In Proceedings to Vacate an Arbitration Award Courts Look At Procedural Issues Only

Disputes resolved through arbitration often turn into disputes resolved in a “regular” civil court, typically by way of a motion to vacate the arbitration award. The law states that motions to vacate must be filed within three months. But does this mean that modifying or expanding the grounds on which the motion is filed, and the award annulled, can be done only within the three-month period? The Supreme Court answered that question in a recent ruling.

The claimant in the case believed the motion to vacate was legitimate for several reasons, one being the invalidity of the contract under which the arbitration clause was agreed. The reasons were not given in the motion itself, however. The claimant brought them up only during the court hearing. After the claimant lost the first instance proceedings, it decided to file an appeal.

However the claimant lost the appellate proceedings as well after the appellate court determined that the claimant delivered its reasons too late. The court found not only that the motion must be filed on time, but that the reasons for the annulment also had to be raised within the statutory three-month period.

The claimant turned to the Supreme Court as a last resort. The Supreme Court emphasized that the claimant’s duty to include all substantial facts in the lawsuit (i.e. to describe the facts leading to the claim) must at all times be distinguished from its duty to claim the grounds for a motion to vacate (i.e. to add legal qualification to the facts of the case). The courts are then responsible for pairing the facts established during cross-examination with applicable legal provisions and for judging which grounds for a motion to vacate apply to the particular case.

Additional Facts Have a Time and Place

The Arbitration Act imposes a three-month deadline for filing an action to vacate. The act, however, does not impose any deadlines for submitting additional facts and new grounds for such a motion. Nevertheless, facts and grounds cannot be given at any time during the proceedings, since there are statutory procedural limits, such as the principle of concentration.

In the end, the Supreme Court held that court proceedings to vacate an arbitration award are not a kind of substitute appellate arbitration proceedings. Parties to the proceedings often fail to bear in mind this key fact: in court proceedings to vacate an arbitration award, the court reviews procedural issues only. As such, the facts of the case and material legal issues are not addressed by the court at all.