Privy Council: Trinidad Appeal Court not entitled to overturn arbitral award where no error of law

The Judicial Committee of the Privy Council (Privy Council), which acts as the highest court of appeal for several Commonwealth countries, restored the arbitrator's original decision in a dispute involving the construction of the new Scarborough Hospital in Tobago. Contractor NH International (Caribbean) Ltd (NHIC) was therefore entitled to terminate its agreement with the state-owned National Insurance Property Development Company (NIPDEC) given the facts of the case, they said.

Litigation expert Craig Connal QC of Pinsent Masons, the law firm behind Out-Law.com, said that it was "always comforting to find a top bench of UK judges making clear statements".

"There are many rulings which can be interpreted as showing the UK as an arbitration-friendly jurisdiction," he said. "One facet of that is to decline to examine any judgement call made by an arbitrator as being for him and him alone."

"That is precisely what was done here by the Privy Council, albeit in an appeal from the Caribbean. Indeed, a refusal to intervene in what was an assessment of whether letters satisfied a particular contract clause could quite easily have been treated in a different way, as it was not a fact-finding exercise. However, the court's view was that whatever it was, it was not a question of law," he said.

The judges’ interpretation of some of the contractual terms would be of “material interest to the construction industry” in particular, Connal said. The Privy Council “readily accepted that a clause providing a rule for notification of claims also compendiously controlled set-off or cross-claims to prevent anything not so notified being employed”, he said.

NIPDEC engaged NHIC to construct the new hospital in March 2003. NHIC suspended work on the project in September 2005 following disagreements between the parties and, in November 2006, attempted to terminate the agreement in line with the contract terms. The parties then referred a number of the issues between them to arbitration. After the arbitrator found that NHIC was entitled to terminate the agreement, NIPDEC challenged this and certain financial claims awarded in NHIC’s favour in the courts.

The Privy Council heard that the parties were not in disagreement over certain facts, which included a letter from NIPDEC stating that provisional funding for the hospital had been secured. However, this letter referred to the fact that the necessary funding had been reserved “without prejudice”. NHIC requested further clarification, and suspended work when this did not arrive. It attempted to exercise its right to terminate after again requesting confirmation that the funding was approved, and again receiving no response.

Under the terms of the agreement, NIPDEC was required to provide “reasonable evidence that financial arrangements have been made and are being maintained which will enable [it] to pay the contract price”. The arbitrator decided that NIPDEC had not done so, giving NHIC the contractual right to terminate. This was upheld by the first judge, but overturned by the Court of Appeal.

Overturning the Court of Appeal’s decision, the Privy Council said that there was “no suggestion” that the arbitrator had “misconstrued the relevant provisions of the agreement”.

“The arbitrator’s conclusion … was one of fact rather than of law,” said Lord Neuberger. “It can be said to be a finding of secondary fact or even the making of a judgment rather than a strict fact-finding exercise, but it is not a resolution of a dispute as to the law. In those circumstances, save (arguably) to the extent that it might be contended that there was simply no evidence on which he could make the finding (or reach the judgment) that he did, or that no reasonable arbitrator could have made that finding (or reached that judgment), it was simply not open to a court to interfere with, or set aside, his conclusions on such an issue.”

“Where parties choose to resolve their disputes through the medium of arbitration, it has long been well established that the courts should respect their choice and properly recognise that the arbitrator’s findings of fact, assessments of evidence and formations of judgment should be respected, unless they can be shown to be unsupportable. In particular, the mere fact that a judge takes a different view, even one that is strongly held, from the arbitrator on such an issue is simply no basis for setting aside or varying the award,” he said.

Courts had more power to interfere with awards where there had been an error of law, but the arbitrator’s “careful analysis of the relevant clauses” and “coherent and clear” reasoning showed that this was not the case here, Lord Neuberger said.