Source: https://globalarbitrationreview.com/jurisdiction/1004961/england-&-wales
Timestamp: 2020-01-29 17:45:44
Document Index: 743126398

Matched Legal Cases: ['art 36', 'EWCA ', 'UKSC ', 'EWCA ', 'UKSC ', 'CJEU ', 'UKSC ', 'EWCA ', 'EWCA ']

GAR Know how: Commercial Arbitration: England & Wales
Nigel Rawding QC and Leilah Bruton
The United Kingdom (UK) (which incorporates Great Britain and Northern Ireland) signed and ratified the New York Convention in 1975, subject to the "reciprocity" reservation, viz: the UK courts will enforce awards made in a state that is also party to the Convention.
The Act brought English law significantly closer to the UNCITRAL Model Law, but it is not a wholesale adoption. Unlike the Model Law, the Act is not limited to international commercial arbitration. For a helpful summary of other key differences between the Act and the Model Law, see Merkin and Flannery, Arbitration Act 1996 (2014, 5th ed.) pp.3–4.
A consultation was launched in 2016 by the Law Commission of England and Wales regarding the question of reform of the Act. Responses from the General Council of the Bar of England and Wales included proposals to grant arbitrators the power to strike out unmeritorious claims and for parties to be given a right to make settlement offers with the same effect as Civil Procedure Rules Part 36 offers in English High Court litigation (namely, a right to make settlement offers that carry defined cost consequences, dependent upon the nature of the offer and outcome of the proceedings). However, the Law Commission ultimately decided not to include reform of the Act in its Thirteenth Programme of Law Reform, as it was unable to secure sufficient cross-governmental support for the publication of the programme.
An arbitration agreement must be "in writing" or evidenced in writing to fall within the scope of the Act (sections 5(1)–(2)). What constitutes in writing or evidence in writing is broadly defined (see sections 5(2),(4)–(6)), and includes an oral agreement to arbitrate by reference to "terms which are in writing" (section 5(3)). Save for the exception in section 5(3), oral arbitration agreements are recognised only by the common law.
Indeed in an April 2016 decision the Court of Appeal confirmed that an anti-suit injunction should be issued to restrain proceedings brought by a third party to enforce rights that were subject to an arbitration clause, without any need to make a higher showing that the proceedings are "vexatious and oppressive" (Shipowners’ Mutual v Containership Denizcilik (Yusuf Cepnioglu) [2016] EWCA Civ 386; the question of whether it was appropriate to grant the final anti-suit injunction has been appealed to the Supreme Court, and was heard from 17–18 October 2017 (judgment still pending)).
This issue was scrutinised in A v B [2017] EWHC 3417 (Comm), where, following a challenge to an award under section 67 of the Act in relation to jurisdiction (see further question 42) the Commercial Court set aside the tribunal’s award upholding its own jurisdiction to hear a single request for LCIA arbitration seeking to refer disputes under two separate contracts. The Court did so on the grounds that article 1.1 of the LCIA Rules requires a separate written request for each arbitration. Hence, the LCIA Rules do not permit a party to consolidate arbitration proceedings without the consent of all parties in respect of disputes under multiple contracts. This highlights the importance of considering the applicable institutional rules when commencing arbitration; a failure to follow the procedure laid out will result in a purported commencement of arbitration being wholly ineffective.
English law does not recognise the group of companies doctrine. An award based on this doctrine may be challenged (see, eg, Peterson Farms Inc v C&M Farming Ltd [2004] EWHC 121 (Comm)). Accordingly, group companies will normally be recognised as parties to an arbitration agreement only where this is expressly agreed. However, the corporate veil may be "pierced" to bind a third party group company to an arbitration agreement where a court or tribunal is persuaded that the existence of a separate corporate entity is merely a façade (Trustor AB v Smallbone and Others [2001] EWHC 703 (Ch); Anglo German Breweries Ltd (In Liquidation) v Chelsea Corp Inc [2012] EWHC 1481 (Ch); Ashot Egiazaryan and Vitaly Gogokhiya v OJSC OEK Finance and The City of Moscow [2015] EWHC 3532 (Comm)).
Unless otherwise agreed by the parties, an arbitration agreement is treated as a distinct agreement and is not regarded as invalid, non-existent or ineffective because the wider contract is invalid, non-existent or ineffective (section 7 of the Act). The Commercial Court has recently confirmed that the separability of an arbitration agreement providing for arbitration in England is governed by English law, even where the law governing the underlying contract is foreign law, and that, due to separability, the arbitration agreement is unaffected by alleged corruption or bribery affecting the underlying contract (National Iranian Oil Company v Crescent Petroleum Company International Ltd and another [2016] EWHC 1900 (Comm)). However, in certain limited cases (eg, forgery), the arbitration agreement may be declared invalid on the same grounds as the wider contract (Fiona Trust Corporation and Ors v Privalov and Ors [2007] All ER (D) 233).
In the context of enforcement proceedings (see questions 44 and 45), the English courts may revisit the question of the tribunal’s jurisdiction if the party resisting enforcement seeks to prove that there was no arbitration agreement binding upon it under the law of the country where the award was made (Dallah Real Estate and Tourism Holding Company v Ministry of Religious Affairs, Government of Pakistan [2010] UKSC 46).
In multi-party agreements the clause must specify the procedure by which the tribunal is to be constituted. In order to ensure that all parties have an equal opportunity to participate in the constitution of the tribunal, recommended practice is to provide that the claimant parties collectively and the respondent parties collectively may each nominate one arbitrator and that in default of any parties doing so, all members of the tribunal will be appointed by the appointing authority. The main arbitration rules now permit the institution to appoint the entire tribunal where the multiple parties fail to agree (see, eg, article 8 of the LCIA Rules). It is also worth noting that the fact that a pre-dispute agreement establishes a procedure for appointment of a tribunal that does not provide each party with equivalent rights with respect to appointment is unlikely to render the arbitration agreement unenforceable as a matter of English law.
English law has traditionally placed few limits on a party’s choice of arbitrator, although specific criteria in the arbitration agreement may fetter that choice. Parties are free to agree on the number of arbitrators and the procedure for their appointment (sections 15 and 16 of the Act). However, note that a party may apply to the court (or relevant arbitral institution) to remove an arbitrator if, inter alia, it has justifiable doubts as to the arbitrator’s impartiality (see further question 24).
Nationals of any member of the European Economic Area (EEA) are at present free to enter the UK to visit and work; it remains to be seen what the position will be following UK withdrawal from the EU. However, non-EEA arbitrators will be subject to standard immigration requirements, which may include obtaining a visa and work permit (see the UK Visas and Immigration website for further details).
Section 17 of the Act sets out the procedure by which a party that has appointed its arbitrator may give to a party in default notice of its intention to appoint such arbitrator as the sole arbitrator. Section 18 provides a further mechanism by which any party may apply to the court to exercise its powers inter alia to give directions relating to arbitral appointments or to make the arbitral appointment(s) itself.
A party may challenge an arbitrator in the courts if circumstances give rise to justifiable doubts as to his or her impartiality (section 24(1)(a) of the Act). The test applied by the courts is whether a fair-minded and informed observer would conclude that there was a real possibility of bias (see, eg, A and others v B and another [2011] EWHC 2345, Cofely Ltd v Bingham & Anor [2016] EWHC 240 (Comm); and Sierra Fishing Company & Ors v Farran & Ors [2015] EWHC 140 (Comm)). The other grounds on which an arbitrator may be challenged are lack of qualifications required by the arbitration agreement; physical or mental incapacity; or a refusal or failure properly to conduct proceedings or to use reasonable despatch in conducting the proceedings or making an award (where this has caused or will cause substantial injustice to the applicant) (section 24(1) of the Act).
The applicant must first exhaust any available recourse under, inter alia, institutional rules to remove an arbitrator before applying to the court (section 24(2)). While the IBA Guidelines are non-binding, they are regarded as a "first port of call" for arbitral institutions considering a challenge and are likely to be given some weight before the courts. That said, the Commercial Court criticised the IBA Guidelines and declined to set aside an award notwithstanding an arbitrator’s failure to disclose a circumstance on the Non-Waivable Red List of the Guidelines, indicating that the Guidelines may not be followed to the letter (W Ltd v M SDN BHD [2016] EWHC 422 (Comm), in which an arbitrator’s firm regularly advised a company with the same corporate parent as the respondent; however, the Court held that to a fair-minded and informed observer, the arbitrator was not conflicted as he operated as a sole practitioner, had completed the firm’s conflict check systems, and would have made a disclosure had he been truly aware of the relationship).
Following the ECJ decision in Allianz SpA and Others v West Tankers Inc C-185/07 [2009] AC 1138, the English courts may not grant an anti-suit injunction to restrain proceedings commenced in the court of another EU member state. This position was not changed by the recast Brussels I Regulation, but in Gazprom OAO C-536/13, the ECJ (now known as the Court of Justice of the European Union (CJEU)) has confirmed that anti-suit injunctions issued by arbitral tribunals are not impacted by EU law. Anti-suit injunctions remain available in respect of proceedings brought outside the EU (see, for example, Midgulf International Ltd v Groupe Chimique Tunisien [2010] EWCA Civ 66; Shashoua and ors v Sharma [2009] EWHC 957 (Comm)), and, of course, the position will have to be revisited following the UK's withdrawal from the EU.
Unless the parties agree otherwise, the tribunal has the power to order the claimant to provide security for costs (sections 38(2)–(3) of the Act), which include both the costs of the arbitrators and the parties’ own costs (section 39). Under the Act, the position is that this relief is now available only from the tribunal (save in court proceedings relating to the arbitration, eg, under sections 67–69).
Unless otherwise agreed by the parties, the courts may make orders inter alia for: the taking of witness evidence; the preservation of evidence; and the inspection of property (sections 42 and 44 of the Act). Notwithstanding any contrary agreement, a party may apply to the court to secure the attendance of witnesses (section 43) (see DTEK Trading SA v Morozov [2017] EWHC 94 (Comm)).
Unless the parties agree otherwise, it is for the tribunal to decide on the scope of document production (section 34(2)(d) of the Act). Procedures regulating document production are set out in the IBA Rules and may be adopted by agreement of the parties or order of the tribunal. Parties generally produce those documents upon which they rely and, if necessary, request the production of certain documents or categories of documents from the opposing party. If a party fails to comply with a peremptory order for document production, the tribunal may, inter alia, draw adverse inferences and/or make appropriate orders as to costs (section 41(7)). Alternatively, the tribunal may seek an order from the court (section 42(1)).
The parties are free to agree on the remedies or relief that the tribunal may grant (section 48(1) of the Act). Accordingly, subject to public policy restrictions, parties can provide that a remedy not available under English law (eg, punitive damages) may be awarded by the tribunal. With respect to public policy, the High Court has rejected a challenge to an award enforcing a penalty clause in a foreign law-governed contract (that would have been unenforceable had the contract been governed by English law), finding no public policy impediment to enforcement – instead, the public policy of refusing to enforce penalty clauses was held to be outweighed by the public policy in favour of enforcing international arbitration awards (Pencil Hill Ltd v US Citta di Palermo Spa 2016 (Case BA40MA198) (unreported)).
For the remedies that a tribunal has the power to award by default, see sections 48(2)–(5). These include: declaratory relief; an order for the payment of a sum of money; an order that a party do or refrain from doing something; an order for specific performance of a contract (other than a contract relating to land); and/or the rectification, setting aside or cancellation of a deed or other document.
The tribunal may correct an award on its own initiative or on the application of either party. Any application must be made within 28 days of the award (sections 57(3)–(4)). Any correction must be made within 28 days of receipt of the application or, where made by the tribunal of its own motion, within 28 days of the award (section 57(5)). The parties are free to agree on different time limits (eg, by adopting institutional rules), which time limits can themselves be extended by the court pursuant to section 79. The Commercial Court recently used the power under section 79 to extend the time limit set by the LCIA Rules for an application for correction of an award (see Xstrata Coal Queensland Pty Ltd and others v Benxi Iron and Steel (Group) International Economic and Trading Co Ltd [2016] EWHC 2022 (Comm)).
In a notable case the Commercial Court held that costs of the arbitration may include the costs of obtaining third-party funding (Essar Oilfields Services Ltd v Norscot Rig Management PVT Ltd [2016] EWHC 2361 (Comm)). This case should not, however, be taken to stand for the proposition that funding costs can be recovered in every case. The court stressed the particular circumstances of the case, including the respondent’s oppressive conduct in causing a situation in which the claimant required third-party funding in order to be able to bring its claims. On these facts, the court found that it was reasonable and appropriate to make an award that included as costs of the arbitration the costs of third-party funding pursuant to section 59 of the Act.
The potential recoverability of third-party funding costs in arbitration differs from the position in litigation in England and Wales. In litigation, success fees in conditional fee agreements and deferred contingent premiums for after-the-event insurance are not recoverable as costs, pursuant to the Jackson reforms of 2013.
With regard to challenges under section 67 of the Act, see the case of A v B referred to in response to question 10 on consolidation above. In the recent case of Exportadora de Sal SA de CV v Corretje Maritimo Sud-American Inc [2018] EWHC 224 (Comm), the court emphasised that, given the importance of jurisdiction, a party raising a challenge under section 67 of the Act has to act quickly and within a timescale of days not weeks. Baker J indicated that
the general context in which that question of reasonable diligence falls to be assessed is that when faced with a legal claim asserted through arbitration, logically and practically the first question any respondent can fairly be expected to consider and keep under review throughout is whether it accepts the validity of the process (at para. 48).
The majority of challenges under section 68 are refused. An interesting example of how the courts address these issues is provided in the recent case of UMS Holding Ltd & Ors v Great Station Properties SA & Anor [2017] EWHC 2398 (Comm), which arose from an arbitration relating to a joint venture agreement and the price payable in respect of the exercise of a “put option”. The grounds of challenge were set out over 24 pages, prompting Teare J to comment on the appropriate scope of section 68 challenges. Teare J noted that an allegation that a tribunal has ignored or failed to have regard to evidence relied upon by one of the parties cannot be the basis of an allegation of serious irregularity. Similarly, the mere fact of the tribunal’s reasoning being manifestly illogical or not rationally sustained cannot amount to a serious irregularity.
The courts retain the discretion to enforce an award that has been set aside or suspended by the courts in the seat of arbitration (section 103(2)(f) of the Act), but this is rare in practice. In 2017, the Supreme Court clarified the scope of this discretion in relation to an award debtor providing security, holding that an order for security was only permissible in relation to an adjournment under section 103(5) of the Act (IPCO (Nigeria) Ltd v Nigeria National Petroleum Corporation [2017] UKSC 16). Where an award debtor was resisting enforcement on properly arguable grounds, an enforcing court would not be able to make a decision conditional upon the provision of security. This judgment overturned the Court of Appeal’s previous decision in 2015 to allow the enforcement of an award pending set aside proceedings at the seat of the arbitration due to “catastrophic” delays in the courts of the seat.
In Micula and ors v Romania and another [2017] EWHC 31 (Comm), the English Court clarified its position on enforcement proceedings of an ICSID award, pending a CJEU decision on the question of whether the execution of the award would constitute state aid. The Court rejected Romania’s application to set aside the order to register the ICSID award, as Romania’s previous application to annul the ICSID award had failed. Hence, there was no further available recourse against the award itself. However, the Court granted a stay of further enforcement proceedings pending the CJEU’s decision.
As indicated in question 37, the Act incorporates into English law the provisions for the recognition and enforcement of awards which are found in the New York Convention (sections 101–103). The courts favour the enforcement of awards and will only rarely refuse to enforce on public policy grounds (see, eg, Westacre Investments Inc v Jugoimport-SPDR Holding Co Ltd [1999] 3 WLR 811, where enforcement was ordered despite public policy considerations relating to alleged illegality R v V [2008] EWHC 1531). Enforcement of an ICC award was refused in the case of Dallah Estate and Tourism Holding Company v Ministry of Religious Affairs, government of Pakistan [2010] UKSC 46, although this was on the grounds, inter alia, that the government of Pakistan had not been a party to the operative arbitration agreement. The Supreme Court applied French law as the governing law, concluding that there was no evidence of a common intention on the part of Dallah and the government of Pakistan to make the government a party to the arbitration agreement.
The relevance of issue estoppel to enforcement has twice been considered by the English courts in recent years in a way that appears to complicate the multi-jurisdictional enforcement of awards, in both Yukos Capital Sarl v OJSC Rosneft Oil Co [2012] EWCA Civ 855, then more recently in Diag Human SE v Czech Republic [2014] EWHC 1639 (Comm). At issue in both cases was whether a decision by another state’s courts not to enforce an arbitral award gave rise to an issue estoppel as to enforceability of the award that had to be taken into account in enforcement proceedings in the English courts. In Yukos, issue estoppel did not bar enforcement on the basis that the issue previously decided (the application of Dutch public policy) was not the same as that before the English courts (the application of English public policy). In Diag Human, issue estoppel was held to apply and, for what is understood to be the first time, to bar enforcement of a foreign arbitral award by the English courts. The judgment in Diag Human, in particular, has been controversial, but it has not been appealed.
While there remains some uncertainty as to the future enforceability of English court judgments in the EU (which is governed by EU law) pending the outcome of the negotiations concerning the UK’s exit from the EU, the enforcement of English arbitral awards (which is governed by the New York Convention) will be unaffected.
There is no provision relating to confidentiality in the Act. However, under English common law it is an implied term of the arbitration agreement that the arbitration is private and that, as discussed in response to question 48, certain documents generated in relation to it are confidential (Michael Wilson & Partners Ltd v Emmott [2008] EWCA Civ 184). However, the implied terms relating to confidentiality are subject to certain exceptions. The details of arbitral proceedings may, for example, become public if the courts make an order for disclosure in the interests of justice or for the protection of the legitimate interests of an arbitrating party in respect of a claim against or brought by a third party (the Michael Wilson case) or where the award is challenged in the courts.
Subject to the mandatory procedural rules in the Act (see question 27), tribunals generally adapt the procedure to suit the arbitration and the parties involved. There is no "standard" procedural framework.