RUSSIAN MINISTRY OF JUSTICE CLARIFIES RUSSIAN ARBITRATION LEGISLATION UPON JOINT REQUEST OF HKIAC AND VIAC

In February 2020, the Hong Kong International Arbitration Centre (the “HKIAC”) and the Vienna International Arbitration Centre (the “VIAC”) jointly applied to the Russian Ministry of Justice (the “MOJ”) and the Council for the Development of Arbitration at the MOJ (the “Council”) for clarification of certain “grey areas” of Russian Arbitration legislation (the “Joint Request“). Both arbitration institutions have recently published the response issued by the Working Group No. 2 on Foreign Arbitral Institutions of the Council (the “Working Group”) on the questions posed in the Joint Request (the “Response“)[1]. Although the position in the Response was declared to be non-binding on the Russian courts, the Working Group’s views might impact Russian court practice on the reformed arbitration legislation.

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A decade of emergencies in Stockholm

The SCC Arbitration Institute was at the forefront of the development of emergency arbitration proceedings, which now constitute a permanent part of the international arbitration landscape. The end of 2019 marked a decade since the arbitral institution’s innovative rules amendment. In April this year, the SCC released a report analysing its emergency arbitration statistics, which demonstrate the success of these once novel provisions.

The introduction of emergency arbitration

In January 2010, the SCC introduced into its rules Appendix II, which provided for emergency arbitration. While there were some precursors to emergency arbitration rules (such as the ICC pre-arbitral referee procedure and the ICDR article 37 emergency measures provisions), the emergency arbitration rules implemented by the SCC represented one of the first examples of modern emergency arbitration provisions. Since these rules were promulgated, other leading institutions have followed suit, issuing their own emergency arbitration rules with a variety of refinements, for instance the SIAC, the ICC, the HKIAC and the LCIA.

The emergency arbitration rules allowed parties for the first time to make an application to the SCC for the urgent appointment of an emergency arbitrator who would be empowered to make emergency decisions on interim measures before the case had been referred to the arbitral tribunal. An emergency decision on interim measures was to be made not later than five days from the date when the application was referred to the “Emergency Arbitrator”. The SCC board could extend the five-day time limit upon a reasoned request by the Emergency Arbitrator, or if otherwise deemed necessary.

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ENGLISH COURT GRANTS ANTI-SUIT INJUNCTION RESTRAINING FOREIGN PROCEEDINGS IN BREACH OF ARBITRATION AGREEMENT INCORPORATED BY REFERENCE IN BILLS OF LADING

In Seniority Shipping v City Seed Crushing Industries, “Joker”, [2019] EWHC 3541 (Comm), the English Commercial Court granted an anti-suit injunction restraining proceedings brought by City Seed before a Bangladeshi court in breach of an arbitration agreement incorporated by reference in the bills of lading under which the dispute arose (the “Bills of Lading”). The Court first found that the arbitration agreement had been effectively incorporated from the relevant voyage charter and considered the law applicable to this issue of incorporation. The Court then concluded that, despite some steps taken by Seniority Shipping in the foreign proceedings, there was no good reason not to grant the anti-suit injunction.

Background

Seniority Shipping Corporation (“Seniority Shipping”) were owners of the m.v. Joker, a ship which collided with a tanker within Bangladesh waters, causing damage to cargo. City Seed Crushing Industries (“City Seed”) – as holder of the Bills of Lading and the intended recipient of the cargo – then filed a suit in Bangladesh (the “Cargo Claim”). The Bangladeshi court ordered the arrest of the ship.

Seniority Shipping subsequently issued proceedings in the English Commercial Court and filed an application for an anti-suit injunction in respect of the Cargo Claim on the basis that any claims arising under or relating to the Bills of Lading should have been referred to arbitration. Seniority Shipping argued that:

  • the Joker was operating under a time charter between Seniority Shipping and DHL Project & Chartering Ltd (“DHL”) and a voyage charger between DHL and COFCO (the “Voyage Charter”).
  • Clause 6 of the Voyage Charter, entitled “Law & Arbitration Clause” provided that: (a) the Voyage Charter was governed by English law; and (b) disputes which have not been settled shall be referred to arbitration in London in accordance with the small claims procedure of the LMAA.
  • The Bills of Lading incorporated this arbitration agreement by reference. Based on the Congenbill 1994 form (a standard form designed to be used with charter-parties), the Bills of Lading provided that “all terms and conditions… of the Charter Party [i.e. the Voyage Charter], dated as overleaf, including the Law and Arbitration Clause, are herewith incorporated” (emphasis added).

The Commercial Court granted an interim injunction restraining City Seed from continuing or further prosecuting the Cargo Claim. While Seniority Shipping participated in the Cargo Claim before the Bangladeshi court (discussed below), City Seed did not participate in the action before the Commercial Court.

The Court’s decision

In its decision on the question of a final anti-suit injunction, the Court considered two issues: (a) was the incorporation of the arbitration agreement in the Bills of Lading effective; and (b) if so, should the Court grant an anti-suit injunction restraining the Cargo Claim in breach of the arbitration agreement?

Was the incorporation of the arbitration agreement effective?

The Court began its analysis by determining the law applicable to the issue of incorporation. Applying English conflict of laws rules, the Court noted that the question of whether the Bills of Lading incorporated the express choice of English law from the Voyage Charter would typically be governed by English law by virtue of Article 10(1) of the Rome I Regulation. This Article 10(1) provides that “the existence and validity of a contract, or of any term of a contract, shall be determined by the law which would govern it under this Regulation if the contract or the term were valid” (emphasis added). However, Article 10(1) is subject to Article 10(2) of the Rome Regulation (addressed below).

If the choice of English law was incorporated from the Voyage Charter, the question whether the arbitration clause from the Voyage Charter was incorporated in the Bills of Lading would also be governed by English law (based on conflict of law rules under English common law as the Rome I Regulation does not apply to arbitration agreements.)

The Court found that if the issue of incorporation was governed by English law, it could “straightforwardly” conclude that the arbitration clause from the Voyage Charter had been incorporated in the Bills of Lading: the Bills of Lading expressly incorporated the “Law and Arbitration Clause” from the Voyage Charter and that was sufficient as a matter of English law.

Therefore, the only question was whether Article 10(2) of the Rome I Regulation precluded the application of English law to the issue of incorporation. In essence, pursuant to Article 10(2), the effectiveness of the incorporation of the choice of English law from the Voyage Charter would be determined by reference to the law of Bangladesh (i.e. the law of the country in which City Seed has habitual residence) if it was unreasonable to apply English law to that question.

The Court found that it was “eminently reasonable and in accordance with the ordinary expectations of international trade” to determine the effectiveness of the incorporation by reference to English law. The Court explained that City Seed, as a buyer who wished to leave to its seller responsibility for arranging carriage, had full freedom to contract and specify the terms on which the seller should cause it to become party to the Bills of Lading with Seniority Shipping.  In the absence of evidence to the contrary, the Court considered that the Bills of Lading, which were in a very well-known, widely used form, may be taken to have conformed with City Seed’s contractual requirements. If City Seed did not wish to refer disputes to London-seated arbitration or agree to any other terms of the Bills of Lading or the Voyage Charter whose terms were incorporated in the Bills of Lading, it was free to choose to contract on that basis.

In conclusion, the Court held that the incorporation of the arbitration agreement in the Bills of Lading was effective and City Seed was therefore bound to refer any disputes relating to the Bills of Lading (in this case, concerning the damage to the cargo) to London-seated arbitration.  It also followed that the Cargo Claim – the proceedings before the Bangladeshi court – was in breach of this arbitration agreement.

Should the Court issue an anti-suit injunction restraining the Cargo Claim?

It is well settled that, where foreign proceedings are brought in breach of a London arbitration agreement, the Court would enforce the negative aspect of that arbitration agreement (i.e. the obligation on the parties not to bring such foreign proceedings) by granting an anti-suit injunction unless there are good reasons not to restrain the foreign proceedings (including if they are covered by the intra-EU Brussels Regulation). Referring to The Angelic Grace, [1995] 1 Lloyd’s Rep 87, the Court considered that it would be right to restrain the Cargo Claim unless (a) Seniority Shipping had allowed the Cargo Claim to proceed so far and/or had participated in it to such an extent that it would now be inappropriate to interfere, or (b) there was some other good reason why City Seed should not be restrained.

As to (b), the Court held that the burden of establishing good reason lay upon City Seed.  By choosing not to participate in the injunction proceedings, City Seed had chosen not to seek to discharge the burden.  Nevertheless, the Court did briefly consider whether the possibility that City Seed would not comply with the anti-suit injunction was a good reason not to grant it (on the basis that equity would be acting in vain). The Court concluded that this should not affect its analysis because: (i) the fact that City Seed would not comply with the anti-suit injunction could not be inferred simply from its refusal to participate in the proceedings and/or other facts; and (ii) the Court should not lightly hold that it would be acting in vain if it granted the anti-suit injunction – the prospect of contempt proceedings against City Seed, its directors and/or insurers should not be assumed to be without value.

As to (a), the Court considered why, and the extent to which, Seniority Shipping had participated in the Cargo Claim before the Bangladesh Court. The Court found that while there was not complete inactivity on Seniority Shipping’s part before the Bangladeshi Court, Seniority Shipping’s participation did not advance the Cargo Claim to such an extent as to make it now inappropriate to interfere.  In particular, the Court noted:

  • Seniority Shipping issued proceedings in the English court and applied for an anti-suit injunction “perfectly promptly” (as the Cargo Claim was filed on 14 May 2019 and the English court proceedings were issued on 3 June 2019).
  • Seniority Shipping had neither done nor allowed anything to be done to advance the proceedings before the Bangladesh Court. Its participation was restricted to steps which were reasonably required to free the Joker from arrest, which arrest was a result of a breach of contract by City Seed.
  • The steps taken by Seniority Shipping could not be regarded as voluntary submission to the jurisdiction of the Bangladeshi Court.
  • Those steps were taken by Seniority Shipping alongside “clear and repeated protest” that City Seed was obliged to refer the matter to arbitration.
  • Seniority Shipping’s three appearances before the Bangladesh Court to obtain extensions of time to file a Written Statement of Defence should not have been necessary and “were capable in principle, and if judged in isolation, of amounting to a voluntary submission … to the jurisdiction of the Bangladesh court”. However, in the context of the other steps Seniority Shipping had taken (the bullet points above), the Court did not view Seniority Shipping’s appearances as amounting to voluntary submission.

In conclusion, the Court found that there was no good reason not to restrain the foreign proceedings and granted a final anti-suit injunction.

Comment

The decision in Joker is a helpful reminder that where foreign proceedings are brought in breach of a London arbitration agreement, the English courts may be prepared to grant an anti-suit injunction. More significantly, the decision provides useful guidance for applicants faced with foreign proceedings and seeking anti-suit injunctions:

  • An application for an anti-suit injunction should be made promptly. We have previously covered cases (see, for example, here and here) where English courts have denied delayed applications for anti-suit injunctions.
  • Careful consideration should be given to whether any steps taken in the foreign proceedings may amount to voluntary submission to the jurisdiction of the foreign court.

As we have previously noted, if the claimant in the foreign proceedings does not voluntarily comply with the English court’s anti-suit injunction, and the applicant is unsuccessful in challenging jurisdiction in the foreign court, the applicant may wish to consider commencing arbitration proceedings (including, potentially for breach of the arbitration agreement) in order to obtain an award. This may be appropriate where the claimant in the foreign proceedings has assets in the UK or in another New York Convention country other than that in which the vexatious claims are brought.

For further information, please contact Nicholas Peacock, Partner, Divyanshu Agrawal, Associate, or your usual Herbert Smith Freehills contact.

Nicholas Peacock
Nicholas Peacock
Partner
+44 20 7466 2803

Divyanshu Agrawal
Divyanshu Agrawal
Associate
+44 20 7466 2593

ENGLISH COURT OF APPEAL ORDERS NON-PARTY TO GIVE EVIDENCE IN SUPPORT OF NEW YORK-SEATED ARBITRATION

In a recent judgment, the English Court of Appeal determined that English courts do indeed have jurisdiction under s44(2)(a) of the English Arbitration Act (“the Act”) to issue an order compelling a non-party to an arbitration agreement to give evidence in support of arbitration proceedings seated both inside and outside England and Wales. In A and B v C, D and E [2020] EWCA Civ 409 (“the Court of Appeal Decision”), the Court of Appeal deviated from a line of first instance decisions which had held that the English courts did not have the power to make orders against non-parties under s44. Having considered the facts of the case, the Court of Appeal held that it would exercise its discretion and grant the order. Accordingly, the Court of Appeal overturned the High Court decision (“the First Instance Decision”), which we had previously written about here.

Background

C and another party applied to the Commercial Court to compel the third defendant, E (a non-party to the New York seated arbitration), to give evidence in England on certain bonus payments. It remained an issue in the underlying arbitration whether these were deductible from the amounts claimed by C and another party in the underlying arbitration. E was involved in the negotiations regarding these bonus payments. The arbitral tribunal in New York delayed the closing of the evidentiary phase of the arbitration to enable this appeal to be heard and judgment to be given.

The First Instance Decision

In the First Instance Decision, the court acknowledged that the wording of s44 of the Act might suggest that s44(2)(a) could apply to give the court the power to issue an order compelling a non-party to give evidence in support of a foreign seated arbitration. However, given the decisions in earlier cases on s44, this was not a simple question.

The Commercial Court referred extensively to the decisions in Cruz City Mauritius Holdings v Unitech Limited [2014] EWHC 3704 (Comm) (“Cruz City”) and DTEK Trading SA v Morozov [2017] EWHC 1704 (Comm) (“DTEK”). In light of these authorities, the Court determined that s44(2)(a) was confined to parties to the arbitration agreement. This was due to the following reasons:

  • s44 was stated to be subject to contrary agreement between the parties;
  • a number of other subsections pointed towards an intra-parties interpretation of s44 as a whole (such as subsections (4), (5), (6), and (7));
  • if Parliament had intended to permit the court to make third party orders in support of arbitrations around the world, it would have expressly said so in the Act; and
  • a difference in treatment between different subsections of s44 was unattractive without a difference in language.

Permission was given to appeal the decision to the Court of Appeal.

The Court of Appeal Decision

Overruling the First Instance Decision, the Court of Appeal unanimously found that English courts do have jurisdiction under s44(2)(a) to compel a non-party to give evidence in support of an arbitration. Lord Justice Males, who had decided Cruz City, issued a concurring opinion to explain his decision.

This decision was based on the following considerations:

  1. S44(1) must be read alongside s2(3) and s82(2):

The Court of Appeal considered that s44(1) of the Act must be read alongside s2(3) and s82(2) of the Act. When read with these provisions, it was clear that the English courts have the same powers in relation to foreign-seated arbitrations as they would in relation to civil proceedings before the High Court or a County Court.

  1. The meaning of “witnesses”:

The Court held that the phrase “the taking of evidence of witnesses” in s44(2)(a) was broad enough linguistically to include all witnesses, and not just those who were parties to the arbitration. As the Act distinguished between witnesses and the parties in other sections when necessary, if Parliament had intended any different definition of witnesses in s44(2)(a), confining the term to parties only, it would have made this clear. The Court observed that it would be rare for a witness to also themselves be a party to the arbitration.

  1. Powers of the court in relation to English court proceedings:

The key question was what powers the court had in relation to non-parties in English court proceedings. It was clear that the English courts had the power to compel non-parties to give evidence by deposition under the Civil Procedure Rules (“CPR”) 34.8. While the Court acknowledged that this would create the “somewhat anomalous” situation that an English court can give an order requiring a deposition in support of a foreign arbitration, when this would not be possible in support of foreign court proceedings, the Court decided that this did not justify interpreting s44(2)(a) as applying only to parties to the arbitration.

  1. The relevance of other s44 subsections:

The various other subsections of s44 did not point against interpreting s44(2)(a) as applying to non-parties. The opening words of s44(1) and s44(4) were better understood as “gateways”, which needed to be satisfied before the court could exercise its discretion. Once the threshold was met, the court had the same powers regarding the taking of evidence of witnesses as it would in English court proceedings. The Court further observed that while the Respondents noted that third parties would not be able to appeal (given the limitation in s44(7)), this issue was “more apparent than real”. In practice, a first instance judge is likely to grant permission to appeal, and in any event this issue was not enough to justify interpreting s44(2)(a) so that it did not apply to non-parties.

  1. Practical use of the power to order a deposition was irrelevant:

The Court of Appeal rejected the Respondents’ argument that the power to order a deposition in civil litigation proceedings was rarely used in practice and only in limited circumstances. There was no reason to justify interpreting CPR 34.8 narrowly such that it only applied when a witness was unable to attend trial. There was in fact no reason why the court should not have the power to order the deposition of a witness in support of a domestic arbitration, for example in circumstances in which a reluctant witness was unwell or about to travel abroad, but the arbitrators were unavailable to hear the evidence at that time.

  1. The Respondents’ interpretation of s44(2)(a) would give the sub-section “little or no content”:

The Court rejected the Respondents’ narrow interpretation of s44(2)(a) on the grounds that it would mean the sub-section had “no or little content”. It was clear from previous authority that the section could not apply to inwards letters of request from arbitral tribunals. While it could apply to outward letters of request to a foreign court in support of an arbitration seated within England and Wales, it was hard to see how this would ever be useful in respect of a foreign-seated arbitration.

  1. It was not relevant that different subsections of s44(2) might fall to be treated differently:

Any apparent inconsistency could be explained on the basis of different language in each subsection. The Court of Appeal was content to leave the decisions in Cruz City and DTEK on their respective subsections to stand until any future appeal on either subsection.

  1. The reasoning of the decision in Commerce and Industry Insurance was compelling:

Finally, the Court of Appeal was persuaded by the earlier case of Commerce and Industry Insurance v Certain Underwriters at Lloyd’s [2002] 1 WLR 1323. This first instance decision directly dealt with the issue and held that an English court could issue an order in support of a foreign-seated arbitration to compel a witness who was a non-party to give evidence (although in this earlier case, the court had decided not to exercise its discretion to make the relevant order). The Court of Appeal cited the section of this judgment that considered it relevant that the arbitrators in New York had the power under s7 of the United States Federal Arbitration Act to subpoena witnesses to give deposition evidence in the form of oral testimony.

The Court of Appeal reiterated that in order to justify the court granting an order of this kind, the applicant must satisfy the relevant test. This requires the applicant to provide an explanation of the nature of the proceedings, identify the issues on which the witness was to give evidence, give reasons why the witness would be able to give evidence on these issues, and justify why the evidence is necessary for the just determination of the dispute.

In relation to the foreign-seated arbitral tribunal, the Court of Appeal noted that unless the parties are agreed, the party seeking the witness evidence will need the permission of the tribunal under s44(4) in order to make an application. In addition, the court always has a discretion under s44 whether to make the  order sought. In the case of a foreign arbitration, the court also has a specific discretion under s2(3) not to make an order if the court considers it inappropriate. In the circumstances of the case, the Court found that it was appropriate to make the order.

Comment

The decision of the Court of Appeal has provided some much-needed clarity on whether English courts have the power to issue orders under s44(2)(a) compelling a non-party witness to give evidence in support of arbitrations. This case has also provided useful guidance about the circumstances in which the courts will exercise their discretion and grant this type of order.

Whilst the decision has not overruled the earlier authorities of Cruz Shipping and DTEK, it is likely that some arbitration users will in future seek other types of orders against third parties in support of arbitrations under s44 of the Act.

For more information, please contact Nicholas Peacock, Partner, Rebecca Warder, Professional Support Lawyer, Aseel Barghuthi, Associate, Christine Sim, Associate, or your usual Herbert Smith Freehills contact.

Nicholas Peacock
Nicholas Peacock
Partner
+44 20 7466 2803

Rebecca Warder
Rebecca Warder
Professional Support Lawyer
+44 20 7466 3418

Aseel Barghuthi
Aseel Barghuthi
Associate
+1 917 542 7859

Christine Sim
Christine Sim
Associate
+1 917 542 7853

ICCA-IBA JOINT TASK FORCE PUBLISHES ROADMAP TO DATA PROTECTION IN INTERNATIONAL ARBITRATION FOR CONSULTATION

A consultation draft of the highly anticipated ICCA-IBA Joint Task Force’s Roadmap to Data Protection in International Arbitration has now been released for public comment. The public consultation period runs until 31 March 2020.

The Roadmap and its Annexes have been developed by the Task Force (of which Charlie Morgan of HSF is a member) to help arbitration professionals identify and understand the data protection and privacy obligations to which they may be subject in an international arbitration context.

Following public consultation, the Roadmap and Annexes will be finalised and launched during the ICCA Congress in Edinburgh on 12 May 2020.

You can access a copy of the consultation draft here and submit any comments to bureau@arbitration-icca.org before 31 March 2020.

For more information please contact Nick Peacock, Partner, Charlie Morgan, Senior Associate, or your usual Herbert Smith Freehills contact.

Nicholas Peacock
Nicholas Peacock
Partner
+44 20 7466 2803

Charlie Morgan
Charlie Morgan
Senior Associate
+44 20 7466 2733

ENGLISH COURTS DECLINE TO GIVE ORDER FOR TAKING OF EVIDENCE FROM NON-PARTY TO ARBITRATION AGREEMENT

The English High Court recently decided in A and another v. C and Others [2020] EWHC 258 (Comm) (“A v C”) that it did not have jurisdiction under s44(2)(a) of the English Arbitration Act (“the Act”) to issue a coercive order compelling a non-party to an arbitration agreement to give evidence in support of arbitration proceedings seated in New York.

The Claimants wished to compel the third defendant, E, who was not a party to the New York-seated arbitration, to give evidence in England. The claimants had been given permission by the New York tribunal to make such an application to the English court. However, despite the order of the tribunal, the Court ultimately found that it was unlikely that Parliament had intended to give the English courts jurisdiction to make the order sought under s44.

The Court considered the two leading authorities on the issue (Cruz City I Mauritius Holdings v Unitech Limited [2014] EWHC 3704 (Comm) (“Cruz City”) and DTEK Trading SA v Morozov [2017] EWHC 1704 (Comm) (“DTEK”)) and confirmed that the Court does not have jurisdiction under s.44 of the Arbitration Act to make an order against a non-party to the arbitration agreement.

Background Facts

The parties had embarked on a joint venture in relation to an oil field in Central Asia and the Claimants held a 15% interest in the oil field. A dispute arose between the parties, and an arbitration proceeding was initiated by the Claimants. The arbitration proceedings were seated in New York and, by the time of the High Court proceedings, the evidentiary hearing in the arbitration had already taken place. However, there remained an issue as to whether certain bonus payments made by the First and Second Defendants to the arbitration were deductible from the amount claimed by the Claimants in the arbitration.

Although the arbitral tribunal had already heard evidence from the assistant general counsel responsible for drafting and negotiating the agreements, the Claimants sought evidence from E, who was a non-party to the arbitration and the lead commercial negotiator who had been involved in negotiating the specific bonus payment.

The tribunal granted permission to the Claimants to bring an application in England, where E was domiciled, for the taking of his evidence.

S44 of the English Arbitration Act

Parties may apply under s44 of the English Arbitration Act for court assistance in relation to an arbitration seated within or outside England & Wales. The court’s power under this section is extensive and includes ordering the taking of witness evidence, the preservation of evidence, granting an interim injunction or appointment of a receiver, the sale of any goods which are the subject of the proceedings, and the power to make various other orders  relating to property which is the subject of the proceedings.

The Court noted that at first sight the language of s44 lent “some support” to the Claimants’ contention that it was possible for orders to be made against non-parties. The legislation specifically stated at s44(1) that the court had the same power in relation to the particular matters listed as it would do in respect of court litigation. This tended to suggest that the Court had the same power to make orders in respect of non-parties to an arbitration as it did against non-parties to court litigation. It was also noticeable that the specific legislative provision relevant to this case referred to “the taking of evidence of witnesses” and this might be taken as an indication that the provision was mainly focused on taking evidence from witnesses outside the control of the parties to the arbitration.

Cruz City and DTEK

The Court noted that while the wording of the legislation might suggest that the provision could be employed against non-parties, the leading authorities of Cruz City and DTEK made it clear that the question is much less straightforward.

Cruz City concerned an attempt to serve out of the jurisdiction an application for a freezing injunction against non-parties to the arbitration agreement. The court in Cruz City considered the question of application to non-parties and decided that there were a number of indications in s44 itself that it was intended to be limited to orders made against a party to the arbitration agreement. This was primarily because s44 is expressly stated to be subject to contrary agreement between the parties, which the court decided could only mean the parties to the arbitration agreement. Subsection (4) operated so that, unless the matter was urgent, the court could only act on an application made either with the tribunal’s permission or agreement in writing given by “the other parties”. This must again mean the other parties to the arbitration agreement.

In addition, Subsection (5) stated that the court can only act where the arbitrators either have no power or are currently unable to act effectively. This would always be the situation in respect of an order against a non-party. Subsection (6) provided that the court could hand back control in respect of the relevant issues to a tribunal with “power to act in relation to the subject matter of the order”. This could not be relevant to orders made against a non-party. Subsection (7) provided that an appeal could only be made against an order under s44 if the first instance court gave permission. The court commented that it would be surprising if the non-party’s right of appeal was limited in this way in respect of an order against a non-party. The court in Cruz City also noted that s44 was one of only a small number of sections in the Act to apply to arbitrations seated outside England and Wales or Northern Ireland. It seemed unlikely that Parliament would have intended to give the English courts the jurisdiction to give orders against non-parties in support of arbitrations happening around the globe. Had there been any intention to permit the court to make such third party orders this would have been clearly expressed in the Act.

The court in Cruz City accordingly decided that s44 did not allow orders to be made against non-parties and the court in DTEK later reached the same conclusion.

The Claimants’ application to the High Court

In A v C the Claimants advanced two arguments in an attempt to distinguish the current case from the position in Cruz City and DTEK.  They firstly contended that s44(2)(a) permitted orders to be made against non-parties because it referred to the taking of the evidence of witnesses, even if this was not the case for other sub-sections of s44(2). Secondly, the difficulties with making orders against non-parties in Cruz City and DTEK arose from the need to serve the applications out of the jurisdiction and this issue did not arise in A v C because E resided in England & Wales.

The Court took the view that the argument that some powers under s.44(2) can be exercised against non-parties, while others could not, was unattractive in the absence of statutory language justifying such a distinction. If s44(2)(a) orders could not  be made against non-parties, it would be surprising if coercive orders could nonetheless be made against non-party witnesses. The judge recognised that the English Court could issue letters of request asking foreign courts to take evidence from non-parties, but that ultimately depended on the discretion of foreign courts, which was a different matter from ordering non-parties to give evidence for the purpose of foreign arbitrations.

In respect of the Claimants’ second argument, the Court emphasised that the applications to serve out of jurisdiction in Cruz City and DTEK failed because s44 does not apply to non-parties, not because it is impossible to serve such applications out of jurisdiction.

Appropriateness of the order

The Court further considered whether it would have been appropriate to issue the requested order if the Court had found that it had the power to do so, having regard to the fact that the seat of the arbitration was New York.

The Court concluded that there was no particular inconvenience to the witness and there was sufficient justification for his attendance. The evidence requested was “clearly an issue of importance in the New York Arbitration”. Since the witness was the lead commercial negotiator of the contract under which the bonus was payable, the Court found that there was a sufficient possibility that he may have relevant evidence to give, notwithstanding the evidence already given by the assistant general counsel. It also did not matter that his memory of the events might have been compromised by the passing of time. In any event, his memory could be assisted by reference to the documents. In addition, the Court found that it would not be appropriate to delve too deeply into the relative weight of evidence, as this was “pre-eminently a matter for the arbitral tribunal”.

However, the proposed list of topics on which the Claimants wished to question the non-party was too broad and the Court would have required the Claimants to produce an amended, narrower list of questions. The Court also noted that E had offered to produce a witness statement and evidence by video-link to the arbitral tribunal. The proposal made by E reasonably balanced the interests of the arbitrating parties and E and, even if any order had been granted under s44 of the Act, the order would have been along the same lines.

Comment

This case has confirmed that the English courts’ powers in support of arbitration under s44 of the Act do not extend to orders against non-parties to the arbitration, whether or not there is a need to serve the application out of the jurisdiction. Accordingly, the current position is that s44 orders are unavailable against non-parties to the arbitration, even where those third parties are based within England & Wales. The decision is being appealed to the Court of Appeal.

For more information, please contact Nick Peacock, Partner, Rebecca Warder, Professional Support Lawyer, Peter Chen, Associate, Aseel Barghuthi, Associate, Christine Sim, Associate, or your usual Herbert Smith Freehills contact.

Nicholas Peacock
Nicholas Peacock
Partner
+44 20 7466 2803

Rebecca Warder
Rebecca Warder
Professional Support Lawyer
+44 20 7466 3418

Peter Chen
Peter Chen
Associate
+44 20 7466 3868

Aseel Barghuthi
Aseel Barghuthi
Associate
+1 917 542 7859

Christine Sim
Christine Sim
Associate
+1 917 542 7853

 

INSIDE ARBITRATION ISSUE #9: PERSPECTIVES ON CROSS-BORDER DISPUTES

Welcome to the ninth issue of Inside Arbitration

We are delighted to share with you the latest issue of the publication from the Herbert Smith Freehills Global Arbitration Practice. With a new decade afoot, the articles in this issue focus on trend spotting and change.

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In addition to sharing knowledge and insight about the markets and industries in which our clients operate, the publication offers personal perspectives of our international arbitration partners from across the globe.

In this issue you can find:

  • Kathryn Sanger and Marco de Sousa looking at the statistics of the main arbitral institutions, highlighting interesting similarities and differences and offering some predictions for the future.
  • Jonathan Ripley-Evans interviewing Professor David Butler, Emeritus Professor of Law at Stellenbosch University and lead advisor to the South African Government on the International Arbitration Act in South Africa who provides insights into the future of arbitration in South Africa.
  • Nick Peacock, Vanessa Naish and Jerome Temme looking at common drafting issues in arbitration and whether arbitration agreements work in unilateral documents.
  • Natasha Blycha, Brenda Horrigan and Guillermo García-Perrote providing an update on what smart legal contracting may mean for businesses and dispute resolution in the future.
  • Charlie Morgan looking at technology as a disruptor for arbitration and considering how data analytics may change the way we approach all stages of the arbitral process.
  • Chinnawat Thongpakdee and Warathorn Wongsawangsiri offering their insights into the Thai arbitration market and how Bangkok is developing as an arbitral seat.
  • Nick Peacock sharing his views on arbitration trends in the banking and finance and technology sectors, including some insights on cybersecurity issues in arbitration.
  • Nick Peacock and Olga Dementyeva looking at investment treaty claims that have arisen from the dispute over Crimea and what the future may hold for investors.
  • An infographic sharing some statistics about our Global Arbitration Practice and our case load from 2017-2019.
  • Our regular “Watch this space” piece highlighting some key developments in global arbitration.

Previous issues can be viewed on our website by clicking on this link here. To obtain hard copies, please contact Arbitration.Info@hsf.com.

We hope that you enjoy reading issue #9 of Inside Arbitration and would welcome your feedback.

 

 

WORKING GROUP ON CYBER SECURITY IN INTERNATIONAL ARBITRATION RELEASES 2020 EDITION OF CYBERSECURITY PROTOCOL

Introduction

A multi-organisational Working Group on Cybersecurity in International Arbitration has released the 2020 edition of its Cybersecurity Protocol for International Arbitration (the “Cybersecurity Protocol”).

This edition reflects comments received by the ICCA-NYC Bar-CPR Working Group during a year-long consultation on the initial draft of the Cybersecurity Protocol (on which we commented here).

The Cybersecurity Protocol is intended to assist stakeholders in the arbitral process to address issues of cybersecurity, acknowledging that arbitration is now an often largely digital process which can be the subject of “increasingly pervasive cyberattacks“.

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INDIA INTRODUCES KEY AMENDMENTS TO ARBITRATION AND CONCILIATION ACT 1996

After the Arbitration and Conciliation Bill, 2019 (the “Bill“) was passed by both houses of the Indian Parliament, the President of India on 9 August 2019 gave his assent.  The new Arbitration and Conciliation (Amendment) Act, 2019 (the “2019 Act“) will amend the Indian Arbitration and Conciliation Act, 1996 (the “1996 Act“), implementing the recommendations of the High Level Committee Report issued in 2017 under the chairmanship of Justice BN Srikrishna. The changes proposed in the Bill were previously discussed here.

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English High Court recognises arbitral tribunal’s jurisdiction over settlement agreement in absence of express arbitration clause

In the recent decision of Sonact Group Limited v. Premuda SPA [2018] EWHC 3820 (Comm), the English High Court confirmed its pro-arbitration approach to the interpretation of arbitration agreements. The Court held that an arbitration agreement contained in a charterparty contract could apply in relation to disputes arising out of a subsequent settlement agreement contained in correspondence between the parties relating to the sum allegedly due under the charterparty. The Court concluded the parties could be taken to have intended that the arbitral tribunal under the principal agreement would also have jurisdiction over disputes arising out of a settlement agreement between the same parties, despite the absence of an express arbitration clause in the settlement agreement.

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