of 9% to take account of certain terms in the lease that he considered had been onerous. However, the parties had not made submissions on this basis. The judge considered that there had been a serious irregularity and remitted the matter back to the arbitrator for his reconsideration s68 of the Arbitration Act 1996.

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