Role of the Courts in Arbitration Process

1.0 Introduction

Arbitration is a process whereby two or more parties agree to submit a legal dispute to one or more third parties, whose role it is to enunciate judicially on that dispute in the shape of a binding award.[1] The purpose of arbitration is to retract the power to decide a dispute from the national court, and to transfer that power to an arbitrator.[2] The consensual nature of arbitration may need the parties in the arbitration agreement to resort to the Court to enforce incidence of their agreement.[3] The court will support and supervise the arbitration process, but this does not imply that the court gives powers to the arbiter beyond those that are strictly necessary to permit the arbiter to perform the duties that have been imposed upon, and accepted by him.[4] As a general principle, the Court should not intervene with the arbitration process except as provided by the Act.[5]

2.0 Role of Court in Arbitration

2.0.1 Extension of Time

In section 12 and section 79 of the Arbitration
Act 1996 (AA 1996), the court has power to extend time for beginning of
arbitral proceedings, and to extend time limits relating to arbitral
proceedings. The court’s pro-arbitration stance is demonstrated in the case Xstrata Coal Queensland Pty Ltd and others v
Benxi Iron & Steel (Group) International and Economic Trading Co Ltd,[6]
where it allows an application under section 79 of AA 1996 to extend the time
limit in which a party could apply to the tribunal under Article 27 of the
London Court of International Arbitration (LCIA) Rules 1998. The application
was in the circumstance of seeking the correction of an ambiguity regarding to
the identity of one of the claimants. Since the time limit under Article 27 of
the LCIA Rules 1998 would almost always expire in practice before the outcome
of enforcement proceedings, the decision to allow a retroactive extension of
time displays the court’s pragmatic approach.[7]

2.0.2 Appointment of Arbiter

Section 18 of AA 1996 and Rule 7 of
Arbitration (Scotland) Act 2010 (AA 2010) enable a party to apply to the court
for the court to exercise its powers to give directions as to the making of
tribunal appointments or make the appointments itself.[8] Any
appointment made by the court has effect as if made with the agreements of the
parties.[9] In the
English case Silver Dry Bulk Company
Limited v Homer Hulbert Maritime Company Limited,[10] the
court has established the relevant principle when asked to assist with
appointments of the tribunal. It was held that an initial threshold test must
be made in order for an application under section 18(3) to succeed, namely
there must be a “good arguable case” that a tribunal would have a jurisdiction
to hear the issue. It was also concluded that even if the court has such power
under section 18, it would not have been applied as a matter of discretion,
primarily because making an order that the tribunal had been “validly
constituted” in this case would go much deeper than would be justified from
merely concluding that there was a “good arguable case”, and that the tribunal
was in existence and was already dealing with the matter, and also capable to
continue without any assistance from the court, even if its status at the time
was uncertain.[11]
The court’s approach in this matter remain in favour of not interfering with
decisions that fall within the realm if an arbitral tribunal’s jurisdiction, in
line with the kompetenz-kompetenz
principle.

2.0.3 Evidence and Disclosure

The court in England and Wales has the
same power as the arbiters to make orders in support of arbitral proceedings in
regards to certain matters, including taking evidence of witness outside the
jurisdiction, and the preservation of evidence.[12] The
power primarily relates to the parties in the arbitration, and the court will
only exercise such powers in exceptional circumstances.[13] The
court will only make such an order if, or to the extent that the tribunal has
no power or unable act effectively. In Scotland, while the court also has the
power to take evidence,[14] there
is no right of discovery at the commencement of the proceedings.[15]
Nonetheless, during the arbitration proceedings, the court will order
production of the documents in the hands of the parties to the dispute or
others, provided that they can be shown to be relevant in regards to the
pleadings and not protected by privilege or confidentiality.[16]

2.0.4 Court Orders and Foreign Arbitration Proceedings

In Scotland, the court will grant a
warrant to arrest on the dependence of an action (that is for an attachment
made pending the outcome of the proceedings) founded on a contract that
includes an enforceable arbitration clause, even where an arbitration is being
conducted, or is anticipated to be conducted outside Scotland.[17] In the
case of Motordrift A/S -v- Trachem,[18] a
Norwegian company raised an action in Scotland against an English company whose
registered office was in London. The pursuer established his jurisdiction on
the arrestment of funds held by the English company’s bankers in Scotland. Arrestment
of moveable property in Scotland was one of the grounds to establish
jurisdiction in the Scottish courts. The English company sought recall of the
arrestment obtained on the dependence of the action, on the ground that the
action was founded on a contract containing an arbitration clause referring
disputes between the parties to arbitration, and another clause stipulating that
English law would apply. The court held that the pursuers would be entitled to
use the present process to enforce any arbitral award in their favour relating
to the matters raised in the action, and refused to recall the arrestment.

Furthermore, in the case of Channel Tunnel Group Ltd v Balfour Beatty
Construction Ltd,[19]
in the speech of Lord Mustill in the House of Lord,[20] while
the court had no power to grant an injunction in an arbitration whose seat was
outside England and Wales, the High Court may by order (whether interlocutory
or final) award an injunction or appoint a receiver in all cases where it
appears to the court that it is just and convenient to do so.[21] He held
that the English court had power under this provision to award interim
injunction although the arbitration was not seated in England or Wales.
Besides, by awarding the order, the court does not involve itself at all in the
resolution of the dispute, instead it merely seeks to make the resolution of
the dispute by the foreign court more effective. The granting of the
interlocutory injunction by way of interim protection does not mean that the
court is playing any part in the decision, but rather, doing its best that the
resolution by the arbiters is fruitful.[22]

2.1 Discussion

Based on the above situations, it can be
seen that the court would only intervene with the arbitration process when it
is very necessary, and when the arbiter or tribunal is incapable to carry out
the arbitration effectively. The court would try to stay as far away from
making any decision for the tribunal, and would only do so on the basis of very
strong ground. It also allows the tribunal to run the arbitration on their own
course, and would only interfere to ensure that the arbitration is carried
forward to its best advantage.[23] Also
when the court intervenes, it is because it is just and convenient to do so.
Furthermore, when the court exercise it powers, for instance in the disclosure
of evidence and witness, it is to ensure that the arbitration proceedings run
smoothly, and not to replace the power of the arbiter or the tribunal.

3.0 Conclusion

To perceive the role of the court either
as supporter, or enforcer is a difficult stance to take, because the court
enforce its power to support the arbitration proceedings. Perhaps it would be
easier to see the role of the court as complementary in arbitration, where it
only exerts its power when the tribunal alone is unable to bring the best
outcome in a proceeding.

Table of Cases

UK Cases

• Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] 1 AER 664
• Motordrift A/S v Trachem Co Ltd 1982 SLT 127
• Silver Dry Bulk Company Limited v Homer Hulbert Maritime Company Limited [2017] EWHC 44 (Comm)
• Xstrata Coal Queensland Pty Ltd and others v Benxi Iron & Steel (Group) International Economic & Trading Co Ltd [2016] EWHC 2022 (Comm)

Table of Legislation: UK

• Arbitration Act 1996 s 18(4), s 44(2)(a), s 44(2)(b)
• Arbitration Act Scotland 2010 s 1, rule 45(1), rule 45(2)
• Supreme Court Act 1981, s 37(1)

Bibliography

• Davidson F P, Arbitration (2^nd edn, W. Green 2012)
• Kehoe C, Wren A and Chandran L, ‘Appointment of Arbitrators: English Court Grapples Conflicting Case Law and Clarifies Relevant Principles When Asked to Assist with Appointments’ [2017] < www.hsfnotes.com/arbitration/2017/02/02/appointment-of-arbitrators-english-court-grapples-conflicting-case-law-and-clarifies-relevant-principles-when-asked-to-assist-with-appointments/> accessed 13 April 2018
• Practical Law Arbitration, ‘Top 10 English Cases in 2016’ [2016] Thomson Reuters <www.uk.practicallaw.thomsonreuters.com/w-004-7272?transition Type=Default&contextData=(sc.Default)&firstPage=true&bhcp=1> accessed 15 April 2018
• Rares S, ‘The Role of Court in Arbitration’ (Federal Court of Australia 2012) Semple W G, ‘The UNCITRAL Model Law and provisional measures in international commercial arbitration’, [1993] I.B.L.J. 765

[1] Fraser P Davidson, Arbitration
(2^nd edn, W. Green 2012).

[2] Walter G Semple, ‘The UNCITRAL Model Law and
provisional measures in international commercial arbitration’, [1993] I.B.L.J.
765.

[3] Steven Rares, ‘The Role of Court in Arbitration’
(Federal Court of Australia 2012)

[4] Semple (n 2) 766.

[5] Arbitration Act Scotland 2010 (AA 2010), s 1.

[6] [2016] EWHC 2022 (Comm).

[7] Practical Law Arbitration, ‘Top 10 English Cases in
2016’ [2016] Thomson Reuters <www.uk.practicallaw.thomsonreuters.com/w-004-7272?transitionType=Default&contextData=(sc.Default)&firstPage=true&bhcp=1> accessed 15 April 2018.

[8] Caroline Kehoe, Anna Wren and Luxmy Chandran,
‘Appointment of Arbitrators: English Court Grapples Conflicting Case Law and
Clarifies Relevant Principles When Asked to Assist with Appointments’ [2017]
< www.hsfnotes.com/arbitration/2017/02/02/appointment-of-arbitrators-english-court-grapples-conflicting-case-law-and-clarifies-relevant-principles-when-asked-to-assist-with-appointments/> accessed 13 April 2018.

[9] Arbitration Act 1996 (AA 1996)  s 18(4).

[10] [2017] EWHC 44 (Comm).

[11] Kehoe,
Wren and Chandran (n 8).

[12] AA
1996, s 44(2)(a) and s 44(2)(b).

[13] Practical Law Arbitration (n
7).

[14] AA
2010, rule 45(1).

[15] AA
2010, rule 45(2).

[16] Semple
(n 2) 767.

[17] Semple
(n 2) 768.

[18] 1982 SLT 127.

[19] [1993] 1 AER 664.

[20] ibid
670.

[21] Supreme
Court Act 1981, s 37 (1).

[22] Semple
(n 2) 773.

[23] Channel (n 19) 689.