A recent rejection of a court appeal against an arbitrator’s decision highlights the importance of those dull dispute resolution clauses at the back of the contract.
Topic: Dispute resolution
Who: Brandeis Brokers Ltd v Black & Others
When: Reported mid 2001
A standard contract between a Metal Exchange broker and its customer provided for any dispute to be settled by arbitration. Disappointed at an arbitration outcome, the claimants challenged the arbitrator’s award in the courts. The ground was that evidence had been admitted by the arbitrator which would not have been admissible in court. In its judgement the court reminded the claimant that under the Arbitration Act 1996, the decision of an arbitrator can only be challenged in very limited circumstances. The only available ground here was that there had been a “serious irregularity”causing grave injustice to the applicant. In this case the court’s view was that the admission of questionable evidence did not even come close to qualifying as a “serious irregularity” of the kind required to persuade the court to overturn the arbitrator’s verdict. Having delegated the dispute resolution role to the arbitrator, the court said the parties had to live with the outcome unless there were extreme circumstances suggesting that the arbitrator was in grave error.
Why this matters:
Before signing a contract which includes an arbitration clause buried somewhere in the biolerplate, the parties should be satisfied that this is how they want any dispute settled. This case underlines how difficult it is to overturn an arbitrator’s finding. Some may say that this is how it should be, but views may change when the selected arbitrator is for any reason not equal to the task and the losing party feels justifiably robbed of justice. These days, moreover, arbitration is not necessarily materially swifter than litigation, particularly if the crucial process of selecting the arbitrator is not adequately and workably set out in the contract and disagreements and delays result. It is also not necessarily cheaper, and it is unlikely to be significantly less formal or less beset by procedural complexity. Instead, the parties might want to consider mediation as a form of dispute resolution avoiding litigation. The mediator does not impose any sort of “judgement” but just attempts to bring the parties to a consensual settlement they are both happy to sign up to. It can happen within weeks, lasts no more than one day and if this does not resolve matters, the parties can litigate, safe in the knowledge that nothing said in the course of the mediation can be mentioned in court.