The recent decision of the Court of Appeal in Haley v Haley  EWCA Civ 1369 (case report at  Fam Law 37) settled an important issue for family arbitration. It established that contested awards in the area of financial remedy could be reviewed by the Family Court by a process akin to an appeal against decisions made in court proceedings, and on the same basis as such an appeal: that the decision is ‘wrong’.
This article assesses the significance of the decision by looking at its background and context. It sets out our understanding of the procedural implications. Finally, it identifies remaining areas of uncertainty and offers some views as to how they might be resolved.
The conjunction of arbitration and the area of family law may, at first glance, seem incongruous. The essence of arbitration is the principle that disputing parties appoint a trusted third-party well-versed in their area of activity to adjudicate, on the basis that they agree to be bound by the outcome. The simplicity of this principle allows for speed and informality, suiting the process very well to areas of commercial activity which call for robust, rapid resolution. Important features are the encouragement of party autonomy – the ‘ownership’ of the dispute by the parties themselves; and the discouragement of court intervention, which would be likely to impede efficiency.
In contrast, family law is an area where the courts have traditionally seemed jealous of their role, perhaps because of the sensitive and personal nature of the issues to which it gives rise, and their at once immediate and general significance. A highpoint is the principle that agreements arrived at by parties themselves may not oust the jurisdiction of the court. Even less so, it would seem, should a potentially rival process such as arbitration be capable of shutting out the court’s scrutiny.
Nevertheless, when the Institute of Family Law Arbitrators (‘IFLA’) initiated a family law arbitration scheme some 10 years ago, points of synergy were identified. In particular, a movement towards party autonomy (which arbitration would encourage) seemed to coincide with a growing willingness on the part of the courts to respect agreements freely arrived at in the area of family law, characterised, for example, by the Supreme Court’s decision in Radmacher (Formerly Granatino) v Granatino  UKSC 42,  2 FLR 1900.
And when it came to devising different aspects of the scheme, the remarkable flexibility afforded by the open weave of the Arbitration Act 1996 (the Act) allowed a considerable degree of integration. Non-mandatory sections of the Act facilitated rules by which a family law arbitration model for England and Wales was fashioned. Thus the ‘applicable law’ (s 46), which ordinarily would be a matter of choice, was delimited to the law applicable within England and Wales. Conversely, available ‘remedies’ (s 48), which ordinarily would be limited in range, were enlarged to encompass those frequently used in family matters. And ‘costs’ (s 61), which ordinarily would be allocated following a civil pattern, were specifically aligned with the family regime.
One aspect where integration was less immediately obvious concerned that of potential challenge to an award. The routes available under the Act were clear: a slip rule (s 57); jurisdictional challenge (s 67); procedural irregularity causing injustice (s 68); and error of law (s 69). Equally clear was the arbitral orthodoxy that findings of fact and overall conclusions were generally not open to challenge.
How would these sit with family law matters, where an outcome would often represent an exercise of discretion following a multitude of factual decisions? Would there be a basis for overriding an award where the arbitrator had arrived at an irrational or bizarre outcome? And how would the arbitral regime be compatible with the family law principle that the court’s jurisdiction may not be ousted?
In the absence of legislative assistance or judicial direction, recourse was had to s 58 of the Act, dealing with the effect of an award. The section provides that an award is final and binding subject to the routes of challenge within the Act. Crucially, this provision is non-mandatory, so it operates ‘unless otherwise agreed by the parties’. It follows that parties to family arbitrations could agree to leave the way open to some kind of further court intervention.
Since the form and extent of that intervention were not certain, the wording of the rules (and corresponding wording of the ‘ARB1’ arbitration agreement) was intentionally somewhat open-ended. It committed the parties, where necessary (and in virtually all financial remedy cases, it would be necessary):
• To apply to an appropriate court for an order in the same or similar terms as the award;
• To recognise that the court had a discretion as to whether and in what terms to make an order; and
• To acknowledge that the finality of the award was subject to any changes which the court making that order may require.
This formula represented a platform that would allow a court to take a range of steps from making changes purely incidental to the transformation of an award into an order (for example, by translating a party commitment in the arbitration into a formal undertaking to the court) to (we considered) changing the outcome of an award in its entirety, if possible and necessary.
It remained to see how the courts would construe their role in relation to actual cases. The progress of a number of decisions was charted by the Court of Appeal in Haley, paras –.
Perhaps unsurprisingly, those decisions adopted a general approach that adhered to the routes of challenge under the Act, but made a limited – and diminishing – acknowledgment that some residual possibility of discretionary intervention should be available. This was partly in deference to arbitral orthodoxy. However it also reflected a sense that by agreeing to refer their dispute to an arbitrator – a qualified and accredited third party who, as a matter of duty, was bound to act fairly and impartially – parties were taking a course that was less susceptible to a problematic outcome than if they simply reached agreement between themselves.
The decision under appeal in Haley represented an extension and extreme instance of the trend, asserting arbitral orthodoxy with virtually no possibility of exception.
The Court of Appeal’s decision in Haley was that where the award concerned financial remedy of a kind that fell within the Matrimonial Causes Act 1973 (‘MCA 1973’) and a contested application was made to embody it in a court order, it was open to the court to review the award substantively, applying the same test as would apply in an appeal in a financial remedy case that had gone through the court procedure: was the decision ‘wrong’ or ‘unjust’ (because of a serious procedural or other irregularity in the arbitral process) [49(ii)].
Further, whilst not wishing to be seen as ‘undermining the arbitration process’ , the Court of Appeal held :
‘Given that the orders determining the enforceable legal rights of the parties following divorce are made under the MCA 1973 and not under the AA 1996, there is no requirement for the discontented party first to make an application under s 57, s 68 or s 69 AA 1996 before asking the Family Court to decline to make an order under the MCA 1973 in the terms of the arbitral award.’
Further, the Court expressly rejected the notion that an arbitrated outcome was somehow stronger than an agreement between the parties. In the latter case, the parties were committing to a known outcome; in the former, they were simply committing to a process .
On one view, the decision in Haley could be considered ‘niche’- a decision that is simply about the process available for challenging a financial remedy arbitration award, interesting only to those who actually arbitrate, and primarily about the firm promotion of the MCA 1973 appeal route over the arbitral challenge routes.
However, it would be wrong and simplistic to consider Haley in isolation. For those who act as arbitrators and those who use arbitration there are, of course, important practical implications to be aware of, which we consider (below). Haley goes further than this though and raises significant questions that go to the heart of what arbitration means in the family law context.
It is quite clear that both the Form ARB1 FS and IFLA’s Rules now need to be amended. For example, the current warning on the ARB1 FS says: ‘Arbitration is a process whose outcome is generally final. There are very limited bases for raising a challenge or appeal, and it is only in exceptional circumstances that a court will exercise its own discretion in substitution for the award.’ At the time of writing, work was underway to address this, with a revised edition of Rules and Forms envisaged for early 2021.
For those advising parties or clients about the arbitration process, they too will need to amend their advice about the finality of an award. No doubt this will be welcomed by family lawyers who are likely to be far more comfortable explaining the appeals test under the MCA 1973 and Family Procedure Rules 2010 than they are explaining to clients the routes of challenge available under the Act. An added complication has been that no family arbitration award has yet been successfully challenged under the Act and there is therefore no precedent on which to base advice.
A word of caution, though. The ‘wrong’ test may be less restrictive, but it is by no means pushing at an open door. Parties entering arbitration should continue to do so in full expectation of being bound by the eventual award made. King LJ herself warned at para :
‘… parties must go into arbitration with their eyes open with the understanding that, all other things being equal, the award made at the end of the process will thereafter be incorporated into a consent order.’
Paragraphs  and  of Haley state that, unless and until otherwise indicated, practitioners need to adopt the approach set out in Part 30 FPR 2010 when it comes to challenging a financial remedy arbitration award using the ‘wrong’ test.
It is important to remember that Haley does not sweep away the routes of challenge under the Act, nor the ability to challenge an award on the grounds of mistake or supervening events; these remain open, although it is difficult to envisage the circumstances in which a party would not opt for the FPR 2010 route.
As with appeals more generally, practitioners will need to advise their clients that where permission is granted, the appeal hearing is not an opportunity for a ‘second bite of the cherry’. Unless justice demands otherwise, the appeal will be a review hearing. The approach to appeals as set out in Piglowska v Piglowski  1 WLR 1360 remains good law.
The Court of Appeal held that without orders made under the MCA 1973 following an arbitral award, parties’ rights were both ‘legally undetermined’  and ‘unenforceable’ . This raises some doubt about the precise status of an award that has been made (and would normally be effective, at least as between the parties, following s 58), but not yet embodied in a court order. In practical terms, it means that parties to arbitrations dealing with financial remedies under the MCA 1973 are bound to make an application to court in relation to their arbitral awards, rather than that being an optional recourse.
Authorities such as S v S (Financial Remedies: Arbitral Award)  EWHC 7 (Fam),  1 FLR 1257 had endorsed an approach that arbitral awards should attract less court scrutiny than, for example, agreements arrived at by the parties themselves, when presented to the court to be converted into a consent order. Indeed, in S v S, Sir James Munby (then President of the Family Division) famously said, ‘the arbitral award should be determinative of the order the court makes’ (para ).
By contrast, in Haley, King LJ said:
‘The agreement to arbitrate is an agreement that a third party will determine the terms. It is not, at the time the agreement is reached, an agreement to any particular terms’ (para ).
Whilst this seems highly unlikely to be a direct criticism of the arbitration process itself (King LJ commented on more than one occasion that the judgment should not be read as undermining the ‘valuable service’ arbitration provides (paras – and )), it is hard to simply ignore it. Should those who choose to arbitrate feel more exposed as a result?
As set out below, the Family Court does not rubber stamp consent orders. However, arbitrators should not fear greater scrutiny of their awards by the Family Court. Well-reasoned, well-structured awards, arrived at as they are by qualified, experienced specialists who are bound by a duty to act fairly and impartially with the benefit of all the evidence, will continue to carry significant weight. At para , King LJ concluded by saying ‘Although the court still has to exercise its statutory role, it will be heavily influenced by what the parties themselves have agreed’. If greater scrutiny of awards reduces the scope for errors and helps to ensure consistently high quality awards, it is surely to be welcomed.
The Court of Appeal has firmly asserted the pre-eminence of relevant family law – the MCA 1973 – over arbitration law and orthodoxy. It has also confirmed the availability of a substantive review adopting a family law orientation. Does this tell us anything about the interplay between the Family Court and the Act?
As mentioned above, the IFLA scheme derives its authority from the Act. Some purists are likely to hold a view that when parties agree to arbitrate under the IFLA scheme, they are contracting to arbitrate under the Act as modified by the scheme’s rules. And a key feature of the Act is that arbitral awards can only be challenged in very limited circumstances as highlighted in the quote at para : ‘Remember, when parties agree arbitration they buy the right to get the wrong answer’. So, for non-family lawyers the mere fact that an award is wrong or even unjust does not, of itself, provide a basis for challenging the award.
Being critical, one might ask, ‘what makes financial remedy arbitration awards so special that they deserve a different review process, one that is less restrictive?’ The writers cannot fail to be reminded of the Supreme Court decision in Prest v Petrodel Resources Ltd & Others  UKSC 34,  2 FLR 732 where the Family Court had taken a different approach to their Chancery colleagues when it came to piercing the corporate veil. Lord Sumption said: ‘Courts exercising family jurisdiction do not occupy a desert island in which general legal concepts are suspended or mean something different’ (para ).
A key consideration must be that, unlike their civil counterparts, family law consent orders – the enforceable orders - derive their authority from the court and not from the consent of the parties. This is recognised on the Form ARB1 FS. Family lawyers are all too familiar with the court’s inquisitorial jurisdiction not being a rubber stamp, but also ‘neither being a bloodhound or a ferret’ (L v L  EWHC 966 (Fam)). The Supreme Court in Sharland v Sharland  UKSC 60,  2 FLR 1367 made clear that the fact there is an agreement (even if it is an agreement to arbitrate and therefore put the decision-making in the hands of a third party) does not oust the court’s jurisdiction and that, although the court is heavily influenced by an agreement, the court should always conduct its own assessment to enable it to discharge its statutory role.
It should be noted that the scope of the IFLA Financial Scheme is not limited to financial remedies that would fall within the MCA 1973. It also accommodates cases under the Trusts of Land and Appointment of Trustees Act 1996, the Inheritance (Provision for Family and Dependants) Act 1975, the Children Act 1989, Schedule 1 and the Married Women’s Property Act 1882, for example. The Court of Appeal was not asked to consider whether the Haley type of review would be available for arbitral awards in these areas.
It may be that this would depend on factors such as whether cases turned on trust and property principles rather than the exercise of a discretion; and whether the relevant court procedure was governed by the Family or the Civil Procedure Rules. Further cases will presumably clarify the position.
It seems likely that the conclusions in Haley would apply to the IFLA Children Scheme (whose scope engages for the most part with matters which could be the subject of applications to court under s 8 of the Children Act 1989). Arrangements for children would seem to be always open to review by the court in the interests of the child’s welfare; however, we await further guidance.
Interestingly, no mention is made in the judgment of the New York Convention 1958 (‘NYC’). The UK is bound by this convention, and refusing to enforce an arbitral award is a breach of it. How would an overseas court in a signatory state respond to an attempt by a party to enforce an English award for financial remedy that had not been made into a court order? Could Art V 1(e) of the NYC (which allows enforcement to be refused if ‘the award has not yet become binding on the parties’) be successfully invoked to resist enforcement? Whilst such an eventuality may be rare (because of the domestic orientation of IFLA arbitrations; and the commercial opt-out that precludes the entertainment of non-commercial awards in many jurisdictions) it is an area that may at some stage have to be considered and fully scrutinised.
The court system has changed beyond recognition in the wake of Covid-19. Courts, whilst open, are operating with limited caseloads, with much work being conducted remotely. Litigators have to seriously consider alternative dispute resolution to avoid the log-jam. And it is no surprise that arbitration – bespoke, private, quick to set up and able to be conducted remotely on a variety of digital platforms – has become increasingly popular.
Yet there had remained a fear that, by submitting to arbitration, a wrong decision from an arbitrator, unless very wrong, or so wrong that it ‘leapt off the page’, could not be challenged. By placing financial remedy arbitration on the same footing as financial remedy litigation when it comes to appeals, the Court of Appeal’s decision is likely to encourage more couples to see arbitration as a viable, meaningful alternative to lengthy and expensive court proceedings.
More generally, it seems possible to regard Haley as a significant step towards a closer integration of the arbitral and family regimes, and the evolution of family arbitration as a fully developed process.
The views expressed in this article are those of the authors (and not, necessarily, those of IFLA).