2 March 2010
Hotel Agreements often choose to have arbitration as the final dispute resolution mechanism due to the relative ease of enforcing arbitration awards overseas. However, often little thought is given to the drafting of arbitration clauses and existing templates are simply adopted. These templates (particularly those which are governed by English law or the laws of jurisdictions influenced by English Law such as Hong Kong) may need to be reconsidered in light of the decision in Shell Egypt West Manzala GmbH and Shell Egypt West Qantara GmbH v Dana Gas Egypt Limited (formerly Centurion Petroleum Corporation). In this case, the English High Court confirmed that in an arbitration clause, the words "final, binding and conclusive" do not preclude the parties from seeking to appeal against an arbitral award. For a right of appeal to be excluded, there must be clear and express wording to that effect.
Shell Egypt entered into an agreement with Centurion for two concessions for crude oil and gas exploration in the Nile Delta in Egypt.
The agreement was governed by English Law and contained an arbitration clause by which all disputes were to be settled by arbitration under the UNCITRAL Arbitration Rules. The Clause further provided that "the decision of the arbitrators, rendered in writing, shall be final, conclusive and binding on the parties, and the judgment upon such
decision may be entered in any court of a country having jurisdiction."
A dispute arose between the parties and an arbitral tribunal was duly appointed. The Tribunal rejected Shell's claim for repudiatory breach against Centurion.
Shell sought leave from the High Court to appeal the arbitral tribunal's award pursuant to Section 69 of the Arbitration Act 1996.
1. the arbitration clause in the agreement had the effect of excluding the right to appeal under Section 69;
2. the Court did not have jurisdiction to hear Shell's application.
The Court held that the words "final and binding" in the arbitration clause simply related to the award itself and meant that the award disposed of the issues in dispute between the parties. As to the word "conclusive", it only meant that the parties could not re-open issues of law or fact decided by the award.
This decision endorses and confirms the previous decision of Ramsey J in Essex County Council v Premier Recycling Ltd that the mere use of the words "final and binding" does not amount to an exclusion of the right of appeal against an arbitral award. These words, even coupled with the word "conclusive", only serve to confirm the validity of the award. In other words, the award is final and binding, subject to the exercise by one party of the right of appeal under the Arbitration Act.
These words alone did not prevent the parties from seeking to appeal against the award as they did not expressly exclude Section 69 of the Arbitration Act. For the right to appeal to be excluded, there must be sufficiently clear and express wording to that effect, although specific reference to Section 69 is not essential.
Examples of clear wording to exclude the right of appeal include:
a. "the parties waive irrevocably their right to any form of appeal, review or recourse to any state court or other judicial authority" (Rules of the London Court of International Arbitration (LCIA)); and
b. "the parties waive their right to any form of recourse" (the International Chamber of Commerce (ICC) Rules).
Parties wishing to exclude the application of legislation such as S.23 of the Hong Kong Arbitration Ordinance or Section 69 of the English Arbitration Act and rights of appeal against arbitral awards should include express provisions along the lines set out above. It is clearly not sufficient to rely on the words "final, binding and conclusive". Agreements and templates currently containing these wordings may therefore need to be reconsidered if arbitration is indeed intended to be the final stage of the dispute resolution process.