The International Arbitration Review: United Kingdom - England & Wales
Arbitrations seated in England and Wales,2 both international and domestic, are governed by the Arbitration Act 1996 (Act).3 The Act, which is based in many respects on the UNCITRAL Model Law, consolidated and reformed the existing arbitration law, introducing a modern and pro-arbitration legislative regime. Although comprehensive, the Act does not codify all aspects of English arbitration law.4 Practitioners must therefore consult the common law as well as the Act to determine the status of the law on many issues.
i The structure of the Act
The provisions of the Act are set out over four parts:
- Part I contains the key provisions relating to arbitration procedure, including the appointment of the arbitral tribunal, the conduct of the arbitration, and the powers of the tribunal and the court. Section 4 of Part I expressly distinguishes between mandatory provisions (i.e., those that have effect notwithstanding any agreement to the contrary) and non-mandatory provisions (i.e., those that can be opted out of by agreement). The mandatory provisions are listed in Schedule 1 of the Act;
- Part II contains provisions dealing with domestic arbitration agreements and consumer arbitration agreements, and small claims arbitration in the county court;
- the provisions of Part III give effect to the United Kingdom's obligations to recognise and enforce awards under Articles III to VI of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention); and
- Part IV comprises provisions concerning the allocation of proceedings between courts, and the commencement of the Act and the extent of its application.
ii The main principles of the Act
The Act is based on three general principles set out in Section 1, which have served as a starting point for judicial reasoning and innovation in the application of the Act. A member of the Departmental Advisory Committee on Arbitration (DAC), who helped draft the Act in consultation with arbitration practitioners and users, recently described these principles as the 'philosophy behind the Act'.5 The principles are:
- fairness ('the object of arbitration is to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense');6
- party autonomy over the arbitration proceedings ('the parties should be free to agree how their disputes are resolved, subject only to such safeguards as are necessary in the public interest');7 and
- the restriction of judicial intervention in proceedings ('in matters governed by [Part I] of the Act, the court should not intervene except as provided by [that] Part').8
Section 1 of the Act provides that Part I is founded on these principles and shall be construed accordingly, and the English courts continue to refer to the guiding principles in resolving concerns over the interpretation and the application of the Act.9
iii The scheme of the Act
The aforementioned general principles are also reflected throughout the provisions of the Act. For example, the Act supports the general principle of fairness by imposing upon the parties the duty to 'do all things necessary for the proper and expeditious conduct of the arbitral proceedings'; and upon the tribunal, the duty to act fairly and impartially,10 and to adopt suitable procedures for 'avoiding unnecessary delay or expense, so as to provide a fair means for the resolution of the matters falling to be determined'.11
As for party autonomy, the Act reinforces this general principle through the non-mandatory nature of most of the provisions of Part I.12 In contrast to the provisions specified by the Act as mandatory, parties can opt out of non-mandatory provisions by agreement.
The courts in turn have emphasised in a number of judgments the importance of party autonomy to the arbitral process. The Supreme Court in Jivraj v. Hashwani13 upheld an arbitration clause that required arbitrators to be drawn from a particular religious group when the Court of Appeal had found the clause void for offending against European anti-discrimination legislation.14 In that judgment, their lordships approved the following statement of the International Chamber of Commerce (ICC):
The raison d'être of arbitration is that it provides for final and binding dispute resolution by a tribunal with a procedure that is acceptable to all parties, in circumstances where other fora (in particular national courts) are deemed inappropriate (e.g., because neither party will submit to the courts or their counterpart; or because the available courts are considered insufficiently expert for the particular dispute, or insufficiently sensitive to the parties' positions, culture, or perspectives).15
The Act gives effect to the third principle – limited court intervention – in many of the mandatory provisions of Part I. Whereas a tribunal has substantial powers to decide all procedural and evidential matters,16 to give directions in relation to property or the preservation of evidence17 and to order relief on a provisional basis,18 the court on the other hand has only limited power to intervene. The court's intervention is limited to only certain circumstances to support arbitration (such as appointing arbitrators where the agreed process fails,19 and summoning witnesses to appear before the tribunal);20 and the court has the same powers for the purposes of and in relation to arbitral proceedings as it has in respect of legal proceedings, such as taking evidence of witnesses, preservation of evidence, granting of an interim injunction or the appointment of a receiver.21 In this respect, the Act mirrors the UNCITRAL Model Law.22
In addition, the Act confers only limited rights of challenge of an award, on grounds that either the tribunal lacked substantive jurisdiction (under Section 67) or there was serious irregularity causing substantial injustice (under Section 68), or that an appeal is warranted on a point of law (under Section 69). As these provisions are designed to support the arbitral process and reduce judicial involvement in arbitral proceedings,23 the courts have tended to place a high hurdle on parties seeking to set aside arbitral awards,24 insisting that such challenges are 'long stop[s] only available in extreme cases where the tribunal has gone so wrong in its conduct of the arbitration that justice calls out for it to be corrected'.25 Although challenges of awards on the grounds of serious irregularity under Section 68 do not require the leave of the court, unlike appeals on points of law under Section 69, there is no evidence that this lesser requirement has encouraged frivolous litigation.26
iv Court relief in support of arbitration
A consistent theme in recent case law, in 2018 as in previous years, has been the English courts' exercise of their power to make orders in support of arbitrations seated in England and Wales. The Supreme Court has noted that the court has jurisdiction to grant an anti-suit injunction under Section 37 of the Senior Courts Act 1981 even where there are no arbitral proceedings in contemplation or there is no statutory basis under the Act for an injunction, in circumstances where the court is seeking to support arbitration by requiring parties to refer their disputes to arbitration.27
v Applications under the Act
Two specialist subdivisions of the High Court in London hear most arbitration-related claims under the Act,28 namely the Commercial Court (for general commercial arbitration) and the Technology and Construction Court (for construction disputes).
The year in review
i Developments affecting international arbitration in England and Wales
Although the decision of the United Kingdom to commence the process of leaving the European Union (Brexit) by serving notice under Article 50 of the Treaty of Lisbon occurred three years ago, the impact of Brexit is still the prevalent topic of discussion in the London legal market. Assuming that it goes ahead, Brexit will be one of the biggest political and legal shifts felt by a country. Although the long-term consequences of this decision for London as a financial and legal centre remain unknown and the subject of a great deal of speculation, the Brexit decision will have little immediate formal impact on the process for arbitration in England and Wales.
The United Kingdom will remain a signatory to the New York Convention. The New York Convention is the backbone of international arbitration, as it governs enforcement of both arbitral awards and arbitration agreements. A party obtaining an award in an arbitration seated in England and Wales will presumptively remain able to enforce the arbitral award in more than 156 contracting states that are signatories to the New York Convention.
There are also no immediate proposals to amend the Act as a result of Brexit. The Law Commission of England and Wales continues to consider and consult upon potential changes to the Act in order to retain London's competitive edge as a seat for arbitration. For example, the Law Commission considered whether the Act should be amended expressly to permit tribunals to determine preliminary issues of fact or law akin to the summary judgment procedures applicable in English court proceedings and to allow for the arbitration of trust disputes.29 However, these possible changes are not connected to the Brexit decision, and are driven by a more general desire to ensure that London maintains its competitive advantage as an arbitration-friendly seat.
There is also no suggestion that Brexit will materially change the substantive content and application of English contract law and commercial law. There is therefore no reason why English law as a governing law should not remain a popular choice for parties in their international contracts and London as a popular arbitration seat.
Brexit may arguably have positive consequences for the London arbitration market in several respects.
First, Brexit may create additional reasons for commercial users in some sectors that have historically been more inclined to resort to the English courts (e.g., in the financial services sector) to use arbitration.30 While the United Kingdom remains a Member State of the European Union, a judgment obtained in the English courts is presumptively enforceable in other states within the European Union under the Brussels I Regulation (recast), Regulation 1215/2012 (Recast Regulation) (subject only to limited exceptions). However, as discussed further below, it is unclear whether the Recast Regulation will continue to apply in the United Kingdom after it leaves the European Union.31 This potentially increases the 'enforceability premium' that attaches to an arbitral award as distinct from an English judgment. Whereas there is potential uncertainty surrounding the extent to which an English judgment will continue to be enforceable in other European Union Member States, an arbitral award will continue to benefit from the existing enforcement regime under the New York Convention. Parties entering into long-term contracts, in particular, may see significant advantages in opting for international arbitration over other means of dispute resolution.
Second, Brexit may give English courts greater freedom to issue anti-suit injunctions to protect the integrity of an agreement to arbitrate in London. At present, the English courts cannot issue anti-suit injunctions to restrain parties from court proceedings in other EU Member States.32 The English courts can only grant an anti-suit injunction to restrain a party from seeking to proceed with claims in a national court outside the EU in breach of an agreement to arbitrate. Thus, post-Brexit, since the limitation would no longer apply, English courts could more freely issue anti-suit injunctions for breach of arbitration agreements.
The Hague Convention
On 10 December 2015, the EU ratified the Hague Convention on Choice of Court Agreements (Hague Convention) through Council Decision 2014/887/EU.33 The EU, Singapore, Mexico and Montenegro have all adopted the Hague Convention, the EU, Singapore and Montenegro by ratification, and Mexico by accession.34 The Hague Convention currently applies to the United Kingdom by virtue of its EU membership. The Hague Convention may provide one mechanism to ensure that English judgments are enforceable in other EU Member States in some circumstances, although its scope is more limited than the Recast Regulation35 (and, in particular, the Hague Convention only applies to exclusive jurisdiction agreements).
On 28 December 2018, the United Kingdom deposited an instrument of accession with the intention that the Hague Convention would come into force for the United Kingdom on 1 April 2019. However, following the multiple extensions to the Brexit timetable, this accession has been suspended until 1 November 2019. It therefore remains uncertain if and when the ratification will take place.
The London Court of International Arbitration
The London Court of International Arbitration (LCIA), which was established in 1892, remains one of the world's pre-eminent international arbitration institutions. In May 2019, Paula Hodges QC took over as President of the LCIA, replacing Judith Gill QC.36 The Vice Presidents are Peter Rees QC of 39 Essex Chambers in London, James Loftis of Vinson & Elkins in Houston, James Townsend of Hughes Hubbard & Reed in Washington, Nathalie Voser of Schellenberg Wittmer in Zurich, E Y Park of Kim & Chang in Seoul and Jean Kalicki, an independent arbitrator. Audley Sheppard QC of Clifford Chance is chair of the board of directors.
In 2018, 317 arbitrations were referred to the LCIA.37 Of these, 271 were conducted under the LCIA Rules (the highest number ever recorded in a single year), and the others under the UNCITRAL Rules (with the LCIA acting as appointing authority).38 The types of cases referred continue to be diverse, with healthcare and pharmaceuticals, energy and resources, construction and infrastructure, banking and finance, telecommunication, insurance, real estate, and media and sports disputes all featuring.39
The LCIA continues to be particularly attractive to European parties, with the majority in 2018 being from the United Kingdom (20.6 per cent) and western Europe (15.8 per cent).40 The percentage of parties who are Russian has continued to grow, with an increase from 6.5 per cent in 2017 to 7 per cent in 2018. However, this figure understates the popularity of LCIA arbitration within Russia, as many Russian companies operate through entities incorporated in other jurisdictions (such as the British Virgin Islands (BVI) and Cyprus). The LCIA is also widely used by parties from Africa (8 per cent) and the BVI (3.5 per cent), and is gaining popularity with parties from other nations such as the United Arab Emirates, India and Mexico.41
In 2018, the LCIA appointed 449 arbitrators (up from 412 the previous year).42 The appointments made in 2018 reflect a slight preference for sole arbitrators as compared to three-member tribunals (51 per cent versus 49 per cent).43 However, over the past seven years, despite yearly fluctuations in the statistics, there is a relatively even split between the two types of tribunals.44
In terms of gender diversity, in 2018, 23 per cent of all LCIA appointments were women. Furthermore, the percentage of female arbitrators being appointed by the LCIA Court in 2018 was 43 per cent, which represents an encouraging increase of 9 per cent from 2017.45
The use of emergency procedures has been the focus of recent attention in international arbitration, and in June 2015 the LCIA issued guidance notes for parties and arbitrators on the use of emergency procedures. This includes guidance on the expedited formation of a tribunal, and the appointment of an emergency arbitrator and replacement arbitrators.46 For instance, the guidance notes explain that a party can request the expedited formation of a tribunal at the same time that it files a request for arbitration by writing to the Register (preferably via electronic means) and by notifying all the other parties.47 They also explain the procedures for applying for an emergency arbitrator and what must be included in the application, such as the specific grounds for requiring an emergency arbitrator; the specific claim, with reasons for emergency relief; and all relevant documentation.48 In addition, the notes clarify what will happen after an application is submitted. This can include giving the responding party the opportunity to comment before a determination is made.49
England and Wales continues to be a popular seat for arbitrations conducted under the rules of other international arbitration institutions, including those of the ICC.
London was the second-most popular seat for ICC arbitrations in 2017 with 73 cases, after Paris with 121.50 Swiss cities featured as the third and fifth most-popular seats, with 51 and 36 arbitrations being seated in Geneva and Zurich respectively (totalling 87 across both).51 Of the disputes referred to the ICC, English law and US law were most commonly chosen, followed by the laws of France and Switzerland. Among US law, New York law appeared to be the most popular, followed by that of California and Delaware.52
The United Kingdom also continues to provide the largest number of arbitrators for ICC appointments at 219 (14.7 per cent), followed by 141 from France (9.5 per cent) and 116 from Switzerland (7.8 per cent).53
The latest version of the ICC Rules of Arbitration were effective from 1 March 2017. Under the new ICC Rules, an expedited procedure will be available for claims for amounts not exceeding US$2 million, or where the parties have otherwise agreed in their arbitration agreement to use the expedited procedure. Furthermore, in October 2017, the ICC published an update to its practice note on the conduct of arbitration, affirming that applications for the expeditious determination of manifestly unmeritorious claims or defences may be dealt with under the tribunal's broad case management powers pursuant to Article 22 of the ICC Rules.54 These changes will allow for more disputes to be resolved quickly and cost-efficiently.
London Maritime Arbitrators Association and other arbitral institutions
England and Wales is also frequently chosen as a seat in arbitrations under rules developed for specific industry sectors, such as those of the London Maritime Arbitrators Association (LMAA).
In 2018, the LMAA continued to feature as a popular arbitration forum, principally for maritime and shipping disputes despite, or perhaps because of, prevailing poor drybulk market conditions globally.55 It made 2,599 appointments (up from 2,533 in 2017).56 In 2018, 508 awards were rendered, which was an increase on the figures for 2017 at 480.57 The LMAA conducted only 21 mediations (a steep drop from 221 mediations in 2015), of which 17 were successful.58
The LMAA published new terms that came into effect for appointments on or after 1 May 2017. The changes are incremental and maintain the light-touch approach that the LMAA is known for.
Tribunal secretaries have long been a feature of arbitration. They are assistants (typically more junior lawyers) employed by arbitral tribunals to assist with the administration of the arbitration and to help improve arbitrator efficiency. However, the limits of the tribunal secretary role and the transparency of the secretaries' function has been the subject of considerable debate recently.
In particular, there have been fears that these secretaries could take on illegitimate roles that extend beyond their remit, becoming, in effect, a 'fourth arbitrator.' Their use was called into question in 2017 in the English High Court case P v. Q, R, S and U.59 The Court confirmed that, in English-seated arbitrations at least, there is nothing wrong with the appropriate use of a tribunal secretary. Agreeing with the LCIA, the Court held that soliciting the views of the tribunal secretary (as the chair did in P v. Q, R, S and U) did not of itself demonstrate a failure to discharge the personal duty to perform the decision-making function, especially when the chair was an experienced judge who was used to reaching independent decisions.
Following this, many institutions issued guidance on tribunal secretaries. In its updated Notes for Arbitrators,60 the LCIA put great emphasis on ensuring that the decision-making process remains firmly in the arbitrators' hands. According to the Notes, an arbitral secretary may only be appointed if the parties agree on:
- the person proposed by the arbitral tribunal;
- the scope of the tasks to be carried out by the arbitral secretary;
- the confidentiality requirements and the relevant limitation of liability; and
- the applicable hourly rate (if relevant).
The parties can, for instance, agree that the arbitral secretary will only carry out administrative tasks or, on the contrary, that he or she will be allowed to carry out substantive tasks. The ICC also issued guidance that made it clear that parties may object to the appointment of a secretary, and that a secretary must under no circumstances be delegated decision-making functions.61
The issues surrounding third-party funders have continued to be the subject of considerable debate in both the litigation and arbitration contexts as such funding becomes increasingly mainstream. Recently, the English courts have given support to third-party funding in arbitration. In Essar Oilfields Services Ltd v. Norscot Rig Management PVT Ltd,62 the English Commercial Court held that third-party funding fell within the ambit of other costs under Section 59(1)(c) of the Act. Thus, the Court held that it was within the power of a tribunal constituted under the ICC Rules to award recovery of the additional costs payable to a third-party funder.
This decision means that arbitration is potentially more attractive than litigation to parties that may require third-party funding, and is likely to attract more third-party funders to the London market. Practically, it will affect the conduct of arbitrations. We are likely to see applications for disclosure of the other party's funding arrangements if it is suspected to be in receipt of third-party funding. This topic covers a range of legal issues and will continue to generate further discussion. Disputes regarding confidentiality, privilege and the availability of security for costs against funders are expected to arise in the near future.
ii Arbitration developments in the English courts
The English courts continue to witness a significant inflow of arbitration-related cases raising a plethora of issues. These cases illustrate the application of the principles of the Act as described above. In particular, the cases demonstrate the willingness to intervene in support of an arbitration where consistent with the Act, but also an overarching concern that a court should be slow to intervene where the arbitrators are empowered and able to act.
Arbitrator's duty to disclose
In recent years, clients and lawyers have expressed increasing concern over the repeat appointment by parties of the same arbitrator. At its simplest, this boils down to a fear that a particular arbitrator may, through habitual appointment, have become sufficiently dependent on a particular client for repeat business that he or she may be inclined to favour them. This issue was brought to the fore by the recent Court of Appeal decision of Halliburton v. Chubb.63
The dispute between Halliburton and Chubb concerned insurance coverage for Halliburton's liabilities arising out of the Deepwater Horizon catastrophe. The parties could not agree on the identity of the third arbitrator, so a judge of the Commercial Court made an order appointing M. When Halliburton subsequently discovered that Chubb had asked M to act as arbitrator in two other arbitrations concerning overlapping subject matter, Haliburton applied for M's removal under Section 24(1)(a) of the Act on grounds of apparent bias.
Hamblen LJ, delivering the Court's judgment, held that M should not be removed. The English Court of Appeal was asked to consider whether it is possible for an arbitrator to accept multiple appointments with overlapping subject matter and one common party without giving rise to doubts over impartiality; and at what point an arbitrator should disclose these further appointments, if at all. On the first issue, the Court held that an arbitrator may accept appointments in two proceedings concerning the same subject matter in which there is one common party. That alone does not give rise to an appearance of bias: something more is required. The starting point is that an arbitrator should be trusted to decide the case solely on the evidence or other material adduced in the proceedings in question. On the second issue, the Court decided that an arbitrator cannot serve if circumstances would cause a fair-minded observer to conclude there is a real possibility of bias. However, an arbitrator must disclose circumstances that would or might lead the observer to reach that conclusion. The consequence of a failure to disclose will be a factor in applying the test for apparent bias, and hence removal, under Section 24(1)(a). However, if the non-disclosed circumstance does not itself require removal, non-disclosure alone cannot meet the test, either. Once again, something more is required.
Halliburton is the first English arbitration case in the field of arbitration to grapple seriously with a duty of disclosure as a separate obligation, distinct from the duty to be impartial. The tests set out by the Court of Appeal are inherently vague, and so it is expected that the decision will act as a spur to, rather than a break on, challenges to arbitrators on grounds of impartiality.64 The case is set to be heard by the Supreme Court later this year with a number of arbitral institutions intervening, so the law on this topic may well be re-written in the not-too-distant future.
Anti-suit injunctions in respect of proceedings before an EU Member State
As noted above, as a result of the CJEU decision in West Tankers, the English courts cannot issue anti-suit injunctions to restrain parties from court proceedings in other European Union Member States. In Nori Holdings v. Public Joint-Stock Company,65 Males J addressed some interesting questions relating to this matter.
The claimants sought anti-suit injunctions against the defendant, a Russian bank, in respect of two sets of proceedings commenced by the defendant against multiple parties (including the claimants) before courts in Russia and Cyprus. The basis for the claim was the defendant's alleged breaches of arbitration agreements contained in multiple financing transactions. The defendant was challenging these transactions in the foreign proceedings by arguing that they formed part of a large-scale fraud resulting in the loss of roughly US$600 million. The claimants also commenced 10 LCIA arbitrations, again seeking anti-suit injunctions.
The High Court ordered the defendant to discontinue the Russian court proceedings (at least as against the claimants; the court was not asked to make any order in respect of the proceedings as against other parties to that action who were not signatories to the arbitration agreements). However, it dismissed the claimants' request for an injunction restraining the Cyprus proceedings, even though they were found to have been commenced in breach of arbitration agreements. Males J rejected the arguments that the Recast Regulation and the opinion of Advocate General Wathelet in Gazprom OAO had changed the West Tankers position, and meant that anti-suit injunctions were now available to restrain proceedings before an EU Member State. Males J described the opinion as fundamentally flawed, and stated that 'if the EU legislature intended to reverse the West Tankers decision, it chose an odd way to do so'. As such, the court had no power to grant anti-suit injunctions in respect of proceedings pending before the courts of another EU Member State. However, Males J noted that Gazprom OAO shows that an anti-suit injunction issued by an arbitral tribunal in the form of an award will be able to be enforced in EU Member States.
Following Brexit, this decision may be rendered academic as it is possible that the English courts will not need to follow the West Tankers ruling, thereby allowing anti-suit injunctions restraining proceedings in EU Member States that are commenced in breach of an arbitration agreement. However, at least for the time being, if a party has commenced proceedings in breach of an arbitration agreement in another EU Member State, Nori shows that it will be wise to first seek an anti-suit injunction from the arbitral tribunal and then enforce it in the courts, if necessary.
Determination by the court of a preliminary point of law
Section 45 of the Act provides a route whereby the court may determine any question of law arising during ongoing arbitration proceedings, provided certain requirements are met. There are surprisingly few authorities relating to Section 45, and last year's M/Y Palladium66 was a rare example of an application under this provision.
The underlying arbitration proceedings concerned the super yacht M/S Palladium. The question was whether a claim under a shipbuilding contract had been settled in without-prejudice correspondence between the parties, which took place at the start of a four-week arbitration hearing and led to the adjournment of the hearing. If the arbitrators were to consider this question and determine that no settlement had been concluded, they would then have to either resume the arbitration, excluding from their minds material that it would be better if they had not seen, or be replaced with a new and untainted tribunal at additional cost. An application under Section 45 avoided that danger. Males J concluded that there had been no settlement.
When Section 45 has arisen, judges have been keen to point out both how seldom the procedure is used and how useful it can be. Although such applications will result in a delay to the arbitration, the courts recognise the need to act promptly: Males J handed down judgment six days after the hearing, and in another case,67 the judge indicated his answers immediately at the end of the hearing. M/Y Palladium serves as a useful reminder to practitioners of the availability of an application under Section 45 of the Act.
The confidentiality of arbitrations
Under English law, arbitration proceedings and materials produced during the course of them are confidential. The courts have held that there is an implied term between the parties to this effect, but 'the implied agreement is really a rule of substantive law masquerading as an implied term'.68 Confidentiality is not addressed in the Act, and has been left to the common law to develop. One such development and refinement is seen in the recent case of The Chartered Institute of Arbitrators v. B and others.69
The court was asked to authorise the release to the Chartered Institute of Arbitrators (CIArb) of certain documents for use in disciplinary proceedings against B, who was a fellow of the institute. B had been removed as an arbitrator following a successful application to remove him on grounds of partiality. An exception to the confidentiality rule in English law is when disclosure will be in the interests of justice.70 The CIArb sought copies of documents generated in the arbitration on the basis that use of the documents was in the public interest. Moulder J held that there was a general public interest in maintaining the quality of and standards of arbitrators that extends beyond the interests of the parties in a particular case. In her view, the general public was entitled to expect that arbitrators belonging to a recognised body meet certain minimum standards as laid down by that body. She concluded that arbitration is a quasi-judicial process and that the interests of justice lie in supporting the integrity of this alternative dispute resolution mechanism.
This decision comes at a time when some practitioners have questioned whether the English rule on confidentiality of arbitral proceedings should be maintained.71 The case provides some guidance, but the interests of justice exception to confidentiality remains difficult to construe. For example, the difference between the interests of justice and the public interest is unclear, and Moulder J uses the terms interchangeably in her judgment. The precise scope of this exception remains uncertain and will continue to develop.
The Fiona Trust one-stop shop presumption
The Fiona Trust litigation reinforced, inter alia, the presumption that parties to an arbitration agreement are likely to have intended any dispute arising out of their relationship to be decided by the same tribunal. The recent decision of The Four Island 72 considered and reinforced this principle.
The claimant charterer and defendant owner entered into a charterparty that provided for arbitration. The defendant owner claimed demurrage and heating costs from the claimant charterer. Those claims were settled by means of an exchange of emails in which the charterer agreed to pay US$600,000, but the charterer failed to make the payment. The defendant owner served a notice of arbitration on the claimant charterer claiming the agreed sum of US$600,000, which the tribunal then awarded. The claimant charterer challenged the jurisdiction of the arbitral tribunal to decide a claim arising under the settlement agreement on the basis that the settlement agreement did not include an arbitration clause. The tribunal concluded that it did have jurisdiction. The claimant charterer sought to challenge the award under Section 67 of the Act by arguing once more that the tribunal did not have jurisdiction.
Males J interestingly stated the arbitrators' view in this case should be given considerable weight given their experience in the shipping industry. The judge agreed with their conclusion and held that the parties intended for the arbitration clause contained in the charterparty to continue to apply in the event that the sum agreed to settle claims under that agreement was not paid. The wording of the arbitration clause was broad enough to encompass such a claim, even though the settlement agreement to pay US$600,000 represented a new cause of action under a new and binding agreement. The judge thought it was inconceivable that the parties intended that, if the agreed sum was not paid, the owner would be unable to pursue its claim in arbitration, and instead would be required to commence court proceedings. This decision demonstrates the commercial, pragmatic and supportive approach that the English courts take to arbitration.
Upholding an award despite the risk of inconsistent decisions
In the context of international commercial dispute resolution, arbitration practitioners are well aware of the difficulties that can arise when multiple related proceedings across several jurisdictions arise. In SCM Financial Overseas Ltd v. Raga Establishment Ltd,73 the High Court addressed one such issue: the risk of inconsistent decisions.
The defendant had commenced the arbitration following a lack of payment after an agreement for the sale of shares in a Ukrainian telephone company. The claimant's defence revolved around the risk that the Ukrainian court would decide that the defendant's subsidiary had breached the privatisation agreement through which it had acquired the telephone company, entitling the state to confiscate the shares in the telephone company without compensation. The tribunal proceeded to issue an award finding the claimant liable without waiting for the Ukrainian court. The Ukrainian court then handed down a judgment three months later and reached diametrically opposite conclusions to the tribunal on some of the issues, with the consequence that the claimant was obliged to pay a purchase price of US$860 million to the defendant, plus a penalty of US$81.9 million to the Ukrainian state, for shares in the company that will be confiscated. An appeal before the Ukrainian Supreme Court is pending.
The claimant made an application under Section 68 of the Act challenging the award on the grounds of a serious irregularity. The claimant argued that by issuing an award without awaiting the outcome of the related Ukrainian court proceedings, the tribunal had failed to comply with its general duty of fairness under Section 33 of the Act, and that breach had caused substantial injustice to the claimant. In dismissing the claimant's application, Males J held that the arbitrators were entitled to decide not to defer their award. The question of whether the arbitrators' decision not to defer constituted an irregularity must be determined as at the date of publication of the award. The judge stated that the arbitrator's decision was not unfair so as to constitute a breach of Section 33, and there was no irregularity or substantial injustice within the meaning of Section 68. The judge stated that the arbitrators had wide discretion as to how to proceed, and that their decision was one that they were entitled to reach.
The decision is a prime example of the English court's belief in minimum court intervention in the arbitral process (which is reflected in Section 1(c) of the Act). This case shows that if a tribunal acted fairly, the court will support its decision, even if other tribunals would have reached a different decision. The case also serves as a cautionary tale of the inherent risk of inconsistent decisions in multi-party situations. When the risk does materialise, this alone will not constitute a substantial injustice in the context of a Section 68 challenge.
Jurisdiction challenges and second bites at the cherry
English law explicitly recognises the Kompetenz-Kompetenz principle in the Act,74 so a tribunal is able to rule on its own jurisdiction. However, this ruling can be challenged under Section 67 of the Act. This involves a rehearing and not merely a review of the issue of jurisdiction, so the court must decide that issue for itself.75 The decision and reasoning of the arbitrators are not entitled to any particular status or weight, although that reasoning will inform and be of interest to the court. These challenges can result in a waste of time and money, and the decision of the High Court in The Pounda76 provides an example of this.
The arbitration concerned an alleged guarantee between the shipowner (owner) and the alleged guarantor (JSG) for a charterparty. JSG denied entering into the guarantee and challenged the jurisdiction of the tribunal. Deciding the matter as a preliminary issue, the tribunal rejected that challenge. The matter turned on whether JSG had authorised the charterers to enter into the guarantee on its behalf, which largely depended upon whether or not a conversation had taken place between a representative of the claimant (SWM) and the charterers. At the arbitration hearing, SWM's evidence was given via videolink from China and with the aid of an interpreter. The tribunal rejected the evidence given by SWM and found that he had in fact authorised the guarantee. The tribunal then went on to award nearly US$70 million plus interest and costs to the owner.
JSG challenged the preliminary jurisdiction finding in the High Court under Section 67 of the Act. As the Section 67 challenge involves a rehearing, parties are free to adduce fresh evidence. Therefore, for the court hearing, SWM gave live evidence. Carr J found SWM to be a reliable and credible witness and accepted his evidence. The Court therefore held that there was no valid arbitration agreement between JSG and the owners because on the facts, it was unlikely that JSG had given authority for the guarantee to be signed on its behalf. This case shows that when there are disputes as to jurisdiction, multiple challenges may be made, and a favourable decision by the tribunal may not be the final word on the matter.
Worldwide freezing orders in support of arbitral awards
English courts have a number of tools available to support arbitrations. For example, in appropriate circumstances, a court can issue anti-suit injunctions, appoint receivers and grant freezing orders. The last of these is a particularly significant measure when it comes to the enforcement of awards. If the assets in question are outside of England, the English courts are generally only prepared to grant freezing orders if the defendant or dispute has a sufficiently strong link to England, or where there was some other factor of sufficient strength, to justify proceeding in the absence of such a link.77 The recent case of ArcelorMittal USA LLC v. Essar Steel Limited and others78 shows that one such factor can be where there has been an international fraud.
The proceedings arose out of an ICC award under which a Mauritian company, Essar Steel Limited (Essar Steel), was ordered to pay a company from Delaware, ArcelorMittal USA (AMUSA), more than US$1.5 billion in respect of a wrongful repudiation of a contract for the sale of steel pellets entered into in connection with a major project in Minnesota. Essar Steel refused to pay the award, and efforts to enforce it in Minnesota and Mauritius were unsuccessful. AMUSA then commenced proceedings in England to enforce the award and sought worldwide freezing orders in support of enforcement.
Jacobs J concluded that there was a real risk of dissipation of assets because of the historic misconduct of the Essar Group in various jurisdictions. It was therefore just and convenient to grant the worldwide freezing orders notwithstanding that the award was a foreign award, Essar Steel was a foreign company and there was no evidence of assets in the jurisdiction. Jacobs J explained that in cases of international fraud, the English courts should be more willing to intervene. In explaining its reasoning, the court held that international fraud is not limited to situations where the underlying claim is in deceit or related to the theft of assets, but extends to 'serious wrongdoing comprising conduct on a large or repeated scale whereby a company, or the group of which it is a member, is acting in a manner prejudicial to its creditors, and in bad faith'. Furthermore, the court was prepared to grant the freezing order despite evidence that the Mauritian courts could in principle grant the same relief. The court considered that the Mauritian courts 'would not regard the WFO as offensive in some way'.
The judgment provides helpful guidance on areas of interest to practitioners in the fields of fraud, asset recovery and injunctive relief. Most importantly, Jacobs J sets out the court's approach to the exercise of its injunctive powers in cases where a foreign arbitral award is sought to be enforced against a foreign defendant. It demonstrates the supportive approach of English courts to international arbitration awards and the availability of a powerful tool when enforcing arbitral awards.
iii Investor–state disputes
The Convention on the Settlement of Disputes between States and Nationals of Other States 1965 came into force in the United Kingdom on 18 January 1967.79 The United Kingdom also ratified the Energy Charter Treaty 1994 (ECT) on 16 December 1997.80 In addition, the United Kingdom is currently party to 103 bilateral investment treaties (BITs).81
Under the Treaty of Lisbon, which took effect on 1 December 2009, the EU's competence was extended to cover foreign direct investment, which includes BITs concluded between EU Member States and third countries (extra-EU BITs). The EU subsequently enacted Regulation No. 1219/2012, which came into force on 9 January 2013, to clarify the status of the more-than 1,200 extra-EU BITs entered into before Lisbon came into force, as well as the ability of Member States to negotiate new extra-EU BITs. Regulation 1219/2012 confirmed that extra-EU BITs signed prior to December 2009 will remain in force until they are replaced by new treaties between the EU and the relevant third countries.82
In March 2018, the CJEU ruled in Achmea v. Slovak Republic83 that investor–state arbitration provisions in intra-EU BITs were incompatible with EU law. In July 2018, the European Commission announced that all investor-state arbitration clauses in intra-EU BITs are inapplicable and that any tribunal established under them 'lacks jurisdiction due to the absence of a valid arbitration agreement'.84 Following the decision, all current EU Member States have pledged to terminate intra-EU BITs. However, the question remains as to the extent, if any, the decision has on multilateral investment treaties, the most prominent being the ECT. The European Commission has said that the ECT cannot be used as a basis for dispute settlement between EU investors and EU Member States.85 On 15 January 2019, 21 Member States (including the United Kingdom) issued a declaration that accepted that the Achmea decision applied to the ECT with regard to intra-EU matters.86 However, two separate declarations, one by Hungary87 and one jointly by Finland, Luxembourg, Malta, Slovenia and Sweden,88 did not agree with this and expressly reserved their position on the basis of ongoing litigation before the Svea Court of Appeal, which was considering this very question. None of these declarations are legally binding, so it remains to be seen whether a court will enforce an award made pursuant to the ECT in an EU-related matter.
Practically, the decision may incentivise EU investors to structure their investments through non-EU companies in order to maintain investment treaty protections. In addition, the uncertainty of the scope of the decision may make non-EU arbitral seats more popular. Therefore, if Brexit goes ahead, Achmea may have a positive effect for the United Kingdom and arbitrations in London.
Outlook and conclusions
England and Wales remains one of the most frequently selected seats for international arbitration. The practical attractions of England and Wales as a seat are built not just on the firm foundation of the Act but also on judicial willingness to apply the guiding principles that underpin the Act. Brexit will have little impact on a highly competent and independent English judiciary that has ample experience in complex arbitral disputes. Nor is Brexit likely to have a material effect on the depth of talented arbitration specialists practising in London. England and Wales as a seat is distinctly arbitration-friendly, with a keen understanding of the benefits arbitration aims to confer on parties, and the policy considerations such benefits entail. Recent case law generally reinforces the fact that the English courts are strongly supportive of international arbitration. This is consistent with the principles of party autonomy and judicial non-intervention enshrined in the Act.
With the coming into force of the 2014 LCIA Rules, and its guidance on emergency procedures subsequently issued in 2015, the LCIA has one of the most innovative and up-to-date sets of institutional rules. The 2014 LCIA Rules contain a range of innovative mechanisms such as emergency arbitration and consolidation that can be used to support the arbitral process.
International arbitration in England and Wales will no doubt continue to evolve as it seeks to preserve its competitive edge as an arbitral seat. Although it has little impact on the formal framework applicable to international arbitration, in terms of perceptions, the Brexit decision will create both challenges and opportunities for England and Wales as an arbitral seat in future years.
1 Duncan Speller is a partner and Tim Benham-Mirando is a graduate lawyer at Wilmer Cutler Pickering Hale and Dorr LLP. The information in this chapter was accurate as at June 2019.
2 There are three distinct jurisdictions in the United Kingdom, each of which has its own court system and laws. England and Wales together comprise a single jurisdiction; the other two are Scotland and Northern Ireland.
3 English Arbitration Act 1996, Section 2(1).
4 For example, the Act contains no provisions as to the confidentiality of arbitrations, but the courts have continued to develop and refine the law on this issue: Ali Shipping Corp v. Shipyard Trogir  1 WLR 314; Glidepath BV v. Thompson  EWHC 818 (Comm); Michael Wilson & Partners Ltd v. Emmott  EWCA Civ 184.
5 The DAC produced two reports that provide a useful commentary on many of the Act's provisions: the Departmental Advisory Committee on Arbitration Law: Report on the Arbitration Bill (February 1996); and The Supplementary Report on the Arbitration Act 1996 (January 1997), chaired by the Rt Hon Lord Justice Saville (as he then was). The reports continue to be referred to by the courts (see, e.g., Ust-Kamenogorsk Hydropower Plant JSC v. AES Ust-Kamenogorsk Hydropower Plant LLP  UKSC 35 at paragraph 31 et seq.; and The London Steam Ship owners Mutual Insurance Association Ltd v. The Kingdom of Spain  EWHC 2840 (Comm) at paragraphs 25 and 49).
6 Section 1(a) of the Act.
7 Section 1(b) of the Act.
8 Section 1(c) of the Act.
9 AES Ust-Kamenogorsk Hydropower Plant LLP v. Ust-Kamenogorsk Hydropower Plant JSC  EWCA Civ 647, per Lord Justice Rix at paragraphs 100, 105; Itochu Corporation v. Johann MK Blumenthal GMBH & Co KG & Anr  EWCA Civ 996 at paragraph 17ff; Bitumex (HK) Co Ltd v. IRPC Public Co Ltd  EWHC 1065 (Comm) at paragraph 22; Lombard North Central Plc v. GATX Corp  EWHC 1067 (Comm) at paragraph 15; Nomihold Securities Inc v. Mobile Telesystems Finance SA (No. 2)  EWHC 130 (Comm) at paragraphs 26, 58; Turville Heath Inc v. Chartis Insurance UK Limited  EWHC 3019 at paragraph 53; Jivraj v. Hashwani  UKSC 40 at paragraph 61ff; and Gujarat NRE Coke Limited, Shri Arun Kumar Jagatramka v. Coeclerici Asia (PTE) Limited  EWHC 1987 (Comm) at paragraph 23.
10 Section 40 of the Act.
11 Section 33(1) of the Act.
12 See Section 4 of the Act.
13  UKSC 40.
14 Employment Equality (Religion or Belief) Regulations 2003.
15 Jivraj v. Hashwani  UKSC 40 at paragraph 61.
16 Section 34 of the Act.
17 Section 38(4) and (6) of the Act.
18 Section 39 of the Act.
19 Section 18 of the Act.
20 Section 43 of the Act.
21 Section 44 of the Act.
22 Section 17 J of the UNCITRAL Model Law.
23 See, e.g., Itochu Corporation v. Johann MK Blumenthal GMBH & Co KG & Anr  EWCA Civ 996 ('The policy of thus restricting appeals, found in Section 18 and a variety of other Sections in the Act, is deliberate. It reflects the underlying general principles, as to party autonomy and protection of the parties from unnecessary delay and expense, enshrined in Section 1(a) and Section 1(b) of the Act').
24 In Bandwidth Shipping Corporation Intaari (the 'Magdalena Oldendorff')  EWCA Civ 998,  1 All ER (Comm) 1015,  1 Lloyd's Rep 7, Waller LJ stated, at paragraph 38: 'In my view the authorities have been right to place a high hurdle in the way of a party to an arbitration seeking to set aside an Award or its remission by reference to Section 68 and in particular by reference to Section 33 [. . .] It would be a retrograde step to allow appeals on fact or law from the decisions of arbitrators to come in by the side door of an application under Section 33 and Section 68.'
25 The DAC Report. See also Lesotho Highlands Development Authority v. Impregilo SpA and Others  UKHL 43 and more recently La Société pour la Recherche La Production Le Transport La Transformation et la Commercialisation des Hydrocarbures SPA v. Statoil Natural Gas LLC (Statoil)  EWHC 875.
26 A survey has shown that in 2009, 12 applications were made under Section 68, and 62 under Section 69; and in 2012, challenges under Section 68 were fewer than those under 69, being seven and 11 respectively: www.olswang.com/articles/2013/03/do-the-2012-stats-reveal-an-abuse-of-the-right-to-challenge-an-arbitral-award-for-serious-irregularity. Furthermore, the Commercial Court Users' Group Report dated 13 March 2018 provides some recent statistics: https://www.judiciary.uk/wp-content/uploads/2018/04/commercial-court-users-group-report.pdf. In 2015, there were 34 application under Section 68, of which only one was successful; in 2016, there were 31 applications, of which none was successful; and in 2017, there were 47 applications, of which none was successful.
27 AES Ust-Kamenogorsk Hydropower Plant LLP v. Ust-Kamenogorsk Hydropower Plant JSC  UKSC 35. As described below, these injunctions can only be issued to support arbitration when court proceedings have been brought in countries other than European Union Member States.
28 See the High Court and County Courts (Allocation of Arbitration Proceedings) Order 1996, SI 1996/3215, as amended.
31 The Recast Regulation is multilateral in its operation and a directly effective instrument of European Union Law – the United Kingdom cannot single-handedly legislate that the Recast Regulation will continue to apply or its judgments will be entitled to recognition and enforcement in the rest of Europe. After the United Kingdom leaves the European Union, the Recast Regulation will not be able to apply unless a new regime is negotiated and agreed with other signatory states. By contrast, when it comes to the rules that determine the applicable law for obligations (the Rome I and Rome II Regulations) the United Kingdom can simply, if it wants to, copy the text of the Regulations into its own private international law. As the United Kingdom helped draft these rules and they operate much better than the old common law principles that they replaced, Rome I and Rome II are likely to continue to be a part of English law after Brexit.
32 Allianz SpA and Others v. West Tankers Inc  EUECJ C-185/07. However, if an arbitral tribunal issues an anti-suit injunction to restrain parties from court proceedings in other European Union Member States, an English court can enforce this award. See Gazprom OAO (C-536/13) EU:C:2015:316.
35 The exclusion of the carriage of goods and passengers (Art 2(2)(f)) and antitrust matters (Art 2(2)(h)) would mean that many choice-of-court agreements concluded in favour of the English courts would not be covered.
37 2018, LCIA: Casework Report, p. 4.
38 ibid., p. 4.
39 ibid., p. 5.
40 ibid., pp. 8–9.
41 ibid., pp. 8–9.
42 ibid., p. 12.
43 ibid., p. 12.
44 ibid., p. 12.
45 ibid., p. 14.
47 ibid., at 3.2.
48 ibid., at 4.2.
49 ibid., at 4.3.
50 ICC Dispute Resolution Statistics 2017.
57 ibid. These figures do not reflect figures from supporting members of the LMAA accepting arbitration appointments, so may slightly understate the full figures.
59  EWHC 194 (Comm). Discussed in detail in the previous edition.
62 Essar Oilfields Services Ltd v. Norscot Rig Management PVT Ltd  EWHC 2361 (Comm).
63 Halliburton v. Chubb  EWCA Civ 817.
64 For one such example, see, Soletanche Bachy France SAS v. Aqaba Container Terminal (PVT) Co  EWHC 362 (Comm).
65 Nori Holdings v. Public Joint-Stock Company  EWHC 1343 (Comm).
66 Goodwood Investments Holdings Inc. v. Thyssenkrupp Industrial Solutions AG (The M/Y Palladium)  EWHC 1056 (Comm).
67 Secretary of State for Defence v. Turner Estate Solutions Ltd  EWHC 1150 (TCC).
68 Emmott v. Michael Wilson & Partners Ltd  EWCA Civ 184 at paragraph 84.
69 The Chartered Institute of Arbitrators v. B and others  EWHC 460 (Comm).
70 Emmott v. Michael Wilson & Partners Ltd  EWCA Civ 184 at paragraph 107.
71 Partasides and Maynard, 'Raising the Curtain on English Arbitration', 2017 33(2) Arbitration International 197.
72 Sonact Group Limited v. Premuda SPA (The Four Island)  EWHC 3820 (Comm).
73 SCM Financial Overseas Ltd v. Raga Establishment Ltd  EWHC 1008 (Comm).
74 Section 30 of the Act.
75 Dallah Real Estate and Tourism Holding Company v. Ministry of Religious Affairs of the Government of Pakistan  UKSC 46.
76 Jiangsu Shagang Group Co Ltd v. Loki Owning Company Ltd  EWHC 330 (Comm).
77 Mobil Cerro Negro Ltd v. Petroleos de Venezuela SA  EWHC 532 (Comm).
78 ArcelorMittal USA LLC v. Essar Steel Limited and others  EWHC 724 (Comm).
81 See investmentpolicyhub.unctad.org/IIA/CountryBits/221 for information about the United Kingdom in the UNCTAD database.
82 Article 3 of the Regulation.
83 Slowakische Republik v. Achmea BV  (case C-284/16).