English Court's reminder that (i) courts will allow the arbitral process to correct itself without intervention where possible and (ii) a party seeking to set aside an Award must do so on the correct basis and in good time

In a recent judgment handed down by Eder J in the case of Union Marine Classification Services LLC v Government of the Union of Comoros, the English Commercial Court rejected a party's application for an order setting aside and / or declaring to be of no effect a "Correction and Addition to Award" under sections 67(1)(a) and / or (b) of the Arbitration Act 1996 (the "Act"). The decision was based on:

• recognition of the principle behind the Act that courts should be hesitant to interfere with the arbitral process, according room for that process to "correct itself";
• the fact that the application was made on an inappropriate basis in the circumstances (under s67 rather than s68 of the Act); and
• a timely application on the correct ground would have failed on the merits in any event.

Factual background and procedural history

Union Marine Classification Services LLC ("UM") entered into an agreement (the "Agreement") with the Government of the Union of Comoros (the "Government") in 2007, under which UM was authorised to act and accomplish on the Government's behalf all acts and functions relating to the maritime administration of Comoros, including the registration of vessels under the Comoros flag.

In 2012, the Government purported to terminate the Agreement. UM disputed the Government's entitlement to do so. The dispute was referred to a sole arbitrator (the "Arbitrator"). The Government raised various counterclaims, including (i) a certain minimum monthly payment for a certain period, (ii) an order for an account and (iii) damages for the sums found to be due on the taking of the account.

It was "ordered/ agreed" that the issue of quantum would be decided separately. An Award on the merits of the dispute was issued on 22 July 2014 (the "Original Award") which concluded that both UM's claims and the Government's counterclaims failed.

The Government subsequently applied to the Arbitrator under, amongst other provisions, section 57(3) of the Act, for the correction or clarification of the following two matters (the "Request"):

1. "It appears that the Tribunal has omitted to decide this issue [UM's liability for the minimum monthly payments to the Government] in the Award"; and
2. The Tribunal "does not appear to have determined the separate question of whether [UM] was liable to account to the Government as pleaded".

The relevant wording of s57(3) provides as follows:

"(3) The tribunal may on its own initiative or on the application of a party—

(a) correct an award so as to remove any clerical mistake or error arising from an accidental slip or omission or clarify or remove any ambiguity in the award, or

(b) make an additional award in respect of any claim (including a claim for interest or costs) which was presented to the tribunal but was not dealt with in the award."

The Arbitrator then published an "Amended Award", whereby he "by way of addition and/or correction to [his] original award" resolved the two matters in the Government's favour.

UM, in turn, applied for an order setting aside and / or declaring to be of no effect the Amended Award under sections 67(1)(a) and / or (b) of the Act which provide for awards to be set aside in circumstances where a tribunal does not have substantive jurisdiction.

UM's application

UM's key submissions were as follows:

1. under s58 of the Act, the Original Award was final and binding on the parties such that the Arbitrator's mandate had come to an end. Therefore, the Arbitrator had no jurisdiction to change his Original Award in the manner that he did and the Amended Award was a nullity; and
2. that it was plain from the terms of the Amended Award that the Arbitrator intended to change his decision in his Original Award rather than to make an additional award in relation to a claim not dealt with. This therefore fell outside the scope of s57(3)(b) of the Act.

The Government's response

In response, the Government submitted a threshold objection: the complaint could not be properly made properly under s67 of the Act, as there was no question as to the tribunal's substantive jurisdiction – UM had not submitted that there was no valid arbitration agreement, that the Tribunal was not properly constituted, or that matters submitted to arbitration fell outside of the arbitration agreement. Rather, UM was disputing the Arbitrator's correction of an award under s57, which properly fell to be determined under s68(2)(b) of the Act, which makes provision for an award to be set aside if a tribunal has exceeded its powers.

The decision

Section 67

Eder J accepted the Government's threshold objection, with the result that UM's s67 application failed from the outset. Section 68(2)(b) would have been the only actionable ground for challenging the Amended Award, and it was irrelevant that an application under this section would place additional hurdles on the applicant, such as demonstrating substantial injustice.

Section 68

In anticipation of the court's decision on the s67 application, UM made a late attempt to bring the s68 application. This was rejected by Eder J as too late and inappropriate, referring to the strict time limits provided by the Act for applications under the Act and, in particular, the non-compliance with the procedural requirement of providing evidence demonstrating substantial injustice.

Notwithstanding this, the judge went on to deal with the hypothetical s68 application, and nonetheless concluded that it would have failed. In coming to this decision, the judge bore in mind that "one of the objectives of the 1996 Act was to limit the rights of parties to arbitration agreements to resort to the Courts and so to ensure greater autonomy for their chosen tribunal" and "the policy which underlies the [1996] Act is one of enabling the arbitral process to correct itself where possible, without the intervention of the court".

Relying on previous case law, the judge considered that where an arbitrator is entitled to correct an error, he is then entitled to make changes to the dispositive parts of the award in order to reflect the correction. Viewed in its proper context, the judge then concluded that "[w]hat happened in the Original Award was an accidental slip (mistake) or omission by the Arbitrator which he was entitled to correct under s57(3)(a)…".

Comment

This is a welcome decision confirming that the courts will be slow to interfere with the arbitral process. This is particularly so when the court might be duplicating an action specifically envisaged to fall within the scope of the arbitral process (here, ruling on the appropriateness of correcting an award).

Moreover, this decision serves as a reminder that whenever the court's intervention is sought, this must be done (i) on the correct basis (here, s68 instead of s67) and (ii) in compliance with the applicable procedural requirements. If not, the court is likely to refuse involvement on account of failure to meet threshold requirements.

Parties should take this judgment as encouragement that the courts will generally respect the autonomy of the arbitral process and give effect to anything done in accordance with it. Should parties wish to challenge such correction (or make any other applications), they should exercise great care to do so on the correct grounds and in accordance with the strict procedural requirements, without placing hope on the court's leniency in cases of non-compliance.

For further information, please contact Craig Tevendale, Partner, Maximilian Szymanski, Associate or your usual Herbert Smith Freehills contact.