Key takeaways
Arbitrators can award costs after jurisdictional wins
Court confirms tribunals retain discretion even when claims are dismissed early.
Cost orders reinforce efficiency in arbitration
Discourages weak jurisdictional challenges and promotes fair cost recovery.
Careful drafting of arbitration clauses is essential
Clear terms help avoid disputes over tribunal powers and cost allocation.
Ravfox Ltd -v- Bexmoor Ltd [2025] EWHC 1313 (Ch)
The Court has held that an arbitrator who decided he had no jurisdiction over the substantial dispute nonetheless had the power to make a determination as to the costs of the jurisdictional challenge.
This is an issue that is not specifically dealt with in the Arbitration Act 1996 (the Act) but has been expressly addressed in section 6(3) of the Arbitration Act 2025 as a way of putting the matter beyond doubt, rather than changing the law.
The background facts
The underlying dispute related to the amount of service charge payable by Bexmoor Ltd, the sub-lessee of premises on an industrial estate to Ravfox Ltd, the head lessee. The sub-lessee referred the dispute to the Royal Institution of Chartered Surveyors (RICS) for arbitration. The arbitrator accepted appointment and gave directions for the future of the arbitration proceedings.
In its arbitral submissions, the sub-lessee argued that it was not a party to the sub-lease mentioned in the referral to arbitration but to another sub-lease. On that basis, in its reply submissions, the head lessee challenged the arbitrator’s jurisdiction because, on its own case, the sub-lessee had said it was not bound by the sub-lease. The head lessee also sought its full costs and expenses of the arbitration from the sub-lessee.
In a subsequent award (the Main Award), the arbitrator upheld the jurisdictional challenge. Further, given that the arbitrator found he had no jurisdiction over the dispute referred to arbitration, he concluded that he did not have jurisdiction to determine the costs of the jurisdictional challenge.
The head lessee disagreed and contended by email that the arbitrator had jurisdiction to do so as both parties had agreed that the arbitrator had jurisdiction and the costs award requested was consequential upon the jurisdictional decision in the Main Award.
The arbitrator responded in a short unsigned email, maintaining he did not have the requisite jurisdiction but was happy for the issue to be put before the Court.
The head lessee applied to the Court for relief on three alternative bases: an appeal on a point of law under s.69 of the Act; a challenge on the grounds of serious irregularity under s.68 of the Act; and an application for a costs award under s.63 of the Act (“recoverable costs of the arbitration”).
The Court decision
S.63 of the Act
Pursuant to s.63(4) of the Act, if the tribunal does not determine the recoverable costs of the arbitration, any party to the arbitral proceedings may apply to the Court to determine those costs as it thinks fit.
However, in circumstances where the arbitrator did not make an order in respect of the costs of the jurisdictional challenge, the Court did not believe it had the power to make such an order. The Court distinguished the decision in Rollitt v. Ballard [2017] EWHC 1500 (TCC), on which the head lessee sought to rely. That was a case where the arbitrator had made a costs award, both parties agreed he had the power to make a costs award, and one party was seeking to challenge that award under s.68 or s.69 of the Act.
If the arbitrator was wrong to think he had no jurisdiction to make an award of costs in respect of the jurisdictional challenge, then the head lessee could potentially challenge that decision under s.68 or s.69 of the Act.
Arbitrator’s jurisdiction
The arbitrator was wrong to conclude that if he had no jurisdiction pursuant to the referral made to him, he had no jurisdiction to award costs to the party that made the successful jurisdictional challenge.
Such a conclusion would mean that a respondent making a jurisdictional challenge would be at risk of an adverse costs order if the jurisdictional challenge failed and would necessarily bear its own costs if the jurisdictional challenge succeeded, whereas the referring party would be able to recover the costs of successfully defending a jurisdictional challenge but would be at no risk of an adverse costs order if the jurisdictional challenge succeeded. That was an unattractive conclusion.
Furthermore, in Rallitt -v- Ballard, the Court expressly affirmed the arbitrator’s jurisdiction to deal with costs in such circumstances, and this formed part of the ratio.
The Court referred to the Law Commission’s “Review of the Arbitration Act 1996”. The Law Commission noted that some stakeholders taking part in the consultation process had expressed uncertainty on this issue. The Law Commission’s provisional view was that an arbitral tribunal probably had jurisdiction to make an award on costs of the arbitration incurred up to the point that the tribunal ruled that it had no jurisdiction.
The Law Commission recommended that this should be provided for expressly in the Arbitration Act 2025 and, consequently, a new provision has been incorporated into the new Act to make it clear that the tribunal has this power.
S.69 appeal
A s.69 appeal must be on a question of law arising out of an award made in the proceedings. However, in the Court’s view, the costs determination made by the arbitrator was not an award for these purposes. In principle, an award was a final determination of a particular issue or claim in the arbitration. In this case, the arbitrator was not purporting to determine an application for costs. He was not purporting to make an award; he was declining to make an award.
Therefore, the only award that could ground a s.69 appeal was the Main Award. Such an appeal was, however, out of time and the Court refused to extend time for appeal. Among other considerations, the delay was substantial and unreasonable. The applicant head lessee had not complied with the procedural requirements for bringing the appeal and had failed to address the appeal properly.
The Court added that even if the application for leave to appeal had been made within time or it had been minded to grant an extension, it did not believe that the conditions for grant of leave under s.69(3) were met. Specifically, while the arbitrator’s decision with regard to his jurisdiction to award costs was wrong, it was not “obviously wrong.” Nor was the legal question one of general public importance in the sense of requiring judicial determination on an appeal from an arbitration award. The point was also unlikely to arise again in the future, given that it has been addressed in the new Act.
S.68 challenge
The arbitrator did not fail to deal with the issue of costs in the Main Award because, although he did not expressly say anything about costs as between the parties, it was inherent in his reasoning that he was deciding that he could not make an award in that regard. Therefore, the Court did not think that there was a serious irregularity within the terms of s.68.
The head lessees’ challenges were, therefore, dismissed.
Comment
This case highlights the importance of complying with time limits on appeals or challenges to arbitration awards.
Those seeking to appeal an arbitration award before the Court should do so within the relevant 28-day time limit or else make sure they have sufficiently good reason for any delay such that the Court might be inclined to extend time. Opportunistic arguments that time runs not from the date of the award but from the later date of the release of the award are unlikely to be persuasive, particularly where the delay in the release of the award is due to late payment of the arbitrator’s fees.
The prospective appellant should also ensure that it meets all the procedural requirements for making the appeal.
