Lord Sandison, one of Scotland’s Senators and one of three arbitration judges, delivered the keynote speech at the Centre’s Arbitration Training Day. His remarks focused on the role of the Court in Scottish arbitration under the Arbitration (Scotland) Act 2010.
Read the full speech below.
The Role of the Court in Reviewing Arbitral Awards
I would like to talk to you today about the role of the Court of Session in reviewing arbitral awards, now that the Arbitration (Scotland) Act 2010 is well bedded-in and we have built up something that we can sensibly call a jurisprudence on the subject.
The starting point is section 13(2) of the 2010 Act, which is in the following terms:
“13 Court intervention in arbitrations
(1) Legal proceedings are competent in respect of—
(a) a tribunal’s award,
…
only as provided for in the Scottish Arbitration Rules (in so far as they apply to that arbitration) or in any other provision of this Act.
(2) In particular, a tribunal’s award is not subject to review or appeal in any legal proceedings except as provided for in Part 8 of the Scottish Arbitration Rules …”
It follows that the court cannot intervene by way of judicial review or declarator, nor is there any longer any jurisdiction to bring a legal challenge to an award by way of a stated case under s.3 of the Administration of Justice (Scotland) Act 1972. Instead, all questions relating to the arbitration, whether about the composition or jurisdiction of the tribunal, its conduct of the arbitration or its award, are governed by the Act and the Scottish Arbitration Rules, in particular Part 8 thereof.
Part 8 of the Rules provides for three distinct types of challenge to an award:
- a ‘‘jurisdictional appeal’’ under r.67, on the ground that the tribunal did not have jurisdiction to make the award;
- (ii) a ‘‘serious irregularity appeal’’ under r.68, on the ground of serious irregularity, generally, but not exclusively, in the conduct of the arbitration; and
- (iii) a ‘‘legal error appeal’’ under r.69, on the ground that the tribunal erred on a point of Scots law.
Whereas rr.67 and 68 are ‘‘mandatory rules’’, which cannot be modified or disapplied by the parties (see s.8 of the Act), r.69 is a ‘‘default rule’’ which applies only in so far as the parties have not agreed to modify or disapply it (s.9).
Arbitration appeal applications may only be brought in the Court of Session, not the Sheriff courts, as the superior court in Scotland with the historic responsibility of reviewing the decisions of lower judicatures, into which category arbitral decisions fall.
Chapter 100 of the Rules of the Court of Session 1994 provide the procedural rules for arbitration appeals. I think that all that might be of particular interest to you in that Chapter are:
“100.2 All proceedings in the Outer House in a cause to which this Chapter applies shall be brought before a judge of the court nominated by the Lord President as an arbitration judge or, where no such judge is available, any other judge of the court (including the vacation judge).”
The commercial judges of the Court, of whom there are three; currently myself, Lord Richardson and Lord Lake, are the nominated arbitration judges, which means that practice and procedure, insofar as not expressly dealt with by the Scottish Arbitration Rules or the Rules of Court, can be kept relatively uniform, as can what might be called the general judicial attitude to arbitration appeals. We are given effectively free rein in procedure by Rule of Court 100.3:
“100.3 Subject to the provisions of the Scottish Arbitration Rules and this Chapter, the procedure in a cause under the Scottish Arbitration Rules shall be such as the judge dealing with the cause shall determine.”
Rule 100.8 deals with the disposal of applications to the Court for leave to appeal (which, as we shall see, is needed in legal error appeal applications):
“100.8 (4) The application for leave to appeal shall be dealt with without a hearing unless the court considers that a hearing is required.”
In practice, very few applications for leave to appeal are in fact given a hearing; in effect, the party seeking leave puts in his application; the other party or parties are given, typically, 14 days to put in a note of their position, and then a decision is issued simply on the papers.
If leave is refused, some reasons must be given in order to comply with art.6 ECHR. The applicant should in every case be told which particular requirement of the Scottish Arbitration Rules for the grant of leave he has failed to meet; how much detail is required beyond that depends on which requirement has not been met, but will not be more extensive than what is necessary to inform an applicant already well aware of the background to the appeal of the reason for his failure: see North Range Shipping Ltd v Seatrans Shipping Corp [2002] EWCA Civ 405
Rule 100.9 deals with the preservation of arbitral anonymity. I have not reproduced the Rule, which is in rather diffuse terms, but in essence there is initial anonymity, meaning that only the parties and the court staff can see the paperwork, any hearing is in private, and any decision is issued without naming the parties (or the arbitrator); a situation which will continue if an application for it to do so under section 15 of the 2010 Act is made and granted by the time a decision on what substantive procedure is required has to be made. If no such application is made, or is not granted, then the process becomes public.
Jurisdictional Appeals
“67 Challenging an award: substantive jurisdiction M
(1) A party may appeal to the Outer House against the tribunal’s award on the ground that the tribunal did not have jurisdiction to make the award (a “jurisdictional appeal”).”
The court can confirm the existing award, vary it, or set it aside in response to a jurisdiction appeal. The Outer House decision is final unless it gives leave to appeal, which it can only do if it considers that the proposed appeal would raise an important point of principle or practice, or that there is another compelling reason for the Inner House to consider the appeal.
Points from the caselaw:
- While the 2010 Act does not define “substantive jurisdiction”, it includes the question of what matters have been submitted to arbitration in accordance with the arbitration agreement: Arbitration Application No 4 of 2020 2021 SLT 1105 at [23].
- Where the affairs of the parties are regulated by different contracts, a dispute relating to one contract cannot generally be determined by resort to the arbitration procedure provided for in another contract: discussed in Arbitration Appeal No 2 of 2017 [2018] CSOH 12 at [13].
- Where the matter has already been the subject of binding decision (by another arbitration or by the court) there will be no further arbitral jurisdiction: Arbitration Application No 4 of 2020 2021 SLT 1105 at [24].
- Where an award is outwith the scope of the reference to arbitration (even if within the confines of the arbitration clause): discussed in Arbitration Appeal No 2 of 2017 [2018] CSOH 12 at [17].
Serious Irregularity Appeals
“68 Challenging an award: serious irregularity M
(1) A party may appeal to the Outer House against the tribunal’s award on the ground of serious irregularity (a “serious irregularity appeal”).
(2) “Serious irregularity” means an irregularity of any of the following kinds which has caused, or will cause, substantial injustice to the appellant—
(a) the tribunal failing to conduct the arbitration in accordance with—
(i) the arbitration agreement,
(ii) these rules (in so far as they apply), or
(iii) any other agreement by the parties relating to conduct of the arbitration,
(b) the tribunal acting outwith its powers (other than by exceeding its jurisdiction),
(c) the tribunal failing to deal with all the issues that were put to it,
(d) any arbitral appointments referee or other third party to whom the parties give powers in relation to the arbitration acting outwith powers,
(e) uncertainty or ambiguity as to the award’s effect,
(f) the award being—
(i) contrary to public policy, or
(ii) obtained by fraud or in a way which is contrary to public policy,
(g) an arbitrator having not been impartial and independent,
(h) an arbitrator having not treated the parties fairly,
(i) an arbitrator having been incapable of acting as an arbitrator in the arbitration (or there being justifiable doubts about an arbitrator’s ability to so act),
(j) an arbitrator not having a qualification which the parties agreed (before the arbitrator’s appointment) that the arbitrator must have, or
(k) any other irregularity in the conduct of the arbitration or in the award which is admitted by—
(i) the tribunal, or
(ii) any arbitral appointments referee or other third party to whom the parties give powers in relation to the arbitration.”
In a serious irregularity appeal, the court can confirm the award, order its reconsideration, or just set it aside. Where certain types of irregularity are found made out (i.e. the worst ones), it can make orders about the arbitrator’s fees and expenses, including ordering repayment. Again, further appeal to the Inner House can only occur with the leave of the Outer House, which it can only give for the same reasons as in jurisdictional appeals.
Points from the Caselaw:
The court’s general approach may be summarised as follows:
- The founding principles set out in section 1 of the 2010 Act underpin all questions of arbitration in Scotland. They are (i) the object of arbitration is to resolve disputes fairly, impartially and without unnecessary delay or expense; (ii) the parties should be free to agree how to resolve disputes, subject only to such safeguards as are necessary in the public interest; and (iii) the court should not intervene except as provided by the Act.
“lA]s a matter of general approach, the courts strive to uphold arbitration awards. They do not approach them with a meticulous legal eye endeavouring to pick holes, inconsistencies and faults in awards and with the objective of upsetting or frustrating the process of arbitration. Far from it. The approach is to read an arbitration award in a reasonable and commercial way, expecting, as is usually the case, that there will be no substantial fault that can be found with it.” – Zermalt Holdings v Nu-Life Upholstery Repairs [1985] 2 EGLR 14.
“One of the distinguishing features of arbitration that sets it apart from proceedings in national courts is the breadth of discretion left to the parties and the arbitrator to structure the process for resolution of the dispute.” – Hashwani v Jivraj [2011] 1 WLR 1872
- All affirmed in Arbitration Application 1 of 2013 [2014] CSOH 83 at [10] – [12].
- Serious irregularity appeals are designed as “a long stop available only in extreme cases where the tribunal has gone so wrong in its conduct of the arbitration that justice calls out for it to be corrected”: Departmental Advisory Committee on Arbitration Report on the Arbitration Bill 1996; Walsall Metropolitan Borough Council v Beechdale Community Housing Association Ltd [2005] EWHC 2715.
- It follows that the court will not intervene on the basis that it might have done things differently, or expressed its conclusions on the essential issues at greater length. Such an appeal can only succeed if there has been substantial injustice. If the result of the arbitration would have been likely to be the same or very similar, then there is no basis for overturning the award: Arbitration Application 1 of 2013 [2014] CSOH 83 at [18].
- A simple way of expressing the test: Has the arbitrator gone so far wrong in the conduct of the arbitration that justice calls out for it to be corrected? – Arbitration Application 1 of 2013 [2014] CSOH 83 at [34].
Authority on what may and may not constitute serious irregularity.
- If something is an error of law, it cannot also be an irregularity: Arbitration Application No 1 of 2013 [2014] CSOH 83 at [28].
“The proper classification of the points taken by way of challenge to an arbitration is crucial to the proper working of the 2010 Act in accordance with its founding principles, which discourage judicial involvement in the decisions and awards of arbitrators except in strictly defined circumstances … the same point cannot be treated as arising under different heads of appeal”. The proper classification of a ground of appeal under the Scottish Arbitration Rules in the 2010 Act is a question of law for the court to determine, having regard to the substance and reality of the challenge made, however the appellant seeks to classify it. If a ground is wrongly classified, that of itself will result in its refusal: Arbitration Application No 4 of 2020 2021 SLT 1105 at [21] – [22].
- The conduct complained of must, if it is to qualify as a serious irregularity, be something done or omitted by the arbitral tribunal itself, not by anyone else: Arbitration Application 1 of 2013 [2014] CSOH 83 at [19].
- Failure to give reasons. The nature and length of the reasons to be given in an individual case will depend upon the whole context within which the decision is given. An arbitrator is only required to deal with the essential issues, not every point that is raised: Fidelity Management SA v Myriad International Holdings BV [2005] EWCH 1193 (Comm) at [9]. Further, an award may be upheld, even if the reasoning is poor and unimpressive: Compton Beauchamp Estates Ltd v Spence [2013] EWCH 1101 (Ch) at [79]. One approach is to ask whether the award makes sense. An exercise of professional judgment, such as arbitrators are called upon to make in many kinds of arbitration, may not be not readily susceptible to elaborate reasons: Arbitration Application 1 of 2013 [2014] CSOH 83 at [23] – [24].
- An alleged failure by the arbitrator to deal with a specific point does not constitute an irregularity. The question is whether matters have been dealt with by due process. It is not for the court to determine, in a serious irregularity appeal, whether the arbitrator made the right decision, or to assess the adequacy of his reasons: Arbitration Application No 4 of 2020 2021 SLT 1105 at [33].
- Little authority on procedural failings. One example – the arbitrator, having (with the consent of the parties) taken the opinion of counsel on the construction of the relevant provisions of the contract in question, followed that advice in arriving at his award without first giving the parties an opportunity of commenting thereon; the point was raised, but not decided, in Arbitration Application No 1 of 2011 (no report).
Legal Error Appeals
“69 Challenging an award: legal error D
(1) A party may appeal to the Outer House against the tribunal’s award on the ground that the tribunal erred on a point of Scots law (a “legal error appeal”).
(2) An agreement between the parties to disapply rule 51(2)(c) by dispensing with the tribunal’s duty to state its reasons for its award is to be treated as an agreement to exclude the court’s jurisdiction to consider a legal error appeal.
70 Legal error appeals: procedure etc. M
(1) This rule applies only where rule 69 applies.
(2) A legal error appeal may be made only—
(a) with the agreement of the parties, or
(b) with the leave of the Outer House.
(3) Leave to make a legal error appeal may be given only if the Outer House is satisfied—
(a) that deciding the point will substantially affect a party’s rights,
(b) that the tribunal was asked to decide the point, and
(c) that, on the basis of the findings of fact in the award (including any facts which the tribunal treated as established for the purpose of deciding the point), the tribunal’s decision on the point—
(i) was obviously wrong, or
(ii) where the court considers the point to be of general importance, is open to serious doubt.
…
(5) The Outer House must determine an application for leave without a hearing (unless satisfied that a hearing is required).
(6) The Outer House’s determination of an application for leave is final.
(7) Any leave to appeal expires 7 days after it is granted (and so any legal error appeal made after then is accordingly invalid unless made with the agreement of the parties).”
The court can, if it grants leave for a legal error appeal, after hearing the substantive appeal, either confirm the award, order a reconsideration, or set aside the award. Further appeal to the Inner House is subject to the Outer House’s leave, to be granted or refused on the bases already discussed in connection with the other kinds of appeal.
Points from the Caselaw:
As this is a default rule, the parties to an arbitration agreement can opt out of it. Merely saying in the arbitration agreement that the decision of the arbitrator is to be “final and binding” does not operate to oust the option of a legal error appeal: Arbitration Appeal No 4 of 2020 2021 SLT 1105 at [16] to [17]. However, if, in an elderly arbitration agreement, parties excluded the operation of section 3 of the Administration of Justice (Scotland) Act 1972 (duty of arbitrator to state a case on a point of law for the opinion of the court) that is inconsistent with the continuing subsistence of the option to take a legal error appeal: Arbitration Appeal No 2 of 2024 [2024] CSOH 83 at [20].
The overall policy of the law in relation to legal error appeals is “in the interests of party autonomy, privacy and finality, that such awards should not be readily transferred to the courts for appellate review’’, per Rix LJ, dealing with the provisions in the (English) Arbitration Act1996 – on which the 2010 Act was modelled – in CGU International Insurance Plc v AstraZeneca Insurance Co Ltd [2006] EWCA Civ 1340 at [3].
However, remember that the “obviously wrong” and “open to serious doubt” criteria are only applicable at the stage of getting leave to appeal; if leave is granted (or is not required because the parties agree that a legal error appeal can proceed without leave – although that is a vanishingly rare circumstance), then when the actual appeal is heard, the simple question will be whether a legal error was or was not made, even one that is very narrow in nature; at this stage, the answer to the legal question informing the award will be adjudged either right or wrong: Arbitration Application No. 2 of 2011 [2011] CSOH 186 at [22].
What the case law on legal error appeals tells us:
- A substantial effect on parties’ rights may exist when the sum affected by the decision complained of is sufficiently large, even if far larger sums are at stake in the arbitration overall: Arbitration Application No 2 of 2016 [2017] CSOH 23 at [14]. However, the sum at stake does not render a matter one of general importance: Arbitration Appeal No 3 of 2024 [2025] CSOH 7 at [35].
- In determining whether the arbitrator was asked to decide the point of law, the test is whether it was fairly and squarely placed before him: Safeway Stores plc v Legal & General Insurance Society [2005] 1 P & CR 9: Arbitration Application 1 of 2013 [2014] CSOH 83 at [30]; Arbitration Application No 2 of 2016 [2017] CSOH 23 at [8].
- For a decision to be obviously wrong, it must involve something in the nature of a major intellectual aberration, or “making a false leap in logic or reaching a result for which there was no reasonable explanation”: HMV UK Ltd v Propinvest Friar Ltd Partnership [2012] 1 Lloyd’s Rep 416: Arbitration Application 1 of 2013 [2014] CSOH 83 at [32]. It does not suffice that the criticised decision is one in relation to which respectable intellects might well disagree: Doune Wind Farm (Scotland) Ltd v Alfred McAlpine Business Services Ltd [2008] EWHC426 (TCC): Arbitration Appeal No 1 of 2019 2019 SLT 1309 at [6]. One is searching for a conclusion which is so obviously wrong as to preclude even the possibility that the arbitrator was right: Antaios Compania Naviera SA v Salen Rederierna AB at [1985] AC 191: Arbitration Appeal No 1 of 2019 2019 SLT 1309 at [8]; Arbitration Appeal No 1 of 2021 [2021] CSOH 41 at [19].
- If a decision is arguably correct, it cannot be obviously wrong: Arbitration Application No 2 of 2016 [2017] CSOH 23 at [9]; Arbitration Appeal No 3 of 2024 [2025] CSOH 7 at [35].
- Questions of contractual construction typify the sort of situation where two decision makers may often arrive at different conclusions without obvious error: Arbitration Appeal No 1 of 2019 2019 SLT 1309 at [15]; Arbitration Appeal No 1 of 2021 [2021] CSOH 41 at [30]; Arbitration Appeal No 1 of 2023 [2023] CSOH 78 at [24].
- It is for the arbitrator to decide questions as to the admissibility, relevance, materiality and weight of any evidence (Rule 28(1)(b) of the Scottish Arbitration Rules), and his decisions on that point will not be capable of amounting to a reviewable error of law: Arbitration Application No. 3 of 2011 2012 SLT 150 at [28] – [29]; Arbitration Appeal No 4 of 2019 [2020] CSOH 46 at [31].
- Questions as to the proper interpretation of arbitral pleadings and their effect on the proper conduct of the arbitration are paradigmatically for the arbitrator to assess and determine within a wide ambit of discretion: Arbitration Appeal No 2 of 2024 [2024] CSOH 83 at [22].
- If the correct legal principles have been identified by the arbitrator, an incorrect application of them to the facts is not an error of law: Benaim (UK) v Davies Middleton & Davies [2005] EWHC 1370 (TCC): Arbitration Appeal No 4 of 2019 [2020] CSOH 46 at [31]. In order for there to be a legal error based on an allegedly erroneous factual finding, it needs to be shown that a finding was made for which there was no evidence or which is inconsistent with the evidence or contradictory of it arbitrator’s findings were inconsistent with the evidence or contradictory of it: Arbitration Appeal No 1 of 2021 [2021] CSOH 41 at [33].
- Issues of construction which arise in standard form contracts are more likely to be regarded as raising a point of general importance, and thus the grant of leave to appeal in such cases may well turn only on whether the arbitrator’s view is open to serious doubt, rather than having to be obviously wrong: Arbitration Application No. 3 of 2011 2012 SLT 150 at [26]. However, if there have been significant alterations to a standard form, the general importance of the decision is likely to be lessened: Arbitration Application No 2 of 2016 [2017] CSOH 23 at [10]. A decision on a bespoke contract is likely to have no wider resonance, even where authority on the point is scarce: Arbitration Application 1 of 2013 [2014] CSOH 83 at [33]; Arbitration Appeal No 1 of 2023 [2023] CSOH 78 at [24]; Arbitration Appeal No 2 of 2024 [2024] CSOH 83 at [22].
Further general procedural points:
Appeals of any of the kinds I have been discussing are competent only if the appellant has exhausted any available arbitral process of appeal or review (including any recourse available under rule 58) – r.71(2), and no appeal may be made against a provisional award – r.71(3).
Time limits for appeals (or seeking leave to appeal if needed) – no later than 28 days after the making of the order complained of, or after any decision (positive or negative) on proposed correction thereto under rule 58, or after the notification of the result of any arbitral process of appeal or review – r.71(4).
The tribunal may continue with the arbitration pending determination of an appeal against a part award – r.71(7).
The court can order the arbitrator to state reasons for the award being appealed in sufficient detail to enable it to deal with the appeal properly – r. 71(8).
If an award is set aside on appeal, the court may also order that any contractual bar on bringing legal proceedings in relation to the subject-matter of the award (or part thereof) set aside is of no effect – r.71(9).
If, in a serious irregularity appeal or legal error appeal, the court orders the arbitrator to reconsider its award in whole or in part, he must do so and make a new award within 3 months of being so ordered, or within such other period as the court may specify – r. 72(1).