Arbitration clause scope and finality of specific legal questions: deliberately referred issues cannot be reopened for alleged error of law.
When parties specifically refer a pure question of law to an arbitrator for final decision, including one going to the scope of the arbitration agreement, that question is not reopened merely because a court thinks the legal conclusion is wrong. The distinction is drawn between legal questions arising incidentally and those deliberately submitted for decision; only the latter are treated as conclusively decided by the award. A broadly framed arbitration clause covering disputes arising out of or relating to the contract was also held wide enough to include a contractor's claim for increased cost of imported equipment and technical know-how, because the claim depended on the contractual bargain and its execution.
Issues: (i) Whether a specific question of law touching the arbitrator's jurisdiction, when expressly referred by the parties for decision, could later be reopened on the ground of error of law apparent on the face of the award. (ii) Whether the contractor's claim for compensation for increased cost of imported pile driving equipment and technical know-how fell within the scope of the arbitration clause.
Issue (i): Whether a specific question of law touching the arbitrator's jurisdiction, when expressly referred by the parties for decision, could later be reopened on the ground of error of law apparent on the face of the award.
Analysis: A distinction was drawn between a question of law that arises incidentally in the course of deciding a reference and a question of law specifically submitted for decision. Where parties deliberately refer a specific legal question to the arbitrator and intend his decision to be final, the award is not liable to be set aside merely because the court would have reached a different legal conclusion. This rule applies even where the question concerns the ambit of the arbitration agreement and therefore the arbitrator's jurisdiction, provided the reference to decide that question was itself specific and deliberate.
Conclusion: The specific legal question was conclusively referred to arbitration, and the award could not be set aside merely because the High Court thought the construction of the arbitration clause was erroneous.
Issue (ii): Whether the contractor's claim for compensation for increased cost of imported pile driving equipment and technical know-how fell within the scope of the arbitration clause.
Analysis: The arbitration clause was widely framed to cover every claim, right, matter or thing arising out of or relating to the contract or concerning the works. The claim arose from the performance of the contract, depended upon the contractual arrangements and correspondence between the parties, and required recourse to the contract for its determination. The contractual setting showed that the foreign exchange expenditure and import of equipment were integral to the bargain, so the compensation claim was connected with the contract and its execution.
Conclusion: The claim fell within the arbitration clause and was arbitrable.
Final Conclusion: The High Court's refusal to uphold the award was unsustainable. The arbitral award was valid and the trial court's order making it rule of court stood restored.
Ratio Decidendi: When parties specifically refer a pure question of law, including one on the scope of the arbitration agreement, for final decision by an arbitrator, the resulting award is not open to challenge merely because the court considers the legal conclusion wrong; a broadly worded arbitration clause will cover claims that arise out of or relate to the contract and require construction of its terms.
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