UK: Court Of Appeal Confirms "Final And Binding" Status Of Partial Arbitration Awards

Sucafina SA v. Rotenberg [2012] EWCA Civ 637

The Court of Appeal has recently made it clear that arbitration awards are either final and binding or they are not and labels such as "interim" placed on an award will not change this. In doing so, the Court of Appeal upheld the Commercial Court decision in a dispute surrounding the status of interim arbitration awards issued under the rules of the Coffee Trade Federation (the "CTF Rules").

The background facts

The facts are set out in more detail in our earlier article. In summary, however, the parties were in dispute in relation to a series of coffee futures contracts and the disputes went to CTF arbitration. In due course, the CTF Appeal Board issued two appeal interim awards, the first dealing with the identity of the sellers under the disputed contracts and the second dealing with the quantum of the claims. The third award, the final award, dealt with costs but was not taken up or published because it was not paid for within the time period set down by the CTF Rules. Mr Rotenberg sought an extension of time under S. 79 of the Arbitration Act 1996 (the "Act") to take up the final award on costs, alternatively a declaration that in the event the final appeal award was not taken up, the two appeal interim awards should remain final and binding between the parties. Sucafina argued that the Appeal Board's awards should be disregarded and the original awards reinstated.

Mr Justice Eder in the Commercial Court granted Mr Rotenberg a declaration that the appeal interim awards were binding on the parties but held that the final award on costs, absent an extension under S.79, could not be made or published. On the facts, the judge was unwilling to extend the deadline for collection of that award. Sucafina appealed against the decision on the declaration.

The Court of Appeal Decision

Rule 48 of the CTF Rules states that "The board of appeal shall have power to make an interim award or awards". Rule 49 of the CTF Rules provides that the within a reasonable time from the hearing, the board of appeal should make its arbitration award and that this award, subject to any valid appeal to the court, "shall be final and binding". Rule 52 states that if an appeal award is not taken up within 30 days of the parties being notified that it is ready, the original award of the arbitrator or umpire becomes final and binding immediately upon expiry of those 30 days and payment of the fees and costs of the appeal award after that time does not constitute the taking up of the award.

S.47 of the Act permits the arbitral tribunal to make awards on different issues (commonly called "partial awards"), unless the parties agree otherwise. S.59 of the Act provides that such awards are final and binding on the parties.

Sucafina's position was that an interim award under Rule 48 was not restricted to provisional awards under S.39 of the Act (i.e. an award where a tribunal makes an order on a provisional basis for relief which it would have power to grant in a final award). It could include an award intended to resolve aspects of the merits which would resemble a partial award under S.47 of the Act. Sucafina accepted that both interim awards did purport to decide liability and quantum but contended that awards under Rule 48 had a subordinate role and that it was only the "final" award under Rule 49 of the CTF Rules that constituted an award that was final and binding. Until that stage, it argued, the interim awards under Rule 48 were not final and binding or only conditionally final and binding.

The Court of Appeal disagreed. Firstly, on consideration of the CTF Rules, it was clear that nothing in those Rules, either expressly or impliedly, prevented the tribunal from making partial awards of the type described under S.47 of the Act. Secondly, the Court of Appeal held that it could not have been intended by the draftsmen of any arbitration rules, which were intended to facilitate arbitration in London under the provisions of the Act, that there be a species of award which was intended to be binding only until certain intervening events occurred.

Whilst the term "interim" is capable of giving rise to confusion, under arbitration law and practice an award is either final and binding or it is not. As such, the Court of Appeal conclusively held that the power to make partial awards under S.47 was not excluded by the Rules and further, that the CTF Board of Appeal had the same power to make partial awards. Moreover, the terms of both interim appeal awards made it clear beyond doubt that the CTF Board of Appeal considered each award was final and binding on the issues determined by it.

In conclusion, the "interim awards" were final and the failure to take up the costs award did not have the effect of revoking these awards in favour of the original awards. As the final costs award had not been published, the original award on costs (which was not specifically set aside in either of the two appeal interim awards) stood.

Comment

The Court of Appeal rejected the idea that Rule 52 could have been intended to have the effect that a final and binding award on an issue would be rendered null and void because a fee for a subsequent award was not paid, not least because the tribunal had the power to take security for its fees. Rather, the appeal judges thought that the construction of the Rules contended for by Sucafina did not make commercial sense in the light of the common practice of arbitral bodies to make partial awards and that "no one with any understanding of arbitration law and practice or commercial dealing could have intended such a result". This reflects the English courts' continued support for the autonomy of arbitrators chosen by the parties to rule on their disputes.

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