bls-arbitration law and practice 2011

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COURSE FOR BPP PROFESSIONAL EDUCATION

ARBITRATION LAW AND PRACTICE

Peter Aeberli

RIBA, ARIAS, FCIArb, Barrister

Chartered Arbitrator, Adjudicator, Registered CEDR Mediator

TIME TABLE

9.30 - 9.35: Introduction

9.35 - 10.15: Arbitration the statutory and contractual framework.

10.15 - 11.00: Beginning an arbitration and constituting the tribunal

11.00 - 11.15: Morning coffee

11.15 - 12.00: Enforcing the right to arbitrate and dealing with jurisdictional disputes

12.00 - 12.45: The duties of the tribunal and the parties the tribunals procedural andevidential powers

12.45 - 1.45: Lunch

1.45 - 2.30: The tribunals general powers and sanctions

2.30 - 3.15: The arbitral award

3.15 - 3.30: Afternoon tea

3.30 - 4.15: Enforcing an arbitral award and obtaining assistance from the court

4.15 - 5.00: Supervisory powers of the court

INTRODUCTION

This one-day seminar, which is a companion seminar to International Commercial Arbitration,provides a comprehensive review of the law and practice of arbitration conducted under the ArbitrationAct 1996. It is intended for those who are involved in arbitral proceedings or who engage in areas ofcommerce were arbitration is commonly used for the resolution of disputes. In addition to explaining

the legal framework that governs arbitral proceedings and reviewing recent case law, this seminarexplores the role of both the tribunal and of the court in arbitral proceedings. It gives practicalguidance on how arbitration can be used to achieve a just and cost-effective resolution of disputes.Those attending the course are expected to have some familiarity with the Arbitration Act 1996 andwith litigation procedures.

Further material relevant to the topics covered by these notes can be found at www.aeberli.com.


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A PRACTICAL EXERCISE

By the end of the course, you should be able to answer the following questions.

1. How does arbitration differ from litigation and other methods of dispute resolution such as expertdetermination and mediation?

2.

In what circumstances does a person have the right to arbitrate a dispute with another person andhow can that right be enforced if the other party to that dispute commences proceedings in court inrespect of that dispute?

3. How are arbitral proceedings commenced and why is it important that the correct procedure isfollowed?

4.

What is a jurisdictional challenge and what are various ways in which such challenges can bedetermined?

5.

What are the principal powers that an arbitral tribunal has to manage the proceedings and whatprinciples govern its exercise of these powers?

6. What powers, if any, does the court have to intervene in the conduct of arbitral proceedings?

7. If a party obtains an arbitral award in its favour, how can that award be enforced if it is ignored bythe other party?

8. What are the principal ways in which a party can dispute an arbitral award that is adverse to itsinterests?


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Peter Aeberli September 2011

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SESSION 1: ARBITRATION

THE STATUTORY AND CONTRACTUAL FRAMEWORK

Peter Aeberli



PART A: METHODS OF DISPUTE RESOLUTION

Arbitration is only one of a number of different methods by which disputes can be resolved.

1.

The CourtThe courts jurisdiction is both inherent (High Court) and statutory. Litigation is a non-consensual, adversarial, method of dispute resolution. It is concerned with legal rights andremedies and is conducted in accordance with detailed procedural rules. The outcome is a

binding third party determination, a judgement, reviewable on appeal. Judgements can bedirectly enforced with court assistance, if necessary.

The Civil Procedure Rules (CPR) and the various pre-action protocols, have lead togreater front loading of costs, and uncertainties over how those costs will be allocated bythe court. The pre-action protocols also embody the view of litigation as a last resort.

Advantages/disadvantages: Public, subsidised, but still expensive, little party control, non-consensual joinder of parties, wide rights of appeal, competence of judiciary, legal aid,restricted rights of audience, limited international enforceability of judgements.

2. Private Arbitration

Jurisdiction is founded on agreement of the parties, but augmented by the Arbitration Act1996. Arbitration is a consensual, generally adversarial method of dispute resolution,conducted in accordance with procedures agreed by the parties or determined by thetribunal. It is concerned with disputes and differences, in practice, with legal rights andremedies. The outcome is a binding third party determination, an award. Limited courtassistance and supervision is available during the process and once an award is made.

Advantages/disadvantages: Private, not subsidised, party control, flexibility and speed ofprocedure (?), technical understanding, finality, difficulties with joinder of parties, nolegal aid, wide choice of representation, international enforcement of awards.

3. Statutory adjudication (construction disputes)

Construction adjudication is a quasi-statutory procedure for the determination of disputesunder construction contracts governed by Part II of the Housing Grants, Construction andRegeneration Act 1996. It is a non-consensual, rapid (28 days), generally inquisitorialmethod of dispute resolution conducted in accordance with agreed or implied proceduresthat comply with the statutory requirements. It is concerned with contractual rights. Theoutcome is not final but is binding until the dispute has been determined by litigation,


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arbitration, if applicable, or agreement. If appropriate, and subject to limited rights ofchallenge (no jurisdiction, want of impartiality), a Court will enforce the decision.

Advantages/disadvantages: Limited to construction disputes. Private, not subsidised,

flexibility and speed of outcome, rough justice. Although not final the decision affectslitigation/arbitration risk, little possibility of joinder, no legal aid, wide choice ofrepresentation, party costs generally irrecoverable.

4. Expert determination

This is similar to statutory adjudication, but the experts jurisdiction is founded solely onthe parties agreement, which is not constrained by statutory requirements. The court may

provide limited assistance to the process, Channel Tunnel Group v. Balfour Beatty [1993]1 WLR 262.1 Expert determination may concern the creation as well as the determinationof legal rights. The outcome is generally final and binding on the parties and will beenforced by the court as a contractual entitlement. There may be a right of action against

the expert. Consider Jones v. Sherwood Computer [1992] 1 WLR 277.2Bernhard Schultev. Nile Holdings [2004] EWHC 977 (Comm); [2004] 2 Lloyds Rep 352. 3

Advantages/disadvantages: As statutory adjudication, but the decision is final and binding.

5.

Mediation/conciliation

This is a consensual process, possibly with court support. It is facilitative/generally non-evaluative without a third party determination. Resolution of the dispute remains in the

parties hands. If settled, the agreement can be enforced by action for breach of contract.

Advantages/disadvantages: Private, flexible, party control, multi-party dispute resolution,speed, low cost, open to tactical abuse, uncertainty of outcome, loose-loose or win-win?

PART B: THE NATURE OF ARBITRATION

There is no statutory definition of arbitration. The common law requirements are aformulated dispute or difference between the parties, the submission of that dispute ordifference by agreement to a third party for resolution in a judicial manner and an opportunityfor parties to present evidence or submissions in support of their claims in the dispute;

1 Channel Tunnel: The cour t has i nher ent j ur i sdi cti on t o st aypr oceedi ngs br ought i n br each of di sput e r esol ut i on pr ocedur e. Woul ddo so where, as here, t he par t i es were at arms l engt h and equalcommerci al advant age.

2 Jones: Gr ounds of chal l enge ar e l i mi t ed t o answer i ng t he wr ongquest i on, f r aud.

3 Schulte: As a matt er of l aw, apparent or unconsci ous bi as orunf ai r ness was, i n any case, of no assi st ance t o N i n t he absence ofactual bi as, f r aud, col l usi on, or mat er i al depar t ur e f r omi nst r uct i ons. The cour t f ol l owed, i n t hi s r espect , Macro &or s vThompson &or s ( 1996) BCC 707 CA. I t saw expert determi nat i on as

havi ng af f i ni t i es wi t h cont r act cer t i f i cat i on, t hus the concept ofappar ent bi as had no pl ace, si nce ar chi t ect s or engi neer s are of t enempl oyed by one of t he part i es and cannot be chal l enged on t hat basi s.


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Arenson v. Arenson [1977] AC 405 (HL), Lord Wheatley; see David Wilson Homes v.Survey Services Ltd [2001] BLR 267 (CA).4

1. The sources of arbitration law

There may be a number of different legal systems relevant to arbitral proceedings.

-

The law of the substantive agreement (the proper law of the contract).

- The law of the arbitration agreement, which is not necessarily the same as theeither the curial law or the proper law of the contract. Consider JSCZestafoniv. Ronly Holdings [2004] 2 Lloyds Rep 335 (Comm);5Halpern v. Halpern[2006] EWHC 603 (Comm); [2006] 2 Lloyds Rep 836(common law principlesapply as arbitration agreements not governed by the Rome Convention, lawmust be that of a country. Law of the seat had also to be a municipal system oflaw). Issues as to the identity of the parties to an arbitration agreement are

governed by the law of that agreement, Musawi v. RE International [2007]EWHC 2981 (Ch); [2008] 1 Lloyds Rep 326.7

-

The curial law of the arbitration, the law of the seat of the arbitration, seeChannel Tunnel Group Ltd v. Balfour Beatty Construction Ltd [1993] 1 WLR

4 David Wilson: Di sput e under an i ssuance pol i cy t o be r ef err ed t o a QC,on appoi ntment by Chai r man of t he Bar i f not agreed. The Cour tconcl uded t hat t he par t i es expect ed a j udi ci al enqui r y t o hear casesdeci de on evi dence, al so want ed more t han a non bi ndi ng opi ni on. Thus

an ar bi t r at i on cl ause.Cape v. Rosser & Russel l ( 1995) 46 Con LR 75. Use of t he wordadj udi cat i on i s not deci si ve. The agr eement had t he essent i alf eat ur es of ar bi t r at i on. Consi der I nCr ouch P. 670, t he r ol e of anar bi t r at or was sai d t o be t o f i nd f acts appl y t he l aw, gr ant r el i ef ,l i t i gat i on i n t he pr i vat e sector. Di scussi on of di f f er ent meani ngsof adj udi cat i on, a di sput e resol ved i n a j udi ci al manner , but may bean i ni t i al summar y det er mi nat i on. Unl i kel y t hat par t i es i nt endeddi sput es t o be submi t t ed t o a pr ocedur e wi t hout possi bi l i t y of r evi ewor r ever sal . Hence an ar bi t r at i on agr eement .

5 JSCZestafoni: Four par t i es concl uded cont r act , gover ned by Engl i shl aw, f or el ectr i ci t y and ser vi ces, pr ovi ded f or ar bi t r at i on bef or e apanel of t hr ee. Subsequent di sput es bet ween t wo of t hem J SCZ

( Geor gi an) and Ronl y (Engl i sh) agr eed t o ar bi t r at i on bef or e a sol ear bi t r at or . Af t er awar d made J SCZ chal l enged i t , inter alia, ongr ounds t hat agr eement t o ar bi t r at e bef or e a si ngl e ar bi t r at or voi dunder l aw of Georgi a. Cour t sai d estopped f r om t aki ng t he poi nt unders. 73, but even i f coul d be taken, ar bi t r at i on agr eement was i mpl i edl ygoverned by Engl i sh l aw as made i n cour se of an agr eement whi chpr ovi ded f or Engl i sh Law and pr ovi ded f or ar bi t r at i on i n Engl and andmade by f ax send by J SCZ r ecei ved i n Engl and. Si nce arbi t r at i onagr eement was made i n Engl and and t o be per f ormed i n Engl and, andconcer ned act s l awf ul i n Engl and, not cont r ar y t o publ i c pol i cy t oenf or ce i t on gr ounds t hat i t was i l l egal and/ or voi d under l aw of af or ei gn f r i endl y st at e.

6 Halpern: I t was f or t hese r easons t hat J ewi sh l aw, coul d not be t he

l aw of t he ar bi t r at or or of t he agr eement .7 Musawi; f ol l owed Hal per i n on how t o i dent i f y the l aw of t hear bi t r at i on agr eement .


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262, Lord Mustill.8 The choice of the seat is the choice of the forum forremedies seeking to attach the award, C v. D [2007] EWCACiv 1282; [2008] 2Lloyds Rep 239 (injunction issued to stop D seeking to challenge an Awardmade by a tribunal seated in London, in courts of the USA (NY)).9Note also

Syska v. Vivendi Universal [2009] EWCACiv 67 (Under the EU InsolvencyRegulations, the effect of insolvency proceedings on a pending lawsuit aredetermined solely by the law of the MemberState in which the law suit is

pending. There is nothing in English law that voids an arbitration agreement orreference on insolvency, thus an English Arbitration agreement was not voidedunder Polish law as a result of the Polish party being subject to a bankruptcyorder in Poland.)

- The law of the place of enforcement of the tribunals award.

- The law of the place or places of domicile of the parties.

Where the applicable law is that of England and Wales, there are a number of sourcesof law to consider.

- Contract law, the agreement between the parties.

- The courts inherent powers. These may be less important than under the oldlaw, see AA1996, s. 1(c).The implications of AA1996, s. 1(c) have beenconsidered in a number of cases concerned with the courts power to determine

jurisdictional questions outside of the framework of the 1996 Act. SeeABBLummus Global Ltd v. Keppel Fils Ltd[1999] 2 Lloyds Rep. 2410 (s. 1(c)

precludes this). . Vale de Rio DoceNavegaao SA v. Shanghai Bao[2000] 2Lloyds Rep. 111(s. 1(c) does not preclude this).

8 Balfour Beatty: May be an expr ess choi ce of cur i al l aw whi ch i s nott he l aw of t he pl ace wher e ar bi t r at i on t o be hel d, but i n absence ofcl ear or expr ess wor ds t o t hi s ef f ect, t he i r r esi st i bl e i nf er ence i st hat t he par t i es by cont r acti ng t o ar bi t r at e i n a par t i cul ar pl acei nt end t he ar bi t r al pr ocess t o be gover ned by t he l aw of t hat pl ace.

9 For an exampl e of t he di f f i cul t i es t hat can ar i se i n det er mi ni ng t heseat wher e ther e ar e i nconsi st ent pr ovi si ons, eg seat i n Gl asgow,Ar bi t r at i on Act 1996 t o appl y, cour t s of E&W t o have excl usi vej ur i sdi ct i on, see Br aes of Doune v. McAl pi ne [ 2008] EWHC 426 ( TCC) ;

[ 2008] 1 Ll oyd s Rep 608.10 ABB: Despi t e havi ng par t i ci pat ed i n t he ar bi t r at i on, t he respondentsought a decl ar at i on t hat t he t r i bunal had no j ur i sdi ct i on. The cour tsai d t hat t he i nt ent i on of t he 1996 Act was t o restr i ct t he rol e of t hecour t at an ear l y st age of t he ar bi t r at i on and hel d t hat , because of s.1( c), i t had no j ur i sdi cti on t o det er mi ne t he t r i bunal s j ur i sdi cti on ont he appl i cat i on of a par t i ci pant i n t he ar bi t r at i on unl ess t he pr e-condi t i ons f or a s. 32 appl i cat i on wer e met .

11 Vale: The cour t hel d t hat t he r est r i cti on on cour t i nt er vent i on i n s.1( c) was not , l i ke ar t i cl e 5 of t he Model Law, an absol ut e pr ohi bi t i on.I t onl y expr essed a gener al i nt ent i on t hat t he cour t s shoul d not usual l yi nt er vene except i n t he ci r cumst ances speci f i ed i n Par t I of t he 1996Act ; ABB Lummus Gl obal Lt d v. Keppel Fi l s Lt dwas consi dered but not

f ol l owed. But , i n t hi s case, whi ch concer ned an appl i cat i on by acl ai mant who had i ni t i at ed ar bi t r at i on t o det er mi ne a j ur i sdi ct i onalobj ect i on r ai sed by a non- par t i ci pat i ng r espondent , t he cour t r ef used t o


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- These inherent powers may also be relevant in circumstances where the

Arbitration Act is silent. See for example.

University of Reading v. Miller (1994) 75 Build LR 9112

(CA) (concurrentproceedings between the same parties on overlapping issues in court and inarbitration, arbitration stayed). But note, Elektrim v. Vivendi Universal (No 2)[2007] 2 Lloyds Rep 8 (Comm Ct) (application for injunction under s. 37 SCA1981 to restrain one of two arbitrations between overlapping parties,refused),13also Jarvis v. Blue Circle [2007] BLR 439 (application for injunctionto retrain one of two arbitrations refused, also Jackson J said that possibility of

parallel proceedings in arbitration and court an inevitable consequence of s. 9AA1996, and not, of itself, an abuse of process or vexatious). Compare Albon v.

Naza Motor Trading [2007] EWCACiv 1124; [2008] 1 Lloyds Rep 1 (CA),injunction to restrain arbitration granted where issue as to whether signature on

the contract containing the arbitration agreement a forgery already before theEnglish court.14

i nt er vene under t hi s i nher ent power si nce i t consi der ed that suchci r cumst ances must have been ant i ci pated by Par l i ament . The pr opercour se was f or t he cl ai mant t o pr ocur e the appoi nt ment of t he tr i bunaland have t he j ur i sdi ct i onal obj ect i on deal t wi t h by i t under s. 31. Thecour t r ej ect ed t he argument t hat , as a mat t er of gener al conveni ence, i tshoul d deal wi t h the j ur i sdi ct i onal obj ect i on i mmedi at el y rat her t hanwai t f or i t t o come back to t he cour t on a s. 67 chal l enge. I t observedt hat one of t he underl yi ng pr i nci pl es of t he 1996 Act was that t hepart i es shoul d resol ve t hei r di sput e by t he met hod they had chosen:

ar bi t r at i on. See JT Mackley& Co. Ltd v. Gossport Marina Ltd[ 2002] BLR367, wher e t he cour t di d det er mi ne t he j ur i sdi ct i onal poi nt under i t si nherent j uri sdi ct i on.

12 Reading: The cour t had j ur i sdi cti on t o r est r ai n ar bi t r al pr oceedi ngswher e concur r ent l egal pr oceedi ngs, i f no i nj ust i ce t o cl ai mant i nar bi t r at i on, and appl i cant shows t hat cont i nuance of ar bi t r at i on,oppr essi ve, vexat i ous or abuse of pr ocess ( I n t hi s case i t was becausea r ace bet ween t r i bunal s, and a r i sk of i nconsi st ent f i ndi ngs i n t hedi f f er ent pr oceedi ngs ( Mi l l er was i n ar bi t r at i on agai nst Readi ng.Readi ng commenced proceedi ngs agai nst Mi l l er and ot her s, st ay ofact i on agai nst Mi l l er r ef used. See al so Oxf or d Shi ppi ng Co Ltd v.Ni ppon Yuesn Kai sha [ 1984] 2 Ll oyd' s Rep 373; Or der f or concur r enthear i ngs made i n excess of j ur i sdi ct i on set asi de. Tr af al gar House

Const r uct i on ( Regi ons) Ltd v. Rai l t r ackPl c ( 1995) 75 Bui l d LR 55;decl ar at i on as t o t he t r i bunal s power t o make or der s f or j oi nderunder J CTNSC/ 4 j oi nder pr ovi si ons, al t hough woul d not i ndi cat e how heshoul d exer ci se hi s j ur i sdi cti on.

13 Elektrim. Cour t assumed i t had j ur i sdi ct i on, but sai d t hat i t wasonl y avai l abl e t o enf or ce a subst ant i ve r i ght or t o pr ot ect agai nstvexat i on or oppr essi on, and under l yi ng ri ght was subj ect t o thej ur i sdi ct i on of t he Engl i sh Court . Her e t here was no r i ght bei ngi nf r i nged, al so not oppr essi ve or vexat i ous t o al l ow bot h t o cont i nue.Fur t her mor e, t he scheme of t he Ar bi t r at i on Act 1996, l i mi t ed t he scopef or i nt er f er ence of t hi s t ype.

14 Albon: For cour t t o have di scr et i on, def endant must be amendabl e t oEngl i sh t er r i t or i al and per sonal j ur i sdi cti on, and i t must be j ust and

convent t o gr ant t he i nj unct i on, s. 37 SCA. Di scret i on exer ci sabl ewhere t hr eatened conduct unconsci onabl e, t hat i s oppr essi ve orvexat i ous or i nt er f er es wi t h t he due pr ocess of t he cour t and where


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The courts jurisdiction to grant injunctions: Hiscox Underwriting. V. Dickson[2004] 2 Lloyds Rep 438 (Comm) where both parties accepted that the courtshad, under s. 37 of the Supreme Court Act 1981,15 a residual jurisdiction to

intervene outside the framework of the Arbitration Act 1996). For an exampleof this see Glidepath Holdings v. Thompson [2005] 1 All ER (Comm) 434(Com Ct)16 (freezing, disclosure and disk imagingorders against intended

parties to arbitration in support of pending arbitral proceedings, NorwichPharmacal orders against non parties). But note Cetelem SA v. Roust HoldingsLtd [2005] EWCACiv 618 (CA) where it was said that the relationship betweenAA1996, s. 44 and s. 37 SCA 1981 was yet to be worked out.

- Statute, now principally the Arbitration Act 1996.

This course is concerned with arbitral proceedings whose seat is in England and

Wales or Northern Ireland.

2. What matters can be arbitrated?

In general any matters that give rise to a dispute or difference between persons can bearbitrated other than those, such as matters of criminal law, which public policy dictatescannot be determined by arbitration.

3. Approach of the court to arbitration

The court had, historically, a somewhat ambivalent attitude to arbitration. There is ahistory of excessive court intervention continuing up to repeal of the Arbitration Act 1950.

Under the Arbitration Act 1996, the courts powers of intervention have been codified,and thus curtailed; see s. 1(c).

t he j ur i sdi cti on i s necessar y t o pr ot ect t he appl i cant ' s l egi t i mat ei nt er est i n pr oceedi ng i n Engl and, t he nat ur al f or um f or t hel i t i gat i on. Thi s was t he case her e as Al bi on had a good ar guabl e caset hat j ust i f i ed i n i ssui ng and cont i nui ng pr oceedi ngs i n Engl and, t heEngl i sh cour t wi l l be t he f i nal j udge of t he aut hent i ci t y quest i on,t her e i s a good ar guabl e case of f or ger y af t er pr oceedi ngs i nst i t ut edi n Engl and, ar bi t r at i on a needl ess expose wi t h pr ol i f er at i on ofpl eadi ngs and di scl osur e, t hus unconsci onabl e, i n the sense of

oppr essi ve, t o al l ow ar bi t r at or t o cont i nue.15 Supreme Cour t Act 1981, s. 37( 1) , gi ves t he Hi gh Cour t power t o granti nt er l ocut or y and f i nal i nj uncti ons, or appoi nt r ecei ver s i n al lcases i n whi ch i t appear s t o the cour t t o be j ust and conveni ent t o doso.

16 Glidepath: Or der s had been obt ai ned i n support of l egal pr oceedi ngs,par t of whi ch subsequent l y st ayed t o arbi t r at i on by agr eement . Onappl i cat i on t o di schar ge f or no j ur i sdi ct i on: Hel d: cour t had ani nher ent j ur i sdi cti on t o gr ant i nt er i m r el i ef wher e a need t o do so,f or exampl e f or pr ot ect i on a par t y agai nst t he ant i ci pat ed di ssi pat i onof assets even t hough t here was an arbi t r at i on cl ause whi ch mi ghtl at er l ead t o a st ay. Thi s j ur i sdi ct i on not as l i mi t ed as t he AA1996j ur i sdi ct i on, whi ch was l i mi t ed t o t he preser vat i on of asset s, but

ext ended to t he gr ant i ng of any i nj unct i on wher e i t appeared to bej ust and conveni ent t o do so. Appropr i at e i n t hi s case becauseevi dence of f r aud and an appr ehensi on of di ssi pat i on.


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PART C: THE CONTRACTUAL BASIS

Arbitration is founded on contract, an arbitration agreement. This contractual foundation has

implications for the nature of the process.

1. Privity

Arbitral proceedings bind only the parties to the arbitration agreement, and those claimingunder or through them, AA1996, s. 82(2).

- This can create problems with joinder, such as in Oxford Shipping Co Ltd v.Nippon Yusen Kaisha [1984] 2 Lloyd's Rep 37317 unless such procedures areagreed by all concerned, see AA1996, s. 35 and, for example, CIMAR, Rule 3.

- This can create problems on assignment, such as in Baytur SA v. Fingaro [1992]

QB 610.18

Certain statutes enable third parties to enforce benefits under a contract, but this right maybe subject to arbitration, if provided for in the contract.

-

Third Parties (Rights against Insurers) Act 1930; consider The Padre Island[1984] 2 Lloyds Rep 408.19

- Contract (Rights of Third Parties) Act 1999; consider Nisshin Shipping v.Cleaves & Co [2004] 1 Lloyds Rep 38.20

2.

The doctrine of seperability

An arbitration agreement is regarded as conceptually distinct from any substantivecontract in which it is embodied and thus is not necessarily affected by the invalidity or

premature termination of the substantive contract. This is known as the doctrine of

17 Oxford: No power t o or der concur r ent hear i ngs i n di f f er entar bi t r at i ons under di f f er ent agr eement s ( owner s/ char t er er s,char t er er s/ sub- char t er er s, same i ssues.

18 Baytur: Equi t abl e assi gnment not suf f i ci ent t o make assi gnee a part yt o ar bi t r al pr oceedi ngs, had t o not i f y t he ot her si de and submi t t ot he t r i bunal s j ur i sdi ct i on. Had not done so. Assi gnor had ceased t o

exi st ( company di ssol ved) , so ar bi t r at i on had l apsed as one of t hepar t i es had ceased t o exi st .

19 Padre Island: The Act ef f ect s a st at ut or y assi gnment t o t he t hi r dpar t y wher e the assured has become bankr upt or has been wound up. Butt he par t y wi t h t he benef i t of t hi s assi gnment must pur sue i t i naccor dance wi t h t he arbi t r at i on agr eement i n t he cont r act of i nsuranceeven i f t he agr eement r ef er s onl y t o t he par t i es t o t hat cont r act .

20 Nisshin: See s. 8 of t he Act whi ch deems t he t hi r d par t y t o be apar t y t o t he ar bi t r at i on agr eement . Si nce t he scope of t hearbi t r at i on agr eement was wi de enough t o embrace a di spute bet weenowner s and char t ers about payment of t he broker s commi ssi on, t hebr oker was ent i t l ed and i ndeed obl i ged t o r ef er di sput es about i t sent i t l ement t o t hat commi ssi on t o ar bi t r at i on. Si nce t he 1999 Act

pr ovi ded a t hi r d par t y wi t h a r emedy not ot her wi se avai l abl e t o i t ,t he obl i gat i on, i n s. 8, t o pur sue t hat r i ght by ar bi t r at i on di d noti nf r i nge ar t 6( 1) of t he ECHR.


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seperability and is now embodied in AA1996, s. 7. Consider Harbour Assurance v.Kansa [1993] 1 Lloyds Rep 455 (CA);21Vee Networks v. Econet International [2005] 1Lloyds Rep 192 (Comm).22

In Fiona Trust &Holding Corp v. Yuri Privalov [2007] UKHL 40; [2008] 1 LloydsRep 254, the HL, applying these principles, held that an arbitral tribunals authority isnot impeached by an allegation that contract in which the arbitration agreement isfound, was procured by bribery. It is only if the arbitration agreement is itself directlyimpeached for some specific reason that the tribunal will be prevented from decidingthe disputes that relate to the main contact. Note in El Nasharty v. J Sainsbury [2007]EWHC 360 (Comm); [2008] 1 Lloyds Rep 360, the suggestion that an arbitrationagreement had been procured by duress was rejected on the grounds that while theclaimant might have been under duress in purchasing shares, that duress did not preventhim exercising free will in relation to the dispute resolution machinery.

3.

ConfidentialityArbitral proceedings (subject to English law, where these are implied terms of thearbitration agreement) are a private process, hearings being conducted in private, andare confidential in the sense that parties are under an obligation of confidence to suedocuments disclosed or generated in an arbitration only for the purpose of thearbitration even if they did not contain anything which was itself confidential, seeDolling-Baker v. Merrett [1990] 1 WLR 1205 (CA);23Emmott v. Michael Wilson[2008] EWHCCiv 184; [2008] 1 Lloyds Rep 616 (CA).

- This can create problems where the same tribunal is appointed in differentarbitrations involving different parties concerned in the same project, as in AbuDhabi Gas Liquefaction Co Ltd v. Eastern Bechtel Corp (1982) 21 Build LR11724or where a party wishes to rely on an arbitral award in other proceedings, for

21 Kansa: The ar bi t r at i on agr eement coul d sur vi ve an al l egat i on t hat t hesubst ant i ve cont r act was voi d f or i l l egal i t y.

22 Vee: Al l egat i on that cont r act f or suppor t ser vi ces concer ni ng mobi l ephone net work i n Ni geri a was ul t r a vi r es Econet s memor andum ofagr eement , deal t wi t h as a pr el i mi nar y i ssue i n ar bi t r at i on. Hel d:Ef f ect of s. 7 ( wi t h embodi ed t he common l aw doct r i ne of seperabi l i t y,was t hat Tr i bunal had j ur i sdi ct i on concl usi vel y t o det er mi ne i ssues ont he voi dness or voi dabl i t y of t he cont r act , and deci si on on t hatquest i on not open t o chal l enge under s. 67. I f t he quest i on of whether

t he ar bi t r at i on agr eement was al so voi d or non- exi st ent had beenbef or e t he ar bi t r at or , t hen Tr i bunal coul d not det er mi ne t hatconcl usi vel y, any awar d on that quest i on bei ng suscept i bl e t ochal l enge under s. 67. Her e, onl y t he val i di t y of t he cont r act hadbeen chal l enged, not t he ar bi t r at i on agr eement .

23 Dolling: An i mpl i ed obl i gat i on on par t i es not t o di scl ose or use f orany ot her pur pose document s prepared f or or used i n the ar bi t r at i on,or di scl osed or pr oduced i n t he pr oceedi ngs, or t r anscr i pt s or not esof evi dence or t he awar d, other t han wi t h consent of ot her par t y, orper mi ssi on of cour t . But t he mere f act t hat a document was used i narbi t r at i on does not i mpose conf i dent i al i t y. See al so Hassneh v. Mew[ 1993] 1 Ll oyd s Rep 243, t he award and r easons coul d be di scl osedwher e reasonabl y necessary t o f ound cl ai m or def ence agai nst t hi r d

par t y. But not otherwi se, see I nsurance Company v. Ll oyd' s Syndi cat e[ 1995] 1 Ll oyd' s Rep 272.

24 Abu Dhabi: Probl ems wher e same ar bi t r ator appoi nt ed i n rel ated


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instance to found an issue estoppel; consider Ali Shipping Corporation vShipyard Trogir [1999] 1 WLR 314.25

- Emmott v. Michael Wilson [2008] EWHCCiv 184; [2008] 1 Lloyds Rep 616

(CA). If issues relating to privacy and confidentiality come up during apending arbitration they are for the tribunal, unless the right to a stay is waived.The court did not have a general unlimited discretion to consider exceptions toconfidentiality. The exceptions were compulsion by law, public interest,including the interests of justice, protection of a partys legal rights andconsent. Running inconsistent cases in arbitration and in subsequent litigating,here alleging fraud in the latter, having abandoned it in the former, entitled anorder for disclosure of material from the arbitration, this being in the interestsof justice.

This principle of confidentiality may also affect any court proceedings relating to the

arbitration. It is for the court to decide, under CPR Parts 39 and 62.10 whether the hearingof such proceedings should be in private (in secret, not just in chambers) and whether anyresulting judgment should also be private; City of Moscow v. Bankers Trust Co [2004] 2Lloyds Rep 179 (CA).26 There is no presumption in favour of privacy, C v. D [2007]EWCACiv 1282; [2008] 2 Lloyds Rep 239, there has to be a special reason for it.

4. Party autonomy

The concept of party autonomy, controlled only by public policy, is enshrined in theArbitration Act 1996, in particular in ss. 1(b), 4(2) and 36 (representation).

PART C: THE STATUTORY FRAMEWORK

1. Introduction

pr oceedi ngs bet ween over l appi ng par t i es, but wi t h no power t o or derconcur r ent hear i ngs or consol i dat i on. Par t y mi ght be pr ej udi ced bynot bei ng abl e t o comment on mat t ers r ai sed bef ore t r i bunal , and t husi nf l uenced opi ni on, i n pr oceedi ngs t o whi ch not a par t y.

25 Ali Shipping: I nj unct i on t o rest ra i n par t y f rom usi ng cert ai nmat er i al , i ncl udi ng awar ds, f r om pr evi ous ar bi t r at i on i n subsequentar bi t r at i on made f i nal subj ect t o an r eser vat i on or pr ovi so t opr ecl ude t he necessi t y f or t he def endant t o r et ur n t o t he cour t f or

exempt i on f r om i t s t er ms i n r espect of t he t r anscr i pt s of evi dence,shoul d t he r espondent i n t he ear l i er ar bi t r at i on make an appl i cat i ont o di smi ss t he def endant ' s cl ai m f or want of pr osecut i on or shoul d anywi t ness f or t he respondent suppl y st at ement s or gi ve evi dencei nconsi st ent i n some rel evant r espect wi t h t he evi dence whi ch he gavei n t he f i r st ar bi t r at i on ( t hi s bei ng an ext ensi on of t he "wher enecessar y t o f ound a cl ai m or r i ght " except i on) . The CA di d not seemer i t i n t he i ssue est oppel ar gument , t hat f or med t he basi s of t heargument f or di scl osi ng t he awar ds.

26 Moscow: Cour t not bound by t he par t i es' agr eement t o conf i dent i al i t y.Depends on whether t he pr oceedi ngs i nvol ve any si gni f i cantconf i dent i al i nf or mat i on. Mor e l i kel y t hat hear i ng wi l l need t o bepr i vat e than any j udgment , si nce l at t er can be f r amed not t o reveal

such materi al . I n t hi s case, however, t he CA uphel d t he j udge sdeci si on t hat hi s j udgment shoul d be pr i vat e and onl y a Lawt el lsummary made avai l abl e.


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The statutory framework for arbitration is provided by the Arbitration Act 1996. Thisrepealed the earlier legislation apart from most of Part II of the Arbitration Act 1950. TheAct was prepared by the Departmental Advisory Committee on Arbitration, and its reports(the DAC Reports of February and September 1996) were read into the parliamentary

debates and thus can, in appropriate circumstances, be referred to as aids to itsinterpretation. The court will also seek guidance from UNCITRAL (the model law).

2. Structure of the 1996 Act

The 1996 Act is divided into Parts.

Part I: General law of private Arbitration (both domestic and international (ss.1-84).

Part II Special provisions concerned with domestic and consumer arbitrations. (ss.89-91). Note ss. 85-87 have not been brought into force.

Part III Recognition and enforcement of New York Convention awards (s. 99-104);see Part II of the 1950 Act for similar provisions relating to GenevaConvention awards.

Part IV Amendments (Schedule 3) and repeals (Schedule 4).

3. Application of the 1996 Act

The 1996 Act applies to England and Wales and to Northern Ireland (which was notsubject to the 1950 Act). It does not apply in Scotland. For transitional procedures seeAA1996, s. 84.

Part I of the 1996 Act includes mandatory and non-mandatory provisions, see AA1996, s.4(1), 4(2) and Schedule 1. Most non-mandatory provisions apply in the absence ofcontrary agreement between the parties. Two, one concerned with joinder, the other withrelief on a provisional basis, only apply if agreed.

4. Overview of Part I of the 1996 Act

The principal sections in Part I the 1996 Act are as follows

Application of the Act

AA1996, s. 2. When does Act apply.AA1996, s. 3. Identifying the seat of the arbitration.AA1996, s. 4. Mandatory and non-mandatory provisions.AA1996, s. 5. Application only to agreements in writing.AA1996, ss. 6, 7, 8. Nature and meaning of an arbitration agreement.

General principlesAA1996, s. 1. Overriding objectives.AA1996, s. 33. The tribunals duty, see also s. 1.AA1996, s. 40. The parties duty.

Beginning arbitral proceedingsAA1996, s. 9. Stay of legal proceedings.


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AA1996, s. 12. Extending time for beginning proceedings.AA1996, s. 13. Application of the Limitation Acts.AA1996, s. 14. Beginning proceedings.

Establishing the tribunal, remuneration and liabilityAA1996, s. 15 23, 28, 29, 56, 74.

Jurisdiction and competenceAA1996, s. 7 (seperability), s. 30 (Kompetenz-Kompetenz), s. 31, 32 (jurisdictionalobjections, see also ss. 67, 72(1) and 73).

The tribunals procedural powersAA1996, s. 34-39, 40,41 (these powers generally apply in the absence of agreement to thecontrary, but note ss. 35, 39).

The tribunals powers and duties as regards the substantive disputeAA1996, ss. 46, 47 (see also s. 39), 48, 49, 51, 52, 53, 54, 55, 57, 58.

The tribunals powers as regards costsAA1996, ss. 59-65.

Supportive powers of the courtAA1996, ss. 9 (stay of proceedings), 12, 42-45, 50, 66. See also CPR Part 62.

Supervisory powers of the courtAA1996, s. 24, 66-71 (see also ss. 72, 73). Note AA1996, s. 1(c). See also CPR Part 62.

______________________________


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SESSION 2: BEGINNING AN ARBITRATION

AND CONSTITUTING THE TRIBUNAL

Peter Aeberli



PART A: THE AGREEMENT TO ARBITRATE

The right to bring arbitral proceedings depends on there being an arbitration agreementbetween the parties to the proposed proceedings.

1.

Characteristics of an arbitration agreement

An arbitration agreement is an agreement under which the parties promise that specifieddisputes or differences between them will be resolved by a third person acting asarbitrator, and that they will honour valid decisions (awards) made by that person.

Such an agreement, sometimes known as a submission, may be ad hoc, or relate to futuredisputes. In the latter case, a specific arbitration conducted under such an agreement isknown as a reference (or arbitral proceedings). The arbitrator is often referred to as thetribunal; particularly where there is a panel of arbitrators. If the reference is managed byan arbitral institution it is referred to as an administered arbitration.

An arbitration agreement may incorporate procedural (institutional) rules selected by theparties as appropriate to the types of dispute they may encounter. Examples include theConstruction Industry Model Arbitration Rules (CIMAR), the Grain and Feed Association(GAFTA) Rules and the London Court of International Arbitration (LCIA) Rules.

2. Contractual requirements

An arbitration agreement is, in principle, little different from any other contract. Theusual contractual requirements must be satisfied.

-

Capacity of parties.

-

Agreement, consideration, intent and certainty.

- Not vitiated at common law or by statute.

- Public policy may prevent matters being arbitrated, for example criminal matters.

But, because the effect of such an agreement is to limit recourse to the courts, there are anumber of extra considerations.

- Where an arbitration agreement is to be incorporated by reference, clear words are

required. But (other than in cases concerned with incorporation from charterpartyto bill of lading) express words are, probably, unnecessary, at any rate where the


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v. Football Association [2007] 2 Lloyds Rep 31 (CA)32(An arbitration agreemententered into voluntarily and freely amounted to a waiver of those Article 6 rights,

public hearing, independent tribunal established by law, and public judgement, thatwere not provided for in the AA1996).

- Arbitration agreements are sometimes coupled with clauses giving exclusivejurisdiction to a court. This is often resolved by finding that the exclusivejurisdiction clause is concerned with the courts supervisory or supportive powers,thus there is no conflict with the agreement to arbitrate. See, for example,McConnell Dowell v. National Grid Gas [2007] BLR 92 (TCC).

3.

Scott v. Avery clauses

A Scott v. Avery clause makes the obtaining of an arbitral award a precondition to thecommencement of legal proceedings. It may either be in the form of a provision that noaction shall be brought until an arbitration has been conducted and an award made, or in

the form of a stipulation that the defendants only obligation is to pay such sum as anarbitrator determines.33

4. Statutory formalities

If an arbitration agreement, and any reference under it, is to be governed by Part I ofthe Arbitration Act 1996 it must satisfy the following requirements.

-

It must be in writing and concern disputes or differences, see AA1996, ss. 5, 6(the definition of writing is extremely wide and may have affected therequirement, under the old law, that any words of incorporation to be in writing,Aughton v. Kent (1991) 57 Build LR 1 (CA)).34

-

Other than in respect of Part III (enforcement of New York Convention Awards)and a few provisions in Part I, being ss. 9-11, 43, 44 and 66, which apply whereverthe seat is or if no seat is designated or determined identified, see AA1996, ss. 2(2)

2(5),35 the seat of the arbitration must be in England and Wales or NorthernIreland, AA1996, ss. 2(1), 3. However, by s. 2(4) the court may exercise any PartI power for the purpose of supporting the arbitral process where no seat has beendesignated or determined andby reason of a connection with England and Walesor Northern Ireland the court is satisfied that it is appropriate to do so.36 Thiswas considered in ChalburyMcCouat v. PG Foils Ltd [2011] 1 Lloyds Rep 23

hear i ng can be wai ved.32 Stretford: The CA r evi ewed t he r el evant ECHR j ur i sprudence i n

r eachi ng i t s deci si on.33 See Scott v. Avery ( 1856) 5 HL Cas 811, wher e t he ef f ect i veness of

such pr ovi si ons as a def ence t o pr oceedi ngs, r at her t han asi nval i dat i ng such pr oceedi ngs, was uphel d.

34 Aughton: The cour t hel d t hat t her e was no wr i t t en di r ect i on t o t hepl ace where the cl ause coul d be f ound ( r ef err ed t o t he wr ong document ,GC Works/ 1, not t he Press/ Kent condi t i ons) so not a wr i t t enar bi t r at i on agr eement .

35 Pri nci pal l y ss. 9- 11 and 66, and ss. 42 and 44. Sect i on 7 appl i es i ft he l aw of t he ar bi t r at i on agr eement i s t hat of Engl and and Wal es, or

Nor t her n I r el and, i r r especti ve of t he seat .36 Not al so t he l i nk bet ween t hi s t est and t he abi l i t y t o ser ve anar bi t r at i on cl ai m f or m out of t he j ur i sdi cti on, CPR Par t 62. 5


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(TCC)37 where the court, on a s. 18 application for the appointment of anarbitrator, said that one of the relevant considerations was whetherthe applicablelaw of the contact was likely to be that of England and Wales and, finding thatthis was so, declared that the appointment should be made by the LCIA.

- The seat of the arbitration is the juridical seat of the arbitration, see AA1996, s. 3.See Channel Tunnel Group Ltd v. Balfour Beatty Construction Ltd [1993] 1WLR 262, Lord Mustill;38Dubai Islamic Bank v. Paymentech, [2000] 1 LloydsRep 65.39 But the use of the word seat is not conclusive, see Braes of Doune v.Alfred McAlpine [2008] EWHC 426 (TCC).40

-

Note: ChalburyMccouat v. P.G.Foils Limited [2010] EWHC 2050 (TCC), para 19,disputes as to the seat to be resolved by the arbitral tribunal, not the court.

Even if these formalities are not satisfied, an arbitration agreement may still be valid atcommon law, see AA 1996, s. 81. If the seat is outside England and Wales or NorthernIreland, the arbitration agreement will be governed by some other applicable law, such asUNCITRAL. Nevertheless, the court retains some of its supportive powers, see AA1996,ss. 2(2) - 2(5).

5.

Discharging an arbitration agreement or reference

An arbitration agreement and/or a reference can be terminated by agreement (whether ornot in writing), see AA1996, s. 23(4).

37 Chalbury: The par t i es were Engl i sh and I ndi an and t he work was t o

di smant l e a pl ant i n t he Nether l ands and, under a separate agreement ,r eassembl e i t i n I ndi a.

38 Channel Tunnel: Ther e may be an expr ess choi ce of cur i al l aw t hat i snot t he l aw of t he pl ace wher e arbi t r at i on t o be hel d, but i n absenceof cl ear or expr ess wor ds to thi s ef f ect, t he i r r esi st i bl e i nf er encei s t hat t he par t i es by cont r acti ng t o ar bi t r at e i n a par t i cul ar pl acei nt end t he ar bi t r al pr ocess t o be gover ned by t he l aw of t hat pl ace.

39 Dubai: Seat of t he ar bi t r at i on i s det er mi ned havi ng r egar d t o t hepar t i es' agr eement and al l t he r el evant ci r cumst ances whi ch i ncl udeany connect i on wi t h one or mor e count r i es that can be i dent i f i ed i nr el at i on t o t he par t i es, t he di sput e, t he pr oposed ar bi t r al pr ocedur esi ncl udi ng t he pl ace of i nt er l ocut or y and f i nal hear i ngs, t he i ssue ofawards. Thi s i s t o be deter mi ned at t he dat e at whi ch t he r el evant

ar bi t r at i on began. Ci r cumst ances af t er t hat dat e ar e not r el evant . I nt hi s case t he rel evant date was when Dubai i nvoked t he ar bi t r at i onappeal process and Payment ech submi t t ed t o i t . Thi s was i nCal i f or ni a, t he pl ace wher e t he pr epar at or y admi ni st r at i ve wor k f ort he appeal s and t he const i t ut i on of t he t r i bunal was car r i ed out .Thi s was despi t e t he appeal boar d si t t i ng i n London.

40 Braes: A cont r act f or work i n Scot l and was st ated t o be governed byEngl i sh Law. One pr ovi si on i dent i f i ed t he cour t s of Engl and and Wal esas havi ng excl usi ve j ur i sdi ct i on t o set t l e di sput es anot her pr ovi ded f orar bi t r at i on st at ed t o be a r ef er ence t o ar bi t r at i on under t heAr bi t r at i on Act 1996 but wi t h t he seat of t he ar bi t r at i on t o beGl asgow, Scot l and. The cour t hel d t hat t he r ef er ence t o t he cour t sj ur i sdi ct i onal was t o i t s super vi sor y j ur i sdi ct i on over t he arbi t r at i on,

t hus t he seat must have been i ntended t o be i n Engl and and Wal es, t hi sal so bei ng appar ent f or m t he r ef er enced t o t he Engl i sh Act . Ther ef erence to Gl asgow was t o the pl ace wher e hear i ngs shoul d t ake pl ace.


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It is a matter of construction whether parties who agree to terminate a substantiveagreement also intend to terminate any arbitration agreement contained in it,ChimimportPlc v. G D'Alesio SAS [1994] 2 Lloyd's Rep 366.41

The termination of arbitral proceedings does not, in itself, discharge the arbitrationagreement, Furness Withy (Australia) Pty Ltd v. Metal Distributors (UK) Ltd [1990] 1Lloyd's Rep 236 (CA).42

Discharge of a substantive contract, for instance by breach or frustration, does notordinarily discharge an arbitration agreement,Heyman v. Darwins Ltd [1942] AC 356 .43

Discharge of an arbitration agreement or a particular reference by frustration orrepudiatory breach is rare; Bremer Vulkanetc v. South India Shipping Corp [1981] AC909.44But note John Downing v, Al Tameer [2002] BLR 323 (CA).4546 Now see Enticov.

41 Chimimport: Where t he par t i es termi nat e the subst ant i ve cont r act byagr eement , i t i s a mat t er of const r uct i on whet her t hey al so i nt ended t ot er mi nat e thei r ar bi t r at i on agr eement as wel l .

42 Furness: An agr eement t o ref er f ut ur e di sput es t o ar bi t r at i on can beanal ysed as compr i si ng an of f er by each part y t o agr ee to ref er apar t i cul ar cat egor y of di sput e t o ar bi t r at i on shoul d such a di sput eari se between t hemand when cal l ed on by t he other part y to do so. Suchof f ers ar e i r r evocabl e because they ar e suppor t ed by the consi derat i ont hat each part y gave when i t ent er ed i nt o t he ar bi t r at i on agr eement . Apar t i cul ar r ef er ence i s gover ned by a separ at e agr eement f r om t hear bi t r at i on agr eement . The l at t er can be t er mi nat ed wi t hout af f ect i ng

t he f or mer .43 Hayman: Wher e an ar bi t r at i on cl ause i s i ncl uded as a t er m of a

subst ant i ve cont r act , t he pr i nci pl e of separ abi l i t y means t hat t hear bi t r at i on agr eement wi l l not be di scharged by t he di scharge of t hesubst ant i ve agr eement t hr ough, f or exampl e, f r ust r at i on or r epudi at or ybr each, AA1996, s. 7( 1) .

44 Bremer: Mer e i nact i vi t y i n t he conduct of ar bi t r al pr oceedi ngs by apar t y t o t hose pr oceedi ngs i s not capabl e of amount i ng to ar epudi at i on of t he agr eement underl yi ng those pr oceedi ngs unl ess t hatpar t y s i nacti vi t y amount s a br each of a t er m of t he ar bi t r at i onagr eement of suf f i ci ent ser i ousness t o j ust i f y t he ot her par t y i nt r eat i ng t he cont r act as di schar ged and bot h par t i es are not equal l yat f aul t .

Nei t her does i nact i vi t y f r ust r at e an ar bi t r at i on agr eement . Thi s i sbecause bot h par t i es ar e obl i ged t o t ake st eps t o pr ogr ess ar bi t r alpr oceedi ngs by appl yi ng t o t he t r i bunal f or di r ect i ons necessar y t opr event del ay and a cont r act cannot be f r ust r at ed by t he def aul t of apar t y t o that cont r act , Paal Wi l son & Co A/ S v. Par t enr eederei HannahBl ument hal [ 1983] AC 854.

45 Downing: Def endant r ef used t o r ecogni se t he exi st ence of cont r act ,i ncorporat i ng an arbi t r at i on agr eement . Cl ai mant commenced l egalproceedi ngs. The def endant s cont ent i ons amounted t o a r epudi atorybreach of t he arbi t r at i on agr eement , accept ed by conduct when, i n t hef ace of t hose cont ent i ons, l egal proceedi ngs were commenced.

46 Note: Commenci ng pr oceedi ngs i n breach of an arbi t r at i on agr eement i s

not , i t sel f , r epudi at or y, unl ess done i n ci r cumst ances t hat show t hatt he par t y i n quest i on no l onger i nt ended t o be bound t o ar bi t r at e.Thi s was common ground i n BAE Hot el s v. Bel l way [ 2007] 2 Ll oyd' s Rep


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UNESCO [2008] EWHC 532 (Comm); [2008] 1 Lloyds Rep 673, para 11 whereDowning was doubted in the light of Fiona Trusts affirmation of the doctrine ofseperability. A court should be slow to characterise denial of the existence of a contract asnecessarily repudiatory of an arbitration agreement which, if the contact was agreed, was

included in it.

PART B: BEGINNING ARBITRAL PROCEEDINGS

Arbitral proceedings are ordinarily begun when one party to an arbitration agreement serves aNotice to Concur (a Notice of Arbitration) identifying the dispute or difference and requiring it tobe referred to arbitration. The Notice should be prepared and served in the manner required bythe arbitration agreement or, if not stated, in the manner provided for in AA1996, s. 14. In thecase of an ad hoc agreement to arbitrate, the referral may be encompassed by the agreement toarbitrate.

1.

Preconditions to the service of a Notice to ConcurThere are a number of preconditions that must be satisfied before a Notice to Concur can

be issued.

- There must be a prior dispute or difference between the parties, considerEllerineBros (Pty) Ltd v. Klinger [1982] 1 WLR 1275 (CA).47The meaning of the worddispute was reviewed in Collins v. Baltic Quay [2005] BLR 63 (CA). 48

- The dispute or difference must come within the scope of the arbitrationagreement. Words such as "Disputes arising under ..." have a narrower meaningthan "Disputes in connection with/ arising out of ..."; a contract, Heyman v.Darwins Ltd [1942] AC 356; Overseas Union Insurance Ltd v. AA MutualInternational Insurance Co Ltd [1988] 2 Lloyd's Rep 63 (CA).49 Thus, the

493 ( Comm Ct ) .47 Ellerine: A di sput e, as wel l as a di f f er ence, can ar i se, not onl y when

an assert i on made by one part y i s r ej ected by the other, but al so wherean asser t i on i s met by si l ence or pr evar i cat i on. But not e: A si t uat i oni n whi ch t he par t i es nei t her agr ee nor di sagr ee about t he t r ue posi t i oni s not one i n whi ch t her e i s a di sput e, M&B p. 128, appr oved i n Al f r edMcAl pi ne v. RMG El ect r i cal , 11t h J anuary 1995, unr epor t ed.

There i s no di f f erence or di spute wher e a par t y i s not t ol d and i s

unawar e of t he r espect s i n whi ch a cl ai m i s made agai nst i t and i s noti n a posi t i on to admi t or deny that cl ai m ( Cr uden Const r uct i on Ltd v.Commi ssi oner f or New Towns ( 1994) 75 Bui l d LR 134) . Nei t her can t her ebe a di sput e or di f f er ence wher e a cl ai m i s made and admi t t ed, El l er i neBr os ( Pty) Ltd v. Kl i nger [ 1982] 1 WLR 1275 ( CA) .

48 Collins: Maki ng of a cl ai m does not amount t o a di sput e. Ther e i s adi sput e when i t can r easonabl y be i nf er r ed t hat t he cl ai m i s notadmi t t ed. Negot i at i on and di scussi on ar e mor e consi st ent wi t h t heexi st ence of a di sput e than t he absence of one, and t he court wasl i kel y to readi l y i nf er t hat a cl ai m was not admi t t ed and t hat adi sput e exi st ed so t hat i t coul d be r ef er r ed t o ar bi t r at i on.

49 Hayman: Wor ds ref er r i ng t o di sput es or di f f er ences "under " or " ar i si ngunder" a cont r act are gener al l y i nt er pr eted as nar r ower i n meani ng than

t hose r ef er r i ng t o di sput es or di f f er ences "i n r espect of ", "i n r el at i ont o" or " i n connect i on wi t h" or " ar i si ng out of " a cont r actAA Mut ual Wor ds such as "i n r espect of ", " i n r el at i on t o" or " i n


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words in connection with are wide enough to encompass claims inmisrepresentation and in negligent misstatement and allegations of mistake;Ashville Investments v. Elmer Contractors [1989] 1 QB 488 (CA).

-

But now see Fiona Trust&Holding Corp v. Yuri Privalov [2007] UKHL 40;[2008] 1 Lloyds Rep 254, where it has been held, at any rate in an internationalcommercial contract, the words arising under a contract should no longer begiven a narrower meaning than the words arising out of a contract.

- If the word agreement is used, rather than contract, the wider form of wordingmay be sufficient to encompass disputes about whether the agreement is void,for instance for illegality; Harbour Assurance v. Kansa [1993] 1 Lloyds Rep455 (CA);50AA1996, s. 7.

- The old law still may have relevance; Norscot Rig v. Essar Oilfields [2010] 2

Lloyds Rep 209 (Comm); (Counterclaims arising under an earlier contract didnot arise out of the later contract that with the arbitration agreement but didrelate to it, these words also being used in the arbitration agreement, thus werewithin the jurisdiction of the arbitrator).

-

There may be contractual preconditions, or limits on the service of a Notice toConcur, for example prior mediation, review by a third person or time bars.

2. Preparing a Notice of to Concur (a Notice of Arbitration)

The wording of the Notice to Concur merits careful consideration.

-

The Notice identifies the matters that have been referred and, together with thearbitration agreement and the Arbitration Act 1996, defines the jurisdiction and

powers of the tribunal. If the notice is unclear, previous correspondence can beconsidered to establish what disputes are encompassed by it, CasilloGrani v.

Napier Shipping Co [1984] 2 Lloyd's Rep 481.51

connect i on wi t h" or "ar i si ng out of " a cont r act ar e gener al l y regar dedas synonymous, and as havi ng wi de meani ng. For a r ecent exampl e,

adopt i ng thi s appr oach, see El Nashat r y v. J Sai nsbur y [ 2004] 1 Ll oyd' sRep 309 ( Comm Ct ) . Hel d: di sput e concerni ng a var i at i on t o 1999 ShareSal e Agr eement s ( whi ch pr ovi ded f or ar bi t r at i on) wer e i n r el at i on t ot hat agr eement , whet her di sput e was as t o t he const r uct i on or ef f ect ofan admi t t ed vari at i on or as t o i t s t er ms or as t o whet her t her e was avari at i on at al l .

50 Kansa: By subst i t ut i ng "agr eement " f or "cont r act " wor ds such as " i nr espect of " , " i n connect i on wi t h" have an even wi der meani ng, and canencompass di sput es about whether t he cont r act i n quest i on i s voi d, f ori nstance, f or i l l egal i ty

51 Casillo: Sect i on 34( 3) of t he Li mi t at i on Act 1980 ( now r epeal ed, seeAA1996, Schedul e 4) , t he equi val ent pr ovi si on under t he ol d l aw, di d notr equi r e t he not i ce t o i dent i f y t he mat t er t o be r ef er r ed. Never t hel ess,

t he mat t er had t o be i dent i f i ed ei t her on t he f ace of t he not i ce or , i ft he not i ce was uncl ear, f r om pr evi ous cor r espondence bet ween t hepart i es.


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- Claims made later, for instance in case statements, must be encompassed by thedescription of the dispute in the Notice.52

- The availability of defences by way of set-off depends on the nature of the set

off and the width of the arbitration clause. Transaction set-offs are more likelyto be within the scope of a widely drawn arbitration agreement than independentset-offs; see discussion in Metal Distributors v. ZCCM Investment Holdings[2006] 2 Lloyds Rep 37 (Comm).53 If the words relating to are used, thencounterclaims arising under a related contract may be within the tribunals

jurisdiction; Norscot Rig v. Essar Oilfields [2010] 2 Lloyds Rep 209 (Comm).

-

The Notice will, ordinarily, commence proceedings for limitation purposes.

3.

The commencement arbitral proceedings for limitation purposes

The parties can agree when arbitral proceedings are commenced for limitation

purposes. The service of Notice to Concur will, ordinarily, stop time running forlimitation purposes, AA1996, ss. 13(1), 14 and, depending on the wording of thecontract, may do so for the purpose of contractual time bars. Note Taylor Woodrow v.RMDKwickform[2008] EWHC 825 (TCC); [2008] 2 Lloyds Rep 345 (provision thatdisputes to be referred to arbitration before a person to be agreed or failing agreementto be appointed by the CIArb was, as regards the commencement of the arbitration,subject to s. 14(4). The provision was not an agreement as to when arbitral proceedingswere to be regarded as commenced for the purpose of s. 14(1)).

- To have this effect, the Notice must be worded appropriately to the manner inwhich the tribunal is to be constituted and served on the right person. (Subjectto contrary agreement: designated/named arbitrator serve on other partyrequiring dispute to be referred to arbitrator: party appointed arbitrator orarbitrators serve onother party requiring it to appoint or agree to appointment ofarbitrator; third party appointed arbitrator give notice to that person requiringhim to make the appointment) see AA1996, s. 14.54 But a failure in theserespectsprovided the right person is served was not fatal under the pre 1996 Actlaw, see NeaAgrex SA v. Baltic Shipping Co Ltd [1976] 2 Lloyd's Rep 47

52 Consi der cl ai ms, def ences, abat ement s, set - of f s and count er cl ai ms.But t he par t i es can al t er t he t r i bunal ' s j ur i sdi ct i on and power s bysubsequent agr eement , est oppel or wai ver .

53 The concept ual di f f i cul t i es wher e t he set of f r el at es t o a cl ai m undera cont r act over whi ch t he t r i bunal has no j ur i sdi ct i on wer e di scussedi n Ronl y Hol di ngs v. J CSZest af oni s [ 2004] EWHC 1354 ( Comm) : Thet r i bunal has no j ur i sdi ct i on over t hat cont r act yet must make adeci si on on whet her t he set of f def ence i s pr oper l y avai l abl e, andt hi s may gi ve r i se t o an i ssue est oppel .

54 Most ar bi t r at i on agr eement s pr ovi di ng f or a sol e ar bi t r at or envi sagean ar bi t r at or bei ng agr eed or , f ai l i ng agr eement t o a name, a thi r dpar t y appoi nt ment . Thus i t may be t hat s. 14( 4) appl i es andproceedi ngs ar e commenced when t he Not i ce i s served by one par t y ont he ot her r equi r i ng i t t o agr ee to t he appoi nt ment of an ar bi t r at or .The conf usi on ar i ses because s. 14( 5) provi des t hat where t hear bi t r at or i s t o be appoi nt ed by a per son ot her t han a par t y,

proceedi ngs commence when not i ce i s gi ven t o t hat par t y. Thi s wasconf i r med t o be t he case i n Tayl or Woodrow v. RMDQui ckf orm [ 2008] EWHC825 (TCC) ; [ 2008] 2 Ll oyd s Rep 345.


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(CA),55 and may still not be fatal. Consider AtlanskaPlovidba v.ConsignacionesAsturianas SA [2004] 2 Lloyds Rep 109 (Comm) where it wassaid that arbitration being used by commercial men, the court shouldconcentrate on the substance, not the form, of the notice.56

- The Notice must unequivocally require the disputes or differences to be referredto arbitration; Allienzetc v. SFI Rotterdam BV [1999] 1 Lloyds Rep68;57Taylor Woodrow v. RMDKwikform [2008] EWHC 825 (TCC); [2008] 2Lloyds Rep 345 (notice must make clear that the party is intending to refer thedispute to arbitration, not merely threatening to do so if demands not met).Contrast Bulk & Metal Transport v. VOC Bulk [2009] EWHC 288 (Comm);[2009] 1 Lloyds Rep 481, s. 14(4) should be interpreted broadly and flexiblyconcentrating on substance not form.58

55 NeaAgrex: Unl ess t he par t i es have agr eed ot her wi se, a f ai l ur e t o

compl y wi t h requi r ement s such as t hese may be regarded as ani r r egul ar i t y that does not i nval i dat e a Not i ce t o Concur but whi ch canbe cur ed by amendment , by subsequent cor r espondence or by thei mpl i cat i on of t er ms i nt o t he not i ce i t sel f . Thus, a Not i ce t o Concurt hat r equi r ed t he reci pi ent t o name i t s arbi t r at or when, because thet r i bunal was t o compr i se a sol e ar bi t r at or , i t shoul d have r equest edt he r eci pi ent t o agr ee t o t he appoi nt ment of an ar bi t r ator has beenhel d t o be ef f ect i ve despi t e t hi s def ect . ( NeaAgr ex SA v. Bal t i cShi ppi ng Co Lt d [ 1976] 2 Ll oyd' s Rep 47 ( CA) . Al t hough Thi s caseconcer ned a f ai l ur e t o compl y wi t h t he r equi r ement s i n s. 34( 3) of t heLi mi t at i on Act 1980, now r epeal ed, t he r easoni ng i s pr obabl yappl i cabl e t o commencement procedur es agreed between t he par t i es orpr ovi ded f or i n the new Act .

I t was al so suggested by Lor d Denni ng i n NeaAgr ex, t hat t he Not i ce t oConcur woul d have been ef f ect i ve had i t sai d nothi ng about t her equi r ement t o agr ee an arbi t r ator, as such a r equi r ement woul d bei mpl i ed. Thi s was, subsequent l y, doubt ed; see Sur r endr a Over seas Ltd v.Gover nment of Sri Lanka [1977] 1 Ll oyd' s Rep 653.

56 AtlanskaPlovidba: The not i ce r ef er r ed t o di sput es ar i si ng under t hebi l l of l adi ng, wher eas i t arose under t he booki ng not e. Hel d:consi der i ng ss. 14 and 16 of t he Act . To be ef f ect i ve t he not i cemust , havi ng r egar d t o i t s t er ms and t he cont ext i n whi ch i t i swr i t t en, i dent i f y t he di sput e wi t h suf f i ci ent par t i cul ar i t y, and makecl ear t hat t he per son gi vi ng i t i s i nt endi ng t o r ef er t he di sput e t oar bi t r at i on, not mer el y t hr eat eni ng t o do so i f hi s demands are not

met . Ther e ar e f ur t her r equi r ement s beyond t hi s. I n t hi s case t hecont ext made cl ear t hat t he part y i ssui ng t he not i ce was al soasser t i ng t hat t he di sput e f el l wi t hi n t he ar bi t r at i on agr eement i nt he booki ng note

57 Allienz: A not i ce of ar bi t r at i on must unequi vocal l y r equi r e t he mat t eri n cont ent i on bet ween t he par t i es t o be r ef er r ed t o ar bi t r at i on. Ar ef er ence t o t he possi bi l i t y of ar bi t r at i on at some f ut ur e dat e i s notsuf f i ci ent , Sur r endr a Over seas Lt d v. Gover nment of Sr i Lanka [ 1977] 1Ll oyd' s Rep 653. A not i ce r equi r i ng i mmedi at e ar bi t r at i on, but st at i ngt hat i t wi l l be wi t hdr awn i f a set t l ement i s r eached, wi l l be ef f ecti ve.I f t he demand f or i mmedi at e ar bi t r at i on i s cl ear , r ef er ence t o ani ncor r ect met hod f or appoi nt i ng t he t r i bunal wi l l not i nval i dat e t henot i ce.

58

Bulk: Not i ce st at ed f ai l i ng payment wi t hi n seven days we ar ei nst r uct ed t o commence ar bi t r at i on and i nvi t i ng t he r eci pi ent t o agr eean ar bi t r at or f r om one of t hr ee names, suf f i ci ent t o commence


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PART D: CONSTITUTING THE TRIBUNAL

Once arbitral proceedings are commenced, the tribunal is, if not already agreed, appointed eitherby agreement between the parties, on application to an agreed third party or, if the agreedappointment procedure has failed, by the court.

1. Methods of appointment

The parties can agree on how the tribunal is to be constituted, AA1996, ss. 15(1), 16(1).Apart for a single arbitrator, the most usual alternatives are three arbitrators, one appointedas chairman, or party arbitrators with a substitute umpire.

-

Panels of three arbitrators sit together and take decisions by majority (AA1996, ss.20, 22).

- Party arbitrators have sole responsibility for the reference until they disagreewhereupon the umpire takes over (AA1996, s. 21), whereupon the party arbitratorsmay become advocates before the umpire.

The parties can agree on the person(s) to be appointed to the tribunal

-

It is rare for an arbitrator to be named in the agreement unless it is ad hoc. In thecase of a single arbitrator the usual arrangement is that, once a dispute has arisen,the parties seek to agree a name or, failing agreement, either of them can apply to anamed third party, an appointing body, for an appointment.

-

In the case of a two or three arbitrator tribunal, it is usual for each party to appointone arbitrator and for the chairman or umpire to be chosen by agreement betweenthe arbitrators or by a nominated third person.

- Party arbitrators, particularly those who may be replaced by an umpire, have asomewhat anomalous status, see Redfern& Hunter, 2ndedition, p 198-201.

-

An arbitration agreement which stipulates a specific religious requirement for thearbitrators does not fall foul of the Employment Equality (religion or Belif)

Regulations 2003, or the EU Directive they implement. Arbitrators are notemployees within the meaning of these Regulations; Jivraj v. Haswani[2011]UKSC 40.

There is, apparently, no implied term that the contractual right to apply to a third party foran appointment will be excised reasonably and as such within a reasonable period of timefrom issuing the notice to concur. Neither, ordinarily, will the right to apply for anappointment lapse through effluxion of time; Indescon Ltd v. Ogden [2005] BLR 152(TTC).59

arbi t rat i on.59

Indescon: Not i ce t o concur i ssued i n 1992, appl i cat i on f or appoi nt mentf i r st made many year s l ater . Cour t hel d t hat t he r i ght t o seek anappoi nt ment cont i nued t o subsi st . The sol ut i on was, once t r i bunal


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If an arbitration agreement does not make adequate arrangements for the constitution ofthe tribunal, or for how it is to be appointed the default provisions in the Arbitration Act1996 apply, AA1996, ss. 15, 16, 29, 21, 22. The appointments can, if necessary, be made

by the court, AA1996, ss. 17, 18, 19. The court will have regard to AA1996, s. 1 indeciding whether to exercise its s. 18, discretion, Durntnell v. S of S for Trade andIndustry [2000] BLR 771.60 Consider also AtlanskaPlovidba v.ConsignacionesAsturianas SA [2004] 2 Lloyds Rep 109;61ChalburyMccouat v. P.G.FoilsLimited [2010] EWHC 2050 (TCC) (exercise of s. 18 power where no seatdesignated);62Noble Denton Middle East v. Noble Denton International [2011] 1 LloydsRep 387 (s. 18 is a gateway, it is sufficient for an appointment to be made that there is agood arguable case that there is an arbitration agreement, it is then for the arbitrator todetermine its validity or not, neither was the pendency of litigation in Texas, a reason notto appoint, the probable arbitration agreement acting like an exclusive jurisdictionclause,and no exceptionalcircumstances why it should not be upheld.

An appointment takes effect when the arbitrator communicates his acceptance, TradaxExport SA v. Volkswagenwerk AG [1970] QB 537.63

Once an appointment is accepted, there is probably a tripartite contact, with some unusualincidents, between the parties and the arbitrator. In the case of a third party appointment,the contract may come into existence when the selected person is advised to the parties orwhen that person writes to the parties accepting the appointment (nomination).

2. Remuneration

The basis of the arbitrator's remuneration can be agreed with the parties, either beforeaccepting the appointment or subsequently. Excessive fees and cancellation charges bringarbitration into disrepute.

appoi nt ed, t o seek t o di smi ss t he cl ai m f or want of pr osecut i on.60 Durtnell: Appl i cat i on t o appoi nt under s. 18. Di scr et i on gover ned by

s. 1 AA1996, Cour t coul d consi der del ay i n deci di ng whet her possi bl et o obt ai n a f ai r r esol ut i on of t he di sput e. Can r ef use t o appoi nt i fno l onger possi bl e t o have a f ai r r esol ut i on of t he di sput e bef or e ani mpar t i al t r i bunal wi t hout unnecessary del ay. But her e del ay not t oo

l ong, al so cont r i but ed t o by S of S.61 AtlanskaPlovidba: Bef or e bei ng abl e t o exer ci se i t s di scret i onunder s. 18, cour t must be sat i sf i ed that t he par t i es have ent er edi nt o an ar bi t r at i on agr eement f al l i ng wi t hi n t he scope of t he 1996Act . Secondl y t hat an ef f ect i ve not i ce of ar bi t r at i on has been gi ven;t hi r dl y t hat t her e has been a f ai l ur e of t he cont r act ual pr ocedur e f ort he appoi nt ment . Cour t shoul d or di nar i l y exer ci se i t s j ur i sdi cti on t oappoi nt unl ess sat i sf i ed t hat t he ar bi t r al pr ocess cannot l eads t o aj ust r esol ut i on of t he di sput e.

62 Chalbury: wher e part i es have not agr eed t he seat , cour t has, under s.2, s. 18 power t o appoi nt , pr ovi ded t her e i s a suf f i ci ent connect i onwi t h Engl and and Wal es, such as wher e t he agr eed subst ant i ve l aw i s ori s l i kel y to be t he Law of Engl and and Wal es and a f or ei gn cour t i s

not or i s not l i kel y to be sei zed of t he mat t er . .63 Tradax: Appoi ntment t akes ef f ect when arbi t r ator communi catesacceptance.


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- Agreements should not be made with only one of the parties, K/S Norjarl A/S v.Hyundai Heavy Industries Co Ltd [1992] 1 QB 863; Turner v. Stevenage BoroughCouncil [1997] 2 Lloyds Rep 129 (CA).64

-

In the absence of agreement the arbitrator will have an implied entitlement toreasonable remuneration and, possibly, payment by instalments, see AA1996, s.28(1). There is no implied entitlement to cancellation charges.

- The tribunal has a lien on its award for payment of its fees, but a party can apply tothe court to have the award released on payment into court of the sum claimed or alesser amount ordered, AA1996, s. 56, see also s. 28.

- The court can, on application, consider and adjust an arbitrator's fees, but not so asto override a contractual entitlement, AA1996, s. 28; see Agrimex v. Tradgrain[2003] 2 Lloyds Rep 537.65 The position is different where an arbitrator is

removed, AA1996, s. 24(4). Consider also the position on resignation, AA1996, s.25(3)(b).

3. Revocation, removal and resignation

There are various ways in which an arbitrator can cease to hold office beforecompleting the reference.

-

Death. An arbitrator's authority is personal and ceases on death, AA1996, s. 26.

64 Hyundai: To do so may cal l t he t r i bunal s i mpar t i al i t y i nt o quest i on,as may ref usi ng t o pr ogr ess t he ref erence ( once appoi nt ed) unt i l t ermsagr eed by bot h par t i es, Tur ner .

65 Agrimex: Appl i cat i on under s . 28( 2) and ( 3) by part y or dered t o payGAFTA board of appeal s f ees f or cour t t o consi der an adj ust t heAppeal Boar d s cost s i n par t i cul ar t he i t em f or l egal f ees of 9, 000( i ncur r ed t hr ough empl oyi ng a sol i ci t or t o at t end t he hear i ng anddr af t t he awar d) , on gr ounds t hat excessi ve and di spr opor t i onat e.Cour t consi der ed t hat t her e was no reason why a compet ent arbi t r atorshoul d not be expected t o pr oduce i t s own r easoned award. I t appearst hat i f GAFTA had not advi sed t hat i t was r ef or mi ng the syst em, cour twoul d have concl uded a dr af t sman was not j ust i f i ed i n t hi s case.Cour t consi der ed t hat t here was no reason why the sol i ci t or shoul d

have at t ended the hear i ng, or been used at 190 per hour when a l aydraf t sman coul d have done t he work at 35 per hour . The cour t al soexpressed concern at t he suggest i on t hat t he dr af t sman mi ght have ar ol e i n pr ovi di ng a l egal anal ysi s. The cour t consi der ed t hat nei t herhe nor t he boar d had r egar d t o t he pr i nci pl e of pr opor t i onal i t y i nwhat he was doi ng or char gi ng. Cour t r egarded r ate and hours expended( i n excess of 30 hours on draf t i ng a 50 page award, pl us at t endance atheari ng) as excessi ve and t he work di sproport i onate gi ven t hesol i ci t or s l i mi t ed r ol e as dr af t sman, and a char ge f or pr oof r eadi ngby a t r ai nee sol i ci t or as unj usti f i ed. I t r educed hi s f ee t o5, 000. 00. The bal ance i n excess of t hi s had t o be r epai d by GAFTA.Cl ai m was f or about 40, 000. Fees of appeal boar d were about 20, 000.Not e, t he award was onl y r el eased on payment of t he demanded f ees;

t hi s appl i cat i on was commenced about f our weeks l at er . Note, al so,t he j udge reduced t he def endant s cost s of t he appl i cat i on by j ustunder hal f t o 6, 500. 00.


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- Agreement of the parties, AA1996, s. 23.

-

Removal for bias, lack of agreed qualifications, incapacity, and incompetence(misconduct), AA1996, s. 24.

- Resignation, AA1996, s. 25.

4. Consequence of revocation, removal or resignation

If the arbitrator ceases to hold office prior to the conclusion of the reference, there are anumber of consequences to consider.

-

A replacement will have to be appointed, by the court if necessary, andarrangements made about the status of the existing proceedings, AA1996, s. 27,consider Fox v. PG Welfair Ltd [1981] 2 Lloyds Rep 514, 520. 66

-

In principle, the circumstances in which the arbitrator ceases to hold office couldamount to a breach of contract or negligence. But, except in the case ofresignation, an arbitrator is immune from suit, AA 1996, s. 29, see also, s. 74.

- An arbitrator who resigns can seek relief from the court as regards any liabilityincurred as a result of his resignation, and for orders concerning his fees, AA1996,s. 25.

- If the court removes an arbitrator it can make orders with respect of his fees,AA1996, s. 24(4).

Equally importantly, in almost all such cases apart from death, both the arbitrator'sreputation, and that of arbitration itself, may be damaged.

____________________________

66

Fox: Removal of ar bi t r at or does not af f ect exi st i ng par t awar ds.St at us of pr ocedur al di r ecti ons uncl ear but best t o r evi si t , conf i r mor amend i n l i ght of par t i es r epr esent at i ons.


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SESSION 3: ENFORCING THE RIGHT TO ARBITRATE AND DEALING WITHJURISDICTIONAL DISPUTES

Peter Aeberli



PART A: ENFORCING THE RIGHT TO ARBITRATE

The court will not specifically enforce an arbitration agreement, but a claim for damages is, in

theory, possible, see Tracomin SA v. Sudan Oil Seeds Co Ltd [1983] 2 Lloyd's Rep 629 (CA). 67

The usual remedy is to seek a stay of proceedings, if commenced in the High Court or a countycourt or, if commenced in some other forum, an injunction from the High Court.

1. Obtaining a statutory stay of proceedings

A party to an arbitration agreement against whom proceedings are commenced in theHigh Court or a county court in respect of a matter covered by that agreement, canobtain a stay of those proceedings, unless the agreement is null and void, inoperative orincapable of being performed, AA1996, s. 9. The application is made by notice in the

proceedings, CPR, Rule 62.3(2).

- The timing of the application for a stay is critical. The application may not bemade before taking the appropriate procedural step, if any, to acknowledge the

proceedings, or after taking a step in those proceedings to answer the substantiveclaim, see AA1996, s. 9(3); Capital Trust v. Radio Design [2002] 2 All ER 150(CA);68for an example, see Patel v. Patel [2000] QB 551 (CA).69 Note Bilta (UK)Ltd. V. Nazir [2010] EWHC 1086 (Ch), a failure to comply with CPR Part 1170did not mean the right to arbitrate was lost, as s. 9(1) and 9(3) displaced it. Whileasking the court for an extension of time to serve a defence is a step to answer the

67 Tracomin: Statutory st ay was f i r st possi bl e under t he Common LawProcedur e Act 1854. Tr acomi n di scusses t he di f f i cul t y i n pr ovi ngdamages, i . e. have t o show t r i bunal woul d r each a di f f er ent deci si on.

68 Capital: Appl i cat i on f or a st ay but al so f or summary j udgement i n t heevent t hat a st ay was not gr ant ed. The conduct must be such as todemonst r at e an el ect i on t o abandon t he r i ght t o a st ay i n f avour ofal l owi ng t he act i on t o pr oceed, and t he act must have t he ef f ect ofi nvoki ng t he j ur i sdi ct i on of t he cour t . Not t he case her e, so a st aygr ant ed.

69 Patel: Appl i cat i on t o set asi de j udgement i n def aul t and f orconsequent i al di r ect i ons, not a st ep t o answer t he subst ant i ve cl ai m,t he t est under t he new Act . Appl i cat i on f or l eave t o def ence andcount er cl ai m, not necessary, so not such a st ep.

70

CPR Pt 11 r equi r es a def endant who wi shes t o cont est t he j ur i sdi ct i onof t he cour t t o appl y the cour t f or an or der af t er f i l i ngacknowl edgment of ser vi ce.


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substantive claim, since the defendant in question had made clear incorrespondence (although not copied to the court) that it reserved its right to applyfor a stay, the right to apply for a stay had not been lost.

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An arbitration agreement may be inoperative if it contravenes consumerlegislation, Zealander v. Laing Homes Ltd ([2000] 2 TCLR 724.71

- Poverty or inability to honour an award does not render an arbitration agreementinoperative, nor does the availability of remedies in court proceedings that are notavailable in arbitration; The Tuyuti [1984] QB 838 (point not considered at CA);SocieteCommerciale v. Eras (International) Ltd [1992] 1 Lloyds Rep 570 (CA).

- The power to refuse a stay where the arbitration agreement is null and void,inoperative or incapable of being performed, assumes that an arbitration agreementhas been concluded, and is concerned with whether it is derived of legal effect,

Albon v. Naza Motor Trading (No 3) [2007] 2 Lloyds Rep 1 (Ch D).72

- A dispute about whether the court should exercise its supervisory (or supportive)jurisdiction is not encompassed by a normally worded arbitration agreement,thus is not amenable to a stay under s. 9 AA1996, Sheffield United v. West HamUnited [2008] EWHC 2855 (Comm).

If there is a dispute about whether an arbitration agreement has been concluded orwhether it encompasses the dispute, the court should ordinarily determine this, notleave it to the tribunal. It should do so either by hearing a preliminary issue on thequestion or, if the parties agree or if there are no disputed issues of fact, on affidavitevidence. Alternatively, the court can stay the proceedings under the courts inherent

jurisdiction, where in the interests of good sense and litigation management it would bepreferable for the arbitrator to decide the issue;Birse Construction v. St David [2000]BLR 57 (CA); Al-Nami v. Islamic Press Agency [2000] BLR 150 (CA).73

71 Zelander: Unf ai r Ter ms i n Consumer Cont r acts Regul at i ons 1994/ 1999,see al so AA1996, ss. 90 ( consumer i ncl udes l egal per sons) , 91 ( cl ai msup t o 5, 000, where one part a consumer, arbi t r at i on agr eementunf ai r ) . I n Zel ander t he cl ai m was f or mor e t han 5, 000, but consumerhad no oppor t uni t y to negot i ate ar bi t r at i on agr eement i n t he t er ms of

NHBC scheme. I t r est r i ct ed r ecour se t o l egal act i on, par t i cul ar l y byr equi r i ng the consumer t o take di sput es excl usi vel y t o ar bi t r at i on notcover ed by l egal pr ovi si ons, Schedul e 3 paragr aph 1 ( q) , i mbal ance i nbar gai ni ng power . Ar bi t r at i on agr eement coul d not be r el i ed on, st aynot gr ant ed.

72 Albon: I n t hi s case i t was al l eged t hat t he j oi nt vent ur e agr eementi n whi ch t he ar bi t r at i on agr eement was f ound, was a f or gery. Thecour t hel d t hat i t had no j ur i sdi ct i on t o gr ant a st ay under s. 9unt i l t he val i di t y of t he ar bi t r at i on cl ause had been det er mi ned. I tdecl i ned t o exer ci se i t s i nher ent j ur i sdi cti on t o gr ant a st ay.

73 Birse: I f t her e i s a t r i abl e i ssue t hen, unl ess t he par t i es agr ee, i tshoul d be deal t wi t h at a hear i ng. On appl i cat i on f or st ay, t he cour tshoul d r esol ve whet her t her e i s an ar bi t r at i on cl ause ( exi st ence and

ext ent ) . The 1996 Act di d not r equi r e t hi s t o be deci ded byAr bi t r at or . J CT condi t i ons wer e i ncor por at ed by r ef er ence i n l et t er ;cont act was concl uded by conduct . I f r easonabl y cl ear t her e was a


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There is a right of appeal from the courts decision to the Court of Appeal, despiteAA1996, s. 9 being silent on the matter; Inco Europe Ltd v. First Choice [2000] BLR 159(CA).

Abolition of the discretion not to stay proceedingsThe court no longer has discretion as to whether to stay proceedings, or to not do so ifthere is in fact no dispute between the parties. Contrast AA1950, s. 4(1), AA1975, s. 1(both now repealed) and AA1996, s. 86 (not brought into force). SeeHalki Shipping Corpv. Sopex Oils Ltd [1998] 1 Lloyds Rep 465 (CA).74

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The court can no longer give summary judgment before staying proceedingspending arbitration. This is in contrast to the position under the old law, Homeand Overseas Insurance Co Ltd v. Mentor Insurance Co (UK) Ltd [1989] 1 Lloyd'sRep 473 (CA) (AA1950, s. 4, now repealed) SL Sethia Liners Ltd v. State

Corporation of India Ltd [1981] 1 Lloyd's Rep 31 (CA) (AA1975, s. 1,75 nowrepealed).

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It is unclear whether the court could still order an interim payment before stayingthe proceedings as it did in Imodco Ltd. v Wimpey Major Projects Ltd (1987) 40Build LR 1 (CA). Consider Van Uden BV v. Kommandigfesellshaft etc.76[1998] ECR I-7091, see [1999] 2 WLR 1181.77

cl ause and onl y di sput e concer ned i t s extent , t hi s coul d be l ef t t ot he arbi t r at or .

Al - Nami . Under s. 9, j udge shoul d deci de i f t her e i s an ar bi t r at i onagr eement appl i cabl e t o t he cl ai m, not l eave i t t o t he ar bi t r at or . Anumber of opt i ons. Deci de on af f i davi t evi dence t hat t her e i s, andst ay. Or der t he i ssue t o be t r i ed as a pr el i mi nar y i ssue. Deci det hat t her e i s no ar bi t r at i on agr eement and di smi ss t he appl i cat i on.Or st ay, under t he cour t ' s i nher ent j ur i sdi cti on, so t hat t he t r i bunalcan deci de t he i ssue where t hi s was i n the i nt erest s of good sense andl i t i gat i on management ( i e where some mat t er s cl ear l y wi t hi n t het r i bunal ' s j ur i sdi ct i on) .

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bls-arbitration law and practice 2011

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