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Challenging Arbitration Awards in Court

There would be little point in commercial arbitration awards if they were meant to be anything other than final. As one case showed, challenging them in court requires the negotiation of numerous hurdles and is always an uphill struggle.

A German manufacturer of medical equipment granted an English company certain rights to develop, market and distribute an automated patient identification system in this country. The manufacturer lodged arbitration proceedings against the company, alleging that it had failed in its contractual obligation to promote and sell the system in the UK market. The manufacturer’s claim, which it valued at 575 million euros, was, however, rejected by an arbitration panel.

In challenging that outcome before the High Court, the manufacturer argued that the panel’s decision was marred by a serious irregularity. It asserted that it had suffered a substantial injustice in that the panel had either ignored or overlooked the evidence of a crucial witness in the case.

Ruling on the matter, the Court noted that the test of a serious irregularity giving rise to substantial injustice involves a deliberately high threshold which is designed to reduce drastically the extent of judicial intervention in the arbitral process. A balance has to be drawn between the need for finality of arbitration awards and the need to protect parties against the unfair conduct of proceedings.

The Court was concerned with whether due process had been observed and not with whether the panel had made the right findings of fact. The evaluation of evidence was exclusively for the panel and, in giving reasons for its decision, it was not obliged to address each and every point made by either side.

Although the witness’s evidence was not mentioned in the panel’s decision, the Court was not in any event satisfied that it had been overlooked. The panel took an entirely appropriate approach to construing the agreement under German law and plainly and comprehensively rejected the manufacturer’s arguments.

16 May 2022
Last Updated
26 October 2022