In 2021 a survey carried out by accountants Ernst and Young revealed that three quarters of businesses had used Alternative Dispute Resolution (ADR), including arbitration, to settle disputes. This shift towards ADR can largely be explained by the hurdles put in the way of court-based litigation by the Covid pandemic. In our view there are many advantages to arbitration in particular as a way of settling even the most complex shipping and other commercial disputes. We’ll look at some of these advantages below. And we’ll also examine the issue of how final an arbitrator’s decision is. Specifically we’ll look at the 2021 Privy Council decision of RAV Bahamas Ltd v Therapy Beach Club, a case that dealt with challenges to arbitral decisions (known as ‘awards’)
We’ve previously highlighted the encouragement given by governments, judicial authorities and others across the globe to businesses to consider arbitration instead of litigation. Indeed the Bahamas is fast becoming an international arbitration centre of choice. One reason for this is that foreign arbitral awards can be enforced in the Bahamas in the same way as judgments of the court.
Parris Whittaker has an experienced arbitration team. Notably partner Jacy Whittaker is recommended as the go-to attorney for dispute resolution in the Bahamas by international legal organisation Global Legal Experts.
Why Choose Arbitration instead of going to Court?
Here are some of the reasons we advise clients to consider arbitration:
Flexible process – In contrast to the strict nature of court rules and procedure, parties involved in arbitration can control the process themselves. They can choose to follow the framework provided by recognized institutes such as the London Court of International Arbitration or, as in the RAV Bahamas Ltd case we look at below, they can develop their own rules. This is known as ‘ad hoc’ arbitration
Fees – Arbitration can work out cheaper than litigation in the long run, although this very much depends in the complexity of the case. Note that the parties must pay the arbitrator fee (parties to litigation don’t pay the fees of the judge)
Awards are recognized internationally – International agreements now enable the successful party to an arbitration to enforce the decision internationally in much the same way as a court order
A specialist arbitrator – Parties can appoint an arbitrator of choice. Very often this enables the appointment of someone with specialist experience of the key points in dispute. Such technical knowledge means the arbitration can proceed more quickly than a court case where a non- specialist judge may be presiding
Privacy – Unlike court cases, arbitrations are generally private ensuring that sensitive commercial information remains between the parties
Finality – Challenging an arbitral award can be trickier than appealing a court decision, Many clients prefer this because it offers closure on a dispute and makes the decision final.
How Final is an Arbitrator’s decision?
That last factor we listed above – finality – is highly attractive to businesses involved in a dispute because it means commercial certainty. That said, while there are restrictions on how you can appeal the decision of an arbitrator, there are still clear ways a defective award can be set aside or altered.
This is demonstrated by the Bahamian case of RAV Bahamas Ltd v Therapy Beach Club Ltd, centring on section 90 of the Bahamas Arbitration Act, 2009 (which closely resembles section 68 of the Arbitration Act applicable in the UK). S90 makes provision for challenging an arbitration award where a ‘serious irregularity’ of some kind has affected the arbitration or tribunal.
The RAV Bahamas case involved the lease of land on the island of Bimini by RAV (‘RAV’) Bahamas to Therapy Beach Club (‘Therapy’).
Following a dispute between the parties over construction of a restaurant and beach club, RAV demolished what had been constructed and evicted Therapy from the land. The parties agreed to refer the dispute to arbitration and the case was heard by a sole arbitrator – a retired Bahamian judge.
In summary the arbitrator decided that:
Therapy had been wrongfully evicted from the land
Therapy’s claims for breach of contract, trespass, conversion and unlawful interference with economic interests should be allowed
Therapy’s claim that there had been a variation of the lease so that it also had a lease of a second restaurant was dismissed
Therapy should be awarded $6.8million for loss of profit as well as further special and exemplary damages. The amount of damages reflected a reduction by the arbitrator for Therapy’s failure of part of its claim and also because Therapy’s expert witness did not possess accurate documentation to support his calculations of loss of profit
RAV appealed the arbitration ruling on the grounds that it was seriously irregular in two ways:
The arbitrator had not properly considered the arguments put forward by RAV about the precise period damages should be awarded for. In the award the arbitrator had calculated damages on a six-year period (which included a three year renewal period of the original lease). RAV argued that if damages were to be awarded at all they should be limited to the terns of the original lease
The arbitrator hadn’t given RAV a chance to address the way adjustments/reductions were made to the amount of damages awarded.
The Privy Council agreed with RAV that the arbitrator had not properly considered the arguments put forward. This represented a serious irregularity under s90 which was likely to cause a substantial injustice.
Comment
The Bahamian case is a rare example of a successful challenge to an arbitrator’s decision under s90 of the Arbitration Act. Arbitrators must conduct proceedings in a fair and impartial way. If they don’t it’s clear that parties have potential recourse under s90 – although there remains a high bar when it comes to establishing a ‘serious irregularity’.
CONTACT US
To discuss how we might be able to advise you on arbitration or other forms of ADR please schedule a meeting with a lawyer at ParrisWhittaker today.
