ECtHR upholds an agreement to forgo reasoning in an arbitral award

The central legal question in this case was whether any legal provisions – in particular, the Finnish Constitution and Article 6, § 1 of the European Convention for the Protection of Human Rights and Fundamental Freedoms (the "ECHR") – imposed a non-waivable requirement that arbitral awards state reasons. The ECtHR concluded that no such requirement applied under the circumstances.

Jiitee Työt concerned a dispute between two companies in Finland over a construction contract. The parties referred their claims to an expedited arbitration under the rules of the Finland Arbitration Institute (FAI). Those rules provide that final awards in expedited cases “shall not contain reasons, unless a party has requested a reasoned award within the time-limit set by the sole arbitrator.” In the arbitration, "the applicant company had expressly waived its right to a reasoned decision on three separate occasions". The sole arbitrator issued a short unreasoned award in December 2022, granting the claimant approximately EUR 329,000 plus interest and costs, and specifying only the relief granted. The losing party applied to the Helsinki District Court to annul the award on ordre public grounds, arguing that a completely unreasoned award violated guarantees of a reasoned judgment in the Finnish Constitution and the ECHR. The District Court (in January 2024) and subsequently the Helsinki Court of Appeal rejected the challenge. 

The ECtHR found no violation of Article 6(1) of the Convention, either. The Court reasoned that parties who freely agree to arbitrate can waive certain procedural rights inherent in litigation (such as full judicial reasoning), as long as the waiver is free, lawful, and unequivocal. The Court determined that Jiitee Työt’s waiver met these requirements. 

And this is sensible, in our view. As the government argued towards the Court, aligning itself with arguments made by proponents of expedited arbitration rulesets more broadly, "Waiving the right to a reasoned decision" can have "significant positive effects from a party’s perspective – namely, the award would be obtained more quickly and at a lower cost, and business secrets could be protected."

The Court also underscored that the applicant still had access to judicial review for irregularities – and overall that there were still "several procedural safeguards making it possible to object to any failure to comply with the Rules and to have an arbitral award declared null and void and/or set aside".

The outcome in this case aligns with most legal authorities, which agree that arbitral awards should generally contain reasons by default, but also recognize that this requirement can be waived by the parties. The decades-old UNCITRAL Model Law on arbitration – adopted widely across the world – includes Article 31(2), which provides that an award “shall state the reasons upon which it is based, unless the parties have agreed that no reasons are to be given.” In other words, the default rule is a reasoned award, but party autonomy allows opting out. Similarly, major institutional rules (including expedited or simplified procedures) may permit or presume no-reason awards unless a party insists otherwise – a prime example being the Rules for Expedited Arbitration of the Finland Chamber of Commerce which governed the Jiitee Työt arbitration. National courts around the world have generally upheld this principle: they consider a failure to give reasons to be a potentially serious defect only if the parties did not consent to it or if lack of reasons compromises fundamental fairness in an extreme way. But where parties knowingly agreed to dispense with reasons, courts will typically not treat the missing reasons as a violation of public policy or natural justice in itself.

The general rationale for requiring reasons is rooted in fairness and transparency: a losing party should understand how and why it lost. Even a minimal explanation fosters a sense that there is a rational basis / lack of arbitrariness behind an arbitral award, and also facilitates judicial oversight.

Notably, the UNCITRAL Model Law does not list “lack of reasons” as an independent ground for set-aside, but case law applying the law has typically considered that a complete absence of reasons (without a valid waiver) could implicate certain challenge grounds under the law, including procedural irregularity (§34(2)(a)(iv)) or a public policy violation (§34(2)(b)(ii)).

Jurisdictions differ in how strictly they enforce the duty to provide reasons (when it has not been waived). In Sweden, for example, the leading case is Soyak International Construction & Investment Inc. v. Hochtief AG (Swedish Supreme Court, 31 March 2009, NJA 2009 s.128), in which the tribunal had allegedly given scant reasons. The Swedish Supreme Court affirmed there that only a total lack of reasons, or reasons that are so lacking that they can be equated to a total lack of reasons, can constitute a procedural error justifying annulment. It held that lesser problems do not suffice – reflecting a pro-arbitration stance that weighs the interest of full reasoning against the interest of finality. The result in Soyak was that the award stood, since the arbitrators had provided at least some reasoning on all relevant points, thus clearing the (not especially high) threshold for adequate reasoning. Another Swedish case from last year confirmed the same principles, as Schjødt has previously reported.

By contrast, Sylvan Learning, LLC v. EducAsian Ltd. [2024] HKCFI 751, a case decided in Hong Kong, shows a court willing to intervene – as long as an award is almost entirely unreasoned (without consent of the parties to such an approach). In that case – an ICDR arbitration under New York law – the sole arbitrator recited contract clauses, but little else, making its final order without addressing the parties’ arguments. The Hong Kong Court of First Instance declined enforcement of the award on public policy grounds, reasoning that the “structural integrity” of the process was undermined by the lack of any reasoning on central issues, raising doubt whether the relevant issues "had been considered at all". The court stressed it was an exceptional situation: Hong Kong law strongly favors finality and normally reads arbitral awards “generously”, requiring a “clear and virtually inescapable” inference of having "failed to consider an important issue" before finding a violation warranting setting aside an award.

Other jurisdictions reflect that there can be (further) nuances in the reasoning requirement, and perhaps more solicitude for challengers asserting lack of adequate reasoning. Swiss arbitration law imposes a rather balanced approach to the duty to provide reasoning in arbitral awards. As the Swiss Supreme Court wrote in a case where it set aside an award for a partial failure of reasoning (Judgment of 17 April 2013, 4A_669/2012, § 3.1), "The right to be heard … imposes on the arbitrators a minimum duty to examine and address the relevant issues. This duty is breached when, inadvertently or through misunderstanding, the arbitral tribunal fails to consider allegations, arguments, evidence, and offers of proof presented by one of the parties that are important for the decision to be rendered. … However, the arbitrators are not obligated to address all the arguments raised by the parties, so they cannot be faulted, on the grounds of a violation of the right to be heard in adversarial proceedings, for failing to refute, even implicitly, an objectively irrelevant argument."

Even before Jiitee Työt, it was generally widely accepted that parties may waive the requirement of a reasoned award. As mentioned above, UNCITRAL Model Law (originally released in 1985), Article 31(2), enshrines this principle, and national statutes based on the Model Law tend to follow suit. So do arbitration rulesets, many of which take inspiration at least in part from the Model Law. 

Another Nordic example is the Rules of the Arbitration Institute of the Stockholm Chamber of Commerce (SCC): under the current "regular" SCC Rules, the default is that an award will be reasoned – unless all parties agree otherwise (§42(1)); whereas under the Expedited Rules, the default is that an award need not be reasoned – unless a party requests reasons no later than the closing statement (also §42(1) in this alternative ruleset). 

English law provides the same as the standard SCC Rules, recognizing parties’ ability to contract out of a reasoned award (see § 52(4) of the Arbitration Act).

Against the above background, the Jiitee Työt decision seems to aligns with mainstream approaches in the arbitration world. Indeed, it would have been surprising had the Court ruled otherwise – that an unreasoned award (agreed to voluntarily by a party represented by counsel in a commercial arbitration) is per se incompatible with the ECHR. Arbitration users and practitioners can take comfort that expedited/express procedures resulting in shorter (and hopefully faster and less expensive) awards are generally not at odds with international due process norms. 

The case also serves as a caution: many procedural rights are subject to waiver. If parties wants reasoned awards, they must voice their expectations at the appropriate time – ideally by avoiding a waiver in the agreement itself, but also by making appropriate objections later, to the extent such opportunities are provided. One should not expect to be able later to invoke ordre public arguments to undo one's free agreements.