THE ARBITRATION PROCESS

Commencement of arbitration: The parties are free to agree when the arbitration is to be regarded as commenced for the purposes of the 1996 Act and the Limitation Acts: s.14(1). If there is no such agreement, different notice provisions apply depending on whether the arbitrator is named or designated in the arbitration agreement: s.14(3); whether the arbitrator or arbitrators are to be appointed by the parties: s.14(4); or whether the arbitrator or arbitrators are to be appointed by a person other than a party to the proceedings: s.14(5).

In Bulk & Metal Transport (UK) LLP v Voc Bulk Ultra Handymax Pool LLC (The Voc Gallant) [2009] EWHC 288 (Comm); [2009] 2 All E.R. (Comm) 377 it was held that a message which stated that if charterers did not agree to the appointment of a single arbitrator, the owners would commence arbitration and appoint their own arbitrator, in accordance with an arbitration clause, was sufficient to commence arbitration within s.14(4).
Arbitral tribunal: The parties are free to agree on the number of arbitrators to form the tribunal and whether there is to be a chairman or umpire. Where there are an even number of arbitrators there is a presumption that an additional arbitrator is required to act as chairman. If there is no agreement as to the number of arbitrators, the tribunal is made up of a sole arbitrator: s.15

See also: s.20 (Chairman); s.21 (Umpire); s.22 (Decision-making where no chairman or umpire).

The authority of an arbitrator is personal and ceases on his death. However, unless otherwise agreed by the parties, the death of the person by whom an arbitrator was appointed does not revoke the arbitrator’s authority: s.26.

Where an arbitrator ceases to hold office, the parties are free to agree:

  • Whether and if so how the vacancy is to be filled,
  • Whether and if so to what extent the previous proceedings should stand, and
  • What effect (if any) his ceasing to hold office has on any appointment made by him (alone or jointly).

Failing agreement, the provisions of s.16 (procedure for appointment of arbitrators) and s.18 (failure of appointment procedure) apply: s.27. The parties should seek so far as possible to apply the procedure for appointing arbitrators under the arbitration agreement to the appointment of substitute arbitrators: Federal Insurance Co v Transamerica Occidental Life Insurance Co [1999] 2 All E.R. (Comm) 138.

A person alleged to be a party to arbitration but who takes no part in the proceedings may question whether the tribunal is properly constituted by applying to the court for a declaration or injunction or other appropriate relief: s.72(1)(b).

Appointment of the arbitrator(s): The parties are free to agree on the procedure for appointing the arbitrator or arbitrators: s.16. Unless the parties otherwise agree, where each of two parties to an arbitration agreement is to appoint an arbitrator and one party refuses or fails to do so, the party which has duly appointed his arbitrator (“the first party”), may given notice in writing to the party in default that he proposes to appoint his arbitrator to act as sole arbitrator.

The defaulting party has 7 clear days of that notice being given to appoint an arbitrator and notify the first party that he has done so. Failing that the first party may appoint his arbitrator as sole arbitrator whose award is binding on both parties as if he had been appointed by agreement. The party in default can (upon notice to the appointing party) apply to the court to set aside the appointment: s.17.

Jurisdiction of tribunal: Unless otherwise agreed by the parties, the arbitral tribunal is given express power to rule on its own substantive jurisdiction as to (a) whether there is a valid arbitration agreement, (b) whether the tribunal is properly constituted, and (c) what matters have been submitted to arbitration in accordance with the arbitration agreement. Any such ruling may be challenged: s.30.

An objection that the arbitral tribunal lacks substantive jurisdiction at the outset of the proceedings must be raised by a party not later than the time he takes the first step in the proceedings. Appointing or participating in appointing an arbitrator does not constitute as a first step: s.31(1).

An objection during the course of the proceedings that the tribunal is exceeding its substantive jurisdiction must be made as soon as possible after the matter alleged to be beyond its jurisdiction is raised: s.31(2).

The court has power to determine a preliminary point of jurisdiction: s.32.

A person alleged to be a party to arbitration but who takes no part in the proceedings may question what matters have been submitted to arbitration in accordance with the arbitration agreement by proceedings in the court for a declaration or injunction or other appropriate relief: s.72(1)(c).

Where the arbitral tribunal rules that it has substantive jurisdiction and a party to the arbitration who could have questioned that ruling, does not do so, or does not do so within the time allowed by the arbitration agreement or any provision of the 1996 Act, he may not object later to the tribunal’s substantive jurisdiction on any ground which was the subject of that ruling: s.73(2).

Loss of right to object: If a party to arbitration takes part, or continues to take part, in the proceedings without making, either forthwith or within such time as is allowed by the arbitration agreement or the tribunal or by any provision of the 1996 Act, any objection that:

  • The tribunal lacks substantive jurisdiction,
  • The proceedings have been improperly conducted,

There has been a failure to comply with the arbitration agreement or with any provision of the 1996 Act, or
There has been any other irregularity affecting the tribunal or the proceedings
he may not raise that object later, before the tribunal or the court, unless he shows that, at the time he took part or continued to take part in the proceedings, he did not know and could not with reasonable diligence have discovered the grounds for the objection: s.73(1).

In Thyssen Canada Ltd v Mariana Maritime SA [2005] EWHC 219 (Comm); [2005] 1 Lloyd’s Rep. 640 it was held that where a party participated in an arbitration when it had knowledge of or could with reasonable diligence have discovered grounds for objection, a challenge to an award for serious irregularity under s.68 was barred by s.73 of the 1996 Act, no extension of time should be granted for the making of the s.68 application and the application itself was an abuse of process. See also Nestor Maritime SA v Sea Anchor Shipping Co Ltd [2012] EWHC 996 (Comm) and Terna Bahrain Holding Co WLL v Al Shamsi [2012] EWHC 3283 (Comm); [2013] 1 All E.R. (Comm) 580.

General duties of the tribunal: The tribunal must:

Act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting his case and dealing with that of his opponent, and
Adopt procedures suitable to the circumstances of the particular case, avoiding unnecessary delay or expense, so as to provide a fair means for the resolution of the matters falling to be determined: s.33. Failure by the tribunal to comply with s.33 is a substantial irregularity for the purposes of s.68. The test for apparent bias is whether a fair-minded and informed observer, having considered the relevant facts, would conclude that there was a real possibility that the arbitrator was biased. However, the fair-minded and informed observer is not unduly suspicious: see Interprods Ltd v De La Rue International Ltd [2014] EWHC 68 (Comm); [2014] 1 Lloyd’s Rep. 540

It is for the tribunal to decide all procedural and evidential matters, subject to the right of the parties to agree any matter: s.34.

Tribunal’s powers: The parties are free to agree on the powers exercisable by the tribunal for the purposes of and in relation to the proceedings. Unless otherwise agreed by the parties the tribunal has the following powers:

  • To appoint experts or legal advisers to report to it and the parties or to appoint assessors to assist it on technical matters, and may allow any such expert, legal adviser or assessor to attending the proceedings. The parties must be given a reasonable opportunity to comment on any information, opinion or advice offered by any such person: s.37(1)
  • To order a claimant to provide security for the costs of the arbitration: s.38(3)
  • To give procedural directions in relation to any property which is the subject of the proceedings or as to which any question arises in the proceedings, and which is owned by or is in the possession of a party to the proceedings: s.38(4)
  • To direct that a party or witness be examined on oath or affirmation and may for that purpose administer any necessary oath or take any necessary affirmation: s.38(5)
  • To give directions to a party for the preservation for the purposes of the proceedings of any evidence in his custody or power: s.38(6).
  • Unless the parties agree to confer such power on the tribunal, the tribunal has no power:

    • to order consolidation of other arbitration or concurrent hearing: s.35(2)
    • to order on a provisional basis any relief which it would have power to grant in a final award: s.39(4).

    Powers of tribunal in case of party’s default: The parties are under a general duty to do all things necessary for the proper and expeditious conduct of the arbitration: s.40. The parties are free to agree on the powers of the tribunal in case of a party’s failure to do something necessary for the proper and expeditious conduct of the arbitration: s.41(1).

    Unless otherwise agreed by the parties:

    Where there has been inordinate and inexcusable delay on the part of the claimant in pursuing his claim, the tribunal may make an award dismissing the claim: s.41(3). “Delay” includes any delay which causes a substantial risk that it is not possible to have a fair resolution of the issues in the claim: L’Office Cherifien des Phosphates Unitramp SA v Yamashita-Shinnihon Steamship Co Ltd (The Boucraa) [1994] 1 A.C. 486.

    Where a party fails to attend or be represented at an oral hearing of which he has been give notice, or where matters are to be dealt with in writing, fails to submit written evidence, the tribunal may continue the proceedings in the absence of that party or the written evidence and may make an award on the basis of the evidence before it: s.41(4).

    If, without sufficient cause, a party fails to comply with any order or directions of the tribunal, the tribunal may make a peremptory order to the same effect: s.41(5).

    If a claimant fails to comply with a peremptory order of the tribunal to provide security for costs, the tribunal may make an award dismissing his claim: s.41(6).

    Stay of legal proceedings: An agreement which gives one party the option of bringing any dispute between the parties to arbitration is valid and the court will order a stay of proceedings brought in contravention of that agreement pursuant to s.9 of the 1996 Act: NB Three Shipping Ltd v Harebell Shipping Ltd [2004] EWHC 2001 (Comm); [2005] 1 All E.R. (Comm) 200.

    There is a right of appeal to the Court of Appeal of a High Court decision as to the grant of a stay under s.9: Inco Europe Ltd v First Choice Distribution [2000] 1 W.L.R. 586.

    A stay can only be obtained against a party to an arbitration agreement or a person claiming through or under such a party and a mere legal or commercial connection is not sufficient: City of London v Sancheti [2008] EWCA Civ 1283; [2009] Bus. L.R. 996.

    See also: Deutsche Bank AG v Tongkah Harbour Public Co Ltd [2011] EWHC 2251 (QB); [2012] 1 All E.R. (Comm) 194 and Nomihold Securities Inc v Mobile Telesystems Finance SA [2012] EWHC 130 (Comm); [2012] Bus. L.R. 1289.

    Service of notices and documents: The parties are free to agree on the manner of service of any notice or other document. If there is no such agreement a notice or other document may be served on a person by any effective means. If a notice or other document is addressed, pre-paid and delivered by post to the addressee’s last known principal residence, last known principal business address or to the party’s registered or principal office, as the case may be, it will be treated as effectively served: s.76.

    Securing the attendance of witnesses: With the permission of the tribunal or the agreement of the other parties, a party to arbitration may use the same court procedures as are available in relation to legal proceedings to secure the attendance before the tribunal of a witness in order to give oral testimony or to produce documents or other material evidence. The court procedures can only be used if the witness is in the United Kingdom and the proceedings are being conducted in England, Wales or Northern Ireland: s.43.

    • For the procedure governing securing the attendance of witnesses, see CPR Practice Direction 62 paras (7.1 to 7.3).
    • Remedies: The parties are free to agree on the powers exercisable by the arbitral tribunal as regards remedies: s.48.

    Unless otherwise agreed by the parties, the tribunal:

    • May make a declaration as to any matter to be determined in the proceedings;
    • May order the payment of a sum of money, in any currency;

    Has the same powers as the court to order a party to do or refrain from doing anything; to order specific performance of a contract (other than a contract relating to land); to order the rectification, setting aside or cancellation of a deed or other document.

    The parties are free to agree on the powers of the tribunal as regards the award of interest. Unless otherwise agreed the tribunal has the power to award simple or compound interest from such dates, at such rates and with such rests as it considers meets the justice of the case: s.49. See also: Lesotho Highlands Development Authority v Impregilo SpA [2005] UKHL 43; [2006] 1 A.C. 221.