Introduction
In this fourth instalment of our series of articles dealing with the Act, we examine the reforms to challenging the substantive jurisdiction of arbitration tribunals under section 67 (retrospective challenge to arbitration awards on the basis of a lack of jurisdiction) and section 32 (a prospective request for the court to rule on the tribunal’s jurisdiction) of the Arbitration Act 1996.
Challenging the jurisdiction of an arbitral tribunal
The underlying principle when addressing the jurisdiction of an arbitrator in London-seated arbitration is simple – an arbitral tribunal can decide the matters put to it only if it has substantive jurisdiction. It will have substantive jurisdiction if three conditions are met: (i) there is a valid arbitration agreement; (ii) the tribunal is properly constituted; and (iii) the matters it has been asked to decide have been submitted to arbitration in accordance with the arbitration agreement.1
Under the Arbitration Act 1996, all tribunals have the competence to rule on their own jurisdiction.2 However, where one party believes that the tribunal lacks substantive jurisdiction, it can challenge it in one of three ways:
- under section 32 of the Arbitration Act 1996, it is possible to ask the English court to decide whether the tribunal has substantive jurisdiction or not, provided that both parties agree to this, or the tribunal permits it despite the other party’s objection;
- under section 72(1) of the Arbitration Act 1996, the party can seek a declaration or injunction from the court, but only if they take no part in the arbitral proceedings; and
- under section 67 of the Arbitration Act 1996, the party can challenge the tribunal’s award on the basis that the tribunal lacked substantive jurisdiction.
Previously, the UK Supreme Court decision in Dallah Real Estate & Tourism Holding Co v. Ministry of Religious Affairs of the Government of Pakistan (2010)3 meant that jurisdictional challenges under section 67 had to proceed by way of a full rehearing that disregarded the tribunal’s own findings on the question of jurisdiction.
Section 67 jurisdictional challenge generally now a review, not a full rehearing
As a result of the change introduced by the Act, English courts do not now approach section 67 challenges as a full rehearing. If the applicant has already taken part in the arbitration, and provided that the interests of justice do not provide otherwise, then any grounds for objection or evidence already considered by the arbitral tribunal cannot be reconsidered by the court, nor can new grounds for objection or evidence be considered. This is subject to the proviso that new grounds for objection or new evidence will be admissible if the applicant did not know and could not, with reasonable diligence, have discovered the grounds or put forward the evidence to the arbitral tribunal.
This change should reduce the delay and costs that otherwise result from repetition. It also promotes efficiency by forcing an objecting party to make all its objections up front, rather than deploying them in waves.
Under the previous regime, a full rehearing rather than a review gave the losing party a second bite of the cherry having learned from the arbitral tribunal’s criticism of its original position. Previously, with a full rehearing, the losing party could potentially try to put its case differently to the court – perhaps using new arguments and new evidence – in an attempt to cure any deficiencies identified by the arbitral tribunal. At its most extreme, this incentivized a highly tactical approach to the initial challenges before the arbitral tribunal and led some parties to treat that stage as a mere dress rehearsal before making a challenge in court.
Although the court’s prior case management powers already allowed it to control to a degree what arguments and evidence are put before it, there was little specific guidance on this particular issue, and so the changes introduced by the Act bring welcome clarity.
Clarifying the role of section 32
Following the changes introduced by the Act, it is now clear that if an arbitral tribunal has already ruled on its jurisdiction, parties cannot then challenge jurisdiction in the courts using section 32 of the Arbitration Act 1996.
Prior to the change, it was arguable that section 32 could be used after the arbitral tribunal had already ruled on its jurisdiction.4
Having an alternative or additional route via section 32, in addition to section 67, created unnecessary complexity and uncertainty.
Following the change, section 32 is now restricted to operating as a direct access route for getting the court to decide the question of the tribunal’s jurisdiction as a preliminary point.
Practical issues
The changes to jurisdictional challenges under section 67 and section 32 are likely to be welcomed by the majority of practitioners and arbitration users because they should improve cost-efficiency and increase procedural predictability.
Some important practical implications flow from the changes:
- Exceptions to the limitations. The prohibition on bringing new arguments or evidence in a section 67 challenge does not apply where it was not possible with “reasonable diligence” to put the arguments or evidence in question before the tribunal. Similarly, the rehearing of original evidence will not be prohibited where necessary “in the interests of justice.” Both caveats are vague, and untested in the current context. The Law Commission (the advisory body that recommended the changes to the UK government) suggested that “interests of justice” could cover situations where the record of the original evidence is unavailable, or possibly where one party’s evidence was not admitted by the arbitral tribunal (depending on the specific reasons). However, the Law Commission’s commentary is non-binding and adds little clarity. Expect to see these two caveats tested and the position to remain uncertain until ruled upon by the courts.
- Threshold for participation. The new limitations on rehearing apply only where the objecting party had already participated in the arbitration before the arbitral tribunal ruled on its jurisdiction. Otherwise, the section 67 challenge is the objecting party’s first chance to present their challenge, and so no concerns about repetition or second bites of the cherry arise. The principle makes sense in theory, but it is not entirely clear what steps or actions will count as “took part in the arbitration proceedings” in practice. Some guidance may arguably be derived from the courts’ approach to section 73(1), but this is not a perfect analogy since the context, intended effect and exact wording of the two provisions are not identical. This could be another hotly contested area.
- Issue estoppel. Many commentators have expressed concerns that a section 67 challenge that is not a full rehearing may not be enough to trigger an issue estoppel when enforcing the award abroad. The objecting party could then launch yet another jurisdictional challenge before the foreign enforcing court. The resulting delays and increased costs would likely be much greater than the savings made by avoiding a full rehearing in England. The Law Commission was not convinced about the significance of this risk, in part because it expects that foreign courts will still find an issue estoppel even in the absence of a full rehearing. However, given the differences between judicial attitudes across the globe, this is not a universally safe assumption, especially when it comes to jurisdictions where achieving a quick and easy enforcement against local counterparties is already seen as difficult. The Law Commission pointed out at the consultation stage that the objecting party is not required to use section 67 as a precondition to challenging the enforcement of the award before a foreign court, but this does not alleviate the risk that parties will in fact still use section 67 first, including specifically to gain the same tactical advantage that the reform is intended to protect against – getting two bites of the cherry.
In summary, while the reforms to jurisdictional challenges under sections 67 and 32 are a welcome step in combating delays, unnecessary costs and potential unfairness, there are still aspects of the reforms that create potential uncertainty and are yet to be tested in the courts.
Our next article in this series will address the reforms introduced by the Act dealing with the immunity of arbitrators and arbitrators’ duties of disclosure.
- Arbitration Act 1996, sections 82(1) and 30(1)(a)-(c).
- Arbitration Act 1996, section 30.
- Dallah Real Estate & Tourism Holding Co v. Ministry of Religious Affairs of the Government of Pakistan [2010] UKSC 46, [2011] 1 AC 763.
- Film Finance Inc v. Royal Bank of Scotland [2007] EWHC 195 (Comm), [2007] 1 Lloyd’s Rep 382.
This alert is part 4 in a 6 part series, please use the links below to read the rest of the series.
Client Alert 2025-084
