Skip to main content

HFW

Maritime Response

Brexit

GDPR

In this section

Briefings

English Court Support for Arbitration – Recent Developments, February 2018

Parties to English law arbitrations may, in limited circumstances, apply to the High Court for orders in relation to those arbitral proceedings under s.44 of the Arbitration Act 1996 (the Act). The court's role here is to provide support; it is not for the court to supervise or displace the arbitral process.

While the court will always be guided by the general principle of non-intervention (s.1(c) of the Act), recent judgments illustrate how s.44 can provide a party with a speedy and effective remedy, which would be otherwise unavailable from the arbitral tribunal.

In this article, we outline the court's supportive powers under s.44 of the Act and discuss notable recent court judgments which have clarified the scope of those powers. Lastly, we assess the possible future developments in this area which may be relevant to your business.

What are the court's supportive powers under s.44?

Section 44 of the Act grants the court the same powers to make orders in arbitration proceedings as the court has in legal/court proceedings, in respect of:

  • The taking of witness evidence
  • The preservation of evidence
  • The inspection, photographing, preservation, custody, detention or sampling of property, which is the subject of the proceedings or as to which any question arises in the proceedings
  • The sale of any goods which are the subject of the proceedings
  • The granting of an interim injunction or the appointment of a receiver.

S.44 – Key points to note

  • Section 44 is a non-mandatory provision which can be excluded or amended through agreement of the parties. However, an arbitration agreement which grants a tribunal "exclusive jurisdiction" over a dispute does not exclude the court's powers under s.44; instead specific wording would be required (see the judgment of Rix J in Re Q's Estate (1999) 1 All ER (Comm) 499).
  • Orders can be sought under s.44 even where the seat of the arbitration is outside England, Wales and Northern Ireland, or if the arbitral seat is yet to be determined. Nevertheless, the court will be reluctant to act if it would be inappropriate to do so, particularly if the arbitration's curial law is that of another jurisdiction (e.g. Econet Wireless Ltd v Vee Networks Ltd (2006) EWHC 1568 (Comm), where the English court refused to grant a freezing injunction where the seat of the arbitration was in Nigeria and the defendant was based in Nigeria).
  • The court can only make an order under s.44 where the arbitration tribunal or institution "has no power or is unable for the time being to act effectively" (s.44(5)). On this basis, orders may be sought:
    • (a) where the tribunal is not yet fully constituted.
      The application of this provision has been limited to some extent by the increasing prevalence of expedited procedures and emergency arbitrator provisions in institutional arbitration rules, such that similar adequate remedies may be available without the need to involve the court.

      Even where the court grants a s.44 order before the tribunal has been fully constituted, the court may further rule that such order shall cease to have effect once the tribunal or arbitral institution has the power to act (s.44(6)).
    • (b) where the tribunal lacks power to make the order:
      (i) Sale of Goods. A tribunal has no power to order the sale of goods. A court, on the other hand, under s.44(2)(d) may order the sale of any goods which are the subject of proceedings. In the recent decision of Males J in Dainford Navigation Inc v PDVSA Petroleo SA "Moscow Stars" (2017) EWHC 2150 (Comm) (in which HFW acted successfully for the claimants), the court ordered the sale of a cargo of crude oil belonging to the defendant on board a vessel where the claimant vessel owner had exercised a contractual charterparty lien over that cargo and had commenced arbitration proceedings in respect of unpaid sums due under the charterparty. The judge found that even if the arbitration was not directly "about" the cargo or its ownership, the arbitral award would determine what was to happen to that cargo depending on whether the claimant's claims succeeded or not, therefore the court had the power to order the sale of goods which were "the subject of the proceedings". There was good reason for the court to exercise its discretion in making the order as the claimant was incurring the ongoing expense of operating the vessel while exercising the lien for the time required for the underlying arbitration proceedings to be completed. The contractual lien could be transferred over the cargo sale proceeds, such that the cargo sale order would simply preserve the status quo pending resolution of the underlying arbitration.

      (ii) Against third parties. A tribunal has no power to make orders against third parties. The courts do have such powers, yet will only exercise them in exceptional circumstances. The limited nature of the court's powers was highlighted in the recent decision of Ms Cockerill QC in DTEK Trading SA v Mr Sergey Morozov and another (2017) EWHC 94 (Comm) where it was held that s.44 cannot be used to obtain a court order to preserve evidence against third parties based outside the jurisdiction. The judgment suggests that the position might have been different, had there been a substantive cause of action against the third party.

      (iii) Freezing Injunction. Parties to an arbitration may agree (either expressly or through the applicable arbitral institutional rules) that the tribunal should have power to grant a freezing injunction. However, only a court has power to enforce an injunction, especially against third parties such as banks. Furthermore, breach of a court-ordered freezing injunction can be met with significant sanctions, for example breach of a penal notice may constitute a contempt of court. Parties concerned about possible dissipation of assets may obtain a more effective remedy by bypassing the tribunal and applying directly to the court for an injunction under s.44(e). However, the availability of this remedy has been limited following the decision in Gerald Metals v Timis Trust (see further discussion below).
  • Any application for an order under s.44 should generally be made either with the tribunal's permission (which may be made by majority vote, see s.22(2) of the Act) or the written agreement of the other parties (s.44(4)). A without notice application may only be made if the case is one of urgency and, even then, such an order may only be made for the limited purpose of preserving evidence or assets.

The Future – possible reform of section 44(5)?

Since the Arbitration Act 1996 was drafted, we have seen the introduction of expedited formation and emergency arbitrator provisions in many arbitral institutional rules, such that the tribunal may no longer be said to be "unable for the time being to act effectively" (which is one of the requirements for court intervention set out in s.44(5) of the Act). Indeed, the decision of the Commercial Court in Gerald Metals SA v The Trustees of the Timis Trust and others (2016) EWHC 2327 limited the scope of the court's power to grant freezing injunctions in support of arbitration under s.44(5) due to the existence of emergency arbitrator provisions in the London Court of International Arbitration (LCIA) Rules 2014. There is now some concern that the court's power to grant interim relief under s.44 of the Act has been excessively limited, and that access has been impeded to the more powerful enforcement and sanctions regimes in place for breach of a court order. The Law Commission is considering proposals for reform of s.44(5) of the Act so that parties to arbitration will retain the ability to seek court support where necessary.

HFW Perspective

Recent court judgments in respect of applications for court support in arbitration under s.44 have shown how prompt and flexible remedies can be obtained to support arbitration proceedings. If you are party to arbitral proceedings or considering commencing an arbitration, take time to consider whether an application under s.44 for a court order may be of benefit. You may also consider specifically excluding the application of institutional emergency arbitrator/expedited procedure provisions from your arbitration agreement to ensure that you retain access to s.44 remedies, pending the possible reform of s.44(5).

For further information, please contact the authors of this briefing:

Damian Honey
Partner, London
T +44 (0)20 7264 8354
E damian.honey@hfw.com

Martina Kelly
Senior Associate, London
T +44 (0)20 7264 8155
E martina.kelly@hfw.com

Contact Us

Latest News