Finality of Arbitral Awards Reconfirmed

The High Court has recently reconfirmed the finality of arbitral awards. There is scope for recourse against an award in limited circumstances. However, the decision confirms again that an award may not be appealed in the same way that a court decision may be. Commercial Disputes partners, Gearoid Carey and Gerard Kelly examine the High Court decision.

Irish arbitration law is essentially governed by the Arbitration Act 2010. That Act removed the prior distinction between domestic and international arbitrations. It also provided that, subject to certain minor revisions, the UNCITRAL Model Law has the force of law in the State and applies to all arbitrations. The Model Law affords limited opportunity for court intervention. In addition, it only permits recourse against an award as outlined in Article 34. Where court intervention in the arbitral process is referenced in the Act, no appeal lies against relevant decisions.[1] This all reflects a strong public policy in upholding arbitral awards.[2] A recent decision of Mr Justice Nolan[3] has confirmed the principle of arbitral finality. There, following the delivery of an award, one party unsuccessfully sought to set it aside relying on two grounds under Article 34 of the Model Law.

Background

The underlying dispute related to a rent review. The applicant was the landlord and the respondent was the tenant. Absent agreement on the revised rent, the matter was referred to an arbitrator appointed in accordance with the lease. As part of the process, he made directions requiring the exchange of comparable evidence and a summary of same, which occurred. He received submissions and heard oral argument. The surveyor instructed by the tenant had referred to a ‘context comparable’ premises but that rental had not actually proceeded. The arbitrator explicitly stated – more than once - that he would therefore not consider it. The arbitrator ultimately issued an award regarding the applicable rent for:

1. The ground floor retail area, and
2. A first floor storage area.

The landlord brought the proceedings seeking to set aside the award. It maintained that, as provided for in Article 34(2)(a)(ii) of the Model Law, it had been unable to present its case. It also claimed, as provided for in Article 34(2)(a)(iii), that the award contained matters beyond the scope of the submission and evidence in the arbitration.

Decision

Mr Justice Nolan began by considering the approach of the courts to setting aside arbitral awards. He noted that two important principles could be derived from Ryan v O’Leary[4], being:

1. The “finality of arbitration awards”, and
2. That “an application to set aside an award is not an appeal from the decision of the arbitrator and does not afford the court the opportunity of second-guessing the arbitrator’s decision on the merits, facts or on the law.”

He noted that the first principle applied even before the Arbitration Act 2010, referring back to the Supreme Court in Keenan v Shield Insurance Co[5]. That had been cited with approval in Delargy v Hickey[6] where Mr Justice Gilligan commented that:

“Clearly there is a public policy ground in issue in relation to the desirability of making an arbitration award final in every sense of the term…”

Regarding the second principle, Mr Justice Nolan cited Ryan where it had been stated that the “courts are required to construe narrowly the grounds on which an award may be set aside under Article 34 and to exercise the jurisdiction set out in a sparing manner.” He also referred again to Delargy, where Mr Justice Gilligan further stated:

“It is no function of this Court to attempt in any way to second guess the decision as arrived at by the arbitrator and this Court does not propose to do so… This Court does not consider that it is appropriate to revisit the merits of the arbitrator’s award.”

Mr Justice Nolan also recorded the fact that the parties accepted – as did he – that “this application cannot be an appeal from the decision of the arbitrator.”[7]

Application

With those principles in mind, the judge moved on to consider the grounds on which the set aside of the award was sought.

He looked first at the award itself, which he described as “detailed, professional and comprehensive”, and which set out the basis on which the award would be made. The award noted:

• The submissions of each side’s surveyors in detail
• The comparisons each relied on, and
• The written and oral arguments each way

Mr Justice Nolan noted that the award expressly cited that the ‘context comparable’ example which did not proceed to lease was not considered. The court also recorded how the award weighed the factors the arbitrator considered relevant with the location and nature of the premises and factual matters given to him in good faith. It further recorded that the arbitrator’s function was to determine the appropriate rent on the basis set out in the lease. Ultimately, Mr Justice Nolan concluded that it could not be said that the arbitrator “did not consider the matter carefully or that he failed to give reasons or that he embarked on an arbitrary series of adjustments… without evidence.”

Regarding the first ground, that the landlord was unable to present its case, the court considered this to be incorrect. The landlord’s surveyor did present his case, put forward his comparisons and challenged the opposing comparisons. There was a “high hurdle” to succeed on that ground, which would require “a fundamental breach of natural and or constitutional justice to the extent the arbitrator determined the case on something never argued.” That was not the case.

On the second ground, that the award went beyond the scope of the submission and evidence in the arbitration, Mr Justice Nolan disagreed. He determined that the arbitrator “did not adopt an inappropriate means to reach one conclusion or another” and there “was nothing inappropriate in the manner in which he reached his conclusion.” Rather, it was on the basis of the combined knowledge derived from the submissions, oral hearing, site visit and his own experience that the arbitrator came to his award. Mr Justice Nolan concluded: “He had plenty of evidence and used that evidence appropriately giving reasons why he came to his award.”

Conclusion

The decision reiterates that, once the parties have chosen arbitration as their dispute resolution mechanism, the courts tend to be quite hands-off. This reflects the well-established principle of finality of awards, but also that the courts are slow to allow an award to be set aside. For those who may seek to do so, the threshold to be met is high and clear evidence will be required to succeed. As Mr Justice Nolan’s decision records:

“The whole purpose of the Model Law is to support the work of the arbitrator and only in very limited circumstances to interfere with it to the extent as set out in Article 34.”

If such approach is not to a party’s satisfaction, then they should not select arbitration as the dispute resolution mechanism.

For more information and expert advice on commercial disputes, contact a member of our Commercial Disputes team.

The content of this article is provided for information purposes only and does not constitute legal or other advice.

[1] Section 11

[2] As recorded by Dowling Hussey, Dunne & Tackaberry, Arbitration Law (Round Hall, 3^rd ed. 2018), para 1.53, where various authorities are cited.

[3] Parkdenton Ltd v Euro General Retail Ltd t/a Eurogiant [2024] IEHC 387

[4] [2015] IEHC 820

[5] [1988] IR 89

[6] [2015] IEHC 436

[7] Citing O’Leary trading as O’Leary Lissarda v Ryan [2015] IEHC 820