• The Status of Arbitral Awards - Court Of Appeal Confirms “Final and Binding” Status of Partial Arbitration Awards
  • September 24, 2012
  • Law Firm: Norton Rose Canada LLP - Montreal Office
  • Introduction

    Sucafina SA v Rotenberg [2012] EWCA Civ 637

    This article considers the recent Court of Appeal decision in Sucafina SA v Rotenberg [2012] EWCA Civ 637 in which the Court held that arbitration awards are either final or binding or they are not and that labels such as “appeal interim award” do not change this position. In reaching this decision the Court of Appeal upheld the Commercial Court decision in a dispute involving the status of interim awards issued under the rules of the Coffee Trade Federation.

    The facts

    The appellants (Sucafina), a Swiss company specialising in coffee trading, entered into a series of future contracts with, it contended, the respondent to the appeal (Mr Rotenberg). Each of the contracts was subject to the European Contract for Coffee 1996 Edition. That contract provides for the parties to choose where the arbitration is to be held. The parties chose arbitration with the Coffee Trade Federation (CTF).

    At arbitration it became clear that the principal issue between Sucafina and Mr Rotenberg was whether the contracts had been made personally with Mr Rotenberg, or whether they had been made with companies that Mr Rotenberg was a director and shareholder of.

    The Umpire issued an award which held that the losses arising under the disputed contracts were recoverable from Mr Rotenberg and held him liable to pay $880,456.85 together with interest, costs and arbitral fees. Mr Rotenberg appealed to the Board of Appeal as provided for in the rules.

    The Board of Appeal published two awards which it described as “appeal interim award”: the first addressing the identity of the sellers under the contracts and the second dealing with quantum.

    The two appeal interim awards concluded:

    Under the powers given to it by Rule 48 of the CTF Arbitration Rules the Board of Appeal hereby makes the following interim award:

    The third award, which it described as the “final award” dealt with costs and would be published on payment on settlement of the fees and expenses of the CTF. The final award was not taken up or published as it was not paid for because payment had not been received within the 30 day period allowed under the CTF Rules.

    Mr Rotenberg then issued proceedings under section 79 of the Arbitration Act 1996 (the “Act”) seeking an extension of time for taking up the final award and a declaration that in the event that the final appeal award was not taken up, the interim awards should remain final and binding between the parties. Sucafina argued that the two appeal interim awards should be displaced and that the award of the Umpire should be restored.

    The Commercial Court held in favour of Mr Rotenberg that the first and second interim awards of the Appeal Board were binding on the parties. The award on costs, absent an extension under section 79 of the Act, could not be made or published. As the Court refused an extension under section 79, this meant that Mr Rotenberg could not recover the costs of the appeal. As the effect of the interim awards was to set aside the original award of the Umpire, costs of the proceedings before the Umpire had not been determined and could not now be determined.


    The Court of Appeal decision

    The express powers of the Board of Appeal to make orders and awards were set out in CTF Rules:

     

    Interim order
    47. The board of appeal shall have the power to make such order(s) as it may think fit for the interim protection, warehousing, sale or disposal of the subject matter of the arbitration.

    Interim Award
    48. The board of appeal shall have power to make an interim award or awards.

    Appeal Award
    49. Within a reasonable time from the date of the hearing, the board of appeal shall make in writing and shall sign a reasoned award which shall constitute the arbitration award and, subject to any valid appeal to the High Court (if available under these rules), shall be final and binding. The board of appeal may deal with the appeal and any cross-appeal together but the parties shall not be entitled to require separate awards. The award shall state the seat of the arbitration.

    Rules 52, entitled “Taking up the Award”, provided:

    a) The appeal award shall be sent by the board of appeal to the Secretary.

    b) The Secretary shall notify the parties that the appeal award is ready and can be taken up and will be published upon payment of the fees, costs and expenses.

    c) If the appeal award is not taken up within 30 days of the date of said notification the original award of the arbitrator(s) or umpire shall become final and binding immediately upon expiry of said period and

    (i) The fees, costs and expenses of the board of appeal and of the Federation shall be paid by the parties immediately. Such payment shall not affect the right of the party who makes it to recover such payment or any part thereof from the other party.

    ....

    (emphasis in bold)

    Section 39 of the Act, entitled “provisional awards”, permits the parties expressly to agree to the arbitral tribunal having power to order on a provisional basis any relief which it would have power to grant in a final award.

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

    Sucafina’s position was that an award under Rule 48 was not restricted to provisional awards under section 39. It could include an award intended to resolve aspects of the merits which would resemble a partial award under section 47 of the Act. Sucafina accepted that both appeal interim awards did purport to decide liability and quantum but contended that awards under Rule 48 had a subordinate role and it was only the award under Rule 49 of the CTF Rules that constituted an award that was final and binding. Until that stage Sucafina submitted that the appeal interim awards under Rule 48 were not final and binding or only conditionally final and binding. According to Sucafina, whilst the awards represented the Board of Appeal’s final decision on the matters with which they dealt and which it did not intend to revisit, they remained conditional until the Award under Rule 49 was made which then operated to ratify them.

    The Court of Appeal rejected this position. According to the Court, the first issue to be determined is whether there is an agreement to the contrary which excludes the power under section 47 of the Act to make partial awards. In this the Court found that there was nothing in the language of either Rule 48 or 49 (or elsewhere) which amounts to an agreement that an arbitral tribunal under the CTF Rules should not have power under section 47 to make partial awards. Neither were Rules 48 and 49 inconsistent with the provisions of section 47. That is, in the absence of an express or implied agreement to the contrary, the Board of Appeal had the requisite power under section 47 of the Act.

    Second, the Court reasoned that an award which had the effect suggested by Sucafina would be a species of award unknown to arbitration law and practice. In this the Court held that an award is either final and binding or it is not. According to the Court it could never have been the intention of the draftsman of rules, which were intended to facilitate arbitration in London under the provisions of the Act, to create a species of award that was conditional and not final and binding until such time as a later award was made.

    In this the Court accepted that whilst it was unfortunate that the draftsman of the rules used the term “interim”, as it is capable of giving rise to confusion, as a matter of arbitration law an award is either final and binding or it is not.

    As the Court found that the power to make partial awards under section 47 had not been excluded, the Board of Appeal had the requisite power to make partial awards. In this the Court was of the view that as both interim appeal awards made it clear beyond doubt that the Board of Appeal considered each award was final and binding on the issues determined by it, the Commercial Court was plainly right when it held that each of the appeal interim awards was an award under section 47 and final and binding by the terms of section 59.

    As the appeal interim awards were final on the issues decided, the failure to take up the costs award did not have the effect of rendering nugatory the interim awards. As there was no express decision setting aside the award on costs, the two interim awards not addressing this issue, the Court reasoned that the original award of the Umpire on costs stands.


    Conclusion

    The Court of Appeal expressly rejected the argument that Rule 52 could be intended to have the effect that a final and binding award on an issue would be rendered nugatory because a fee for a subsequent award was not paid, given powers to take security for its fees and the powers in section 56 of the Act. In this the Court was of the view that the argument advanced by Sucafina was far from making any commercial sense in 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.”