20 Finality of arbitral awards and

judicial review
Clive M Schmitthoff

The problem of judicial review

Arbitration is essentially a contractual system of dispute resolution. The
parties agree that their dispute, or any dispute which may arise between them
in the future, shall be settled by a private judge, the arbitrator, or a private
court, the arbitration tribunal. As a contractual arrangement, arbitration is, at
least in theory, governed by the principle of party autonomy. According to this
principle the parties are at liberty to make such arrangements as they like but,
as is well known, in all legal systems the principle of party autonomy is subject
to a great and growing number of qualifications. In English law, the principle
of freedom of contracting is not only limited by public policy considerations
but also by a host of mandatory statutory provisions, contained in enactments
such as the Unfair Contract Terms Act 1977, the Consumer Credit Act 1974
and the Supply of Goods and Services Act 1982.
In the law of arbitration, the principle of party autonomy postulates that the
award should be final and there should be no judicial review on its merits.
This, at least, is usually the intention of the parties. Provided that the
arbitration proceedings are conducted in accordance with the requirements of
natural justice, the parties are normally prepared to accept that the arbitrator
may err in his decision on a point of fact or law. After all, public judges may
also err, and the whole appellate hierarchy of the courts is founded on this
assumption and aims at eradicating any mistake which, in the opinion of the
higher judges, the trial judge may have made. But this process of rectifying a
judicial error is slow and costly. One of the great advantages of arbitration, in
the eyes of the business community, is that it eliminates this process. The
experienced or well advised businessman knows that the other advantages
claimed for arbitration over litigation, namely that it is cheaper or speedier, are
questionable. But parties preferring arbitration to litigation expect at least
fmality of the settlement of their dispute and avoidance of costly and lengthy
appellate proceedings. The state, on the other hand, has another interest. The
courts fear that the uniformity of the law is lost if they do not exercise some
kind of review over arbitrations, at least as far as questions of law are involved.
Atkin LJ (as he then was) justified the new obsolete 'case stated' procedure by
saying that, if the parties were allowed to oust the jurisdiction of the courts on
questions of law, 'the result might be that in time codes of law would come to
230 be administered in various trades differing substantially from the English
J. D. M. Lew (ed.), Contemporary Problems in International Arbitration
© Springer Science+Business Media Dordrecht 1987
 Finality of arbitral awards and judicial review 231

mercantile law', 1 and one of the most eminent - and bluntest - commercial
judges of this country, Scrutton LJ, said, 'There must be no Alsatia in England
where the King's writ does not run.' 2 The conflicting views on the desirability
of fmality and the need for judicial review are the crucial issues in the
relationship between arbitration and the courts.

The two kinds of judicial review

Before this issue is examined it is necessary to defme what is understood by
'judicial review'.
There are, in fact, two kinds of judicial review and it is confusing and
misleading if they are not kept separate because they are entirely different in
character.
The first type of judicial review concerns the question whether the
requirements of natural justice were observed in the arbitration proceedings
and the arbitration agreement is valid under the law to which the parties have
subjected it. The second type of judicial review concerns the merits of the
award and here the issue is whether the arbitrator has fallen into an error.
These two types of judicial review will have to be examined later. It will be
seen that quite different considerations apply to them. A judicial review of the
first type is admitted by the courts of all countries because they consider it to be
within the contemplation of the parties when agreeing on arbitration. But the
judicial review of the second type, namely on the merits, is, as we shall see, a
more questionable affair.

Judicial review in transnational arbitrations

Before proceeding to a closer examination of these two types of judicial review,
it has to be considered whether any type of judicial review should be admitted
in transnational arbitrations.
This, of course, raises the question whether transnational arbitrations exist
at a1l 3 and also the wider question: what is transnational law? I have expressed
my understanding of this term in the following passage4 :
'It is ... wrong to attribute the character of international or supranational
law to international trade law. It acquires its autonomous character by leave
and licence of all national sovereigns. In character it is very different from
public international law. Ultimately it is founded on national law but has
be~n developed by international business in an area in which all national

1 In Czarnikow& Co v Roth, Schmidt & Co [1922]2 KB 478, 491; On the old 'case stated'
procedure, see CM Schmitthoff, 'Arbitration: The Supervisory Jurisdiction of the Court' in
[1967]JBL 318.
2 Ibid, at 488.
3 Delaume, 'L'arbitrage transnational et les tribunaux nationaux' HI Clunet 521 (1984); Sir
Michael Mustill, 'Transnational Arbitration in English Law, [1984] Current Legal Problems
133.
4 Clive M Schmitthoff, Commercial Law in a Changing Economic Climate, 2nd ed, London
1981, at 22.