Awards: Challenges

Introduction

As discussed elsewhere in this guide, international arbitral awards are frequently complied with voluntarily by award debtors.^[2] This being said, a dissatisfied party may elect not to comply and instead seek to challenge the award. Since the aim of arbitration is the final determination of the parties’ dispute, there is typically no prospect of appeal, and the means of recourse to challenge awards are very limited.

This chapter first addresses the methods available to a party who wishes to challenge an international arbitral award.^[3] In this context, we consider (1) the review of the award by the arbitral tribunal (i.e., correction, interpretation, supplementation, revision and remission), (2) the internal review mechanism provided for in certain arbitration rules, and (3) the judicial review of the award by national courts.

This chapter then discusses the representative approach to the setting aside of international arbitral awards of the United Nations Commission on International Trade Model Law on International Commercial Arbitration of 1985 (the UNCITRAL Model Law, as amended in 2006).

Methods of challenge of the award

Review of the award by the arbitral tribunal

As a matter of principle, the mandate of an arbitral tribunal ends with the rendering of the final award.^[4] The arbitral tribunal is said to be functus officio.^[5] As pointed out by Gary Born, however: ‘Human fallibility guarantees that all arbitral awards, like all national court judgments and academic treatises, will have mistakes, omissions, or ambiguities.’^[6] These errors can sometimes be significant in financial or commercial terms. As discussed below, most arbitration laws and arbitration rules, therefore, include narrowly prescribed exceptions to the functus officio doctrine, allowing an arbitral tribunal to correct, interpret and supplement its award and, in certain jurisdictions, to revise the award where evidence of fraud, forgery or similar criminal offences comes to light after it was rendered.

Correction of the award by the arbitral tribunal

Most arbitration laws and arbitration rules empower arbitral tribunals to correct typographical, clerical or computation errors, or errors of a similar nature, within a short amount of time after the notification of the award. These provisions are intended to allow the correction of blatant ‘slips’ on the face of the award and typically narrowly restrict the circumstances in which corrections may be made.^[7]

Article 33 of the UNCITRAL Model Law allows the parties to ‘request the arbitral tribunal to correct in the award any errors in computation, any clerical or typographical errors or any errors of similar nature’ within 30 days of receipt of the award. The tribunal is also authorised to make corrections to its award ‘on its own initiative’. The majority of other national arbitration regimes resemble the Model Law approach and only allow limited corrections within a short amount of time after the rendering or notification of the award.^[8] As an illustration, the 2021 revision of the Swiss Federal Act on Private International Law codified the long-standing jurisprudence of the Swiss courts allowing arbitral tribunals, on their own motion or at the request of a party within 30 days of the communication of the award, to ‘correct typographical and accounting errors in the award’.^[9] Similarly, Section 57 of the English Arbitration Act provides that an arbitral tribunal may, on its own initiative or on the application of a party within 28 days of the date of the award, correct an award to ‘remove any clerical mistake or error arising from an accidental slip or omission or clarify or remove any ambiguity in the award’.

In contrast, Section 11 of the United States Federal Arbitration Act empowers federal courts, rather than the arbitral tribunal, to ‘make an order modifying or correcting the award’ if ‘there was an evident material miscalculation of figures or an evident material mistake’, or if the award ‘is imperfect in matter of form not affecting the merits of the controversy’. Nevertheless, Section 11 will be irrelevant in most cases.

Indeed, virtually all major institutional rules empower arbitral tribunals to correct their awards within a short amount of time in a way that is broadly similar to the UNCITRAL Model Law.^[10] Article 36 of the Arbitration Rules of the International Chamber of Commerce (the ICC Rules), for instance, provides that the arbitral tribunal, on its own initiative or at the request of a party, may correct ‘a clerical, computational or typographical error, or any errors of similar nature contained in an Award’. In similar terms, Article 38 of the UNCITRAL Rules empowers arbitral tribunals on their initiative or at the request of a party ‘to correct in the award any error in computation, any clerical or typographical error, or any error or omission of a similar nature’.

Interpretation of the award by the arbitral tribunal

In addition to correction, arbitration laws and institutional rules often grant arbitral tribunals authority to interpret their award to clarify any ambiguity and, therefore, the manner in which the award must be executed.

Many national arbitration laws expressly allow arbitral tribunals to interpret their awards, typically within a short amount of time.^[11] In Switzerland, for instance, the 2021 revision of the Swiss Federal Act on Private International Law expressly grants arbitral tribunals the authority to ‘explain specific parts of the award’ on their own initiative or at the request of a party.^[12] Under Article 33 of the UNCITRAL Model Law, a party may also ‘request the arbitral tribunal to give an interpretation of a specific point or part of the award’ but only ‘if so agreed by the parties’ – that is, generally, where the applicable arbitration rules provide for interpretation. In a few jurisdictions, such as England and the United States, the law does not specifically provide for interpretation of awards. In those jurisdictions, however, the courts widely consider arbitral tribunals to have the power to interpret their awards.^[13]

The majority of arbitration rules broadly track the provisions of the UNCITRAL Model Law on interpretation of awards.^[14] As an illustration, Article 36(2) of the ICC Rules provides that an application ‘for the interpretation of an award’ may be made ‘within 30 days from receipt of the award’. Although a handful of institutional rules are silent in respect of interpretation,^[15] it is suggested that if both the applicable rules and the applicable arbitration law are silent on the issue, ‘the better view is that this power is inherent (for a reasonable period of time after the making of the award) in the arbitrators’ mandate’.^[16]

In practice, arbitral tribunals generally consider that to be admissible, a request for interpretation ‘must seek to clarify the meaning of an operative part of the arbitral tribunal’s decision’.^[17] Requests for interpretation are seldom granted.^[18]

Additional award of the arbitral tribunal

In many jurisdictions, an arbitral award may be challenged if the tribunal decided infra petita (i.e., if the tribunal failed to decide all the issues put to it). Hence, most arbitration laws and institutional rules also empower arbitral tribunals to issue additional awards deciding claims that were advanced by the parties during the arbitration but have been omitted in the final award. This has been described as a ‘sensible solution’.^[19]

Article 33(3) of the UNCITRAL Model Law provides that, unless otherwise agreed by the parties, the arbitral tribunal may ‘make an additional award as to claims presented in the arbitral proceedings but omitted from the award’. The same time limits apply as in respect of correction and interpretation. Many national arbitration laws provide for additional awards when claims presented in the proceedings were omitted in the final award.^[20] Article 1485(2) of the French Code of Civil Procedure (applicable to international arbitration in accordance with Article 1506 of the Code) provides, for instance, that the arbitral tribunal may, on application of a party, ‘make an additional award where it failed to rule on a head of claim’. However, if the arbitral tribunal cannot be reconvened and the parties cannot agree on the constitution of a new tribunal, the only available remedy appears to be the setting aside of the award.^[21] Despite the absence of express authorisation in the Federal Arbitral Act, most courts in the United States have recognised the power of arbitral tribunals to issue additional awards to cure omissions.^[22]

In turn, many arbitration rules also provide for the possibility of additional awards.^[23] For example, Article 27.3 of the Arbitration Rules of the London Court of International Arbitration provides that ‘[w]ithin 28 days of receipt of the final award’, a party may request the tribunal ‘to make an additional award as to any claim, counterclaim or cross-claim presented in the arbitration but not decided in any award’. Notably, the possibility of issuing additional awards for ‘claims made in the arbitral proceedings which the arbitral tribunal has omitted’ was only introduced in the 2021 edition of the ICC Rules.^[24]

Revision of the award by the arbitral tribunal

As a further exception to the functus officio doctrine, arbitral tribunals are sometimes empowered to revise their awards if evidence of fraud, forgery or similar criminal offences comes to light after the issuance of the award.

Award revision is an exceptional post-award remedy that exists only in a few jurisdictions. Under the English Arbitration Act 1996, for instance, an award may be challenged on the ground of serious irregularity if it has been obtained by fraud, and the court hearing the challenge may then remand the award to the arbitral tribunal for reconsideration.^[25] In France, Article 1502 of the Code of Civil Procedure provides for applications for revision of arbitral awards in the event of subsequently revealed fraud.^[26] In contrast with the English position, the application is made to the arbitral tribunal directly. However, if the arbitral tribunal cannot be reconvened, scholars suggest that the application may be made to a new arbitral tribunal.^[27]

In Switzerland, despite the absence of statutory provision to this effect, the Federal Tribunal has held that Swiss courts can remand the award to the arbitral tribunal for revision, if the award was influenced by criminal acts.^[28]

Remission of the award to the arbitral tribunal

The remission of the award refers to the possibility given to the courts of the seat in some jurisdictions to refer the award back (or remand) to the arbitral tribunal for reconsideration when faced with a setting-aside application. Remission is intended to provide the arbitral tribunal with an opportunity to correct defects in the award that would otherwise constitute grounds for its setting aside.^[29]

Article 34(4) of the UNCITRAL Model Law, which has been adopted in a number of jurisdictions,^[30] provides that:

The court, when asked to set aside an award, may, where appropriate and so requested by a party, suspend the setting aside proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the arbitral tribunal’s opinion will eliminate the grounds for setting aside.

A few non-Model Law jurisdictions have adopted similar provisions on remission. Notably, Section 68(3) of the English Arbitration Act provides that the ‘court shall not exercise its power to set aside or to declare an award to be of no effect, in whole or in part, unless it is satisfied that it would be inappropriate to remit the matters to the tribunal for reconsideration’. In the United States, the possibility of remanding an award to the arbitral tribunal has been recognised in case law.^[31]

Arbitration rules do not typically address the remission of awards to arbitral tribunals. By way of exception, Article 36(5) of the 2021 ICC Rules provides that the provisions governing the award ‘apply mutatis mutandis to any addendum or award made pursuant to the terms of such remission’ and sets forth the mechanism applicable to the administration of the proceedings in case of remission.

Internal review mechanisms

Arbitration rules generally leave the parties to resort to the courts at the seat of arbitration to challenge an award. A few institutions, however, have adopted a different approach and provide for the internal review of the award in the framework of the rules under which the arbitration was conducted.

The most well-known example of internal review is the procedure set forth in the 1965 Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (the ICSID Convention). As further discussed in the chapter on ICSID awards, the ICSID arbitration system is self-contained. The judicial review of awards is effectively replaced by the internal ICSID review mechanism. In accordance with Article 52 of the ICSID Convention, a party may apply for the annulment of the award before an ad hoc committee of three members appointed by ICSID. The review of the ad hoc committee is limited to the five grounds set out in Article 52(1), namely:

1. that the Tribunal was not properly constituted;
2. that the Tribunal has manifestly exceeded its powers;
3. that there was corruption on the part of a member of the Tribunal;
4. that there has been a serious departure from a fundamental rule of procedure; or
5. that the award has failed to state the reasons on which it is based.

The ad hoc committee can confirm or annul the award in whole or in part, but it cannot revise the award. If the award is annulled, either party may request that the dispute be submitted to a new arbitral tribunal.^[32]

Outside the ICSID system, arbitration regimes established by trade associations, such as maritime and commodity arbitrations, often provide for internal review procedures.^[33] The arbitration rules of the Paris Maritime Arbitration Chamber, for instance, provide for a two-tier arbitration system.^[34] A similar approach has been adopted in the arbitration rules of the Grain and Feed Trade Association and of the Federation of Oils, Seeds and Fats Associations.^[35]

In sports arbitration, the appellate division of the Court of Arbitration for Sport hears appeals from the awards rendered by the Court in its role as a tribunal of first instance, provided that the rules of the relevant sports federation or body provide for such an appeal.^[36]

Judicial review of the award

If a dissatisfied party decides, for genuine or strategic reasons, that a defect affecting the award cannot be remedied by the arbitral tribunal and the applicable rules do not provide for internal review, then this party may resort to national courts to have the award set aside in whole or in part.^[37]

Given the nature of international arbitration, it is not immediately apparent why awards should be subject to judicial review.^[38] Scholars suggest that the basic justification for the judicial review of awards is that they belong to some extent to the law of a particular jurisdiction, which retains some form of judicial policing, given that the adjudicatory function ordinarily entrusted to national courts was delegated to private actors.^[39] In practice, however, setting aside international arbitral awards is a rare occurrence in most jurisdictions, with a majority of challenged awards being upheld.^[40]

Before considering the approach to setting aside of the UNCITRAL Model Law, we address the preliminary issues of the competent court to hear the challenge and the limitations that may apply to the right of the parties to apply for setting aside.

Jurisdiction over actions to setting aside

Although there is no international agreement on the setting aside of international arbitration awards,^[41] the authority for setting aside is assigned to the courts of the seat in virtually all jurisdictions.^[42] Under the UNCITRAL Model Law, each state is free to specify the court, or courts, or authority competent to hear applications to set aside an award.^[43] In jurisdictions that have not adopted the Model Law, the arbitration law will typically specify which court is competent to hear setting-aside applications.^[44] Leaving aside a few pathological situations, applications to set aside awards shall therefore be made, if at all, at the seat of the arbitration and under the arbitration law of that jurisdiction.^[45]

By way of exception, parties are theoretically free to subject their arbitration to the procedural law of a country that is not the seat of the arbitration. This is what Article V(1)(e) of the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) acknowledges when providing that courts may give effect, in denying recognition or enforcement of awards, to set aside decisions by the courts ‘of the country in which, or under the law of which, [an] award was made’.^[46] If the parties agree that their arbitration will be governed by the arbitration law of a country other than that of the seat, then the courts of that jurisdiction may conceivably have authority to set aside the award instead or in addition to the courts of the seat.^[47] In practice, however, parties virtually never choose a procedural law other than that of the arbitral seat to govern their arbitration.^[48]

In a few isolated instances, courts have assumed authority to set aside awards rendered in other jurisdictions. Indian courts have notably relied on the reference to ‘the country under whose law the award was made’ in Article V(1)(e) of the New York Convention to hear setting-aside applications of awards rendered outside India and governed by Indian substantive law.^[49] In 2012, however, the Indian Supreme Court reversed the position, deciding that Indian courts would no longer be able to set aside awards not rendered in India.^[50] Courts in Pakistan and Bangladesh have also occasionally assumed jurisdiction to hear actions to set aside foreign awards that had some connection to that jurisdiction, such as when the domestic law governed the arbitration agreement.^[51]

Limitations on right to seek setting aside

Certain limitations – voluntary or imposed by statute – may affect the parties’ right to seek the setting aside of an international arbitration award.

First, certain national arbitration laws, such as the English Arbitration Act, require a party to ‘exhaust’ any other remedies available before resorting to the courts to seek the setting aside of the award, which may include, inter alia, correction, additional awards and internal review.^[52]

Second, where the applicable rules provide for a two-tier arbitration system, only the second decision is typically final and binding and, therefore, may be subject to setting-aside proceedings.^[53] Similarly, it is generally the corrected or additional award that will be subject to setting-aside proceedings.^[54]

Third, national arbitration laws generally impose short time limits for the filing of setting-aside applications after the notification of the award to the award debtor. By way of example, Article 34(3) of the UNCITRAL Model Law provides that a setting-aside application must be made within three months of receiving the award or, if a request for interpretation, correction or additional award has been made, within three months of that request being disposed of by the arbitral tribunal.^[55] Subject to a few exceptions imposing time limits of only a few days,^[56] most jurisdictions impose time limits of between 28 days and six months.^[57] Although extensions may be granted in exceptional circumstances in certain jurisdictions,^[58] those time limits are generally ‘strictly enforced’.^[59]

Fourth, a few arbitration laws expressly provide for the possibility of excluding or limiting the parties’ right to seek the setting aside of an award by agreement. By way of example, under French law, any party may waive the right to challenge and that waiver covers all available grounds for setting aside.^[60] In Switzerland and Belgium, this possibility is only open when the arbitration involves foreign parties.^[61] Although the English Arbitration Act allows the parties to waive the right to judicial review of the substance of the award in appellate proceedings,^[62] it is not possible to waive the right to set aside an award for jurisdictional objections or serious irregularity.^[63] However, most arbitration laws – including the UNCITRAL Model Law – are silent in respect of the validity of agreements excluding or limiting the parties’ right to apply for setting aside. In the absence of specific provision, national courts have reached different conclusions on the issue.^[64] Some courts have upheld the validity of such agreements,^[65] while others have refused to enforce them.^[66]

Assuming that agreements to waive judicial review in an action to set aside are in principle valid and enforceable, most jurisdictions have required that waivers be clear and specific.^[67] General waivers by incorporation, such as that contained in Article 35(6) of the ICC Rules, will typically be insufficient.^[68]

Fifth, in most developed arbitral jurisdictions, parties will be deemed to have waived the right to apply for setting aside based on objections that they could have raised but failed to raise in the arbitration.^[69] For instance, virtually all jurisdictions preclude setting-aside applications based on jurisdictional grounds if the tribunal’s jurisdiction was not challenged early in the arbitration.^[70] In the same way, if a party fails to raise a procedural objection before the arbitral tribunal, it will typically be deemed to have waived that objection in subsequent setting-aside proceedings.^[71] The solution is less evident, however, in respect of public policy objections.^[72] Certain courts, such as in France, have notably held that public policy objections are not subject to waiver and, therefore, may be made for the first time in setting-aside proceedings.^[73]

UNCITRAL Model Law approach to setting aside

This chapter focuses on the approach to setting aside under the UNCITRAL Model Law and provides a high-level overview of the positions adopted in non-Model Law jurisdictions against this benchmark. However, it is beyond the scope of this chapter to examine the grounds available for setting aside around the world, which are dealt with in other parts of this guide.

At the time of writing, legislation based on the UNCITRAL Model Law has been adopted in 85 states in a total of 118 jurisdictions. The Model Law provides for the presumptive validity of international arbitral awards, subject to only a few exclusive and exhaustive grounds for setting aside.^[74] Under Article 34(2), an award may be set aside ‘only if’:

• the arbitration agreement was invalid or a party thereto lacked capacity;
• a party was not given proper notice of the appointment of the arbitral tribunal, or the arbitral proceedings, or was otherwise unable to present its case;
• the award deals with matters not contemplated by, or falling within, the arbitration clause or submission agreement, or goes beyond the scope of what was submitted;
• the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, or with the mandatory provisions of the Model Law itself;
• the subject matter of the dispute was not capable of settlement by arbitration under the law of the state in which the arbitration took place; or
• the award is in conflict with the public policy of the state in which the arbitration took place.

The grounds for setting aside in Article 34 of the Model Law deliberately track the grounds for non-recognition of awards under Article V of the New York Convention.^[75] National courts have confirmed that, as the Model Law expressly provides, these grounds are exclusive and exhaustive.^[76] These grounds are also discretionary, in the sense that national courts ‘may’ set aside an award if one or more grounds are satisfied, but are not compelled to do so.^[77]

Reflecting the policy of the New York Convention and of the Model Law, modern arbitration laws generally manifest a ‘pro-enforcement bias’,^[78] in the sense that they treat awards as presumptively valid and permit setting aside only on limited grounds.^[79] In effect, most national laws contain grounds analogous to those set out in Article 34 of the Model Law.^[80]

In a few jurisdictions, such as France and Switzerland, the grounds for setting aside are narrower than those available under Article 34 of the UNCITRAL Model Law, reflecting an arbitration-friendly legislative approach.^[81] Article 1520 of the French Code of Civil Procedure, for instance, provides for setting aside only when:

• the arbitral tribunal has wrongfully accepted or declined jurisdiction in respect of the dispute;
• the composition of the arbitral tribunal was irregular;
• the arbitral tribunal has not respected the limits of its mission;
• there has been a lack of due process, or a party has been denied the right to a fair hearing; or
• the award is contrary to international public policy.

Conversely, a number of arbitration laws contain grounds for setting aside that do not feature in Article 34 of the Model Law or Article V of the New York Convention.^[82] Additional grounds include lack of impartiality or independence of the tribunal or procurement of the award by fraud.^[83] Some national arbitration laws also provide for setting aside internally contradictory or uncertain awards,^[84] or when the award is affected by formal defects such as failures to sign the award^[85] or to provide reasons.^[86]

Last but not least, some jurisdictions allow some form of review of the merits of the tribunal’s decision on the law or facts.^[87] These grounds are examined in detail in the chapter discussing substantive grounds for challenge.

Notes