UK: Avoiding Court Intervention In International Arbitrations

Last Updated: 15 July 1997

(First published in In House Lawyer, February 1997)

Lawyers and businessmen are frequently critical of judicial interference in arbitrations. There are many horror stories of arbitrations being delayed for years by parties fighting through the courts in an attempt to delay an inevitable result. It is therefore natural that one should hear calls for a quick fix solution - keep Judges out of arbitration. Here we consider whether this is desirable and whether, in English law, it is possible.

The history of English arbitration over the last 20 years is one of decreasing judicial interference. When the Arbitration Act 1996 comes into force at the end of January 1997 this process will have been taken a step further. This trend has been generally welcomed but the fact remains that it is extremely important that there should be some recourse to the courts if an arbitration clause is not to result in serious injustice or delay. The Act permits a degree of judicial involvement at each stage which is designed to make England an attractive venue for international arbitration.

Suppose parties to a contract set up an arrangement which effectively excludes all court interference. Some time later, one party wishes to start an arbitration. What happens if the mechanism for appointing the tribunal breaks down? Most sophisticated legal systems provide a procedure by which the court will assist in the appointment of arbitrators. Take another example. What happens if a vital piece of evidence is in the hands of a third party or the subject matter of the dispute is in third party hands and is about to be destroyed? The arbitrator has no jurisdiction over strangers to the contract and is therefore powerless. Only the court could intervene. Suppose the arbitrator accepts a bribe or is found to have a significant financial interest in the outcome but he refuses to withdraw. If the local court cannot interfere before an award is made, what is to stop such an award being enforced, at least in the country in which it was made?

These are just some problems which can arise if recourse to the courts is excluded altogether. An advocate of zero court involvement would argue that some of these problems can be dealt with at the enforcement stage. For instance, an award made by a corrupt or biased arbitrator would not be enforced in other countries which are signatories to the New York Convention. The courts of the country in which the arbitration took place might also refuse enforcement on public policy grounds even though those same courts could not have interfered during the arbitration. However, whilst there may be answers to some of these problems, the risk remains that without judicial support some arbitrations could never be started; others where vital evidence could not be brought before the arbitrator and others where the subject matter of the dispute could be lost.

For these reasons, the majority of practitioners favour a degree of judicial support while also criticising the excessive court involvement which used to characterise English arbitration law.

The remaining question considered in this article is whether the new Arbitration Act allows parties to an arbitration taking place in England to opt out of recourse to the courts completely.

Many provisions of the Arbitration Act 1996 can be disapplied by agreement. Some cannot. Those provisions which are mandatory are helpfully gathered together in Schedule 1 of the Act (see box). These mandatory provisions apply where the seat of the arbitration is in England and Wales and would not apply if the seat was in, say, France. However, even in those circumstances, there is a residual category of powers vested in the English courts which are always available and which the parties cannot disapply by agreement. That category comprises the English court's powers to stay English proceedings where there is an arbitration agreement covering the dispute, the court's power to grant leave for an award to be enforced as if it were a judgement of the court and the power to grant subpoenas. Those are absolute powers always available to the English court irrespective of any contrary agreement and wherever the legal place of the arbitration.

Let us now return to those mandatory provisions in Schedule 1 which are not included in the short list of core powers which apply wherever the arbitration is taking place. Can the parties effectively avoid those provisions in relation to an arbitration taking place in England by specifying that the seat of the arbitration is elsewhere? The answer appears to be that they can. Section 3 of the new Act seems to provide that if the parties agree that the seat of the arbitration is, say, in Paris, then that choice has effect. The fact that the arbitration takes place exclusively in London (perhaps even between two English parties and relating exclusively to English subject matter) seems to make no difference. Quite why parties should wish to do this might be open to question. However, 'the less judicial intervention the better' remains a commonly held view, especially where sovereign powers are involved. An artificially designated seat does seem to be a possible way of achieving this.

Of course, if the parties nominate a foreign seat for their arbitration which will take place in London, they could find themselves subjecting the arbitration to the potential scrutiny of the courts in the country of that seat. That may be a case of out of the frying pan and into the fire. That leads to another thought. Can the parties nominate as the seat of their arbitration a place which is outside any court's jurisdiction? Perhaps a specified location in outer space? The report of the Departmental Advisory Committee on the Arbitration Bill chaired by Lord Justice Saville recommended that English law should not recognise the concept of an arbitration without a seat. To nominate as a seat a place which is outside any court's jurisdiction would, if valid, circumvent that objective. There must therefore be a real possibility that a choice of that kind would, in English law, be ineffective.

Even if such an artificial choice is possible under English law, there are doubts over the enforceability of the resulting award. In one of the best known delocalised arbitrations, British Petroleum Company (Libya) Limited v Libyan Arab Republic (1980) Yearbook of Commercial Arbitration, 143,147, the arbitrator, Lagergren J commented that 'the effectiveness of an arbitral award that lacks nationality...generally is smaller than that of an award founded on the procedural law of a specific legal system and partaking of its nationality.' In his published doctoral thesis on the New York Convention, Albert Jan van den Berg expresses the view that most countries would refuse to recognise and enforce a national award.

One final (and slightly frivolous) point. If the determined 'zero interventionist' is still not deterred from trying an artificial choice of seat in order to avoid English court intervention despite all the above, he may be wise not to select a point in outer space. Article II of the Treaty on Principles Governing the Activity of States in the Exploration and Use of Outer Space, including the Moon and Other Celestial Bodies, 1967 prevents signatory states from claiming sovereignty over the moon and other points in outer space. However, it is clear from the wording of the treaty that this does not preclude the acceptance of jurisdiction by national courts in respect of activities taking place in outer space. Therefore, to conduct an arbitration in outer space, even hypothetically, might result in a number of national courts being willing to accept jurisdiction over the arbitration procedures!

In conclusion, it is believed that the new English Arbitration Act strikes a fair balance between the authority of arbitrators on the one hand and an assurance of sufficient judicial support to avoid injustice on the other. The Act allows a substantial measure of freedom for the parties to contract out but reserves a small core of powers to the courts in all cases. There is some scope for the determined anti-interventionist draftsman for seeking to avoid the non-core powers set out in Schedule 1. However, for the reasons discussed in this article, there are real risks involved in trying to avoid those powers by the selection of a seat of the arbitration outside England and Wales if the intention is that the arbitration should, in fact, take place there. There are even greater dangers in attempting to delocalise the arbitration or to designate as the seat of the arbitration a place beyond the reach of any court.

Provisions of the 1996 Act which are mandatory if the seat is in England & Wales

Section

*Stay of legal proceedings 9-11

Extension of time limits 12

Application of Limitation Acts 13

Removal of arbitrators 24

Death of arbitrators 26

Fees of arbitrators 28

Immunity of arbitrators 29

Objections to jurisdiction 31

Preliminary jurisdiction points 32

General duties of arbitrators 33

Expenses of arbitrators 37(2)

General duties of the parties 40

*Attendance of witnesses 43

Withholding award against fees 56

Orders for costs 60

*Enforcement of award 66

Challenging the award 67-71

Persons not participating in arbitration 72

Loss of right to object 73

Immunity of arbitral institutions 74

Charge in respect of solicitors' costs 75

*Provisions which are mandatory wherever the seat.

 

This note is intended to provide general information about some recent and anticipated developments which may be of interest. It is not intended to be comprehensive nor to provide any specific legal advice and should not be acted or relied upon as doing so. Professional advice appropriate to the specific situation should always be obtained.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.