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Arbitration 2 Notes

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Arbitration 2

Court interference with/supervision of arbitration??Generally, hands-off approach by courts.
S1 AA, general principles 1(b) parties should be free to agree how their disputes are resolved (subject only to such safeguards as are necessary in the public interest)
1(c): in matters governed by this Part, court should not intervene except as provided by this Part.
So balancing act: courts have to retain some degree of oversight over, and support for, arbitral proceedings. Mandatory provisions of AA assist in striking the right balance.

Where court can become involved:

1. To enforce arbitration agreement

2. To enforce peremptory orders of arb tribunal

3. Determine a preliminary point of law

4. (reviewing the award) Where there is a challenge or appeal to an arbitral award

5. (enforcing the award) Where there is an attempt made to enforce the award
(i.e. where has been no challenge or appeal to/from the award, or where a challenge/appeal has been dismissed by the court)
(1) Enforcing an agreement to arbitrate, stays of proceedings (s9)
-Remember, need a valid arbitration agreement (ss5-6 AA):
o (1) agreement in writing

(2) which submits disputes to arbitration.
-NB, where it is feared that proceedings are about to be commenced in breach of an arbitration agreement ? it may be possible to apply for an anti-suit injunction.
-When court proceedings have already been commenced:
-S9 AA 1996 = a mandatory provision:
-S9(1): "A party to an arbitration agreement against whom legal proceedings are brought (whether by way of a claim OR counterclaim) in respect of a matter which under the agreement is to be referred to arbitration may (upon notice to the other parties to proceedings) apply to the court in which the proceedings have been brought to stay the proceedings so far as they concern that matter".
-Technically, the proceedings can be continued if the stay is lifted, but in practical terms s9 stays are usually permanent (because the consequence is that the dispute is referred for final determination by arbitration).
-Must apply to the court in which the claim is proceeding (s9(1)).
-S9(3), must comply with s9(3) before bringing such an application under s9(1) ? prerequisite, the party seeking stay must have filed an A/S: ??

o S9(3): "application may not be made by a person before taking the appropriate procedural step (if any) to acknowledge the legal proceedings against him

But application may not be made after he has taken any step in those proceedings to answer the substantive claim"
o [i.e. (1) must ACKNOWLEDGE SERVICE of the proceedings before making an application under s9; BUT (2) but must not have taken a
'step' in proceedings to answer the substantive claim].
So the party seeking stay must file an A/S (Form N9, response pack); and then apply for stay by issuing an application notice in Form N244.
S9(4):
o on an application under this section, the court SHALL grant a stay,
UNLESS satisfied that the arbitration agreement is (a) null and void,
(b) inoperative, or (c) incapable of being performed.
o [this links to s1(c) ? court shall not intervene except as...]
o encouraging arbitration with minimal court intervention.
A clause that says the parties 'may' refer disputes to arb is permissive, and allows a party to commence litigation, but enables the other party, before or after litigation is started, to insist on arbitration.

To order s9 stay, court must be satisfied that:
-(a) there is a valid, concluded arbitration agreement and
-(b) the subject/issue of the action is within that arbitration clause.
-And the parties to the court proceedings must be the parties to the arb agreement
-If there is a dispute over whether the dispute comes within the arb agreement ? the court may decide that question or give directions, see below.

Application for a stay, CPR 62?62.3: 'An application under s9 AA to stay legal proceedings must be made by application notice to the court dealing with those proceedings'. i.e. PART 23

62.8: the application notice must be served on:
o all parties to the legal proceedings who have given an address for service

AND on any other party to the legal proceedings (whether or not within the jurisdiction) who has not given an address for service, at:
(a) his last known address or (b) a place it is likely to come to his attention.

62.8(3) where a question arises as to whether:
o (a) an arbitration agreement has been concluded; or

(b) the dispute which is the subject-matter of the proceedings falls within the terms of such an agreement

? the court may (a) decide that question or (b) give directions to enable it to be decided, and may order the proceedings to be stayed pending its decision.
Commentary in White Book re s9 stay of legal proceedings (2E-105 - 114)
-S9 is a mandatory provision, and applies even though the seat of arb is outside Eng & Wales or no seat of arb has been designated (s2 AA).
-Right of appeal? there is a right of appeal to the Court of Appeal: the general terms of s107 and Sch 3 do not remove the right of appeal.
-A "party" to an arb agreement

S9(1) stay may be applied for by a "party" to an arb agreement against whom legal proceedings are brought re a matter within the arb agreement.
o "a party" includes 'any person claiming under or through a party to the agreement' (s82(2)).
o S9 cannot apply if the parties to the court proceedings are not the parties (or persons claiming through or under a party) to the arb agreement ? no stay against a C who was not a party to the agreement.
o CA: possible for court to impose a stay in favour of a third party on the basis of an intention to rely on a contractual defence which was subject to a term providing for the submission of disputes to arbitration.
o Difficulties where provisions in one agreement give jurisdiction to the court, and in another refer disputes to arbitration ? in such cases,
allocation of jurisdiction is a matter of construction.
-Whether legal proceedings were in respect of a 'referred matter' within s9 :
o depends on the nature of claim made in the proceedings, but not only on the formulation of it or them in the claim form and any pleadings.
o i.e. it's about the substance of the claim, not how C formulates it, re whether it comes within a matter covered by the arb agreement.
-Who may apply: it is not necessary that all parties to the submission, other than the claimant in the claim, should join in application to stay.
-The application: r62.3 ? an ordinary application notice, made to the court in which the legal proceedings are pending. Should be served as per r62.8.
-Form of order
-"STEP": 'or after he has taken any step in those proceedings to answer the substantive claim':
-It is a prerequisite to s9 stay that the applicant has taken the appropriate step to acknowledge the legal proceedings; BUT
cannot make an application if has taken any step to answer the substantive claim.
-So should acknowledge service before s9 application.
o But no s9 stay if the applicant has taken a 'STEP' to answer the substantive claim, eg:
-Filed a defence
-Applied for security for costs; ?o

o

o

o

o

Attending a CMC or agreeing case management directions
An application for directions issued by the C and agreeing to or obtaining an order thereon
-If D has obtained time to plead and agreed to take short notice of trial
-Opposing an application for final judgment might constitute a
'step'.
-D issues an application for extension of time for defence, but omits to issue an application to stay until after the application for has been dealt with.
-An application to strike out may be.
NO 'STEP' taken where:
-Acknowledging service
-Applying for a stay
-A D opposing an application who not merely raises the matter of the arb clause in his affidavit/witness statement, but also at same time takes out an application to stay the claim.
-Applies for extension of time to serve its defence.
-If he either simultaneously or subsequently to making s9 application, invokes or accepts the court's jurisdiction provided he does so only conditionally on his stay application failing.
-D gives notice demanding particulars of case.
-D, before defence, wrote to C for further time to plead.
-Where D filed affidavits in the claim in answer to C's affidavits in support of an application for a receiver.
-D applying for relief which was otiose to the relief he needed in addition to the relief he did need.
-Institution of an action within the time limit in a competent court in the USA between the same parties (which was subsequently stayed because it was brought in breach of a
London arbitration clause).
The D must act timeously (in good time)
-A 'step' is taken where: If a D resists summary judgment proceedings by serving an affidavit or witness statement in opposition, but omits to issue an application to stay the claim until after a first hearing of C's application which is merely adjourned for a further and fuller hearing.
Seems that: negotiation or correspondence between parties or their solicitors does not constitute a 'step' in the claim; but an application, or the serving of a pleading, does constitute a 'step'.
Whether additional matters re amendment to existing proceedings attract the stay provisions of s9, depends on whether such additional matters were 'part and parcel of the dispute of which the court was already seised or whether they were discrete matters in respect of which s9 entitled D to insist that they be arbitrated'.
Onus of showing that claim should proceed; ?Rests on the claimant to show that the dispute ought not to be referred to arbitration.
S9(4), inoperative/incapable of being performed

Unless s9(4) applies (null and void, inoperative, incapable of being performed) ? the rule for staying is mandatory.
o 'Inoperative'
-Arb agreement is inoperative where: a D has shown an intention not to be bound by the agreement to refer and the other party (C) had accepted such repudiation.
-Arbitration is not inoperative by reason of one party's failure to pay an advance on costs, which breach is not a repudiatory breach.
o 'Incapable of being performed'
-this refers only to the question of whether an arb agreement is capable of being performed up to the point when it results in an award;
-does not extend to the question whether, once an award has been made, the party against whom it is made will be incapable of satisfying it, for the impecuniosity of the loser rendering him unable to pay the amount of the award does not make the arb incapable of being performed.
-Not 'incapable' merely because one party cannot afford the arbitration.

(2) Arbitral tribunal's ability to make PEREMPTORY ORDERS and the court's enforcement thereof
Court's ability to deal with procedural & evidential matters ? s34 AA
[[non=mandatory]]
-s34(1): it shall be for the tribunal to decide all procedural & evidential matters, subject to the right of the parties to agree any matter.
o S34(2) sets out what are 'procedural & evidential matters'
-S38, general powers exercisable by the tribunal

S38(5): tribunal may direct that a party or witness shall be examined on oath or affirmation, and may for that purpose administer any necessary oath or take any necessary affirmation.
-So the tribunal has the power to make orders in relation to such matters as have been left to it.
-S41(5): if a party without showing sufficient cause fails to comply with any order/direction of the tribunal ? tribunal may make a peremptory order,
prescribing such time for compliance with it as the tribunal considers appropriate.
What is a peremptory order ? s41 [non-mandatory], powers of tribunal in case of party's default ? s41(5) can make peremptory orders
-S82, a "peremptory order" = an order made under s41(5) or made in exercise of any corresponding power conferred by the parties. ???peremptory order' (like 'unless' orders) = where an order requires a step to be taken within a prescribed time, and one or other of the parties fails to comply within the time limit.
S41(5): if a party without showing sufficient cause fails to comply with any order/direction of the tribunal ? tribunal may make a peremptory order
(to the same effect as the original order/direction), prescribing such time for compliance with it as the tribunal considers appropriate.
S41(1)-(6): detailed rules re powers of tribunal in case of party's default
S41(6), if party fails to comply with a peremptory order to provide security for costs ? the tribunal may make an award dismissing his claim.
S41(7): if a party fails to comply with other kind of peremptory order , then without prejudice to s42 [enforcement by court of tribunal's peremptory orders] the tribunal may do any of the following:
o (a) direct that the party in default shall not be entitled to rely upon any allegation or material which was the subject matter of that order;
o (b) draw such adverse inferences from the act of non-compliance as the circumstances justify;
o (c) proceed to an award on the basis of such materials as have been properly provided to it;
o (d) make such order as it thinks fit as to the payment of costs of the arbitration incurred in consequence of the non-compliance.
NB, arbitrators cannot impose penal sanctions for default (a fine or committal to prison)? those are powers only for court.

S42, powers of court ? enforcement of peremptory orders of tribunal [nonmandatory]
-court power to enforce:
o Russell on arbitration, 7-207: for most part, tribunals own powers to enforce its (peremptory) orders will be sufficient; it may only occasionally be necessary to involve the court, EG: in order to enforce the tribunal's powers as to make orders as to the preservation of property.
o So in majority of cases, the powers of tribunal will be enough; only occasionally where powers of court needed to enforce orders.
-S42(1): unless otherwise agreed by the parties, the court may make an order requiring a party to comply with a peremptory order made by the tribunal.
-S42(2), an application for an order under this section may be made:
o (a) by the tribunal (upon notice to the parties)
o (b) by a party to the arbitral proceedings with the permission of the tribunal (and upon notice to the other parties)
o (c) where the parties have agreed that the powers of the court under this section shall be available.
-S42(3): the court shall not act unless satisfied that the applicant has exhausted any available arbitral process in respect of failure to comply with the tribunal's order.

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