The Secretary of State for the Home Department v Raytheon Systems Ltd

Following a finding of serious irregularity under Arbitration Act 1996, remission is the default remedy. The court may set aside an award only where remission would be inappropriate. That assessment requires a pragmatic evaluation of all the circumstances, including the seriousness and scope of the irregularity, the objective possibility that the tribunal may unconsciously reproduce its earlier conclusions, the passage of time, the likely need for a rehearing, costs, and the interests of justice.

A serious irregularity affecting only some issues may nevertheless justify setting aside the whole award where the challenged issues are central, substantial reconsideration is required, and justice may not be seen to be done by the original tribunal.

The claimant challenged an arbitral award under section 68(2)(d) of the Arbitration Act 1996. In an earlier judgment, reported at [2014] EWHC 4375 (TCC), the court found two serious irregularities causing substantial injustice: the tribunal had failed to address responsibility for project delay in assessing termination, and had failed to address the defendant’s responsibility for delay in assessing a global unjust-enrichment claim.

The parties then argued whether the award should be remitted, set aside in whole or in part, or declared of no effect. The court also determined costs and an interim payment on account. The central issue was whether it would be inappropriate to remit the affected matters to the existing tribunal.

1. Remedy under section 68(3). Remission is the default remedy. The court cannot set aside or declare an award to be of no effect unless satisfied that remission would be inappropriate. There is no statutory weighting which makes setting aside unavailable, or exceptional, merely because the irregularity falls within section 68(2)(d).

2. Appropriateness. The court must consider all the circumstances and background facts. Relevant matters include the seriousness and importance of the irregularity, whether the challenged issues are central to the award, whether the tribunal can fairly reconsider its earlier conclusions, the objective appearance of justice, the cost and time of remission compared with a new tribunal, and the passage of time affecting recollection of the evidence.

3. An objective risk that a conscientious tribunal may be influenced by its previous findings, or may be perceived as seeking to reach the same result, can make remission inappropriate. The question is not whether the arbitrators acted dishonestly or lacked general competence. It is whether a fair-minded and informed observer could have confidence in their ability to reach a fair and balanced conclusion after remission.

4. The fact that an irregularity affects only some issues does not prevent the court from setting aside the whole award. Here, the liability issue was critical to the validity of termination and the quantum issue concerned more than two-thirds of the award. Much of the arbitration would in any event require reopening, and a rehearing before a different tribunal was preferable in the interests of justice.

5. The award was set aside in total for resolution by a different arbitral tribunal. The defendant was ordered to pay 80 per cent of the claimant’s costs, assessed on the standard basis, together with £146,000 as an interim payment on account.

The judgment records an earlier judgment of the same court, [2014] EWHC 4375 (TCC), which established serious irregularities causing substantial injustice. Permission to appeal was granted in respect of both judgments, but this judgment itself determined the consequential remedy and costs.