Non signatory third parties, the New York Convention and enforcement of arbitration agreements in the US. SCOTUS says ‘Yes, they can’.

In 2007, ThyssenKrupp Stainless USA, LLC, entered into three contracts with F. L. Industries, Inc., for the construction of cold rolling mills at ThyssenKrupp’s steel manufacturing plant in Alabama. Each of the contracts contained an identical arbitration clause.  F. L. Industries, Inc., then entered into a subcontractor agreement with GE Energy Power Conversion France SAS, Corp. (GE Energy), under which  GE Energy agreed to design, manufacture, and supply motors for the cold rolling mills. Between 2011 and 2012, GE Energy delivered nine motors to the Alabama plant for installation. Soon thereafter, respondent Outokumpu Stainless USA, LLC, acquired ownership of the plant from ThyssenKrupp.

According to Outokumpu, GE Energy’s motors failed by the summer of 2015, resulting in substantial damages. Outokumpu and its insurers filed suit against GE Energy in Alabama state court in 2016 and GE Energy removed the case to federal court under 9 U. S. C. §205, which authorizes the removal of an action from state to federal court if the action “relates to an arbitration agreement . . . falling under the Convention [on the Recognition and Enforcement of Foreign Arbitral Awards].” GE Energy then moved to dismiss and compel arbitration, relying on the arbitration clauses in the contracts between F. L. Industries, Inc., and ThyssenKrupp which defined the terms “Seller” and “Parties” to include subcontractors. 

The District Court granted GE Energy’s motion to dismiss and compel arbitration with Outokumpu and Sompo Japan Insurance Company of America. 

The Eleventh Circuit reversed the District as including a “requirement that the parties actually sign an agreement to arbitrate their disputes in order to compel arbitration.” This requirement was not satisfied because “GE Energy is undeniably not a signatory to the Contracts.” It further held  that GE Energy could not rely on state-law equitable estoppel doctrines to enforce the arbitration agreement as a non signatory because, in the court’s view, equitable estoppel conflicts with the Convention’s signatory requirement. The equitable estoppel doctrine permits a non-signatory to a contract which contains an arbitration clause to rely on that arbitration clause when the signatory asserts claims that implicate the contract.

The Supreme Court first found that in cases which fall under Chapter 1 of the U.S. Federal Arbitration Act (FAA), which governs domestic and other arbitrations seated in the U.S., non-signatories may enforce arbitration clauses against signatories.

The Supreme Court then held that the only provision of the New York Convention that addresses the enforcement of arbitration agreements was Article II(3) and the nonexclusive language of that provision did not set a ceiling that tacitly precludes the use of domestic law to enforce arbitration agreements. This states that “[t]he court of a Contracting State, when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed. Nothing in the text of the Convention “conflict[s] with” the application of domestic equitable estoppel doctrines permitted under Chapter 1 of the FAA. 9 U. S. C. §208.

The Court subsequently remanded the case to the Eleventh Circuit to decide whether applicable domestic-law equitable estoppel doctrines would permit GE Energy to compel arbitration.

The Deepwater Horizon liability insurance case. The arbitrator’s duty of disclosure and removal under s.24 of the Arbitration Act 1996.

Halliburton Company (Appellant) v Chubb Bermuda Insurance Ltd (formerly known as Ace Bermuda Insurance Ltd) (Respondent)  [2020] UKSC 48 was a dispute relating to the appointment of Mr Ken Rokison QC as sole arbitrator under a liability insurance policy which arose out of damage caused by an explosion and fire on the Deepwater Horizon drilling rig in the Gulf of Mexico. The relevant parties were BP Exploration and Production Inc. (“BP”) the the lessee of the Deepwater Horizon rig, Transocean Holdings LLC (“Transocean”) the owner of the rig and provider of crew and drilling teams to BP, and, Halliburton Company (“Halliburton”)who provided cementing and well-monitoring services to BP.

Halliburton and Transocean both entered into a Bermuda Form liability policy with the respondent, Chubb Bermuda Insurance Ltd (“Chubb”). A  US judgment was given apportioning blame between the parties, and Halliburton settled the claims against it. Chubb refused to pay out  under the liability policy, contending that Halliburton’s settlement was not a reasonable settlement. The same happened to Transocean. The Bermuda Form provided for arbitration.

Mr Rokison was appointed as sole arbitrator in Halliburton’s arbitration against Chubb, after the parties were unable to agree a third arbitrator. Subsequently Mr Rokson was appointed as an arbitrator in two further Deepwater Horizon references. The first appointment was made by Chubb and related to Transocean’s claim against Chubb. The second was a joint nomination by the parties involved in a claim by Transocean against another insurer.

When Halliburton discovered this they applied to the court under section 24 of the Arbitration Act 1996 to remove Mr Rokison as an arbitrator. That application was refused. The Court of Appeal then found that, while Mr Rokison’s proposed appointment in the subsequent references should have been disclosed to Halliburton, an objective observer would not in the circumstances conclude there was a real possibility of bias.

On Friday the Supreme Court unanimously agreed, Lord Hodge giving the principal judgment, and dismissed the appeal. In considering an allegation of apparent bias against an arbitrator, the test is whether the fair-minded and informed observer would conclude there is a real possibility of bias. The duty of disclosure is a legal duty and not simply good arbitral practice, and is a component of the arbitrator’s statutory obligations of fairness and impartiality. It does not, however, override the arbitrator’s duty of privacy and confidentiality. The duty of disclosure requires the arbitrator to disclose matters which might reasonably give rise to justifiable doubts as to his or her impartiality, and a failure to do so is a factor for the fair-minded and informed observer to take into account in assessing whether there is a real possibility of bias, having regard to the facts and circumstances known at the time of the hearing to remove the arbitrator.

Five factors pointed against any finding of bias. First, at the time, it had not been clear that there was a legal duty of disclosure. Secondly, the Transocean arbitrations had commenced several months after the Halliburton arbitration. Thirdly,  in his measured response to Halliburton’s challenge Mr Rokison hadexplained that it was likely the subsequent references would be resolved by a preliminary issue (as they in fact were) and that, if they were not, he would consider resigning from the Transocean arbitrations. Fourthly, there was no question of his having received any secret financial benefit. Fifth, there was no basis for inferring any unconscious ill will on his part.

Times’ up. NBF gets s.12 extension.

The fate of Times’ anti-suit injunction against National Bank of Fujairah was reported in this blog on May 6 2020 –  they got their injunction on condition not to take any time bar point in any subsequent arbitration against them commenced by NBF.

Shortly afterwards, in National Bank of Fujairah v Times Trading Corp [2020] EWHC 1983 (Comm) Foxton J came part two of the saga. NBF had commenced arbitration against the registered owners, Rosalind, within the one year time limit under the Hague Rules, in respect of misdelivery. This expired on 20 June 2019. Shortly after receiving a copy of the bareboat charter, after months of asking, on 20 March NBF then made an application under s.12 of the Arbitration Act 1996, in respect of its claim against bareboat charterer, Times, on the assumption that the one year time bar applied to that claim.

In the first period before 18 January 2019 Times, through their solicitors, Waterson Hicks (WH), communicated in a manner which implied, and contributed to the belief of R&T, acting for NBF, that WH acted for the carrier liable under the Bills of Lading, and for the entity to whom the claims were appropriately addressed. WH acted innocently but Times knew the true position. In the second period after 18 January 2019, the conduct of WH, and of Times, was open to more criticism. The objective effect of the communications of WH and Holman Fenwick and Willan, solicitors for charterers Trafigura who became responsible for handling NBF’s misdelivery claims on behalf of Rosalind and Times, conveyed an impression which did not accord with the facts as Times and the parties acting for them understood them.

The question before Foxton J was whether the effect of this conduct such as to render it unjust hold NBF to the strict terms of the time bar. As regards the first period, the impression given on Times’ behalf, in ignorance of the true position up to 18 January 2019 and with knowledge of it thereafter, was a significant factor in NBF missing the time bar, such that the requisite causative nexus is established which made it unjust to hold NBF to the strict terms of the time bar. The jurisdictional threshold under s.12(3)(b) – whether the respondent’s conduct makes it unjust not to extend time – was satisfied.

On the matter of discretion, it was right to say that there had been significant culpable delay by NBF in failing to seek s.12 relief before it did – delay measured in months rather than merely weeks or days. The delay was particularly difficult to justify from early November 2019, when NBF did not appear to have taken the possibility that Times might be the carrier seriously. However, this was not a case in which it could be said that Times itself played no part in NBF’s delay in the period after 18 July 2019 when Reed Smith sent its letter advising that Rosalind was not the carrier, and that it was Times. However, the continuing refusal to provide a copy of the demise charter could be regarded as a continuation of the approach which had been adopted by or on behalf of Times before 18 July 2019, and which made it unjust to enforce the strict time bar against NBF. Its clear contribution to NBF’s delay in seeking s.12 relief was seen in the fact that, once the Bareboat Charter was produced for the purposes of Times application for an anti-suit injunction, NBF prepared and issued its s.12 application within short order.

The fault of NBF was not a reason for denying its application for relief under s.12, and NBF got its extension.

Delay and discretion with the anti-suit injunction.

 

The anti-suit injunction is a discretionary remedy. Even when the foreign proceedings are clearly in breach of a High Court jurisdiction clause or a London arbitration clause, you may not get your remedy. The principle reason for the court not issuing the ASI is delay in applying for the remedy and allowing the foreign proceedings to become advanced. Issues of justice and comity coincide here, but what length of delay will incline the court not to grant you the ASI you have set your heart on?

This was the issue in the recent Commercial Court decision of Henshaw J in Daiichi Chuo Kisen Kaisha v Chubb Seguros Brasil SA [2020] EWHC 1223 (Comm) (15 May 2020). A cargo claim arose out of a collision, brought by cargo insurers, Chubb. In March 2016 Chubb started arbitration in London against the owners Fair Wind under the owners’ bill which incorporated a London arbitration clause. In November Chubb commenced proceedings in Brazil against Mizuho the vessel managers, Daiichi, the time charterer, and Noble Resources, an associated company of the voyage charterer, who had Resources used vessel to perform a shipment under a COA with CSN Handel, claiming US$2.7m.

In August 2017 owners and Mizuho issued an arbitration claim form in the Commercial Court seeking an ASI against Chubb in respect of the Brazilian proceedings against Mizuho, and in October Knowles J granted the ASI Mizuho in Brazil. A month later Daiichi’s obtained from Chubb an undertaking mirroring the order of Knowles J. On 26 June 2019 the Brazilian Superior Court of Justice finally rejected Chubb’s amendment claim.

Time charterers, Daiichi, and Chubb then jointly requested a stay of Brazilian proceedings for six months, “ without prejudice to any of their rights (including, in relation to the defendants, the right to challenge the Brazilian court’s jurisdiction, in view of the arbitration clause contained in the Bills of Lading and Charter Party”. In March 2020 Chubb filed substantive defences to the defence and jurisdiction challenges of Noble Resources and then of Daiichi, claiming that the bill of lading arbitration clauses did not apply to them as the subrogated insurer. This was a clear breach of the undertakings previously given to Noble Resources and to Daiichi.  A Court order in Brazil of 23 April 2020 gave Daiichi and Noble Resources until 25 May 2020 to respond to Chubb’s latest submissions.

The principles relevant to delay were set out by Bryan J in Qingdao Huiquan Shipping Co v Shanghai Dong He Xin Industry Group Co Ltd [2018] EWHC 3009 (Comm); [2019] 1 Lloyd’s Rep. 520.

“(1) There is no rule as to what will constitute excessive delay in absolute terms. The court will need to assess all the facts of the particular case: see Essar Shipping Ltd v Bank of China Ltd (The Kishore) [2016] 1 Lloyd’s Rep 427 at paras 51 to 52 per Walker J.

(2) The question of delay and the question of comity are linked. The touchstone is likely to be the extent to which delay in applying for anti-suit relief has materially increased the perceived interference with the process of the foreign court or led to a waste of its time or resources: see Ecobank Transnational Inc v Tanoh [2016] 1 Lloyd’s Rep 360 at paras 129 to 135 per Christopher Clarke LJ; The Kishore at para 43; and see also Sea Powerful II Special Maritime Enterprises (ENE) v Bank of China Ltd [2017] 1 HKC 153 at para 21 per Kwan JA.

(3) When considering whether there has been unacceptable delay a relevant consideration is the time at which the applicant’s legal rights had become sufficiently clear to justify applying for anti-suit relief: see, for example, Sabbagh v Khoury [2018] EWHC 1330 (Comm) at paras 33 to 36 per Robin Knowles J.”[29]

Here the relevant period of delay did not start until Chubb’s change of tack in the Brazilian proceedings. Chubb was, from June 2019 until March 2020 actively co-operating with Daiichi to defer any further substantive proceedings in Brazil, and thus could reasonably be regarded by Daiichi as neither breaching nor threatening to breach the Undertaking. Daiichi and Noble Resources were not, in any substantive sense, actively engaging in the proceedings in Brazilian but rather, with Chubb’s express and active support, seeking to defer them. Such positive steps as were taken were taken only out of necessity or on a precautionary basis. It must have been clear to Chubb at all material times that such steps did not indicate that Daiichi or Noble Resources were content to allow the Brazilian court to decide the jurisdiction issues and, if relevant, the merits. Any legal expenses incurred by Chubb in this period would have been limited. This case was not one where a party who simply allows foreign proceedings to take their course, subject to making a jurisdiction challenge, when faced with a claim brought in breach of a jurisdiction or arbitration agreement. There had been no material delay by Daiichi following the revival of Chubb’s position in the Brazilian proceedings.

Nor did considerations of comity towards the Brazilian court weigh against the grant of such relief. Chubb argued that proceedings were now at an advanced stage, with a risk of judgment on the merits very soon, so to grant an anti-suit injunction would in effect be to ‘snatch the pen’ from the Brazilian judge’s hand. However, since June 2019 the only step taken in relation to the substantive merits has been the precautionary filing of Noble Resources’ defence in September 2019 and Chubb’s reply of 2 March 2020. The Brazilian court had not yet assumed jurisdiction over any of the defendants and it could not be said that it was poised to pass judgment on the merits. Although time which elapses during a jurisdiction challenge in the foreign court is still relevant when considering delay, it did not follow, however, that the mere making of a jurisdiction challenge in the foreign court made any subsequent anti-suit injunction inconsistent with considerations of comity. This was not a case of the ‘two bites of the cherry’ strategy of awaiting the foreign court’s outcome before seeking an anti-suit injunction.

A mandatory injunction was ordered as it was necessary to require Chubb to discontinue otherwise there would now be a real risk that the Brazilian court would proceed to judgment on the merits at some stage after 25 May. Daiichi, to whom the undertaking had been given, wished the injunction to extend to proceedings against Noble Resources, because it feared that otherwise Noble Resources would seek to pass any liability ‘up the line’ to Daiichi. Daiichi had shown a sufficient interest in enforcing the injunction as regards claims against Noble Resources. It was not unlikely that some form of contractual arrangement existed under which Noble Resources could pass up to Noble Chartering, and hence to Daiichi, any liabilities which as between owners and charterers would fall on owners.

 

 

Prestige 3.0 — the saga continues

The Spanish government and SS Mutual are clearly digging in for the long haul over the Prestige pollution debacle eighteen years ago. To recap, the vessel at the time of the casualty was entered with the club under a contract containing a pay to be paid provision and a London arbitration clause. Spain prosecuted the master and owners and, ignoring the arbitration provision, came in as partie civile and recovered a cool $1 bn directly from the club in the Spanish courts. The club meanwhile obtained an arbitration award in London saying that the claim against it had to be arbitrated not litigated, which it enforced under s.66 of the AA 1996 and then used in an attempt to stymie Spain’s bid to register and enforce its court judgment here under Brussels I (a bid now the subject of proceedings timed for this coming December).

In the present proceedings, London Steam-Ship Owners’ Mutual Insurance Association Ltd v Spain (M/T PRESTIGE) [2020] EWHC 1582 (Comm) the club sought essentially to reconvene the arbitration to obtain from the tribunal an ASI against Spain and/or damages for breach of the duty to arbitrate and/or abide by the previous award, covering such things as its costs in the previous s.66 proceedings. By way of machinery it sought to serve out under s 18 of the 1996 Act. Spain claimed sovereign immunity and said these further claims were not arbitrable.

The immunity claim nearly succeeded, but fell at the last fence. There was, Henshaw J said, no agreement to arbitrate under s.9 of the State Immunity Act 1978, which would have sidelined immunity: Spain might be bound not to raise the claim except in arbitration under the principle in The Yusuf Cepnioglu [2016] EWCA Civ 386, but this did not amount to an agreement to arbitrate. Nor was there, on the facts, any submission within s.2. However, he then decided that s.3, the provision about taking part in commercial activities, was applicable and allowed Spain to be proceeded against.

Having disposed of the sovereign immunity point, it remained to see whether the orders sought against Spain — an ASI or damages — were available in the arbitration. Henshaw J thought it well arguable that they were. Although Spain could not be sued for breach of contract, since it had never in so many words promised not to sue the club, it was arguable that neither Brussels I nor s.13 of the 1978 Act barred the ASI claim in the arbitration, and that if an ASI might be able to be had, then there must be at least a possibility of damages in equity under Lord Cairns’s Act.

No doubt there will be an appeal. But this decision gives new hope to P&I and other interests faced with opponents who choose, even within the EU, to treat London arbitration agreements as inconsequential pieces of paper to be ignored with comparative immunity.

Fixture recap “otherwise as clean Gencon 94 charterparty to be amended/altered as per above main terms agreed”. Are Gencon 94 law and arbitration provisions brought into the charter?

 

In London Arbitration 2/20 a fixture recap set out detailed provisions and concluded “otherwise as clean Gencon 94 charterparty to be amended/altered as per above main terms agreed”. The charterers argued that the law and arbitration provisions in cl. 19(a) of Gencon 94 was not a “main term” agreed in the recap email and was not incorporated into the charter. The tribunal rejected this argument and held that the  concluding words of the recap meant that one should take a clean Gencon 94 form and write into it what “main terms” had been agreed. The parties  had agreed considerable details as set out in the recap email, and then incorporated the terms of the Gencon 94 charter, which were to be adjusted to reflect the detail agreed. The tribunal accordingly had jurisdiction

 

Arbitration Hearings… and the Corona ‘New Normal’ Ten Golden Rules: or the easy path to your Virtual Hearing

Simon Rainey QC and Gaurav Sharma

The Covid-19 pandemic places enormous challenges on every aspect of life. Arbitration hearings, almost always with a mixture of parties, representatives, witnesses and tribunal members attending from far and wide and with complex dovetailed ‘availability’ issues, face particular challenges, both from national lockdowns and the disappearance of international (and much domestic) travel.

The initial and immediate reaction, from personal experience and much anecdotal evidence, has been for many parties and tribunals simply to adjourn hearings fixed in the likely affected period. While perhaps understandable as the crisis suddenly changed its perceived severity and impact within hours, we are now in for the long haul, and arbitration hearings (unlike sporting events, music festivals, walking with friends or going to the pub) are in fact very well placed to adapt and ‘carry on’.

Simon Rainey QC and Gaurav Sharma of Quadrant Chambers propose ten easy rules for keeping the current international arbitration diary on the road as much as possible.

Here they are, to cut and paste to your Desktop. For more detail, read on below.

  1. Adjournment should now be the last resort.
  2. Arbitration embraces tools and technology: let’s build on what we already do well.
  3. More realism, please, about ‘seeing the witness’ (etc.)
  4. Using the existing wide procedural powers firmly and creatively
  5. Remember: many useful ‘video-protocols’ are already out there.
  6. Embrace technology as your friend (a.k.a. ‘Use Zoom’)
  7. Electronic hearing bundles really do work.
  8. A new Tribunal Secretary: the Technical Assistant?
  9. Flexibility, flexibility, and more flexibility, in timetabling and everything else…
  10. … including how we handle new disputes in our brave new world.

In more detail, here are our key points to try to make your path to your Virtual Hearing, whether as counsel, in-house adviser or arbitrator an easier one.

  1. Adjournment should be the last resort.

Adjournment simply pushes off the problem. With different jurisdictions on different epidemiological timetables and with second outbreaks wholly unpredictable, let alone ‘resumption of normal services’, never has the term sine die (without a new date being fixed) had such appalling resonance! The norm can and should be, save in the most exceptional cases, to hold the hearing date and to avoid the waste of costs and time which adjournment entails (and the difficulties in rescheduling ‘after Corona’ … whenever that will be). As banking, insurance, legal services and other sectors move over to remote and home-working, it requires a very good explanation why an arbitration hearing cannot take place virtually. If international governmental meetings can do it this way, so can we. The 27th Vis Moot, with 248 teams, is taking place ‘as normal’, online and on Vienna time and in the usual Vienna timeslots (https://vismoot.pace.edu/)  The London Business and Property Court has set the lead of ‘business as usual’ wherever possible and by and by whatever virtual means available (see :https://www.judiciary.uk/publications/civil-court-guidance-on-how-to-conduct-remote-hearings ). For a recent example, see Teare J’s robust case management of a two-week trial: https://www.law360.com/articles/1255010/kazakh-row-over-530m-bny-funds-faces-virtual-trial . So, Golden Rule No. 1? Adjournment should now be the absolute exception, not a default option.

  1. Arbitration embraces tools and technology: let’s build on what we already do well.

Is the challenge, while hugely different in scale and complexity, really so different from the day-to-day practical challenges of international arbitration and what we, as counsel and arbitrators, do now, and do well to address those challenges? Arbitration already makes routine and highly effective use of (at least) two virtual tools to cope with dispersed participants and the logistical impossibility of live attendance: (1) the telephone (or video-link) procedural hearing and (2) the taking of witness evidence by video-link. If the hearing is mostly legal argument or part of it is to be taken up with oral addresses or submissions (with or without an accompanying PowerPoint), then why is not (1) just as effective as it is for a hard-fought and important procedural or disclosure battle? And if the hearing is a heavy evidential one, why is (2) not a perfectly acceptable option? If an arbitration may already turn on the evidence by video-link of a key witness, why is it really so different to run the whole hearing in this way?

  1. More realism, please, about ‘seeing the witness’ (etc.)

This is not the time or place to debate the Anglo-Saxon predilection for ‘seeing the witness’ and belief in assessing his or her veracity and credibility based on the tribunal’s acute psychological insight and unerring ability to read every gesture and passage of emotion across a witness’ face. But if the option is to hold off the hearing until better times (when?) and when the matter can be refixed (think of the rescheduling logjam), we need to assess critically whether the importance of this ‘advantage of seeing the witness’ is not very much overstated, when balanced against postponing a hearing indefinitely. Where a good or even passable video-link takes place, the discomfiture or arrogance of a witness (or whatever it is that we as counsel or tribunal members are supposed to be looking for) is almost always readily apparent. Take the example of a politician in a television interview. Other concerns about who is in the room with the witness etc (if he or she is not self-isolating!) can be dealt with either by the nature of the camera used, or just (as in a recent case) asking the witness to rotate his laptop to show the whole of the room in which he is sitting.

  1. Use the wide existing procedural powers firmly and creatively

As with any potentially disruptive event, Covid-19 may regrettably be fastened onto by the party who wants to derail the procedural timetable, put off the hearing timetable and ‘game’ the practical difficulties for perceived tactical advantage. “Seeing the witness in a serious case of this nature is vital”, “the importance of live interaction between counsel and the tribunal and between tribunal members themselves cannot be overstated” are already submissions which are being made. Under all of the main institutional rules (e.g. ICC 2017 Rules, Article 22(2); LCIA 2014 Rules, Article 14.4(ii) etc) and under the general statutory powers in most seats (e.g. sections 33 and 34 of the Arbitration Act 1996) the tribunal will have effective carte blanche to make the hearing happen and counsel and parties must be expected to cooperate (or be made to do so). Cf. the recent approach of the London Commercial Court (cited above): “The court has to be optimistic rather than hesitant. It is a duty of all the parties to seek to cooperate, to ensure that a remote hearing is possible. […] The default position now in all jurisdictions is that hearings must be conducted with one, more than one, or all parties attending remotely.”  A watch-word for all of us engaged in arbitration.

  1. Remember: many useful ‘video-protocols’ are already out there.

Building on the video-conferencing of witnesses, there exists an impressive and very useful (but in our experience rather underused) body of protocols and guides to best practice, all recent and topical. These have already grappled with almost all of the practical problems inherent in taking evidence by video-link (including dealing with documentary evidence) and provide excellent templates on which to build in drawing up the procedural format for a virtual hearing with multiple participants. First is the ICC’s Commission Report on Information Technology in International Arbitration of October 2017. Then the ever comprehensive CIArb series of guidelines was joined in April 2019 by the CIArb Guidelines for Witness Conferencing in International Arbitration, with many useful insights. But the Hague Conference Draft Guide to Good Practice on the Use of Video-Links Under the Evidence Convention (March 2019) is outstanding in its foresight and coverage and cannot be too highly recommended. These and other resources (e.g. the Seoul Protocol on Video Conferencing in International Arbitration) all make the tasks of counsel and arbitrators in formulating a virtual hearing protocol for a particular case so much easier. The wheel has already been invented and it is just a case of fitting it to size (and adding one or two more if need be). Here are some of the relevant links:

ICC: https://iccwbo.org/publication/information-technology-international-arbitration-report-icc-commission-arbitration-adr/

CIArb: https://www.ciarb.org/news/ciarb-s-new-guidelines-for-witness-conferencing-in-international-arbitration/

Hague: https://assets.hcch.net/docs/e0bee1ac-7aab-4277-ad03-343a7a23b4d7.pdf

Seoul: www.kcabinternational.or.kr

  1. Embrace technology as your friend (a.k.a. ‘Use Zoom’)

A virtual hearing is only ever going to be as good as the platform which is used to host it. Cometh the hour, cometh the platform! The new home-working environment has been the proving-ground of Zoom (www.zoom.us). Its selling-point, apart from being fantastically easy to use and adaptable (see Golden Rule 7) is that it will “Bring HD video and audio to your meetings with support for up to 1000 video participants and 49 videos on screen”. And what it says, it delivers (see Golden Rule 10). It looks set to be the mainstay of arbitration life, just as it is fast becoming the go-to solution for any virtual meeting, congregation, class or any other ‘socially distanced’ interaction. It can be used really effectively for all procedural steps in arbitration, including witness interviews, drafting sessions, work with experts, preparation for hearing, as well as all aspects of the hearing itself. Coupled with setting up parallel “chat” groups for the various counsel and tribunal teams and their internal communication, a virtual hearing in real time is readily achievable, with appropriate flexibility (see Golden Rule 9), including for example frequent planned breaks. Many other options are available. Skype for Business we have of course grown up with and it is working well so far in the Business and Property Court. The Vis Moot will be run on the virtual mediation / dispute resolution platform Immediation (https://www.immediation.com). But the popularity of Zoom may see it becoming an everyday arbitration tool. See for example: https://www.cnbc.com/2020/03/21/why-zoom-has-become-darling-of-remote-workers-amid-covid-19-outbreak.html

  1. Electronic hearing bundles really do work.

For most of us as counsel (or arbitrator), the electronic bundle is, with apologies to Trollope, “The way we live now”. Epiq and Opus2 have revolutionised document heavy hearings in court and arbitration, in venues around the world. The key (as cross-examiners know) is the Olympian operator who seems, even as one is uttering the runic incantation “[B2/16/ page 345]”or some such, to be already bringing it up telepathically on the multiple screens. Normally present in the room, the main providers have already developed the use of remote operators, themselves using the live video-link and managing the electronic hearing bundle: further developments are under way: https://www.epiqglobal.com/en-us/about/news; and Opus2 has already created new offsite case and technical managers: https://cdn2.hubspot.net/hubfs/5553909/New%20remote%20accessw%20brochure%20-%20vFinal.pdf?hsCtaTracking=2d70e7e7-a694-4dbc-91ba-d0abf96ab4d9%7C68ea0924-808d-41ab-9225-9fd372b8ef85 But there are simpler options for less document heavy cases or where there is only a shared electronic bundle and no Epiq or Opus2 document management in place. Zoom (yes again) allows one to exhibit documents on the shared screen by clicking on a document open on your second screen. And there are other portals and providers, all gearing up for the challenge presented by the disruption to the ‘normal way of doing things’.

  1. A new Tribunal Secretary: the Technical Assistant?

In these times, it may well be necessary to add a new face to the arbitral personnel. The arbitral secretary and his or her role is a familiar one (and continues to give rise to optimistic challenges: as in the recent Yukos case before the Hague Court of Appeal. But understandably the challenges to putting in place and then conducting an effective virtual hearing will in reality be technological and logistical (as much as, for some, an inbuilt adherence to traditional ways of doing things or to a preference for the comfort blanket of the cut-and-paste ten or more page procedural order detailing the minutiae of, and preparatory, for the oral hearing: cf. Golden Rule 9). The leading document management platforms will have this ‘built in’ (as with Opus2’s Virtual Hearing Manager, Case Manager and the somewhat forbidding-sounding “EPE [electronic presentation of evidence] Officer”). But while that may be available and appropriate for larger cases, engaging technical advice and a technical advisor should be a priority in every case in order to avoid the tribunal and/or counsel having to grapple with what will be the inevitable breakdowns, non-compatibilities, sound without vision and vice versa etc. And, pragmatically, why should parties not agree (or be directed to agree) on the use of the IT expertise of one or other firm of lawyers, billed at cost as a cost of the arbitration?  In very many cases, any incremental cost will be a very small fraction of the value in dispute. And if that may raise hackles, why not pool or combine the law firms’ IT expertise, or rotate it?

  1. Flexibility, flexibility, and more flexibility in timetabling and everything else…

The demands will initially seem great and, perhaps to some, too difficult. But the alternative of postponing the proceedings indefinitely in the pursuit of some unquantifiable conception of perfection does not serve the interests of the parties who have entrusted the timely and effective resolution of their dispute to the counsel teams they have chosen and the tribunal they have empanelled. The traditional features of a hearing (such as hearing length; the hearing day: its length; its timetabling, order of submissions and witnesses etc) are already handled flexibly by most tribunals with the active support of most arbitration practitioners. The ‘New Normal’ is going to call for even more flexibility and a pragmatic realisation that things will not be the same for an undefined future time. So: hearings and hearing days may have to be shorter; with witness evidence pruned and focused on the things that really matter to make it more manageable to assimilate and test virtually; with greater use of pre-reading in relation to witness evidence with, possibly, counsel showing their hand so that the tribunal can see in advance what the main challenges to a witness’ evidence are, before the live ‘show’ of cross-examination when the documents are put to the witness with a flourish; with the use of telephone only hearings for parts of the arbitration main hearing as appropriate; and timetabling hearings in portions and at mutually uncomfortable times to spread the pain of linking up widely distant participants. If arbitration is anything, it is inherently flexible from a procedural perspective, so as to achieve effective and efficient resolution of the parties’ dispute.

  1. … including how we handle new disputes in our brave new world.

Arbitration serves business needs, not the other way around. As businesses find ways of adjusting their practices to suit the new environment and operate without disruption or interruption, they need to know that their business partners who handle the resolution of their commercial disputes are equally adaptable and ready, and are learning from the challenges we’re all facing together. That includes changing the way in which we handle new disputes arising now, in real time. Counsel should assume that their disputes will be born and live their lives in a world where expensive and diary challenging in-person hearings are neither the norm nor necessarily desirable as a default. We should think carefully about the way in which we draft pleadings, focusing on the issues that really matter, rather than assuming for example that there will be time, utility and patience for the examination of peripheral witnesses on largely immaterial issues. The same goes for an appropriate and judicious evaluation of the evidence – for example, the number and nature of witnesses and experts to be presented or called; the documentary burden to be placed on the tribunal; or the scope and focus of document requests, knowing that any interlocutory applications may not be heard by the tribunal in person. Procedural timetables might similarly assume that hearings and meetings will be conducted by video-conference, and accordingly provide the logistical and technical details in advance. Indeed, all of these things could and should result in shorter overall timetables and lead to quicker awards. If handled responsibly, then who knows: when happier times return we may emerge having all learnt to do things better, more efficiently and more cost-effectively, with long-term advantages for the streamlining and simplification of arbitration hearings.

Virtual hearings will at first undoubtedly have more than their fair share of frustrations and mishaps. But with us all pooling our experiences and knowledge and building on the lead already taken by the major arbitral institutions and venues (and with more from them to come), international arbitration will strengthen and improve its position, where other dispute resolution options may not be able to match its flexibility. 

Chipping away at the ‘narrow approach’ to the Court’s powers in aid of arbitration?

A and B v C, D and E [2020] EWCA Civ 409

Simon Rainey QC looks at the Court of Appeal’s decision:

The long-standing controversy as to whether orders made by the Court “for the purposes of and in relation to arbitral proceedings” under s. 44 of the Arbitration Act 1996 can be made against non-parties to the arbitration received at least a partial resolution on Thursday 19th March 2020, when the Court of Appeal handed down its judgment in A and B v C, D and E [2020] EWCA Civ 409. 

The case concerned a New York arbitration in relation to a dispute over net balances due under settlement agreements. One issue which arose was whether certain payments to a central Asian government were properly deducted as ‘signature bonuses’ (as the Respondents contended) or were bribes and therefore to be left out of account (as the Appellants submitted). The persons said to be involved in the negotiations for the making of the payments included one E, an English resident. He refused to go to New York to give evidence. With the permission of the Tribunal, the Appellants sought to compel his testimony and applied to the English Court under s. 44(2)(a) for an order under CPR34.8 for the taking of E’s evidence by deposition. 

Accordingly, the application centred on the Court’s power as to “the taking of the evidence of witnesses”.

Foxton J. refused the application (with some reluctance) on the basis of accrued first instance Commercial Court authority, making it clear that his view would have been, absent authority, that the particular order sought was one the Court had jurisdiction to make under section 44: see [2020] EWHC 258 (Comm) at [18]. Recognising the controversy over the issue, he granted permission to appeal, notwithstanding the settled first instance view, a course of action which the Court of Appeal considered “obviously sensible”: [55].

On an expedited appeal, the Court of Appeal (Flaux, Newey and Males L.JJ  held), with little hesitation, that s.44(2)(a) did give the Court power to make an order for the taking of evidence by way of deposition from a non-party witness in aid of a foreign or domestic arbitration. But the Court declined to go any further than that or to express any concluded view on the position in relation to other s.44(2) powers. 

It follows that the controversy remains a very live one, pending review by the Supreme Court or the next piecemeal pronouncement by the Court of Appeal in another s.44(2) case involving a different sub-section (2) power.

The s.44 controversy and the previous Commercial Court decisions 

On one view, the controversy might be said to be an arid one. S. 44(1) applies to all English seated arbitrations, unless contracted out of. It provides that, absent such contrary agreement, “the court has for the purposes of and in relation to arbitral proceedings the same power of making orders about the matters listed below as it has for the purposes of and in relation to legal proceedings”. A straightforward approach might be to conclude that the Court has the same power to make orders against non-parties to an arbitration as it would have in legal proceedings to make orders against non-parties to the litigation because that is what s.44(1) says (see [7] and Foxton J. at [18]). If the parties do not like it, they can opt of the section, in whole or in part.

That approach runs up against the concern that the powers in s.44(2) are solely in aid of a consensual process of arbitration which binds only those who are party to the relevant arbitration agreement. It is argued that it would be odd if the Court were placed in a stronger position than the underlying tribunal itself and were able to exercise jurisdiction and powers over third parties, in support of an arbitration, where the arbitrators themselves would have no such jurisdiction or power. This concern has proved to be the dominant theme in the Commercial Court decisions prior to A&B.

The leading analysis remains that of Males J. (as he then was) in Cruz City 1 Mauritius Holdings v Unitech Ltd [2014] EWHC 3704 (Comm).

That case concerned the Court’s jurisdiction under s.44(2)(e) as to “the granting of an interim injunction or the appointment of a receiver”. The case turned on the application of CPR 62.5(1)(c). However, after a careful examination of the textual indications in other parts of s.44. Males J. concluded obiter at [47] that “the better view is that section 44 does not include any power to grant an injunction against a non-party” to the arbitration. While limited to the grant of an injunction under section 44(2)(e), the Judge’s reasoning was generally expressed (as he acknowledged in A&B: [52]) and was equally applicable to all the different paragraphs of section 44(2), without distinguishing between them. The thrust of his reasoning was that the wording of e.g. ss.44(4) and 44(5) made it unlikely that Parliament had intended to give the English court jurisdiction to make orders against non-parties in support of arbitrations happening anywhere in the world and that “the section is simply not concerned with applications against non-parties” [48(e)].

In the subsequent decision of DTEK Trading SA v Morisov [2017] EWHC 1704 (Comm), the Court had to consider whether it had jurisdiction under section 44(2)(b) to make an order for the preservation and inspection of a document in the possession of a third party in Ukraine. Sara Cockerill QC (as she then was) rejected various commentators’ criticisms of Males J’s approach (i.e. Merkin & Flannery, Arbitration Act 1996, 5th Edn; see now 6th Edn at 44.7.5) and reached the same analysis as Males LJ, taking a general approach (note that the application was unopposed). Thereafter later decisions applied the position as if settled at first instance (see e.g. Foxton J. and before him, Trans-Oil International v Savoy Trading [2020] EWHC 57 (Comm), Moulder J.).

The “wide” and the “narrow” questions in play on the appeal

So lay the land on the appeal. 

The Appellant’s primary case was that the appeal had to be determined first and foremost on the “narrow question” of whether the particular s.44(2) power was one which was exercisable against third parties. 

This was accepted by the Court, basing itself on the wide words of s.44(2)(a) with its reference to “witnesses”, not to “parties”, in circumstances where given the wide range of potential witnesses who would not be expected to be only “party” witnesses, “there is no justification in the wording of the statute for limiting “witnesses” to those who are in the control of one or other of the parties. If Parliament had intended that limitation, it would have said so” (Flaux LJ at [37]; see also Males LJ at [59]). Further, the nature of the “legal proceedings” referred to in s.44(1), being High Court and County Court proceedings, connoted the power which those Courts had to take evidence on deposition wherever necessary and just to do so: (; [38]; [61]).

The Appellant nevertheless also mounted an attack on the wider front that the s.44 controversy was not to be resolved by looking at the consensual nature of arbitration and that the starting point for section 44 is not the consensual nature of the arbitration agreement but what powers the Court is to have in a defined situation. 

The Court of Appeal avoided getting into the debate as to whether Cruz City and DTEK were correctly decided. Given that the position was clear for s.44(2)(a), it was not considered necessary to go any further on different s.44 powers.

The end of the wide Cruz City view?

While the Court of Appeal refrained from tackling the correctness of the Cruz City wide approach, it is difficult to see how that approach can survive its decision. Either s.44 as a section is dealing with powers against parties only (as Males LJ opined in Cruz City) or it is not. 

If it is not (as has now been held), then there are only two possible positions: either (a) the wide view that all of the s.44(2) powers are exercisable generally against non-parties is correct or (b) each separate power will turn on its own terms, so that different results may apply; indeed, it may be that only the s.44(2)(a) ‘evidence / witness’ power is a non-party power, while the remainder of s. 44(2) are powers are exercisable against arbitral parties only.

In so far as it is possible to identify the Court of Appeal’s view, this was in favour of the latter, ‘power by power’, approach.

Flaux LJ recognised that the effect of the decision and of the Court’s “narrow approach” was to posit that s.44 (2)(a) applies to non-parties, whereas the other heads of the subsection may not do so, based on the previous decisions. He left the position open by stating that “Any apparent inconsistency between the various heads of subsection (2) may be explained by the different language of those heads.” [44].

Males LJ, who had adopted obiter the wider view in his decision in Cruz City was careful to confine Cruz City to the particular power then before him. Like Flaux LJ he contemplated the possibility that different powers in s.44(2) might lead to different results. In particular, he made it clear that he saw “no reason to doubt” what he carefully referred to as “the actual decisions in in Cruz City and DTEK”(emphasis added)  and only went on (at [56]) to “reserve my opinion whether their reasoning on this point is correct as regards the other paragraphs of section 44(2). […] it may be that the position varies as between the various paragraphs of subsection (2).” He however recognised that there were “strong arguments” either way.

So where are we now?

While the Court’s decision on s.44(2(a) make the position clear for that s.44 power, the s.44(2)(b) and (e) powers remain for the present governed by the Cruz City / DTEK decisions, although arguably open to fresh challenge on the basis that the Court of Appeal chose not to endorse the decisions as such. The position for other s.44(2) powers, not yet dealt with by any current Commercial Court or other decision is fully up for grabs. It is perhaps regrettable that the opportunity for at least a much clearer obiter ‘steer’ was not grasped by the Court of Appeal, although if the Court favoured a ‘power by power’ approach (as it appears implicitly to have done) then as it heard no argument on each power, this may not be surprising. No permission to appeal was sought to take the matter further to the Supreme Court, so the s.44 controversy is unfortunately set to rumble on for a little longer yet.

Anti-suit injunctions in Singapore. The ‘quasi-contractual’ ground recognised.

 

Hai Jiang 1401 Pte. Ltd v. Singapore Technologies Marine Ltd. [2020] SGHC 20 involved an anti-suit injunction granted by Quentin Loh J on the ‘quasi-contractual’ ground under which a claim made in foreign proceedings is based on a contract subject to an arbitration or exclusive jurisdiction clause although the claimant is not a party to that contract.

A yard in Singapore had done work upgrading cranes on the ‘Seven Champion’ which was at that time on demise charter. The contract was with the demise charterer who were later wound up by the vessel owners who then concluded a new demise charter with another company. The yard subsequently arrested the vessel at Sharjah for unpaid sums due under the contract to upgrade the cranes and sought to have the substantive claim against the vessel owners  heard there. Owners sought an anti-suit injunction before the courts of Singapore on two grounds. First, they were the assignees of the former demise charterer’s arbitration clause in its contract with the yard. There was held to be a prima facie case of assignment to the shipowner of the arbitration clause in its contract with the yard to justify remission to the tribunal. Second, the yard’s claim was based on a contract with an exclusive Singapore law and arbitration clause. They sought to enforce the contract against third parties to that contract, the shipowner, and were bound by the arbitration clause in it. The proceedings in Sharjah were vexatious and oppressive. This was a situation recognised by the English courts as the ‘quasi-contractual’ ground for granting an anti-suit injunction and this ground was also recognised under the law of Singapore.

Another twist in the OWB bunkers saga. Bunker supply contracts are contracts “relating to sale of oil products” under assignment to ING Bank.

 

Cockett Marine Oil v Ing Bank [2019] EWHC 1533 (Comm) involved a a challenge to two arbitration awards pursuant to section 67 of the Arbitration Act 1996 on the grounds that the arbitral tribunal had no jurisdiction. The awards were in respect of bunkers supplied to Cockett Dubai and Cockett Asia in October 2014. ING as OWB’s assignee commenced arbitration in London in respect of the supplies which Cockett challenged on two grounds. First, that their contracts had not been subject to London arbitration so London arbitrators had no jurisdiction. Second, that the assignment by OWB applied only to contracts “relating to the sale of oil products traded by the Group”. As the Supreme Court had held in PST Energy 7 Shipping LLC v OW Bunker Malta [2016] UKSC 23 that OWBG’s supply contracts were not contracts for the sale of goods within the meaning of the Sale of Goods Act, the assignment cannot have been effective.

Teare J found for ING on both grounds.

(1) In 2013 OWBG altered their terms and conditions. Prior to 2011 their terms and conditions provided for Danish law and Danish arbitration. Their 2013 terms and conditions provide for English law and London arbitration. OWBG took steps to inform their customers of the change. In view of the number of customers involved they employed an independent company, Concep, to communicate with their customers, rather than perform the task themselves. There was no evidence from Concep as to the steps they took to inform customers of the change in the terms and conditions. However, OWBG was able to access Concep’s web page and, by use of a password, access information about the “campaign”. That was the method provided by Concep to its customers to enable them to assess the success of the campaign. this contract for the supply of bunkers was on OWBG’s 2013 standard terms and conditions. Both contracts were subject to the 2013 revised OWB terms and therefore the arbitration tribunal had jurisdiction to determine the claim referred to it.

In relation to the second sale it was argued that OWB’s terms provided for variation when the bunkers were physically supplied by a third party who insisted on using its own terms. The bunkers had been supplied by a Greek supplier whose terms provided for Greek law and jurisdiction but the supplier had not insisted that its terms applied and accordingly there had been no variation.

(2) The assignment did cover the supply contracts. The parties to the Omnibus Security Agreement assumed that OWBG’s supply contracts were contracts of sale and intended that the security provisions of the contract applied to them, an assumption reflected in OWBG’s standard terms and conditions. In the Court of Appeal in PST Energy 7 Shipping LLC v OW Bunker Malta [2016] 2 WLR 1072 at paragraphs 44 Longmore LJ had said that there can be agreements which “may ……be described in commercial terms as contracts for the sale of goods but are contracts to which the 1979 Act does not apply.”  The parties to the Omnibus Security Agreement described OWBG’s supply contracts as contracts “relating to the sale of oil products” because in commercial terms they had many of the features or characteristics of a sale, notwithstanding that they were not contracts of sale within the meaning of the Sale of Goods Act because they did not envisage the passing of property before payment was due. As there was a valid assignment in favour of ING Bank the arbitrators had jurisdiction to make an award in its favour.