Role of the Courts in Arbitration Process

1.0 Introduction

Arbitration is a process whereby two or more parties agree to submit a legal dispute to one or more third parties, whose role it is to enunciate judicially on that dispute in the shape of a binding award.[1] The purpose of arbitration is to retract the power to decide a dispute from the national court, and to transfer that power to an arbitrator.[2] The consensual nature of arbitration may need the parties in the arbitration agreement to resort to the Court to enforce incidence of their agreement.[3] The court will support and supervise the arbitration process, but this does not imply that the court gives powers to the arbiter beyond those that are strictly necessary to permit the arbiter to perform the duties that have been imposed upon, and accepted by him.[4] As a general principle, the Court should not intervene with the arbitration process except as provided by the Act.[5]

2.0 Role of Court in Arbitration

2.0.1 Extension of Time

In section 12 and section 79 of the Arbitration Act 1996 (AA 1996), the court has power to extend time for beginning of arbitral proceedings, and to extend time limits relating to arbitral proceedings. The court’s pro-arbitration stance is demonstrated in the case Xstrata Coal Queensland Pty Ltd and others v Benxi Iron & Steel (Group) International and Economic Trading Co Ltd,[6] where it allows an application under section 79 of AA 1996 to extend the time limit in which a party could apply to the tribunal under Article 27 of the London Court of International Arbitration (LCIA) Rules 1998. The application was in the circumstance of seeking the correction of an ambiguity regarding to the identity of one of the claimants. Since the time limit under Article 27 of the LCIA Rules 1998 would almost always expire in practice before the outcome of enforcement proceedings, the decision to allow a retroactive extension of time displays the court’s pragmatic approach.[7]

2.0.2 Appointment of Arbiter

Section 18 of AA 1996 and Rule 7 of Arbitration (Scotland) Act 2010 (AA 2010) enable a party to apply to the court for the court to exercise its powers to give directions as to the making of tribunal appointments or make the appointments itself.[8] Any appointment made by the court has effect as if made with the agreements of the parties.[9] In the English case Silver Dry Bulk Company Limited v Homer Hulbert Maritime Company Limited,[10] the court has established the relevant principle when asked to assist with appointments of the tribunal. It was held that an initial threshold test must be made in order for an application under section 18(3) to succeed, namely there must be a “good arguable case” that a tribunal would have a jurisdiction to hear the issue. It was also concluded that even if the court has such power under section 18, it would not have been applied as a matter of discretion, primarily because making an order that the tribunal had been “validly constituted” in this case would go much deeper than would be justified from merely concluding that there was a “good arguable case”, and that the tribunal was in existence and was already dealing with the matter, and also capable to continue without any assistance from the court, even if its status at the time was uncertain.[11] The court’s approach in this matter remain in favour of not interfering with decisions that fall within the realm if an arbitral tribunal’s jurisdiction, in line with the kompetenz-kompetenz principle.

2.0.3 Evidence and Disclosure

The court in England and Wales has the same power as the arbiters to make orders in support of arbitral proceedings in regards to certain matters, including taking evidence of witness outside the jurisdiction, and the preservation of evidence.[12] The power primarily relates to the parties in the arbitration, and the court will only exercise such powers in exceptional circumstances.[13] The court will only make such an order if, or to the extent that the tribunal has no power or unable act effectively. In Scotland, while the court also has the power to take evidence,[14] there is no right of discovery at the commencement of the proceedings.[15] Nonetheless, during the arbitration proceedings, the court will order production of the documents in the hands of the parties to the dispute or others, provided that they can be shown to be relevant in regards to the pleadings and not protected by privilege or confidentiality.[16]

2.0.4 Court Orders and Foreign Arbitration Proceedings

In Scotland, the court will grant a warrant to arrest on the dependence of an action (that is for an attachment made pending the outcome of the proceedings) founded on a contract that includes an enforceable arbitration clause, even where an arbitration is being conducted, or is anticipated to be conducted outside Scotland.[17] In the case of Motordrift A/S -v- Trachem,[18] a Norwegian company raised an action in Scotland against an English company whose registered office was in London. The pursuer established his jurisdiction on the arrestment of funds held by the English company’s bankers in Scotland. Arrestment of moveable property in Scotland was one of the grounds to establish jurisdiction in the Scottish courts. The English company sought recall of the arrestment obtained on the dependence of the action, on the ground that the action was founded on a contract containing an arbitration clause referring disputes between the parties to arbitration, and another clause stipulating that English law would apply. The court held that the pursuers would be entitled to use the present process to enforce any arbitral award in their favour relating to the matters raised in the action, and refused to recall the arrestment.

Furthermore, in the case of Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd,[19] in the speech of Lord Mustill in the House of Lord,[20] while the court had no power to grant an injunction in an arbitration whose seat was outside England and Wales, the High Court may by order (whether interlocutory or final) award an injunction or appoint a receiver in all cases where it appears to the court that it is just and convenient to do so.[21] He held that the English court had power under this provision to award interim injunction although the arbitration was not seated in England or Wales. Besides, by awarding the order, the court does not involve itself at all in the resolution of the dispute, instead it merely seeks to make the resolution of the dispute by the foreign court more effective. The granting of the interlocutory injunction by way of interim protection does not mean that the court is playing any part in the decision, but rather, doing its best that the resolution by the arbiters is fruitful.[22]

2.1 Discussion

Based on the above situations, it can be seen that the court would only intervene with the arbitration process when it is very necessary, and when the arbiter or tribunal is incapable to carry out the arbitration effectively. The court would try to stay as far away from making any decision for the tribunal, and would only do so on the basis of very strong ground. It also allows the tribunal to run the arbitration on their own course, and would only interfere to ensure that the arbitration is carried forward to its best advantage.[23] Also when the court intervenes, it is because it is just and convenient to do so. Furthermore, when the court exercise it powers, for instance in the disclosure of evidence and witness, it is to ensure that the arbitration proceedings run smoothly, and not to replace the power of the arbiter or the tribunal.

3.0 Conclusion

To perceive the role of the court either as supporter, or enforcer is a difficult stance to take, because the court enforce its power to support the arbitration proceedings. Perhaps it would be easier to see the role of the court as complementary in arbitration, where it only exerts its power when the tribunal alone is unable to bring the best outcome in a proceeding.

Table of Cases

UK Cases

• Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] 1 AER 664
• Motordrift A/S v Trachem Co Ltd 1982 SLT 127
• Silver Dry Bulk Company Limited v Homer Hulbert Maritime Company Limited [2017] EWHC 44 (Comm)
• Xstrata Coal Queensland Pty Ltd and others v Benxi Iron & Steel (Group) International Economic & Trading Co Ltd [2016] EWHC 2022 (Comm)

Table of Legislation: UK

• Arbitration Act 1996 s 18(4), s 44(2)(a), s 44(2)(b)
• Arbitration Act Scotland 2010 s 1, rule 45(1), rule 45(2)
• Supreme Court Act 1981, s 37(1)

Bibliography

• Davidson F P, Arbitration (2^nd edn, W. Green 2012)
• Kehoe C, Wren A and Chandran L, ‘Appointment of Arbitrators: English Court Grapples Conflicting Case Law and Clarifies Relevant Principles When Asked to Assist with Appointments’ [2017] < www.hsfnotes.com/arbitration/2017/02/02/appointment-of-arbitrators-english-court-grapples-conflicting-case-law-and-clarifies-relevant-principles-when-asked-to-assist-with-appointments/> accessed 13 April 2018
• Practical Law Arbitration, ‘Top 10 English Cases in 2016’ [2016] Thomson Reuters <www.uk.practicallaw.thomsonreuters.com/w-004-7272?transition Type=Default&contextData=(sc.Default)&firstPage=true&bhcp=1> accessed 15 April 2018
• Rares S, ‘The Role of Court in Arbitration’ (Federal Court of Australia 2012) Semple W G, ‘The UNCITRAL Model Law and provisional measures in international commercial arbitration’, [1993] I.B.L.J. 765

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[1] Fraser P Davidson, Arbitration (2^nd edn, W. Green 2012).

[2] Walter G Semple, ‘The UNCITRAL Model Law and provisional measures in international commercial arbitration’, [1993] I.B.L.J. 765.

[3] Steven Rares, ‘The Role of Court in Arbitration’ (Federal Court of Australia 2012)

[4] Semple (n 2) 766.

[5] Arbitration Act Scotland 2010 (AA 2010), s 1.

[6] [2016] EWHC 2022 (Comm).

[7] Practical Law Arbitration, ‘Top 10 English Cases in 2016’ [2016] Thomson Reuters <www.uk.practicallaw.thomsonreuters.com/w-004-7272?transitionType=Default&contextData=(sc.Default)&firstPage=true&bhcp=1> accessed 15 April 2018.

[8] Caroline Kehoe, Anna Wren and Luxmy Chandran, ‘Appointment of Arbitrators: English Court Grapples Conflicting Case Law and Clarifies Relevant Principles When Asked to Assist with Appointments’ [2017] < www.hsfnotes.com/arbitration/2017/02/02/appointment-of-arbitrators-english-court-grapples-conflicting-case-law-and-clarifies-relevant-principles-when-asked-to-assist-with-appointments/> accessed 13 April 2018.

[9] Arbitration Act 1996 (AA 1996)  s 18(4).

[10] [2017] EWHC 44 (Comm).

[11] Kehoe, Wren and Chandran (n 8).

[12] AA 1996, s 44(2)(a) and s 44(2)(b).

[13] Practical Law Arbitration (n 7).

[14] AA 2010, rule 45(1).

[15] AA 2010, rule 45(2).

[16] Semple (n 2) 767.

[17] Semple (n 2) 768.

[18] 1982 SLT 127.

[19] [1993] 1 AER 664.

[20] ibid 670.

[21] Supreme Court Act 1981, s 37 (1).

[22] Semple (n 2) 773.

[23] Channel (n 19) 689.