The English High Court has confirmed in Daewoo Shipbuilding & Marine Engineering Company Ltd v Songa Offshore Equinox Ltd & Anor [2018] EWHC 538 (Comm) that the 28 day time limit for challenging or appealing an arbitral award under the English Arbitration Act 1996 (the “Act”) commences on the date the award is made and is not necessarily deferred pending any application to the tribunal to correct the award.  This follows an earlier case confirming that the time limit for any challenge or appeal runs from the date the award is made and not the date it is received by the parties (see post here).

Parties wishing to challenge an award should not wait until any correction of the award is considered if the proposed correction of the award is not material to the challenge of the award.  If the outcome of any application to correct the award is material to the potential basis for challenging the award, this case suggests the time limit for challenging the award commences from the date of the corrected award rather than the date it was originally made.  However, where there is an outstanding application for the correction of an award the appropriate action in some cases, to avoid the risk of any challenge becoming time-barred, will be to seek an extension of time for challenging the award before the expiry of the 28 day time limit based on the date of the original award.

Background

On 18 July 2017 an arbitral tribunal under LMAA Terms issued an award in favour of Songa Offshore Equinox (“SOE”) in respect of a claim it brought against Daewoo Shipbuilding & Marine Engineering Company (“DSME”). The claim was for delay and cost overruns in the construction of oil rigs which had been contracted between the two parties.

On 4 August 2017 DSME applied for four clerical errors to be amended in the award under s. 57(3)(a) of the Act.  Section 57(3)(a) of the Act allows a tribunal, on its own initiative or on the application of a party, to correct an award so as to remove any clerical mistake or error arising from an accidental slip or omission, or to clarify or remove any ambiguity in the award.

The tribunal issued two memoranda of correction on 14 August 2017.  The court found that the corrections were clerical and typographical errors and not connected in any way to DSME’s subsequent challenge to the award.

On 18 September 2017, DSME issued a claim form appealing the award on a point of law under s. 69 of the Act (which was more than 28 days after both the date of the original award and its subsequent correction).  On 28 September, DSME belatedly issued an application for an extension of time to appeal the award and for permission to amend the claim form. Permission to amend the claim form was granted.

On 11 October 2017, SOE applied for an order that the appeal of the award be struck out on the basis that it was filed after the 28 day limitation period for appealing the award.  Under s. 70(3) of the Act “Any application or appeal must be brought within 28 days of the date of the award or, if there has been any arbitral process of appeal or review, of the date when the applicant or appellant was notified of the result of that process“.

Decision of the Court

Notwithstanding the fact that DSME’s appeal of the award was brought out of time regardless of whether the date of the award or the date of the correction was used to calculate the time limit, the court considered the question of when time began to run for the purposes of s. 70(3) of the Act in considering DSME’s application for an extension of time.  In considering the issue the court also provided welcomed clarification on this topic, on which there are conflicting authorities.

The court held that:

  1. The wording “if there has been any arbitral process of appeal or review” in s. 70(3) mimics and is therefore making specific reference to s. 70(2)(a), and comparatively does not reference any application for correction of the award under s. 57. Furthermore, the court held that the reference to a process of appeal or review was a reference to a process where there is an appeal or review of the award by another arbitral tribunal. Under this construction, s. 70(3) could not therefore apply to an application to amend clerical and typographical errors.
  2. The above construction is in line with two important principles of arbitration – speed and finality. The Judge opined that allowing any application (his emphasis) for a correction of an award to automatically result in an extension of time to appeal that award would undermine these principles.

The Judge also commented in obiter that only a material application for a correction of an award would affect the date of the award for the purposes of calculating the commencement of the 28 day time limit for challenging an award.  An application for correction of the award would be considered material in this context if its outcome is necessary to allow a party to understand whether there are in fact grounds on which it can challenge an award.

The court refused DSME’s application for an extension of time and struck out its s. 69 application to appeal the award.

Commentary

The clarification that an application for a correction of an award under s. 57 of the Act is not a process of appeal or review for the purposes of s. 70(3) of the Act is welcomed.  Such an interpretation prevents parties from making applications for corrections to an award simply in order to extend the period of time available to that party to challenge the award.

However, the obiter view that the date of the award, for the purposes of the commencement of the 28 day time limit for challenging the award, may be either the date the award is originally made or the date of the corrected award, depending on the materiality to the challenge of the corrections sought, gives rise to considerable uncertainty.  This is despite the court’s view that the test of materiality is “clear, and easy to apply, and it can leave no party uncertain as to the time by which it has to issue an arbitration claim form.”  If there is a challenge to an award more than 28 days after it was originally made but within 28 days of any correction to the award, then, save for clear cut cases (where the correction sought was either immaterial or fundamental to the challenge), it is probable that there will be satellite litigation in respect of the question of whether the correction sought was material and therefore what is the true date of the award for the purposes of calculating the time limit under s. 70(3) of the Act.

Nevertheless, while giving rise to uncertainty, the view of the court in this case that the date of an award is variable depending on the nature of the corrections sought is a pragmatic one.  It avoids potentially unnecessary challenge applications being brought in circumstances where the potential complaint might be resolved through a correction of the award, while also avoiding irrelevant (and potentially tactical) applications for the correction of an award simply to extend the commence date of the deliberately short 28 day time limit for challenging an award.

Parties wishing to challenge or appeal an award should not await the correction of the award if the correction of the award is not material to the grounds for challenging or appealing the award.  In such circumstances parties can be confident that they will not fall foul of the requirement under s. 70(2)(b) of the Act to first exhaust any available recourse to seek the correction of an award before being entitled to challenge or appeal the award.

If the outcome of the application to correct the award is clearly material to the potential basis for challenging the award then a party may be content to only bring a challenge within 28 days of the corrected award. However, such an approach will result in the risk that the court may conclude that the corrections were not in fact material to the challenge and therefore as a consequence the 28 day time limit ran from the date of the original award and not the date of the corrected award. With the risk of the right to challenge or appeal an award being lost, if there is any doubt as to the materiality of the corrections being sought, the appropriate action is likely to be to seek an extension of time for challenging the award before the expiry of the 28 day time limit based on the date of the original award.