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Ajeya Acharya

CRN: 073MSTR252
MSc. In Transportation Engineering

Court Appeal of Arbitration Award


1. Background
Arbitration is the process of bringing a dispute before a disinterested third party for
resolution. The third party, an arbitrator, hears the evidence brought by both sides and
makes a decision. Arbitration is a form of alternative dispute resolution (ADR), used in
place of litigation in the hope of settling a dispute without the cost and time of going to
court. Typically, arbitration begins when two parties agree to settle their dispute through
arbitration. An arbitration case begins when one party submits a Demand for Arbitration.
The arbitrators are selected, hearings are done, documentation, presentations and
exchanged of information are conducted and finally the arbitrator closes the record on the
case and issues a decision, including an award, if applicable. There are certain criteria
for court appeal of award by a party. Regarding court appeal of decisions given by the
arbitrator the criteria are clearly mentioned in Arbitration Act. Detail information about
court appeal of various acts such as Nepal Arbitration Act (1999), UNCITRAL Model Law
on International Commercial Arbitration (1985) and The Arbitration and Conciliation Act
(1996) will be disused later.
Most arbitration decisions can be appealed. However, due to the language that the parties
often agree to before entering arbitration, the decisions are usually considered final
barring some unfairness in the arbitration process, and thus are unlikely to be reversed
or even reviewed by a court. By default, arbitration awards are final and binding. The
appeals of arbitration decisions do occur. An award may be appealed before the courts
regarding jurisdiction, serious irregularity, or on a point of law. Jurisdiction based
challenge challenges the arbitrator’s authority and might address part or the entirety of
the arbitration agreement. Challenge on the ground of serious irregularity may be
because a party feels the arbitrator did not act fairly, was the cause of undue delay or
expense, or in cases where the award was obtained fraudulently or against public policy.
Challenge on a point of law can be made with the agreement of all the parties taking part
in the arbitration or with permission of the court, and must be proven to be essential to
proceedings.
However, a court reviewing the arbitration decision may never even look to the facts of
the case or the merits of the decision, but rather, judge whether the arbitrator was fair and
the final decision was valid. Upon an award being challenged, the court may confirm the
award, amend the award, ask the arbitrator to reconsider the award either in whole or in
part, or even set the award aside altogether. Actually getting a court to reverse the
arbitrator’s decision is extremely rare, as it requires showing that the decision was as
unfair as to be manifestly unreasonable.
2. Arbitration Award
An arbitration award is the award granted by the arbitrator in their decision. This award
can be money one party has to pay to the other party and it can be extension of time as
well. It can also be a non-financial award, such as stopping a certain business practice or
adding an employment incentive. An arbitral award is analogous to a judgment in a court
of law.
Unless the agreement provides otherwise, the arbitrator must read out his written
decision, within 30 days of the order closing the hearing. The Nepal Arbitration Act
expressly provides that the arbitration proceedings shall be held in camera, unless the
parties otherwise decide.
3. Circumstances in which decision by arbitrator may be invalidated (sec. 30
Nepal Arbitration Act, 1999)
Any party dissatisfied with the decision taken by the arbitrator may, if one wishes to
invalidate the decision file a petition to the Appellate Court along with the related
documents and a copy of the decision within 35 days from the date the decision heard or
notice received thereof under the Act. Petition shall also supply a copy of that petition to
the arbitrator and the other party.
In case a petition is filed pursuant, the Appellate Court may, in case the petitioner proves
that the arbitration decision contains any of the following matters, invalidate that decision
or issue an order to have a fresh decision taken as per necessity:
 In case any party to the agreement was incompetent for any reason to sign the
agreement at the time of signing the agreement, or in case the agreement is not
valid under the law of that the nation which governs jurisdiction over the parties, or
in case such law is not clear and agreement is not valid under the laws of Nepal.
 In case the due petition was not given a notice to appoint an arbitrator or about the
arbitration proceedings in time.
 In case the decision has been taken on a that disputed matter which had not been
referred to the arbitrator, or in a manner contrary to the conditions prescribed for
the arbitrator, or by acting beyond the jurisdiction prescribed for the arbitrator.
 Except when an agreement has been signed contrary to the laws of Nepal, in case
the procedure of designation of arbitrators or their functions and actions do not
conform to the agreement signed between the parties, or in case there is no such
agreement it has not been done as per this Act.

Appellate Court may invalidate the decision of the arbitrator in the following
circumstances:
 In case, the dispute settled by the arbitrator cannot be settled through arbitration
under the laws of Nepal.
 In case, the decision taken by the arbitrator is likely to be proven detrimental to the
public interests or policies.
Challenge to the award
An award may be challenged on a petition filed before the Appellate Court within 35 days
from receipt of a copy by the petitioner. The grounds of challenge are as under:
(a) Incompetence of a party to sign the agreement or invalidity of the agreement.
(b) Notice of arbitration proceedings not given to the petitioner.
(c) Decision has been rendered:
(i) on a matter not referred to the arbitrator
(ii) in a manner contrary to the prescribed conditions
(iii) by acting beyond the arbitrator’s jurisdiction
(d) Procedure of designation of arbitrators or their functions and actions do not conform
to the agreement or the Act.
(e) The matter is not arbitrable under the law of Nepal.
(f) The award is likely to prove detrimental to the “public interests or policies” (section 30).

4. Recourse Against Arbitration Award (UNCITRAL Model Law on International


Commercial Arbitration, 1985 Chapter VII )
Recourse to a court against an arbitral award may be made only by an application for
setting aside in accordance with paragraphs (2) and (3) of the article UNCITRAL Model
Law on International Commercial Arbitration, 1985).
An arbitral award may be set aside by the court only if:
a. the party making the application furnishes proof that:
i. a party to the arbitration agreement referred to in article 7 was under some
incapacity; or the said agreement is not valid under the law to which the
parties have subjected it or, failing any indication thereon, under the law of
this State.
ii. the party making the application was not given proper notice of the
appointment of an arbitrator or of the arbitral proceedings or was otherwise
unable to present his case
iii. the award deals with a dispute not contemplated by or not falling within the
terms of the submission to arbitration, or contains decisions on matters
beyond the scope of the submission to arbitration, provided that, if the
decisions on matters submitted to arbitration can be separated from those
not so submitted, only that part of the award which contains decisions on
matters not submitted to arbitration may be set aside
iv. the composition of the arbitral tribunal or the arbitral procedure was not in
accordance with the agreement of the parties, unless such agreement was
in conflict with a provision of this Law from which the parties cannot
derogate, or, failing such agreement, was not in accordance with this Law

b. the court finds that:


i. the subject-matter of the dispute is not capable of settlement by arbitration
under the law of this State
ii. the award is in conflict with the public policy of this State.

5. Recourse Against Arbitration Award in India (THE ARBITRATION and


CONCILIATION ACT, 1996 Chapter VII )
Recourse to a court against an arbitral award may be made only by an application for
setting aside such award in accordance with sub-section (2) and subsection (3).
An arbitral award may be set aside by the court only if:
a. the party making the application furnishes proof that:
i. A party was under some incapacity
ii. The arbitration agreement is not valid under the law to which the parties
have subjected it or, failing any indication thereon, under the law for the time
being in force
iii. The party making the application was not given proper notice of the
appointment of an arbitrator or of the arbitral proceedings or was otherwise
unable to present his case
iv. The arbitral award deals with a dispute not contemplated by or not falling
within the terms of the submission to arbitration, or it contains decisions on
matters beyond the scope of the submission to arbitration provided that, if
the decisions on matters submitted to arbitration can be separated from
those not so submitted, only that part of the arbitral award which contains
decisions on matters not submitted to arbitration may be set aside
v. the composition of the arbitral tribunal or the arbitral procedure was not in
accordance with the agreement of the parties, unless such agreement was
in confl ict with a provision of this Law from which the parties cannot
derogate, or, failing such agreement, was not in accordance with this Law

b. the court finds that:


i. the subject-matter of the dispute is not capable of settlement by arbitration
under the law of this State
ii. the award is in conflict with the public policy of this State.
An application for setting aside may not be made after three months have elapsed from
the date on which the party making that application had received the award or, if a request
had been made under article 33, from the date on which that request had been disposed
of by the arbitral tribunal.
The court, when asked to set aside an award, may, where appropriate and so requested
by a party, suspend the setting aside proceedings for a period of time determined by it in
order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to
take such other action as in the arbitral tribunal’s opinion will eliminate the grounds for
setting aside.
There are limited grounds on which a court may overturn an arbitration award, which
include the following:
• The award was procured by corruption, fraud, or undue means
• There was evident partiality or corruption in the arbitrators
• Arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient
cause shown, or in refusing to hear evidence pertinent and material to the controversy or
of any other misbehavior by which the rights of any party have been prejudiced
• The arbitrators exceeded their powers, or so imperfectly executed them that a mutual,
final, and definite award upon the subject matter submitted was not made.
6. Conclusion
In most countries across the globe, arbitration rules will stipulate that the awards resulting
from an arbitration proceeding are final and binding. However, an award may be appealed
before the courts regarding jurisdiction, serious irregularity, or on a point of law.
Jurisdiction based challenge challenges the arbitrator’s authority and might address part
or the entirety of the arbitration agreement. Challenge on the ground of serious irregularity
may be because a party feels the arbitrator did not act fairly, was the cause of undue
delay or expense, or in cases where the award was obtained fraudulently or against public
policy. Challenge on a point of law can be made with the agreement of all the parties
taking part in the arbitration or with permission of the court, and must be proven essential
to proceedings. Upon an award being challenged, the court may confirm the award,
amend the award, ask the arbitrator to reconsider the award in whole or in part, or even
set the award aside altogether.
References:
1. Nepal Arbitration Act, 2055 (1999)
2. UNCITRAL Model Law on International Commercial Arbitration,1985
3. THE ARBITRATION AND CONCILIATION ACT, 1996
4. American Arbitration Association (adr.org)
5. http://www.supremecourt.gov.np/main.php?d=lawmaterial&f=arbitration_law_in_n
epal (10-March-2013)