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Legal alerts / 3 Jul 2018

Legal Alert – Tardy Bird Loses the Worm: Arbitrator Disregards Arguments Presented Late in Proceedings – Award Challenge Rejected by the Supreme Court

The Supreme Court recently upheld the validity of an arbitral award in challenge proceedings where the losing party had argued that it had not been provided sufficient opportunity to present its case (KKO:2018:48).

The arbitration concerned a claim for damages that the respondent had contested with regards to the grounds for liability. The respondent had waited until the written closing statements submitted after the oral hearing to present arguments concerning the quantum of damages. The sole arbitrator disregarded the arguments regarding the quantum as they had not been submitted in accordance with the procedural timetable.

No explicit cut-off date in the procedural timetable

The respondent sought to have the award set aside based on section 41 of the Finnish Arbitration Act (967/1992; as amended, “FAA”) by arguing that the arbitrator had failed to provide the respondent with sufficient opportunity to present its case.

The Supreme Court noted that either party may, based on section 25 of the FAA, amend or supplement its claims and the grounds for these claims over the course of the arbitration proceedings as long as the arbitration proceedings are not unduly delayed. This provision only applies if the parties have not agreed otherwise.

In this case, the parties had agreed on a procedural timetable. The timetable did, however, not include an explicit cut-off date, beyond which a party would have been precluded from developing its case. As deviating from a provision in the FAA would have required a clear stipulation adopted by the parties, section 25 was applicable to the issue of whether new arguments were allowed in the closing statements.

The Supreme Court’s reasoning

The Supreme Court stated that the issue of whether new arguments in the closing statement would cause the arbitration undue delay was an issue for the arbitrator to evaluate. Furthermore, the Supreme Court held that an award could not be set aside simply because the court seized to examine a challenge of the award would resolve the issue of delay differently from the arbitrator. An award can be set aside only if a party’s right to be heard has been disregarded in a manner that has denied the party from a sufficient opportunity to present its case.

The Supreme Court stated that the claims had been presented early on in the proceedings and that the respondent had been provided with the opportunity to respond to the arguments and evidence. The respondent had not explained in any way why it had left arguments concerning the quantum of damages to the closing statement. As taking the arguments into consideration would have required the arbitrator to provide the claimant with the opportunity to respond and present additional evidence, it would have caused a delay. Furthermore, as the procedural timetable had been organised in a manner that would allow for the arbitrator to resolve contested issues before the oral hearing, the respondent could have anticipated that section 25 of the FAA might apply to any late pleadings.

The Supreme Court therefore concluded that the arbitrator’s decision to disregard new arguments in the closing statement did not inhibit the respondent’s opportunity to present its case in a manner that would allow for the setting aside of the award.

Borenius’ lawyers are available to assist in addressing any questions you may have regarding this legal alert. Please feel free to contact any of the Borenius attorneys listed in this alert or those with whom you usually work.

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