A recent judgment has brought encouraging news for those involved in resolving multiparty disputes in arbitration.
It should now be easier to refer related disputes between multiple parties to the same arbitrator.
In construction projects there are frequently multiple disputes between different parties involved in the same project. For example, in addition to a dispute between the employer and the contractor, there is often a related dispute between either of them and a sub contractor.
The orthodox approach is that it is extremely difficult to enforce "arbitration joinder" provisions in contracts, with the result being that the parties concerned are forced to resort to separate arbitrations, with the consequent risk of increased costs and inconsistent findings.
In City & General (Holborn) Limited v AYH Plc, the judge was asked to appoint an arbitrator pursuant to its powers under the Arbitration Act. City & General had already begun arbitration with its main contractor (Kier Regional Limited), and it now applied for the same arbitrator to hear a dispute with its project manager and quantity surveyor (AYH).
In the AYH deeds of appointment the parties agreed on a joinder provision based on clause 41 of the JCT 1980 standard form. This provided that if there were related disputes between the parties and any other party to the project, then the disputes would be referred to the same arbitrator. The judge had to decide the extent of convergence of issues required to trigger that clause.
The court ruled that the threshold to trigger the clause should not be set too high. As a result, it was not necessary for the majority of the issues in the proposed arbitration to be substantially the same as or connected with issues in the arbitration that had already commenced.
It was sufficient if a material portion of the issues were the same.
This case confirms that when parties choose arbitration to determine their disputes, joinder clauses should be considered wherever multiple contracts are involved.
Where such clauses are used it is possible for the same arbitrator to hear related disputes if there are similar issues involved. However this could be a double-edged sword. On the one hand it is desirable to have multiparty disputes heard by the same arbitrator who will be familiar with the issues therefore saving the parties time and cost. On the other hand if an arbitrator has already decided issues in the existing arbitration in favour of the opposing side, the party on the receiving end of the joinder clause will understandably be reluctant to agree to it being enforced. However this is a risk inherent in joinder provisions and puts a party in no worse a position than if the dispute were to be litigated.
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 01/12/2005.
