In Ravfox Ltd v Bexmoor Ltd [2025] EWHC 1313 (Ch), HHJ Keyser KC (sitting as a judge of the High Court) considered the following two issues: if one party to a dispute makes a reference to arbitration under the Arbitration Act 1996 and the arbitrator accedes to the respondent’s challenge to his jurisdiction, does the arbitrator have the power to award the respondent its costs of the jurisdictional challenge? And whether, if the arbitrator does not have the power to make such an order (or does not exercise the power that he does have to make such an order), the court has the power to make such an order. Although these issues are not dealt with by the 1996 act, they have been addressed by the Law Commission’s Review of the 1996 act and section 6(3) of the Arbitration Act 2025.

R was the head-lessee and responsible for managing an industrial estate, including collecting the ground rent and a service charge from the sub-lessees to whom the individual units on the industrial estate were sublet. The sub-lessee, B, disputed the amount of service charge it was required to pay and referred the dispute to arbitration. B argued that it was not a party to the sub-lease mentioned in the referral to arbitration but to another sub-lease. R challenged the arbitrator’s jurisdiction on the basis that B had, on its own admission, said it was not bound by the sub-lease. R also sought its costs and expenses of the arbitration from B. In his main award, the arbitrator upheld the jurisdictional challenge and concluded that, because he did not have jurisdiction to hear the matter, he did not have jurisdiction to determine the costs of the jurisdictional challenge. R argued that the arbitrator had jurisdiction to award its costs because both parties had agreed that the arbitrator had jurisdiction and the costs award requested was consequential upon the jurisdictional decision in the main award. R applied to the court for relief on three alternative grounds: appeal on a point of law (section 69); challenge on the grounds of serious irregularity (section 68); and an application for a costs award (section 63 – recoverable costs of the arbitration).

It should be noted that section 63(4) provides that if the arbitral 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. R relied on Rollitt v Ballard [2017] EWHC 1500 (TCC) in which the arbitrator had made a costs award.

The judge held that he did not have the power to make a costs order in respect of the jurisdictional challenge where the arbitrator did not make such an order. He distinguished Rollitt by explaining that both parties in that case had agreed that the arbitrator had the power to make a costs award. Further, Rollitt concerned one party challenging that award under sections 68 or 69. The judge held that R could potentially challenge the arbitrator’s decision that he had no jurisdiction on the costs issue under sections 68 or 69.

The judge found that the arbitrator was wrong to conclude that he had no jurisdiction to award costs to R. The judge explained that Rollitt confirmed the arbitrator’s jurisdiction to deal with costs in such circumstances. The arbitrator’s conclusion on costs meant that a respondent making a jurisdictional challenge would be at risk of an adverse costs order if the challenge failed and would have to bear its own costs if the challenge succeeded, whereas the referring party would be entitled to recover the costs of successfully defending a jurisdictional challenge but would be at no risk of an adverse costs order if the challenge succeeded. The judge also considered the Law Commission’s review and noted that some respondents to the consultation had expressed uncertainty on this issue and that the commission’s provisional view was that an arbitral tribunal 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 commission recommended that this should be provided for expressly in the 2025 act and, consequently, a new provision has been incorporated into the 2025 act to make it clear that the tribunal has this power.

The judge found that there was no serious irregularity in the arbitrator’s failure to deal with the issue of costs in the main award because it was inherent in his reasoning that he was deciding that he could not make an award in that regard.

The judge explained that a section 69 appeal must be on a question of law arising out of an award. The arbitrator’s decision on the costs issue was not, however, an award for the purposes of section 69 because the arbitrator was not purporting to determine an application for costs and was therefore declining to make an award. Although the main award could be challenged under section 69, it was out of time and B had failed to comply with the procedural requirements for bringing the appeal. The judge also explained that even if the application for leave to appeal had succeeded, the conditions for grant of leave under section 69(3) were not met because the arbitrator’s decision on costs did not meet the high threshold of being ‘obviously wrong’.

The decision in Ravfox exposes a subtle but significant procedural gap in the 1996 act regarding costs awards following successful jurisdictional challenges. Keyser’s judgment confirms that an arbitral tribunal retains jurisdiction to award costs incurred up to the point it determines it lacks substantive jurisdiction. By rejecting the arbitrator’s contrary position, the court reinforced the principle that cost recovery should not depend on the outcome of a jurisdictional ruling alone, and that fairness must be maintained for both referring and responding parties. However, the court’s inability to step in and award costs where the arbitrator erroneously declines jurisdiction underscores the limited remedial scope under the 1996 act – particularly where procedural requirements for challenges under sections 68 and 69 are not met. The commission’s review rightly identified this lacuna, and the legislative response in section 6(3) of the 2025 act now removes any doubt: arbitral tribunals have the power to award costs even when dismissing a claim on jurisdictional grounds. 

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