BIICL 13th annual review of the Arbitration Act 1996

Practical Law Legal Update 1-501-4869 (Approx. 6 pages)

BIICL 13th annual review of the Arbitration Act 1996

by PLC Arbitration

Panel 1: Enforcement and challenge of arbitration awards

Costs and appeals

The first panel was chaired by Alan Redfern. Michael O'Reilly addressed the provisions of the Act which deal with costs and appeals. He identified processes of harmonisation of international arbitration by way of international treaties and model laws, but stressed that the issues of appeals and costs have not yet been harmonised. He suggested that this was because the cost issue was too controversial and the appeal issue too obvious, and that neither of them are regulated in the UNCITRAL Model Law.

With reference to costs, he outlined two main approaches:

The parties pay their own costs irrespective of the outcome of the case and share the institutional costs and the costs and fees of the tribunal (based on the access to justice arguments).
The successful party recovers its costs from the opponent and the latter also pays the costs of the arbitrators and the institution (reflecting the party's success).

The increasing cost consciousness of users, as well as escalating costs of arbitration, is making this issue ever more important. Mr O'Reilly proposed new wording for the Act, balancing the above approaches and encouraging the parties to behave proportionately and reasonably.

With regard to section 69 of the Act (appeal on a point of law), he briefly outlined the history of English legislation allowing for an appeal on a point of law. Section 69 of the Act is an exceptional provision as the majority of national laws do not allow for such appeals. He presented problems posed by this legislation in the international context, as illustrated by the French case PT Putrabali Adyamulia v Rena Holding (1ére civ, 29 June 2007) and US case Hall Street Associates LLC v Mattel Inc (552 US (2008)). Analysing the pros and cons of abolishing section 69, he proposed an opt-in wording for this particular appeals procedure.

Applications under sections 68 and 69 of the Act

Sir Peter Cresswell presented the 2009 statistics concerning the Act. He concentrated on sections 68 (challenge on the ground of serious irregularity) and 69 of the Act, summarising recent successful and unsuccessful applications under these two sections.

He observed that section 68 may sometimes be subject to abuse by the losing party in an arbitration. Even though the English courts are alive to this issue, Sir Peter suggested that there should be a mandatory requirement that permission be sought from the court before parties can mount a challenge under section 68.

With reference to section 69, he observed that some parties try to circumvent the leave requirement by cloaking it as an application under section 68. Contrary to the views of some commentators, in Sir Peter's opinion, section 69 should not be abolished as certain industries (for example, insurance and maritime industries) need court decisions for the development of precedent in their areas, as well as for greater certainty in international business.

He observed that currently there are no prospects for the review of the Act due to a lack of political interest. Sir Peter also observed that any need for review of the Act should be analysed from the users' perspective, rather than arbitrators or academics. He stressed greater need for proactive case management to make arbitration quicker and cheaper.

Enforcement of awards against States

Khawar Qureshi QC addressed the issue of enforcement of awards against States. He observed that no review of the Act was necessary in this respect as the Act did not distinguish between State and non-State parties.

The key regulation concerning this particular aspect of international arbitration is the State Immunity Act 1978 (SIA 1978), which is becoming more important with the increase in State-related arbitrations. Recent questions which have arisen under SIA 1978 in connection with international arbitrations include:

Against whom can the award be enforced? What instrumentalities of the State are vulnerable to enforcement? He discussed the case of Continental Transfert Technique v The Federal Government of Nigeria and others [2009] EWHC 2898 (Comm), where enforcement was sought against the State-owned Nigerian oil and gas company, Nigerian National Petroleum Corporation.
Is Article 26 of the ICC Rules of Arbitration regarded as a waiver of State immunity under English law? This question remains unanswered.
What assets of the State are covered by immunity? Can foreign aid be seized in enforcement proceedings?

Phillip Capper reflected on the recent case of Shell Egypt West Manzala GmbH and anor v Dana Gas Egypt Ltd [2009] EWHC 2097 (Comm) in the context of section 69 applications (see Legal update, Meaning of "final, conclusive and binding").

He observed that English law is the most commonly chosen applicable law and London one of the most popular seats. However, he expressed concern that the court in Shell v Dana Gas did not attach sufficient importance to the word "conclusive", which was used by the parties in an arbitration agreement which stated that the award will be "final, conclusive and binding on the parties". Gloster J held that the court's jurisdiction under section 69 had not been excluded by such wording, and went on to grant permission to appeal against the award.

Mr Capper suggested that the international context of arbitration must be taken into account in the application of the Act, which, he argued, had not been done in this case. Although he agreed there are no prospects for changing the Act, he suggested that judges should make the assumption that international parties do not want appeals from arbitration awards.

Mr Capper's view is that such an approach is important if London wants to uphold its leading position in the arbitration world against increasing competition.

Panel 2: Enforcement of arbitration agreements

In the second panel, chaired by Stewart Shackleton, Julianne Hughes-Jennett reflected on the strength of the principle of separability under the Act.

She observed that, although the principle developed over the years, it is now, particularly after the case of Fiona Trust & Holding Corporation & Ors v Privalov & Ors [2007] EWCA Civ 20, firmly founded in English law. As a result, she observed that section 7 does not require revision.

Anti-suit injunctions

Sarita Patil Woolhouse addressed the issue of anti-suit injunctions, concentrating on:

Jurisdictions in which anti-suit injunctions are no longer available, that is, within the EU after the decision in Allianz SpA v West Tankers Inc (Case C-185/07) (see Legal update, West Tankers ECJ judgment: full report).
Jurisdictions in which anti-suit injunctions are still available, that is, outside the EU.
Anti-suit injunctions preventing a challenge to an award.

Anti-suit injunctions were addressed by the courts in C v D [2008] EWCA Civ 1282 and Shashoua and another v Sharma [2009] EWHC 957 (Comm), where the English courts prohibited the respondents from challenging an award or resisting its enforcement in any country outside England and Wales (see Legal updates, Law of seat determines scope of permissible challenges to arbitral award and Anti-suit injunctions and the New York Convention).

Ms Woolhouse criticised the cases questioning whether anti-suit injunctions should apply at all at the enforcement stage, even if there was a specific clause in the contract which reinforced the basis for anti-suit injunctions. She observed that, contrary to the challenge proceedings, there is no exclusivity at the stage of enforcement of an arbitral award, and the possibility of parallel enforcement is one of the important features of the New York Convention. If the English courts expand anti-suit injunctions, as in the C v D case, the attractiveness of London as an arbitration seat may be affected.

Arbitration agreements and EU law

David Brynmor Thomas addressed the issues regarding arbitration agreements and EU law, citing the following cases:

National Navigation Co v Endesa Generacion SA [2009] EWCA Civ 1397 (Comm). The Court of Appeal, applying West Tankers, clarified that a judgment of a member state which falls within the Regulation must be recognised by the English courts in all proceedings, whether or not they also fall within the Regulation. This case, where the Spanish court's decision on the interpretation of the arbitration clause (to which English law applied) was inconsistent with the approach the English court would take, highlights the problem that the validity of arbitration agreements cannot be guaranteed EU-wide (see Legal update, National Navigation v Endesa: full report).
Accenture Ltd v Asigra Inc [2009] EWHC 2655 QB. This case concerned an agency agreement between a Canadian licensor and English distributor. The mandatory EU provisions concerning commercial agents resulted in the English judge declaring the arbitration agreements between the licensor and the distributor "null and void" and "inoperative" with regard to questions of mandatory EU law. This, in Mr Thomas' view, not only narrows the concept of arbitrability, but also means that mandatory EU law impacts on the parties' choice of governing law and their choice of the arbitration seat.

Enforcement of arbitration agreements

The next speaker, Mr Richard Smith, addressed the position of the English courts regarding the enforcement of arbitration agreements. In particular, Mr Smith observed that the issue of section 67 of the Act (challenge to the tribunal's substantive jurisdiction) has recently caused the English courts problems.

He pointed to the recent case Republic of Serbia v ImageSat International NV [2009] EWHC 2853 (see Legal update, Arbitrator had jurisdiction to decide status of Serbia). The court in this case considered how deeply it should enquire into the arbitration agreement to satisfy itself that it is "null and void, inoperative or incapable of being performed". Mr Smith proposed that the "unless satisfied" test is based on the prima facie approach. If there is prima facie evidence for the agreement satisfying the criteria of section 67, the proceedings should be stayed.

Panel 3: Possible improvements to the Arbitration Act

The Arbitration (Scotland) Act 2010

In this panel, Hew Dundas presented the new Arbitration (Scotland) Act 2010 (Scottish Act). He stressed that this is the first modern arbitration law for Scotland and that the preceding arbitration legislation, and arbitration-related court decisions to date, was not particularly developed.

The Scottish Act draws from the experience of 30 jurisdictions and addresses issues that are not regulated in other arbitration laws. For example, it makes it clear that only individuals can serve as arbitrators and that an arbitrator's resignation may trigger his or her liability if it is groundless.

The Scottish Act contains an opt-out confidentiality clause and designates relevant professional bodies (not state courts) as appointing authorities. It simplifies appeals and is very user friendly. The authors of the Act hope that arbitration under the Scottish Act will be up to 60% cheaper than arbitration in London.

The Scottish Act closely follows the UNCITRAL Model Law and UNCITRAL Arbitration Rules, and can be amended by secondary legislation if these models are amended.

Interim measures

Shai Wade addressed the question of interim measures. The Act allows for concurrent jurisdiction of the state court and the arbitrators in this respect.

He analysed the current wording of section 44 of the Act and the courts' interpretation of the word "assets", which could be extended to the protection of all kinds of rights and not only monetary rights.

Mr Wade suggested an amendment to legislation concerning court-ordered interim measures, by upholding the courts' rights to grant interim measures, but "in consideration of the specific features of international arbitration".

Confidentiality

Dr Julian D M Lew QC addressed the issue of confidentiality and a potential review of the Act in this regard.

He referred to the Australian case of Esso Australia Resources Ltd & Ors v Plowman (Minister for Energy) & Ors (1995) 128 ALR 321, which addressed the issue of implied but not expressed (and therefore not protected) confidentiality. In the light of this decision, the need to address the issue of confidentiality in the arbitration agreement remains strong.

Comment

The question of whether the Act needs a review was the strong theme of this year's workshop. Many speakers stressed the need to review section 69 of the Act. Some argued for the section to be abolished altogether but most disagreed, acknowledging that the appeal mechanism is important for specific industries. It was agreed that an opt-in mechanism should be introduced to trigger the application of section 69.

Anti-suit injunctions were still a hot topic this year, not only because of the aftermath of the ECJ decision in West Tankers but also due to the fact that the English courts started awarding anti-suit injunctions in enforcement proceedings. Speakers and participants stressed the importance of London as a centre for international arbitration and expressed concern that some recent developments, as well as growing competition, may have an impact on its position as a global arbitration centre. There was agreement that the needs of arbitration users should be taken into account first and foremost when discussing any review of the Act.

BIICL 13th annual review of the Arbitration Act 1996 | Practical Law