Financial remedy arbitrations – now a very appealing prospect?

Matthew Brunsdon Tully considers the appellate routes from arbitration

Not so long ago, we were all advising our clients that in weighing up the pros and cons of going to arbitration to settle financial remedy disputes. One major ‘con’ was the ability to ‘appeal’ was severely curtailed under the Arbitration Act when compared with court proceedings. Of course, that was always offset by a mirror ‘pro’, that if you got a better-than-deserved result the other side, could not easily challenge it either. And in reality, those practitioners who do sit as arbitrators constitute the crème-de-la-crème of our profession – or nobody would want them to arbitrate for them. So, the chances of someone like that, with proper time to read the papers and hear the parties, properly paid, with the best representation, without a busy or stressful list mostly consisting of litigants in person to distract them, was always more likely to get it right anyway.

But clients have been worried about this factor. I am confident many cases have ended up in court proceedings which might otherwise have gone to arbitration. Of course, if we had a court system that worked properly, we would not need arbitration at all. But we don’t, so we do what we can to advance our clients’ interests. Ultimately, when you couple nervousness on the part of the client about the limited right of appeal arbitral awards, with nervousness on the part of the solicitor about being the person who came up with the list of arbitrators in the first place and therefore in the firing line if they go off piste – or worse still, agreed one of those put forward by the other side (!), the subtotal is a tricky client management issue.

In Haley v Haley [2020] EWCA Civ 1369, King LJ ruled at [73] and [96] that, in substance, a challenge to a financial remedy arbitral award should be dealt with in the same way, and subject to the same principles, as a financial remedy appeal in the Family Court from a District Judge to a Circuit Judge. The Judge should conduct a ‘triage/paper’ exercise applying the permission to appeal test. If she takes the view the objection made would not pass the permission test, she can make an order in the terms of the arbitral award without more ado and penalise the ‘appellant’ in costs: see [96].

In the recent case of A v A [2021] EWHC 1889 (Fam), Mostyn J set out an essential list of procedural points in an Appendix to his judgment. Following on from Haley:

[3] If the circuit judge is satisfied at the ‘triage/paper’ stage that the permission to appeal test is passed then she will set the application down for an inter partes hearing at which the court will decide whether the arbitral award is wrong. King LJ at [74] emphasised that the test is “not seriously or obviously wrong, or so wrong that it leaps off the page, but just wrong”. If the circuit judge is so satisfied then she will make different provision to that within the arbitral award. The arbitral award will then be reduced to the status of a mere relic, superseded by the court's order. 

[4] The effect of the judgment of King LJ is to make a challenge to a financial remedy arbitral award under section 68 of the Arbitration Act 1996, or an appeal against such an award under section 69, entirely redundant. For the future all challenges to a financial remedy arbitral award should be undertaken in accordance with the new procedure.

The upshot of all this is to confirm that family arbitration is simply not like other forms of arbitration, due to the highly specific and discretionary way in which the court considers (and must consider) the statutory factors before exercising its discretion in a fair way when dividing assets and apportioning income a divorce. Therefore, as a result of the court having to perform that statutory obligation in every case, it must be possible to appeal within the court system. It is judges who have the statutory obligation. The way around the problem caused by the Arbitration Act, namely that the right to challenge an arbitral award is prescribed by statute, was to create the “quasi appeal” as happened in Haley and now A v A.

In A v A Mostyn J has now fleshed out the procedure to be followed where a party is dissatisfied with a decision made by an arbitrator. He has made clear that the guidance has been approved by the President. Mostyn J said:

[15]… Form A needs to be filed. It may be that a Form A was filed previously and stayed pending arbitral proceedings. But before an application can be made by P challenging an award, or by D seeking to implement an award, there must be a Form A on the file.

[16] The filing of a Form A in these circumstances does not give rise to a requirement to attend a MIAM. An arbitral award is of the character of an agreement: see S v S at [19] where Sir James Munby P stated:

'There is no conceptual difference between the parties making an agreement and agreeing to give an arbitrator the power to make the decision for them. Indeed, an arbitral award is surely of its nature even stronger than a simple agreement between the parties.' 

Therefore, pursuant to FPR PD 3A para 13(2)(b), the proceedings do not fall within FPR PD 3A para 11 to which the MIAM requirement applies: see Practice Guidance (Family Court: Interface with Arbitration) [2016] 1 WLR 59 at [18]. 

[17] Once there is a validly issued Form A on the court file the application by P, challenging the award, or by D, seeking to implement the award, should be made in Form D11 - the standard application notice - using the Part 18 procedure.

Then, later (I have omitted some important parts of the Appendix, which must be read in full, and are not controversial, but they are not relevant for present purposes):

[20] The grounds of challenge should set out succinctly, and in the same manner as grounds of appeal would be pleaded, P's complaints about the arbitral award. They should specify in respect of each ground whether the ground raises a challenge against a point of law or a challenge against a finding of fact, or an allegation of procedural irregularity (c.f. FPR PD 30A para 3.2(b)).

Then, finally, on allocation:

[30] If either P or D considers that the application seeking to challenge or uphold the arbitral award should be allocated within the Family Court to High Court Judge level then a written request to that effect should be made at the time of making the application. This will be considered by the gatekeeper, and if granted the initial order should provide under para 22(iv) above that the papers should be sent to Mostyn J (for a case proceeding in London or on the South-Eastern circuit), or to the relevant FDLJ (for a case proceeding elsewhere), for assignment to a specific High Court judge to conduct the ‘triage/paper’ exercise.

It is easy to see why Haley was decided the way it was, a shot in the arm for family arbitration in the context of our current neglected court system with underpaid (and a lack of) Judges and court staff, a diminishing estate, eye-watering delays (and yet despite that, that it is still functioning at all after the mayhem caused by the pandemic is a credit to everyone in the underfunded system).

But we are now grappling with what it means in practice. Let’s be clear. When challenging an arbitral award, you are making a fresh application for financial remedies. A Form A is needed. The question is about the weight to be given to the arbitrator’s decision. It can be made to look like an appeal, with the language of challenge, of permission, of review. But it is not an appeal. It is a fresh application in Form A.

A Judge can never refuse an application in a Form A in circumstances like this, and a financial order will always be made, whether in the terms sought by the applicant, or the respondent (who will cross apply for notice to show cause why an order should not be made in the terms determined by the arbitrator), or in other terms. The Form A may be a means to an end, but it triggers a statutory obligation to consider and apply s.25. As a result, any decision a Judge makes when determining such an application (on paper or at a hearing or a combination) is a fresh decision and not an appeal. The paper triage system is described as 'permission', but it is not permission to appeal in the technical sense. The court is obliged to take the substantive application for financial remedies seriously. Sure, the fact that there has been an arbitration by a specialist practitioner with live evidence and the like is hugely weighty and, in most cases, will be determinative. But it is not impossible to think of all sorts of things that might happen between the date of the arbitration and a court consideration.

Ultimately, it used to be hard to appeal a financial remedies arbitral award. Now, arbitration is very ‘appealing’ indeed. Because as the ‘appeal’ against an arbitral award is a fresh application in Form A, it does not (notwithstanding the language) require permission. So s54(4) Access to Justice Act 1999 (AJA 1999) which states "no appeal may be made against a decision of a court under this section to give or refuse permission” does not apply. One will always get a full determination in a way that would not happen in a normal appeal where permission is refused. Further, the decision on the Form A and the cross-application for notice to show cause will be a first decision, even if triaged, so any appeal against that decision will be a first appeal. So, one will always have two chances to appeal an arbitrator's decision, even if the second appeal (i.e., the appeal from the determination on the Form A/Dean summons) would require permission. Whereas if you are refused permission to appeal against a judicial s.25 decision in a financial remedy case, you have nowhere to go. 

No more will arbitration be considered unappealing for clients worried about losing out on the chance of an appeal.

A separate issue – if this is now to be the procedure, what weight should be given to an ARB1 which seeks to curtail the ambit of the arbitrator’s decision? Sometimes a party to litigation with a vested interest in delay will try to use that power in a negotiation over concessions in advance of, or the ambit for, arbitration. It is not appropriate and should be banished. But the power to arbitrate still comes from the Arbitration Act. Before Haley and A v A, there was arguably nothing wrong in principle with seeking to narrow the ambit of the arbitration in this way. But if the court is ultimately making the Final Order, and appeals now go through a special financial remedy procedure (rather than under the Arbitration Act), there is a strong argument for treating the way in which the parties have chosen to set out the issues as a matter of weight, rather than power. So, if parties agree to a clean break, say (even though against one party’s interests or under pressure) as a basis for arbitration, why should an arbitrator be stuck with that? After all, only fair decisions will survive any appeal.

Matthew Brunsdon Tully is a partner and employed barrister with Forsters and author of the appeals chapter of Rayden: forsters.co.uk