- If parties are unable to resolve the dispute by themselves, they should ideally consider a process which would lead to the resolution of their disputes with minimum of costs and time. If the parties agree to, say arbitration as the dispute resolution process, then the conclusion of the process should be by way of an enforceable award from the arbitral tribunal. Very rarely would a losing party be happy with the award and hence if there is an option available to appeal against the award, they would be inclined to do soi. In this regard, if the arbitration provides for English Law to govern both the law of the contract and the procedure (i.e. the seat), then the right to appeal on a point of law, is available under the English Arbitration Actii unless parties have expressly excluded it by contractiii. While UK has been the pre-eminent center for Maritime Arbitration, other jurisdictions are now competing for the same class of business, and which may result in the application of different procedural rulesiv. Basically, there are two camps, one in favor for the right of appeal (the “English” approach) and the other against (the “Uncitral” approach). This article will suggest that prior to choosing any seat of the arbitration, parties should consider whether there is any right of appeal available and whether they should consider doing away with this right by expressly providing for it or choose a seat which does not allow for such appeals.
- With respect to shipping contracts, invariably the arbitration clause would provide for both the Law of the Contract and the Seat.
- Law of the Contract: The law of the contract governs issues relating to the contractual validity, interpretation, consideration, mode of performance of the contract, etc. The governing law of the contract does not determine whether there is a right of appeal available and instead it is determined by the law of the seat.
- Law of the Seat: This is the procedural law governing the process of arbitration and may be different from the law of the contract. Given that the English Law is mostly used as the law of the contract, this may be coupled with the law of the seat of another jurisdiction such as say Singapore or Hong Kong, and which would mean that the arbitration would be conducted and supervised as provided under the laws of Singapore or Hong Kong. Conversely, it is quite possible for a contract to be governed by the law of Singapore with the seat in London and in which case, parties would be entitled to appeal on a point of law as provided under S 69 of the English Arbitration Act 1996v unless expressly excluded.
- Arbitration Clauses are also called as the midnight clauses given that parties are invariably more focused in negotiating the deal and only when this is accomplished, consider the dispute resolution / arbitration clause. Often, this would be at the late hours which would result in a hastily concluded instead of a well thought arbitration clausevi. Alternatively, the dispute resolution clauses used may be the last used (i.e., the clause in an earlier contract) without any consideration to the contract at hand including the location whether the parties are located.
- One of the reasons parties choose arbitration is that, amongst others, they are comfortable for their disputes to be heard by parties who are knowledgeable of the trade practices. In a three-member arbitral panel, each party is generally entitled to choose an arbitrator with the third arbitrator being appointed by the first two arbitrators. In the absence of any agreement reached between the first two arbitrators appointed for the appointment of the third arbitrator, parties can seek assistance from the relevant arbitral institution or the seat of the arbitration. Similarly, in the case of a sole arbitrator, if parties are unable to agree, they could seek assistance from the arbitral institution as provided in the arbitration clause or from the courts of the seat. Hence, in an arbitration setting, parties are at liberty to choose who the parties believe would best be able to adjudge their dispute and which is not the case if the dispute were to be litigated.
- We understand that more than 80% of the shipping contracts provide for English Law for both the law of the contract and the seat. This is understandable given that the UK earlier had an empire stretching all over the world and with the former colonies now continuing to use the English Common Law system. This advantage has also resulted in the continuing use of London as the seat of the arbitration. The legislation in place in the UK is the English Arbitration Act 1996. S69 of this Act deals with the right of appeal on a point of law, unless this is expressly excluded in the arbitration agreement. S45vii of this act also allows a party to seek a determination on a preliminary point of law from the English Courts – however, this is subject to the other party’s agreement. Additionally, this determination is meant to be accomplished prior to the Tribunal publishing their award. Our article will focus on S69 and not touch on S45 given that it does not impinge on party autonomy.
- Parties often choose English Law as the law of the contract on the assumption that it is transparent and largely predictable. In the case of UK, the development of law is a function of both the legislature (Parliament) and the Judiciary (the senior courts aid in the development of common law keeping in mind the societal considerations, amongst others). Accordingly, if the appeal goes up the chain to the Senior Courts (the Court of Appeal or the Supreme Court), they may well develop law by overturning the prevailing law and which parties would have not contemplated at the time they contracted. Given that English Law is commonly used by parties who may not have any connection with UK, the question which comes to our mind is whether the parties were aware that if English Law is chosen as the law of the contract and to govern the procedure (seat)
- of the potential right to appealviii at the time the contract was being negotiated together with the attendant costs. We do not think so given that ultimately parties choose arbitration considering that their disputes would be resolved with the minimum of costs. While the provisions of the English Arbitration Act 1996 require a party to seek leave to appeal thus limiting the number of appeals heard, the fact is that a losing party, if they have the means, may wish to try their luck and appeal and which would result in the other party to incur additional time and expenses on a dispute. We do not believe that this would ever have been contemplated when the dispute resolution process was being considered or negotiated.
- that the decision of the English courts, if appealed may be different from the arbitral panel and thus overruling the award of the panel constituted by the express choice of the parties. This surely would not have been the intention of the parties when they engaged a tribunal to hear their disputes in the first place.
- of the potential for change in law and the effect to their disputes. Given the common law nature of the English Courts, the senior courts develop the law considering the societal changes together with their inherent biases. While this is perfectly understandable to parties who are English citizens / entities, this would be an issue of consternation to parties from other jurisdictions and who would never have considered this aspect.
- There is often an argument made, particularly by some English Lawyers, of the necessity to have a steady stream of English Cases to develop the law. However, the proponents of this position do not quantify the expenses incurred for the development of law. Perhaps, if this is advised to disputants that they would not only have to incur expense to pursue their dispute but also to develop “English” Law by taking it through the appeal process, we submit that parties would prefer either not to use English Law or provide for no right to appeal as has been provided by the rules of some arbitral institutions. We submit that for development of international arbitration law, publications of international arbitration awards would be more apt and will better suit the needs of the international shipping community.
- While there has been clamor for a similar right of appeal for International Arbitrations in other common law jurisdictions such as Singaporeix and Hong Kongx, the legislature has, in our opinion, rightfully resisted in following the English position. We would prefer that parties actively (instead of passively) decide on whether they wish to exclude the right of appeal whilst negotiating the contracts instead of being presented a fait accompli. In this regard, if parties do wish to have the right of appeal, they could also consider other jurisdictions such as Singapore and Hong Kongxi and provide for this right in the arbitration clause and which may well result in the better development of common law keeping in mind that these courts would not be developing the English Lawxii but only consider as to whether the law applied was correct or not.
- In conclusion, it is time for parties to be pro-active and actively consider their arbitration clause when the contract is being negotiated. If it is desired that parties should have the right to appeal, then parties should consider as to what best suits them best and whether they would wish to do their bit by developing English Law or simply wish a determination of the law and which could well be accomplished in other seats also.
We thank Mr Joseph Tan of Jlex LLC for reviewing this article. The views expressed in this article together with all errors are entirely ours.
i. The numbers of awards appealed successfully is miniscule compared to published awards and this is due to the high barrier applied.
ii. As provided in S 69 of the English Arbitration Act 1996
iii. See LCIA Rules Article 26.8, ICC Rules 35.6).
iv. The seat of arbitration determines the procedural law of the arbitration. In shipping contracts, arbitration clauses expressly provide for a seat and whose law’s will be used to deal with the procedural aspects of the arbitration. This would include the option to parties to apply to the courts of the seat to facilitate the conduct of the arbitration including ensuring that the arbitration conducted is as has been agreed.
v. Although this is theoretically possible, our understanding is that in order to appeal, the law of the contract must also be English Law and as stated in viii below.
vi. See more on this in the introduction to the case comment on Silverlink Resorts Ltd v MS First Capital Insurance Ltd  SGHC 251 published in the Singapore Academy of Law Journal.
vii. S 45 – Determination of preliminary point of Law:
(1).Unless otherwise agreed by the parties, the court may on the application of a party to arbitral proceedings (upon notice to the other parties) determine any question of law arising in the course of the proceedings which the court is satisfied substantially affects the rights of one or more of the parties.
An agreement to dispense with reasons for the tribunal’s award shall be considered an agreement to exclude the court’s jurisdiction under this section.
(2)An application under this section shall not be considered unless—
(a)it is made with the agreement of all the other parties to the proceedings, or
(b)it is made with the permission of the tribunal and the court is satisfied—
(i)that the determination of the question is likely to produce substantial savings in costs, and
(ii)that the application was made without delay.
viii.The right to appeal is only available if both the law of the contract and the procedural law is English Law
ix. There was a consultation exercise conducted in Singapore by the Ministry of Law in 2019 and what was propounded was an “opt in” exercise i.e. a right to appeal on a point of law would only exist if this was expressly provided for in the Arbitration Clause for International Contracts. See also “Appeal on Questions of Law in International Arbitration” published by the Singapore Academy of Law and which can be viewed at https://journalsonline.academypublishing.org.sg/Journals/SAL-Practitioner/Arbitration-and-Mediation/ctl/eFirstSALPDFJournalView/mid/590/ArticleId/1530/Citation/JournalsOnlinePDF
x. In order for a right of appeal on point of law, this must be expressly stated in the arbitration agreement as provided in S 100 of The Hong Kong Arbitration Ordinance (Cap.609)
xi. If these jurisdictions are nearer to where parties are sited, they may well result in reduction of costs and time in dealing with the dispute.
xii. Singapore Courts do not require expert evidence on English Law and are able make rulings on English Contracts as provided under the Evidence Act (Cap. 97)