Whatever the Family Division is now doing is not arbitration.

November 3, 2020 Posted by:

Written by Steven Barrett

Steven Barrett is a Commercial Chancery Barrister at Radcliffe Chambers. He has the MCIArb qualification and contributes a chapter on challenging arbitration awards to Butterworths Challenges in Arbitration

As someone who practices in arbitration, Haley v Haley [2020] EWCA Civ 1369 came as something of a surprise. I would like to be more histrionic and say shock, but there is a growing sense of numbness to the Family Division which creeps in to inure those of us who dwell outside.

I have intervened in the Family Division. The TL v ML process works broadly well and I have a deep respect for Family practitioners who it seems to me suffer a level of emotional demand from clients which it is all too easy for those of us outside, to fantasise that we would be able to cope with.

We are many years from the, itself impassioned, outburst of the Court of Appeal in Petrodel v Prest [2012] EWCA Civ 1395, where Lords Justices Patten and Rimer actively criticised the division. In the end the Supreme Court used a handy resulting trust ladder that had been lying unused in Lord Sumption’s shed, to pull us all out of that particular hole – so the lesson itself was perhaps forgotten.

But what Haley has done is to end arbitration in the Family Courts.

The case is relatively simple. We are told the outcome of an arbitration was bad because it was not “fair”. This is not defined, but stated. Under the Arbitration Act there are limited grounds to challenge an arbitral award (s.68 and s.69 were attempted initially). The Court accepted these would not work as a means to challenge the award.

Instead the Court took the view that an arbitral award, freely entered into as a process and properly conducted, should not be enforced and was thus void.

The analysis of the Court for why is relatively scant. On the face of it, a form of ‘statutory top trumps’ was engaged in by perceiving a conflict between the Arbitration Act 1996 and the Matrimonial Causes Act 1973. It would be usual in an instance of perceived statutory conflict to interpret the older statute in a way which made it consistent with the newer statute. The presumption would be that by not repealing or amending the old statute, parliament either saw them as consistent or intended the newer to take precedence. It is disappointing then that that was not addressed and, as it was departed from, explained in the text.

Given the case was likely to garner wider attention than merely from Family practitioners, it was at best idiosyncratic to regularly refer to a Court of Appeal Judge as “Sir James”. The IFLA arbitration scheme was also heavily lent on – with little to explain why one scheme of arbitration mattered. If you have only one scheme, I can see why this may be confusing.

But it is normal in the world of arbitration for there to be many, often competing, schemes (not having a scheme at all is called an ‘ad hoc’ arbitration and is also perfectly permitted). Arbitration is terribly liberal. For example in commercial arbitration in London we might use either the LCIA or ICC – would or could it matter to our judges which one of those was used when seeking to set rules for arbitration as a whole? I think not.

A fair conclusion of the lengthy judgment is:

  1. The arbitral award was not fair (wrong and fair are interchangeable).
  2. If an award is not fair as the Family Courts think is fair, then the award will not be enforced
  3. One reason expressly mentioned as to why is that there may be dependent children
  4. If the award is not enforced the parties have to go back to Court

That is fine, not I think for the reasons advanced in the judgment, but it is an arguably tenable position. It just means it is now wrong, to the point of risking being actively misleading, for the Family Division to go on using the word arbitration. One cannot have one’s exceptionalism cake and not eat it.

Strikingly, no mention was made of the New York Convention 1958. Given recent political focus on International Law, we might have hoped the Court would at least seek to be cogent of the risks.

Refusing to enforce an arbitral award is prima facie a breach of the Convention. It tends to bring international commerce grinding to a halt in jurisdictions who do it and it is perceived as unhelpful. Although it is not articulated in the judgment, the UK is bound by that convention – hence we put the Arbitration Act 1996 in place.

Now, had it engaged, there is an argument in Article 5 of the Convention which the Court may have considered useful:

2. Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that:

(a) The subject matter of the difference is not capable of settlement by arbitration under the law of that country; or

(b) The recognition or enforcement of the award would be contrary to the public policy of that country.”

But if Family law is not capable of arbitration either under our law, or as a matter of public policy then why set up the IFLA? More importantly, we might ask fairly whether it is the role of the Court of Appeal to determine this question. The Arbitration Act had to be, and is, compatible with the Convention. How is Family Law, in no longer applying the Act, compatible? Why was this not addressed? Why not ask parliament to exempt Family Law from the Convention?

In cases of statutory conflict between a statute which is purely domestic and one which enshrines international law obligations; why would the purely domestic MCA prevail?

The biggest failure of the judgment was the unwillingness to engage more broadly with arbitration and what it means. The only engagement is with the 1996 Act with no clear acknowledgment that arbitration predates it. Indeed the process of arbitration predates the common law. Here, from the 16th Century the Courts in England and Wales began to regularly enforce awards. Our first Arbitration Act was in 1698. The Family Division is somewhat late to this party and it is a global party – part of a vast interconnected web of international dispute resolution.

In Haley the Court refers both the “commercial” and “civil” arbitration. But that is also at best myopic. I have close orthodox friends so I will not trespass here into the thorny theological question of just when the Beth Din began, but it is undeniably old. And there’s no need to focus on one religion either – arbitration of divorce, or ‘family matters’ has been conducted across the spectrum by a variety of organisations for many years.

Has Haley abolished all of those? Will arbitral awards given by religious tribunals now be enforced if they relate to a divorce? What of non divorce arbitration if there is a potential for impact upon dependant children?

We do not know because it was not addressed. In all I think at least 5 glaring questions remain unanswered:

  1. Is the unenforceability of arbitral awards limited to what we consider to be the Family Division or the MCA?
  2. If yes, how does that impact cases which may be begun either in the Family Division or in the Chancery Division – will the Chancery Division uphold a TLATA arbitration but the Family Division refuse to? Will the Family division enforce TLATA arbitrations it considers unfair but not MCA arbitrations?
  3. What role does the possible impact upon dependant children play in making any arbitral award unenforceable?
  4. Is longstanding religious arbitration of divorce viable in the UK?
  5. What is the impact on international couples? Is London still a viable venue for foreign couples merely to arbitrate? What if English law is voluntary used by a couple in their arbitration but the marriage would not itself qualify to be issued in the English Courts? How does this impact enforcement if assets are domiciled here?

I do not envy those who now have to advise clients on these matters. I wish I could observe this from a lofty height. But the truth is that the commercial world also involves individuals and I have had many cases which involved a relationship between parties or the possibility of dependent children. We should never pretend the Family Division is a world unto itself for that reason – as intervenor cases show.

Arbitration is a kaleidoscope of options for how to resolve a dispute – if you are going to exempt yourself from it, you need to define the boundaries fully.

The net result is said to be good for individuals, but that is again hard to sustain. The parties in Haley are noted to be of modest means and the Court appears to not observe the crushing irony in both noting there is a risk the assets will be absorbed by legal fees, and then directing the parties to spend yet more money on lawyers by sending them back to court.

Arbitration exists to allow parties to opt out of a court system. They may do so for many different reasons and have done so for many centuries. By long standing international law, they may do so. The English (and I only presume Welsh) Family Division has removed that right. The Family Court has exempted itself from International Law and the Arbitration Act. Worse it has not fully articulated why it has done so or been as cautious of the scope and impact of its actions as may have been prudent.

An analogy of bad exceptionalism is the growing use of ‘TOLATA’. The abbreviation is TLATA. That follows the convention (rule) that when we abbreviate a statute, we omit the common words. Thus the Law of Property Act is LPA, not LOPA; and TLATA is TLATA not TOLATA nor TOLAAOTA.

The words we use and the rules governing them matter. It is bad exceptionalism to not articulate why you are exceptional. As I have stated, there may be good reason for exempting divorce from arbitration. But arbitration as a word also matters. It no longer exists in Family Law. As a word, it should accordingly no longer be used – because as a matter of law it no longer exists.

If we have a rule and we do not follow it then we should explain why we are not following it. As with language, so with law. Always we must use cogent and robust reasoning – every child knows that saying “but this is our way” is no justification at all. If our legal reasoning fails, then we have made a mistake.

The lazy use of TOLATA would not survive an appeal on any cogent rational basis. Haley may stand a better chance, but if it does, it will not in my view be on the grounds set out by the Court of Appeal. Much as in Petrodel, we may once more require a rummage in the Supreme Court’s shed. The Supreme Court would, I hope at least, recognise exceptionalism when it is being invoked, explain why it is needed and properly define the boundaries.