#16051 - Arbitration 2 - BPC Alternative Dispute Resolution

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):

  • (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:

  • 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”

  • [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):

  • 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.

  • [this links to s1(c) court shall not intervene except as...]

  • 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:

  • 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:

  • (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.

  • “a party” includes ‘any person claiming under or through a party to the agreement’ (s82(2)).

  • 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.

  • 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.

  • 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:

  • 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.

  • 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.

  • 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;

    • 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

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