In this short video in our Observations on Arbitration series, Professional Support Consultants Vanessa Naish and Hannah Ambrose talk about the myths and realities surrounding the arbitration process. The discussion draws out key points and common misconceptions about arbitration, touching on costs and duration, confidentiality, party autonomy, availability of interim relief, summary judgment and enforcement of arbitral awards.
For more information, please contact Vanessa Naish, Professional Support Consultant, Hannah Ambrose, Professional Support Consultant or your usual Herbert Smith Freehills contact.
In Swallowfalls Limited v (1) Monaco Yachting & Technologies S.A.M. and (2) Mr Peter Landers JR, the English Commercial Court (the Court) rejected an attempt to resist summary judgment by the defendants (Monaco and L), on the basis of counterclaims for set-off in respect of alleged breaches of a construction agreement. Monaco and L had submitted the counterclaims to arbitration and the tribunal had dismissed those claims following failure by Monaco to comply with orders (including peremptory orders) for security for costs. The tribunal had not reached a decision on the merits of those claims.
In an unusually strongly worded judgment, the Court held that for Monaco and L to litigate the counterclaims that had already been the subject of an arbitration would be an abuse of process and that any other conclusion on the facts would be “offensive to justice” and “would not serve the public interest“.
This is a sensible decision: any other conclusion would have offered the defendants a second chance to prosecute claims against Swallowfalls in the court, in circumstances in which they had agreed to arbitrate them, insisted that they should be arbitrated, and agreed to be bound by the outcome of that arbitration. Whilst the tribunal had not reached a decision on the merits of the claims, the arbitration had reached a final outcome which was the dismissal of the claims given Monaco’s failure to provide security for costs.
The case demonstrates that a party must comply with orders for security for costs or risk being unable to prosecute its claims. The defendants were given a number of chances to provide security and offered a number of methods by which it could be provided. The scant reasons provided for failing to comply with the tribunal’s orders did not impress the Court. Whilst the tribunal’s course of action may seem draconian, the Court noted that proceedings in the Commercial Court would ultimately be dismissed after enduring non-compliance in the same way.
The case also shows that a party is not able to “hop” between forums, as convenience or circumstance dictate. The defendants had argued before the Court that the claims should be arbitrated, and having repeatedly failed to comply with the tribunal’s orders, the defendants were not at liberty to raise those claims as counterclaims in the litigation.