Braes of Doune Wind Farm (Scotland) Ltd v Alfred McaLpine Business Services Ltd

An arbitration clause specifying a geographical place as the seat does not necessarily determine the juridical seat where the contract, read as a whole, clearly provides for the procedural control of another country's courts and law. Contractual construction is a question of law for the purposes of an appeal under section 69 of the Arbitration Act 1996. The “obviously wrong” threshold requires more than a competing interpretation which another tribunal could reasonably adopt. A judge may take the time reasonably required to understand the submissions. The application for leave was dismissed because, although the arbitrator's reasoning could be criticised, his ultimate decision was not obviously wrong.

The parties entered into an EPC contract for the construction of a wind farm. The contract was governed by English law, gave the courts of England and Wales exclusive jurisdiction subject to arbitration, and stated that the seat of the arbitration was Glasgow, Scotland. An arbitrator held that the contractual delay-damages provisions were unenforceable and awarded the Contractor £2,836,840.30 plus VAT and interest.

The Employer applied for leave to appeal on a question of law under section 69 of the Arbitration Act 1996. The Contractor challenged the Court's jurisdiction and sought leave to enforce the award. The Court had to determine the juridical seat, whether the statutory conditions for leave were satisfied, and whether the arbitrator's decision was obviously wrong.

1. Jurisdiction. The Court had jurisdiction under section 69 of the Arbitration Act 1996. The juridical seat had to be identified by construing the EPC contract as a whole. Although clause 20.2.2(c) stated that the seat was Glasgow, clause 1.4.1 gave the courts of England and Wales exclusive jurisdiction, the arbitration agreement was subject to English law, and the reference was deemed to be an arbitration within the meaning of the 1996 Act. Those provisions indicated that English law was intended to govern and control the arbitral proceedings. Glasgow was therefore treated as the place of hearings rather than the juridical seat.

2. The approach was consistent with Naviera Amazonica Peruana SA v Compania Internacionale De Seguros Del Peru [1988] 1 Lloyds Rep 116: an arbitration must have a juridical seat subject to a municipal procedural law, but the parties may agree that hearings take place in one country while the arbitration is subject to the procedural law of another.

3. Question of law. The enforceability of the liquidated-damages provisions involved contractual construction and was therefore a question of law. The parties had created the legal rules governing their relationship, and rules of contractual interpretation applied as substantive law.

4. Section 69 threshold. The Court was required to decide whether the arbitrator was obviously wrong. It was insufficient that part of the reasoning was wrong or that another tribunal might reasonably have reached a different conclusion. The Court was not confined to a rapid reading of the papers. The relevant question was whether, having properly understood the issues, the judge considered the decision obviously wrong rather than merely wrong on a finely balanced issue.

5. The arbitrator's conclusion was ultimately correct. The contractual machinery could impose delay damages for unavailability caused by the Wind Turbine Contractor, even though the Contractor could obtain extensions for critical delay caused by that contractor. That mismatch supported the conclusion that the clause operated as a penalty, which English law would not enforce. The arbitrator's reasoning could be criticised, but his decision was not obviously wrong.

6. The Court did not need to determine separately whether it was just and proper to grant leave under section 69(3)(d). The arbitrator's experience was a relevant factor, as recognised in Keydon Estates Ltd v Western Power Distribution (South Wales) Ltd [2004] EWHC 996 (Ch). The Employer's application was dismissed and the Defendant had leave to enforce the award under section 66(1).

Not an appeal from a lower court decision. The judgment concerned an application for leave to appeal an arbitrator's first award and a jurisdictional challenge to the Court's power to entertain that application.