Haley v Haley: Are Arbitration Awards Binding?

Leading arbitrator and commentator Gavin Smith reports on a 23^rd October judgment which he explains should further build client and professional confidence in the arbitration process.

For a fuller analysis, please follow the link here to the family arbitrator website. 

What should be done if one party is unhappy with an arbitrator’s award?  The Court of Appeal has clarified the approach to be taken by the court faced with a formal challenge in the case of Haley v Haley [2020] EWCA Civ 1369.

Summary

In Haley v Haley the Court of Appeal ruled that the court has an inquisitorial role and will not simply make an order in the terms put before it:

1. because parties ask it to; or
2. because it follows an arbitrator’s decision;

where there are good and substantial reasons for concluding that an injustice would be done were an order to be so made.

The party challenging the award must show that the award was ‘wrong’ – this is the same test as applies where the party is unhappy with a judge’s order.  The bar is therefore lower than previously thought from earlier reported decisions where it was thought that the arbitrator’s error had to ‘leap off the page’ or be seriously or obviously wrong.

The procedural steps are quicker than we thought too.  You no longer have to pursue remedies under the Arbitration Act 1996 either (lack of jurisdiction (s67), serious irregularity (s68) or an appeal on a point of law (s69)).

That said, parties must enter the arbitration process in the knowledge that, all other things being equal, the award made at the end of the process will thereafter be incorporated into a consent order.

Comment on Haley v Haley

Anecdotal evidence suggests that the rigour of the previous test (required to challenge an award made in arbitration) may have been operating as a barrier to using arbitration, out of fear that there was no realistic recourse if the arbitrator simply got it wrong.

Now we have a simpler test, that brings arbitration into line with the court approach. Whilst there is the loss of the promise of finality, what we have now is reassurance that an unfair award can be rectified.

Parties for whom finality is a key aim in the arbitration process should be reassured by the knowledge that the ‘wrong’ test is far from being a free pass to a successful challenge, and that the filter of permission to appeal in effect applies, by means of a searching ‘notice to show cause’ triage process.

Finally, in passages strongly supportive of family arbitration, King LJ observed in Haley v Haley:

“5.       There is a common misconception that the use of arbitration, as an alternative to the court process in financial remedy cases, is the purview only of the rich who seek privacy away from the courts and the eyes of the media. If that was ever the position, it is no more. The court was told during the course of argument, that it is widely anticipated that parties in modest asset cases (including litigants in person) will increasingly use the arbitration process in the aftermath of the Covid-19 crisis as the courts cope with the backlog of cases, which is the inevitable consequence of “lockdown”.

6. It goes without saying that it is of the utmost importance that potential users of the arbitration process are not deterred from using this valuable service; either, on the one hand, because the outcome is not seen as sufficiently certain or, on the other, because arbitration is regarded as providing no adequate remedy in circumstances where one of the parties believes there to have been an unjust outcome.”

This important judgment both simplifies the law and, it is suggested, strikes the right balance between the interests of certainty and fairness referred to in paragraph 6 of King LJ’s judgment, quoted above.