Arbitration award — Whether arbitrators entitled to make award in selected currency — Whether arbitrators entitled to award interest — Whether powers excluded by agreement — Court holding arbitrators exceeding jurisdiction — Sections 48(4), 49 and 68(2)(b) of Arbitration Act 1996 — Appeal allowed
The appellants and the respondent were parties to a construction contract governed by the law of Lesotho. The contract provided for the reference of disputes to arbitration under the International Chamber of Commerce (ICC) rules, the effect of which was to exclude the right of appeal on a question of law under section 69 of the Arbitration Act 1996.
A reference was made to arbitrators in respect of claims by the appellants for additional costs. The terms of reference stated that the dispute was to be settled in accordance with the provisions of the 1996 Act.
The arbitrators made a partial award, expressed in various European currencies, in purported exercise of their power under section 48(4) of the 1996 Act to order the payment of a sum of money in any currency “unless otherwise agreed by the parties”. They considered that although the contract provided for the currencies in which payments under it were to be made, its silence as to the currency of any arbitral award meant that the parties had not “otherwise agreed”. The arbitrators also awarded simple interest pursuant to section 49.
The respondent challenged the award under section 68(2)(b) on the ground that the arbitrators had exceeded their powers by: (i) expressing the award in currencies other than those stipulated in the contract, by which the parties had “otherwise agreed” within the meaning of section 48; and (ii) awarding interest in circumstances that were not permitted under Lesotho law. The courts below held that there had been an excess of power, and the appellants appealed.
An issue arose as to whether any error by the arbitrators, as to currency interest, constituted an excess of power under section 68(2)(b) so as to give the courts the power to intervene, rather than an error of law that could be challenged only under the excluded section 69 provisions.
Held: The appeal was allowed.
1. The arbitration agreement was a distinct and separate agreement from the principal or underlying contract, and it was in the arbitration agreement, read with the 1996 Act, that the arbitrators’ powers were to be found. In the case of an ICC arbitration agreement, the terms of reference settled pursuant to it could amend or supplement that agreement and were also a source of the arbitrators’ powers. The 1996 Act should not be interpreted in the light of pre-existing case law. Had the court below not taken that erroneous approach, it would have had no reason to disagree with the natural and commercially sensible construction of the wide words of section 48(4) that had been adopted by the arbitrators. The power of the arbitrators under section 48(4) had been unconstrained. The decision of the court below on the currency point would be reversed.
2. The issue as to whether the arbitrators had exceeded their powers, within the meaning of section 68(2)(b), required the courts to ask whether they had purported to exercise a power that they did not have or had merely exercised erroneously a power that they did have. Only in the former case could an excess of power be made out under section 68(2)(b); categorising an error of law as an excess of jurisdiction had overtones of public law doctrine, in which the powers of the court were quite different from those of arbitration law: Anisminic Ltd v Foreign Compensation Commission [1969] 2 AC 147 distinguished. In order to decide whether section 68(2)(b) had been engaged, it was necessary to focus upon the particular power under an arbitration agreement, the terms of reference, or the 1996 Act, judged in all the circumstances of the case. In the instant case, even if the arbitrators had erred on the currency point, the highest that the case could have been put was that they had committed an error of law by misinterpreting the underlying contract or their section 48(4) powers.
3. On the section 49 point, the provisions of the principal contract did not amount to an agreement to the contrary ousting the arbitrators’ prima facie power to award interest. Nor was the law of Lesotho relevant on the matter; it was not an agreement in writing as defined in the Act and so did not qualify as an agreement to the contrary under section 49.
Ian Glick QC and Neil Kitchener (instructed by Slaughter & May) appeared for the appellants; Nicholas Dennys QC and James Howells (instructed by White & Case) appeared for the respondent.
Sally Dobson, barrister
