International Arbitration: Lecture 8

International Arbitration: Lecture 8
Dr. Matteo Zambelli
[email protected]
University of West London
School of Law
1
Overview
A. Arbitration and the Role of National Courts.
B. At the beginning of the Arbitration.
C. During the Arbitration.
D. At the end of the Arbitration.
E. Q&A.
2
The role of courts
Arbitration is intended to be a separate and independent means of
dispute resolution, however all legal systems will inevitably have some
form of judicial oversight.
It is important to be aware of the fact that English courts do have a role
to play in the arbitration process, and to understand in broad terms, the
scope of their jurisdiction.
The role of the court ought to be supportive rather than supervisory since
the parties have agreed that their disputes should be resolved by
arbitration rather than litigation.
3
(cont.)
The Arbitration Act 1996 contains various provisions which are relevant
to court applications, including:
Rules which govern who can apply to court.
Rules about giving notice of claims or applications.
Rules about securing the permission or agreement of the tribunal or parties
before applying to court.
Rules about who can be heard by the court.
Time limits for applications.
4
(cont.)
The rules about who can apply to court fall into three main categories:
Usually, the Arbitration Act 1996 specifies that any party to the arbitration
agreement or arbitration proceedings may make a claim or application to
court.
Sometimes, only the arbitrator may apply to the court (for example, where an
arbitrator resigns, he is entitled to apply for relief from any liability and to
obtain an order for payment of his fees under section 25(3) of the Arbitration
Act 1996).
In other cases, both the parties and the arbitrator(s) are entitled to apply to
the court. For example, both the tribunal and the parties are entitled to apply
for an order enforcing the tribunal’s peremptory orders under section 42 of the
Arbitration Act 1996. Similarly, both the tribunal and the parties are entitled to
apply for an extension of time for the making of an award under section 50 of
the Arbitration Act 1996.
5
(cont.)
Rules about giving notice. The Arbitration Act 1996 expressly requires
notice of some claims or applications to be given. For example:
Section 12 enables the court to extend contractual time limits for commencing
arbitration, but such applications must be made “
upon notice to the other
parties
“.
Section 24 enables the court to remove an arbitrator, but such an application
must be made “upon notice to the other parties, to the arbitrator concerned
and to any other arbitrator”. Similarly, applications to challenge awards under
sections 67 to 69 require notice to the parties and to the tribunal.
The Arbitration Act 1996 also specifies one situation in which an
application may be made without notice:
Section 44(3) permits a party to apply without notice in an urgent case for
orders that are “
necessary for the purpose of preserving evidence or assets“.
In practice, this provision is most commonly invoked to obtain freezing
injunctions from the court.
6
(cont.)
Rules about obtaining the agreement of other parties or the tribunal’s
permission for an application
: in some cases, the Arbitration Act 1996 requires
the claimant or applicant to prove either that the other parties agree to the
application, or that the tribunal has given permission for the application to
proceed. I.e.
determination of a preliminary point of jurisdiction by the court under
section, or non-urgent applications for supportive court orders under section 44.
Rules about who is entitled to be heard at the application. Sometimes, nonparties (usually the tribunal) can be heard. I.e. section 24 of the Arbitration Act
1996 entitles the arbitrator to be heard at an application made to remove him.
Rules about time limits. The Arbitration Act 1996 provides strict statutory time
limits for some applications to court. I.e. section 70(3) requires any application to
challenge an award under sections 67 to 69 to be brought within 28 days of the
date of the award. The court’s power to extend this time limit is contained in CPR
62.9 (see section 80(5)).
7
An “arbitration claim” …
“Arbitration claim” essentially means any claim or application in the English court
which is concerned with or relates to arbitration.
The definition of “arbitration claim” is contained in CPR 62.2:
“(1) In this Section of this Part “arbitration claim” means –
a. any application to the court under the 1996 Act;
b. a claim to determine
i. whether there is a valid arbitration agreement;
ii. whether an arbitration tribunal is properly constituted; or
iii. what matters have been submitted to arbitration in accordance with an
arbitration agreement;
c. a claim to declare that an award by an arbitral tribunal is not binding on a party;
and
d. any other application affecting –
i. arbitration proceedings (whether started or not); or
ii. an arbitration agreement.”
8
Supportive not supervisory role
Section 1 of the Arbitration Act 1996 sets out the general principles upon
which the provisions of Part 1 are founded and in accordance to which they
are to be construed. These are that:
The object of arbitration is to obtain the fair resolution of disputes by an impartial
tribunal without unnecessary delay or expense (section 1(a)).
The parties should be free to agree how their disputes are resolved, subject only to
such safeguards as are necessary in the public interest (section 1(b)).
in matters governed by this Part the court should not intervene except as provided
by this Part
” (section 1(c)). This means that, in general, the Arbitration Act 1996
will be construed so as to minimise the intervention of the court.
Section 1(c) is an amended version of article 5 of the Model Law, which
provides that the court “shall not” intervene save as provided in the Model
Law. The use of the word “should” (rather than “shall”) indicates that there is
no absolute prohibition on the court intervening outside its statutory powers.
9
Contracting out of court powers
Some of the court’s powers derive from mandatory provisions and cannot
be excluded by agreement. Examples of mandatory provisions are:
Stay of legal proceedings (section 9).
Removal of arbitrator (section 24).
Determination of a preliminary point of jurisdiction (section 32).
Challenging award for lack of jurisdiction (section 67).
All other court powers can be excluded or modified by agreement.
Examples of non-mandatory provisions are:
Court’s powers in relation to appointment of the tribunal (sections 16(7) and 18(3)).
Enforcement of a tribunal’s peremptory orders (section 42).
Determination of a preliminary point of law (section 45).
Court’s power to set aside an award on the grounds that it contains an error of law
(section 69).
10
(cont.)
Other than agreements excluding the right of appeal, it is relatively
unusual for court powers to be expressly excluded.
The parties to an arbitration may have contracted out of non-mandatory
provisions of the Arbitration Act 1996 in two ways:
By agreeing, expressly or impliedly, that the dispute should be resolved in accordance
with a foreign (that is, not English) procedural law.
By agreeing that the dispute should be resolved in accordance with the rules of one of
the arbitral institutions such as the ICC or the LCIA.
11
(cont.)
Foreign laws and the arbitral rules may contain provisions which are
inconsistent with the provisions of the Arbitration Act 1996. Therefore,
such agreements constitute a contracting out of court powers (see
sections 4(3)-(5)).
Therefore, in order to establish whether or not an English court has
jurisdiction or the power to intervene in relation to particular issue, it is
important to look not only at the arbitration agreement and the Arbitration
Act 1996, but also any applicable or potentially applicable foreign
procedural law and any applicable institutional rules.
12
Before the Arbitration Proceedings
The principal remedy for proceedings commenced in the English court in breach
of an arbitration agreement is the stay of proceedings. The court will not make any
orders directly forcing the parties to refer their disputes to arbitration. It will make
an order staying the court proceedings which have been commenced.
The court derives its principal power to stay from sections 9(1) and (4) of the
Arbitration Act 1996, which provide: “
(1) A party to an arbitration agreement
against whom legal proceedings are brought (whether by way of 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 the proceedings) apply to
the court in which the proceedings have been brought to stay the proceedings so
far as they concern that matter… (4) On an application under this section the court
shall grant a stay unless satisfied that the arbitration agreement is null and void,
inoperative, or incapable of being performed
.”
Section 9 is a mandatory provision and therefore applies regardless of any
agreement of the parties to the contrary. It also applies regardless of the seat of
the arbitration (section 2(2)).
13
(cont.)
A stay halts all further prosecution of legal proceedings. The court will not make
an order referring the disputes to arbitration. The practical effect of the stay is that,
unless it is intent on evading arbitration by commencing proceedings in the courts
of another country, the claimant must start an arbitration if it wishes to proceed
with its claims.
There may be time-bar issues arising out of the stayed proceedings. Proceedings
which have been commenced in an incorrect forum are not effective to stop time
from running for the purposes of limitation. This principle applies to court
proceedings which are stayed. Where court proceedings are wrongly commenced,
and are then stayed, the claimant cannot rely upon those proceedings as having
stopped time.
If there are already concurrent arbitral proceedings in which the claims overlap
with those in the court proceedings, the question arises of what is to happen to
those arbitral proceedings pending the hearing of the stay application. If the stay
application is refused, then the claims will proceed in court and to continue with
the arbitration would be a waste of costs and time. There is no express provision
in section 9 which would permit the arbitration to continue.
14
Anti-suit Injunctions
In some jurisdictions (for example, England and Wales, the US and Singapore),
the courts have power to grant an anti-suit injunction restraining the party in
breach from commencing or continuing with foreign court proceedings in breach
of an arbitration (or jurisdiction) agreement.
English courts have been willing to grant anti-suit injunctions and the legal basis is
that the foreign proceedings amount to a breach of contract. In
The Angelic Grace
[1995] 1 Lloyd’s Rep 87 Lord Millet explained: “There is no good reason for
diffidence in granting an injunction to restrain foreign proceedings on the clear and
simple ground that the defendant has promised not to bring them
.”
Less commonly, the court may intervene where the foreign proceedings are
vexatious and oppressive. This may occur where the foreign proceedings have
been commenced by a third party who has colluded with the defendant to impede
the arbitration (i.e.
Joint Stock Asset Management Company “Ingosstrakh
Investments” v BNP Paribas SA
[2012] EWCA Civ 644).
15
Anti-suit injunctions in the EU
Prior to Brexit, the ability of national courts (including the UK) in EU member states to
grant an anti-suit injunction had been limited by the Brussels Regulation pursuant to
which member state courts must rule on any objections made to their jurisdiction and
where court proceedings are commenced in an EU member state in breach of a
jurisdiction agreement, the courts of the agreed forum may not grant anti-suit relief.
Under the recast Regulation (1215/2012) the arbitration exception has been retained
there is a new recital (recital 12) that clarifies the extent of the arbitration exception,
including by:
expressly preserving the right of member states’ courts to rule on issues such as the validity of
arbitration agreements;
stating that a ruling of a member state court on the validity of an arbitration agreement should not be
subject to the rules on recognition and enforcement of the Regulation;
confirming that the New York Convention takes precedence over the Regulation and that, therefore,
member states’ courts may recognise and enforce arbitral awards even if they are inconsistent with a
judgment of another member state court; and
clarifying that the Regulation does not apply to any action or ancillary proceedings relating to, in
particular, the establishment of the tribunal, the arbitrators’ powers, the conduct of the arbitration, nor
any action or judgment concerning the review, appeal, recognition or enforcement of the award.
A new article 73(2) expressly states that the recast Regulation shall not affect the
application of the New York Convention.
16
Anti-suit injunctions in the US
To issue an anti-suit injunction, the petitioned US district court must have personal
jurisdiction over the party that has commenced, or would commence, the foreign
litigation at issue, as well as subject matter jurisdiction to properly hear the request for
the injunction.
Personal jurisdiction is a court’s power to determine the rights and obligations of
persons or entities with contacts in the state where the court is located. A US district
court generally may obtain personal jurisdiction over a defendant when the defendant
has sufficient minimum contacts with the state so that the lawsuit does not offend the
due process standard of “
traditional notions of fair play and substantial justice” i.e. Int’l
Shoe Co. v. Washington
, 326 U.S. 310, 316 (1945).
US courts generally have federal question jurisdiction to hear requests for anti-suit
injunctions because they have jurisdiction to enforce international arbitration
agreements under the Federal Arbitration Act (9 U.S.C. § 4) and the New York
Convention. Therefore, subject to the requirement of personal jurisdiction, a US
court may issue an anti-suit injunction to prevent a party from pursuing a lawsuit in
a foreign court in violation of a valid arbitration agreement i.e.
Quaak v. Klynveld
Peat Marwick Goerdeler Bedrijfsrevisoren
, 361 F.3d 11, 16 (1st Cir. 2004)).
17
Anti-enforcement injunctions
The English court may also intervene post-judgment to restrain enforcement. In such
cases, considerations of comity mean that the English court will regard the grant of
injunctive relief as a particularly serious matter (
Masri v Consolidated Contractors
International (UK) Ltd and ors (No 3)
[2008] EWCA Civ 625).
Although considerations of comity will be of less importance in the case of an exclusive
jurisdiction clause or arbitration agreement, the court will always take comity into
account. The Court of Appeal in
Ecobank Transnational Inc v Tanoh [2015] EWHC
1874 (Comm) upheld the first instance judge’s refusal of the anti-enforcement injunction
on basis of delay in application and further confirmed that:
The threshold requirement in respect of an anti-suit injunction (to show a high degree of
probability that there was an arbitration agreement governing the dispute
) applied
equally in the case of an application for an anti-enforcement injunction.
Delay is a relevant factor: if an application for an anti-suit injunction must be made
promptly, an applicant who does not apply for an injunction until after judgment is given
in the foreign proceedings is not likely to succeed, unless, for example, there was fraud
on the part of the respondent, or the applicant had no means of knowing that the
judgment was being sought until it was served on him.
18
Anti-arbitration Injunctions
An anti-arbitration injunction is a tool to enjoin a party from commencing or continuing
an arbitration to which a court petitioner did not submit or agree. The need for an antiarbitration injunction often arises when:
There is no arbitration agreement between the parties.
The compelled party is only related to a signatory (but is not itself a signatory)
to the arbitration agreement.
A party brings a dispute to an arbitral tribunal under an arbitration agreement,
but the arbitration proceedings do not cover all of the claims contained in the
notice of arbitration.
A party has not met a condition precedent contained in the arbitration
agreement.
In England where the arbitration which is sought to be restrained has a foreign
seat, courts will be particularly cautious about intervening and will do so only
exceptionally (i.e.
Weissfisch v Julius [2006] EWCA Civ 218). This is because, in
general, it is the courts of the seat of the arbitration that should intervene to grant
any appropriate injunctive relief.
19
During the Arbitration
Sections 42 to 44 of the Arbitration Act 1996 confers powers in relation to four
main areas:
Enforcement of the tribunal’s peremptory orders: orders or directions of the
tribunal specifying a time for compliance. A peremptory order is usually made
following failure by one or more parties to adhere to the tribunal’s procedural
orders, and may take the form of an “unless” order.
Witness evidence.
Preserving evidence, property and assets.
Injunctive relief and appointment of receivers.
20
(cont.)
Pursuant to of the Arbitration Act 1996 the court will intervene only where this
is necessary to support the arbitration. So, for example
:
The court will enforce the tribunal’s peremptory orders only where the
applicant has exhausted any available arbitral process (see section 42(3)).
The court may make orders securing the attendance of witnesses only with
the permission of the tribunal or the agreement of the parties (section 43(2)).
Pursuant to section 44, the court may make orders in relation to evidence,
property and assets, or may grant injunctive relief or appoint a receiver, only if
the tribunal or any arbitral institution with power to grant such remedies “
has
no power or is unable for the time being to act effectively
” (see section 44(5)).
The court may order that any remedy granted pursuant to section 44 will
cease to have effect as soon as the tribunal or arbitral institution has the
power to act (section 44(6)).
The court will approach any application in accordance with the general
principle of non-intervention, as enshrined in section 1(c).
21
(cont.)
The limited nature of the court’s supportive powers was considered by Morison J
in
Econet Wireless Ltd v Vee Networks Ltd [2006] EWHC 1568 (Comm).
In that case, the claimant applied without notice for a freezing injunction pursuant
to section 44. Discharging the injunction, Morison J noted that: “
Section 44 of the
Arbitration Act gives the court power to hold the ring until arbitrators become
seised of the dispute
.”
The intention behind section 44, he stated, was to “cover over the crack between
the moment of the application and the time when the arbitral tribunal can be
formed
“. The claimants alleged that disputes were to be determined by LCIA
arbitration: on that assumption (which Morison J in fact rejected), they should
have been required to undertake to form an arbitral tribunal as soon as possible,
so that the LCIA expedited procedures for obtaining security and provisional relief
could have been invoked.
22
Enforcement of tribunal’s peremptory orders
Where a party breaches the tribunal’s orders or directions without good reason,
the tribunal is entitled (pursuant to section 41(5) of the Arbitration Act 1996) to
make a “peremptory order”. If the defaulting party breaches the peremptory order,
two main consequences follow:
The tribunal is entitled to impose the sanctions set out in section 41(7) (for
example, drawing adverse inferences or making costs orders against the
defaulting party).
The court is entitled to enforce the tribunal’s peremptory order pursuant to
section 42 of the Arbitration Act 1996. In doing so, although it has a discretion
and should not merely rubber-stamp the order, the court’s role is limited to
supporting the tribunal, rather than reviewing or second-guessing its order
(
John Forster Emmott v Michael Wilson and Partners Limited [2009] EWHC 1
(Comm).
23
(cont.)
The main significance of the court intervening to enforce an order is that any
further breach by the defaulting party will result in that party being in contempt of
court.
You will need to apply to court in cases where compliance with the tribunal’s
original direction is necessary in the interests of justice, but where the tribunal’s
own range of sanctions are unlikely to achieve this. For example:
Where disclosure of certain documents is essential for the fair determination of the
dispute, but where your opponent persistently breaches an order requiring disclosure,
you may take the view that the sanctions available to the tribunal (such as “drawing
adverse inferences”; see section 41(7)(b) of the 1996 Act), are insufficient. In such a
case, you can apply to court for an order requiring their disclosure; any further breach will
expose your opponent to the more draconian sanctions associated with contempt of
court.
Where your opponent fails to provide further information ordered by the tribunal, the
sanction of preventing reliance specified allegations or evidence (see section 41(7)(a) of
the 1996 Act) may not be sufficient.
24
Witness evidence
The tribunal has power to make orders only against the parties to the arbitration. It
has no general power to make orders against third parties.
The tribunal cannot order witnesses either to attend a hearing to give evidence, or
to make a statement or deposition.
The Arbitration Act 1996 addresses this problem by conferring power on the court
to make the necessary orders in support of arbitral proceedings:
Section 43 (a mandatory provision) permits the court to secure the attendance of a
witness by way of a witness summons in the same way as for court proceedings.
Section 44(2)(a) confers on the court the same power as it would have in relation to court
proceedings regarding “the taking of the evidence of witnesses”. This permits the court to
order the taking of a deposition in the same way as for court proceedings.
25
Preserving evidence, property and assets – sale of goods
Under section 38 of of the Arbitration Act 1996, the tribunal has power to make
orders requiring a party to preserve evidence or property. Arbitration rules may
confer similar powers (i.e. article 25, LCIA Rules; article 28, ICC Rules (2021)).
However:
The tribunal cannot make such orders against third parties.
The tribunal has no power to order the sale of goods.
Orders for the preservation or sale of evidence or property are often required
at the very start of a dispute. However, the tribunal may not be completely
constituted at this point in time. There is a risk that, by the time the tribunal is
completely constituted and thus able to act, the evidence or property will
already have been dissipated.
26
(cont.)
Section 44 of the Arbitration Act 1996 addresses these problems by conferring
power on the court to make the necessary orders. However:
The court’s ability to intervene is limited to a case where the tribunal (or any
arbitral institution) “
has no power or is unable for the time being to act
effectively
” (section 44(5)). This requirement has been strictly applied.
The court may make an order which ceases to have effect as soon as the
tribunal is able to act effectively (see section 44(6)).
Save for cases of urgency (when an application can be made without notice),
the court may intervene only with the permission of the tribunal or the
agreement of the parties (see sections 44(3) and (4)).
27
Compelling Evidence from Non-parties in the US
The parties’ agreement to arbitrate, including the choice of institutional rules,
creates rights and obligations for the parties, but generally does not bind thirdparties to the arbitration. Because the contract and the applicable institutional
rules cannot bind non-parties, they cannot grant any additional authority to an
arbitrator concerning non-parties. Section 7 of the Federal Arbitration Act provides
that:
Arbitrators may summon in writing any person to attend before them or any of them as a
witness and in a proper case to bring with that person or them any book, record,
document or paper that may be deemed material as evidence in the case.
The subpoena (or summons) must be served in the same manner as subpoenas to
appear and testify before the court.
The US district court for the district in which the arbitrators or a majority of them are
sitting may compel the attendance of that person or persons before the arbitrator(s).
The district court may punish that person or persons for contempt in the same manner
provided by law for securing the attendance of witnesses in the courts.
Only the arbitrators, not the parties, may subpoena documents or witnesses
(
Burton v. Bush, 614 F.2d 389, 390 (4th Cir. 1980)). To proceed in federal court to
enforce the subpoena, there must be subject matter jurisdiction.
28
Interim injunctive relief/appointment of receiver
The main significance of the court’s power to grant interim injunctive relief is the
possibility of obtaining a freezing injunction in support of an arbitration. A freezing
injunction has the effect of preventing a person from dealing with or dissipating
assets (usually money in a bank account). Its purpose is to ensure that any award
will not be rendered nugatory by the absence of assets against which to enforce.
In the absence of express agreement, an arbitral tribunal has no power to order a
freezing injunction. There are doubts as to whether the parties can effectively
confer such power by agreement (
Kastner v Jason [2004] EWCA Civ 1599). In
any event, such an agreement would be very rare in practice, and the court is
better able to enforce a freezing injunction.
Section 44 of the Arbitration Act 1996 confers on the court power to make a
freezing injunction in support of an arbitration.
29
(cont.)
A tribunal has no power to appoint a receiver; however, the court may do so
pursuant to its powers under section 44 of the Arbitration Act 1996. As with the
other powers under section 44:
The court may intervene only where the tribunal has no power, or is unable to
act effectively (see section 44(5)).
Unless the case is urgent, the court may intervene only with the permission of
the tribunal or the agreement of the parties (section 43(4)). In
Econet
Wireless Ltd v Vee Networks Ltd
[2006] EWHC 1568 (Comm), Morison J
commented that where the court was being asked to intervene in a
substantial commercial transaction, the applicant would need to show a “very
good reason” for making the application without notice.
30
Can arbitrations be continued pending court intervention?
In some cases, the Arbitration Act 1996 expressly permits a tribunal to continue
arbitration proceedings notwithstanding that one of the parties has made an
application to the court:
Section 24(3) (power of court to remove arbitrator) states that the tribunal may continue
arbitral proceedings and make an award while an application to the court is pending.
Sections 31(5) and 32(4) (court determining preliminary point of jurisdiction) provide that
a tribunal may continue arbitral proceedings and make an award pending the application,
unless the parties agree to a stay.
Section 45(4) (determination of preliminary point of law by the court) provides that a
tribunal may continue arbitral proceedings and make an award pending the application to
the court, unless the parties agree to a stay. The power under section 45 is invoked
rarely in practice, but for an example of a case in which it was exercised see
Secretary of
State for Defence v Turner Estate Solutions Ltd
[2015] EWHC 1150 (TCC).
This is consistent with the general approach of the Arbitration Act 1996 that court
intervention should be minimal and that it should not be permitted to delay
arbitration.
31
At the end of the Arbitration
It is common for arbitration agreements and rules of arbitration to provide that the
award will be final and binding on the parties (i.e. article 34.2, UNCITRAL
Arbitration Rules (2010); article 34.6, ICC Rules 2021, article 26.8 LCIA Rules
2020).
The finality of awards is considered to be one of the main advantages of
international arbitration.
The ways in which an award can be challenged under the Arbitration Act 1996
are limited. There are three ways in which an arbitration award can be challenged
in the English courts:
Challenge to the tribunal’s substantive jurisdiction (section 67).
Challenge on the ground of serious irregularity affecting the tribunal, the
proceedings or the award (section 68).
Appeal on a point of law (section 69).
32
(cont.)
One advantage of international arbitration over litigation is the existence of an
effective and far-reaching enforcement regime in the form of the New York
Convention.
Enforcement of arbitral awards is, accordingly, generally perceived as being
easier than enforcement of judgments. An award which is, on its face, valid will be
enforced by the court, unless the respondent raises a defence to enforcement.
The award debtor must produce the award and the arbitration agreement to the
court. The burden then shifts to the respondent to raise a defence to enforcement,
failing which judgment will be entered in terms of the award.
As a matter of English law, the tribunal may decide whether post-award interest
should be granted (section 49(4), Arbitration Act 1996). The party seeking postaward interest must specifically ask for it and then it is for the tribunal to decide
whether to grant it in the award. Notwithstanding the terms of section 49, the court
may also grant post-award interest once judgment has been entered in terms of
the award, pursuant to the Judgments Act 1838.
33
Freezing injunctions
A freezing order (formerly called a mareva injunction) is an interim
injunction that restrains a party from disposing of or dealing with his
assets. The usual purpose of a freezing order is to preserve the
defendant’s assets until judgment can be enforced.
A freezing order can be made in respect of assets:
Within England and Wales only (domestic freezing order).
Situated outside the jurisdiction or worldwide (worldwide freezing order).
The court’s jurisdiction to grant a freezing order is derived from section
37 of the Senior Courts Act 1981. The relevant procedural rules are in
CPR 25 and PD 25A.
In many cases, an application for a freezing injunction is made preaward, but the court may also grant a freezing order post-award in
support of enforcement.
34
(cont.)
A freezing order is an equitable remedy. The court will exercise its
discretion to grant a freezing order only where it considers it just and
convenient to do so (section 37(1), Senior Courts Act 1981).
In addition, case law has established the following conditions for a
freezing order:
The applicant must have a cause of action, that is, an underlying legal or
equitable right.
The applicant must have a good arguable case.
The existence of assets within the jurisdiction.
A real risk of the respondent’s assets being dissipated.
35
(cont.)
Though it does not provide any security over the assets, a freezing injunction
obtained at an early stage may be particularly useful in cases where a party
wishes to make sure that the respondent has sufficient assets to comply with the
award, or as a method of securing assets for the enforcement of an award (
Orwell
Steel v Asphalt and Tarmac (UK)
[1984] 1 WLR 1097).
In U&M Mining Zambia Ltd v Konkola Copper Mines Plc [2014] EWHC 3250
(Comm), Teare J noted that, where the seat of arbitration is England and Wales, it
will usually be appropriate for the English court to make orders in support of
arbitration and the English court has jurisdiction to do so. The fact that most of the
defendant’s assets were not in Zambia, where enforcement would take place, and
that the Zambian courts could grant a freezing order, did not make it inappropriate
for the English court to grant the freezing order.
Where it appears that a non-party to the arbitration may hold assets on behalf of
the defendant, it may be possible to obtain a freezing order in aid of enforcement
against the non-party under the so-called Chabra jurisdiction (
TSB Private Bank
International SA v Chabra
[1992] 2 All ER 245).
36
Third party funding
The use of third-party funding in international arbitration has been growing over
the last few years in many jurisdictions, including the UK, US and Australia. Some
claimants would not be able to bring their claims without some form of external
financing, while others seek funding in order to share the financial risks of the
arbitral process.
In general terms, third-party funding involves a commercial funder agreeing to pay
some or all of the claimant’s legal fees and expenses in return for reimbursement
of the funder’s direct outlays and a share of any sum recovered from the
resolution of the claim.
Typically, third party funders seek a share of the recovery in the range of 15% to
50% (the median figure is around a third), depending on the costs and risks
involved in funding the dispute. The funder’s fee may also increase over time to
reflect additional costs and risks being incurred. In addition, the funder may agree
to bear any adverse costs liability and provide security for the respondent’s costs.
Alternatively, adverse costs risks may be covered by insurance or remain the
responsibility of the claimant.
37
Q&A
Any Questions?
38