Contents

1 London Maritime Arbitration

2 The Arbitration Act 1996
3 Mediation and Arbitration
4 The Arbitration Agreement
5 The Conflict of Laws
6 Disputes about the Tribunals Jurisdiction
7 Stays of English Court Proceedings Brought in Breach of an Agreement to Arbitrate
8 Injunctions and Arbitration
9 Extending Agreed Time Limits for Beginning Arbitral Proceedings
10 Appointment of Arbitrators and Umpires
11 The Arbitrator
12 Procedure and Evidence
13 Confidentiality in Arbitration
14 Remedies for Delay
15 Arbitration and Third Parties
16 Preliminary Issues
17 Security for Costs
18 Security for Claims in Arbitration
19 Arbitration Awards
20 Arbitrators Fees and Expenses
21 Costs

22 Challenging an Award in the English Courts

23 Enforcement of Awards
APPENDIX A: Arbitration Act 1996
APPENDIX B: THE LMAA Terms (2006)
APPENDIX C: The LMAA Small Claims Procedure
APPENDIX D: The LMAA Intermediate Claims Procedure 2009
APPENDIX E: The LMAA/Baltic Exchange Mediation Terms (2009)
APPENDIX F: The UNCITRAL Model Law
APPENDIX G: CPR Part 62 on Arbitration Claims
APPENDIX H: Practice DirectionArbitration

APPENDIX I: The Admiralty & Commercial Courts Guide

APPENDIX J: Departmental Advisory Committee on Arbitration Law Report on the

Arbitration Bill

APPENDIX K: Departmental Advisory Committee on Arbitration Law Supplementary

Report on The Arbitration Act 1996*

APPENDIX L(i): LMAA Standard Procedure

APPENDIX L(ii): LMAA ICP Procedure

APPENDIX L(iii): LMAA Small Claims Procedure

APPENDIX L(iv): Arbitration Claims

Chapter 1

London Maritime Arbitration

London Maritime Arbitration

1. Introduction
2. The London Maritime Arbitrators Association
3. LMAA Terms
4. The Small Claims Procedure
5. FALCA Rules
6. Intermediate Claims Procedure
7. Maritime arbitration and the Civil Procedure Rules
8. Arbitration and the Human Rights Act 1998
9. Arbitration and European Competition Law

1. INTRODUCTION
Arbitration is a private method of resolving disputes. It is used when parties agree to refer their
dispute to an impartial tribunal consisting of one or more arbitrators. Parties normally agree to
arbitration by means of an arbitration clause in a contract made before a dispute has arisen. It can
also be agreed after a dispute has arisen. Arbitration differs radically from court proceedings in
that it arises out of an agreement and the rules of procedure governing litigation do not apply, thus
allowing a flexible and confidential procedure to be adopted to suit the parties convenience.
Arbitrators are generally appointed and paid by the parties; they are usually chosen for their
familiarity with the commercial, technical or legal aspects of the dispute. The advantages of
arbitration are its privacy and its potential as a flexible, speedy means of resolving commercial
disputes. However, the efficiency of arbitration depends on the cooperation of the parties (and
their lawyers and indeed the arbitrators) in preparing a case and minimising the areas of
substantive dispute. The Arbitration Act 1996 places duties on the parties and the arbitrators to
ensure the dispute is resolved efficiently. However, in practice it may be difficult to enforce these
duties and arbitration can be just as slow and expensive as litigation if the parties will not
cooperate and if the arbitrators do not take a firm approach to the proceedings.
London maritime arbitration is a broad term usually applied to arbitration taking place in
London where the dispute involves in some way a shipfor instance a dispute under a
charterparty, a bill of lading or a ship sale agreement. There is, however, no strict definition of
maritime arbitration which would require the involvement of a ship and any arbitration carried out
on the terms of the London Maritime Arbitrators Association (the LMAA Terms) might be
termed a maritime arbitration. This book aims to provide a practical guide to the law and practice
of maritime arbitrations in London, particularly arbitrations proceeding under the LMAA Terms.

2. THE LONDON MARITIME ARBITRATORS ASSOCIATION (THE LMAA)

History and aims

Traditionally, maritime arbitrators were members of the shipping trade who found time to act as
arbitrators largely on an honorary basis. Maritime arbitration is now much more time-consuming
and formal. Most arbitrations are carried out by full-time professional arbitrators, technical

experts, or lawyers who charge a professional fee. It appears that more than half of London
maritime arbitrations are being decided by about half a dozen individuals.1 The LMAA is a
professional association which was set up in 1960, originating from a group of brokers at the
Baltic Exchange who were listed as available to be appointed as arbitrators. Unlike the
International Chamber of Commerce (ICC) or the Grain and Feeds Trade Association (GAFTA),
the LMAA does not actively supervise or administer arbitrations. However, the LMAA may assist
in a limited way as agreed by the parties. For example, under LMAA Terms, the President of the
LMAA may make appointments where an arbitrator has resigned. The business of the LMAA is
managed by the LMAA Committee, which is chaired by the LMAA President and elected by full
members.
The LMAA plays a central and supportive role in London maritime arbitration. Its members
conduct the vast majority of maritime arbitrations in London; most years they receive around
3,000 appointments and issue more than 400 awards.2 The LMAA is responsible for drawing up
the LMAA Terms (and other rules such as the Small Claims Procedure) and laying down
standards of conduct for its members. It has an informative role: maintaining a website, issuing a
handbook, publishing a newsletter and generally keeping members informed of relevant
developments, for instance by holding seminars. The LMAA website and handbook are very
useful sources of information on practice and individual arbitrators.3 In addition, the LMAA may
be called upon to appoint arbitrators in accordance with the LMAA Terms or an arbitration clause
and to give members advice on specific questions. In a wider context it seeks to maintain high
professional standards in maritime arbitration and to act as a representative body, for instance by
making representations about proposed legislation relevant to its members interests.

Members
The LMAA consists of two main groups of members. There are currently 35 full members who
are generally prepared to undertake maritime arbitration of any description or duration.
Approximately half of these have a predominantly legal background and the rest have technical or
commercial expertise. Many full members arbitrate as a full-time occupation. They would almost
certainly be treated as commercial men or engaged in the shipping trade for the purpose of
satisfying such a qualification required in an arbitration clause.4 To become a full member the
applicant must demonstrate his knowledge of the relevant areas of English law and competence in
writing awards. The general rule is that an applicant for full membership must have been engaged
for at least 15 years in a position of responsibility within the shipping industry, generally in
commercial, technical or legal areas. Applicants must be UK residents or otherwise able to attend
London hearings at short notice. A substantial commitment to arbitration will normally be
required to ensure that sufficient time can be given to arbitrations and to help secure the
impartiality of an independent arbitrator. The LMAA election sub-committee will interview
potential full members in meetings. The sub-committee will report on each applicant but election
to full membership is ultimately decided by the LMAA Committee. The LMAA Committee has
powers (which have never had to be used) to remove a member from the LMAA where his
conduct is inconsistent with LMAA membership.
The second group of LMAA members consists of around 800 supporting members drawn mainly
from the shipping trade, solicitors firms, barristers and P&I clubs. Supporting members do not, as

a general rule, practise as arbitrators or umpires but they lend their support to the objects of the
LMAA. Applicants for supporting membership should be aged at least 28 with suitable
commercial or technical experience or be qualified as a lawyer for five years. The application
must be supported by one full member or two referees, preferably supporting members. The
names of any supporting members who would accept appointments as an arbitrator and are willing
to be named as a would be arbitrator are listed in the LMAA Newsletter.
The supporting members represent the users of London maritime arbitration. The Supporting
Members Liaison Committee plays an important role in raising matters of interest and liaising
with the LMAA, for example in the drafting of LMAA Terms. Most significant changes in
practice will only be adopted after consultation with this committee. Supporting members also
have the opportunity to meet full members throughout the year at seminars, lunches, meetings and
the annual dinner.

3. THE LMAA TERMS

LMAA Terms were first introduced in 1984 and amended versions came into force in 1987, 1991,
1997, 2002 and most recently in 2006 (Appendix L contains flow charts setting out the usual
procedure under the 2006 Terms). The Terms are flexible in that the parties and the arbitrators
may agree to alter or dispense with any part of them. The combination of clarity, convenience and
flexibility found in the LMAA Terms means that they are often chosen to govern arbitrations
where the arbitrators are not members of the LMAA, for instance where the sole arbitrator is a
practising lawyer. The current version (the LMAA Terms (2006)) applies to all arbitrations
commenced on or after 1 January 2006.5 The current Terms (like the previous LMAA Terms)
largely reflect the provisions of the 1996 Act. Paragraph 7(a) provides a general rule that:
The arbitral proceedings and the rights and obligations of the parties in connection therewith shall
be in all respects governed by the [1996] Act save to the extent that the provisions of the Act are
varied, modified or supplemented by these Terms.
The Terms provide further detail and, in some respects, confer greater powers on the tribunal, for
example by enabling the tribunal to make orders for concurrent hearings. The changes introduced
in 2006 are intended to address needs that have become apparent since 2002. Most significantly,
paragraph 22 of the LMAA Terms 2006 now provides for a reasoned award to be made unless the
parties agree otherwise, This change reflects the actual practice in LMAA arbitrations, as well as
being in line with the trend in other arbitral bodies. The more specific effects of the LMAA Terms
are discussed throughout the rest of this book. References to the LMAA Terms in this book are
to the current LMAA Terms (2006).

When are LMAA Terms applicable?

If an arbitration clause specifies that LMAA Terms apply to the arbitration then this agreement
will bind the parties and the tribunal. Maritime arbitrators usually accept appointments on or
subject to the LMAA Terms in force for the time being, either by expressly stating this or by a
printed notice to that effect on their writing paper and fax heading. An arbitrators acceptance of
appointment on LMAA Terms will mean that those Terms govern his appointment and his
relationship with the party appointing him, for example as regards his right to booking fees.

However, this alone will not be sufficient to render the Terms applicable to the conduct of the
arbitration because this requires the agreement of both parties, typically by agreement in the
arbitration clause, or where the arbitrator is appointed as sole arbitrator or the other partys
arbitrator has also accepted an appointment on LMAA Terms. This is reflected by paragraph 5(b)
of the LMAA Terms which provides that the parties shall be taken to have so agreed whenever a
sole arbitrator or both the original arbitrators have been appointed on the basis that the Terms
apply to their appointment. Paragraph 5 further supports this by going on to provide that:
Whenever a sole arbitrator or both the original arbitrators have been appointed on the basis
referred to at (b), such appointments or the conduct of the parties in taking part in the arbitration
thereafter shall constitute between the parties an agreement that the arbitration agreement
governing their dispute has been made or varied so as to incorporate these Terms and shall further
constitute authority to their respective arbitrators so to confirm in writing on their behalf.
Paragraph 5(a) of the LMAA Terms provides that the parties shall be taken to have agreed to the
application of the LMAA Terms where the dispute is referred to a sole arbitrator who is a full
member of the LMAA, or the original arbitrators appointed by the parties are full members (unless
both parties have agreed otherwise). The effectiveness of this provision in making the arbitral
proceedings subject to LMAA Terms is doubtfulif the parties have not agreed to the application
of the Terms, the Terms cannot effectively bind them to be taken to have so agreed.6 The mere
fact of appointing full members of the LMAA would probably not, in itself, always amount to an
agreement (whether implied or as a matter of custom) to the application of the LMAA Terms.
Some full members of the LMAA also accept appointments pursuant to other arbitration rules, for
example GAFTA or LCIA rules so it is not a universal practice that full members of the LMAA
accept all appointments on LMAA Terms.
The decision of Saville J in Fal Bunkering v Grecale Inc of Panama 7 concerned this type of
scenario. A dispute arose out of a charterparty which provided for arbitration but without
reference to arbitration rules. The owners appointed a full member of the LMAA who expressly
accepted the appointment on LMAA Terms. The charterers were not informed of the terms of that
appointment and their arbitrator (also a full member of the LMAA) accepted appointment without
reference to any terms. The owners applied to the arbitrators for security for costs, relying on the
LMAA Terms which gave the arbitrators jurisdiction to grant security for costs. The charterers
sought, and were granted, a declaration that the owners were not entitled to apply to the arbitrators
for security.
Saville J held that the starting point in deciding the terms governing a reference is the parties
express or implied agreement. What the parties impliedly agreed was to be found by looking at
what each party was reasonably entitled to conclude from the attitude of the other. It was not
possible to assume from the fact that both arbitrators were known to be members of the LMAA
that, as a matter of usage, the arbitration should be conducted on LMAA Terms. It was not shown
that LMAA members universally and invariably only accepted appointments on LMAA Terms.
On the facts, there was no agreement on the terms governing the reference. Saville J applied a
contractual analysis of the arbitrators relationship with the parties and suggested, obiter, that if
the charterers arbitrator had accepted appointment on LMAA terms this would probably have
been sufficient to incorporate the LMAA Terms in the reference.8

It is questionable as to whether Fal Bunkering remains good authority that the appointment of full
LMAA members as arbitrators (or the appointment of one arbitrator, but not the others, expressly
on LMAA Terms) in an ordinary shipping dispute does not in itself mean that the reference is
subject to the LMAA Terms. Now it might well be held that it is universal practice for LMAA full
members to accept appointments in charterparty or bill of lading disputes only on LMAA Terms.
The problem is unlikely to arise in practice since full members of the LMAA usually accept
appointments expressly subject to the LMAA Terms. Their correspondence will usually contain
notices to the effect that they accept appointment on LMAA Terms so that parties continuing in
the arbitration without objection to the Terms would probably be treated as agreeing by conduct to
incorporate them.9 If an arbitrator accepts appointment on LMAA Terms and becomes the sole
arbitrator by default (whether by a court appointment or a contractual mechanism or by statute,
see Chapter 10 on default appointments) it is unlikely that the LMAA Terms would apply to the
arbitration because there is no agreement as such. However, if the party in default took part in the
arbitration he would probably be treated as having agreed by conduct to the application of the
Terms (though this may only be the case if the defaulting party knew or should reasonably have
known that the arbitrator had accepted appointment on those Terms).

Which LMAA Terms apply?

The LMAA Small Claims Procedure (or FALCA Rules or the Intermediate Claims Procedure)
will normally apply where there is provision to that effect in the arbitration clause or an agreement
by the parties after the dispute has arisen. In general, however, maritime arbitrators accept
appointments on the current LMAA Terms or those in force for the time being. The LMAA
arbitration clause makes clear that the arbitration shall be conducted in accordance with the
LMAA Terms current at the time when the arbitration proceedings are commenced. The current
LMAA Terms are stated to apply to all arbitrations commenced on or after 1 January
2006.10 Uncertainty as to the applicable terms may arise where the arbitration agreement was
made before the current rules came into force and it provides for arbitration according to the rules
in force at the date of the contract. The question of which version of the LMAA Terms will apply
is a matter of construction of the arbitration agreement and the arbitrators terms of appointment.
Where an arbitration agreement provides that certain rules apply, then prima facie that refers to
the rules in force at the time the arbitration is begun.11
In The Robin,12 a charter made in January 1997 included an arbitration clause providing that
where appropriate the LMAA Small Claims Procedure (1989) will be used. The 1989 procedure
had been superseded by a later procedure and Toulson J found that the 1989 procedure did not
apply: the probable intention of the parties was that the procedure current at the relevant date (i.e.
commencement of arbitration) would apply and the reference to 1989 was an error.
It is doubtful whether amendments to arbitration rules made after the commencement of an
arbitration would apply in preference to the rules in force at the date of commencement. Amended
arbitration rules would probably only be given preference in so far as the old rules had become out
of date and impractical to apply.13

4. THE SMALL CLAIMS PROCEDURE

The LMAA Small Claims Procedure is designed to provide a quicker and cheaper way of dealing
with small claims: it is currently suggested for use where neither the claim nor the counterclaim
exceeds $50,000 (excluding interest and costs). The procedure will apply if agreed by the parties:
typically a charter party arbitration clause may provide that it applies automatically to disputes
below a certain sum. The LMAA Commentary on the Small Claims Procedure (2006) stresses that
this procedure is not suitable in the case of complex issues, or where examination of witnesses
may prove necessary. Further, the LMAA comments that the widespread use of the small claims
procedure, regardless of its suitability for the case at hand, is a regrettable tendency which may
lead parties to be dissatisfied with the ultimate results. Nevertheless, the LMAA still recognises
that the procedure may be suitable for dealing with larger claims involving a single issue where no
hearing is required. The Procedure is popular14 with parties but it is generally not a lucrative area
of practice for arbitrators due to the fixed fees; members of the LMAA agree to deal with disputes
under this procedure as a service to the industry.15 The procedure is set out in Appendix C (with
a flow chart at Appendix L) but the main features are:

use of a sole arbitrator;

fixed arbitrators fees of a sum to be determined from time to time by the LMAA
Committee16 and to be paid as a condition precedent to the valid commencement of the Small
Claims Procedure;
in respect of challenges to jurisdiction, such work must be paid for on a quantum meruit basis
before the arbitrator resolves the challenge. These fees are borne, in the first instance only, by
the claimant. This 2006 change reflects the large quantity of work that an arbitrator may have
to undertake in resolving a jurisdictional challenge;
a strict timetable for exchange of submissions aimed to be completed within three months;
no oral hearing unless in exceptional circumstances; only relevant documents to be
disclosed on exchange of submissions;17
recoverable costs are limited to such sum as is determined from time to time by the LMAA
Committee;18
unless otherwise agreed or requested by the arbitrator, parties are not required to present
schedules of the costs claimed: the amount is to be left to the arbitrators discretion;
no right of appeal, subject to challenges to jurisdiction allowable under the Arbitration Act
1996;19
pursuant to paragraph 9, in any case where it is determined or agreed, because of the nature
and/or weight of a case, that the Small Claims Procedure is inappropriate and shall not be
applicable, it shall cease to apply in its entirety. This represents a departure from the earlier
versions of the Small Claims Procedure, and is designed to combat the regrettable tendency
to over-use this procedure.

Further aspects of the procedure are dealt with more fully in Chapter 12.

5. THE FALCA RULES

FALCA stands for Fast and Low Cost Arbitration. These rules were adopted in 1996 to provide
a speedy and more inexpensive method of resolving middle range disputes; typically involving
claims up to $250,000 (the sum deemed to be agreed in the FALCA arbitration clause). The
FALCA Rules have proved relatively unpopular20 as compared to the Small Claims Procedure and

it is likely that their use will decline further as the new Intermediate Claims Procedure, discussed
below, takes over more medium-sized disputes. Nevertheless, as the FALCA Rules do still exist,
they will be briefly discussed.
FALCA Rules will apply where the parties have agreed on them, ordinarily in the arbitration
clause or after the dispute has arisen. They share many of the features of the Small Claims
Procedure:

sole arbitrator;
timetable designed to produce an award within eight months of appointment;
no oral hearing unless the arbitrator requires it; and
no right of appeal.

Under FALCA Rules, however, neither the arbitrators fees nor the recoverable costs are limited,
although the parties may generally not seek security for costs in excess of 7,500.

6. INTERMEDIATE CLAIMS PROCEDURE

In March 2009 the LMAA introduced the Intermediate Claims Procedure (ICP) to deal with
medium-sized claims deserving a fuller procedure than the Small Claims Procedure but not, on
grounds of proportionality, the full procedure offered by the LMAA Terms. FALCA had proved
relatively unpopular and the LMAA established a working group in 2006 to investigate alternative
methods for dealing with medium-sized claims. The ICP was then developed in collaboration with
the Baltic Exchange. The intention behind the procedure is that it should normally provide its own
momentum and that costs should be largely predictable at the outset.
The full terms of the ICP (together with the LMAA commentary) are set out in Appendix D and
should be referred to for details. The ICP will only apply where the parties have so agreed, either
in their contract or after the dispute has arisen. Parties may have to consider redrafting arbitration
clauses to make reference to the Intermediate Claims Procedure. The LMAA has provided
suggestions as to suitable arbitration clauses which provide for the Intermediate Claims Procedure
to apply.21 The parties may agree on a monetary limit for the application of the ICP but in the
absence of such express agreement the ICP will apply where the total amount of claims or
counterclaims (excluding interest and costs) is between the size of US$100,000 (or the agreed
upper limit for the LMAA Small Claims Procedure) and US$400,000. If either party at any time
advances claims or counterclaims which in total exceed US$400,000 then the tribunal has
discretion as to whether to continue the reference under the ICP or the LMAA Terms.
The full procedure is set out in Appendix D with a flow chart at Appendix L, but the main features
of the procedure are as follows:

The parties may agree on the composition of the tribunal, but in the absence of agreement, the
tribunal shall consist of three arbitrators.
There is no automatic right to an oral hearing, and only exceptionally will one be held. If an
oral hearing is allowed, it will generally be limited to a maximum of five hours and is
intended to allow for cross-examination of witnesses with provision for closing written
submissions thereafter.

A strict timetable is set up for exchange of opening submissions, with no formal disclosure
stage. All relevant documents must be disclosed with opening submissions.
Parties must give notice of intention to serve factual witness statements and serve them within
28 days of completion of opening submissions.
Expert evidence can be adduced only with the express permission of the tribunal.
Supplementary factual and expert witness statements are only allowed with the express
permission of the tribunal.
There is limited provision for written closing submissions where there is an oral hearing or
further evidence has been exchanged following the completion of opening submissions.
In order to ensure that the timetable of the arbitration maintains momentum, a party may
apply for peremptory orders for failure to comply with time limits. Further, any submissions
or evidence submitted after the expiry of a time limit set by a peremptory order shall not be
admissible.
The tribunal will make every effort to publish the award within six weeks from the service of
the last submissions of the parties.
Any right of appeal to the courts is excluded, except the parties are deemed to have agreed
that there will be a right of appeal where the tribunal certifies in its award that the dispute
between the parties involves a question of law of general interest or importance to the trade or
industry in question. This novel provision is intended to avoid a dichotomy of views between
a tribunal and the courts as to whether the award contains a legal question of general
importance and to avoid the cost of applying for permission to appeal where it has been
demonstrated to the tribunal that the award involves a question of general importance.
The tribunal is to assess costs at its discretion on a summary and commercial basis,
according to what is fair, reasonable and proportional to the matters in dispute. The parties
recoverable costs are to be capped at a maximum figure of 30 per cent of the claim advanced
(plus, should there be a counterclaim that the tribunal considers to be distinct22 from the
claim, 30 per cent of the counterclaim). If there is an oral hearing the percentage cap on
recoverable costs will be increased to 50 per cent (not including the cost of hiring a venue and
catering). If non-monetary relief is sought, the tribunal will decide what overall cap to apply
following completion of opening submissions.
Security for costs will not be granted in a sum above the amount at which the parties
respective costs have been capped.
Save in exceptional circumstances, the tribunals costs (excluding the appointment fee and
costs in respect of a challenge to the tribunals jurisdiction) shall not exceed one-third of the
total sum at which the partys costs are capped, or two-thirds thereof in the case of a two- or
three-person tribunal.

As at publication these provisions are brand new: it remains to be seen how popular they will
prove to be with parties and practitioners.

7. MARITIME ARBITRATION AND THE CIVIL PROCEDURE RULES

The Civil Procedure Rules (the CPR), first introduced in 1999, are the court rules applicable to
civil litigation in the English High Court and county court. At its outset the CPR expressly states
its aim, or overriding objective, as follows:

(1) These Rules are a new procedural code with the overriding objective of enabling the
court to deal with cases justly.
(2) Dealing with a case justly includes, so far as is practicable
o (a) ensuring that the parties are on an equal footing;
o (b) saving expense;
o (c) dealing with the case in ways which are proportionate
(i) to the amount of money involved;
(ii) to the importance of the case;
(iii) to the complexity of the issues; and
(iv) to the financial position of each party;
o (d) ensuring that it is dealt with expeditiously and fairly; and
o (e) allotting to it an appropriate share of the courts resources, while taking into account
the need to allot resources to other cases.

The parties are under a duty to help the court to further the overriding objective.23 Particular
features of the CPR involve the use of active case management; this means the court is involved in
giving directions to ensure that the case proceeds efficiently, it will identify the issues at an early
stage and decide which need trial and which could be decided summarily. The court will also take
steps to trim the non-essential features of litigation, in particular by restricting, where possible, the
amount of oral evidence, expert evidence and disclosure of documents. Avoiding the
accumulation of excessive costs is a high priority and this is given effect in various ways, in
particular by the use of settlement offers, encouraging alternative dispute resolution and making
the parties more aware of costs being incurred (e.g. by making orders for summary assessment of
costs as soon as an application is heard). Delay is tackled in particular by using stricter timetables
for preparing a case which cannot simply be extended at the will of the parties. The CPR also aims
to be user-friendly; it avoids technical legal terms and Latin expressions.
The CPR covers applications to court relating to arbitration,24 but has not significantly changed
procedure as the court rules adopted to give effect to the 1996 Act already adopted the philosophy
of dealing with cases expeditiously. More specific features of the CPR as adopted in the
Commercial Court are now features of arbitration, for example the test for disclosure.
The CPR has, however, had a wider impact on arbitration because it has raised new priorities in
resolving civil disputes. The judge is expected to take a proactive approach in taking charge of a
case at an early stage and managing its conduct. The overriding objective clearly echoes the duty
on an arbitral tribunal under section 33 of the 1996 Act to act fairly as between the parties and to
adopt procedures suitable to the circumstances of the case, avoiding unnecessary expense and
delay. The parties duty to give effect to the overriding objective under the CPR also reflects the
parties duty in an arbitration under section 40 of the 1996 Act to do all things necessary for its
proper and expeditious conduct. Lord Woolf MR has suggested that the underlying spirit of the
1996 Act is very much in accord with that of the CPR in that it sets out in readily understandable
terms what is required of the parties.25 It is noteworthy, however, that although the 1996 Act
encouraged autonomy and independence of arbitration from court procedure, many arbitrators
have now adopted practices from the CPR, for example when making costs orders.26 The
procedural rules set out in the Second Schedule of the LMAA Terms (2006) adopt the CPRs test
for standard disclosure of documents and expressly provide that parties will generally not be

required to provide broader disclosure of documents than required by the courts. In addition, they
adopt a fairly strict timetable for exchange of submissions. However, the LMAA Terms give the
arbitrators very wide discretion over procedure and CPR practice would only be adopted if
appropriate to combat undue costs and delay.
Adoption of some aspects of case management in arbitration will be welcomed since they may be
useful, in particular if the parties are failing to cooperate with each other or one party is being
obstructive. Cresswell J has recommended that in major arbitrations, arbitrators should consider
asking the parties to produce a short agreed list of the important issues and the common ground
between the parties, thus following practice under the CPR and the LMAA Terms.27 Limiting
disclosure is also valuable since this has often proved to be a disproportionately expensive and
time-consuming part of the preparation for an arbitration. However, arbitrators should exercise
some caution in adopting the CPR. First, in an arbitration the parties may choose the procedure for
resolving their dispute; the tribunals broad powers to decide procedural matters only apply to the
extent that there is no such agreement. Second, the CPR is designed to cover a wider range of
cases where parties have not necessarily entered into a contract (e.g. tort claims). In such
circumstances it will be particularly important to ensure that the parties are on an equal footing
so that a wealthy litigant cannot exploit the rules to intimidate a weaker party. In arbitration,
however, the parties are generally commercial concerns who have chosen to arbitrate pursuant to a
commercial contract; accordingly there will often be less need to make allowances for inequality
between the parties. Third, judges have to consider how much of the courts finite and publicly
funded resources should be spent on a particular case with regard to the interests of other litigants
in the queue. In contrast, an arbitrators authority derives from the fact that he was appointed by
the parties for the express purpose of spending time to resolve their dispute. He should not accept
an appointment if he cannot find adequate time to deal with the case, and accordingly the issue of
appropriate allocation of time between appointments should not cause conflict. However, the
principle of proportionality will apply in arbitration in accordance with section 33 of the 1996 Act
(i.e. choosing a fair procedure and avoiding unnecessary delay or expense) so that an arbitrator
can decide on the most appropriate procedure for a particular case depending on its size,
significance and complexity. In addition, hearing dates will generally depend on the tribunals
other commitments.
A final note of caution in case management arises from the fact that the CPR requires the parties
to put substantial work into a case at the outset in identifying the issues and the merits of the case.
This front-loading effect means that high costs are incurred at an early stage. The CPR also
requires the parties to stick to the courts timetable and streamlining measures. Most parties will
favour the efficiency of this approach but the fast track is not always the best track;28 some may
choose arbitration for a more flexible and thorough approach; if that preference is agreed it should
be respected by the tribunal.

8. ARBITRATION AND THE HUMAN RIGHTS ACT 1998

The Human Rights Act 1998 came into force in English law on 1 October 2000 and comparatively
quickly it began to have an impact, however modest, in maritime arbitration.29 The purpose of the
Human Rights Act is to give effect, within English law, to the rights and freedoms protected by
the European Convention on Human Rights. This Convention is an international treaty drawn up

in the aftermath of the atrocities of the second world war and the European Court of Human
Rights in Strasbourg was set up to protect the rights recognised.
The Convention is directed towards giving the individual (including legal persons such as bodies
corporate) rights which are enforceable against public authorities. Accordingly, commercial
arbitration will very rarely involve substantive Convention rights such as freedom of speech since
arbitration is normally between private parties and concerns issues of private lawtypically
contractual claims. However, the right to a fair hearing is a fundamental human right and its scope
is fairly often disputed in a commercial disputeusually in procedural issues such as whether
certain evidence should be admitted. Article 6(1) of the Convention provides that everyone is
entitled to a fair and public hearing within a reasonable time by an independent and impartial
tribunal established by law. The Human Rights Act has not, however, had any significant effect
on confidentiality and procedural autonomy in arbitration because, in accordance with the
Strasbourg jurisprudence, the parties choice of arbitration amounts to a renunciation of the
guarantees of a public court procedure given by Article 6(1).30 Consideration was given to this
issue in a non-maritime context inDepartment of Economics Policy & Department of the City of
Moscow v Bankers Trust Co.31 For similar reasons the existing statutory restrictions on access to
court would probably be treated as compatible with the Human Rights Act, in particular since
mandatory procedural safeguards are maintained under the 1996 Act.32
There have been attempts to argue that arbitration clauses as a whole should be found contrary to
Article 6 of the Convention because they restrict access to a court hearing. Such attempts have
been unsuccessful because Convention jurisprudence accepts that, by agreeing to arbitrate, parties
waive their rights to a court hearing under Article 6(1).
In Stretford v Football Association,33 the Court of Appeal considered an argument that an
arbitration clause in respect of disciplinary proceedings under the FA Premier League Rules (and
the disciplinary proceedings carried out thereunder) were contrary to Article 6. The Court of
Appeal found, however, that the Arbitration Act 1996 complied with the requirements of Article
6. The only Article 6 requirements not formally met by the Act were those that the hearing be held
in public, that the tribunal members be independent, that the tribunal be established by law and the
judgment be pronounced publicly. However, by entering into the arbitration agreement
voluntarily, the parties thereto were to be considered as having waived their Article 6 rights,
provided that the waiver was agreed without constraint and was not contrary to any important
public interest. English law itself protected parties from such constraint, and further provided for
the courts to put right any partiality or lack of procedural fairness.
Similarly in El Nasharty v J Sainsbury plc,34 Tomlinson J rejected the argument that an arbitration
agreement was in breach of Article 6 by depriving the parties of access to the courts. Further, an
argument that one party could not now afford the costs of arbitration, and therefore was being
deprived of access to justice, was rejected. In Sumukan Ltd v Commonwealth
Secretariat 35 Colman J considered that an exclusion agreement precluding appeals under section
69 of the Arbitration Act, was not in breach of Article 6. The case continued to the Court of
Appeal, but on different points.36

The Human Rights Act has more commonly been invoked to challenge legislation and practice
relating to proceedings linked to arbitration. The courts have taken a robust but carefully
considered approach to such human rights points and have generally found that English law is
compatible with Convention rights. For example, the civil procedure rules provide that most
arbitration claims are heard in private and these rules were carefully considered and upheld
inDepartment of Economics Policy & Development of the City of Moscow v Bankers Trust
Co.37 The rule that applications for permission to appeal are ordinarily decided without an oral
hearing has also been upheld.38 However, some practices have changed in light of the Human
Rights Act, in particular judges now give reasons for their decision on an application for
permission to appeal under section 69 of the 1996 Act.
In North Range Shipping Ltd v Seatrans Shipping Corporation 39 Steel J had refused to give full
reasons for refusing permission to appeal from an award, instead referring simply to the statutory
grounds for refusing permission. The applicants argued that under the Human Rights Act 1998 the
court should give full reasons in accordance with Strasbourg jurisprudence on the right to a fair
hearing under Article 6(1). The Court of Appeal upheld Steel Js decision but held that the
practice of giving no reasons established in The Antaios 40 was incompatible with the Human
Rights Act. At the very least, the unsuccessful applicant for permission should be told which of
the statutory tests he had failed to meet. Whether or not the judge must go further and explain why
the test was not satisfied would depend on the circumstances, but very brief reasons would be
sufficient.41
Statutory restrictions on court intervention have also been challenged but have been found to be
compatible with the Human Rights Act because they reflect the parties choice, in the interests of
finality, privacy and efficiency, to waive their rights to have a public court hearing in favour of
having an arbitrator decide their dispute. In addition, the courts have been willing to uphold
statutory restrictions because the 1996 also maintains mandatory procedural safeguards.42 For
instance, the tribunal is under a mandatory duty to act fairly and impartially between the
parties43 and the Court of Appeal has a residual jurisdiction to intervene to prevent arbitrariness in
a judges decision making.
In Republic of Kazakhstan v Istil Group Ltd 44 the Court of Appeal had to consider whether the
restrictions on appeals in section 67(4) of the 1996 Act45 were compatible with the right to fair
trial set down in Article 6 of the Convention. It decided that section 67(4) was both legitimate and
proportionate, in that it was legitimate for Parliament to seek to restrict further appeals and that it
was proportionate to limit second appeals to those cases where the judge found there to be a
reasonable prospect of success. A further safeguard in the interests of fairness was provided in that
it was open to the Court of Appeal to review the fairness of the decision making process engaged
in under section 67(4). This exception, which is meant to provide an effective safety net, derives
from CGU International Insurance plc v AztraZeneca Insurance Co Ltd,46 where it was alleged
that the procedure in reaching the decision was so flawed that the decision could not be properly
called a decision at all. Intervention under this residual jurisdiction would, however, be
exceptional since it requires a substantial defect in fairness, going beyond even perversity, such
that the decision is invalidated. A residual jurisdiction to this effect was considered by the court to
have existed prior to the Human Rights Act in any event.

These decisions show that the law of arbitration is subject to the Human Rights Act but substantial
changes in law and practice have been relatively limited.
The applicability of the Human Rights Act within the arbitral process itself has not been fully
tested but the Act will probably be applicable in an arbitration governed by English law by reason
of an arbitrators implied duty to apply the law. If English law applies to the substance of the
dispute, arbitrators would be required to interpret legislation compatibly with Convention rights
and to recognise the unlawfulness of public authorities violating Convention rights.47 A tribunals
failure to apply these principles of law would render the award potentially challengeable for an
error of law. More controversial is whether an arbitral tribunal is under a duty to act compatibly
with Convention rights in making procedural decisions, for example in admitting evidence which
was obtained in breach of the parties right to privacy.48
The full impact of the Human Rights Act on arbitration will depend on the development of human
rights principles by the courts. Human rights issues are becoming increasingly important in
commercial disputes in the same way that European Community points have become increasingly
relevant in what might once have been regarded as purely domestic cases. The case law on Article
6(1) (both from Strasbourg and the English courts) is increasingly invoked in arbitration cases.49

9. ARBITRATION AND EUROPEAN COMPETITION LAW

If a competition law issue arises in a London maritime arbitration it will usually be governed by
English law and accordingly will depend on principles of European competition law which now
govern English law in this area. This book does not propose any in-depth treatment of European
competition law (or any other anti-trust rules) but rather attempts a brief introduction to the
growing relationship between this field and maritime arbitration.
Substantive European competition law is contained in Articles 81 and 83 of the EC Treaty. The
basic principle under EU law is that competition law prohibits anti-competitive agreements and
the abuse of a dominant position. Until fairly recently the main means of enforcing competition
law was by means of investigation by national competition authorities such as the Office of Fair
Trading or the European Commission. Pursuant to Regulation 01/2003, increased power to apply
competition law was devolved from the European Commission to national competition authorities
and courts of the EU Member States. However, Articles 81 and 83 have direct effect in English
law and are therefore enforceable in an arbitration governed by English law. The most common
issue to arise in an arbitration is the enforceability and effect of an agreement that breaches
competition law.
At the outset an issue may arise as to the very arbitrability of such issues. Historically, some
jurisdictions held that competition claims were not properly arbitrable since they raised issues of
public policy that could not properly be determined in a private arbitration.50 However, it is now
firmly established that competition issues are arbitrable under English law.51 Competition issues
do, however, raise particular problems in the context of arbitration. First, an arbitral tribunal will
not be able to provide the range of remedies available to official competition regulators (e.g. fines
or exemptions). In addition, competition issues may often require extensive disclosure and
complex expert economic evidence which may be costly and unfamiliar to most maritime
arbitrators. Issues of competition law will also commonly involve third parties that may not easily

be bound by the arbitral process.52 However, notwithstanding these problems, an arbitral tribunal
should generally address a competition issue where it arises since otherwise its award may be
unenforceable. The European Court of Justices key ruling in Eco Swiss China Time
Ltd v Benetton International BV 53 has had a significant, and controversial, impact on arbitration
law in this respect.
The Eco Swiss case concerned a dispute over a licence to make watches with the Benetton name.
Benetton unilaterally terminated the agreement, and subsequently an arbitration was commenced
to determine whether Benetton was in breach of its obligations under the licence agreement.
During the arbitration neither the parties nor the tribunal raised the issue of whether the agreement
was in accordance with European competition law. The arbitrators made two awardsa partial
and final awardboth of which found against Benetton. Benetton subsequently applied to the
Dutch courts for annulment of both awards on the grounds that they should be considered contrary
to Dutch public policy, as the original licence agreement was contrary to European competition
law. The matter went to the Dutch Supreme Court, who sought guidance from the European Court
of Justice as to whether a national court should grant annulment of an arbitration award if the
national court determined that the award was contrary to European competition law.
The European Court of Justice concluded that Article 81 was a matter of public policy. Therefore,
where a domestic court should, according to its own rules, annul an arbitration award on the
grounds of failure to comply with national public policy, it should similarly annul an award if it
failed to comply with Article 81. Further, the European Court held that competition law rules
should be considered as public policy for the purposes of Articles V(1)(c) and (e) and II(b) of the
New York Convention, and therefore national courts should refuse recognition and enforcement of
awards which did not comply with competition law. However, the court did not decide whether
arbitrators should be obliged to raise competition law issues of their own volition if they were
relevant to the dispute before it.
This last issue has caused some controversy, and no clear position seems to have been reached in
England on this subject. Given the paucity of published arbitration awards, uncovering the
reasoning and positions adopted by arbitral tribunals faced with this problem is difficult. Insofar as
a tribunal fails to consider competition law points (even if not raised by the parties), it may render
an award that is ultimately unenforceable, and therefore may be remiss in its duty to render an
enforceable award.54 However, maritime arbitrators may be reluctant to deal with competition law
issues which frequently involve a quasi-public economic analysis outside their normal experience.
This factor should be taken into account when appointing arbitrators, if a familiarity with
competition law would be advantageous in the context of the arbitration.55 Arbitration tribunals do
not have the ability to seek guidance from the European Court of Justice in the way that is open to
national courts.56 Similarly, if a tribunal sought guidance from the European Commission it could
place itself in breach of its obligation of confidentiality to the parties. However, pursuant to
section 37 of the Arbitration Act 1996, the tribunal could appoint an expert to provide it with
appropriate advice.
Parties approaching an arbitration involving competition elements must also consider whether the
remedies which an arbitral tribunal can provide are apt to deal with competition law problems. For
instance, insofar as a party is alleging that there is some form of anti-competitive collusion

between one party to the arbitration and a third party, the arbitral tribunal has extremely limited
scope in providing remedies that could bind the third party.57
It is difficult to ascertain the frequency with which competition issues are arising in London
maritime arbitrations, given the confidentiality of awards. However, the ambit of competition law
is expanding in the maritime field and there is an increasing scope for issues to arise. This is
particularly the case in respect of joint venture agreements in the field of maritime law, and
disputes involving slot chartering.58 Parties may find that this is an area which increasingly needs
to be addressed in the context of maritime arbitration, and both practitioners and the arbitrators
they appoint need to be live to the issues and pitfalls that this may create.
1 Bruce Harris, [1995] ADRLJ 18 at 19.
2 See the statistics regularly published in the LMAA Newsletter.
3 www.lmaa.org.uk. The LMAA can be contacted via the Honorary Secretary. Personal details of
said Honorary Secretary may change and therefore reference should be made to the website.
4 The Myron (Owners) v Tradax Export SA, The Myron [1969] 1 Lloyds Rep 411, at
415, Rahcassi Shipping Company SA v Blue Star Line Ltd, The Bede [1967] 2 Lloyds Rep 261.
5 For the meaning of commencing arbitration, see section 14 of the 1996 Act and Chapter 10 on
appointments.
6 Fal Bunkering of Sharjah v Grecale Inc of Panama [1990] 1 Lloyds Rep 369, 373.
7 [1990] 1 Lloyds Rep 369. At the time of the decision arbitrators only had the power to grant
security for costs if this was agreed by the parties.
8 Saville J at 373 made an analogy with Clarke v Dunraven [1897] AC 59 where competitors in a
regatta had each agreed with the secretary of the yacht club to obey certain rules during the race. It
was held that there was a contract on those rules between the competitors.
9 The last sentence of paragraph 5 of the LMAA Terms would support this view.
10 The issue of when an arbitration is treated as commenced is considered in Chapter 10. See
section 14 of the 1996 Act.
11 China Agribusiness Development Corporation v Balli Trading [1998] 2 Lloyds Rep
76; Perez v John Mercer & Sons (1922) 10 Ll L Rep 584; Bunge SA v Kruse [1979] 1 Lloyds
Rep 279 and EDM JM Mertens & Co PVBA v Veevoeder Import Export Vimex BV [1979] 2
Lloyds Rep 372 at 383.
12 Ranko Group v Antarctic Maritime SA [1998] LMLN 492, see transcript of 12 June 1998.
13 Bunge SA v Kruse [1979] 1 Lloyds Rep 279 at 286.
14 See statistics in the LMAA Newsletter.
15 LMAA Handbook, commentary on the Small Claims Procedure.

16 The fee level will be published on the LMAA website and in the LMAA Newsletter. As of July
2008, the fee stands at 2,000, with an additional fee of 1,250 where there is a counterclaim
which exceeds the amount of the claim.
17 The disclosure aspect of the Small Claims Procedure will probably be viewed similarly to
paragraph 9 of the Second Schedule to the LMAA Terms (2006) which provides that a party will
only be required to disclose the documents on which it relies or which adversely affect its own
case as well as the documents which either support or affect the other partys case. It is likely that
a similar test will be applied in practice in the Small Claims Procedure.
18 As of July 2008, the limitation on costs stands at 2,750 or 3,250 where the counterclaim
exceeds the amount of the claim (3,000 for arbitrations commenced before 1 July 2008).
19 This is an appeal under section 69 of the 1996 Act, challenge under sections 67 and 68 cannot
be excluded by agreement.
20 See LMAA Statistics (e.g. LMAA Newsletter Spring 2000, Autumn 2001).
21 See www.lmaa.org.uk for details.
22 In deciding whether the counterclaim is distinct from the claim the tribunal is likely to use the
same principles that are in applicable in deciding whether to award security for the costs of a
counterclaim, see Chapter 17.
23 Paragraph 1.3 of Part 1 of the CPR.
24 CPR Part 62 supplemented by the Arbitration Practice Direction.
25 Patel v Patel [2000] QB 551.
26 For example, Harris, Planterose and Tecks, The Arbitration Act 1996. A Commentary (4th edn),
p. 289, see also the award set out in Eastrade Commodities Inc v Gannet Shipping Ltd [2002] 1
Lloyds Rep 713.
27 Petroships Pte Ltd v Petec Trading & Investment Corporation of Vietnam, The Petro
Ranger [2001] 2 Lloyds Rep 348 at 358.
28 Mustill & Boyd, 2001 Companion, p. 32.
29 Mousaka Inc v Golden Seagull Maritime Inc [2001] 2 Lloyds Rep 657, upheld on appeal
in North Range Shipping v Seatrans Shipping Corporation [2002] EWCA Civ 405; [2002] 2
Lloyds Rep 1.
30 Deweer v Belgium, A/35, 27 February 1980, (1980) 2 EHRR 439, E Ct HR, paragraph
49, Stretford v Football Association [2007] EWCA Civ 238; [2007] 2 Lloyds Rep
31, Department of Economics Policy & Development of the City of Moscow v Bankers Trust
Co [2004] EWCA Civ 314; [2004] 2 Lloyds Rep 179, para 27. For further discussion see Mustill
& Boyd, 2001 Companion, pp. 76-79, C. Ambrose, Arbitration and the Human Rights Act 1998
[2000] LMCLQ 468 at 481-483.
31 [2003] EWHC 1377 (Comm); [2003] 1 WLR 2885 and on appeal at [2004] EWCA Civ 314;
[2004] 2 Lloyds Rep 179.

32 Notably in sections 24, 33 and 68. In Mousaka Inc v Golden Seagull Maritme Inc [2001] 2
Lloyds Rep 657, it was common ground that the statutory restrictions on the right to appeal from
an award under section 69 of the 1996 Act were consistent with Article 6(1). The requirement of
independence in addition to impartiality was rejected in the 1996 Act as unnecessary and
undesirable in arbitration, see paragraph 101 of the DAC Report.
33 [2007] EWCA Civ 238; [2007] 2 Lloyds Rep 31.
34 [2007] EWHC 2618 (Comm); [2008] 1 Lloyds Rep 360.
35 [2006] 2 Lloyds Rep 54; [2006] EWHC 304.
36 [2007] EWCA Civ 1148; [2008] 1 Lloyds Rep 40. An arbitration clause providing for
arbitrators to be drawn from a religious class was upheld in Jivraj v Hashwani [2009] EWHC
1364 (Comm).
37 [2004] EWCA Civ 314; [2004] 2 Lloyds Rep 179, for further discussion of the case see
Chapter 13 on confidentiality.
38 Section 69(5) of the 1996 Act. The absence of an oral hearing for determining an application
for permission to appeal was regarded as compatible with Convention rights in BLCT (13096)
Ltd v J Sainsbury plc [2003] EWCA Civ 884; [2004] 1 CLC 24.
39 [2002] EWCA Civ 405; [2002] 2 Lloyds Rep 1, upholding the decision in Mousaka
Inc v Golden Seagull Maritime Inc [2001] 2 Lloyds Rep 657.
40 Antaios Compania Naviera SA v Salen Rederierna AB [1985] 1 AC 191.
41 The Court of Appeals decision that it had residual jurisdiction to intervene in North Range
Shipping was confirmed in CGU International Insurance plc v AstraZeneca Insurance Co
Ltd [2006] EWCA Civ 1340; [2007] 1 Lloyds Rep 142; [2006] 2 CLC 441.
42 See Stretford v Football Association [2007] EWCA Civ 238; [2007] 2 Lloyds Rep at 31
and Republic of Kazakhstan v Istil Group Ltd [2007] EWCA Civ 471; [2007] 2 Lloyds Rep 548.
In Mousaka Inc v Golden Seagull Maritime Inc [2001] 2 Lloyds Rep 657 it was common ground
that the statutory restrictions on the right to appeal from an award under section 69 of the 1996
Act were consistent with Article 6(1).
43 The requirement of independence in addition to impartiality in Article 6 was not
incorporated into the 1996 Act because it was regarded as unnecessary in arbitration, see
paragraph 101 of the DAC Report.
44 [2007] EWCA Civ 471; [2007] 2 Lloyds Rep 548.
45 Section 67(4) provides that: The leave of the court is required for any appeal from a decision
of the court under this section.
46 [2006] EWCA Civ 1340; [2006] 2 CLC 441; [2007] 1 Lloyds Rep 142, see also ASM Shipping
Ltd of India v TTMI Ltd of England [2006] EWCA Civ 1341; [2007] 1 Lloyds Rep 136.
47 Human Rights Act 1998, sections 3 and 6, Arbitration Act 1996, section 46.

48 C. Ambrose, Arbitration and the Human Rights Act 1998 [2000] LMCLQ 468, see, also, Al
Hadha Trading Company v Tradigrain SA [2002] 2 Lloyds Rep 512.
49 Department of Economics Policy & Development of the City of Moscow v Bankers Trust
Co [2004] EWCA Civ 314; [2004] 2 Lloyds Rep 179.
50 E. Lecchi, M. Cover, Arbitrating Competition Law Cases [2008] Arbitration 65.
51 ET Plus SA v Welter [2005] EWHC 2115 (Comm); [2006] 1 Lloyds Rep 251, paragraph 51.
52 See Chapter 15 on third parties.
53 Case C-126/97 [1999] ECR I-3055; [1999] 2 All ER (Comm) 44.
54 P. Landolt, Modernised EC Competition Law in International Arbitration (Kluwer, 2006) No.
7-122.
55 H. van Houtte, Arbitration and Articles 81 and 82 EC TreatyA State of Affairs, ASA
Bulletin, 23/3 (2005); P. Lomas, Arbitration: Jurisdiction over EC Competition Law
Issues (Practical Law, 2004).
56 Nordsee Deutsche Hochseefischerei GmbH v Reederei Mond Hochseefischerei Nordstern AG
& Co KG Case C-102/91 [1982] ECR 1095.
57 See Chapter 15 on third parties.
58 C. Hancock QC, Containerisation, Slot Charters and the Law, Chapter 14 in Legal Issues
Relating to Time Charterparties (2008), Ed. Professor D. Rhidian Thomas.

Chapter 2

The Arbitration Act 1996

The Arbitration Act 1996

1. Introduction
2. History
3. Aims
4. Application
5. Interpretation
6. Time limits

1. INTRODUCTION
Most maritime arbitration in London will be governed by the Arbitration Act 1996 (the 1996
Act). This statute came into force on 31 January 1997. It was innovative in many respects,
particularly in setting out a fresh statement of the law and imposing duties on the tribunal to adopt
efficient procedures. The 1996 Act also maintained many of the established features of the English
system, for instance appeals for errors of law. Its main hallmarks are party autonomy and

minimising court intervention. However, many provisions apply as a matter of public interest
regardless of the parties agreement: for example the tribunals duty to act fairly and impartially.
Overall, the 1996 Act has been extremely successful. There is now less anxiety that the English
system is losing ground to competing jurisdictions. Those who use arbitration have generally
responded favourably to the 1996 Act, due largely to the fact that it reflected careful consultation.
For example, a 2006 survey of arbitration users carried out by Bruce Harris for the Commercial
Court Users Committee, the British Maritime Law Association and the London Shipping Law
Centre concluded that the Act is working well. In particular, the authors of the survey concluded
that, despite some unfavourable commentary about the appeals process under the Act (and the
general perception that it had become too difficult to obtain permission to appeal, with the result
that English maritime law was being starved of nourishment), most users felt that it was
effective. The only area of dissatisfaction related to jurisdictional issues, where a significant
proportion of users felt that the arbitral tribunal should have the power to rule finally (i.e., without
review by the courts) on their own jurisdiction. The survey is available on the International
Dispute Resolution Centre website (www.idrc.co.uk). There has been a substantial amount of
litigation under the 1996 Act but its drafting has generally withstood tests except for one error
regarding rights of appeal.1 Overall, the law has settled down remarkably quickly, due in part to
the courts respect for the approach adopted by the Departmental Advisory Committee on
Arbitration Law (the DAC).

2. HISTORY

The Mustill Report

The starting point for the 1996 Act was the 1989 Mustill Report2 produced by the Departmental
Advisory Committee on Arbitration Law (the DAC) under the chairmanship of Lord Justice
Mustill (now Lord Mustill). The DAC had been asked to consider reform of English law, in
particular whether the UNCITRAL Model Law on International Commercial Arbitration (the
Model Law) should be adopted. The Model Law is a statement of rules and principles of
arbitration adopted in 1985 by the United Nations Commission on International Trade Law
(UNCITRAL). It has been implemented in many countries, including Scotland. The Mustill
Report recommended against the adoption of the Model Law on the grounds that English law on
arbitration was sufficiently well developed and satisfactory to its users; the practical disadvantages
of enacting the Model Law would outweigh its potential advantages. The Mustill Report also
decided that radical changes to the content of English arbitral law were not needed. However, it
indicated that the existing law was unsatisfactory since it was mostly found in case law only
accessible to specialist lawyers. The statute law which did exist was dispersed in the Arbitration
Acts of 1950, 1975 and 1979 and various amending statutes such as the Limitation Acts. The old
statutes provided a disjointed and illogically arranged set of rules which were often drafted in
complex terms incomprehensible to the layman.
Recommendations for reform were set out in paragraph 108 of the Report:
In these circumstances we recommend an intermediate solution, in the shape of a new Act with a
subject-matter so selected as to make the essentials of at least the existing statutory arbitration law

tolerably accessible, without calling for a lengthy period of planning and drafting, or prolonged
parliamentary debate. It should in particular have the following features:

(1) It should comprise a statement in statutory form of the more important principles of the
English law of arbitration, statutory and (to the extent practicable) common law.
(2) It should be limited to those principles whose existence and effect should be
uncontroversial.
(3) It should be set out in a logical order, and expressed in language which is sufficiently clear
and free from technicalities to be readily comprehensible to the layman.
(4) It should in general apply to domestic and international arbitrations alike, although there
may have to be exceptions to take account of treaty obligations.
(5) It should not be limited to the subject matter of the Model Law.
(6) It should embody such of our proposals for legislation as have by then been enacted.
(7) Consideration should be given to ensuring that any such new statute should, so far as
possible, have the same structure and language as the Model Law, so as to enhance its
accessibility to those who are familiar with the Model Law.

The Report recommended that the proposed legislation should not attempt to codify the entire
English law of arbitration or provide a restatement in the style of the American Restatements, but
it should do more than merely consolidate the existing statutory provisions since mere
consolidation would leave many important principles hidden in the law reports.

The Marriott Working Group

The initiative towards a new arbitration act was taken up by Mr Arthur Marriott QC who led a
group of lawyers and arbitral institutions (the Marriott Working Group) in a project for the
privatised drafting of the new statute.3 They commissioned Mr Basil Eckersley, a distinguished
arbitrator and barrister, to draft a bill. His work was widely approved by the arbitration industry.
However, in order to obtain the necessary Government support for enactment it was essential that
a new statute should be drafted by a lawyer trained as a parliamentary draftsman. The DAC
recommended that the Department of Trade and Industry should carry the work forward as a
Government bill. This recommendation was taken up by the President of the Board of Trade
(Michael Heseltine MP) in April 1992 and the work was taken forward as a public project under
the supervision of the DTI. The project was carried on with the assistance of the DAC, including
members of the Marriott Working Group.

Work under the auspices of the Department of Trade and

Industry
A former parliamentary draftsman was instructed to prepare a new bill but his draft failed to
follow the structure of the Model Law. Another former parliamentary draftsman was instructed to
produce a consolidating measure.4 Her work was used as the basis for the draft bill which was
published in February 1994 with a consultation paper. The February draft was not warmly
received: many felt that a bolder approach than consolidation was needed and that the draft did
little to improve the accessibility of English arbitral law. It was felt that a new statute should give
clearer emphasis to party autonomy and the role of the courts in supporting the parties choice.

Both commentators and the DAC considered that it was essential to make the format and language
more user-friendly than that of the February 1994 draft.
Lord Justice Saville (now Lord Saville) took over the chair of the DAC from Lord Steyn in the
autumn of 1994 and, together with other members of the DAC, he personally undertook much of
the work involved in the new draft and a consultative paper (the July 1995 Consultative Paper).
Their draft was passed to a parliamentary draftsman, Mr Geoffrey Sellers, to produce the July
1995 draft. Following a consultation period over the summer, the Arbitration Bill was introduced
into the House of Lords in December 1995. In February 1996, the DAC published its Report on
the Arbitration Bill (the DAC Report). The Bill was supported by all parliamentary parties and
underwent the Public Bill Committee Procedure. This procedure, sometimes called the Jellicoe
Procedure, had only previously been used for Law Commission bills. It involved experts giving
evidence on the impact of the proposed statute at the committee stage in the House of Lords. The
Act received Royal Assent on 17 June 1996 and came into force on 31 January 1997.5

3. AIMS OF THE 1996 ACT

The DAC used the recommendations of paragraph 108 of the Mustill Report (set out above) as its
starting point in identifying its aims, but reinterpreted them to the extent that the Report had
expressly rejected a restatement of the English law of arbitration.6 In 1996 the DAC decided that a
bolder approach than consolidation was necessary and in its title the 1996 Act is expressly
described as an Act to restate and improve the existing statutory and common law rules. The
1996 Act aims to restate the basic principles of the English law of arbitration within a logical
structure: it is not an exhaustive code of the law; some aspects such as confidentiality were
deliberately omitted.7 Several fundamental objectives underpin the Act:8

to promote party autonomy: most of the provisions only come into play to support the
arbitration when the parties have not decided what should happen;
to respect the parties decision to choose a private tribunal rather than a court to resolve their
dispute;
to make arbitration a fair, speedy and cost-effective method of dispute resolution by an
impartial tribunal;
to limit court intervention to situations where it is obvious that the arbitral process needs
assistance or there is likely to be a clear denial of justice;
to follow the structure and content of the Model Law as far as possible;
to make the law accessible and user-friendly (plain English was favoured, Latin terms were
avoided, time limits were included alongside the provision to which they apply, provisions
relating to one topic have been located together under headings and recurring terms are
defined in one place).

Unusually, the general aims of the 1996 Act are enunciated as general principles at the outset.
These general principles are routinely referred to by the courts when interpreting the Act. Section
1 provides that:
The provisions of this Part are founded on the following principles and shall be construed
accordingly

(a) the object of arbitration is to obtain the fair resolution of disputes by an impartial tribunal
without unnecessary delay or expense;
(b) the parties should be free to agree how their disputes are resolved, subject only to such
safeguards as are necessary in the public interest;
(c) in matters governed by this Part the court should not intervene except as provided by this
Part.

The main impetus for the 1996 Act came from legal and commercial circles, with the aim of
safeguarding the position of London as a world centre for arbitration.9 The Act also implemented
wider policies: by making the law simpler and more accessible, it was hoped to ensure that
business had access to fair and efficient methods of resolving disputes.10 The Act was passed
following the publication of the Woolf Report11 (which ultimately led to far-reaching reform of
civil procedure, see Chapter 1) and may be perceived as a parallel projectalthough it was
initiated much earlier by the Mustill Report. In addition, the Act was intended to have
deregulatory benefits and encourage the competitiveness of the arbitration industry.12

4. APPLICATION OF THE 1996 ACT

Commencement
The title of Part I of the 1996 Act, Arbitration pursuant to an arbitration agreement, indicates
that it covers arbitration arising by agreement as opposed to compulsory arbitration imposed by
statute or otherwise. (Part I is the part of the Act that is relevant to maritime arbitration and
subsequent references to the Act are to that Part; Part II relates to other matters such as consumer
arbitration agreements, and Part III governs the enforcement of foreign awards). Section 84 makes
clear that the Act applies to arbitral proceedings commenced after it came into force on 31 January
1997 regardless of the date when the arbitration agreement was made.13 Thus the Act had limited
retrospective effect in that it could apply to an arbitration even though the parties agreement to
arbitrate was made before the Act was passed. The question then arose as to whether the Act
applied where no arbitral proceedings had been commenced, for instance where a party seeks a
stay of court proceedings or an extension of time to commence arbitration. The Act does not deal
with this expressly, but the statutory instrument by which it was brought into force makes clear
that it applies to any arbitration application made after 31 January 1997, whether or not arbitral
proceedings have been commenced.14

Relevance of the seat

However, not all arbitrations will be governed by the 1996 Act: they must have some connection
with the English legal system. This connecting factor is the seat of the arbitration: section 2(1) of
the Act provides that it applies where the seat of the arbitration is England, Wales or Northern
Ireland. The seat of the arbitration is ordinarily the place where the parties have agreed that it
should be held. However, the concept of the seat of an arbitration does not refer simply to its
geographical location; it connotes the legal place15 of the arbitration. By choosing the legal
place of the arbitration the parties choose the laws of that place to govern the arbitral proceedings.
Thus the parties could choose London as the seat of the arbitration so that the 1996 Act would

apply, but hearings could take place in other countries, perhaps for the convenience of witnesses
or the arbitrators.16 Section 3 goes on to explain that:
In this Part the seat of the arbitration means the juridical seat of the arbitration designated

(a) by the parties to the arbitration agreement, or

(b) by any arbitral or other institution or person vested by the parties with powers in that
regard, or
(c) by the arbitral tribunal if so authorised by the parties,

or determined, in the absence of any such designation, having regard to the parties agreement and
all the circumstances.
This provision is considered in more detail in Chapter 5, but as a general rule the choice of
London for arbitration will be treated as a designation of London as the seat of the arbitration, so
the 1996 Act will apply. Similarly, the choice of LMAA Terms17 or arbitration under the auspices
of an arbitral institution in London will usually mean that the 1996 Act applies to the arbitration.
In ABB Lummus Global Ltd v Keppel Fels Ltd 18 the parties to a shipbuilding contract had agreed
that disputes shall be referred to the London Court of International Arbitration. Disputes shall
be settled in accordance with Singapore Law. Clarke J held that this amounted to a choice of
London as the seat of the arbitration.
Certain provisions of Part 1 of the 1996 Act will apply even where the seat of the arbitration is not
in England, in particular sections 9 and 11. These provisions apply by reason of the UKs
international obligations under the New York Convention on the Recognition and Enforcement of
Foreign Arbitral Awards. The courts supportive powers under sections 43 and 44 (to secure the
attendance of arbitral proceedings and grant interim injunctions) will also apply even if the seat of
the arbitration is not in England or has not been designated unless the court considers this
inappropriate. The corollary of this is that, where an arbitration has a foreign seat, the English
court will not generally intervene to rule upon matters which would fall within the jurisdiction of
the courts at the foreign seat (e.g., injunctive relief. In this connection, section 44 of the Act is
intended to confer power on the English court to grant injunctions in support of arbitrations, not to
restrain the arbitration itself.19

Mandatory provisions
In accordance with the policy of enabling the parties to decide for themselves how the arbitration
should be handled the parties may contract out of most provisions of the 1996 Act. However,
some provisions are imposed mandatorily as a matter of public interest and, where the Act applies,
these will apply regardless of the parties agreement and are usefully listed in Schedule 1.20

5. INTERPRETATION OF THE 1996 ACT

The starting point in construing any statute is to give its words their plain, ordinary and natural
meaning. The court should generally give effect to the ordinary meaning of the words used by
Parliament without regard to evidence as to the statutes history or purpose. However, the court
will not adopt a literal approach to the language used. Most questions of interpretation will arise

where a statutes wording is open to more than one interpretation. In interpreting a statute the
court (or arbitral tribunal) should read it as a whole, taking into account the context and facts
known to Parliament when the statute was enacted.21 Thus the courts interpretative role may, in
exceptional cases, enable it to correct clear drafting errors where the parliamentary purpose is
clear.22 The court will also use the various canons of statutory interpretation that reflect common
sense and justice: for instance, a construction which leads to absurdity will be rejected.
Parliamentary materials such as Hansard may be referred to if there is ambiguity in the wording
which was dealt with in Parliament by the Government representatives promoting the legislation.23
These general principles apply to the 1996 Act although the courts have tended to take a
noticeably purposive approach to it. In particular, the courts have been willing to make decisions
on the basis of the spirit or philosophy of the Act.24 It is not surprising that a purposive
approach has been favoured because section 1 expressly sets out the principles upon which it is
founded, and against which it should be construed. This is unusual in an English statute and
demonstrates the firm intention to give effect to party autonomy and minimal court intervention.
In addition, the DAC Report is regarded as an extremely authoritative statement of the purpose of
the various provisions. The DAC recommendations were accepted by Parliament save for minor
drafting changes. Most of the judges who deal with arbitration cases have had practice in the area
and their general readiness to take a purposive approach probably reflects their agreement with the
underlying policy of the 1996 Act.
The drafters of the 1996 Act intended it to restate the law in a clear and accessible way so that it
is readily understandable to all those who are considering arbitration.25 This objective has been
achieved to a large degree, although inevitably there has been litigation as to the correct meaning
of parts of the Act. The proper construction of various provisions of the 1996 Act is considered
throughout this book. The general issues that have arisen concern the extent to which cases under
the old law remain relevant, the relevance of the Model Law in interpreting the 1996 Act and the
authority of the DAC Report.

Relevance of earlier case law

Section 81(1) expressly preserves the role of the common law by stating that Nothing in this Part
shall be construed as excluding the operation of any rule of law consistent with the provisions of
this Part. The DAC commented that it seems to us to be necessary to make clear that the
common law (so far as it is consistent with the Bill) will continue to make its great contribution to
our arbitration law, a contribution that has done much to create and preserve the worldwide
popularity of arbitration in our country. Thus, reliance on previous case law is possible where the
1996 Act does not deal with an issue, (e.g., confidentiality); or if it has left the issue open (e.g.,
regarding what is required for the incorporation of an arbitration agreement by reference to
another contract).26
However, where the Act does address a particular area, the proper approach to construing a
consolidating statute is to give the words their ordinary meaning without recourse to decisions on
the previous legislation unless real and substantial ambiguity arises which cannot be resolved by
the usual canons of construction.27 Approving the dicta of Thomas J, the House of Lords has
indicated that, in general, pre-Act authority is not relevant to its interpretation:28

It is also necessary to consider how the 1996 Act should be interpreted. In his speech already
cited Lord Wilberforce pointed out that Many laymen have to participate in arbitrations and many
arbitrations are conducted by people who are not lawyers (col 777). Can they realistically be
asked to interpret the 1996 Act in the light of pre-existing case law? Clearly not. In Seabridge
Shipping AB v AC Orssleffs EFTFs A/S [1999] 2 Lloyds Rep 685 at 690 Thomas J (now
Thomas LJ), a judge with enormous experience in this field, made valuable observations on which
I cannot improve. He said, at p 690:

One of the major purposes of the Arbitration Act 1996 was to set out most of the important
principles of the law of arbitration of England and Wales in a logical order and expressed in a
language sufficiently clear and free from technicalities to be readily comprehensible to the
layman. It was to be in user friendly language. (See the Report on the Bill and the Act made
by the Departmental Advisory Committee, published in Arbitration International, vol 13, at p
275.)
As this has been the actual achievement of the Act, it would in my view be a retrograde step if
when a point arose reference had to be made to pre-Act cases. Reference to such cases should
only generally be necessary in cases where the Act does not cover a pointas, for example,
in relation to confidentiality or where for some other reason it is necessary to refer to the
earlier cases. A court should, in general, comply with the guidance given by the Court of
Appeal and rely on the language of the Act. International users of London arbitration should,
in my view, be able to rely on the clear user-friendly language of the Act and should not
have to be put to the trouble or expense of having regard to the pre-1996 Act law on issues
where the provisions of the Act set out the law. If international users of London arbitration
are not able to act in that knowledge, then one of the main objectives of the reform will have
been defeated.

The reference to an earlier decision of the Court of Appeal is to Patel v Patel [2000] QB 551. I
would respectfully endorse the observation in Seabridge.
Despite, this, reliance on case law may be useful where the statute has enacted rules set out in case
law: for instance, section 7 states the common law principle of separability, and pre-Act
authorities were referred to by the House of Lords when construing this provision.29
In general, the courts have been pragmatic in relying on case law under the previous system where
it assists.30 This is justified on grounds of consistency and justice: the safe and well-known rule
of construction is to assume that the legislature when using well-known words upon which there
have been well-known decisions uses those words in the sense which the decisions have attached
to them.31

Recourse to the Model Law

The DAC Report maintained that the Model Law should not be adopted wholesale but that its
structure had been followed and many provisions of the 1996 Act reflected its content.32 The DAC
had adopted the policy of party autonomy and minimal court intervention that underlies the Model
Law. The DAC also recognised the need to make the English system more accessible to
international users and more competitive with other jurisdictions.33 The fact that many provisions
reflect the Model Law but do not reproduce its wording gives the courts wide discretion. In

some instances the court has relied on the wording of the Model Law,34 in others it has rejected it
on the basis that the same wording has not been adopted.35 Overall, however, the courts will take a
purposive approach where it is clear that a provision was intended to follow the Model Law.

Use of the DAC report

Under traditional principles of statutory interpretation preparatory materials such as the DAC
Report should only be taken into account where there is an ambiguity in the statutes
wording.36 However, in many cases relating to the 1996 Act the courts have made reference to the
Report and treated it as an authoritative statement as to the Acts meaning. In Cetelem SA v Roust
Holdings Ltd,37 the Court of Appeal described the DAC Report as a valuable aid to construction,
and referred to the many other cases where the courts had relied upon it.

6. TIME LIMITS
In the interests of speedy dispute resolution the 1996 Act gives effect to time limits for various
steps in an arbitration or for challenging an arbitral award. Different types of time limits can be
identified:

(a) time limits applicable to the making of an appeal or application to court (e.g., section
70(3) imposes a 28-day time limit from the making of an award for making an appealit is
considered in Chapter 22);
(b) time limits agreed by the parties for any matter relating to the arbitral proceedings (e.g.,
under paragraph 9 of the LMAA Terms each party is required to appoint an arbitrator not later
than 14 days after a request to do so);
(c) time limits specified in the 1996 Act applying to the arbitral proceedings in default of
agreement (e.g., section 17 imposes a 7-day limit for appointing an arbitrator).

Reckoning time limits

Court rules will apply in reckoning the time limits applicable to court applications so that the 28day period will not include the day on which the period begins.38 Thus if the award is dated 2 July,
the application must be made on or before 30 July. As regards time limits agreed by the parties or
time limits specified in the 1996 Act, the parties may agree on how time is reckoned, but in the
absence of agreement, section 78 applies. It provides that:

(3) Where the act is required to be done within a specified period after or from a specified
date, the period begins immediately after that date;
(4) Where the act is required to be done a specified number of clear days after a specified
date, at least that number of days must intervene between the day on which the act is done and
that date.
(5) Where the period is a period of seven days or less which would include a Saturday,
Sunday or a public holiday in the place where anything which has to be done within the
period falls to be done, that day shall be excluded.

Extension of time limits

The 1996 Act also allows for time limits to be extended in limited circumstances. The time limits
for making court applications under sections 67 to 69 of the 1996 Act apply regardless of the
parties agreement but it would be open for a party not to take a point on a late application
(although the court could still dismiss the application on grounds of it being out of time). The
court has power to extend these time limits under section 80(5). The principles governing its
discretion are discussed in more detail in Chapter 22.
Section 79 of the 1996 Act applies to the extension of time limits relating to the arbitral
proceedings which are agreed by the parties or specified in that Act.39 Section 79 provides:

(1) Unless the parties otherwise agree, the court may by order extend any time limit agreed
by them in relation to any matter relating to the arbitral proceedings or specified in any
provision of this Part having effect in default of such agreement.
This section does not apply to a time limit to which section 12 applies (power of court to
extend time for beginning arbitral proceedings, etc.)
(2) An application for an order may be made
o (a) by any party to the arbitral proceedings (upon notice to the other parties and to the
tribunal), or
o (b) by the arbitral tribunal (upon notice to the parties).
(3) The court shall not exercise its power to extend a time limit unless it is satisfied
o (a) that any available recourse to the tribunal, or to any arbitral or other institution or
person vested by the parties with power in that regard, has first been exhausted, and
o (b) that a substantial injustice would otherwise be done.
(4) The courts power under this section may be exercised whether or not the time has already
expired.
(5) An order under this section may be made on such terms as the court thinks fit.

In most cases extensions of time can be agreed or dealt with by the tribunal, only exceptional
cases should require court applications. However, the fact that the parties have agreed on a time
limit in the arbitration clause or institutional rules will not exclude the courts jurisdiction under
section 79.40 The requirement of substantial injustice leaves the court with a wide discretion as
to whether or not to grant an extension of time. Relevant considerations will include the parties
choice of arbitration as a speedy method of dispute resolution, whether the delay is excusable, the
amount at stake, the merits (if they are plain), and any prejudice caused by the delay.41
1 Inco Europe Ltd v First Choice Distribution [2000] 1 WLR 586.
2 [1989] 6 Arbitration International 1.
3 See Steyn LJ (as he then was) in [1994] 10 Arbitration International 1.
4 Denning Lecture [1995] 61 Arbitration 157 at 159.
5 The Arbitration Act 1996 (Commencement No 1) Order 1996.
6 Paragraph 107 of the Mustill Report [1990] 6 Arbitration International 36.
7 Paragraph 17 of the DAC Report.

8 See the Explanatory Memorandum accompanying the 1996 Bill, the July 1995 Consultative
Paper and the DAC Report generally.
9 Page 2 of the July 1995 Consultative Paper.
10 Page 1 of the July 1995 Consultative Paper.
11 Access to Justice: Interim Report to the Lord Chancellor on the Civil Justice System in
England and Wales by the Rt Hon the Lord Woolf, published in June 1995.
12 Page 2 of the July 1995 Consultative Paper.
13 The Arbitration Act 1996 (Commencement No 1) Order 1996the meaning of
commencement of arbitral proceedings is defined in section 14. See Chapter 10 on appointments.
14 The Arbitration Act 1996 (Commencement No 1) Order 1996.
15 ABB Lummus Global Ltd v Keppel Fels Ltd [1999] 2 Lloyds Rep 24 at 33, and Union of
India v McDonnell Douglas Corporation [1993] 2 Lloyds Rep 48 at 50, Dubai Islamic Bank
PJSC v Paymentech Merchant Services Inc [2001] 1 Lloyds Rep 65, Arab National Bank v ElAdbali [2004] EWHC 2381 (Comm); [2005] 1 Lloyds Rep 541, DAC Supplementary Report on
the Arbitration Act 1996, paragraph 11.
16 Section 34(2)(a) of the 1996 Act, Naviera Amazonica Peruana SA v Cia Internacional de
Seguros del Peru [1988] 1 Lloyds Rep 116 at 121.
17 Paragraph 6 of the LMAA Terms provides that the parties agree that the seat of the arbitration
is in England. (See Chapter 1 for the application of the Terms.)
18 [1999] 2 Lloyds Rep 24.
19 See Weissfisch v Julius [2006] EWCA Civ 218; [2006] 1 Lloyds Rep 716.
20 Section 4 of the 1996 Act, paragraph 19 of the DAC Report.
21 Black-Clawson International Ltd v Papierwerke-Waldhof Aschaffenburg AG [1975] 2 Lloyds
Rep 11 at 14.
22 Inco Europe Ltd v First Choice Distribution [2000] 1 WLR 586.
23 Pepper v Hart [1993] AC 593.
24 E.g., Patel v Patel [2000] QB 551; Henry Boot Construction (UK) Ltd v Malmaison Hotel
(Manchester) Ltd [2000] BLR 509.
25 Page 2 of the July 1995 Consultative Paper.
26 Section 6(2) of the 1996 Act, paragraph 42 of the DAC Report, Trygg Hansa Insurance Co
Ltd v Equitas Ltd [1998] 2 Lloyds Rep 439; Delos (Owners of cargo lately laden on
board) v Delos Shipping Ltd, The Delos [2001] 1 Lloyds Rep 703.
27 Sheldon v RHM Outhwaite (Underwriting Agencies) Ltd [1995] 2 Lloyds Rep
197; R v Environment Secretary ex p. Spath Holme Ltd [2001] 2 WLR 15.

28 Lesotho Highlands Development Authority v Impregilo SpA and others [2005] UKHL 43;
[2005] 3 WLR 219, per Lord Steyn at para 19.
29 Premium Nafta Products Ltd v Fili Shipping Company Ltd [2007] UKHL 40; [2008] 1 Lloyds
Rep 254; see also Seabridge Shipping AB v AC Orssleffs EFTFs A/S. [1999] 2 Lloyds Rep 685
at 690, where Thomas J referred to Patel vPatel [1999] 3 WLR 322.
30 E.g., Judge Toulmin QC relied on case law under the 1950 Act in R Durtnell & Sons
Ltd v Secretary of State for Trade and Industry [2001] 1 Lloyds Rep 275.
31 Greaves v Tofield (1880) 14 Ch D 563 at 571.
32 Paragraph 4 of the DAC Report and generally.
33 Page 2 of the July 1995 Consultative Paper. See also the Mustill Report, paragraph 108.
34 Patel v Patel [2000] QB 551; Federal Insurance v Transamerica Occidental Life Insurance
Co [1999] 2 Lloyds Rep 286.
35 Vosnoc Ltd v Trans Global Projects Ltd [1998] 1 Lloyds Rep 711; Trygg Hansa Insurance Co
Ltd v Equitas Ltd [1998] 2 Lloyds Rep 439.
36 Black-Clawson International Ltd v Papierwerke Waldhof Aschaffenburg AG [1975] 2 Lloyds
Rep 11; Mustill & Boyd 2001 Companion, page 68. The House of Lords in BTP Tioxide
Ltd v Pioneer Shipping Ltd [1982] AC 724 at 730 refused to consider the report that led to the
enactment of the Arbitration Act 1979.
37 [2005] EWCA Civ 618; [2005] 2 Lloyds Rep 494 at para 40
38 Section 80(5) of the 1996 Act, CPR Part 2, paragraph 2.8.
39 The DAC had originally intended that section 79 would apply to applications to court, see
paragraphs 294 and 382 of the DAC Report, DAC Supplementary Report on the Arbitration Act
1996, paragraph 41.
40 John Mowlem Construction plc v Secretary of State for Defence [2000] CILL 1655.
41 Gold Coast Ltd v Naval Gijon SA [2006] EWHC 1044; [2006] 2 Lloyds Rep 4000, Pirtek
(UK) Ltd v Deanswood Ltd [2005] EWHC 2301 (Comm); [2005] 2 Lloyds Rep 728, discussed
further in Chapter 19.

hapter 3

Mediation and Arbitration

Mediation and Arbitration

1. Introduction
2. Agreements to mediate
3. LMAA/Baltic Exchange Mediation Terms

4. Procedure
5. Confidentiality in mediation
6. The role of arbitrators in encouraging mediation
7. Costs implications of mediation
8. EU Directive 2008/52 on mediation

1. INTRODUCTION
Alternative dispute resolution (ADR) is a broad term covering methods of resolving disputes
without resort to adjudication by a court or arbitrator. ADR has become a prominent potential
alternative to these conventional methods of dispute resolution because the latter are increasingly
associated with unduly high costs. The term ADR is most commonly applied to procedures such
as mediation or conciliation where parties negotiate a settlement agreement with the assistance of
a neutral third party. Mediation and conciliation are the most common forms of ADR. Both terms
have broadly similar meaning and are often used interchangeably. Mediation has now become the
more common term (and the most common form of ADR) and accordingly this chapter deals
specifically with mediation.
The essential difference between arbitration and ADR is that in arbitration a binding decision is
imposed on the parties whereas the purpose of ADR is to enable the parties to reach their own
binding agreement. In ADR the parties remain in control of the outcome so that its success
depends on the parties cooperation and genuine willingness to compromise. The key features
shared by ADR and arbitration are that they are both confidential procedures used for resolving
disputes and they are entered into by agreement. In commercial disputes the neutral third party
(typically a mediator) will usually be chosen by the parties. This will generally be someone with
respected experience in the area of the dispute or mediation, or a senior lawyer. A number of
LMAA arbitrators act from time to time in this capacity. The mediator will invariably be paid a
fee agreed by the parties in advance, broadly based on the time spent in dealing with the case.
ADR in shipping disputes was relatively slow to become established. This reflected a view that if
compromise were a realistic possibility then this could usually be achieved without resorting to a
formal procedure. Parties sometimes considered that if they could not reach a commercial
settlement by themselves then mediation would be unlikely to succeedit would be a waste of
further time and money. However, perceptions have changed and parties are finding mediation
increasingly attractive. Parties now have more experience of mediation and recognise that a
formal procedure may be effective to resolve apparently unbridgeable differences. A reasonable
settlement will generally be more preferable for commercial parties than resolving a dispute by
arbitration. In particular the parties will have agreed on the outcome rather than having had a
decision imposed on them and where successful, mediation is invariably cheaper, quicker and less
damaging to commercial relations than arbitration. The costs consequences of refusing to mediate
(see below) have also become a further incentive for parties to attempt mediation.
This chapter is intended to provide a brief introduction to mediation in relation to resolving
disputes that would otherwise be determined in London arbitration. Reference to more detailed
works is recommended for discussion in more depth.1

2. AGREEMENTS TO MEDIATE OR USE ADR

Mediation agreements in shipping contracts are relatively rare. Most shipping contracts contain a
relatively simple arbitration clause and if the parties decide to mediate after a dispute has arisen
then they will conclude an additional mediation agreement. At this stage parties will often use
institutional mediation rules (such as the LMAAs 2009 Mediation Terms) or use a standard form
mediation agreement, possibly amended to cover any specific needs of the parties. The mediator
chosen may even suggest using his own standard agreement. These agreements or mediation rules
will usually cover matters such as the appointment process, the mediators fees, costs,
confidentiality and the termination of the mediation process. It may be useful to agree to suspend
limitation periods during the mediation process (particularly in shipping disputes with short timebar periods). Ordinary contractual principles govern such agreements.
Some parties will include more complex dispute resolution clauses in their contracts, sometimes
called hybrid clauses or escalation clauses, that will provide for different methods of dispute
resolution. Typically they will provide for one or more alternative dispute resolution procedures to
be adopted by the parties to precede any arbitration. The wordings of such clauses vary
enormously, but often provide for the following as a precursor to arbitration:

the parties to negotiate in good faith;2

the chief executives of each party to meet and endeavour to resolve the dispute amicably;3
reference of a dispute for expert determination;4
mediation under specific institutional rules.5

The parties may also agree that some disputes are referred to arbitration and others to a different
form of dispute resolution. The effect of any of these types of clauses will depend largely on their
wording and care should be taken when drafting them to ensure that they have the intended effect.
Where possible, the courts will modify the arbitration provisions to give effect to the intentions of
the parties and to ensure that the clause works sensibly.6
The most common issue that arises in relation to these types of clauses is whether the initial
procedure is a condition precedent to the right to arbitrate. This will raise questions as to whether
provisions for such procedures are enforceable. The traditional position under English law is that
agreements to negotiate are not binding because they lack sufficient certainty to be
enforced.7 However, the courts are becoming increasingly willing to give effect to the parties
intentions in this type of clause8 and have recognised the benefits of mediation. Accordingly the
courts will give effect to provisions that parties use specific procedures such as mediation,9 or
expert determination,10 but will not give effect to more vague or general undertakings to negotiate.
In Holloway v Chancery Mead Ltd 11 Ramsey J put the requirements fairly high in suggesting that
an ADR clause would be treated as enforceable if it met the following three requirements: First,
that the process must be sufficiently certain in that there should not be need for an agreement at
any stage before matters can proceed. Secondly, the administrative processes for selecting a party
to resolve the dispute and to pay that person should also be defined. Thirdly, the process or at least
a model of the process should be set out so that the detail of the process is sufficiently certain.
Ramsey Js comment was obiter and the suggested requirements are unlikely to be applied rigidly.
In practice the requirements will usually be satisfied by the choice of institutional rules for the
mediation (such as LMAA or CEDR rules) and the most important consideration in deciding

whether the agreement to mediate is enforceable is whether it is sufficiently well defined that it
can be clearly determined whether a party has complied.
Even if the ADR provision is enforceable in principle, a further issue that may arise is whether it
is appropriate for a tribunal to stay the arbitration or court proceedings while the parties comply
with the contractual provisions on mediation. This will be a matter of discretion and will depend
on factors such as whether the mediation has any prospect of success, whether there has been
undue delay in raising the point and whether the costs of mediation would be disproportionate.
In Cable & Wireless plc v IBM United Kingdom Ltd 12 the parties had agreed an escalation clause
under which the parties agreed to submit disputes to negotiation by senior executives, failing
which the parties shall attempt in good faith to resolve the dispute or claim through an ADR
procedure as recommended to the parties by CEDR (a mediation organisation). Colman J was
willing to give effect to this clause by ordering a stay of proceedings while the parties complied
with the agreement on ADR. The ADR procedure could be completed within a few weeks with no
material prejudice to either party. In the event that ADR was unsuccessful the parties could
reinstate the claim. He considered that the parties agreement on CEDR mediation was of
sufficient certainty for the court to ascertain whether it had been complied with and that as a
matter of public policy, as endorsed by the rules of civil procedure, the courts should be giving
effect to parties agreements to mediate.13
Sometimes failure to complete a procedure intended as a precursor to arbitration will be raised as
a challenge to the jurisdiction of any arbitral tribunal appointed under the clause. This type of
challenge would raise issues as to the effectiveness of the agreement to mediate (see above) and
whether the intended procedure was a condition precedent to the right to arbitrate. It will be
relatively rare that non-compliance with an agreement to mediate can be successfully raised as a
ground for challenge to an arbitration award, since normally a party will have lost the right to
object by failing to raise the objection at the outset.14
Another issue that arises is whether the court or the arbitral tribunal should decide on the legal
effect of such clauses. Any question as to whether an ADR clause affects the jurisdiction of an
arbitral tribunal would ordinarily be ruled upon by the tribunal in the first instance with the
possibility of subsequent application to court under section 67 of the 1996 Act.15 However, the
court would be willing to rule on such issues where this would be most practical, typically where
the matter is likely to fall for determination by the court in any event or the tribunal has not yet
been appointed.16
In Holloway v Chancery Mead Ltd,17 the parties disagreed as to the meaning of a construction
contract arbitration clause which required claims to be referred to a dispute resolution service
before any arbitration was commenced. Ramsey J rejected an argument that this issue was to be
determined by the tribunal: it would be unfair if the parties could not raise such an issue in court
and judicial reluctance to grant declarations as to whether a party is entitled to arbitrate (deriving
from Vale Do Rio Doce Navegacao SA & Anor v Shanghai Bao Steel Ocean Shipping Co Ltd 18)
would be less likely to apply where the tribunal has not yet been appointed.

3. LMAA MEDIATION TERMS

Many members of the LMAA have specialist training in mediation and accept appointments as
mediators. In 2002 the LMAA introduced Mediation Terms and in 2009 the LMAA teamed up
with the Baltic Exchange to establish a mediation service for shipping and commodity disputes.
The aim is for senior Baltic Exchange members and LMAA members trained in mediation to
provide mediation services. For this purpose the 2002 Mediation Terms were revised (mainly as to
the procedure for appointing a mediator) so as to provide the LMAA/Baltic Exchange Mediation
Terms (2009) (the 2009 Mediation Terms). These are likely to be the preferred terms for LMAA
members undertaking mediations.
The 2009 Mediation Terms envisage the commencement of a mediation procedure whereby the
parties to a dispute appoint a single mediator to take appropriate steps to assist the parties in
reaching an amicable settlement. If parties to a dispute cannot agree on a mediator then the Terms
make provision for appointment of a mediator. If both parties to a dispute are members of the
Baltic Exchange then the 2009 Mediation Terms provide that they may apply to the Chairman of
the Baltic Exchange for appointment of a mediator. Otherwise the parties may apply to the
President of the LMAA for appointment of a mediator.
The 2009 Mediation Terms expressly provide that the parties should cooperate in good faith with
the mediator in submitting written materials and attending meetings. On termination of the
mediation procedure the mediator will give written notice to the parties of the costs of the
mediation. These costs are to be paid in equal proportions unless he orders otherwise. They would
include expenses incurred by him in the mediation plus his fees which are assessed with regard to
the time involved, the amount and complexity of the dispute. Normally each party bears its own
legal costs although the mediator is given express power to make costs orders where a party has
failed to co-operate so as to thwart the mediation procedure or to cause increased costs.

4. PROCEDURE
ADR procedures are extremely flexible although it is common to agree on institutional rules or a
model procedure or for a procedural framework to arise from the mediation agreement concluded
between the parties and the mediator. Although lawyers are frequently involved in mediations, an
important aspect of any mediation is the direct involvement of the parties in dispute, and in
particular someone who has authority to conclude a settlement agreement. This usually means that
a fairly senior representative of each party, with authority to settle, should attend the mediation.
In each case the procedure will be tailored to the nature of the dispute and the parties needs.
However, most mediations follow a basic pattern. In advance of the mediation each party will
commonly provide the mediator (and the other party) with a case summary and important
supporting documents such as the contract in issue, key correspondence or an experts report on a
critical issue. The case summary will usually set out the background to the dispute and the parties
relationship, identify the main issues and where the parties stand, in particular in relation to their
objectives in mediating, costs at stake and past settlement attempts.
The mediation will usually start with a joint meeting with both parties and the mediator (although
the mediator may discuss the matter separately with each party before the joint meeting). The
mediator will normally commence by giving a brief introduction as to his role and then each party
will give a short presentationsometimes called an opening statement. This will usually introduce

each partys position in relation to the dispute and focus on what each party wants to achieve in
the mediation.
The mediator may then hold separate meetings with the representatives of both parties, asking
them realistically to put forward the strengths and weaknesses of their case. Most mediators will
take a facilitative approach and resist indicating their views as to the likely outcome. However, in
some cases the mediator may be more willing to identify the determinative issues and express his
views on them. The mediation will be an opportunity to assess the likely overall cost of the
dispute (taking into account legal fees and possible damages, but also management time and
commercial reputation) and to explore potential settlement options. The mediator will usually
liaise between the parties and facilitate direct discussion between them. If the parties draw closer
to settlement proposals he may assist in drawing up a settlement agreement.
If a settlement agreement is not concluded at the mediation (or shortly thereafter) then various
options are available depending on the parties willingness to take settlement discussions further.
If a firm impasse has been reached then the parties may terminate the mediation and revert to the
arbitral process. However, they may want to take the negotiations further and ask for the
mediators continued assistance, whether at an adjourned mediation or simply by continuing
availability to communicate with the parties.
ADR is not covered by the 1996 Act and common law principles (typically of contract, tort and
confidentiality) are applied to disputes arising out of the procedure, for instance a disagreement as
to the effect of any settlement reached.

5. CONFIDENTIALITY IN MEDIATION
All stages of the mediation will be confidential (unless the parties agree otherwise) and the
information or views exchanged within the mediation must generally not be used subsequently in
arbitration or for other purposes. The principle of confidentiality in mediation currently has two
sources. First, it derives from the parties express19 or implied agreement that the mediation will
be confidential. Most mediations will be preceded by a mediation agreement which will contain a
clause on confidentiality. However, even if there is no express agreement, there would be an
implied agreement reflecting the confidentiality that is necessary for the mediation to work
effectively. Secondly, confidentiality in mediation is a reflection of the underlying public policy
that parties should be encouraged, so far as possible, to resolve their disputes by negotiation, and
should not be discouraged by the prospect that the content of the negotiations could be used
against them in subsequent litigation.20 EU Directive 2008/52 on mediation also recognises
confidentiality in the mediation of EU cross-border disputes (see below on the scope of the
directive) with exceptions where necessary for overriding considerations of public policy or for
the enforcement of a settlement agreement resulting from mediation (this would probably also
include situations where there is an issue as to whether the dispute was settled). When
implemented (as required by 2011), it is likely to give rise to specific provision for confidentiality
in mediation.
One aspect of confidentiality of mediation is the rule that communications in a mediation are not
admissible in subsequent litigation. Such communications are regarded as privileged from
disclosure on the basis of the rule protecting without prejudice communications. Without

prejudice communications are those that pass between the parties as part of settlement
negotiations without prejudice to their case in the proceedings. The courts have firmly taken the
view that mediation takes the form of assisted without prejudice negotiation and that, with
some exceptions, what goes on in the course of mediation is privileged, so that it cannot be
referred to or relied on in subsequent court proceedings if the mediation is unsuccessful.21
The courts have not yet accepted that a distinct mediation privilege attaches to the mediation
process.22 Accordingly, the exceptions to confidentiality in mediation are based on general
principles of confidentiality and the without prejudice rule. In deciding admissibility of
communications within a mediation, broadly the same exceptions apply as under the without
prejudice rule relating to litigation.23
In Cumbria Waste Management Ltd v Baines Wilson,24 the claimant used mediation to settle a
dispute with a third party and then sued its solicitor for negligence giving rise to the dispute with
the third party. An issue in the negligence proceedings was whether the dispute with the third
party was reasonably settled and the defendant solicitor sought disclosure of documents relating to
the mediation but the third party refused consent to such disclosure. HHJ Frances Kirkham refused
to order disclosure on grounds that the documents were protected by the without prejudice rule.
Privilege will obviously not cover documents that have already been openly disclosed (e.g., the
governing contract, the pleadings, or expert reports that have been exchanged) even where such
documents might otherwise come within a broadly worded confidential-ity clause covering all
documents exchanged in the mediation. One exception to the without prejudice privilege attaching
to communications in a mediation is where an issue arises as to whether the mediation resulted in
a concluded or enforceable settlement agreement.25
In Brown v Rice 26 the parties mediation agreement had expressly provided that all statements in
the mediation should be confidential and that any agreement would not be binding until reduced
into writing. No settlement was reached at the mediation but an offer was left on the table
overnight and alleged to have been accepted in a telephone conversation the following day. Stuart
Isaacs QC, sitting as a Deputy Judge, admitted evidence as to what happened at the mediation in
order to determine whether the dispute had been settled.

6. THE ROLE OF ARBITRATORS IN ENCOURAGING MEDIATION

Under the English court rules, parties are expressly required to consider the option of ADR and
the courts often allow time within the pre-trial timetable for its use. The courts increasingly
consider that mediation would be appropriate in the majority of cases since it has established a
high success rate. EU Directive 2008/52 on mediation also makes clear that the courts can invite
the parties to use mediation. The Commercial Court currently offers the facility of early neutral
evaluation; this is where a judge offers a without prejudice, non-binding evaluation of the merits
of a case (or certain issues) at an early stage in the proceedings. The judge will then take no
further part in the case.
Maritime arbitrators have generally not been as active as judges in encouraging the use of
mediation. First, arbitrators are chosen and paid by the parties to resolve the dispute, so they
mayperhaps understandablybe reluctant to encourage the parties to use another neutral third
party (who will also charge further fees) to assist in resolution. Secondly, encouraging ADR

within litigation reflects the fact that it saves court time; this is relevant because a judge is
required to take into account the appropriate allocation of the courts resources towards the
various cases before it. In contrast, arbitrators face no such issue as to the appropriate allocation of
public resources when making decisions. Thirdly, early neutral evaluation (or a comparable
procedure) is unlikely to occur within arbitration because it will not be as easy to pass the case on
to another tribunal. If the arbitrator is unsuccessful in prompting settlement, the parties may think
that he has unfairly pre-judged the case before giving them a reasonable opportunity to put their
case. Fourthly, although the EU directive will give courts the power to invite parties to mediate, it
remains to be seen whether the implementing legislation will also empower arbitral tribunals to
give similar orders. These differences between court proceedings and arbitration may also affect
the costs implications of refusing to mediate (see below).
Notwithstanding these differences, in some cases an arbitrator will raise the option of mediation or
allow time for the parties to pursue it. This typically arises where both parties have shown a
genuine interest in mediation, as if one party is firmly resisting the process, it is less likely to be
useful. The questionnaire which the Second Schedule to the LMAA Terms requires parties to
complete after the exchange of submissions specifically asks whether they have considered
mediation. An arbitrator could also give an indication of his views on the merits at an early stage
but he must make it clear that these are only provisional views and he is not pre-judging the
issue.27 If an issue seems clear-cut or potentially determinative it may be safer to propose deciding
it as a preliminary issue (see Chapter 16). The courts have not yet decided whether an arbitrator
could stay an arbitration in favour of mediation in the absence of both parties consent. However,
it is arguable that arbitrators have such powers (unless there is express agreement to the contrary)
since these measures, if appropriate to the circumstances of the case, would probably fall within
their duty to adopt suitable procedures for a fair and efficient resolution of the dispute under
section 33 of the 1996 Act. The courts would probably be reluctant to remove an arbitrator who
took active steps to encourage ADR in an appropriate case as this is regarded as part of dealing
with a case justly and efficiently under the CPR. Powers conferred on courts to invite parties to
mediate under EU Directive 2008/52 may also provide further support for arbitrators making
orders inviting the parties to mediate.
In some jurisdictions (e.g., Singapore) legislation expressly recognises that an arbitrator may
switch roles between arbitrator and mediatorthis is sometimes called a med/arb procedure. This
type of procedure is unlikely to be adopted in London maritime arbitration where the roles of
mediator and arbitrator are generally kept entirely separate. Unless the parties have specifically
agreed upon it, an arbitrator should generally avoid any attempt to mediate or assist in settlement
discussions as this is likely to give rise to the appearance of bias.28

7. COST IMPLICATIONS OF MEDIATION

Most mediations are preceded by a mediation agreement which will deal with costs. The usual
agreement is that each party bears equally the costs of the mediation. This will ordinarily include
the mediators fees and any other expenses such as room booking fees. The mediator (or the
organisation administering the mediation) will ordinarily be given power to fix the costs of the
mediation. Each party will usually bear its own legal costs incurred in mediating (and any other
costs, e.g., the attendance of witnesses); such costs would, unless otherwise agreed, not ordinarily

be treated as the costs of the arbitration subject to award by the tribunal. However, it is possible
for the parties to agree that, if the matter does not settle at mediation, the mediator or the arbitral
tribunal may assess and award costs incurred by the parties in mediating. For instance, under the
2009 Mediation Terms the mediator is given express power to make costs orders where a party
has failed to co-operate so as to thwart the mediation procedure or to cause increased costs. In the
absence of this type of agreement the costs of mediating will not usually be recoverable from the
other party.

Costs implications of refusing to mediate

The general rule in English court proceedings and arbitration is that the unsuccessful party pays
the costs of the successful party.29 The most common exception to this general rule is where the
unreasonable conduct of the successful party makes it inappropriate to award them the whole or
part of his costs. In the context of court proceedings, there has been considerable case law on the
issue of whether a successful partys refusal to mediate justifies a departure from the general rule,
such that the successful party is not awarded all his costs. The leading case is Halsey v Milton
Keynes General NHS Trust.30 It established that a court may deprive a successful party of his costs
(or part of them) where it refused to mediate, but the burden falls upon the unsuccessful party to
establish that the successful party unreasonably refused to agree to mediate. Each case will depend
on its facts but the Court of Appeal considered that the following considerations would be relevant
to the question of whether a party unreasonably refused to mediate:

(a) the nature of the dispute(e.g., allegations of fraud may not lend themselves to
mediation);
(b) the merits of the casea party who reasonably considers that its case is watertight may be
justified in refusing to mediate;
(c) the use of other settlement methods;
(d) the disproportionate cost of mediationthis will be most relevant where the amount at
stake is relatively small;
(e) delayif mediation is suggested late in the day it may be reasonable to refuse;
(f) whether mediation has a reasonable prospect of success;
(g) the encouragement given by the tribunalwhere a successful party refuses to mediate
despite the courts encouragement then it will be easier to show that the refusal was
unreasonable.

The Court of Appeal made clear, however, that a party is entitled to adopt whatever position it
wishes within a mediation; such conduct would remain confidential and would not be taken into
account in assessing costs.
Halsey v Milton Keynes General NHS Trust has some application in arbitration since it is open to
a party to ask the arbitrator to take into account a partys unreasonable behaviour in assessing
whether it is entitled to all its costs of the arbitration. However, judges have given much more
emphasis than arbitrators to the use of ADR for resolving disputes that would otherwise go to trial
and, for reasons set out above, they are much more likely to encourage the parties to mediate.
Accordingly, judges are much more likely than arbitrators to consider it appropriate to penalise a
party for unreasonably refusing to mediate. An arbitrator is most likely to take such conduct into

account in awarding costs where he has accepted at an earlier stage that the case would be
appropriate for mediation.

8. EU DIRECTIVE 2008/52
In 2008 the European Union adopted a directive (the Directive) on cross-border mediation in
civil and commercial disputes. The Directive reflected a common consensus that mediation should
be encouraged as a speedy and cost effective alternative to litigation. It applies where two or more
parties to a cross border dispute of a civil or commercial nature attempt by themselves, on a
voluntary basis, to reach an amicable settlement with the assistance of a mediator. A cross-border
dispute is defined here as being a dispute where one party is domiciled in a Member State other
than that of any other party (the Directive does not cover Denmark) and would include disputes
that are subject to an arbitration clause. The measures set out in the directive must be implemented
in national legislation by 2011 so the UK Parliament should adopt legislation within that
timescale. Its key measures aim to encourage and improve mediation within the EU.

The Directive obliges Member States to encourage the training of mediators and the
development of voluntary codes of conduct for mediators and organisations providing
mediation services.
It gives courts the right to invite the parties to use mediation and attend an information
meeting on mediation if the judge deems it appropriate.
It will enable parties to apply to enforce settlement agreements concluded following
mediation in a similar way to judgments.
It protects the confidentiality of mediation. The parties or the mediator cannot be compelled
to give evidence about what took place during mediation in subsequent proceedings
(including arbitration) between the parties except where there are overriding public policy
considerations or where disclosure is necessary for enforcement of the settlement resulting
from mediation.
The Directive lays down measures on limitation periods intended to ensure that, when the
parties engage in mediation, any such period will be suspended or interrupted.

The Directive applies to the mediation of many shipping disputes which involve parties from
different EU states. However, it is unlikely to make a significant change to arbitration or
mediation in London of shipping disputes since the practice and law of mediation within the UK is
already well developed. In particular, most mediators in London have training, the courts already
encourage parties to use mediation and confidentiality is a recognised aspect of mediation. The
provisions on enforcement, confidentiality and limitation periods are the main measures that are
likely to make substantive changes. However, the Directive and implementing legislation is likely
to increase awareness of mediation and go further in making it an established method for resolving
disputes.
1 E.g. Mackie, Miles, Marsh and Allen, The ADR Practice Guide: Commercial Dispute
Resolution (3rd edn).
2 Paul Smith Ltd v H & S International Holding Inc [1991] 2 Lloyds Rep 127, Petromec
Inc v Petroleo Brasiliero SA [2005] EWCA 891; [2006] 1 Lloyds Rep 121.

3 Halifax Financial Services & Intuitive Systems [1999] 1 All ER (Comm) 303.
4 Channel Tunnel Group v Balfour Beatty Construction Ltd [1993] 1 AC 334, JT Mackley & Co
Ltd v Gosport Marina Ltd [2002] EWHC 1315.
5 Cable & Wireless plc v IBM United Kingdom Ltd [2002] EWHC 2059 (Comm); [2002] 2 All
ER (Comm) 1041.
6 Film Finance Inc v The Royal Bank of Scotland [2007] EWHC 195 (Comm); [2007] 1 Lloyds
Rep 382.
7 Courtney & Fairburn Ltd v Tolaini Brothers (Hotels) Ltd [1975] 1 WLR 297, Paul Smith
Ltd v H & S International Holding Inc [1991] 2 Lloyds Rep 127.
8 Petromec Inc v Petroleo Brasiliero SA [2005] EWCA 891; [2006] 1 Lloyds Rep 121, where the
Court of Appeal indicated that an agreement to negotiate could be given legal effect if it was
workable.
9 Cable & Wireless plc v IBM United Kingdom Ltd [2002] EWHC 2059 (Comm); [2002] 2 All
ER (Comm) 1041.
10 Channel Tunnel Group v Balfour Beatty Construction Ltd [1993] 1 AC 334, JT Mackley & Co
Ltd v Gosport Marina Ltd [2002] EWHC 1315; [2002] BLR 367.
11 [2007] EWHC 2495 (TCC); [2008] 1 All ER (Comm) 653, para 81.
12 [2002] EWHC 2059 (Comm); [2002] 2 All ER (Comm) 1041.
13 Arbitrators are less likely to be influenced by court rules encouraging the use of mediation but
considerations as whether mediation would resolve a dispute effectively would be relevant to their
duty under section 33 of the 1996 Act to adopt procedures to ensure the fair and efficient
resolution of a dispute.
14 Section 73 of the 1996 Act.
15 JT Mackley & Co Ltd v Gosport Marina Ltd [2002] EWHC 1315; [2002] BLR 367, para
31, Fiona Trust & Holding Corporation v Privalov [2007] EWCA Civ 20; [2007] 2 Lloyds Rep
267 at 275.
16 JT Mackley & Co Ltd v Gosport Marina Ltd [2002] EWHC 1315; [2002] BLR
367, Holloway v Chancery Mead Ltd [2007] EWHC 2495 (TCC); [2008] 1 All ER (Comm), see
also Chapter 7 on jurisdictional issues arising in the context of applications for a stay of
proceedings.
17 [2007] EWHC 2495 (TCC); [2008] 1 All ER (Comm) 653.
18 [2000] 2 Lloyds Rep 1.
19 E.g., LMAA/Baltic Exchange Mediation Terms 2009, Article 15.
20 Unilever plc v The Proctor & Gamble Co [2000] 1 WLR 2436.

21 Aird v Prime Meridian Ltd [2006] EWCA Civ 1866; [2007] BLR 105, Brown v Rice [2007]
EWHC 625 (Ch); [2008] FSR 3.
22 Brown v Rice [2007] EWHC 625 (Ch); [2008] FSR 3.
23 Ibid., the exceptions are discussed in Unilever plc v Proctor & Gamble Co [2000] 1 WLR
2436.
24 [2008] EWHC 786 (QB); [2008] BLR 330.
25 Brown v Rice [2007] EWHC 625 (Ch); [2008] FSR 3.
26 Ibid.
27 Hagop Ardahalian v Unifert International SA, The Elissar [1984] 1 Lloyds Rep 206.
28 Cf Glencot Development & Design Ltd v Ben Barrett & Son (Contractors) Ltd [2001] EWHC
Technology 15; [2001] BLR 207.
29 Section 61(2) of the 1996 Act.
30 [2004] EWCA Civ 576; [2004] 1 WLR 3002.

Chapter 4

The Arbitration Agreement

The Arbitration Agreement

1. Introduction
2. Types of arbitration agreement
3. Form
4. Uncertainty
5. Incorporation
6. The parties
7. Scope and construction
8. Counterclaims
9. Scott v Avery clauses
10. Termination

1. INTRODUCTION
Arbitration is a method of dispute resolution which is justified by and dependent upon the
existence of an agreement between the parties. An agreement to arbitrate may take many different
forms. In maritime contracts such as charterparties, the agreement to refer disputes to arbitration is
usually contained in a written arbitration clause, often in a standard printed form contract. Usual
principles of contract law are relevant to the validity and effect of an arbitration agreement.
However, the effect of a London arbitration clause will also be affected by the Arbitration Act
1996 and also by the particular principles of the common law which have developed in relation to

arbitration agreements. This should not be regarded as an unacceptable derogation from the
parties choice: by specifying arbitration in London the parties must be regarded as having
impliedly accepted the supplementing provisions of English law, and in particular the 1996 Act.1
This chapter will consider those rules of English law (statutory and common law) which relate to
arbitration agreements. The question of whether the arbitration agreement is one which is
governed by English law or foreign law raises questions of the conflict of laws which are
considered in Chapter 5.

2. TYPES OF ARBITRATION AGREEMENT

Section 6(1) of the 1996 Act contains the following definition of an arbitration agreement:
In this Part an arbitration agreement means an agreement to submit to arbitration present or
future disputes (whether they are contractual or not).
As this definition suggests, arbitration agreements may take many different forms. They may be
written or oral, express or implied; they may incorporate vastly different levels of detail, and they
may be wide or narrow in their scope. Subject to general principles of law governing the validity
of contracts, English law will recognise and enforce any arbitration agreement but, as discussed
below, the remedial and supervisory regime of the 1996 Act applies only to written agreements.

Agreements to refer existing disputes

As section 6(1) of the 1996 Act makes expressly clear, an arbitration agreement may refer to
arbitration disputes which are already in existence between the parties. This type of agreement is
often referred to as a submission agreement or an ad hoc arbitration agreement (though the
term ad hoc is frequently also used to describe arbitrations which are not administered by an
arbitral institution). An agreement to refer existing disputes will usually incorporate a greater level
of detail (e.g., as to procedures to be adopted) than agreements relating to future disputes. In
principle, there is no difference between the effect of the two types of agreement. However, some
important consequences follow from the distinction. For example, section 12 of the 1996 Act
(extension of agreed time limits) applies only to an agreement to refer future disputes and
section 60 (which permits the parties to agree that each party should pay its costs in any event)
applies only in the case of submission agreements.

Express and implied arbitration agreements

In the maritime context, the vast majority of arbitrations are conducted pursuant to express
agreements, usually contained in a charterparty, sale contract or bill of lading. In the event of a
dispute arising it is far easier and quicker to progress matters if there is already an express
agreement to arbitrate. However, English law does recognise the possibility of an implied
arbitration agreement, usually arising from the conduct of one or both of the parties. An implied
arbitration agreement will most usually be held to exist where the parties proceed with an
arbitration, each taking positive steps to progress that arbitration without objection.2 As further
discussed below, this possibility is recognised by section 5(5) of the 1996 Act.
Issues relating to implied arbitration agreements may be of particular importance in disputes as to
jurisdictionfor instance in relation to the inclusion in arbitration proceedings of a particular

dispute which falls outside the agreement, or the introduction to arbitration proceedings of a third
party. If a party intends to object to the tribunals lack of jurisdiction, it is important to object at
the earliest possible stage and to ensure that no positive steps are taken to progress the hearing of
those particular disputes. For example, any pleadings or correspondence should be expressed to be
without prejudice to the contention that the tribunal has no jurisdiction to determine dispute x,
or the dispute involving party y. In the absence of such precautions, there is a risk that the
tribunal or the court will find an implied agreement to arbitrate those disputes (or, possibly, find a
waiver of the right to object to the lack of jurisdiction). In any event, it would be likely in such
circumstances that the right to object had been lost: see section 73 of the 1996 Act.
In The Almare Prima,3 a dispute arose concerning a shortage of cargo under bills of lading. The
bills purported to incorporate the terms of a charterparty. The claimants commenced arbitration
and over the next four years correspondence and pleadings were exchanged. Security for the claim
was given in consideration of the claimants refraining from proceeding other than by way of
London arbitration and was expressed to be for such sums as may be adjudged by the London
Arbitration Tribunal. At the arbitration, the respondents contended that the arbitrators had no
jurisdiction because the claimants were not party to the bill of lading contracts. It was agreed that
the arbitrators could decide the question of jurisdiction. They held that although the claimants
were not party to the bills of lading, the parties had by their conduct conferred jurisdiction. This
award was upheld by Phillips J.4
Similarly, in LG Caltex Gas Co Ltd v National Petroleum Corporation,5 the Court of Appeal
confirmed the possibility of parties concluding an ad hoc agreement that the tribunal should deal
finally with jurisdictional issues, thereby precluding any right of challenge to the court. In Caltex,
arbitral proceedings were commenced under two related contracts and consolidated by agreement.
In each reference, the respondents challenged the tribunals jurisdiction, denying that they were
party to any contract with the claimant. Following correspondence between the parties as to the
appropriate procedure to be adopted, the arbitrator declined to determine the jurisdictional issue as
a preliminary issue. Instead, the parties proceeded to a hearing intended to deal both with
jurisdiction and (without prejudice to the respondents denial of jurisdiction) the merits. The
arbitrator issued an award declaring that the respondents were not party to the contracts. The
claimant issued proceedings in the Commercial Court pursuant to section 67 of the 1996 Act,
challenging the arbitrators decision. At first instance, the judge held that the correspondence
between the parties constituted an ad hoc agreement whereby the parties had conferred
jurisdiction on the arbitrator finally to decide his jurisdiction, and that no challenge was therefore
possible. On appeal, the Court of Appeal held that it remained possible under the 1996 Act for the
parties to confer on the tribunal jurisdiction to make a final and binding award on jurisdiction. In
such a case, any challenge to the arbitrators decision under section 67 would fail. However, in the
present case the correspondence was all consistent with the arbitrators merely exercising his
power under section 30 of the 1996 Act and, therefore, no separate ad hoc agreement was
brought into existence.
In Gulf Import & Export Co v Bunge SA,6 the court clarified that an ad hoc agreement will be
implied only where the conduct relied upon is consistent only with an ad hoc submission. Conduct
which is consistent with maintaining a right to object to the tribunals jurisdiction will not suffice.

The applicability of arbitration rules may also be implied. Paragraph 5 of the LMAA Terms
expressly recognises and sanctions the creation of an implied agreement that the LMAA Terms
should apply. It provides:
5. These Terms shall apply to an arbitration agreement whenever the parties have agreed that
they shall apply and the parties shall in particular be taken to have so agreed:

(a) whenever the dispute is referred to a sole arbitrator who is a full Member of the
Association and whenever both the original arbitrators appointed by the parties are full
Members of the Association, unless both parties have agreed or shall agree otherwise;
(b) whenever a sole arbitrator or both the original arbitrators have been appointed on the basis
that these Terms apply to their appointment. Whenever a sole arbitrator or both the original
arbitrators have been appointed on the basis referred to at (b), such appointments or the
conduct of the parties in taking part in the arbitration thereafter shall constitute an agreement
between the parties that the arbitration agreement governing their dispute has been made or
varied so as to incorporate these Terms and shall further constitute authority to their
respective arbitrators so to confirm in writing on their behalf.

Conditional or hybrid arbitration agreements

English law recognises and will enforce an agreement whereby arbitration is made conditional on
the prior completion of some other form of procedure.
Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd 7 involved a dispute under a
building contract which provided for the initial reference of disputes to a panel of experts, and
which provided for final settlement by arbitration. The House of Lords stated that, even if the
agreement was not technically an arbitration agreement within the meaning of the 1975
Arbitration Act, the court had an inherent jurisdiction to stay proceedings brought in breach of it.
Lord Mustill indicated that in any event the agreement did constitute an arbitration agreement
within the meaning of English arbitration legislation.8
Where, therefore, an arbitration clause imposes clear obligations on the parties to take steps to
attempt to settle a dispute, they must do so before commencing any arbitral
reference.9 Furthermore, the court (rather than the arbitral tribunal) will usually be the most
convenient forum for determining whether such pre-arbitration steps have been taken.
In Holloway v Chancery Mead Ltd,10 the parties disagreed as to the meaning of a a construction
contract arbitration clause which required claims to be referred to a dispute resolution service
before any arbitration was commenced. Ramsey J rejected an argument that this issue was to be
determined by the tribunal: it would be unfair if the parties could not raise such an issue in court,
and the rule (deriving from Vale Do Rio Doce Navegacao SA & Anor v Shanghai Bao Steel Ocean
Shipping Co Ltd 11) that a pre-emptive declaration is not available from the court did not apply
in a pre-appointment case.
Similarly, the court will enforce a hybrid agreement under which some disputes are referred to
arbitration and others to a different form of dispute resolution. It is particularly important to
ensure that this type of dual mechanism clause is clearly drafted. Where necessary, the courts

will modify the arbitration provisions to give effect to the intentions of the parties and to ensure
that the clause works sensibly.12

Unilateral arbitration clauses

An option to arbitrate (exercisable by one party at his discretion) constitutes an arbitration
agreement which the courts will recognise and enforce. A good example of such a unilateral
option is provided by the Shelltime arbitration clause, which provides for disputes to be
determined by the High Court, but with an option on the part of either party to elect to arbitrate,
provided that the contractual procedures for such election are followed.
In Pittalis v Sherefettin 13 a lease contained provision for the determination of rental value either
by agreement between the lessor and lessee following written notification from the lessor or, at
the election of the lessee by notice in writing to the lessor not later than three months after [the
lessors notification in writing as set out above] by an independent surveyor appointed for that
purpose by the Lessor and Lessee by agreement in writing or failing such agreement as to such
appointment then by an independent surveyor appointed for that purpose by the President for
the time being of the Royal Institute of Chartered Surveyors. The Court of Appeal held that the
clause did constitute an arbitration agreement (for the purposes of the arbitration legislation that
was then applicable14).
It appears that for the purpose of the 1996 Act, an agreement to arbitrate on the election of either
party will be characterised as an agreement to refer future (not present) disputes.

3. FORM

Agreements to be in writing
Arbitration agreements have the important effect of depriving the parties of their basic right to
seek redress through the courts. It is important that these agreements be properly recorded, not
least because such a record should help to avoid disputes as to whether or not an arbitration
agreement was made.15 A requirement that an arbitration agreement be recorded in writing is also
consistent with the Model Law and the New York Convention on Enforcement of Awards.
For these reasons, the 1996 Act provides that all agreements relating to arbitration should be made
or evidenced in writing. Section 5(1) of the Act provides that:
The provisions of this Part apply only where the arbitration agreement is in writing.
Section 5(1) goes on to make clear that the writing requirement extends beyond the arbitration
agreement itself. Any agreement to vary an arbitration agreement, or to exclude the provisions of
the Act, will be effective for the purposes of Part I of the Act only if it is made in writing. It is
extremely important to ensure that any agreement relating to procedure, the powers of the tribunal,
or the scope of the reference, is made in writing if it is to be recognised and given effect under the
1996 Act.
However, the meaning of agreement in writing is relatively broad. Furthermore, the provisions
of section 5 do not mean that oral agreements are entirely invalid. Such agreements continue to
take effect at common law, as is clear from section 81, which provides that:

(1) Nothing in this Part shall be construed as excluding the operation of any rule of law
consistent with the provisions of this Part, in particular, any rule of law as to
(b) the effect of an oral arbitration agreement
Oral agreements would, therefore, continue to have effect at common law, but would not attract
the beneficial and supportive regime of the 1996 Act. In practice, it is preferable to ensure that all
agreements are made and recorded in writing.

The meaning of agreement in writing

Although the 1996 Act effectively requires all agreements relating to the arbitration to be written,
section 5 of the Act incorporates an extremely wide concept of agreement in writing. An
agreement in writing will be found in any of the following situations:
(a) if the agreement is made in writing (whether or not it is signed by the parties). This category
encompasses all ordinary written contracts, whether or not they are signed.
(b) if the agreement is made by exchange of communications in writing. Under section 5(6),
references to anything being in writing include it being recorded by any means. Accordingly,
this category would include faxes, telexes and also e-mails16 in which an agreement to arbitrate
was recorded. This is consistent with pre-1996 Act law.
In Zambia Steel & Building Supplies Ltd v James Clark & Eaton Ltd 17 the defendants final
quotation to the plaintiff contained certain written terms including an arbitration agreement, but
provided that orders would only be accepted on those terms, the quotation was itself not an offer
and was subject to final confirmation of the plaintiffs acceptance. No written confirmation was
made. It was held that the clause was a written arbitration agreement within the meaning of the
then applicable arbitration legislation, it being unnecessary to show written assent to a term in
writing. Oral assent would suffice. The DAC expressly referred, with apparent approval, to
the Zambia Steel case in their report.18
Similarly, in The Sargasso 19 the parties entered an ad hoc agreement to arbitrate after disputes
had arisen between them. The defendants sent a telex stating we confirm that in our
conversation we did agree that all disputes should be arbitrated with a tribunal consisting of
Messrs Ferryman and Hamsher, but that they could not agree dates of appointment until certain
documentation had been provided. The plaintiffs replied the next day by telex, stating that they
awaited resolution of the outstanding matters in order that the Arbitrational Tribunals may be
completed. It was held that this exchange of telexes constituted a written agreement for the
purposes of the arbitration legislation that then applied.
In Abdullah M Fahem v Mareb Yemen Insurance Co,20 the second defendant sent the claimant a
telex, expressed to be an offer and setting out terms for the sale of 30,000 mt sugar, including an
arbitration clause referring disputes to the Refined Sugar Association. Two days later, the second
defendant sent the claimant a further telex, confirming the sale of the sugar, and stating all other
terms and conditions as per our offer telex. Cresswell J decided that he was bound by the
decision in the Zambia Steel case and, applying that decision, held that the contract was in writing
(for the purpose, in that case, of the 1975 Arbitration Act).

(c) if the agreement is evidenced in writing. This category includes oral agreements which are
recorded by one of the parties or by a third party acting with the authority of the parties: section
5(4). This would include, for example, agreements made during arbitral proceedings and recorded
by the arbitrator
In addition, section 5(3) of the 1996 Act confirms that an oral agreement which incorporates by
reference terms which are in writing is an agreement in writing. The reference could be to a
written agreement containing an arbitration clause (e.g., the LMAA arbitration clause) or to a set
of written arbitration rules (e.g., the LMAA Terms). This category would cover an oral salvage
agreement incorporating the Lloyds Open Form.
In Heifer International Inc v Christiansen 21 the claimants representative showed the fifth
defendant a copy of a contract which the claimant had concluded with the fourth defendant, and
which incorporated an arbitration clause. The claimant informed the fifth defendant that the same
conditions would apply to its own contract and the contract was then concluded. The court held
that this amounted to a contract between the parties which was made otherwise than in writing, but
by reference to terms which are in writing, within the meaning of section 5(3).
In Oceanografica SA de CV v DSND Subsea AS,22 a charterparty which had been signed by one
party only, contained a provision which prevented a binding contract from arising until both
parties had signed. Despite this, it was held that a binding agreement existed, because the nonsigning party had, by its conduct, waived its right to insist on a signature; furthermore, the parties
had acted on the assumption that the terms of the charterparty applied. However, each case will
turn on its facts, and in other cases, the court may find that the parties were proceeding on the
basis that they would not be bound until a charterparty was formally signed.23
Finally, section 5(5) of the 1996 Act makes clear that an agreement constituted by the exchange of
written submissions in arbitral or legal proceedings in which the existence of the agreement is
asserted by one party and not denied by the other is also an agreement in writing. This concept,
which derives from article 7 of the Model Law, represents a notable widening of the category of
agreements in writing. The requirement of an exchange of submissions will, however, prevent a
written agreement arising by virtue of a mere failure to respond to the other partys submissions.

4. UNCERTAINTY
Arbitration clauses contained in charterparties and bills of lading are often extremely
abbreviatedthey may often consist solely of the words Arbitration London. Nevertheless, the
courts have been unwilling to find that such clauses are too uncertain to be enforced, and will
usually expand the clause in accordance with the parties presumed intentions.
In Hobbs Padgett & Co (Reinsurance) Limited v J.C. Kirkland Ltd,24 the contract between the
parties contained the provision suitable arbitration clause. This was construed by the Court of
Appeal as meaning that disputes would be referred to any arbitration which reasonable men in
this type of business would consider suitable.
Similarly, in Tritonia Shipping Inc v South Nelson Forest Products Corporation 25 a clause which
provided arbitration to be settled in London was held to mean any dispute under this
charterparty to be settled by arbitration in London. (In Hobbs Padgett (supra), Salmon LJ,

commenting on the Tritonia case, went so far as to say that had the clause read simply
arbitration, it would have been valid.26)
In The Star Texas 27 a charterparty contained an arbitration clause which provided that Any
dispute arising under the charter is to be referred to arbitration in Beijing or London in defendants
option. Owners commenced proceedings in the High Court in respect of unpaid hire and
expenses. The charterers applied for a stay under section 1 of the 1975 Act. In the stay
proceedings, the owners contention that the clause was void for uncertainty was rejected by the
Court of Appeal. The owners had argued that the word defendant in the clause had at least eight
different possible meanings. The Court of Appeal stated that it was the obligation of the court to
select the meaning which best matched the intentions of the parties. In this case, defendant was
intended to mean the party against whom arbitral or court proceedings were commenced. The fact
that the defendant could exercise the option under the clause only after the commencement of
arbitral proceedings in one jurisdiction did not render the clause void for uncertainty.
In Mangistaumunaigaz Oil Production v United World Trading Inc,28 a clause providing
Arbitration, if any, by ICC rules in London was held to constitute an ordinary arbitration
agreement requiring immediate arbitration of disputes.
However, where the clause is so ambiguous and uncertain that no sense can be made of it, the
court must reject it. For example in EJR Lovelock Ltd v Exportles,29 the Court of Appeal rejected
as meaningless a single clause which provided for disputes to be referred to both London and
Moscow arbitration.
Where a written arbitration agreement does not provide how many arbitrators there are to be, then
by virtue of section 15(3) of the 1996 Act, the reference is to a sole arbitrator. However, it is
important to note that even a vague reference to a mode of arbitration will be sufficient to oust
the operation of section 15(3).
In The Laertis,30 the arbitration clause provided for arbitration to be settled in London according
to British law in its customary manner. It was held that this constituted a provision for the mode
of reference and that the relevant statutory provision (then section 6 of the Arbitration Act 1950)
did not, therefore, apply. Evidence was heard from several London maritime arbitrators before the
court determined that the appointment of two arbitrators and, if necessary, an umpire, was the
usual manner of conducting shipping arbitrations.
Although the principle of The Laertis holds good, the case would probably be decided differently
today because it is now much more common (and possibly even customary) for disputes to be
referred to three arbitrators, rather than to two arbitrators with an umpire.

5. INCORPORATION
The question of whether an arbitration clause has been incorporated into the relevant contract
(such as a charterparty or bill of lading) is a matter of construction of that contract.31 An
arbitration agreement is often one of many clauses in a single written contractual document
typically an amended standard form contract. In such a case, the parties intention to arbitrate is
clear. Alternatively, the parties may incorporate by reference the terms of another entire

agreement (e.g., a head charter or contract of carriage). It is in relation to this latter form of
agreement (incorporation by reference) that difficult disputes commonly arise.
An arbitration clause will not usually be characterised as particularly onerous or unreasonable, so
as to require special notice to be drawn to it.32 However, difficult issues may arise particularly
acutely in situations involving two linked contracts, which are common in the shipping,
reinsurance and construction contexts. Where the parties seek to incorporate the terms of a third
partys contract (e.g., where charterparty terms are sought to be incorporated in a bill of lading),
there may be difficulties in establishing that the parties to the negotiable bill of lading were fully
aware of the charterparty terms; or that the charterparty terms are, as a matter of construction,
applicable to issues arising under the bill of lading.

The 1996 Act

Section 6(2) of the 1996 Act provides:
The reference in an agreement to a written form of arbitration clause or to a document containing
an arbitration clause constitutes an arbitration agreement if the reference is such as to make that
clause part of the agreement.
While recognising in general terms the possibility of incorporation of an arbitration clause by
reference, section 6(2) deliberately leaves open the question of whether or not an arbitration clause
contained in a longer document such as a standard form of contract can effectively be incorporated
by reference solely to that document, or whether it is necessary to refer expressly to the arbitration
clause itself. Prior to the 1996 Act, this question had been the subject of some debate. The
conflicting approaches of two members of the Court of Appeal in a construction
case, Aughton v MF Kent Services,33 had crystallised the arguments each way. In that case, Sir
John Megaw had expressed the view that it would generally be necessary to make express
reference to the arbitration clause in order to effectively incorporate it. Ralph Gibson LJ was of
the view that, in principle, reference to the standard form or other document which contained the
clause should suffice. As the DAC explained:34
In English law there is at present some conflicting authority on the question as to what is required
for the effective incorporation of an arbitration clause by reference. Some made critical
comments of the views of Sir John Megaw inAughton v MF Kent Services (a construction contract
case) and suggested that we should take the opportunity of making clear that the law was as stated
in the charter party cases and as summarised by Ralph Gibson LJ in Aughton . It seemed to us,
however, that although we are of the view that the approach of Ralph Gibson LJ should prevail in
all cases, this was really a matter for the court to decide.

Bills of lading cases: common law background

Traditionally, a different approach has prevailed in the maritime context. The issues surrounding
incorporation by reference have most often arisen in the shipping context in connection with the
incorporation into a bill of lading of a charterparty arbitration clause. In general, the question of
whether a charterparty clause is sufficiently clearly incorporated into a bill of lading is regarded as
a question of construction of that bill of lading.35 However, a bill of lading is a negotiable

instrument which may pass through many hands and to subject the holder to the terms of an
arbitration clause of which he is unaware is perceived as unfair.36 In this context the courts
developed the requirement that specific reference must be made to the arbitration clause in the bill
of lading if it is to be incorporated. These cases form a clear and developed line of authority,
which is well known and recognised in the shipping trade.37 A reference to all terms conditions
and exceptions of the charterparty would not in itself, therefore, be enough to incorporate an
arbitration clause. Such general terms are sufficient only to incorporate terms relevant to the
receipt, carriage or delivery of the goods. A specific reference to the arbitration clause is required
to incorporate an agreement to arbitrate.
However, the courts have recognised a possible exception to this generally accepted rule where
the arbitration clause in the charterparty is wide enough on its true construction and without any
verbal manipulation to include disputes under the bill of lading and between the parties to it. In
such cases the courts have on occasion found that general words of incorporation are sufficient to
incorporate an arbitration clause. There is Court of Appeal dicta in The Annefield which supports
the existence of such an exception where a charterparty specifically refers to disputes under the
bill of lading, for instance by providing for arbitration of all disputes arising under the charterparty
and any bill of lading issued under it.38 However, more recently, the Court of Appeal in The
Federal Bulker 39 doubted whether the fact that a charterparty arbitration clause was framed in
such terms would be sufficient to incorporate that arbitration clause into a bill of lading which
made no specific reference to it. In Excess Insurance Co v Mander,40 Colman J took the view that
the Annefield exception could arise only where the contracting parties had access, at the time of
contracting, to both the charterparty and the bill of lading.
In The Federal Bulker, the charterparty provided that bills of lading, to include the charterparty
arbitration clause, should supersede the charter itself. The arbitration clause provided that all
disputes arising out of this contract shall be referred to the final arbitrament of two
Arbitrators carrying on business in London. Cargo owners sought to claim against owners under
bills of lading which had been issued in accordance with the charterparty but with no specific
reference to the arbitration clause. They commenced arbitration proceedings and owners sought a
declaration that there was no arbitration agreement between themselves and cargo owners.
Granting the order, the Court of Appeal held that the general language used in the bills of lading
was not sufficient, and had never in the past been held to be sufficient, to incorporate the
arbitration clause into the bill of lading.
In The Nerano,41 the bill of lading contained a clause providing conditions as per relevant
Charterparty are incorporated in this bill of lading and have precedence if there is a conflict,
English law and jurisdiction applies. The conditions on the back of the bill of lading provided
All terms and conditions liberties exceptions and arbitration clause of the Charterparty are
herewith incorporated. The relevant charterparty included a clause requiring disputes between
the Owners and Charterers to be referred to arbitration. The defendants applied for a stay of court
proceedings brought in breach of the arbitration clause. Clarke J held that the charterparty
arbitration clause, because it referred to Charterers, could not refer to disputes under the bill of
lading without verbal manipulation. The exception recognised in the Annefield therefore did not
apply. However, since the bill of lading conditions expressly referred to the charterparty

arbitration clause, and since the reference on the front of the bill of lading to English jurisdiction
was not inconsistent with this, the defendants were entitled to a stay of proceedings.

Cases following the 1996 Act

As the passage from paragraph of the DAC report set out above makes clear, the DAC took the
view that in all cases, general words of incorporation should suffice to incorporate an arbitration
agreement. This raises the question of whether the bill of lading cases will remain good law under
the 1996 Act. The better view is that, while general words of incorporation are regarded as
sufficient in most single contract cases, bills of lading cases now form a specific exception to that
general rule.42 The status of the Annefield exception remains unclear, though the courts appear
reluctant to endorse it.
The authorities were reviewed by Gross J in Siboti K/S v BP France SA. 43 The following four
propositions were characterised as well-established, and there was no serious dispute about them:

(i) The starting point is the contract contained in or evidenced by the bill of lading; it is that
contract which the court must construe.
(ii) The incorporation of terms is to be distinguished from mere notice of terms; the fact that
the holder of a bill of lading has notice of terms in a charterparty does not mean that those
terms are incorporated in the bill of lading.
(iii) General words of incorporation will incorporate into the bill of lading only those
provisions of the charterparty which are directly germane to the shipment, carriage and
delivery of the goods. Provisions of the charterparty which are ancillary rather than directly
germane to the subject-matter of the bill of lading as aforesaid, will not be incorporated by
general words of incorporation in the bill of lading. By way of amplification:
o (a) General words of incorporation are to be distinguished from wording making a
specific reference to a particular charterparty provision (for example, a charterparty
arbitration clause). Accordingly, even comparatively wide wording such as all terms,
conditions and exceptions as per charterparty constitute general words of
incorporation for these purposes.
o (b) Arbitration clauses are ancillary in this sense.
(iv) Even when the wording of a bill of lading is prima facie of sufficient width to incorporate
the charterparty clause in question, such incorporation may be defeated if undue manipulation
is required. That said, in this regard the intention of the parties is paramount. Accordingly,
while the purported incorporation of certain charterparty clauses may prove ineffective on the
ground of linguistic inapplicability alone (e.g., charterparty arbitration clause wordings such
as any disputes arising out of this charter), where the intention to incorporate a particular
charterparty clause is clear, difficulties of manipulation may be overcome. It may well be that
the true intentions of the parties serve to define the ambit of permissible manipulation.

On the question of whether the inquiry may go outside the terms of the bill of lading, Gross J was
reluctant to endorse the Annefield principle. He indicated that there was Court of Appeal authority
(The Varenna and The Federal Bulker) that unless the wording in the bill of lading is of a
sufficient width so as prima facie to incorporate the provision of the charterparty under
consideration, it is irrelevant and unnecessary to construe the charterparty. He recognised that

these authorities were difficult to reconcile with The Annefield, but took the view that it was his
duty to follow them.
He further held that there was powerful authority (The Varenna, The Merak and The Federal
Bulker) that clauses in the charterparty as to the form or content of bills of lading to be issued
thereunder are irrelevant to the contract constituted by the bills of lading themselves.
The question of whether an arbitration clause is incorporated therefore remains the subject of
some uncertainty, and will depend upon all the facts and circumstances. However, some forms of
bill (for example, Congenbills) are recognised as giving rise to a valid incorporation:
In The Delos,44 claims arose under bills of lading issued on behalf of the defendants. The bills
were on two forms. Congenbills were issued in respect of cargoes of soya oil; these stated All
terms and conditions, liberties and exceptions of the Charter Party including the Law and
Arbitration clause are herewith incorporated. Ocean bills were issued in respect of the other
cargoes: these stated merely This shipment is carried under and pursuant to the terms of the
Charter Party and all the terms whatsoever of the said charter apply to and govern the rights
of the parties. The charterparty included provision for arbitration in London. The claimants, who
asserted claims as lawful holders of the bills, commenced court proceedings in London. The
defendant shipowners applied under section 9 of the 1996 Act to stay the proceedings. Langley J
stayed the claims arising under the Congenbills, but held that the wording of the ocean bills was
insufficient to incorporate the charterparty arbitration clause.
Welex AG v Rosa Maritime Ltd 45 was also concerned with Congenbills. It was argued that the
word charterparty was intended to refer to a single, formally executed charterparty document,
and could not refer to a fixture constituted by an exchange of telexes. This argument was rejected
by the Court of Appeal, who held that parties to Congenbills would expect charterparty terms to
be incorporated. There was no reason to give a narrow meaning to the term charterparty.

6. THE PARTIES
Arbitration agreements contained in commercial contracts raise particular problems relating to the
question of the parties entitled to invoke the agreement. Such problems may relate to the capacity
of the contracting parties, or to the subsequent assignment by one of the parties of the benefit of
the contract containing the arbitration clause. The problems raised are essentially matters of
substantive law beyond the scope of this book. Assignment and agency are discussed in Chapter
15 below on arbitration and third parties.

Capacity
In relation to general corporate capacity, an English company will be bound by any arbitration
agreement it enters, whether beyond the capacity of the company or of the board of directors or
not, if the other party to the agreement dealt with the company in good faith.46 In the case of
individual contracting parties, issues as to capacity arise only rarely. One example is afforded
by Irvani v Irvani.
In Irvani v Irvani,47 two brothers (Bahman and Ali Irvani) were in partnership in a wide range of
business affairs, but disputes arose and their partnership terminated. Many of the difficulties were

caused by Alis drug addiction. The brothers elder sister was appointed as an arbitrator pursuant
to an ad hoc agreement and she produced an award determining the disputes which had arisen.
The award was broadly unfavourable to the claims brought by Ali. Ali commenced proceedings in
the courts of Georgia seeking dissolution of the partnership and distribution of its assets. He
argued that the arbitration agreement was ineffective because he had not, at the time, been
competent to contract by reason of his drug addiction. Bahman sought declarations from the
English court that the arbitration agreement, and the award, were valid and binding. The Court of
Appeal held that there was nothing unconscionable or oppressive about the arbitration agreement,
that Ali (an experienced businessman) had been capable of concluding it, and that it was
accordingly binding on him.

Administration or liquidation of corporate party to an

arbitration agreement
If an English company is put into administration, arbitration proceedings cannot be commenced
against it unless the administrator or the court consents. However, the administrator may himself
commence arbitration on behalf of the company.48 On liquidation, the liquidator may disclaim
unprofitable contracts (including the arbitration agreements contained in them) or may commence
or defend arbitration proceedings. The effect of foreign insolvency proceedings may depend upon
the effect of EC Council Regulation 1346/2000 on Insolvency Proceedings.49 Reference should be
made to specialist texts dealing with corporate insolvency.

7. SCOPE AND CONSTRUCTION

An arbitrator has the power to bind the parties to an arbitration because the parties agreed that he
should have such power. If the parties did not agree to refer an issue to arbitration then any award
on that issue will be invalid since it was made without jurisdiction. Arguments often arise as to
whether the agreement to arbitrate covers a particular issue, since enormous tactical advantages
may be obtained by forcing a party either to arbitrate or litigate that issue. The question of whether
the arbitrator or the court should decide whether a particular dispute falls within an arbitration
clause is considered in Chapter 6. This section will deal with the substantive issues of scope and
construction which may arise in such proceedings.
English law adopts a benevolent approach to construction and the court is usually unwilling to
construe the arbitration clause narrowly so as to exclude disputes from its scope, particularly
where this would result in a situation which is uncommercial or inconvenient.50 Where the
arbitration clause is abbreviated in its form, it will be construed widely and any challenges to the
scope of the clause will fail except in the most extreme circumstances. Thus the commonly
adopted provision for arbitration London or London arbitration will encompass the great
majority of disputes connected with the contract.
Many clauses make express reference to the claims, disputes or differences which are to be
referred. Such formulations are usually further refined by a requirement that the claim etc must
arise out of, under, in connection with or relate to the main contract. The possible
formulations are endless and the meaning of each depends on the intentions of the parties to the
particular contract. Historically, such formulations gave rise to a good deal of case law, in which

fine distinctions were drawn (e.g., between disputes or claims) and in which it was recognised
that some formulations (e.g., arising out of) were wider than others (e.g., arising under).
Such authorities were in any event only of persuasive value, since every contract is different and
issuees of construction always depend on the particular context. Since the House of Lords
decision in the well known Fiona Trustcase,51 authorities on the meaning of particular phrases
must be viewed as being of little assistance.
In Fiona Trust, the Lords considered a charterparty law and litigation clause which provided for
disputes to be referred to the English court, but which also conferred an option to arbitrate. The
provision was internally inconsistent, referring both to disputes arising under and out of the
charterparty. The issue before the Lords was whether an allegation that the charters had been
procured by bribery was one which fell within the scope of the arbitration clause (and was
therefore an issue to be determined by the tribunal). Considering the many authorities on
construction of arbitration clauses, the Lords endorsed the Court of Appeals view that the time
had come to draw a line and make a fresh start. The starting point in every case was the strong
presumption that the parties intended all their disputes to be determined in a single forum. With
that in mind, arbitration clauses should be interpreted broadly and with reference to the parties
intentions, rather than by focusing on particular phrases. If a businessman wishes to exclude
particular disputes from the scope of the arbitration clause, it is relatively easy to say so. Here,
there was nothing to suggest that the parties intended to exclude disputes about bribery from the
scope of the tribunals jurisdiction.
Post-Fiona Trust, therefore, authorities about the detailed meaning of particular phrases are of
limited relevance. Instead, a court faced with issues of construction will adopt a broad approach,
seeking to give a wide interpretation to any arbitration agreement and to give effect to the
intentions of the parties.
For example, in Film Finance Inc v The Royal Bank of Scotland,52 Andrew Smith J considered a
dual mechanism clause which referred some disputes to arbitration and others to the English
court. He was willing to modify the arbitration provisions in order to give effect to the parties
intentions and to make the clause work sensibly

8. COUNTERCLAIMS
Often both parties to a maritime contract wish to assert claims against each other. The respondent
to arbitration proceedings may do so by way of counterclaim where his own claim falls within the
scope of the arbitration agreement. Although it may be argued that it is technically necessary for
two separate arbitrations to be commenced, this is obviously inconvenient and unheard of in
practice. By agreeing to the arbitrator hearing the respondents claim by way of counterclaim,
both parties submit that claim to the arbitrators jurisdiction.53
Problems arise where the respondent wishes to assert a counterclaim (sometimes pleaded as a setoff) that does not arise under the same contract or does not clearly come within the scope of the
the arbitration agreement. In these circumstances, whether the arbitrator has jurisdiction over the
counterclaim will depend on the scope of the arbitration clause.54 If the counterclaim arises out of
the same transaction or one closely connected to the main contract containing the arbitration
clause then unless the arbitration clause excludes such a defence, it is likely that the arbitral

tribunal would have have jurisdiction to consider the claim.55 Such a situation is sometimes called
transaction set-off, but reference should be made to specialist texts for discussion of the different
types of set-off.56 The courts have commented that issues of some intricacy can arise,57 and the
issue will ultimately turn upon the construction of the particular arbitration clause.58 It will usually
be more convenient for the parties to agree that the arbitrator should determine both claim and
counterclaim since this avoids the risk of duplicated proceedings and inconsistent findings.

9. SCOTT v AVERY CLAUSES

Arbitration clauses sometimes take the form of an agreement that arbitration shall be a condition
precedent of the right to enforce rights under a contract in the courts, or that the parties only
obligation in the event of a dispute is to pay such sums as awarded by an arbitrator. Such clauses
are called Scott v Avery clauses because in the case of Scott v Avery 59 the House of Lords decided
that such agreements were legal and enforceable,60 and not contrary to public policy as ousting the
courts jurisdiction.
A Scott v Avery clause has two practical consequences. First, like other arbitration clauses, it
entitles the parties to seek a stay of legal proceedings brought in breach of the clause. Second,
unlike other arbitration clauses, a Scott vAvery clause has the effect that until the dispute between
the parties has been referred to arbitration, there is no cause of action over which the courts have
jurisdiction. Moreover, the amount in respect of which any claimant can bring judicial
proceedings is limited to the amount awarded by the arbitrator, the clause being treated as an
agreement to pay such amount. A Scott v Avery clause is thus not merely a procedural provision. It
affects the substantive rights of the parties,61 conferring on the defendant a complete defence to
any court proceedings the subject matter of which falls within the clause. Because of the farreaching effects of a Scott v Avery clause, the courts are unwilling to imply one into a
contract,62 and have adopted a restrictive approach to the question of whether such clauses affect
the right of the parties to approach the court for ancillary relief such as security.63
A claim form issued in breach of a Scott v Avery clause is not a nullity, but the clause provides a
complete defence to such an action on the basis that the plaintiff has no cause of action until it has
arbitrated. However, although a defendant to such proceedings is certainly entitled to await trial
and assert a defence based on the Scott v Avery clause, the more efficient course of action is to
seek an immediate stay of the judicial proceedings.

Loss of right to rely on Scott v Avery clauses

Despite the fact that a Scott v Avery clause confers substantive rights, those rights can be lost.
First, section 9(5) of the 1996 Act provides that where the court has refused to stay legal
proceedings brought in breach of a Scott v Averyclause, then that clause ceases to have effect. This
avoids a situation where the arbitration clause is unworkable, yet no legal proceedings can
successfully be brought.64 Second, the Scott v Avery provision may be waived by the conduct of
the defendant (usually by participating in court proceedings without objection). Similarly, a
defendant may not rely upon the clause as a defence where he has by his own conduct hindered
the progress of arbitration proceedings.65

10. TERMINATION

Since the arbitration clause is regarded as an agreement separate from the main contract to which
it relates, termination of the main contract does not entail automatic termination of the arbitration
agreement. The parties can agree to terminate the arbitration agreement: if this is the intention of
the parties, it should usually be stated expressly, though section 23(4) of the 1996 Act makes clear
that it is possible to reach such agreement without writingin particular, if one party simply
abandons the arbitration.66 However, it should be noted that the courts have been reluctant to find
that an arbitration agreement has been terminated (or abandoned) by implied agreement or by
conduct.67
1 The 1996 Act applies where the seat of an arbitration is England, Wales or Northern Ireland. In
most such cases, the arbitration agreement will also be governed by English law (C v D) [2007]
EWCA Civ 1282; [2008] 1 Lloyds Rep 360. However, an arbitration agreement specifying
arbitration in London may, if the parties agree, and subject to certain mandatory provisions (see
Chapter 5), be governed by a different law. Similarly, a choice of foreign curial law will (subject
to the application of the mandatory provisions of the 1996 Act) displace the application of English
procedural rules, including the Act: see the obiter view of the House of Lords in Channel Tunnel
Group Ltd v Balfour Beatty Construction Ltd [1993] 1 AC 334 at 357-358; see also paragraph 23
of the DAC Report.
2 Westminster Chemicals and Produce Ltd v Eichholz and Loeser [1954] 1 Lloyds Rep 99
(appointment of arbitrators by each side); A/B Legis v V Berg & Sons Ltd [1964] 1 Lloyds Rep
203 (submission to an umpire); Luanda Exportadora SARL etc v Wahbe Tamari & Sons Ltd and
Jaffa Trading Co [1967] 2 Lloyds Rep 353 (submission to an umpire); The Tuyuti [1984] 2
Lloyds Rep 51 at 58; see also Furness Withy v Metal Distributors (The Amazonia) [1990] 1
Lloyds Rep 236.
3 Almare Societa di Navigazione SpA v Derby and Co Ltd [1989] 2 Lloyds Rep 376.
4 Cf Hoesch Export AG v Hansa Projekt Transport GmbH (The World Umpire) [1990] 1 Lloyds
Rep 374, in which the court held that on the facts there were two implied agreements, between
owners and charterers and shippers and owners, but that the agreement between shippers and
owners incorporated no arbitration clause.
5 [2001] 2 All ER (Comm) 97; see also Republic of Kazakhstan v Istil Group Inc [2006] EWHC
448 (Comm); [2006] 2 Lloyds Rep 370
6 [2007] EWHC 2667 (Comm); [2008] 1 Lloyds Rep 316.
7 [1993] 1 AC 334.
8 At page 355.
9 See Chapter 3.
10 [2007] EWHC 2495 (TCC); [2008] 1 All ER (Comm) 653.
11 [2000] 2 Lloyds Rep 1.
12 Film Finance Inc v The Royal Bank of Scotland [2007] EWHC 195 (Comm); [2007] 1 Lloyds
Rep 382.

13 [1986] 1 QB 868.
14 The same result would apply under the 1996 Act.
15 Paragraph 35 of the DAC Report.
16 Paragraph 34 of the DAC Report.
17 [1986] 2 Lloyds Rep 225.
18 Paragraph 34 of the DAC Report.
19 Petredec Ltd v Tokumaru Kaiun Co Ltd [1994] 1 Lloyds Rep 162.
20 [1997] 2 Lloyds Rep 738.
21 [2007] EWHC 3015 (TCC); [2008] Bus LR D49.
22 [2006] EWHC 1360 (Comm); [2007] 1 Lloyds Rep 37.
23 See, e.g., Sun Life Assurance Company of Canada v CX Reinsurance Company Limited [2003]
EWCA Civ 283; [2004] Lloyds Rep IR 58.
24 [1969] 2 Lloyds Rep 547.
25 [1966] 1 Lloyds Rep 114.
26 At p. 549.
27 Star Shipping AS v China National Foreign Trade Transportation Corporation [1993] 2
Lloyds Rep 445.
28 [1995] 1 Lloyds Rep 617.
29 [1968] 1 Lloyds Rep 163.
30 Laertis Shipping Corporation v Exportadora Espanola de Cementos Portland [1982] 1 Lloyds
Rep 613.
31 Excess Insurance Co Ltd v Mander [1997] 2 Lloyds Rep 119, AIG Europe SA v QBE
International Insurance Ltd [2001] 2 Lloyds Rep 268, Axa Re v Ace Global Markets Ltd [2006]
EWHC 216 (Comm); [2006] Lloyds Rep IR 683.
32 Stretford v The Football Association Limited [2006] EWHC 479 (Ch); [2007] EWCA Civ 238;
[2007] 2 Lloyds Rep 31.
33 [1991] 57 BLR 1.
34 Paragraph 42 of the DAC Report.
35 It appears that a reference to charterparty terms is apt to incorporate the terms of written, but
not oral, chartering agreements. Moreover, a reference to a charterparty is more likely to refer to
a written instrument than to a contract evidenced by a recap telex: Partenreederei m/s Heidberg
and ors v Grosvenor Grain & Feed Co (The Heidberg) [1994] 2 Lloyds Rep 286.

36 The Annefield [1970] 2 Lloyds Rep 252; [1971] P 169, 184; see also The Nerano [1994] 2
Lloyds Rep 50 at 52 (first instance per Clarke J) and Excess Insurance Co v Mander [1997] 2
Lloyds Rep 119.
37 Thomas & Co Ltd v Portsea Steamship Co [1912] AC 1; The Merak [1964] 2 Lloyds Rep
527; Federal Bulk Carriers Inc v Itoh & Co Ltd, The Federal Bulker [1989] 1 Lloyds Rep 103.
38 Brandon J in The Rena K [1979] 1 QB 377 at 389-390, endorsed this view, stating that The
Merak [1964] 1 Lloyds Rep 527 was the authority for it. See also the first instance judgment
in The Varenna [1983] 1 Lloyds Rep 416 at 422 per Hobhouse J, and the Court of Appeal in The
Nerano [1996] 1 Lloyds Rep 1.
39 At 108 and 110, Dillon LJ emphasised that the question of incorporation turned upon the
construction of the bill of lading.
40 [1997] 2 Lloyds Rep 119. See also Michael S Evryalos Maritime Ltd v China Pacific
Insurance Co, The Michael S, per Colman J, 20 December 2001, LMLN [2002].
41 [1994] 2 Lloyds Rep 50; [1996] 1 Lloyds Rep 1.
42 See, e.g., Excess Insurance Co Ltd v Mander [1997] 2 Lloyds Rep 119, Secretary of State for
Foreign and Commonwealth Affairs v Percy Thomas Partnership 65 Con LR 11, Sea Trade
Maritime Corp v Hellenic Mutual War Risks Association (Bermuda) Ltd [2006] EWHC 617;
[2007] 1 Lloyds Rep 280, Axa Re v Ace Global Markets Ltd [2006] EWHC 216 (Comm); [2006]
Lloyds Rep IR 683.
43 [2003] EWHC 1278 (Comm); [2003] 2 Lloyds Rep 364.
44 [2001] 1 Lloyds Rep 703.
45 [2003] EWCA Civ 938; [2003] 2 Lloyds Rep 509.
46 Companies Act 1989, section 108, substituting section 35 and inserting section 35A of the
Companies Act 1985 (repealed from 1 October 2009 by the Companies Act 2006 and substituted
by sections 39-40 of the 2006 Act). The question of the capacity of foreign corporations to enter
contracts must be answered by reference to the law governing that corporations capacity.
47 [2000] 1 Lloyds Rep 412.
48 See, generally, Insolvency Act 1986 sections 8-27.
49 Discussed in Syska v Vivendi Universal SA [2008] EWHC 2155 (Comm); [2008] 2 Lloyds
Rep 636; [2009] EWCA Civ 677.
50 See, e.g., the references to commercial good sense made by Lord Goff in The Pioneer
Container [1994] 2 AC 324 and the recognition of the presumption of one stop adjudication
in Continental Bank NA v Aeakos Cia Naviera SA[1994] 1 Lloyds Rep 505 and in Harbour
Assurance Co (UK) Ltd v Kansa General International Insurance Co Ltd [1993] QB 701; cf The
Mahkutai [1996] 2 Lloyds Rep 1.
51 Also known as Premium Nafta Products Ltd (20th Defendant) & Ors v Fili Shipping Company
Ltd & Ors [2007] UKHL 40; [2008] 1 Lloyds Rep 254.

52 [2007] EWHC 195 (Comm); [2007] 1 Lloyds Rep 382.

53 Mustill & Boyd, 2nd edn, p. 131.
54 Metal Distributors (UK) Ltd v ZCCM Investment Holdings plc [2005] EWHC 156 (Comm);
[2005] 2 Lloyds Rep 37, Econet Satellite Services Ltd v Vee Networks Ltd [2006] EWHC 1664
(Comm); [2006] 2 Lloyds Rep 423.
55 Aectra Refining v Exmar BV [1994] 1 WLR 1634 suggests that an equitable or transactional
set-off can ordinarily be raised as a defence in an arbitration whereas a legal set-off may be
subject to a procedural bar such as a stay of proceedings, see also Glencore Grain Ltd v Agros
Trading Co [1999] 2 Lloyds Rep 410, discussed at [2000] LMCLQ 153 (Berg)
56 E.g., RW Wood on English and International Set Off (Sweet & Maxwell).
57 Ronly Holdings v JSC Zestafoni Nikoladze Ferroalloy Plant [2004] EWHC 1354 (Comm),
para 33.
58 Metal Distributors (UK) Ltd v ZCCM Investment Holdings plc [2005] EWHC 156 (Comm);
[2005] 2 Lloyds Rep 37, para 17.
59 (1856) 5 HL Cas 811.
60 A Scott v Avery clause postpones but does not annihilate the right of access to the
court: Freshwater v Eastern Australian Assurance Co Ltd [1933] 1 KB 515 at 523.
61 Dennehy v Bellamy [1938] 2 All ER 262.
62 Hardwick Game Farm v Suffolk Agricultural and Poultry Producers Association [1964] 2
Lloyds Rep 227.
63 E.g., the comments of Rix J in Re Qs Estate [1999] 1 Lloyds Rep 931 at 935-6,
considering Mantovani v Carapelli [1980] 1 Lloyds Rep 375.
64 Paragraph 57 of the DAC Report.
65 Hickman & Co v Roberts [1913] AC 229; Toronto Rly Co v National British and Irish Millers
Insurance Co Ltd (1914) 20 Com Cas 1; Woodall v Pearl Assurance Co Ltd [1919] 1 KB 593.
66 Paragraph 99 of the DAC Report.
67 Bremer Vulkan v South India Shipping Corporation [1981] AC 909 and Paal
Wilson v Partenreederei Hannah Blumenthal (The Hannah Blumenthal) [1983] 1 AC 854.

Chapter 5

The Conflict of Laws

The Conflict of Laws

1. Introduction

2. The substance of the dispute

3. The procedure of the arbitration
4. The agreement to arbitrate
5 The reference to arbitration
6. The arbitration award

1. INTRODUCTION
The principles of the conflict of laws (sometimes described as private international law)
determine which system of law governs a particular legal problem and which forum should decide
a dispute. These principles are sometimes of particular relevance in maritime arbitration which, by
reason of its international nature, may give rise to disputes as to which law governs a particular
issue and which tribunal should decide it. These disputes are of practical importance since
different systems of law (or tribunals) will often give rise to different outcomes. This chapter aims
to set out the basic principles determining the law applicable to disputes relating to arbitration.
Reference to specialist works such as Dicey, Morris & Collins on the Conflict of Laws is
recommended for greater detail. Disputes as to whether a case should be decided in English
arbitration or a foreign tribunal are considered further in Chapter 8 on injunctions. Jurisdictional
issues are covered more broadly in Chapters 6 and 7.
The task of determining the law governing a particular issue is generally performed by the arbitral
tribunal but it may sometimes be referred to the court (e.g., as a preliminary issue of law under
section 45 of the 1996 Act). Where an issue as to the applicable law is raised in England (whether
in court or before the arbitrator) in relation to a London maritime arbitration, English rules of
conflict of laws will usually apply to determine which system of law applies. Foreign conflict of
law rules would only apply in the highly unusual case where the parties have made an express and
enforceable choice in favour of those rules. If it becomes necessary to apply foreign law in a
maritime arbitration its content and effect will be regarded as a question of fact, to be proved by
evidence, usually a report from a foreign lawyer although submissions may also be used. In the
absence of such evidence, it will be assumed that foreign law is the same as English law although
there would be no appeal for error of law.1
The general principle is that it is for the parties to choose the law which is to govern the different
aspects of their arbitration, subject only to mandatory provisions in the public interest.2 However,
the rules derived from that principle are complex due to the different aspects of arbitration which
may be governed by different laws; for this reason the 1996 Act does not attempt to codify
them.3 In understanding disputes as to the applicable law it is important to distinguish the different
aspects of the arbitration, each of which might, in theory, be governed by different laws:4

(a) the agreement to arbitrate;

(b) the act of referring the dispute to arbitration (i.e., the reference to arbitration);
(c) the substance of the dispute which is referred to arbitration;
(d) the arbitral procedure;
(e) the arbitration award.

It would be misleading to suggest that it is common for these aspects to be governed by different
laws. Usually the arbitration agreement (and the procedure of the arbitration conducted pursuant
to it) is governed by the same law as the main contract in which it is contained. Occasionally,
however, the laws of different countries may govern different aspects of a single arbitration.5 For
instance, the laws governing the substance of the dispute and the procedure of the arbitration will
be different where London arbitration is used to resolve a dispute arising out of a contract
governed by foreign law. In practical terms the most common issues that arise are as to the law
governing the substance of the dispute, the law governing the procedure of the arbitration and the
law governing the arbitration agreement itself (including issues as to its validity). The law of the
procedure will invariably govern any challenge to the award and questions as to the reference to
arbitration are generally of academic interest only.

2. THE SUBSTANCE OF THE DISPUTE

In most cases the dispute referred to arbitration is contractual and therefore the merits, or
substance, of the dispute will be governed by the proper law of the main contract. The proper law
of the contract may significantly affect the outcome, and choice of a foreign law will preclude an
appeal on grounds of error of law even if the applicable principles of foreign law are identical to
those of English law.6 Section 46 of the 1996 Act prescribes what rules are applicable to the
substance of the dispute. It is based largely on article 28 of the Model Law and appears to follow
the common law principle that, subject to specific exceptions, an arbitrator is under a duty to
apply the law chosen by the parties to govern the merits of the case in the same way as a court.7 It
expressly provides that:

(1) The arbitral tribunal shall decide the dispute

o (a) in accordance with the law chosen by the parties as applicable to the substance of the
dispute, or
o (b) if the parties so agree, in accordance with such other considerations as are agreed by
them or determined by the tribunal.
(2) For this purpose the choice of the laws of a country shall be understood to refer to the
substantive laws of that country and not its conflict of laws rules.
(3) If or to the extent that there is no such choice or agreement, the tribunal shall apply the
law determined by the conflict of laws rules which it considers applicable.

Section 46 is directed towards the law applicable to the substance of the dispute. It may
sometimes be relevant to consider whether an issue is one of substance (governed by the law
applicable to the substance of the dispute) or relates to the procedure of the arbitration (usually
governed by the law of the seat of the arbitration). Detailed consideration of this complex issue is
beyond the scope of this book and may be influenced by the terms of the parties agreement on the
disputed matter.
In Lesotho Highlands Development Authority v Impregilo SpA,8 parties to a construction contract
had agreed that the contract was governed by the law of Lesotho and that payments were to be
made in Lesotho currency. The seat of the arbitration was London and the tribunal made an award
in hard currency and also awarded pre-award interest (which was not permitted under Lesotho
law). The majority of the House of Lords found that the award of currency was a matter of

substance and that the tribunal had erred in law in applying the contract terms. The award of
interest was, however governed by the law of the seat of the arbitration (i.e., the interest
provisions of the 1996 Act) and the pre-award interest involved no error.
Section 46(1)(a) restates the common law principles of the conflicts of law. The mere fact that the
parties have chosen to arbitrate in London will often give rise to a finding that they have impliedly
chosen English law to govern the main contract.9 Section 46(1)(a) allows the parties to choose the
law of a country as opposed to other systems of law, such as religious law.10 Section 46(1)(b)
expressly validates honourable engagement clauses or clauses requiring disputes to be
determined in accordance with principles of international commercial law or general
considerations of justice and fairness (equity clauses). One consequence of such clauses is that
the parties deprive themselves of the right to appeal, since there will be no question of English law
for the court to decide.11 Section 46 is also consistent with parties having an agreement to arbitrate
disputes according to international law (e.g., in the context of a bilateral investment treaty).12
Section 46(2) makes clear that the parties choice of the law of a country shall be understood to
refer to the substantive laws of that country and not its conflict of law rules. This principle, which
derives from the existing English rules of the conflict of laws, prevents the circularity (arising
from the doctrine of renvoi) which may arise where the foreign conflict rules themselves refer the
substantive issue back to English law.
If the parties have not agreed on the applicable law or an equity clause, section 46(3) of the 1996
Act enables the tribunal to decide which laws to apply in accordance with the conflict of laws
rules which it considers applicable. This confers a discretion on the tribunal in deciding which
conflict of law rules to apply and is only likely to be invoked in international commercial
arbitrations usually administered by an institution, for example ICC arbitrations. The DAC was of
the view that the tribunal cannot make up its own conflict of law rules: it only has discretion in
selecting a set of conflict of law rules.13 In a dispute arising under a bilateral investment treaty the
dispute may be decided according to international law.14
In the absence of an express or implied choice of law, most maritime arbitrators will use English
conflict rules to determine the proper law of the contract. The Contracts (Applicable Law) Act
1990 will be applied, unless, exceptionally, different conflict rules have been agreed. Where
tortious claims are referred to London arbitration, the arbitrator will also ordinarily apply English
conflicts rules to determine the law applicable to those claims.

3. THE PROCEDURE OF THE ARBITRATION

Procedure normally governed by law of the seat of the

arbitration
The law governing the procedure or conduct of the arbitration is sometimes called the curial
law.15 According to English conflict rules, the law governing the procedure to be adopted during
the arbitration is usually the law of the seat of the arbitration. Every arbitration must always
have a seat.16 The seat of the arbitration is ordinarily the place where the parties have agreed
that it should be held and it would be unusual for the juridical seat to be different from the venue
chosen for hearings.17 It is generally presumed that by choosing London arbitration, the parties

have impliedly agreed that English procedural law and its conflict of law rules will apply in
support of the arbitration.18 Similarly, if the parties agree on English law to govern the procedure
of the arbitration this will usually amount to a choice of England as the seat of the
arbitration.19 Accordingly, if the parties agree on London as the place of arbitration or choose
LMAA Terms or the rules of any arbitral institution in London, then in the absence of agreement
to the contrary, the parties will be treated as agreeing that the seat of the arbitration is in
England.20 Invariably the law of the seat, the curial law and the procedural law of the arbitration
will coincide.21 A party might very exceptionally agree on England as the seat of the arbitration
but choose some other law to govern a non-mandatory aspect of the arbitration.
English law recognises that the seat of the arbitration means more than its geographical
location; it connotes the legal place of the arbitration in so far as by choosing the legal place of
the arbitration the parties ipso facto choose the laws of that place to govern their arbitration
proceedings.22 Thus the parties could choose London as the seat of the arbitration so that English
law would apply to the procedure but hearings could still take place in other countries, perhaps for
the convenience of witnesses or the arbitrators.23
The law of the seat of the arbitration generally governs the conduct of the arbitration, including
procedural and evidential matters, and also the availability of the English courts supervisory and
supportive powers (e.g., to make a default appointment or to set aside an award for lack of
jurisdiction).24 The law of the seat will govern the effect of the insolvency of an EU party on the
arbitration agreement and the arbitration itself.25
Other principles of English procedural law, including conflicts rules, will generally apply in a
maritime arbitration in London unless the parties have agreed on a different procedural law. A
choice of a foreign seat, or foreign curial rules, for a maritime arbitration taking place in London
would be unusual. The LMAA Terms may still apply even if the parties choose a seat outside
England and Wales; paragraph 7(b) expressly provides:
Where the seat of the arbitration is outside England and Wales the provisions of these Terms
shall nevertheless apply to the arbitral proceedings, save to the extent that any mandatory
provisions of the law applicable to the arbitration agreement otherwise provide.

The 1996 Act26

Application of mandatory provisions
Party autonomy underlies the 1996 Act and it remains possible for parties to choose a foreign law
to apply to the procedure of the arbitration even where its seat is London. A clear intention to
achieve this result would be necessary as it is likely to create practical problems.27 Moreover, if
the parties choose England as the seat of their arbitration the mandatory provisions of the 1996
Act will apply regardless of the parties agreement on foreign procedural law (see Schedule 1 of
the Act which lists the mandatory provisions). The policy appears to be that if parties choose
England as the legal place of their arbitration then they must comply with the mandatory
safeguards imposed in the public interest.28 Thus the parties agreement on foreign law would be
given effect except in relation to matters covered by mandatory provisions (see section 4(5) of the
1996 Act). Where the parties have chosen England as the seat, the choice of another law to govern

the substance of the contract cannot displace the mandatory rules of the 1996 Act and would not
be treated as displacing the non-mandatory rules.29 In order to ensure compliance with the United
Kingdoms international obligations under the New York Convention, section 2(2) of the 1996
Act provides that the English courts powers in relation to stays of court proceedings and
enforcement of awards (sections 9 and 66 of the 1996 Act) will apply even where the parties have
chosen a seat outside the jurisdiction or no seat has been designated.
Designation of the seat of the arbitration
The 1996 Act maintains the concept of the seat as the connecting factor in deciding the law
applicable to the procedure of the arbitration and the courts supportive and supervisory powers.
Under section 2(1), the provisions of Part I of the Act apply where the seat of the arbitration is in
England and Wales or Northern Ireland. Section 3 goes on to explain that:

In this Part the seat of the arbitration means the juridical seat of the arbitration
designated
o (a) by the parties to the arbitration agreement, or
o (b) by any arbitral or other institution or person vested by the parties with powers in that
regard, or
o (c) by the arbitral tribunal if so authorised by the parties,
or determined, in the absence of any such designation, having regard to the parties agreement
and all the circumstances.

The 1996 Act only requires the choice of seat to be designated, thus probably allowing for the
parties implied agreement on the seat (rather than an agreement in writing as required elsewhere
in the Act). If the parties have not designated the seat of the arbitration this will be determined
having regard to the arbitration agreement and relevant circumstances (including the parties, the
nature of the dispute, the proposed procedures, the place of arbitration hearings and the place of
issue of awards) existing at the time the arbitration is started.30 The term juridical seat refers to
the country that has judicial control over the arbitration31 and is used to ensure that there will only
be one seat of the arbitration even if the arbitration takes place in several countries. Once the
arbitration starts then it cannot be changed unless by agreement.32 The procedure in the vast
majority of maritime arbitrations in London will be governed by English law since the choice of
London arbitration will be considered as a designation of London as the juridical seat of the
arbitration. Thus, the 1996 Act will invariably apply to all proceedings in an arbitration governed
by LMAA Terms even if parts of the hearing take place abroad.
In ABB Lummus Global Ltd v Keppel Fels Ltd 33 the arbitration clause in a shipbuilding contract
provided that disputes arising in connection with or as a result of the contract shall be referred
to the LCIA. Disputes shall be settled in accordance with Singapore Law. Clarke J held that this
amounted to an agreement that the juridical seat of the arbitration would be London and the 1996
Act applied.
Under the 1996 Act, the parties are free to agree that the seat of their arbitration should be outside
England and Wales even if hearings and other aspects of the arbitration take place within England
and the LMAA Terms expressly allow for this.34 An English court would recognise and enforce

such a choice, even the choice of a floating curial law, except in so far as it might conflict with
public policy; however, English law does not recognise the concept of a delocalised arbitration.35
The courts supportive powers available regardless of seat
The court may exercise supportive powers under section 2(3) of the 1996 Act (e.g., to preserve
evidence or assets in cases of urgency) even where the seat is outside England. The court may,
however, refuse to grant such relief if the case has insufficient connection with England or where
the exercise of such powers would result in a conflict with the powers of another
jurisdiction.36 The courts supportive powers under section 2(3) are also available where the seat
of the arbitration has not yet been designated. The powers are discretionary and the court may
refuse to exercise such powers if the fact that the seat of the arbitration is likely to be outside
England makes it inappropriate to intervene. The discretion will typically be exercised where
arbitration has not yet been commenced but the seat of the arbitration is extremely likely to be in
London.
Section 2(4) grants the court wide powers to exercise any powers conferred under the 1996 Act
where the seat of the arbitration has not yet been designated or determined and by reason of a
connection with England the court is satisfied that it is appropriate to do so. The discretion could
be appropriately exercised where the arbitration tribunal has not yet been constituted but the seat
of the arbitration is likely to be London. For example, the court could extend time under section
12 even if arbitration had not been properly commenced.37

4. THE AGREEMENT TO ARBITRATE

The proper law of the arbitration agreement is the law governing its validity, meaning and scope
(including questions as to whether a particular dispute falls within its terms), the validity of the
notice to arbitrate, the constitution of the tribunal, and the jurisdiction of the arbitrators.38 It does
not govern questions of procedure, which are almost always matters for the law of the place (or
seat) of the arbitration.39
English common law conflicts rules will usually apply in order to ascertain the proper law of
arbitration agreements because they are outside the scope of the Contracts (Applicable Law) Act
1990.40 Where the exercise of determining the proper law is performed by an English court, it is
clear that the conflicts rules of the forum (i.e., English law) will be applied unless there is an
enforceable agreement otherwise. Similarly, in a London maritime arbitration the tribunal would
apply English conflicts rules to determine the proper law of the arbitration agreement unless,
exceptionally, foreign procedural rules have been chosen. Where there is a jurisdictional dispute
as to whether a matter should be arbitrated in London or decided in a foreign forum, an English
court will apply English law to the dispute if satisfied that the arbitration agreement is governed
by English law.
In Starlight Shipping Co v Tai Ping Insurance Co Ltd 41 a cargo claim arose under a bill of lading
expressly incorporating an arbitration clause in a voyage charter providing for London arbitration
according to English law. Cooke J granted the shipowners an anti-suit injunction restraining cargo
insurers from pursuing the cargo claim in the Chinese courts on grounds that English law applied
and would allow such relief. He regarded it as irrelevant that under Chinese law cargo interests
would not be bound by the arbitration clause.

The intention of the parties is the basic criterion applied in order to determine the proper law of
the arbitration agreement. In the absence of any implied or express choice of law, the arbitration
agreement will be governed by the system of law with which the agreement has its closest and
most real connection. If the parties have not expressly agreed the law which is to govern their
contract, recourse must be had to the surrounding circumstances, which may indicate an implied
choice of law, or the system to which the arbitration agreement is most closely connected.42
In this context, a choice of London as the seat of the arbitration will be a strong factor in
determining the legal system to which the arbitration agreement has its closest and most real
connection.43 The fact that the parties have chosen arbitration in London will also be regarded as
an important, but not decisive, pointer towards a finding that the parties impliedly agreed that the
arbitration agreement should be governed by English law.44 Similarly, if the parties agree to the
application of LMAA Terms (whether expressly or impliedly, in their arbitration agreement, or by
reason of appointing arbitrators subject to LMAA Terms) then paragraph 6(a) of those terms
means that, unless there is contrary agreement, the parties will be treated as having agreed that
English law governs the arbitration agreement.45
Other relevant factors include the language in which the agreement is made, the nationality of the
parties, the currency in which any payment is to be made, the place of performance of the
contract, and, to a lesser extent, the flag of the vessel to which it relates. The nature of contract
involved will be relevant, for example an arbitration clause in a bilateral investment treaty will be
regarded very differently to that contained in a standard shipping contract, and may be governed
by international law even though England has been chosen as the seat of the arbitration.46 It is
important to note that the fact that a charterparty or bill of lading incorporates the Hague or
Hague-Visby Rules by reference to the enacting legislation of a particular country is not regarded
as evidencing an implied choice of the law of that country.47
In The Star Texas,48 a charterparty arbitration clause provided for arbitration in Beijing or
London in defendants option. The Court of Appeal rejected the submission that the arbitration
clause was governed by an implied choice of a floating proper law, holding that it was only
where a single place of arbitration was selected by the parties that an implied choice of law could
be made out. The court accepted that English law applied to the arbitration agreement because this
was the system with which the contract had the closest connection.
Where, as is usually the case in the maritime context, the arbitration clause forms part of a
contract such as a charterparty or a bill of lading, there may also be an express choice of law
clause (which usually coincides with the country in which arbitration is to occur). Although an
arbitration agreement is separable and independent from the main agreement,49 the existence of an
express choice of law clause in the latter will usually be determinative of the proper law of the
arbitration agreement, even if the seat of the arbitration is in another country.
For example, in Sumitomo Heavy Industries Ltd v Oil and Natural Gas Commission,50 the parties
to a contract to install a floating production plant off the coast of South India chose ICC
arbitration in London but agreed that the applicable law of the contract was that of India. Potter J
found that the proper law of the arbitration agreement was probably Indian law, although English
law governed the procedure of the arbitration.

Similarly, in Peterson Farms Inc v C & M Farming Ltd,51 the parties contract contained a choice
of law clause in favour of the law of Arkansas but an arbitration clause referring to ICC arbitration
in the UK. Langley J found that the arbitration agreement was governed by Arkansas law and
rejected an argument based on the doctrine of separability to justify applying a different system of
law to the arbitration agreement.
The proper law of the arbitration agreement will always depend on the particular circumstances
and will not always be the same as the law governing the rest of the contract. For example where
an arbitration clause expressly refers to English law or the Arbitration Act 1996 and makes
England the seat of the arbitration, but is contained in a contract with a foreign choice of law
clause it is more likely to be governed by English law than the foreign governing law.52This is
because the arbitration agreement is likely to have a closer connection with the law of the seat of
the arbitration. It also flows from the principle that the arbitration agreement is separable from the
main contract.
In XL Insurance Ltd v Owens Corning,53 the parties to an insurance contract agreed on arbitration
in England under the provisions of the Arbitration Act 1996, but the governing law of the contract
was that of the State of New York. Toulson J held that by stipulating for arbitration in London
under the 1996 Act the parties had impliedly chosen English law as the proper law of the
arbitration clause.
Where the existence or validity of the arbitration agreement is disputed, the law in accordance
with which this issue is normally determined is that which, assuming that the agreement were
valid, would apply to it (the putative proper law).
In The Atlantic Emperor,54 an arbitration clause providing for London arbitration had been telexed
to buyers but had not been acknowledged by the sellers. It was held that the putative proper law of
the arbitration agreement was English law. Therefore English rules of contract concerning offer
and acceptance would be used to determine whether an agreement had been concluded.
However, Article 8(2) of the Rome Convention may modify this principle to some extent to
enable a party to have recourse to the law of the country in which he has his habitual residence to
establish that he did not consent if it appears that in the circumstances it would not be reasonable
to determine the effect of his conduct in accordance with the putative proper law. Such recourse
would be fairly rare.
In Welex A.G. v Rosa Maritime Ltd. (The Epsilon Rosa) (No. 2),55 a bill of lading expressly
incorporated the arbitration clause in the charter referred to on the bill. The charter was evidenced
by a recap telex referring to ARB IN LONDON ENG LAW TO APPLY. The claimant was
based in Switzerland and relied on Article 8(2) of the Rome Convention to seek to apply Swiss or
Ukrainian law (as opposed to English law) to the question of incorporation. The applicability of
the Rome Convention to the issue of the incorporation of an arbitration agreement
(notwithstanding the exclusion of arbitration agreements in Article 1(2)(d)) was not challenged
and David Steel J held there was nothing unreasonable in applying English law since the
transaction was entirely conventional and the incorporation of arbitration clauses was
commonplace in this context.

5. THE REFERENCE TO ARBITRATION

There is a distinction between the original arbitration agreement and the acts of referring disputes
to arbitration and appointing arbitrators, which constitute new agreements in
themselves.56 Traditionally it was expected that the law governing the agreement to refer to
arbitration would be the same as that of the arbitration agreement.57 It was also considered that the
law governing the agreement to refer a particular dispute to arbitration would govern the parties
duties to conduct the reference and the parties relationship with the arbitrator.58 Under the 1996
Act, however, most aspects of these matters will be governed by English law if London is the seat
of the arbitration, regardless of the law governing the arbitration agreement or the reference
(indeed the parties statutory duty to proceed expeditiously with the arbitration applies
mandatorily). Accordingly, in the absence of an enforceable agreement to the contrary, it will
rarely be useful to draw a distinction between the reference to arbitration and the procedure of the
arbitration. Sometimes, however, it may be useful to distinguish the law governing the parties
relationship with the tribunal and the law governing the procedure of the arbitration. Where an
arbitrator is appointed on LMAA Terms, it is implicit that, unless expressly agreed otherwise, his
appointment will be governed by English law.59

6. THE ARBITRATION AWARD

Issues as to whether an award can be challenged in the English courts, and the application of the
courts supervisory powers over awards under Part I of the 1996 Act will depend on whether the
juridical seat of the arbitration is in England (see section 3 above). The choice of London as the
seat of the arbitration is treated by the English courts as analogous to the choice of an exclusive
jurisdiction for the supervision of the award and the court may restrain a party who seeks to
invoke the supervisory jurisdiction of another court.60
In C v D 61 an insurance policy was governed by US law but the parties had chosen London
arbitration in accordance with the 1996 Act. One of the parties sought to challenge the award in
the New York courts. The Court of Appeal held that the choice of seat of the arbitration is a
choice of the same forum for remedies to challenge the award. The appropriate remedy was an
anti-suit injunction restraining the New York proceedings.
The recognition and enforcement of an award under the New York Convention62 depends on
where it is made. The UK is a party to the Convention and makes provision for enforcement of
awards made outside the UK63 under Part III of the 1996 Act. Part I applies to awards made in
England and Wales or Northern Ireland. Section 53 makes clear that in the absence of contrary
agreement an award will be treated as being made at the seat of the arbitration:
Unless agreed otherwise by the parties, where the seat of the arbitration is in England and Wales
or Northern Ireland, any award in the proceedings shall be treated as made there, regardless of
where it was signed, despatched or delivered to any of the parties.
As explained above, an arbitration agreement providing for arbitration in London (as is typical for
maritime arbitrations) will almost invariably be treated as a choice of England as the juridical seat
of the arbitration. This means that an award made pursuant to that agreement will be ordinarily be
treated as made in England, thus subject to the courts powers of enforcement and its other
supervisory powers under Part I of the 1996 Act, regardless of whether the award might have been
signed or drafted elsewhere.64 The remedy of appeal against an award on the ground of error of

law is not mandatory and may be excluded by agreement in writing. Other supervisory powers
over awards (typically remission on grounds of serious irregularity) will, however, apply
mandatorily unless the parties have designated a seat outside England and Wales (see above).
Powers of enforcement under section 66 of the 1996 Act will apply regardless of the seat of the
arbitration,65 but will not usually be applied where the seat of the arbitration is outside the UK
since the award would then be treated as a foreign award governed by Part III.
1 Hussmann (Europe) Ltd v Al Ameen Development & Trade Co [2000] 2 Lloyds Rep 83, para
42, s 82(1) of the 1996 Act.
2 XL Insurance Ltd v Owens Corning [2000] 2 Lloyds Rep 500 at 506.
3 Paragraph 24 of the DAC Report.
4 Naviera Amazonica Peruana SA v Compania Internacional de Seguros del Peru [1988] 1
Lloyds Rep 116 at 119, Sumitomo Heavy Industries Ltd v Oil and Natural Gas
Commission [1994] 1 Lloyds Rep 45 at 56.
5 E.g., Union of India v McDonnell Douglas Corporation [1993] 2 Lloyds Rep 48.
6 Section 82(1) of the 1996 Act, see Egmatra AG v Marco Trading Corporation [1999] 1 Lloyds
Rep 862; Sanghi Polyesters Ltd (India) v International Investor (KCFC) (Kuwait) [2000] 1
Lloyds Rep 480, Reliance Industries v Enron Oil & Gas India Ltd [2002] 1 All ER (Comm) 59.
7 Wealands v CLC Contractors Ltd [1999] 2 Lloyds Rep 739 at 749.
8 [2005] UKHL 43; [2005] 2 Lloyds Rep 310.
9 Compagnie dArmement Maritime SA v Compagnie Tunisienne de Navigation SA [1971] AC
572. The choice of law need not be in writing since it is not referred to as an agreement, see
section 5(1) of the 1996 Act.
10 Musawi v RE International (UK) Ltd [2007] EWHC 2981 (Ch); [2008] 1 Lloyds Rep 326,
although the Court of Appeal considered section 46(1)(a) would cover international law
in Republic of Ecuador v Occidental Exploration and Production Co [2005] EWCA Civ 116;
[2005] 2 Lloyds Rep 707, para 33.
11 A question of law is defined in section 82 not to cover questions of foreign law.
12 Republic of Ecuador v Occidental Exploration and Production Co [2005] EWCA Civ 116;
[2005] 2 Lloyds Rep 707, para 33.
13 Paragraph 225 of the DAC Report.
14 Republic of Ecuador v Occidental Exploration and Production Co [2005] EWCA Civ 116;
[2005] 2 Lloyds Rep 707, para 33.
15 In Paul Smith Ltd v H & S International Holding Inc [1991] 2 Lloyds Rep 127 at 130, Steyn J
distinguished between rules of procedure (which depend upon the choice of the parties) and the
curial law (a body of rules which sets a standard external to the arbitration agreement and the
wishes of the parties, for the conduct of the arbitration). Saville J in Union of India v McDonnell
Douglas Corporation [1993] 2 Lloyds Rep 48 at 50 also recognised the undesirable possibility of

different laws governing the internal and external supervision of the arbitration. Section 2(1) of
the 1996 Act clarifies the extent to which that statute will apply to both aspects of the conduct of
the arbitration. A potential distinction between the law of the seat of the arbitration and the curial
law was also drawn in Dubai Islamic Bank PJSC v Paymentech Merchant Services Inc [2001] 1
Lloyds Rep 65. In practice though, the two concepts tend to be elided and both are referred to as
the curial law.
16 Naviera Amazonica Peruana SA v Compania Internacional de Seguros del Peru [1988] 1
Lloyds Rep 116; Dubai Islamic Bank PJSC v Paymentech Merchant Services Inc [2001] 1
Lloyds Rep 65.
17 Shashoua v Sharma [2009] EWHC 957 (Comm). See also Braes of Doune Wind Farm
(Scotland) Ltd v Alfred McAlpine Business Services Ltd [2008] EWHC 426 (TCC); [2008] 1
Lloyds Rep 608 where the parties arbitration clause was unusual in choosing English law to
govern the arbitration agreement but Glasgow as the seat of the arbitration.
18 See, generally, Coppee-Lavalin SA/NV v Ken-Ren Chemicals & Fertilizers Ltd [1994] 2
Lloyds Rep 109 where the House of Lords held that the courts would apply principles of English
procedural law to support a maritime arbitration. See also C v D [2007] EWCA Civ 1282; [2008]
1 Lloyds Law Rep 239.
19 Naviera Amazonica Peruana SA v Compania Internacional de Seguros del Peru [1988] 1
Lloyds Rep 116.
20 Paragraph 6(b) of the LMAA Terms. If the arbitration agreement originally provided
(expressly or impliedly) for a seat outside England then this would probably be treated as
agreement to the contrary preventing application of this term.
21 C v D [2007] EWHC 1541 (Comm); [2007] 2 Lloyds Rep 367 at 374.
22 ABB Lummus Global Ltd v Keppel Fels Ltd [1999] 2 Lloyds Rep 24 (decided under the 1996
Act), and Union of India v McDonnell Douglas Corporation [1993] 2 Lloyds Rep 48 at 50 and
relied upon in the DAC Supplementary Report on the Arbitration Act 1996, paragraph 11.
23 Section 34(2)(a) of the 1996 Act, Naviera Amazonica Peruana SA v Compania Internacional
de Seguros del Peru [1988] 1 Lloyds Rep 116 at 121.
24 C v D [2007] EWCA Civ 1282; [2008] 1 Lloyds Law Rep 239, para 39.
25 Syska v Vivendi Universal SA [2009] EWCA Civ 677 (in relation to EU insolvency rules).
26 See also Chapter 2 on the application of the Act.
27 ABB Lummus Global Ltd v Keppel Fels Ltd [1999] 2 Lloyds Rep 24 and Union of
India v McDonnell Douglas Corporation [1993] 2 Lloyds Rep 48.
28 Section 1(b) of the 1996 Act.
29 XL Insurance Ltd v Owens Corning [2000] 2 Lloyds Rep 500, C v D [2007] EWCA Civ 1282;
[2008] 1 Lloyds Law Rep 239.

30 Dubai Islamic Bank PJSC v Paymentech Merchant Services Inc [2001] 1 Lloyds Rep 65, Arab
National Bank v El-Abdali [2004] EWHC 2381; [2005] 1 Lloyds Rep 541 at 544.
31 Braes of Doune Wind Farm (Scotland) Ltd v Alfred McAlpine Business Services Ltd [2008]
EWHC 426 (TCC); [2008] 1 Lloyds Rep 608.
32 Dubai Islamic Bank PJSC v Paymentech Merchant Services Inc [2001] 1 Lloyds Rep 65 at
73; ABB Lumus Global Ltd v Keppel Fels Ltd [1999] 2 Lloyds Rep 24 at 33 and Union of
India v McDonnell Douglas [1993] 2 Lloyds Rep 48 at 50.
33 [1999] 2 Lloyds Rep 24.
34 Paragraph 7(b).
35 Naviera Amazonica v Peruana SA v Compania Internacional de Seguros del Peru [1988] 1
Lloyds Rep 116 at 119; Dubai Islamic Bank PJSC v Paymentech Merchant Services Inc [2001] 1
Lloyds Rep 65 at 73; cf Dallal v Bank Mellat [1986] 1 QB 441 at 458, where Hobhouse J
recognised that a transnational curial law was conceptually possible. In Star Shipping AS v China
National Foreign Trade Transportation Corporation, The Star Texas [1993] 2 Lloyds Rep 445
the Court of Appeal rejected a floating proper law of the arbitration agreement but accepted that a
floating curial law (which might fix when arbitration began, in line with the analysis in Dubai
Islamic Bank) was not a concept repugnant to English law.
36 DAC Supplementary Report on the Arbitration Act 1996, paragraph 15.
37 See paragraph 16 of the DAC Report which appears to affirm that this principle is maintained
under sections 2(1) and 4(5) of the 1996 Act. See International Tank and Pipe SAK v Kuwait
Aviation Fuelling Co KSC [1975] QB 224;Mitsubishi Corporation v Castletown Navigation
Ltd, The Castle Alpha [1989] 2 Lloyds Rep 383, and Chapter 9 below.
38 Sumitomo Heavy Industries Ltd v Oil and Natural Gas Commission [1994] 1 Lloyds Rep 45 at
56.
39 See section 3 above on the law governing the procedure of the arbitration.
40 The 1990 Act enacts the Rome Convention on the Law Applicable to Contractual Obligations
between the Member States of the European Communities and does not apply to arbitration
agreements, see Article 1(2)(d). Rome Convention principles may, however, apply to the issue as
to whether there was consent to any arbitration agreement at all (e.g., Welex A.G. v Rosa Maritime
Ltd. The Epsilon Rosa (No 2) [2002] EWHC 2035 (Comm); [2002] 2 Lloyds Rep 701) see by
analogy Allianz SpA v West Tankers Inc Case C-185/07 [2009] 1 Lloyds Rep 413, para 26.
41 [2007] EWHC 1893 (Comm); [2008] 1 Lloyds Rep 230, para 14, see also Tamil Nadu
Electricity Board v ST-CMS Electric Company Private Ltd [2007] EWHC 1713 (Comm); [2008] 1
Lloyds Rep 93, para 35.
42 Compagnie dArmement Maritime SA v Compagnie Tunisienne de Navigation SA [1971] AC
572.

43 E.g., Deutsche Schachtbau-und Tiefbohrgesellschaft mbH v Ras Al Khaimah National Oil

Co [1987] 2 Lloyds Rep 246 at 249, agreement to arbitrate in Switzerland held to be governed by
Swiss law.
44 Compagnie dArmement Maritime SA v Compagnie Tunisienne de Navigation SA [1971] AC
572; Star Shipping AS v China National Foreign Trade Transportation Corporation, The Star
Texas [1993] 2 Lloyds Rep 445 at 451.
45 Paragraph 6(a) of the LMAA Terms.
46 Republic of Ecuador v Occidental Exploration and Production Co [2005] EWCA Civ 116;
[2005] 2 Lloyds Rep 707, para 33, departing from Hobhouse Js suggestion in Dallal v Bank
Mellat [1986] 1 QB 441 that an arbitration agreement must be subject to a domestic system of
law.
47 Mineracoas Brasilieras Reunidas v E.F. Marine SA, The Freights Queen [1977] 2 Lloyds Rep
140.
48 Star Shipping AS v China National Foreign Trade Transportation Corporation, The Star
Texas [1993] 2 Lloyds Rep 445. Even if a floating choice of law for the arbitration agreement is
found to fail for uncertainty, the court will be willing to uphold the arbitration agreement
itself: Sonatrach Petroleum Co (BVI) v Ferrell International Ltd [2002] 1 All ER (Comm) 627.
49 Section 7 of the 1996 Act and Harbour Assurance Co (UK) Ltd v Kansa General International
Insurance Co Ltd [1993] QB 701.
50 [1994] 1 Lloyds Rep 45.
51 [2004] EWHC 121 (Comm), [2004] 1 Lloyds Rep 603.
52 C v D [2007] EWCA Civ 1282; [2008] 1 Lloyds Law Rep 239, Shashoua v Sharma [2009]
EWHC 957 (Comm).
53 [2000] 2 Lloyds Rep 500.
54 Marc Rich & Co AG v Societa Italiana Impianti PA, The Atlantic Emperor [1989] 1 Lloyds
Rep 548.
55 [2002] EWHC 2035 (Comm); [2002] 2 Lloyds Rep 701.
56 E.g., Black-Clawson International Ltd v Papierwerke Waldhof-Aschaffenburg AG [1981] 2
Lloyds Rep 446 at 455 and Sumitomo Heavy Industries Ltd v Oil and Natural Gas
Commission [1994] 1 Lloyds Rep 45 at 57.
57 Black-Clawson International Ltd v Papierwerke Waldhof-Aschaffenburg AG [1981] 2 Lloyds
Rep 446 at 455; Dubai Islamic Bank PJSC v Paymentech Merchant Services Inc [2001] 1 Lloyds
Rep 65.
58 Sumitomo Heavy Industries Ltd v Oil and Natural Gas Commission [1994] 1 Lloyds Rep 45 at
57.
59 Paragraph 6 makes clear that English law applies to the arbitration agreement.

60 C v D [2007] EWCA Civ 1282; [2008] 1 Lloyds Law Rep 239.

61 [2007] EWCA Civ 1282; [2008] 1 Lloyds Law Rep 239.
62 The Convention on the Recognition and Enforcement of Foreign Arbitral Awards adopted by
the United Nations Conference on International Commercial Arbitration on 10 June 1958.
63 More specifically, Part III of the Act deals with awards made, in pursuance of an arbitration
agreement, in territories of states (other than the UK) which are party to the New York
Convention. Section 100(2)(b) follows section 53 in that an award shall be treated as made at the
seat of the arbitration, regardless of where it was signed, despatched or delivered to any of the
parties. Part II of the 1950 Act continues to apply to foreign awards made in non-Convention
countries, see section 99 of the 1996 Act.
64 Hiscox v Outhwaite [1992] 1 AC 562. Section 53 reverses the reasoning underlying this
decision (but not the result).
65 Section 2(2) of the 1996 Act.

hapter 6

Disputes about the Tribunals Jurisdiction

Disputes about the Tribunals Jurisdiction

1. Introduction
2. Types of jurisdictional issues
3. Separability
4. The scheme of the statutory provisions
5. Tribunals power to rule on jurisdictional issues
6. Courts power to determine jurisdictional issues
7. Arbitral proceedings pending challenges to jurisdiction
8. Loss of the right to object.

1. INTRODUCTION
An arbitrators jurisdiction is the power conferred on him to determine the dispute between the
parties and to make final decisions which are binding on them. This power derives from the
arbitration agreement between the parties and from the steps, such as appointment, which are
taken pursuant to that agreement to refer the dispute to arbitration. If the tribunal lacks
jurisdiction, then any award which it makes will be without effect, and the costs incurred in the
arbitration will be wasted.
Challenges to the tribunals jurisdiction raise a logical problem. How can an arbitrator make a
binding ruling to the effect that he has no power to bind the parties? If the agreement containing
the arbitration clause is void or ineffective, from where does the tribunal derive jurisdiction to rule
that this is the case? English law traditionally took a strictly logical approach precluding the
tribunal from ruling on its jurisdiction. Many other legal systems (and the UNCITRAL Model

Law) preferred to enable the tribunal to rule on jurisdictional disputes. This was achieved mainly
by the doctrine of Kompetenz-Kompetenz under which a tribunal is allowed to rule on its
jurisdiction, and also the doctrine of separability under which the arbitration agreement remains
effective notwithstanding challenges to the validity of the contract in which it is contained. These
doctrines are now considered as being more consistent with the parties choice to arbitrate than the
traditional approach. English law under the 1996 Act has now largely adopted the doctrines of
Kompetenz-Kompetenz and separability. This means that in most cases the tribunal will make an
initial ruling on a dispute about its jurisdiction, although the issue may ultimately be decided by
the court.
Challenges to jurisdiction are relatively common, and are sometimes employed as a means of
delaying arbitral proceedings or seeking to evade an obligation to arbitrate. The DAC recognised
this1 and the 1996 Act contains provisions designed to limit the use of such tactics.

Common law background

It is perhaps worth considering the provisions of the 1996 Act against the background of the
common law which preceded it.
The orthodox common law view, represented by the decision of the House of Lords
in Heyman v Darwins 2 was that, although the arbitrator could take a provisional view as to
whether he had jurisdiction to determine (for example) the validity of the main contract, his
decision was not finally binding on the parties since he lacked the power to decide the scope and
existence of his own jurisdiction. According to this traditional principle, such issues could only
finally be determined by a different tribunalusually the court.
In Heyman v Darwins, the parties concluded an agency agreement whereby the claimants would
sell quantities of steel on behalf of the defendant steel manufacturers. The contract contained an
arbitration clause. The defendants discovered that, contrary to the agreement, the claimants had
been selling steel in circumstances which might expose them to possible claims from purchasers
and therefore stopped providing steel to the claimants. The claimants commenced court
proceedings seeking a declaration that the defendants had repudiated the agreement. The
defendants obtained a stay of those proceedings on the ground that the claim should, in
accordance with the terms of the contract, be referred to arbitration. In granting this relief, the
court drew a distinction between challenges based on the premise that the contract was void ab
initio (over which the tribunal would have no jurisdiction) and those based on the assertion that
the contract was merely voidable (which fell within the tribunals remit). Viscount Simon
summarised the position thus: if one party to the alleged contract is contending that it is
void ab initio the arbitration clause cannot operate, for, on this view, the clause itself is also
void.
It was clear, therefore, that the tribunal could not make a final and binding decision on the issue of
the existence or scope of its own jurisdiction. Any such determination had to be made by another
tribunal. Alternatively, the parties could enter a separate agreement conferring on the tribunal
jurisdiction to determine its own jurisdiction in relation to the main dispute.

As a matter of practice, however, the common law always recognised that a tribunal must take a
view as to the existence (or otherwise) of its own jurisdiction, and that it will usually make a
provisional ruling on that issue. The common law position was explained by Devlin J
in Christopher Brown v Genossenschaft Osterreichischer Waldbesitzer:3
It is not the law that the arbitrators, if their jurisdiction is challenged or questioned, are bound
immediately to proceed to act, or to refuse to act, until their jurisdiction has been determined by
some court which has power to determine it finally. Nor is it the law that they are bound to go on
without investigating the matter in dispute, leaving the question of their jurisdiction to be held
over until it is determined by some court which had power to determine it. They might then be
merely wasting their time and everybody elses. They are not obliged to take either of these
courses. They are entitled to inquire into the merits of the issue as to whether they have
jurisdiction or not, not for the purpose of reaching any conclusion which will be binding upon the
partiesbecause that they cannot dobut for the purposes of satisfying themselves as a
preliminary matter about whether they ought to go on with the arbitration or not. If it became
abundantly clear to them, on looking into the matter, that they obviously had no jurisdiction
then they might well take the view that they were not going to go on with the hearing at all. They
are entitled, in short, to make their own inquiries in order to determine their own course of action,
and the result of that inquiry has no effect whatsoever upon the rights of the parties.
The provisions of the 1996 Act (explained in detail below) build upon the common law position,
by giving the tribunal competence to rule upon jurisdictional challenges, while recognising that
any such ruling is subject to review by the courts. This reflects the key principle of party
autonomy, and is intended to minimise the use of jurisdictional challenges as a delaying tactic. In
practice, however, the right to challenge the tribunals ruling in court (by means of a full hearing)
means that a determinedly recalcitrant party can still delay an arbitration by raising spurious
jurisdictional challenges. Furthermore, although the provisions of the Act will govern most
jurisdictional challenges, the court has recognised that it has, in addition, an inherent power to rule
on jurisdictional issues, which it may choose to exercise even though the conditions for the
exercise of its statutory powers are not satisfied.4

2. TYPES OF JURISDICTIONAL ISSUE

Section 30 of the 1996 Act defines issues as to the tribunals substantive jurisdiction5 in terms of
three categories:

(a) whether there is a valid arbitration agreement,

(b) whether the tribunal is properly constituted, and
(c) what matters have been submitted to arbitration in accordance with the arbitration
agreement.

Whether there is a valid arbitration agreement

This represents the most usual type of jurisdictional issue and arises where the defendant in the
arbitration contends that there is no arbitration agreement at all, or that the arbitration agreement
does not, on its true construction, extend to the disputes which the claimant has sought to refer to
arbitration.

Sometimes this type of jurisdictional objection arises where the defendant denies the existence, or
continued existence, of the host contract which contains the arbitration agreement. For example,
challenges to the initial existence of the host contract may be founded upon allegations of lack of
consensus, lack of consideration, or lack of authority. Challenges to the continued existence of the
host contract may be based upon allegations of misrepresentation, non-disclosure, repudiation,
fundamental breach, termination, mistake or frustration. The essence of such allegations is that
although the contract was valid when it was made, it has ceased, or should cease, to exist because
of supervening factors. The approach of the courts to the doctrine of separability (see further
below) means that such challenges have only limited prospects of success. It is only if the relevant
factors apply specifically to the arbitration agreement (and not merely to the agreement as a
whole) that the jurisdiction of the tribunal is likely to be affected.
Issues of agency, or identification of the correct parties to the arbitration agreement, can
sometimes give rise to jurisdictional issues. For example, if arbitration is commenced against a
party who is not named as party to the arbitration agreement, the tribunal will lack jurisdiction.
In Internaut Shipping GmbH v Fercometal SARL,6 (a pre-1996 Act case), disputes arose under a
Gencon charterparty. Arbitration was commenced by owners by solicitors authorised by Gard,
who were the P&I Club for Internaut Shipping. However, subsequent claim submissions identified
the owners as Sphinx and the third arbitrator was appointed after the claimant had been thus
identified. Once the inconsistency was identified, a further arbitration was commenced in the
name of Sphinx, but the two references were not consolidated. The Court of Appeal held that
Internaut was the only party to the charter, that the naming of Sphinx in the claim submissions had
not been a mere misnomer and that the arbitration in which Sphinx was named as claimant was a
jurisdictional nullity.
Sometimes, a party may accept that there is a valid arbitration agreement, but deny that it applies
to the dispute in question (e.g., that the dispute arises under the relevant contract). Determining
such an issue will require the arbitration agreement to be construed. Generally, English law adopts
a liberal approach to construction of arbitration agreements.7 Furthermore, in the context of
LMAA arbitration, paragraph 10 of the LMAA Terms provides:
10. Notwithstanding the terms of any appointment of an arbitrator, unless the parties otherwise
agree the jurisdiction of the tribunal shall extend to determining all disputes arising under or in
connection with the transaction the subject of the reference, and each party shall have the right
before the tribunal makes its award (or its last award, if more than one is made in a reference) to
refer to the tribunal for determination any further dispute(s) arising subsequently to the
commencement of the arbitral proceedings.
This is an extremely broad formulation, covering all disputes arising in connection with the
transaction which is the subject of the reference. Therefore, unless the parties have sought to cut
down the scope of this provision in their arbitration clause, most disputes which arise (including
counterclaims or set-offs, possibly even arising under separate but related contracts) will fall
within the scope of the arbitration agreement for the purposes of section 30. For further discussion
of the principles which determine whether a counterclaim or set-off falls within the scope of an
arbitration agreement, see Chapter 4.

Whether the tribunal is properly constituted

This category raises questions relating to the appointment of the tribunal and, in particular,
whether the contractual or statutory requirements governing appointment have been complied
with. For example, the arbitration clause may require appointments to be made by a third party, or
may specify certain preconditions to appointment (such as the completion of ADR procedures).
The position is not entirely clear, but the better view is probably that a lack of specified
qualifications does not affect the tribunals jurisdiction (though it may be a ground for removal
under section 24 of the 1996 Act).8

What matters have been submitted to arbitration in

accordance with the arbitration agreement
The final category of jurisdictional issue raises the question of whether the claims advanced fall
outside the scope of the reference to arbitration and, therefore, outside the jurisdiction of the
tribunal.
In The World Era9 disputes arose under a voyage charterparty which formed part of a chain of
back-to-back charters. Charterers claimed that a breach of the charterparty by owners had caused
liability on their part down the chain. Arbitrators were appointed to resolve the issue of whether
owners were liable to charterers for damages for breach of charter, and points of claim were
served. By a later amendment, charterers sought to argue that they had entered the charterparty as
agents for undisclosed principal on whose behalf they were now claiming damages. It was held
that the claim referred to arbitration was a simple claim for damages for breach of charterparty
and that the arbitrators had no jurisdiction to hear or determine the new claim based on the
allegation that charterers were agents for an undisclosed principal.
Again, however, such arguments arise relatively rarely in LMAA arbitrations because of the
provisions of paragraph 10 of the LMAA Terms, which permit disputes to be introduced into the
reference at any time before the tribunal gives notice of its intention to proceed to an award.

3. SEPARABILITY
The doctrine of separability is based upon a legal fiction, by virtue of which the arbitration
agreement is regarded as a separate and collateral contract which is unaffected by the invalidity or
unenforceability of the main host agreement between the parties. It follows that issues relating
to the validity or enforceability of the main contract will not affect the tribunals jurisdiction
arising under the separable arbitration clause. Were it otherwise, some other tribunal (probably the
court) would have to determine these issues.
The doctrine developed in part as a response to parties seeking to evade their obligations to
arbitrate by the simple expedient of raising issues involving indirect challenges to the tribunals
jurisdiction.10 The doctrine of separability gives effect to the parties intentions of adopting onestop adjudication and ensures that all issues are determined by the chosen arbitral tribunal.
The doctrine of separability was recognised in the common law before the 1996 Act11 and is now
given statutory force by section 7, which provides:

Unless otherwise agreed by the parties, an arbitration agreement which forms or was intended to
form part of another agreement (whether or not in writing) shall not be regarded as invalid,
nonexistent or ineffective because that other agreement is invalid, or did not come into existence,
or has become ineffective, and it shall for that purpose be treated as a distinct agreement.
It would be extremely rare in practice for the parties to agree, either before or after disputes have
arisen, that an arbitration agreement was not to be regarded as a separate agreement. The
qualification provided by the words or was intended to form is probably intended to preclude
the argument that, technically, an arbitration agreement cannot form part of another
unenforceable or invalid agreement (though it may well be intended to do so). The final phrase of
the section (and it shall for that purpose be treated as a distinct agreement) emphasises that the
concept of separability applies only for the purposes of Part I of the 1996 Act. Thus, for example,
the issue of whether an arbitration clause has been assigned along with other rights in the
substantive agreement or incorporated by reference into another contract is not affected by the
doctrine of separability.12
The limits of the doctrine of separability are reached where the non-existence or invalidity of the
main contract also directly impeaches the arbitration clause. In such a case, the tribunal cannot,
logically, have jurisdiction to hear or determine any disputes
In Fiona Trust & Holding Corporation & Ors v Privalov & Ors,13 the Owners alleged that
charters had been concluded as a result of bribes paid to their representatives, and purported to
rescind the charters. The charterers commenced arbitrations, prompting the Owners to apply to the
English court pursuant to section 72 of the Act for an injunction restraining the arbitration on the
basis that the charterparties, and the arbitration agreements contained in them, had been rescinded.
Refusing the injunction, the Court of Appeal indicated that the arbitration agreement will be
impeached only if there are independent vitiating factors which directly affect the arbitration
agreement, and not merely the main host agreement. The Court of Appeal gave examples of
such situations: mistake as to the identity of the contracting parties, non est factum, or a case
where the parties had failed to reach any agreement at all. Another situation in which the
arbitration agreement might be directly impeached is where there is an absence of intention to
create legal relations. In each of these situations, there has never been any concluded agreement
between the parties: it follows that the alleged arbitration agreement never came into existence,
and is directly impeached. The Court of Appeals decision was upheld by the House of Lords.14

4. THE SCHEME OF THE STATUTORY PROVISIONS

The 1996 Act envisages two basic situations in which a jurisdictional issue might arise. First, the
party who challenges jurisdiction may simply ignore the arbitration altogether. If he refuses to
participate at all, his right to apply to the court for injunctive or declaratory relief, or to challenge
any award which is made, is saved expressly by the Act.
If, however, the challenging party participates in the arbitration for the purposes of having the
jurisdictional issue determined within the arbitral remit, then in most cases the tribunal will rule
on the issue (though any such ruling may later be challenged in court). Alternatively, in some very
limited situations, the court may make the first preliminary ruling on jurisdiction. The position
was well described by Rix J in Azov Shipping Co v Baltic Shipping Co:15

Where a challenge to an arbitrators substantive jurisdiction is made, the party that challenges the
jurisdiction has a number of options under the Act. It may agree to participate in the argument
before the arbitrator of the question of his competence and jurisdiction: see section 30 of the Act.
It may do so while reserving its right to challenge the arbitrators award as to his own competence
(see section 67). Of course, it may accept the award of the arbitrator even though it be against its
own submission. In that case no question of challenge arises.
Alternatively, it may seek, without arguing the matter before the arbitrator, to promote the
determination of the preliminary point of jurisdiction by the court under section 32.
The third option of someone disputing an arbitrators jurisdiction is to stand aloof and question the
status of the arbitration by proceedings in court for a declaration, injunction or other appropriate
relief under section 72 of the Act. In such a case he is in the same position as a party to arbitral
proceedings who challenges an award under section 67 on the ground that there was no
substantive jurisdiction. He takes the risk, however, that in the meantime an award on the merits
might be entered against him.
Those basic choices are reflected in the statutory provisions which govern the determination of
jurisdictional issues.

5. TRIBUNALS POWER TO RULE ON ITS OWN JURISDICTION

Source of the tribunals power

Section 30 of the 1996 Act confers on the tribunal the power to rule upon its own jurisdiction in
the following terms:

(1) Unless otherwise agreed by the parties, the arbitral tribunal may rule on its own
substantive jurisdiction, that is, as to
o (a) whether there is a valid arbitration agreement;
o (b) whether the tribunal is properly constituted; and
o (c) what matters have been submitted to arbitration in accordance with the arbitration
agreement.

The LMAA Terms do not contain any provision addressing the tribunals power to rule on its
jurisdiction, and so the position is governed by section 30.
Despite the unqualified wording of section 30, it is not intended to confer on the tribunal power to
make a final ruling. The DAC stated that clearly the tribunal cannot be the final arbiter of a
question of jurisdiction for this would provide a classic case of pulling oneself up by ones own
bootstraps.16 Instead, the provision enables the arbitrator to take a view and, if necessary, rule on
his own jurisdiction, but recognises that any such ruling always remains subject to review by the
court. This has significant practical consequences, because either party can challenge the
tribunals ruling as of right; furthermore, the challenge takes the form of a complete re-hearing
rather than merely a review of the tribunals reasoning (see below).17

Relationship with stays

The provisions of sections 30 and 9 have raised the question of what approach the court should
adopt on a section 9 stay application where the existence or scope of the arbitration agreement is
challenged. Under section 9, which is a mandatory provision, the court must grant a stay unless
satisfied that the arbitration agreement is null and void, inoperative, or incapable of being
performed. These matters, however, represent challenges to the tribunals jurisdiction. Under
section 30, the tribunal has the power to rule on them, and the policy of the Act is that generally
the tribunal and not the court should take the first view on such issues. Who, then, should decide
these issuesthe court or the tribunal?
For reasons of convenience, the courts have taken the view that in most cases, it should decide the
issues as part of the section 9 stay application. This avoids the costs and delays of referring the
issue to the tribunalespecially as the tribunals ruling would be open to challenge as of right
(see below).
However, there are some circumstances in which the court will stay its own proceedings, pursuant
to its inherent jurisdiction, to enable the tribunal to rule on the jurisdictional issue. Those
circumstances are:

Where it is virtually certain that there is a valid effective arbitration agreement (and,
therefore, the chances of successfully challenging the tribunals ruling are remote).
Where there is an arbitration agreement, and the only dispute relates to its precise scope.
Where the jurisdictional issues are inextricably intertwined with the substantive disputes.18

Only in exceptional cases will the court grant a stay pursuant to its inherent jurisdiction.19 In most
cases, it will simply decide the issue as part of the section 9 application.20

Practice
The procedure for seeking a ruling from the tribunal is governed by section 31 of the 1996 Act,
which sets out various provisions governing the timing of any application. Section 31 provides:
(1) An objection that the arbitral tribunal lacks substantive jurisdiction at the outset of the
proceedings must be raised by a party not later than the time he takes the first step in the
proceedings to contest the merits of any matter in relation to which he challenges the tribunals
jurisdiction.
A party is not precluded from raising such an objection by the fact that he has appointed or
participated in the appointment of an arbitrator.
(2) Any objection during the course of the arbitral proceedings that the arbitral tribunal
isexceeding its substantive jurisdiction must be made as soon as possible after the matter alleged
to be beyond its jurisdiction is raised.
(3) The arbitral tribunal may admit an objection later than the time specified in subsection (1) or
(2) if it considers the delay justified.
(4) Where an objection is duly taken to the tribunals substantive jurisdiction and the tribunal has
power to rule on its own jurisdiction, it may

(a) rule on the matter in an award as to jurisdiction, or

(b) deal with the objection in its award on the merits.

If the parties agree which of these courses the tribunal should take, the tribunal shall proceed
accordingly.
(5) The tribunal may in any case, and shall if the parties so agree, stay proceedings whilst
anapplication is made to the court under section 32 (determination of preliminary point of
jurisdiction.
Section 31 is a mandatory provision. It is founded upon the basic principle that jurisdictional
challenges should be dealt with as quickly and efficiently as possible. It is intended to prevent
parties from keeping jurisdictional objections up their sleeve.21
By contrast, section 30 is not mandatoryit is possible for the parties to exclude altogether the
tribunals power to rule on jurisdiction. One possible construction of section 31 is that it is a
purely procedural provision, which applies only where the tribunals power to rule on jurisdiction
has not been excluded by agreement and where an application to rule on jurisdiction is made to the
tribunal. However, the DAC suggested that jurisdictional objections must always be raised with
the tribunaleven where the tribunals power to rule on the issue is excluded by agreement,22 and
(presumably) even where the parties agree to refer a jurisdictional issue to be determined by the
court pursuant to section 32 of the 1996 Act. Given the mandatory character of section 31 and
given, also, the provisions of section 73 (loss of the right to object),23 it will always be safer for a
party participating in the arbitration to raise any jurisdictional issue with the tribunal, even if the
tribunal has no power to rule on it.
Sections 31(1) and (2) reflect the general principle that objections (whether existing at the outset,
or arising during the arbitration) must be made promptly. An objection arising during the
proceedings must be raised as soon as possible; one arising at the outset of the proceedings must
be raised before the first step to contest the merits. There is no statutory definition of step.
Merely appointing an arbitrator, or correspondence about appointment and terms, will in most
cases not amount to a step but serving a defence without reserving the position on jurisdiction
would amount to one.24 The DAC expressed the view that the concept of a step was not limited
to service of a defence,25 and generally, a step for these purposes is analysed in a similar way to
a step for the purposes of section 9(3) of the Act. It is unclear whether applying for an extension
of time for the service of a defence would be a step, but unqualified communications with the
tribunal might do so unless they are concerned solely with administrative or preparatory matters.26
Accordingly, if a defendant makes any unqualified challenge to the merits of the underlying claim,
then he will generally lose the right to challenge the tribunals jurisdiction. However, it should be
possible to advance a jurisdictional challenge at the same time as advancing submissions on the
merits of the underlying claims, as long as it is made clear that the latter are without prejudice to
the former.27
The arbitrator is permitted to exercise some discretion in admitting objections out of time by
section 31(3), which provides that late objections may be admitted by the arbitral tribunal if it
considers the delay justified. This provision appears to confer on the tribunal an unfettered

jurisdiction to determine whether to admit late objections. Consequently, any challenge to such a
decision by an arbitrator will be very difficult. There is no statutory guidance as to the meaning of
justified, though deliberate or careless delays will rarely qualify.
The tribunals ruling on the jurisdictional issue must be contained in an award. Section 31(4) gives
the tribunal power to produce a separate preliminary award on jurisdiction, or to leave the
jurisdictional issue to be dealt with in the main award on the merits. The tribunal must comply
with any agreement by the parties as to which course of action it is to take,28 failing which the
tribunals decision in this regard must have regard to the mandatory duties under section 33 of the
Act to conduct the reference without unnecessary delay and expense. In many cases it will be
preferable to make a separate preliminary award, so that any application to court can be heard
before the parties incur costs in progressing the main dispute.

Challenging the tribunals ruling

The tribunals ruling is not finally binding: either party may challenge it as of right, by applying to
the court pursuant to section 67 of the 1996 Act which provides:
A party to arbitral proceedings may apply to court challenging any award of the arbitral
tribunal as to its substantive jurisdiction.
Where a tribunal rules solely on the validity or otherwise of the main contract, that ruling is not a
ruling on substantive jurisdiction for the purposes of section 67 and cannot be challenged
pursuant to that section.29
The application to court takes the form of a complete re-hearing. All the evidence relevant to the
jurisdictional issueincluding witness and expert evidencewill be re-heard by the court.
Because of the nature of the application (rehearing rather than review) the parties are not limited
to the evidence which was placed before the tribunal, and may rely on additional evidence in
relation to the section 67 challenge.
In Azov Shipping Co v Baltic Shipping Co,30 the defendant in the arbitration denied that it was a
party to the relevant contract and argued that the arbitration clause was not binding upon it. The
arbitrator ruled pursuant to section 30 that he did have jurisdiction. In order to make that ruling, he
heard expert evidence relating to foreign law in a three-day hearing. The defendant challenged the
ruling in court pursuant to section 67. Rix J held that the defendant was entitled to re-call all the
witnesses for the benefit of the court, noting that where a jurisdictional issue raised substantial
issues of fact, the court must not be placed in a worse position than the arbitrator for the purpose
of determining the challenge.
In Electrosteel Castings Ltd v Scan-Trans Shipping & Chartering,31 disputes arising in connection
with a booking note were referred to arbitration. The defendants challenged the tribunals
jurisdiction, denying that they had concluded any agreement incorporating an arbitration clause.
The arbitrator ruled that he did have jurisdiction to determine the disputes, and this ruling was
challenged pursuant to section 67. Gross J held that not only would the application take the form
of a re-hearing but the court was not limited to the evidence put before the arbitrator. The parties
could place before the court additional evidence, not considered by the tribunal. However, as
Gross J pointed out, nothing said here should encourage parties to seek two evidential bites of the

cherry in disputes as to the jurisdiction of arbitrators, not least because: (1) evidence introduced
late in the day may well attract a degree of scepticism; and (2) the court has ample power to
address such matters when dealing with questions of costs.
Although the challenging party may rely upon new evidence or arguments, it may not raise new
grounds of challenge which were not before the tribunal. In this regard, there may be a fine
distinction between new grounds of challenge (which may not be raised) and new arguments
(which may be raised if they fall within the grounds of challenge ruled upon by the tribunal).
In Primetrade AG v Ythan Ltd (The Ythan),32 the respondents challenged the jurisdiction of the
tribunal, arguing that they were not the lawful holders of bills of lading, nor had they made a
claim under the contract of carriage, for the purposes of the Carriage of Goods by Sea Act 1992
and therefore that they were not bound by the bill of lading arbitration clause. The tribunal
rejected these arguments, and concluded that it had the jurisdiction to determine the claims under
the relevant bills of lading. The respondents challenged this ruling pursuant to section 67 of the
1996 Act and sought to rely upon new arguments and evidence. The court held that the new
arguments fell within the existing grounds of challenge, and that the right to rely upon them had
not, therefore, been lost by virtue of section 73 of the 1996 Act. Aikens J commented that a party
which wished to rely upon new evidence must give notice of its intention and, if opposed, must
obtain the permission of the court to do so. Permission would be refused if admitting the new
evidence would cause substantial prejudice which could not fairly be addressed by costs or by an
adjournment. In the present case, the new evidence was admitted.
Under the CPR the court has wide-ranging powers to control evidence in appropriate cases and
could decide, in the interests of justice and efficiency, to determine factual issues on the basis of
written witness statements or affidavits only.33 However, such cases are rare.
Because of the potential waste of time and resources involved in challenges to the tribunals
rulings on jurisdiction, it may be worth considering referring the jurisdictional issue to the court in
the first instance (see below).

Ad hoc agreements
The parties may make an ad hoc agreement conferring jurisdiction upon the tribunal to make a
final and binding ruling on jurisdictional issues. In Republic of Kazhakstan v Istil Group
Inc,34 David Steel J described an ad hoc agreement as conferring enlarged jurisdiction to make a
final decision. Where such an agreement exists, although the right to challenge the tribunals
ruling is technically still available (because section 67 of the Act is mandatory), any challenge
under section 67 is bound to fail because of the parties agreement.
In LG Caltex Gas Co Ltd v National Petroleum Corporation,35 arbitral proceedings were
commenced under two related contracts and consolidated by agreement. In each reference, the
respondents challenged the tribunals jurisdiction, denying that they were party to any contract
with the claimant. Following correspondence between the parties as to the appropriate procedure
the arbitrator declined to determine the jurisdictional issue as a preliminary issue. Instead, the
parties proceeded to a hearing intended to deal both with jurisdiction and (without prejudice to the
respondents denial of jurisdiction) the merits. The arbitrator issued an award declaring that the

respondents were not party to the contracts. The claimant issued proceedings in the Commercial
Court pursuant to section 67 of the 1996 Act challenging the arbitrators decision. At first
instance, the judge held that the correspondence between the parties constituted an ad hoc
agreement conferring jurisdiction on the arbitrator finally to decide the jurisdictional issue, and
that no challenge was therefore possible. On appeal, the Court of Appeal confirmed that it remains
possible under the 1996 Act for the parties to confer on the tribunal jurisdiction to make a final
and binding award on jurisdiction. In such a case, any challenge under section 67 to the tribunals
ruling would fail. However, in the present case the correspondence was all consistent with an
exercise of power under section 30 of the Act and, therefore, no separate ad hoc agreement was
brought into existence.

6. COURTS POWER TO DETERMINE JURISDICTIONAL ISSUES

The court has power to determine jurisdictional issues in the following situations:

Under section 32, which entitles the court to make preliminary determinations of
jurisdictional issues in specified circumstances.
Under section 67, where an award is challenged on the basis of lack of substantive
jurisdiction.
Under section 9, where a party resists an application for a stay pursuant to section 9(4) (see
above and Chapter 7).
(In the case of non-participating parties) under section 72, by way of an application for
injunctive or declaratory relief.

Before the 1996 Act, it was possible to apply to court, before appointing an arbitrator, for a preemptive declaration affirming the existence of a binding arbitration agreement. This is no longer
an option. The proper course is to appoint an arbitrator first, then bring yourself within section 32
of the 1996 Act.36 However, this limitation of the courts power does not apply to the question of
whether pre-appointment requirements have been satisfied.37 Furthermore, the court has
recognised an inherent jurisdiction, in addition to its powers under section 32, to rule upon issues
of jurisdiction. It is likely that this inherent power will be exercised only rarely.38

Preliminary determination of jurisdictional issue under

section 32
Section 32 of the 1996 Act entitles the court to determine preliminary jurisdictional objections in
limited circumstances:

(2) An application under this section shall not be considered unless

o (a) it is made with the agreement in writing of all the other parties to the proceedings, or
o (b) it is made with the permission of the tribunal and the court is satisfied
(i) that the determination of the question is likely to produce substantial savings in
costs,
(ii) that the application was made without delay, and
(iii) that there is good reason why the matter should be decided by the court.

(3) An application under this section, unless made with the agreement of all the other parties
to the proceedings, shall state the grounds on which it is said that the matter should be
decided by the court.

Unless the parties have contracted out of the tribunals section 30 power to rule on jurisdictional
issues, the circumstances set out in section 32(2)(b) represent a derogation from the principle of
party choicefor this reason, there are strict criteria which must be complied with. The DAC
Report suggests that section 32 is intended for exceptional cases and that it is anticipated that
the courts will take care to prevent this exceptional provision from becoming the normal route for
challenging jurisdiction.39 In most cases the courts have, accordingly, adopted a restrictive
approach to section 32.
Nevertheless, some courts have suggested that a section 32 application may, in some cases,
represent the most efficient method of determining jurisdictional issues. Where the initial ruling
on jurisdictional challenges is made by the tribunal, that ruling may be challenged as of right in
court and the challenge takes the form of a complete rehearing of the evidence (see above). This
may obviously involve duplication of effort and costs, and it was for this reason that Rix J in
the Azov Shipping case suggested that in cases which raise substantial issues of fact, the
appropriate course may well be to proceed pursuant to section 32, either by agreement or by
obtaining the permission of the tribunal.40 Similarly, where it is clear that the tribunal does not
have the power to determine all the issues arising in relation to the question of jurisdiction, it may
be better to apply to the court under section 32.41
The court may not grant injunctive relief pursuant to section 32: the available remedy is a
declaration.42 The court does have an inherent jurisdiction to grant relief even if the requirements
of section 32 are not satisfied,43 but cases in which this will be appropriate are extremely rare.
Where the court determines a jurisdictional issue pursuant to section 32, its decision involves two
elementsa decision that the requirements of section 32 have been satisfied, and a decision on the
jurisdictional issue itself. Either decision can be appealed, but only with the leave of the first
instance courtthe Court of Appeal may not grant leave.44 Where leave is sought to appeal
against the first instance courts decision on the jurisdictional issue itself, such leave may be
granted only if the court considers that the question involves a point of law which is one of
general importance or is one which for some other special reason should be considered by the
Court of Appeal.

Post-award challenge under section 67

It is possible simply to ignore the arbitration, await the issue of the tribunals award, and then to
challenge that award on the basis that it was made without jurisdiction.
However, this strategy is possible under the 1996 Act only if the applicant has taken no part in the
arbitration: any participation without a party making a clear objection will result in the loss of the
right to object (see further below and see Chapter 11).

Non-participating parties

Parties who refuse to participate in the arbitration at all are in a different position. Such parties
retain the right to challenge the tribunals jurisdiction at any stage. Section 72 of the 1996 Act
provides:
(1) A person alleged to be a party to arbitral proceedings but who takes no part in the
proceedings may question

(a) whether there is a valid arbitration agreement,

(b) whether the tribunal is properly constituted, or
(c) what matters have been submitted to arbitration in accordance with the arbitration

agreement, by proceedings in the court for a declaration or injunction or other appropriate relief.
This was recognised as a vital provision by the DAC:
A person who disputes that an arbitral tribunal has jurisdiction cannot be required to take part in
the arbitration proceedings or to take positive steps to defend his position, for any such
requirement would beg the question whether or not his objection has any substance and thus be
likely to lead to gross injustice. Such a person must be entitled, if he wishes, simply to ignore the
arbitral process, though of course (if his objection is not well-founded) he runs the risk of an
enforceable award being made against him.45
Participating in the appointment process would amount to participation for these purposes,46 as
would taking part in the tribunals determination of the jurisdictional issue.47 In general, the courts
have held that correspondence with the tribunal will not cause a party to fall outside section
72,48 though any such correspondence should be carefully worded so as not to engage with the
merits of the jurisdictional issue or any substantive claim.
The relationship between sections 72 and 9 was considered by the Court of Appeal in Fiona
Trust v Privalov.49 In that case, charterparties were rescinded by Owners on the grounds of alleged
fraud and bribery. Owners then applied to court, pursuant to section 72, alleging that there was no
existing arbitration agreement, and seeking an injunction restraining the Charterers from
proceeding with arbitrations commenced pursuant to the charters. The charterers in turn applied
for a stay of the proceedings pursuant to section 9 of the 1996 Act. At first instance, Morison J
held that as a matter of construction, the allegations that the charters had been rescinded fell
outside the charterparty arbitration clauses; furthermore, the rescission of the charters had brought
the arbitration agreements to an end. He therefore granted the injunction, indicating that even if he
were wrong on the construction and rescission issues (so that the tribunal had jurisdiction to
determine the claims), he would have granted an injunction in any event because it was
convenient for the court to deal with the issues. This was set aside by the Court of Appeal, which
disagreed with Morison Js conclusions on construction and on the effect of the rescission. The
court also considered the relationship between sections 9 and 72, and how a court should proceed
where it is faced with opposing applications under these sections. It held that in such a case, the
stay application should be determined first. If there is an issue about the validity of the arbitration
agreement, then this might be determined by the court or by the tribunal, with the court staying its
proceedings pursuant to its inherent jurisdiction. Once the court has determined, pursuant to

section 9, that there is a valid arbitration agreement, then any right to apply pursuant to section 72
falls away. The two sections are mirror images of each other.
Note that, while the ECJs decision in West Tankers50 prevents the English court from granting an
anti-suit injunction restraining the pursuit of proceedings in the court of an EC Member State,
declaratory relief may nevertheless be available in such circumstances. This is so even though the
foreign court may have ruled upon the jurisdictional issue.51

7. ARBITRAL PROCEEDINGS PENDING CHALLENGES TO JURISDICTION

Both sections 31 and 32 of the 1996 Act contain provisions addressing the status of the
substantive arbitral proceedings pending a challenge to jurisdiction. Section 31(5) provides that:
The tribunal may in any case, and shall if the parties so agree, stay proceedings whilst an
application is made to the court under section 32 (determination of preliminary point of
jurisdiction).
The combination of sections 31(5) and 32(2)(b) means that if the tribunal approves a section 32
application and wishes to stay the arbitral proceedings in the meantime, a party may find itself
effectively disabled from pressing on with the arbitral proceedings until the court has determined
the jurisdictional issue. The other possibility is implicit in section 31(5), and is set out expressly in
section 32(4) which provides:
Unless otherwise agreed by the parties, the arbitral tribunal may continue the arbitral proceedings
and make an award while an application to the court under this section is pending.

8. LOSS OF THE RIGHT TO OBJECT

The available procedures for challenging jurisdiction are all subject to the principle, embodied in
section 73 of the 1996 Act, that delay in raising jurisdictional objections may result in the loss of
the right to object. Section 73, entitled Loss of the right to object, provides:
(1) If a party to arbitral proceedings takes part, or continues to take part, in the proceedings
without making, either forthwith or within such time as is allowed by the arbitration agreement or
the tribunal or by any provision of this Part, any objection

(a) that the tribunal lacks substantive jurisdiction he may not raise that objection later,
before the tribunal or the court, unless he shows that, at the time he took part or continued to
take part in the proceedings, he did not know and could not with reasonable diligence have
discovered the grounds for the objection.

As the opening words make clear, this provision applies only to parties who participate in the
arbitral proceedingsincluding parties who participate for the sole purpose of challenging
jurisdiction (see Chapter 11). Taking part is not limited to active participation and includes
simply allowing the reference to proceed.
In Rustal Trading Ltd v Gill & Duffus Ltd,52 buyers under a sugar sale contract participated in a
Refined Sugar Association arbitration. Following submissions (in which the sellers sought to
undermine the buyers evidence by attacking their commercial representative), the buyers sought
to challenge the tribunal by alleging bias on the part of one of its members (this being a matter

which, in additional to jurisdictional challenges, falls within section 73). The court held that since
the buyers had continued to participate in the reference after the appointment of the arbitrator in
question, it was now precluded by section 73 from seeking to object.
Participating parties (unlike a non-participating party, who is described in the Act as a person
alleged to be a party to arbitral proceedings and whose position is protected by section 72) must
put up or shut up. Delaying tactics are no longer a realistic possibility under the 1996 Act. Any
challenge to jurisdiction must be formulated and put forward at the earliest possible stage if the
right to advance the challenge is not to be lost.
Section 32 (determination by the court of preliminary point of jurisdiction) expressly refers to
section 73. Section 31 (tribunals ruling on jurisdictional objection) does not expressly refer to
section 73 and, moreover, permits the tribunal to entertain late applications. However, the wording
of section 73 (in particular, the reference to applications to the tribunal), together with the
important policy which it embodies and the fact that it is a mandatory provision indicate that
section 73 applies to all jurisdictional challenges. Where the tribunal determines a jurisdictional
challenge, the relevant time limits, for the purposes of section 73, are those prescribed by section
31. Failure to comply with those limits will result in the loss of the right to object, unless the
tribunal extends time.
Rights to challenge will not be lost if it is shown by the challenging party that he did not know
and could not with reasonable diligence have discovered the grounds for the objection. The
question of what amounts to reasonable diligence will depend on the circumstances of the case,
but may require parties to take English or foreign law advice on time limits or other issues.53
A similar principle applies to challenges to the tribunals ruling on jurisdiction. Section 73(2)
provides that:
(2) Where the arbitral tribunal rules that it has substantive jurisdiction and a party to arbitral
proceedings who could have questioned that ruling

(a) by any available arbitral process of appeal or review, or

(b) by challenging the award,
does not do so, or does not do so within the time allowed by the arbitration agreement or any
provision of this Part, he may not object later to the tribunals substantive jurisdiction on any
ground which was the subject of that ruling.

Section 73(2) applies only to a tribunals ruling that it does have jurisdiction: it does not apply to
rulings that no jurisdiction exists.54 It is also clear that section 73(2) does not prevent any later
challenge on the basis of a ground upon which the tribunal did not rule in its original ruling:
however, challenges based on such grounds may well fall within the prohibitive provisions of
section 73(1).55 Note, however, that new arguments which fall within a ground of challenge which
was raised will not fall foul of section 73(1).56
1 Paragraph 297 of the DAC Report.
2 [1942] AC 356.

3 [1954] 1 QB 8, 12-13.
4 J. T. Mackley & Co Ltd v Gosport Marina Ltd [2002] EWHC 1315 (TCC); [2002] BLR 367.
5 The term substantive jurisdiction is defined under section 82(1) as referring to the matters
specified in section 30(1)(a) to (c). However, a tribunal may exceed its powers other than by
exceeding its substantive jurisdiction although the main statutory relief would be challenge under
section 68(2) of the 1996 Act, discussed in Chapter 22.
6 [2003] EWCA Civ 812; [2003] 2 Lloyds Rep 430.
7 See Premium Nafta Products Ltd v Fili Shipping Company Ltd [2007] UKHL 40; [2008] 1
Lloyds Rep 254.
8 Mustill & Boyd, Commercial Arbitration, 2nd edn, 2001 Companion, Butterworths 2001, pp
290-291.
9 Leif Hoegh & Co A/S v Petrolsea Inc [1992] 1 Lloyds Rep 45.
10 See International ArbitrationThree Salient Problems by Judge Schwebel of the ICJ (Grotius
Publications 1987).
11 Harbour Assurance Co Ltd v Kansa General International Insurance Co Ltd [1992] 1 Lloyds
Rep 81, Paul Smith Ltd v H&S International Holding Inc [1991] 2 Lloyds Rep 127.
12 The earlier (July 1995) version of the Bill contained an express provision clarifying that this
was the case in relation to assignments and transfers; however, the provision was considered too
unwieldy to include in the final version. See also the Denning Lecture 1995 (Arbitration and the
Courts) by Lord Justice Saville [1995] 61 Arbitration 157 at 161, and paragraph 44 of the DAC
Report.
13 [2007] EWCA Civ 20.
14 Fiona Trust & Holding Corp Ltd v Privalov (sub nom Premium Nafta Products Ltd (20th
Defendant) & Ors v Fili Shipping Company Ltd & Ors [2007] UKHL 40; [2008] 1 Lloyds Rep
254.
15 [1999] 1 Lloyds Rep 68.
16 Paragraph 138 of the DAC Report.
17 Challenging the tribunals ruling; page 82.
18 Birse Construction Ltd v St David Ltd [1999] BLR 194, Al-Naimi v Islamic Press Agency
Inc [2000] 1 Lloyds Rep 522, El Nasharty v J Sainsbury plc [2003] EWHC 2195; [2004] 1
Lloyds Rep 309, Patel v Patel [2000] QB 551.
19 Albon (t/a NA Carriage Co) v Naza Motor Trading SDN BHD & anr [2007] EWHC 665 (Ch);
[2007] 2 Lloyds Rep 1.
20 See Chapter 7.
21 Hussmann (Europe) Ltd v Al Ameen Development and Trade Co [2000] 2 Lloyds Rep 83.

22 Paragraph 145 of the DAC Report; see also the approach of Thomas J in Vale do Rio Doce
Navegacao SA v Shanghai Bao Steel Ocean Shipping Co Ltd [2000] 2 Lloyds Rep 1 at 11 and JT
Mackley v Gosport Marina (supra), although in that case the judge did, exceptionally, grant
declaratory relief as to the jurisdictional issue.
23 See below under Loss of the right to object.
24 Vee Networks Ltd v Econet Wireless International Ltd [2004] EWHC 2909 (Comm); [2005] 1
Lloyds Rep 192.
25 See paragraph 145 of the DAC Report.
26 Athletic Union of Constantinople (AEK) v National Basketball Association [2002] EWCA Civ
830; [2002] 1 Lloyds Rep 305.
27 See e.g., Patel v Patel [2000] QB 551; but cf, in the context of adjudication, R.C . Pillar &
Sons v The Camber [2007] EWHC 1626 (TCC).
28 Section 31(4)though presumably any such agreement would be effective only if consistent
with the tribunals mandatory duties under section 33see paragraph 145 of the DAC Report.
29 Vee Networks Ltd v Econet Wireless International Ltd [2004] EWHC 2909; [2005] Lloyds
Rep 192, Continental Enterprises Ltd v Shandong Zhucheng Foreign Trade Group Co [2005]
EWHC 92. Note, though, the possibility of an implied ruling on jurisdiction, recognised in Vee
Networks.
30 [1999] 1 Lloyds Rep 68. See also Astra SA Insurance & Reinsurance Co v Sphere Drake
Ltd [2000] 2 Lloyds Rep 550, in which the court was required to rehear detailed expert evidence
on Romanian law, Kalmneft v Glencore [2002] 1 Lloyds Rep 128, Electrosteel Castings
Ltd. v Scan-Trans Shipping & Chartering Sdn Bhd [2002] EWHC (Comm) 1993; [2003] 1
Lloyds Rep 190, Peoples Insurance Co of China v Vysanthi Shipping Co [2003] EWHC 1655
(Comm); [2003] 2 Lloyds Rep 617, Peterson Farms Inc v C&M Farming Ltd [2004] EWHC 121
(Comm); [2004] 1 Lloyds Rep 614; X Ltd v Y Ltd [2005] EWHC 769 (TCC); [2005] BLR 341.
31 [2002] EWHC 1993 (Comm); [2003] 1 Lloyds Rep 190.
32 [2005] EWHC 2399 (Comm); [2006] 1 Lloyds Rep 457.
33 See the discussion in Al-Naimi v Islamic Press Agency Inc [2000] 1 Lloyds Rep 552.
34 [2006] EWHC 448 (Comm); [2006] 2 Lloyds Rep 370.
35 [2001] 2 All ER (Comm) 97.
36 Vale do Rio Doce Navegacos SA v Shanghai Bao Steel Ocean Shipping Co Ltd [2000] 2
Lloyds Rep 1, Law Debenture Trust v Elektrim Finance BV [2005] EWHC 1412 (Ch); [2005] 2
Lloyds Rep 755, ABB Lummus Global Ltd v Keppel Fels Ltd [1999] 2 Lloyds Rep 24.
37 Holloway and anor v Chancery Mead Ltd [2007] EWHC 2495 (TCC); [2008] 1 All ER Comm
653.
38 J T Mackley & Co Ltd v Gosport Marina Ltd [2002] EWHC 1315 (TCC); [2002] BLR 367.

39 Paragraph 147.
40 See also the comments of Judge Humphrey Lloyd QC in Birse Construction Ltd v St David
Ltd [1999] BLR 194 and the CA in Al-Naimi v Islamic Press Inc [2000] 1 Lloyds Rep 522; see,
however, Colman J in AOOT Kalmneft v Glencore International AG [2002] 1 Lloyds Rep 128,
indicating that in some cases it may be preferable for the tribunal to rule upon jurisdiction at an
early stage, notwithstanding the availability of recourse as of right against such a ruling.
41 Esso Exploration and Production UK Ltd v Electricity Supply Board [2004] EWHC 787
(Comm); [2004] 1 All ER (Comm) 926.
42 Welex AG v Rosa Maritime Ltd [2003] EWCA Civ 938; [2003] 2 Lloyds Rep 509.
43 Mackley & Co Ltd v Gosport Marina Ltd [2002] EWHC 1315; [2002] BLR 367.
44 See sections 32(5) and (6); as to the meaning of the court in these provisions, see Henry Boot
(Construction) (UK) Ltd v Malmaison Hotel (Manchester) Ltd [2000] EWCA Civ 175; [2001] QB
388, Athletic Union of Constantinople vNational Basketball Association (No 2) [2002] 1 WLR
2863; [2002] EWCA Civ 830.
45 Paragraph 295 of the DAC Report.
46 Vale do Rio doce Navegacao, supra. However, default appointments made by the court under
section 18 of the Act would fall within section 72 (ibid).
47 Mustill & Boyd, 2001 Companion, p. 361, Caparo Group Ltd v Fagor Arrasate
Sociedad [2000] ADRLJ 254.
48 Caparo Group, The Law Debenture Trust Corporation v Elektrim Finance BV [2005] EWHC
1412; [2005] 2 Lloyds Rep 755.
49 Fiona Trust & Holding Corporation & Ors v Privalov & Ors [2007] EWCA Civ 20. This issue
was not addressed by the Lords.
50 Allianz SpA and Generali Assicurazioni Generali SpA v West Tankers Inc. (Case C-185-07)
[2009] WLR (D) 44.
51 National Navigation Co v Endesa Generacion SA [2009] EWHC 196 (Comm); [2009] 1
Lloyds Rep 666, discussed further in Chapter 8.
52 [2000] 1 Lloyds Rep 14.
53 See, e.g., Kalmneft JSC v Glencore International AG and another [2002] 1 All ER 76.
54 LG Caltex Gas Co Ltd v National Petroleum Corp [2001] 2 All ER (Comm) 97.
55 JSC Zestafoni G Nikoladze Ferroalloy Plant v Ronly Holdings Ltd [2004] EWHC 245
(Comm); [2004] 2 Lloyds Rep 335 and Westland Helicopters Ltd v Sheikh Al-Hejailan [2004]
EWHC 1625 (Comm); [2004] 2 Lloyds Rep 535.
56 Primetrade AG v Ythan Ltd (The Ythan) [2005] EWHC 2399 (Comm); [2006] 1 Lloyds
Rep 457.

Chapter 7

Stays of English Court Proceedings Brought in Breach of an

Agreement to Arbitrate
Stays of English Court Proceedings Brought in Breach of an Agreement to
Arbitrate

1. Introduction
2. Mandatory stays under section 9 of the 1996 Act
3. The inherent jurisdiction to grant a stay
4. Stays and jurisdictional issues
5. Practice

1. INTRODUCTION
The fact that parties have agreed to refer their disputes to arbitration does not mean that the
English court lacks jurisdiction to resolve those disputes1 or that a judgment given on that dispute
is unenforceable. However, such proceedings have been brought in breach of an arbitration
agreement and the court will be reluctant to exercise its jurisdiction over the dispute.2 The
defendant can either allow the proceedings in court to continue (and possibly claim damages for
breach of the arbitration agreement) or apply for a stay of the proceedings.
A stay, which is the legal term for a suspension or halt, is the most usual and effective remedy
since damages for breach of the arbitration agreement may be nominal unless a partys costs have
been increased by reason of the disputes having been referred to court rather than arbitration and a
court will not make an order requiring the parties to perform the arbitration agreement.3 The
practical effect of a stay of proceedings is to force the claimant to refer the dispute to arbitration
and the courts have firmly rejected any suggestion that this would contravene the claimants right
of access to court under Article 6 of the European Convention on Human Rights.4 The courts
jurisdiction to grant an injunction restraining a party from pursuing foreign proceedings in breach
of an arbitration agreement is discussed in the following chapter.
The courts primary jurisdiction to grant a stay arises by statute under section 9 of the 1996 Act.
The statutory jurisdiction is mandatory in that if an applicant for a stay can bring himself within
section 9, then the court is required to grant the stay; it has no discretion to decline to stay the
proceedings or to make the stay subject to conditions. The jurisdiction is also mandatory in the
sense that the parties to an arbitration agreement cannot contract out of it.5 The court retains an
inherent jurisdiction to stay proceedings but this would only be exercised in cases where there is
no statutory power.

2. MANDATO RY STAY S UNDER SECTION 9 OF THE 1996 ARBITRATION

ACT
Section 9 of the 1996 Act is intended to give effect to international obligations under the 1958
New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. The
mandatory power to stay proceedings under section 9 applies to all written arbitration agreements

regardless of the nationality of the parties. Under the old law the courts had discretion to stay
arbitration agreements with no international element defined as domestic arbitration
agreements. The distinction between domestic and non-domestic arbitration agreements was not
brought into force in the 1996 Act because it was potentially contrary to the UKs obligation
under European Union (EU) law not to discriminate against an EU party on grounds of
nationality.6
Section 9 has removed the courts jurisdiction to grant summary judgment where a claim falls
within an arbitration clause but there is no arguable defence to it.7 Previously summary judgment
was often used as a speedy way of recovering indisputable claims for freight or demurrage or the
price of goods, notwithstanding the existence of an arbitration agreement. Now the parties must
arbitrate to recover such claims.
Section 10 of the 1996 Act also requires a stay of proceedings where one party brings interpleader
proceedings because he is faced by conflicting claims from other parties and does not know who
to account to. For example, a voyage charterer may be faced by competing claims for freight from
a shipowner and time charterer. If the issue between the competing claimants (e.g., the shipowner
and time charterer) is subject to an arbitration clause then the court will direct that the issue
between them is determined by arbitration unless there are reasons why the court would not have
granted a stay of proceedings brought by the competing claimants.

Requirements for a stay

Section 9 provides that:

(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 to stay the proceedings so far as they concern that matter.
(2) An application may be made notwithstanding that the matter is to be referred to arbitration
only after the exhaustion of other dispute resolution procedures.
(3) An application may not be made by a person before taking the appropriate step (if any) to
acknowledge the legal proceedings against him or after he has taken any step in those
proceedings to answer the substantive claim.
(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.
(5) If the court refuses to stay the legal proceedings, any provision that an award is a
condition precedent to the bringing of legal proceedings in respect of any matter is of no
effect in relation to those proceedings.8

In summary, the applicant under section 9 must establish that:

he is party to an arbitration agreement in writing (or a person claiming through or under such
a person); and
he is a party against whom legal proceedings are brought in respect of any matter agreed to be
referred to arbitration; and
he has not taken any step in those proceedings to answer the substantive claim.

If these three factors are established then the burden of proof 9 shifts to the party opposing the stay
application to show that:

the arbitration agreement is null and void, inoperative or incapable of being performed; or
there are other reasons precluding the grant of a stay (e.g., an estoppel).

Party to an arbitration agreement

Section 9 only applies to arbitration agreements in writing as defined by section 5 of the 1996 Act.
The statutory definition of an agreement in writing is extremely wide (see Chapter 4 above). For
example, it includes an agreement contained in an exchange of letters or telegrams and an oral
agreement incorporating written terms by reference, such as a salvage agreement made orally on a
ships radio incorporating the terms of the Lloyds Open Form.10
In Zambia Steel & Building Supplies Ltd v James Clark & Eaton Ltd,11 there had been a written
quotation containing an arbitration agreement. A contract in the terms of the quotation was
subsequently agreed orally. The Court of Appeal held that the contract was partly written and
partly oral. The requirement for an agreement in writing was satisfied if there was a document
which recognised the existence of an agreement to arbitrate or which contained the agreed terms
even if one of the parties only assented orally to the contract. There was no requirement that the
arbitration agreement be signed.
The court may also have to consider jurisdictional questions as to whether the contract sued upon
in the legal proceedings actually contains an arbitration clause. For example, in cargo disputes the
court will often have to construe a charterparty and bill of lading to decide whether an arbitration
clause in a charter has been incorporated into the bill of lading.12 The correct approach to such
jurisdictional issues is considered below and in Chapter 6.
Under section 82(2) of the 1996 Act a party to an arbitration agreement is defined as including any
person claiming under or through a party to the agreement. The issue of whether an applicant
for a stay is a party to the arbitration agreement, or claiming under or through a party, has
generally been given a wide, purposive treatment by the courts. The assignee of a debt arising out
of a contract containing an arbitration clause13 and a party claiming under the Third Parties
(Rights against Insurers) Act14 have been held (in pre-1996 Act cases) to fall within this category.
However, a legal or commercial connection to the party to the arbitration agreement will not be
sufficient.15

Party against whom legal proceedings are brought in

respect of any matter agreed to be referred to arbitration
A stay is only available to a party against whom civil proceedings in the High Court or county
court have been commenced.16 It may be granted in respect of proceedings brought by claim or
counterclaim, including third-party contribution proceedings.17 It is probably not available to
someone who has applied to be made a party to the proceedings because section 9 is only intended
to benefit those who have been sued in relation to a matter agreed to be arbitrated.18 Section 9(2)
makes clear that a party can apply for a stay even where the dispute has not yet reached the stage

when it can be referred to arbitration because the parties have agreed to use other dispute
resolution procedures first (e.g., expert determination or mediation).19
The question of whether the proceedings are brought in respect of a matter agreed to be arbitrated
raises jurisdictional issues as to the existence and the scope of the arbitration clause. This type of
issue is discussed in Chapter 6, but the question of whether the court or the tribunal will resolve
such an issue is considered below.

A dispute to be referred to arbitration

Arbitration clauses often provide for disputes or differences arising out of the contract to be
referred to arbitration. (For the purposes of the 1996 Act a dispute includes any difference.20) The
term dispute is to be given its normal meaning and is not defined legalistically. Whether a dispute
has arisen will depend on the particular circumstances but generally while the mere making of a
claim does not amount to a dispute, a dispute will be held to exist once it can readily be inferred
that a claim is not admitted.21
Before the 1996 Act came into force it was generally accepted22 that if there was no arguable
defence to a claim, or the claim was indisputably due then there was no dispute referable to
arbitration. However, the 1996 Act excluded the provision in the 1975 Act precluding a stay
where there is not in fact any dispute between the parties with regard to the matter to be
referred. The Court of Appeal in The Halki 23 decided that the removal of these words meant that
a court could no longer refuse a stay on the ground that the claim is indisputable or there is no
arguable defence to it.
In The Halki the claimants entered a tanker voyage charter containing a clause referring any
disputes arising from the charter to London arbitration. The claimants commenced proceedings to
claim demurrage. The defendants issued an application for a stay under section 9 which the
claimants countered by claiming summary judgment for demurrage which they said was
indisputably due. The defendants did not admit the sum was due but raised no real answer to it.
The defendants contended that there was a dispute between the parties within the meaning of the
arbitration clause because they did not admit that they were liable for the demurrage. The
claimants said there was no dispute because the claim was indisputably due in that the defendants
had no arguable defence to it. Clarke J and the Court of Appeal decided that there was a dispute
within the meaning of the clause and that the entire claim should be stayed.
The fact that a stay is now clearly available in respect of a claim which is indisputably due means
that a defendant can obtain a stay in circumstances where a claimant might previously have
obtained summary judgment. This change was justified since arbitrators can proceed speedily to
determine a very strong case by making an award at an early stage on certain issues. Giving
summary judgment for a claim within the scope of an arbitration clause would also be inconsistent
with the principle of respecting the parties choice of arbitration to resolve disputes.24
The practical result is that summary judgment is no longer available for a straightforward claim
which the other side has refused to pay. In addition, even where a party has admitted a claim, the
court is likely to grant a stay of proceedings in favour of arbitration if that party refuses to pay the

claim. There had been varying dicta on this point,25 but the Commercial Court has now taken a
robust approach and indicated that a stay should be granted in such circumstances.
In Exfin Shipping (India) Ltd v Tolani Shipping Co Ltd 26 charterers under a voyage charter
containing a standard arbitration clause admitted that a sum was due for demurrage but refused to
pay. Owners commenced arbitration and obtained an award. Charterers sought to set it aside for
want of jurisdiction. Langley J decided that failure to make a payment admittedly due constituted
a dispute referable to arbitration. He considered that any other conclusion would found a debtors
charter.

No step taken in the proceedings to answer the

substantive claim
An application for a stay may not be made after the applicant has taken any step in the
proceedings to answer the substantive claim. This wording has been interpreted in a similar way
to the previous provision in section 1 of the 1975 Act.27 The wording of section 9 is directed
towards steps taken to defend the claim on the merits. Whether an act amounts to a step in the
proceedings to answer the claim will depend on all the circumstances: the courts will make an
objective assessment of whether a party has impliedly affirmed the proceedings and indicated a
willingness to defend the claim rather than merely maintaining the status quo pending the issue of
an application for a stay. The Court of Appeal has endorsed the following tests:
It seems to me that in order to deprive a defendant of his recourse to arbitration a step in the
proceedings must be one which impliedly affirms the correctness of the proceedings and the
willingness of the defendant to go along with a determination by the courts of law instead of
arbitration.28
Two requirements must be satisfied. First, the conduct of the applicant must be such as to
demonstrate an election to abandon his right to stay, in favour of allowing the action to proceed.
Second, the act in question must have the effect of invoking the jurisdiction of the court.29
A step in the proceedings would probably not include purely procedural steps designed to
maintain the status quo, for example, an application for an extension of time for serving a
defence30 or an application to set aside service of proceedings or the arrest of a ship. Similarly, an
agreement to put up security to release a ship under arrest would probably not count as a step in
the proceedings. Service of statements of case or witness statements resisting summary judgment
would probably, however, count as relevant steps.31 A step in the proceedings does not have to be
a positive application; merely serving a witness statement in opposition to an application for
summary judgment indicates a willingness for the court to decide the merits and would preclude
the grant of a stay unless a stay application is issued at the same time.32 However, an act which
would otherwise be treated as a step in the proceedings will not be treated as such if the applicant
has specifically stated that he intends to seek a stay.33 Although the legal test is well established,
the authorities themselves do not present a consistent pattern so the safest course is probably to
issue a stay application and make clear that any other subsequent or simultaneous step is taken
subject to that application.

In Capital Trust Investments Ltd v Radio Design TJ 34 the defendant issued an application for a
stay and, shortly before the hearing, issued a further application notice stating that, in the event
that its application for a stay was unsuccessful, it applied for summary judgment. The Court of
Appeal held that this did not amount to a step in the proceedings since it expressed no willingness
to have a court determination of the merits. The defendant had made clear that the application was
only advanced if the stay application failed.
In Patel v Patel 35 the claimant had obtained default judgment and the defendant applied to set
aside the judgment and sought leave to defend the actions. Subsequently he served affidavits
dealing with the merits of the claim and also asking the court for a stay. Referring to the spirit of
the 1996 Act, Lord Woolf MR decided that the primary relief sought was for an order setting aside
the default judgment. The defendants further application for leave to defend the action was
otiose to the relief he needed and accordingly did not amount to a step in the proceedings to
answer the substantive claim. This case suggests that the courts may lean towards granting a stay
where possible.
In Skopos Design v Homelife Nursing Times 36 the Court of Appeal held that ticking a box to
apply for a transfer of the action to another district registry was not sufficient to amount to a step
in the proceedings.
In Blue Flame Mechanical Services v David Lord Engineering 37 applying for an adjournment of a
summary judgment application was not treated as a step amounting to an election to litigate.
Once a party has taken a relevant step in the proceedings then he will generally have lost the right
to a stay unless distinctly separate matters are subsequently raised which are also subject to the
arbitration agreement.
In Ahad v Uddin 38 the claimants had commenced court proceedings in respect of matters that fell
within an arbitration clause. The defendant took a step in the proceedings by serving a defence but
when the claimants applied to amend their claim he applied for a stay of proceedings insofar as
they related to the amendments. The Court of Appeal refused a stay since the amended matters
were part and parcel of the dispute raised in the original proceedings, in which the defendant
had already taken steps to preclude the grant of a stay.

Arbitration agreement null, void, inoperative or

incapable of being performed
These words follow the New York Convention and were found in the old law (and also the Model
Law). The words null and void should be construed narrowly and mean devoid of legal effect:
they probably assume that an arbitration agreement has been concluded but that it is not legally
binding.39 For example, they would cover situations where the agreement is not valid by reason of
illegality or public policy or where it has been avoided on the basis of duress, mistake, fraud or
misrepresentation. In exceptional cases an arbitration clause might be held to fail for
uncertainty.40 It is unlikely that these words cover a situation where an arbitration agreement has
never been concluded.41

The word inoperative has also been interpreted restrictively and is intended to cover situations
where the arbitration clause has ceased to have legal effect (e.g., by reason of an accepted
repudiation). Where an arbitration agreement exists and one party commences proceedings this
could in itself amount to a repudiatory breach of the arbitration agreement or an acceptance of the
other partys repudiatory breach. Whether such conduct amounts to a repudiatory breach (or
acceptance thereof) will depend on the circumstances and the parties pre-commencement
communications.
In Downing v Al Tameer Establishment 42 an inventor of a process for separating crude oil entered
into a joint venture agreement which included an arbitration clause. When disputes arose he
sought to refer the matter to arbitration but the defendants repeatedly denied that they had any
contractual relationship with him. He then started proceedings and the defendants applied for a
stay. The Court of Appeal refused a stay on grounds that the arbitration agreement was
inoperative. The defendants denial of any contract amounted to a repudiation not only of the main
contract but also the arbitration agreement. By commencing proceedings the claimant had
unequivocally accepted the repudiation.
An agreement is incapable of being performed if it can no longer be performed even if both
parties were ready, willing and able to perform (e.g., if the chosen tribunal has refused to accept
jurisdiction).43 This term probably covers cases where the arbitration clause has been frustrated
(although it may also be regarded as inoperative in such circumstances).44 It has been held that an
arbitration agreement is not inoperative or incapable of being performed simply because any claim
referred to arbitration will be time-barred,45 or one party lacks the means to arbitrate.46
In Janos Paczy v Haendler & Natermann GmbH 47 an inventor granted a licence incorporating an
ICC arbitration clause and commenced proceedings against the defendant. The Court of Appeal
held that the fact the claimant was financially unable to commence an ICC arbitration did not
mean that the arbitration agreement was incapable of being performed. This provision could
only apply where both parties were incapable of arbitrating.

Other reasons precluding a stay

Although the jurisdiction to grant a stay is mandatory the court retains power to refuse a stay
where equity and fairness would require it. A commonly invoked ground arises where a party, by
unequivocal representations or conduct, has waived its right to apply for a stay or is subject to an
estoppel precluding the right to arbitrate. It might be said that the arbitration agreement was no
longer operative in such circumstances or that there has been a variation of the arbitration
agreement (or one party is precluded from denying such variation).
In The Leila 48 Mustill J held that a defendant was estopped from relying on an arbitration clause
in a bill of lading because the parties conduct in discussing an extension for time for commencing
proceedings had given rise to an estoppel by convention rendering it unconscionable for the
defendant then to insist on arbitration.
If the dispute is not properly arbitrable,49 the court may also refuse a stay of proceedings.
In Exeter City AFC Ltd v Football Conference Ltd 50 the claimant football club was a member of a
football league organised by the respondent, such membership being subject to an arbitration

agreement. The claimant fell into financial difficulties and entered into a creditors voluntary
arrangement (CVA). The respondents policy was to expel members who entered into CVAs
unless certain creditors were given priority, but the Inland Revenue would not allow such priority
treatment. The claimant responded to the situation by issuing a section 459 petition under the
Companies Act 1985 alleging that the respondents affairs were being conducted in an unfairly
prejudicial way. The respondent applied for a stay. The judge appeared to find that the dispute was
within the scope of the arbitration clause, but that the statutory right to apply for section 459 relief
could not be excluded by contract. It was common ground that section 9 did not apply to disputes
that were not susceptible to arbitration and the judged decided as a matter of discretion to refuse a
stay. An alternative analysis might have been that the arbitration clause was not operative in
relation to such a dispute.

3. THE INHERENT JURISDICTION TO GRANT A STAY

The High Court has inherent powers at common law to stay English proceedings wrongly brought
in breach of contract. This jurisdiction does not depend on statute51 and has been justified by
reference to the principle that the court will require people to abide by their contracts,52 and also
by reference to the interests of the orderly regulation of international commerce.53 The 1996 Act
provides at section 1(3) that in matters governed by this Part the court should not intervene
except as provided by this Part. This means that the inherent jurisdiction to stay proceedings will
survive as a residual power, only available where there is a gap in the statutory jurisdiction. It
would apply, for example, where there is an agreement for a dispute resolution procedure other
than arbitration54 or an oral agreement to arbitrate not covered by the 1996 Act.55 It could also
apply where the dispute in the court proceedings is not caught by section 9, but it would still be
preferable for the dispute to be decided by arbitration.56 The Court of Appeal in AlNaimi v Islamic Press Agency Inc 57 suggested that the courts inherent jurisdiction to stay
proceedings could be used where an issue as to the scope of the arbitration agreement arises on an
application under section 9 but the court decides that it would be preferable for the arbitrator to
consider the whole matter first.

4. STAY S AND JURISDICTIONAL ISSUES

Probably the most common issue on a stay application is the existence or scope of the arbitration
agreement relied upon in seeking the stay. The courts jurisdiction to grant a stay under section 9
of the 1996 Act depends on the court being satisfied that there is a concluded arbitration
agreement and that the relevant dispute is within its scope.58 The court clearly has power to
determine jurisdictional issues arising on a stay application. CPR Part 62 addresses the issue by
providing at rule 62.8(3) that:
Where a question arises as to whether an arbitration agreement has been concluded; or the
dispute which is the subject-matter of the proceedings falls within the terms of such an agreement,
the court may decide that question or give directions to enable it to be decided and may order the
proceedings to be stayed pending its decision.
Two important aspects of the 1996 Act must, however, be taken into account. First, the courts
discretion to decide the jurisdictional issue only arises if there is truly a question whether there is a
valid arbitration agreement (or an issue as to whether the dispute was covered). The doctrine of

separability (considered in Chapter 6) means that where allegations go to the validity of the main
contract as opposed to the arbitration agreement then the issue must be decided by the tribunal.
In Premium Nafta Products Limited v Fili Shipping Company Limited,59 shipowners claimed that
several charters including an arbitration clause had been induced by bribery of their employees by
charterers representatives. They commenced claims in court for rescission of the charters and
conspiracy. Charterers applied for a stay of proceedings and the House of Lords upheld a stay of
the proceedings under section 9 of the 1996 Act. It decided that the claims for rescission on
grounds of bribery were within the scope of the arbitration clause and would be investigated by
the tribunal. The bribery allegations went to the main contract but did not impeach the arbitration
clause and a stay should be granted.
Secondly, the policy of the 1996 Act is firmly in favour of the doctrine of kompetenzkompetenz (i.e., that the tribunal is competent to rule on its own jurisdiction) and section 30
confers power on the tribunal to determine jurisdictional issues such as whether an arbitration
agreement has been concluded. There is accordingly tension between the courts power to
determine jurisdictional issues in this context and the Acts express provision for the tribunal to
decide such issues. Guidelines laid down in Al-Naimi v Islamic Press Agency 60 remain the
primary authority. These guidelines are to the effect that on an application for a stay where the
existence of the arbitration agreement is in issue, the following options are open to the court:

(1) to decide the issue on the available statement evidence where this is possible, (normally if
the parties agree); and accordingly either grant or refuse a stay;
(2) to give directions for the trial by the court of the issue (and following trial grant or refuse
a stay);
(3) to stay the proceedings under the courts inherent jurisdiction on the basis that the
arbitrator will decide the issue (with the possibility that the arbitrators decision will be
reviewed by the court under section 67 and the section 9 stay application will be
reconsidered).

The correct approach will depend on the particular circumstances of the application. The court
should bear in mind that it must not deprive the party of the benefit of an agreement that disputes
should be referred to arbitration. However, section 30 is not mandatory and the 1996 Act does not
require a party who objects that there is no arbitration agreement to have that question decided by
an arbitral tribunal; any such requirement would beg the question as to whether or not the
objection is well-founded.61 As a general principle a party has a right of access to court unless it is
clearly proven that he has waived that right: to require him to go first to the arbitral tribunal to
obtain a jurisdictional ruling would infringe that right.62 Practical considerations are of equal
importance and the avoidance of unnecessary delay or expense is probably the dominant factor to
be taken into account in deciding whether a jurisdictional issue should be decided in court or in
arbitration. The court is entitled to take into account whether the court proceedings preceded the
commencement of the arbitration and whether the decision of the arbitrators would be subject to
review by a court.63 The court should also take into account the potential danger of two hearings
on the same jurisdictional issue, first before the tribunal and then before the court under sections

67 or 69 of the 1996 Act. The risk of having to come back to court in any event will mean that
ordinarily it will be most convenient for the court to decide the issue.
In Al-Naimi v Islamic Press Agency Inc 64 the claimant was a building contractor who carried out
works on the defendants building pursuant to a written contract containing an arbitration
agreement. The claimant commenced proceedings in respect of further works not identified in the
written contract claiming that they were carried out under a separate oral contract. It was likely
that the claimant issued proceedings in court because he could not obtain legal aid to conduct an
arbitration. The defendant claimed a stay relying on the arbitration clause. The judge at first
instance decided that the issue as to whether the further works were carried out under the written
contract or a separate oral contract should be decided in the arbitration. The Court of Appeal
allowed the appeal, decided the jurisdictional issue and granted a stay under section 9.
The trend of authorities65 now clearly suggests that the courts have not fully embraced the
principle of kompetenz-kompetenz in this context; it would only be an exceptional case where the
court would exercise its inherent jurisdiction to stay the proceedings so as to enable the tribunal to
decide the jurisdictional issue. Such a case would typically arise where it is virtually certain that
the arbitration agreement exists or there were overwhelming considerations of convenience and
cost.66
A v B 67 is an example of an exceptional case where the courts inherent jurisdiction might be
exercised. Colman J suggested that he would have granted a stay of English proceedings allegedly
pursued in breach of an agreement to arbitrate in Switzerland where there were opposing
allegations that the arbitration agreement was induced by fraud. It was relevant that the tribunal
was already investigating its own jurisdiction and that Swiss law very clearly gave the arbitrator
power to rule on its jurisdiction. There was a serious risk of conflicting decisions and Switzerland
was the appropriate place for judicial supervision.
It would probably be appropriate to leave the issue to the arbitrators where they clearly have
jurisdiction over some matters but there is a dispute as to others, especially where the
jurisdictional issue is closely linked to the substantive issues between the parties. If the judge does
decide that it would be better for the arbitrator to consider the jurisdictional issue then a stay under
section 9 cannot be ordered since the court has not decided that the proceedings are covered by an
arbitration agreement. The stay can only be granted pursuant to the courts inherent jurisdiction.68
If the court decides to resolve the jurisdictional issue then CPR rule 62.8(3) gives it wide
discretion as to whether the matter should be decided immediately or following a trial. Birse
Construction Ltd v St David Ltd 69 suggests, however, that if there is a triable issue as to the
existence or scope of the arbitration agreement then the judge should not decide the issue on
statement evidence unless the parties agree to this. On the other hand, where the parties agree that
the jurisdictional issue can be decided on the basis of statements without need for a trial then in
the interests of good litigation management and the saving of costs the judge should endeavour
to do so unless he considers oral evidence is necessary.70

5. PRACTICE
The application for a stay is begun by issuing an application notice in the court in which the legal
proceedings are pending.71 The application must ordinarily be issued within the period allowed for

serving a defence (usually 28 days from the service of the particulars of claim) otherwise the
defendant risks judgment being entered against him. The applicant must file an acknowledgment
of service of the claim form before issuing the application.72 Evidence referring to the existence of
the arbitration agreement and the dispute thereunder should be served with the application. Notice
of the application should be given to all the parties to the proceedings and this is done by making
them defendants to the application and serving them with the application and evidence in
support.73 The court may grant a stay of those parts of the proceedings that concern the matter
agreed to be referred to arbitration and this may require a difficult delineation of the subject matter
of the proceedings.74 The costs of the application for a stay will normally be granted to the
successful party. If a party can establish that court proceedings were commenced in breach of an
arbitration agreement then it can probably justify asking for indemnity costs, effectively to give
full compensation for the breach. In A v B 75 Colman J stated that:
In my judgment, provided that it can be established by a successful application for a stay or an
anti-suit injunction as a remedy for breach of an arbitration or jurisdiction clause that the breach
has caused the innocent party reasonably to incur legal costs, those costs should normally be
recoverable on an indemnity basis.

Stays and obtaining permission to serve out of the

jurisdiction
The existence of an arbitration agreement does not itself bar the court from granting permission to
serve a claim form out of the jurisdiction where the claim falls within the scope of that agreement.
However, if the defendant would be entitled as a matter of right to a stay and has made it plain that
he will assert that right, the court will not ordinarily grant permission to serve out of the
jurisdiction because service out would be an empty formality rendered futile when a stay is
obtained.76 It is important to note that an application by a foreign party for a stay of proceedings
under section 9 would probably not amount to a voluntary submission to the English jurisdiction.77

Security for a claim

A stay under section 9 of the 1996 Act cannot be made subject to conditions since the statute
provides no express power to make such conditions and the court would have no power to set
aside a mandatory stay as a sanction if conditions were not complied with.78 If, however, a party
has issued proceedings to arrest a vessel the court may grant a stay of these proceedings but order
that the arrest be maintained as security for an award under section 26 of the Civil Jurisdiction and
Judgments Act 1982.79 The court probably has power under section 44 of the 1996 Act to allow a
freezing order to remain in force to preserve assets where court proceedings are stayed under
section 9 of the 1996 Act.

Appeals
There is a right of appeal from a first instance decision under section 9 or the courts inherent
jurisdiction. Such an appeal can only be made with the permission of the Court of Appeal or the
first instance court.80 This is not clear from the 1996 Act which makes no provision for appeal
from decisions under section 9. On its literal meaning this provision, taken together with the

provisions on appeals under the Supreme Court Act 1981, could be read as excluding any right of
appeal. However, the House of Lords in Inco Europe Ltd v First Choice Distribution 81 resolved
the point by deciding that there had been a drafting error in the legislation and that it should be
read so as to not to remove the Court of Appeals jurisdiction.
1 However, if there is a Scott v Avery clause, the absence of an arbitration award will provide a
defence to the claim and postpone the courts jurisdiction. Scott v Avery clauses are discussed in
Chapter 4.
2 For example in refusing permission to serve proceedings out of the jurisdiction see A & B v C,
D, E, F, G, & H [1982] 1 Lloyds Rep 166.
3 This is an order for specific performance, see Doleman v Ossett Corporation [1912] 3 KB 257
at 270 per Fletcher Moulton LJ. An injunction to restrain a party from pursuing English
proceedings would be unavailable because a stay is the appropriate remedy, but an injunction
would be available to restrain a party pursuing foreign court proceedings outside EU or Lugano
Convention states: see Chapter 8.
4 Premium Nafta Products Limited v Fili Shipping Company Limited [2007] UKHL 40; [2008] 1
Lloyds Rep 254, El Nasharty v J Sainsbury plc [2007] EWHC 2618; [2008] 1 Lloyds Rep 360.
5 See section 4 of the 1996 Act and Schedule 1, the jurisdiction cannot be avoided by choice of a
foreign seat of the arbitration: see section 2(2).
6 See Arbitration Act 1996 (Commencement No 1) Order 1996 which prevented sections 85 to 87
from coming into force, paragraphs 317 to 331 of the DAC report and paragraphs 47 to 49 of the
DACs Supplementary Report on the Arbitration Act. See also Philip Alexander Securities and
Futures Limited v Bamberger [1997] I L Pr 73, CCH; [1996] CLC 1757 (CA).
7 Halki Shipping Corporation v Sopex Oils Ltd, The Halki [1998] 1 Lloyds Rep 465.
8 This provision is designed to deal with contracts involving Scott v Avery clauses. The DAC
suggested at paragraph 57 of their report that this avoids a situation where the arbitration clause
is unworkable, yet no legal proceedings can successfully be brought.
9 Overseas Union Insurance Ltd v AA Mutual International Insurance Co Ltd [1988] 2 Lloyds
Rep 63 at 70. It is suggested that a comment by Potter LJ in Downing v Al Tameer
Establishment [2002] EWCA Civ 721; [2002] 2 All ER (Com) 545, para 20, suggesting that a stay
should be granted if the defendant can raise an arguable case in favour of validity, was intended as
a reference to this case rather than a new interpretation on the burden of proof.
10 DAC Report, paragraph 36.
11 [1986] 2 Lloyds Rep 225, see also Excomm Ltd v Ahmed Abdul- Qawi Bamaodah, The Saint
Raphael [1985] 1 Lloyds Rep 403 and Aughton v MF Kent Services [1991] 31 Con LR 60.
12 For example Daval Aciers DUsinor et de Sacilor v Armare Srl, The Nerano [1996] 1 Lloyds
Rep 7 and The Delos [2001] 1 All ER Comm 763, see Chapter 4 above.
13 Rumput (Panama) SA v Islamic Republic of Iran Shipping Lines, The Leage [1984] 2 Lloyds
Rep 259.

14 Socony Mobil Oil Co Inc v West of England Ship Owners Mutual Insurance Association
(London) Ltd, The Padre Island [1984] 2 Lloyds Rep 408.
15 In Roussel-Uclaf v GD Searle & Co [1978] 1 Lloyds Rep 225, a wholly owned subsidiary,
selling goods on behalf of its parent company which was party to the arbitration agreement, was
granted a stay. In Mayor of the City of London vSancheti [2008] EWCA Civ 1283, [2009] 1
Lloyds Rep 117, Collins LJ considered that the decision was wrongly decided in relation to the
statutory jurisdiction. It was also distinguished in Grupo Torras SA v Al-Sabah [1995] 1 Lloyds
Rep 374 at 451.
16 Section 82(1) of the 1996 Act.
17 Wealands v CLC Contractors Ltd [1999] 2 Lloyds Rep 739.
18 Etri Fans Ltd v NMB (UK) Ltd [1987] 2 Lloyds Rep 565.
19 This provision reflects the views of Lord Mustill in Channel Tunnel v Balfour Beatty [1993] 1
AC 334 at 352, DAC Report, paragraph 52.
20 See section 82(1) of the 1996 Act.
21 Collins (Contractors) Ltd v Baltic Quay Management (1994) Ltd [2004] EWCA Civ 1757;
[2005] BLR 63, para 63 referred to in AMEC Civil Engineering Ltd v Secretary of State for
Transport [2005] EWCA Civ 291; [2005] 1 WLR 2339. See below as to whether an admitted
claim can give rise to a dispute for the purposes of section 9.
22 For example, Hayter v Nelson & Home Insurance Co [1990] 2 Lloyds Rep 265
and Hume v AA Mutual International Insurance [1996] Lloyds Rep IR 19.
23 Halki Shipping Corporation v Sopex Oils Ltd, The Halki [1998] 1 Lloyds Rep 465.
24 The Merak [1964] 2 Lloyds Rep 283 at 295, Grimaldi Compagnia Di Navagazione
SpA v Sekihyo Lines Ltd, The Seki Rolette [1998] 2 Lloyds Rep 638.
25 In The Halki [1998] 1 Lloyds Rep 464 there were obiter suggestions that there was a dispute
until the defendant admits the sum claimed is due and payable, see Swinton-Thomas at 487 and
Henry LJ at 482. Mance LJ affirmed this approach in Wealands v CLC Contractors Ltd [1999] 2
Lloyds Rep 739 at 745. See also Ellerine Brothers (Pty) Ltd v Klinger [1982] 1 WLR 1375 at
1381, 1383 (Templeman LJ) and The M Eregli, Tradex Internacional SA v Cerrahogullari
TAS[1981] 2 Lloyds Rep 169 at 173. On the other hand, Clarke LJ in Glencore Grain Ltd v Agros
Trading Co [1999] 2 Lloyds Rep 410 at 422 considered that an admission would not supercede a
dispute, following his comments at first instance in The Halki [1998] 1 Lloyds Rep 49 at 55, see
his comments at paragraph 63 of Collins (Contractors) Ltd v Baltic Quay Management (1994) Ltd
[2004] EWCA Civ 1757; [2005] BLR 63. See also AMEC Civil Engineering Ltd vSecretary of
State for Transport [2005] EWCA Civ. 291; [2005] 1 WLR 2339 for discussion of the meaning of
dispute in a different context.
26 [2006] EWHC 1090 (Comm); [2006] 2 Lloyds Rep 389.
27 In Patel v Patel [1999] 3 WLR 322, Lord Woolf MR suggested that the approach adopted
in Pitchers Ltd v Plaza (Queensbury) Ltd [1940] 1 All ER 151 would apply under the new law.

Ward and Otton LJJ also appeared to accept that the old authorities would apply. See also Capital
Trust Investment Ltd v Radio Design TJ AB [2002] EWCA Civ 135; [2002] 2 All ER 159, para 57.
28 Eagle Star Insurance Co Ltd v Yuval Insurance Co Ltd [1978] 1 Lloyds Rep 357 at 361 (Lord
Denning MR), applied in Capital Trust Investment Ltd v Radio Design TJ AB [2002] EWCA Civ
135; [2002] 2 All ER 150, para 23.
29 Patel v Patel [2000] QB 551 at 555, Capital Trust Investment Ltd v Radio Design TJ
AB [2002] EWCA Civ 135; [2002] 2 All ER 150, para 23.
30 Lawson v Midland Travellers [1993] 1 WLR 735 suggests that such an application would not
amount to a submission to the jurisdiction of the court but see Fords Hotel Co
Ltd v Bartlett [1896] AC 1 and London Sack v Dixon & Lugton[1943] 2 All ER 763.
31 Turner & Goudy v McConnell [1985] 1 WLR 898, but see Patel v Patel [2000] QB 551.
32 Pitchers Ltd v Plaza (Queensbury) Ltd [1940] 1 All ER 151.
33 Patel v Patel [2000] QB 551 at 558 and Capital Trust Investments Ltd v Radio Design
TJ [2002] EWCA Civ 135; [2002] 2 All ER 159.
34 [2002] EWCA Civ 135; [2002] 2 All ER 159.
35 [2000] QB 551, see also London Central and Suburban Developments Ltd v Banger [1999]
ADRLJ 119.
36 24 March 1988 (CA).
37 [1992] Con LJ 164.
38 [2005] EWCA Civ 883; The Times, 30 June 2005.
39 Albon v Naza Motor Trading Sdn BHD (No 3) [2007] EWHC 327 Ch; [2007] 2 Lloyds Rep 1,
para 18.
40 Star Shipping AS v China National Foreign Trade Transportation Corporation, The Star
Texas [1993] 2 Lloyds Rep 445.
41 Albon v Naza Motor Trading Sdn BHD (No 3) [2007] EWHC 327 Ch; [2007] 2 Lloyds Rep 1,
para 18, but see Mustill & Boyd p. 465 and Sun Life Assurance Company of Canada v CX
Reinsurance Company Ltd [2003] EWCA Civ 283; [2004] Lloyds Rep IR 58 where the point
does not seem to have been in issue. In practice the distinction as to whether these words cover a
concluded agreement is only likely to affect the burden of proof on that issue since the party
applying for a stay must establish an arbitration agreement whereas the burden is upon the
opposing party to establish matters under section 9(4).
42 [2002] EWCA Civ 721; [2002] 2 All ER (Comm) 545.
43 Traube v Perelman 25 July 2001 (Jacobs J).
44 Mustill & Boyd, 2001 Companion, p. 217.

45 The Merak [1964] 2 Lloyds Rep 283 at 295, Grimaldi Compagnia Di Navagazione
SpA v Sekihyo Lines Ltd, The Seki Rolette [1998] 2 Lloyds Rep 638.
46 El Nasharty v J Sainsbury plc [2007] EWHC 2618, [2008] 1 Lloyds Rep 360.
47 [1981] 1 Lloyds Rep 302.
48 Government of Swaziland v Leila Maritime Co Ltd, The Leila [1985] 2 Lloyds Rep 172.
49 The concept of arbitrability has not been fully explored by the English courts, see Mustill &
Boyd, 2001 Companion, pp. 70-76.
50 [2004] EWHC 831; [2004] 4 All ER 1179.
51 Although it has been preserved by section 49(3) of the Supreme Court Act 1981, see Reichhold
Norway ASA v Goldman Sachs International [1999] 2 Lloyds Rep 567.
52 Albon v Naza Motor Trading Sdn BHD (No 3) [2007] EWHC 327 Ch; [2007] 2 Lloyds Rep
1, El Nasharty v J Sainsbury plc [2003] EWHC 2195 (Comm); [2004] 1 Lloyds Rep 309.
53 Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] 1 Lloyds Rep 291, 301.
54 Ibid.
55 Section 81(1) of the 1996 Act preserves the common law where it is consistent with the
provisions of that Act, in particular as to the effect of an oral arbitration agreement.
56 T & N Ltd v Royal & Sun Alliance plc [2002] EWHC 2420 (Ch); [2004] Lloyds Rep IR 102.
57 [2000] 1 Lloyds Rep 522 at 525 and 528, see also Albon v Naza Motor Trading Sdn BHD (No
3), [2007] EWHC 327 (Ch); [2007] 2 Lloyds Rep 1 and El Nasharty v J Sainsbury plc [2003]
EWHC 2195 (Comm); [2004] 1 Lloyds Rep 309.
58 Albon v Naza Motor Trading Sdn BHD (No 3) [2007] EWHC 327 Ch; [2007] 2 Lloyds Rep 1.
59 [2007] UKHL 40; [2008] 1 Lloyds Rep 254.
60 [2000] 1 Lloyds Rep 522, following guidelines laid down by HHJ Humphrey Lloyd QC
in Birse Construction Ltd v St David Ltd [1999] BLR 57. The Court of Appeal endorsed this
approach in Downing v Al Tameer Establishment [2002] EWCA Civ 721; [2002] 2 All ER
(Comm) 545.
61 Albon v Naza Motor Trading Sdn BHD (No 3) [2007] EWHC 327 (Ch); [2007] 2 Lloyds Rep
1, see also Law Debenture Trust Corporation PLD v Elektrim Finance BV [2005] EWHC 1412
(Ch); [2005] 2 Lloyds Rep 755 at 766 referring to paragraph 72 of the DAC Report and Anglia
Oils Ltd, Owners of the Marine Champion, 10 October 2002 where Gross J decided that staying
the proceedings to enable the tribunal to determine its jurisdiction would involve determining the
issue in favour of the defendant by the back door.
62 Albon v Naza Motor Trading Sdn BHD (No 3) [2007] EWHC 327 Ch; [2007] 2 Lloyds Rep 1,
para 20.

63 Ibid., where the arbitrators decision would be subject to Malaysian law with no power of
review.
64 [2000] 1 Lloyds Rep 522.
65 T & N Ltd v Royal & Sun Alliance plc [2002] EWHC 2420 (Ch); [2004] Lloyds Rep IR
102, El Nasharty v J Sainsbury plc [2003] EWHC 2195 (Comm); [2004] 1 Lloyds Rep
309, Albon v Naza Motor Trading Sdn BHD (No 3) [2007] EWHC 327 Ch; [2007] 2 Lloyds Rep
1.
66 Albon v Naza Motor Trading Sdn BHD (No 3) [2007] EWHC 327 Ch; [2007] 2 Lloyds Rep
1; El Nasharty v J Sainsbury plc [2003] EWHC 2195 (Comm); [2004] 1 Lloyds Rep 309.
67 A v B [2006] EWHC 2006 (Comm); [2007] 1 Lloyds Rep 237.
68 Al-Naimi v Islamic Press Agency Inc [2000] 1 Lloyds Rep 522; Albon v Naza Motor Trading
Sdn BHD (No 3) [2007] EWHC 327 Ch; [2007] 2 Lloyds Rep 1, El Nasharty v J Sainsbury
plc [2003] EWHC 2195 (Comm); [2004] 1 Lloyds Rep 309.
69 [1999] BLR 194.
70 Al-Naimi v Islamic Press Agency Inc [2000] 1 Lloyds Rep 522.
71 CPR Part 62, rule 62.3(2), SI No 3215, High Court and County Courts (Allocation of
Arbitration Proceedings) Order 1996.
72 Al-Naimi v Islamic Press Agency Inc [2000] 1 Lloyds Rep 522.
73 Section 9(1) of the 1996 Act, see rules 62.6(3) and 62.8(1) of CPR Part 62.
74 See section 9(1) of the 1996 Act and Socit Commerciale de Reassurance v Eras
International Ltd [1992] 1 Lloyds Rep 570 at 611-612.
75 A v B (No 2) [2006] EWHC 54 (Comm); [2007] 1 Lloyds Rep 358, para 11.
76 A & B v C, D, E, F, G & H [1982] 1 Lloyds Rep 166, affirmed in A v B [2006] EWHC 2006
(Comm); [2007] 1 Lloyds Rep 237, para 84.
77 Finnish Marine Insurance Company Ltd v Protective National Insurance Company [1990] 1
QB 1078; [1989] 2 Lloyds Rep 99.
78 The Rena K [1978] 1 Lloyds Rep 545 at 557 and The World Star [1986] 2 Lloyds Rep 274.
79 See Greenmar Navigation Ltd v Owners of Ships Bazias 3, The Bazias 3 [1993] 1 Lloyds Rep
101 on the scope of the discretion under section 26.
80 CPR, Rule 52.3.
81 [2000] 1 Lloyds Rep 467.

Chapter 8

Injunctions and Arbitration

Injunctions and Arbitration

1. Introduction
2. Types of injunction
3. Arbitrators jurisdiction to grant injunctions
4. Injunctions and the 1996 Act
5. Injunctions to restrain foreign proceedings
6. Injunctions to restrain arbitral proceedings
7. Practice

1. INTRODUCTION
An injunction is an order requiring a party to do something or (more usually) to refrain from doing
something. It is a remedy with a very broad range of use. For example, freezing orders may be
granted to stop a party dissipating its assets pending the determination of a dispute (see Chapter
18). Injunctions may also be the appropriate remedy to prevent disclosure of confidential
information (see Chapter 13). Injunctions are a general remedy which arbitrators can award under
section 48(5) of the 1996 Act (see Chapter 19). This chapter will focus on the use of an injunction
against a party who has breached an arbitration agreement by pursuing foreign proceedings which
relate to disputes the parties agreed to resolve by arbitration, or where a party is pursuing an
arbitration in an unlawful way (e.g., where the matter has already been decided against that party).
European case law1 now precludes an English court from granting such an injunction in relation to
proceedings in another EU state but such relief remains available to restrain proceedings outside
the EU. Where proceedings are brought in the English courts in breach of an arbitration clause the
appropriate remedy is a stay of proceedings (see Chapter 7).

2. TYPES OF INJUNCTION
English law recognises that an injunction may be granted either as an interim or as a final
remedy. A final injunction is a permanent order restraining a party indefinitely from doing
something (or requiring him to do something). An interim injunction is a temporary order and is
usually sought to preserve the status quo pending the final determination of the parties rights
(e.g., a freezing order will usually be subject to a time limit). Despite its temporary nature an
interim injunction may be commercially determinative of the dispute between the parties. The
basic rule governing the grant of an interim injunction is that the remedy is discretionary. The
applicant must establish a serious issue to be tried on the merits (although if the injunction is
likely to be determinative of the question of the forum for a dispute, an applicant will probably
have to show a stronger case on the merits).2 An interim injunction will not be granted if damages
would be an adequate remedy for the wrong alleged. The applicant must also establish that the
balance of convenience lies in favour of the grant of an injunction. This will involve considering
the risk of causing injustice if the injunction is granted or refused.3 One particular feature of an
interim injunction is that the applicant must give an undertaking (often to be supported by
security) to pay damages for any loss sustained by reason of the injunction if it is found that the
applicant was not entitled to it.

Injunctions are also sometimes categorised on grounds of whether they prohibit an act (a negative
injunction) or require a positive act (a mandatory injunction). The courts are generally much more
reluctant to make mandatory injunctions (whether interim or final) unless it is clear exactly what
the enjoined party is required to do and there is a high degree of assurance that the applicant is
entitled to the injunction.4 An injunction to restrain a party from pursuing foreign proceedings is
generally called an anti-suit injunction. A further type of injunction is one granted to restrain a
wrongful act which is threatened or imminent. This is sometimes called a quia timet 5 injunction.
Shell International Petroleum Co Ltd v Coral Oil Co Ltd 6 provides an example of a quia
timet anti-suit injunction. It involved an agreement for supply of oil providing for arbitration in
London of any dispute arising in connection with the agreement. Shell gave notice to terminate
the agreement and Coral threatened to bring proceedings in Lebanon claiming a right to
compensation granted under Lebanese law rather than on the basis of breach of the agreement.
Moore-Bick J granted an injunction to prevent Coral pursuing proceedings in Lebanon on grounds
that the claim that Coral wished to make in Lebanon depended on the contract and was a claim
within the scope of the arbitration clause.

3. ARBITRATORS JURISDICTION TO GRANT INJUNCTIONS

Section 48(5) of the 1996 Act makes clear that as regards remedies, arbitrators have the same
powers as the court to order a party to do or refrain from doing anything. Thus arbitrators may
grant an injunction as a remedy in an award (e.g., an order restraining disclosure in breach of
confidence). However, in practice a tribunals power to grant injunctions is more limited than that
of a court. First, an injunction granted by an arbitrator will only be enforceable against the parties
to the arbitration and cannot bind third parties. Secondly, an arbitrator lacks the courts coercive
powers to punish for non-compliance (e.g., committal for contempt). Thirdly, an arbitrator only
has power to grant final relief and cannot grant an interim injunction unless the parties have
agreed on such powers. This is because section 39 of the 1996 Act precludes the grant of interim
relief on a provisional basis in the absence of written consent. This construction of the Act was
applied in Starlight Shipping Co v Tai Ping Insurance Co Ltd 7 where Cooke J held that arbitrators
had powers under LMAA Terms to make a final award restraining the pursuit of foreign
proceedings, but not to grant an interim injunction. Even if the parties have agreed to confer
power on the tribunal to grant interim orders, such orders may be less easy to enforce than a
comparable court order, in particular since they would not generally be covered by the New York
Convention. Fourthly, urgent injunctive relief may be more difficult to obtain from an arbitral
tribunal because it may not be possible to constitute the tribunal at short notice. Maritime
arbitrators are likely to be reluctant to hear an application without full notice to the other party
since this is perceived as inconsistent with the consensual nature of arbitration and enforcement of
such an order could be refused on grounds of lack of proper notice. In addition, an arbitrators
order may be less likely to be given recognition in a foreign court. Accordingly, it is more
common for injunctions to be sought from a court.

4. INJUNCTIONS AND THE 1996 ACT

Section 48(5) of the 1996 Act expressly recognises the power of arbitral tribunals to grant
injunctions in a final award. The court has broad power under section 37 of the Supreme Court
Act 1981 to grant an injunction in all cases in which it appears to the court to be just and

convenient to do so. However, the precise scope of the courts jurisdiction to make injunctions in
the context of disputes relating to an arbitration has raised some difficult issues as to the
relationship between the wide powers conferred on the court by the 1981 Act and the much
narrower powers conferred by the 1996 Act.
In the past injunctions were available from the courts to prevent an arbitration being pursued
where the arbitrator was biased8 or where there was no arguable claim.9 Such decisions must now
be viewed in the light of the 1996 Act, which attempts to define the limits of the courts power to
intervene in the arbitral process. Section 1(c) provides that in matters governed by this Part the
court should not intervene except as provided by this Part. Accordingly, where the 1996 Act
provides a remedy, for example removal of an arbitrator for bias under section 24, the court will
not intervene by way of injunction.10
The 1996 Act has, however, expressly preserved the courts jurisdiction as developed by the cases
in so far as it is consistent with the scheme of the Act.11 In addition, section 44 of the Act
expressly allows the court to intervene by means of interim injunction in cases of urgency where
the arbitrators lack power or are unable to act effectively. This power is designed to enable the
court to grant freezing orders and other orders to preserve property or evidence and it can be used
to justify an interim anti-suit injunction to preserve the contractual right to arbitrate.12 The courts
powers to grant an injunction are not defined by section 44 since the courts have held that section
37 allows the courts to intervene by way of injunction whether or not section 44 could also be
brought into play.13 Indeed, if a party seeks a final injunction it will probably have to rely upon the
courtss powers under section 37 since section 44 does not give power to grant final relief.
However, in exercising any discretion to grant interim relief in support of an arbitration under
section 37 the court would have regard to matters which arise under section 44.14
In Starlight Shipping Co v Tai Ping Insurance Co Ltd,15 cargo insurers commenced Chinese
proceedings in breach of an arbitration clause incorporated into a bill of lading. London arbitration
was also commenced and Owners sought a final award restraining the Chinese proceedings but a
fully constituted tribunal was not available before the Chinese court would make a ruling on its
jurisdiction. Cooke J granted owners an interim anti-suit injunction restraining the cargo insurers
from pursuing the Chinese proceedings. He was satisfied that urgency in obtaining relief had been
established and the tribunal was unable to act effectively within the relevant timescale.
Section 72 of the Act also expressly recognises the right of a party who has not taken part in the
arbitral proceedings to seek relief by way of injunction. It provides that:
(1) A person alleged to be a party to arbitral proceedings but who takes no part in the
proceedings16 may question

(a) whether there is a valid arbitration agreement,

(b) whether the tribunal is properly constituted, or
(c) what matters have been submitted to arbitration in accordance with the arbitration
agreement, by proceedings in the court for a declaration or injunction or other appropriate
relief.

It is thus fair to conclude that the courts will continue to grant injunctions where expressly
permitted under the 1996 Act, where there is a gap in the protection conferred by the Act, or
where the tribunal would be unable to act effectively.

5. INJUNCTIONS TO RESTRAIN FOREIGN PROCEEDINGS

This type of injunction is commonly called an anti-suit injunction. It is usually sought where
foreign proceedings have been commenced for matters that the parties agreed to refer to
arbitration and damages would not be an adequate remedy for the breach of the arbitration
agreement. It could also be sought as a means of restraining foreign proceedings to challenge an
award17 or, alternatively foreign proceedings to enforce an award subject to challenge for want of
jurisdiction or serious irregularity.18 Where proceedings are brought in the UK in breach of an
arbitration clause the appropriate remedy is a stay of proceedings under section 9 of the 1996 Act.
An English court is not competent to stay foreign proceedings but it can restrain a party from
commencing or pursuing foreign proceedings. However, the European rules of jurisdiction
contained in EC Regulation 44/2001 (the Brussels Regulation) now preclude an English court
from granting anti-suit injunctions to restrain proceedings covered by that Regulation. The
Brussels Regulation broadly covers proceedings in civil and commercial matters in European
Union states.19 This would include claims in contract and tort, thereby covering most claims
ordinarily covered by arbitration clauses in shipping contracts. The influence of European law
means that injunctions to restrain proceedings within and outside the European Union must be
considered separately.

Injunctions to restrain proceedings within the EU20

The decision of the European Court of Justice (the ECJ) in The Front Comor 21 now means that
an English court will not grant an anti-suit injunction restraining a party from pursuing
proceedings before the courts of another EU or Lugano Convention state on the ground that such
proceedings would be in breach of an arbitration agreement. The ECJs earlier decision
in Turner v Grovit 22 precluded the grant of such an injunction on the grounds that proceedings
covered by the Brussels Regulation were being pursued in bad faith (this would cover proceedings
which were being pursued vexatiously or oppressively). These decisions marked a significant
change in practice since previously such injunctions were commonly available but the ECJ firmly
ruled that such relief would be incompatible with the Brussels Regulation.
In The Front Comor 23 the claimant shipowners vessel collided with the defendant charterers
jetty. The charter contained a London arbitration clause. Charterers insurers commenced delictual
proceedings in Sicily against owners to recover moneys paid out. Colman J granted owners an
anti-suit injunction to restrain the Italian proceedings on grounds of breach of the arbitration
clause. On leap-frog appeal to the House of Lords, the House of Lords referred the following
question to the ECJ: Is it consistent with [the Brussels Regulation] for a court of a Member State
to make an order to restrain a person from commencing or continuing proceedings in another
Member State on the ground that such proceedings are in breach of an arbitration agreement?
The ECJs response was negative. It accepted that the anti-suit injunction proceedings were
outside the scope of the Brussels Regulation but considered that the making of such an injunction
was inconsistent with the Regulation because it undermined its effectiveness. In particular, the

injunction would prevent the Sicilian court from ruling on whether it had jurisdiction under the
Regulation and would run counter to the mutual trust upon which the Regulation is based.

Alternative remedies, including anti-suit injunctions from

the arbitral tribunal
Until the ECJ decision in The Front Comor anti-suit injunctions from an English court were the
most common remedy for dealing with a party that breached a London arbitration clause by
pursuing foreign proceedings. Now that remedy is no longer available to restrain proceedings in
EU or EFTA states, parties will have to develop alternative means to deal with the problem of
proceedings wrongfully pursued in breach of arbitration agreements. The best means to avoid the
problem is to draft the arbitration clause as clearly and widely as possible so that a foreign court
will give effect to it and decline jurisdiction. However, in practice most arbitration agreements are
in standard form and it is also difficult to anticipate the approach of a foreign court to their
application. Some parties may now simply try to make best use of the procedures of the foreign
court, but these can involve long delays. Another source of relief would be to seek damages for
breach of the arbitration agreement from the arbitral tribunal. Such relief is recognised under
English law24 and maritime arbitrators are willing to award damages for costs incurred in foreign
proceedings wrongfully pursued where the claim is within the scope of the arbitration clause and
the foreign proceedings are not being pursued solely to obtain security.25 More difficulty may
arise if a party is claiming damages on grounds that the result would have been different before
the arbitral tribunal since this will involve an assessment of the appropriateness of the foreign
courts decision.
Parties may still apply to the English court for a declaration as to the validity of the arbitration
agreement but this remedy will probably only be of practical use in giving effect to the arbitration
agreement if the foreign judgment is likely to be enforced in the English courts.26
In light of The Front Comor parties may be more likely to apply to the arbitral tribunal for an antisuit injunction restraining the foreign proceedings. As discussed above, arbitrators have the power
to grant injunctions (including anti-suit injunctions27) but there are obvious limitations regarding
such powers. Unless otherwise agreed the tribunals powers to grant final injunctions under
section 48(5) of the 1996 Act are the same powers as the court so that The Front Comor may
preclude such relief unless the parties have agreed on additional powers. The need for anti-suit
relief may often arise before a tribunal has been constituted or is able effectively to act.
Furthermore, arbitrators lack the powers of enforcement available to courts and may be reluctant
to make an order that cannot be readily enforced. However, arbitrators do have sanctions for noncompliance (e.g., peremptory orders) and parties may be reluctant to disobey a tribunals award.
Further limitations are that arbitrators cannot grant interim relief unless the parties have so
agreed28 and will generally be unwilling to grant injunctions ex parte (i.e., in the absence of the
other party) even where there is urgency.
In addition, the compatibility of such anti-suit injunctions with EU law is open to argument, in
particular regarding enforcement. If the tribunal issues a peremptory order requiring compliance
with the injunction and default continues then the tribunal could proceed to an award on the
merits29 and such an award would probably be enforceable under the New York Convention

without falling foul of the Brussels Regulation. However, if a party asked the court to enforce a
peremptory order under section 42(1) of the 1996 Act then such enforcement by the English court
could be regarded as incompatible with the regulation on the basis of The Front Comor.
Overall, alternative remedies to anti-suit injunctions are likely to be developed by the courts and
tribunals but there will be some uncertainty as principles are established. In addition, future
amendment of the Brussels Regulation may resolve some problems.30

Injunctions to restrain proceedings outside the EU31

The law here remains largely unaffected by European law32 and has been built up by case law
(including case law involving EU proceedings decided prior to The Front Comor). The courts
jurisdiction to restrain foreign proceedings pursued in breach of an arbitration clause is clearly
preserved by the 1996 Act, but as discussed above, the courts will have regard to the provisions of
the Act (notably section 44) in exercising their discretion to grant such relief.33 It would be
arguable that the question of whether the foreign proceedings are in breach of the arbitration
agreement is a dispute within the scope of the arbitration agreement, so the application would be
subject to a stay of proceedings under section 9 of the 1996 Act.34 However, although the court
has accepted that there may be an overlap between the jurisdiction of the tribunal and that of the
court, this has not, in itself, justified refusing an injunction.35
The first prerequisite for an anti-suit injunction is that the party to be restrained is subject to the
powers of the English court.36 In this context, it will usually be necessary to establish that the seat
of the arbitration is in England.37
The courts jurisdiction to grant injunctions, whether interim or final, is generally confined to
injunctions granted (a) for the enforcement or protection of some legal or equitable right; or (b)
where the other partys conduct is vexatious, oppressive or unconscionable.38 The courts power is
statutory,39 but it is an equitable jurisdiction in origin and an injunction is an equitable remedy.
Accordingly, the power is discretionary; it is exercised when the ends of justice require it.40 The
term vexatious or oppressive has been used in a general way to cover the wide range of
situations where justice requires an injunction to be granted.41 It has also been used more narrowly
to cover conduct distinct from a mere breach of contract, for instance if a foreign court adopted
inherently unfair procedures.42 The English courts would not be willing to grant an anti-suit
injunction to restrain arrest proceedings where their sole purpose is to obtain security for the claim
to be arbitrated.43 However, if a party was using arrest proceedings for the purpose of frustrating
an arbitration agreement then relief may be available.44
To justify the grant of an anti-suit injunction it will usually be sufficient to establish that a party
has acted in breach of contract in commencing the foreign proceedings, without establishing any
other unconscionable or vexatious or oppressive conduct. Indeed, in Toepfer
International v Socit Cargill France 45 Phillips LJ drew a clear distinction between the courts
jurisdiction to intervene to restrain (i) a breach of contract; and (ii) unconscionable conduct.
Millett LJ in The Angelic Grace 46 stated that where an injunction is sought to restrain a party
from proceeding in breach of an arbitration agreement governed by English law the justification
for the grant of the injunction is that without it the plaintiff will be deprived of its contractual
rights in a situation in which damages are manifestly an inadequate remedy.47 The jurisdiction is,

of course, discretionary and is not exercised as a matter of course, but good reason needs to be
shown why it should not be exercised in any given case. The House of Lords
in Donohue v Armco Inc 48 preferred to use the test of strong reason.
Breach of the arbitration agreement will be fairly easy to establish if the foreign proceedings are
concerned with a contractual claim since this will usually fall clearly within the scope of the
arbitration clause. However, where tortious or other claims are made, the question of whether they
fall within the arbitration clause (and thus whether the foreign proceedings are a breach of the
arbitration clause) may itself be the source of dispute. In these circumstances, the applicant must
show that there is a sufficiently close connection between the tortious (or other) claim and the
contractual claim. The court has developed a twofold test for determining whether such a
connection is made out: it is necessary to show either that the resolution of a contractual issue is
necessary for the determination of the tortious (or other) claim, or that the contractual and tortious
disputes are so closely knitted together on the facts that an agreement to arbitrate on one can
properly be construed as covering the other.49 The parties will generally be taken to have intended
that disputes between them relating to the contract would be determined by a the same tribunal,
this is sometimes called the presumption of one-stop adjudication.
In The Angelic Grace 50 an arbitration clause in a voyage charter extended to all disputes arising
out of the contract. The vessel was involved in a collision and the charterers commenced
proceedings in Venice, claiming for damage to the other vessel. In English law this would be
characterised as a claim in tort based on the masters negligence. An arbitration was commenced
by owners based upon charterers breach of the safe anchorage warranty and negligence.
Charterers cross-claimed relying on the masters negligence. The Court of Appeal upheld an
injunction restraining the Venice proceedings, holding that the arbitration clause covered the
tortious claims in Venice. The claims in tort could not be segregated from the cross-claims under
the charterparty. The Court of Appeal relied in part upon the fact that the charterers claim for
negligence could not be determined without reference to the charterparty terms and also upon the
parties presumed choice of one-stop adjudication.
The court may also treat proceedings to challenge an award in a foreign jurisdiction as a breach of
the arbitration agreement.51 Even if the applicant establishes that the foreign proceedings infringe
its legal or equitable rights, typically by reason of breach of the arbitration agreement, the court
may refuse an injunction. Its power is discretionary and it will be influenced by any relevant
factors. In particular, the court will not grant an injunction that cannot be effectively enforced, for
example because the respondent is not within the jurisdiction and has no assets there.52 Relevant
factors going to the courts discretion include the risk of conflicting decisions53 but the fact that
the foreign court has been asked, but has not yet determined, whether it has jurisdiction is not in
itself a ground for refusing to grant an injunction.54 Factors going to the convenience or
appropriateness of the foreign court will, however, have little weight because London arbitration
is generally chosen on grounds of being a neutral forum.55 If the parties have already commenced
arbitration and the arbitral tribunal has been asked to determine whether it has jurisdiction over
issues in dispute in the foreign proceedings then the court may decline to pre-empt the tribunals
decision by granting an injunction. By contrast, where the arbitral tribunal has already decided it
has jurisdiction then the court may be more willing to grant injunctive relief.

The most common factor to be taken into account is whether the applicant has delayed in making
the application such that the foreign proceedings are advanced and prejudice will be caused by the
delay. Voluntary submission to the foreign court may also be good reason for refusing an
injunction, especially when the proceedings have progressed.56
In Toepfer International GmbH v Molino Boschi SRL 57 a dispute had arisen out of a contract for
the sale of soya meal. The contract contained a London arbitration clause on the GAFTA form but
the buyers had made a claim for short delivery and poor quality in the Italian courts. The sellers
contested jurisdiction in Italy from the outset but seven years after the Italian proceedings
commenced the sellers applied to the English court for an injunction restraining the buyers from
taking further steps in the Italian proceedings. By this stage any arbitration in London would have
been time-barred. Mance J refused the injunction on grounds of delay in applying for relief in
England and the progress of the Italian proceedings.

6. INJUNCTIONS TO RESTRAIN ARBITRAL PROCEEDINGS

This type of order is sometimes called an anti-arbitration injunction and the availability of such
relief has, like anti-suit injunctions, been a fertile source of litigation.
There are many early cases of injunctions being granted to restrain arbitral proceedings being
pursued, or even to restrain the arbitrators from proceeding with an award.58 These decisions must
now be viewed in the light of the restrictions on court intervention set out in the 1996 Act
(discussed in section 4) and also the House of Lords decision in Bremer Vulkan v South India
Shipping Corporation 59 to the effect that the courts have no general supervisory jurisdiction over
the conduct of arbitrations beyond that conferred by the Arbitration Acts.
In some respects the principles applicable to this type of relief are similar to those applying to
anti-suit injunctions. In particular the courts jurisdiction to intervene arises under section 37 of
the Supreme Court Act 1981 and the court will only intervene to enforce a legal or equitable right
or to protect against vexatious, oppressive or unconscionable conduct.60 However, the jurisdiction
is generally exercised much more sparingly.
In particular, in relation to injunctions to restrain an arbitration with a foreign seat the court would
act with extreme caution and only intervene in exceptional circumstances.61 Ordinarily
jurisdictional issues and case management should be left to the tribunal and any judicial
supervision should be for the courts of the seat of the foreign arbitration.
Where the arbitration to be restrained has an English seat, then the courts jurisdiction will be
restricted by the 1996 Act.62 In particular, where a party has taken part in the arbitration the
requirements of section 44 will usually be considered in an application for interim relief.63 Where
a party has not taken part in the arbitration then section 72 of the 1996 Act confirms that the court
may grant an injunction on grounds that the tribunal lacks substantive jurisdiction (e.g., invalidity
of the arbitration agreement).
The most common ground for seeking an injunction to restrain a party proceeding with an
arbitration is that the tribunal lacks jurisdiction to make a binding decision (for example, the
arbitration agreement is void64 or the matter has already been litigated65). Other grounds include
allegations that the pursuit of the arbitration is vexatious or oppressive66 or that there has been a

breach of the arbitration agreement (for example, by disregard of an agreement on the venue of the
arbitration67).
In contrast to the courts relatively liberal approach towards injunctions restraining the pursuit of
foreign proceedings in breach of an arbitration agreement, the courts have been much more
reluctant to intervene to restrain a party pursuing arbitral proceedings. First, the issue giving rise
to the injunction application will often be a matter within the scope of the arbitration clause so that
the application may be subject to a stay of proceedings under section 9 of the 1996
Act.68 Secondly, an injunction may not be an appropriate remedy, and indeed may usurp the role
of the arbitral tribunal, because the tribunal can deal most effectively with the issue, for instance,
by dismissing a claim or staying the arbitral proceedings.69
In addition, where the injunction is sought on grounds of invalidity of the arbitration agreement, it
is difficult to discern the infringement of right that is the basis for the courts intervention. The
arbitral proceedings will lead only to an invalid, unenforceable award, and an injunction will not
be granted solely on the grounds of preventing a party being harassed by futile proceedings.70 In
such circumstances the courts have sometimes declined to grant an injunction on the basis that it is
unnecessary to protect the applicants rights.71 The courts are now generally unwilling to grant an
injunction where alternative relief is available within the framework of the 1996 Act, for example
by raising a jurisdictional challenge before the tribunal or under section 67.
In Elektrim SA v Vivendi Universal SA 72 the parties had commenced LCIA arbitration under an
investment agreement but then produced a draft settlement agreement containing an ICC
arbitration clause. Subsequently, Elektrim denied the validity of the settlement agreement and
Vivendi commenced ICC arbitration seeking a declaration that the settlement was valid. Elektrim
claimed an injunction to restrain Vivendi from further pursuit of the LCIA arbitration until final
determination of the ICC arbitration on grounds that the simultaneous pursuit of both arbitrations
by Vivendi was vexatious and oppressive. Aikens J refused the injunction because Elektrim could
not establish that the pursuit of the LCIA proceedings constituted an infringement of a legal or
equitable right, or was vexatious or oppressive. Elektrim had agreed to LCIA arbitration and the
two arbitrations concerned different subject matters. In addition the injunction would be
inconsistent with the statutory scheme of the 1996 Act.
However, notwithstanding the difficulties associated with obtaining this type of injunction, the
courts have been willing to grant such relief in rare circumstances where such it is the only
effective means to protect a partys rights or to prevent oppressive litigation.
In Republic of Kazakhstan v Istil Group Inc 73 the defendant commenced LCIA arbitration in
defiance of a ruling of the French court. The defendant obtained an award in its favour but that
award was successfully challenged under section 67 for lack of jurisdiction. Notwithstanding this,
the defendant asked the LCIA tribunal to proceed to an award on the merits. The claimant applied
for an injunction restraining the defendant from pursuing any further claims in the LCIA
arbitration. Tomlinson J granted an injunction because further pursuit of the LCIA arbitration
would be oppressive, vexatious and unconscionable. Were the tribunal to proceed to an award on
the merits then the court would be bound, in light of the earlier court ruling on jurisdiction, to set
it aside for want of jurisdiction.

The courts jurisdiction remains discretionary and when an interlocutory injunction is sought the
application may turn on the balance of convenience, depending on factors such as delay in
applying and prejudice caused by the injunction.74 Where the application will be determinative of
the forum for a dispute the applicant for an interim injunction will have to show a strong case on
the merits.75 In most cases the balance of convenience will lie in favour of refusing an injunction
because most complaints can be resolved using procedures laid down under the act, for example
removing a tribunal under section 24 or challenging the award on grounds of jurisdiction or
serious irregularity.76

7. PRACTICE
Applications for injunctions arise in such a wide range of situations that it is beyond the scope of
this chapter to provide any definitive guide to practice. Where an application for an injunction is
made to the arbitral tribunal the procedure will follow that of any application, usually involving
submissions in writing and sometimes an oral hearing. Where an application is made to court it
should usually be made by means of an arbitration claim form.77 Detailed guidance on
applications for interim injunctions is given in the Civil Procedure Rules. It is common for interim
injunctions to be sought as a matter of urgency in the absence of one party and this sort of
application will require full and frank disclosure of any matters relevant to the application, even if
they are unfavourable. If the respondents are outside the jurisdiction it may be necessary to obtain
permission to serve the application on them. Again, guidance is to be found in the Civil Procedure
Rules.
The court has a wide discretion in the granting of injunctions and may impose such conditions as
it considers appropriate (for instance, undertakings as to damages are invariably required if an
interim injunction is sought). Where foreign proceedings, typically arrest proceedings, are pursued
for the purpose of obtaining security for a claim which the parties have agreed to refer to
arbitration, then ordinarily this will not in itself be treated as a breach of the arbitration
agreement.78 The court would only grant an injunction on terms that alternative security is
provided by the party applying for the injunction.79
Where the court has granted an anti-suit or anti-arbitration injunction on grounds that the other
party has acted in breach of contract, it may be willing to grant costs on an indemnity basis, in
particular where a party was deliberately in breach.80
1 Allianz SpA v West Tankers Inc Case C-185/07, [2009] 1 Lloyds Rep 413, commonly known
as The Front Comor and Turner v Grovit Case C-159/02 [2004] ECR I-3565; [2005] 1 AC 101.
2 Sheffield United Football Club Limited v West Ham United Football Club plc [2008] EWHC
2855 (Comm); [2009] 1 Lloyds Rep 167.
3 See generally, American Cyanamid Co v Ethicon Ltd [1975] AC 396; R v Secretary of State for
Transport, ex parte Factortame Ltd (No 2) [1991] AC 603.
4 Shepherd Homes Ltd v Sandham [1971] Ch 340, see further CPR, Part 25.
5 Meaning because he fears.
6 [1999] 1 Lloyds Rep 72.

7 [2007] EWHC 1893 (Comm); [2008] 1 Lloyds Rep 230, see also Kastner v Jason [2004]
EWHC 592 (Ch); [2004] 2 Lloyds Rep 233 in the context of freezing orders.
8 Beddow v Beddow (1878) 9 Ch D 89.
9 Sissons v Oates (1894) 10 TLR 392, a court would now probably refuse to interfere given that
the parties agreed to arbitrate (e.g., see Halki Shipping Corporation v Sopex Oils Ltd, The
Halki [1998] 1 Lloyds Rep 465).
10 See Fiona Trust & Holding Corporation v Privalov [2007] EWCA Civ 20; [2007] 2 Lloyds
Rep 267, where the Court of Appeal confirmed that an injunction should not be granted where
relief under section 9 of the 1996 Act was available. This part of the judgment was not subject to
appeal.
11 1996 Act, section 81(1) Nothing in this Part shall be construed as excluding the operation of
any rule of law consistent with the provisions of this Part, see also paragraph 312 of the DAC
Report.
12 Starlight Shipping Co v Tai Ping Insurance Co Ltd [2007] EWHC 1893 (Comm); [2008] 1
Lloyds Rep 230 and Cetelem SA v Roust Holdings Ltd [2005] EWCA Civ 618; [2005] 2 Lloyds
Rep 494.
13 Ibid.
14 Starlight Shipping Co v Tai Ping Insurance Co Ltd [2007] EWHC 1893 (Comm); [2008] 1
Lloyds Rep 230, Sheffield United Football Club Limited v West Ham United Football Club
plc [2008] EWHC 2855 (Comm); [2009] 1 Lloyds Rep 167,Elektrim SA v Vivendi Universal
SA [2007] EWHC 571 (Comm); [2007] 2 Lloyds Rep 8. However, section 44 was not directly
considered in Republic of Kazakhstan v Istil Group Inc [2007] EWHC 2739 (Comm); [2008] 1
Lloyds Rep 382. The restrictions imposed by section 44 do not apply when the court is
considering final injunctionsSteamship Mutual Underwriting Association (Bermuda)
Ltd v Sulpicio Lines Inc [2008] EWHC 914 (Comm); [2008] 2 Lloyds Rep 269.
15 [2007] EWHC 1893 (Comm); [2008] 1 Lloyds Rep 230, see also National Insurance &
Guarantee Corporation Ltd v M Young Legal Services Ltd [2004] EWHC 2972 (QB); [2005] 2
Lloyds Rep 46.
16 See Chapter 11 for the meaning of taking part in the proceedings.
17 C v D [2007] EWHC 1541 (Comm); [2007] 2 Lloyds Rep 367; [2007] EWCA Civ 1282;
[2008] 1 Lloyds Rep 239.
18 Burkett Sharp & Co v Eastcheap Dried Fruit Company and Perera [1962] 1 Lloyds Rep 267.
This type of injunction may now be more difficult to obtain unless the applicant can establish that
the proceedings would be contrary to the arbitration agreement or would infringe an equitable
right, for instance because they would be vexatious or oppressive or the foreign proceedings
would give rise to a defence in English law (see e.g., British Airways Board v Laker Airways
Ltd [1985] AC 58 at 81).

19 Similar provisions under the Lugano Convention set up jurisdictional rules covering similar
proceedings in the European Free Trade Association (i.e., Iceland, Norway and Switzerland).
Reference should be made to specialist works such as Dicey, Morris & Collins on the Conflict of
Laws for the precise scope of the Regulation and Lugano Convention.
20 And Iceland, Switzerland and Norway.
21 Allianz SpA v West Tankers Inc Case C-185/07, [2009] 1 Lloyds Rep 413.
22 Case C-159/02 [2004] ECR 1-3565; [2005] 1 AC 101.
23 Allianz SpA v West Tankers Inc Case C-185/07; [2009] 1 Lloyds Rep 413, applied in National
Navigation Co v Endesa Generacion SA, The Wadi Sudr [2009] EWHC 196 (Comm).
24 Union Discount v Zoller [2002] 1 WLR 517, see also CMA CGM SA v Hyundai MIPO
Dockyard Co Ltd [2008] EWHC 2791 (Comm); [2009] 1 Lloyds Rep 213.
25 Kallang Shipping SA v AXA Assurances Senegal, The Kallang [2008] EWHC 2761; [2009] 1
Lloyds Rep 124 at para 78.
26 National Navigation Co v Endesa Generacion SA, The Wadi Sudr [2009] EWHC 196 (Comm);
[2009] 1 Lloyds Rep 666.
27 Steamship Mutual Underwriting Association (Bermuda) Ltd v Sulpicio Lines Inc. [2008]
EWHC 914 (Comm); [2008] 2 Lloyds Rep 269, at para 33.
28 Starlight Shipping Co v Tai Ping Insurance Co Ltd [2007] EWHC 1893 (Comm); [2008] 1
Lloyds Rep 230.
29 Section 41(7)(c) of the 1996 Act.
30 Green Paper on the Review of Council Regulation (EC) No 44/2001 published in June 2009.
31 And Iceland, Switzerland and Norway.
32 In Shashoua v Sharma [2009] EWHC 957 (Comm) Cooke J made clear that The Front
Comor did not preclude this type of injunction.
33 E.g. Starlight Shipping Co v Tai Ping Insurance Co Ltd [2007] EWHC 1893 (Comm); [2008] 1
Lloyds Rep 230.
34 Toepfer International GmbH v Socit Cargill France [1998] 1 Lloyds Rep 379 at 385, Re
Qs Estate [1999] 1 Lloyds Rep 931.
35 Sheffield United Football Club Limited v West Ham United Football Club plc [2008] EWHC
2855 (Comm); [2009] 1 Lloyds Rep 167, para 40.
36 Socit Nationale Industrielle Aerospatiale v Lee Kui Jak [1987] 1 AC 871 at 892, Channel
Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] 1 Lloyds Rep 291, CPR, Part 6 for
the rules governing the English courts jurisdiction.
37 C v D [2007] EWHC 1541 (Comm); [2007] 2 Lloyds Rep 367 and Shashoua v Sharma [2009]
EWHC 957 (Comm), para 23. If the seat of the arbitration is not England the court is unlikely to

consider that it is the proper forum for enforcing the arbitration agreement, see CPR Part 6.37(3)
and Part 62.5.
38 Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] 1 Lloyds Rep 291 at
306, Elektrim SA v Vivendi Universal SA [2007] EWHC 571 (Comm); [2007] 2 Lloyds Rep 8.
Some authorities suggest that the jurisdiction is only available where there is infringement of a
legal or equitable right, but in such cases this would usually include unconscionable, vexatious
and oppressive conduct (e.g., Bremer Vulkan Schiffbau und Maschinenfabrik v South India
Shipping Corporation [1981] AC 909 and Schiffahrtsgesellschaft Detlev Von Appen
GmbH v Voest Alpine Intertrading GmbH, The Jay Bola [1997] 2 Lloyds Rep 279 at 286).
39 Supreme Court Act 1981, section 37(1).
40 Socit Nationale Industrielle Aerospatiale v Lee Kui Jak [1987] 1 AC 871 at 892893; Schiffahrtsge-sellschaft Detlev Von Appen GmbH v Voest Alpine Intertrading GmbH [1997]
2 Lloyds Rep 279 at 286.
41 See the discussion in Socit Nationale Industrielle Aerospatiale v Lee Kui Jak [1987] 1 AC
871 at 892-893.
42 Schiffahrtsgesellschaft Detlev Von Appen GmbH v Voest Alpine Intertrading GmbH [1997] 2
Lloyds Rep 279 at 286-292; Bankers Trust Co v PT Jakarta International Hotels &
Development [1999] 1 Lloyds Rep 910 at 914; Bouygues Offshore SA v Caspian Shipping Co (No
2) [1997] 2 Lloyds Rep 485 at 489.
43 Kallang Shipping SA v AXA Assurances Senegal, The Kallang (Nos 1 & 2) [2006] EWHC
2825 (Comm); [2007] 1 Lloyds Rep 8; [2008] EWHC 2761; [2009] 1 Lloyds Rep 124, para 78.
44 Ibid.
45 [1998] 1 Lloyds Rep 379. The terms unconscionable and vexatious or oppressive are not
applied uniformly, for example, in Schiffahrtsgesellschaft Detlev Von Appen GmbH v Voest
Alpine Intertrading GmbH [1997] 2 Lloyds Rep 279 at 286, Hobhouse LJ characterised the
breach of contract in pursuing the foreign proceedings as unconscionable conduct. In The Angelic
Grace the Court of Appeal considered that the pursuit of proceedings in breach of the arbitration
clause was in itself vexatious, see also Sohio Supply Co v Gatoil (USA) Inc [1989] 1 Lloyds Rep
588 at 592 and Continental Bank NA v Aeakos Compania Naviera SA [1994] 1 Lloyds Rep 505 at
512.
46 Aggeliki Charis Compania Maritima SA v Pagnan SpA, The Angelic Grace [1995] 1 Lloyds
Rep 87.
47 The inadequacy of damages as a remedy is has been confirmed in Starlight Shipping Co v Tai
Ping Insurance Co Ltd [2007] EWHC 1893 (Comm); [2008] 1 Lloyds Rep 230 and Sheffield
United Football Club Limited v West Ham United Football Club plc [2008] EWHC 2855
(Comm); [2009] 1 Lloyds Rep 167.
48 [2001] UKHL 64; [2002] 1 Lloyds Rep 425.

49 Empresa Exportadora de Azucar v Industria Azucarera Nacional SA, The Playa Larga [1983]
2 Lloyds Rep 171; see also Continental Bank NA v Aeakos Compania Naviera SA [1994] 1
Lloyds Rep 505.
50 Aggeliki Charis Compania Maritima SA v Pagnan SpA [1995] 1 Lloyds Rep 87.
51 C v D [2007] EWHC 1541 (Comm); [2007] 2 Lloyds Rep 367; [2007] EWCA Civ 1282;
[2008] 1 Lloyds Rep 239.
52 Socit Nationale Industrielle Aerospatiale v Lee Kui Jak [1987] 1 AC 871 at 892; Philip
Alexander Securities & Futures Ltd v Bamberger [1996] CLC 1757 at 1789-1790.
53 Verity Shipping SA v NV Norexa [2008] EWHC 213 (Comm); [2008] 1 Lloyds Rep 652, A/S
D/S Svendborg v Wansa [1996] 2 Lloyds Rep 559, The El Amria [1981] 2 Lloyds Rep 119.
54 Aggeliki Charis Compania Maritima SA v Pagnan SpA, The Angelic Grace [1995] 1 Lloyds
Rep 87; Continental Bank NA v Aeakos Compania Naviera SA [1994] 1 Lloyds Rep 505,
although Phillips LJ expressed reservations as to this appoach in Toepfer International
GmbH v Socit Cargill France [1998] 1 Lloyds Rep 379 at 386.
55 Akai Pty Ltd v Peoples Insurance Co Ltd [1998] 1 Lloyds Rep 90 at 105. Colman J
in Toepfer International GmbH v Socit Cargill France [1997] 2 Lloyds Rep 98 at 110 also
considered that the New York Convention meant these factors should be given little weight.
56 A/S D/S Svendborg v Wansa [1996] 2 Lloyds Rep 559 at 570.
57 [1996] 1 Lloyds Rep 510 (decided before The Front Comor precluded anti-suit injunctions to
restrain EU proceedings). See also Verity Shipping SA v NV Norexa [2008] EWHC 213 (Comm);
[2008] 1 Lloyds Rep 652.
58 Malmesbury Railway Co v Budd (1876) 2 Ch D 113; Beddow v Beddow (1878) 9 Ch D 89.
59 [1981] AC 909.
60 Cetelem SA v Roust Holdings Ltd [2005] EWCA Civ 618; [2005] 2 Lloyds Rep 494.
61 Weissfisch v Julius [2006] EWCA 218; [2006] 2 Lloyds Rep 716, Albon v Naza Motor
Trading SDN BHD (No 4) [2007] EWHC 1879 (Ch); [2007] 2 Lloyds Rep 420, upheld in [2007]
EWCA Civ 1124; [2008] 1 Lloyds Rep 1.
62 Elektrim SA v Vivendi Universal SA [2007] EWHC 571 (Comm); [2007] 2 Lloyds Rep 8,
Aikens Js analysis is probably to be preferred to that of Gloster J in Intermet FZCO v Ansol
Limited [2007] EWHC 2739 (Comm) where the issue was not argued.
63 Starlight Shipping Co v Tai Ping Insurance Co Ltd [2007] EWHC 1893 (Comm); [2008] 1
Lloyds Rep 230 (anti-suit injunction). Aikens J in Elektrim SA v Vivendi Universal SA [2007]
EWHC 571 (Comm); [2007] 2 Lloyds Rep 8 accepted that section 44 would not justify an antiarbitration injunction in that case. Section 44 was not considered in Republic of Kazakhstan v Istil
Group Inc [2007] EWHC 2739 (Comm); [2008] 1 Lloyds Rep 382, para 46. The restrictions
under section 44 have been held not to apply to applications for final injunctionsSteamship

Mutual Underwriting Association (Bermuda) Ltd v Sulpicio Lines Inc [2008] EWHC 914
(Comm); [2008] 2 Lloyds Rep 269.
64 E.g., Albon v Naza Motor Trading SDN BHD (No 4) [2007] EWHC 1879 (Ch); [2007] 2
Lloyds Rep 420, upheld in [2007] EWCA Civ 1124; [2008] 1 Lloyds Rep 1.
65 Siporex Trade SA v Comdel Commodities Ltd [1986] 2 Lloyds Rep 428 at 435.
66 E.g., Elektrim SA v Vivendi Universal SA [2007] EWHC 571 (Comm); [2007] 2 Lloyds Rep 8.
67 Compagnie Europeene De Cereals SA v Tradax Export SA [1986] 2 Lloyds Rep 301 at 306.
68 Sheffield United Football Club Limited v West Ham United Football Club plc [2008] EWHC
2855 (Comm); [2009] 1 Lloyds Rep 167 suggests that a stay application is unlikely in itself to
preclude the grant of an injunction. If a jurisdictional issue arises on the stay application (e.g., as
to the validity of the arbitration agreement) then the court may be able to resolve that issue,
thereby probably precluding the need for an injunction. See Chapter 7 and Al-Naimi vIslamic
Press Agency Inc [2000] Lloyds Rep 522 and Albon v Naza Motor Trading (No 3) [2007] 2
Lloyds Rep 1.
69 See, for example, the analysis in Republic of Kazakhstan v Istil Group Inc [2007] EWHC 2739
(Comm); [2008] 1 Lloyds Rep 382, para 46 and Elektrim SA v Vivendi Universal SA [2007]
EWHC 571 (Comm); [2007] 2 Lloyds Rep 8 at para 75.
70 Bremer Vulkan Schiffbau und Maschinenfabrik v South India Shipping Corporation [1981] AC
909 at 981.
71 North London Railway Co v Great Northern Railway Co (1883) 11 QBD 30; London &
Blackwall Railway Co v Cross (1886) 13 Ch D 354.
72 [2007] EWHC 571 (Comm); [2007] 2 Lloyds Rep 8.
73 [2007] EWHC 2739 (Comm); [2008] 1 Lloyds Rep 382.
74 E.g. Industrie Chimiche Italia Centrale v Alexander Tsavlivris & Sons Maritime Co, The
Choko Star [1987] 1 Lloyds Rep 508; Intermet FZCO v Ansol Limited [2007] EWHC 2739
(Comm); Elektrim SA v Vivendi Universal SA [2007] EWHC 571 (Comm); [2007] 2 Lloyds Rep
8 at paras 80-85.
75 Sheffield United Football Club Limited v West Ham United Football Club plc [2008] EWHC
2855 (Comm); [2009] 1 Lloyds Rep 167.
76 Elektrim SA v Vivendi Universal SA [2007] EWHC 571 (Comm); [2007] 2 Lloyds Rep
8, Compagnie Europeene De Cereals SA v Tradax Export SA [1986] 2 Lloyds Rep 301 at 307;
1996 Act, sections 67 and 68.
77 CPR Part 62.2(1)(d) and Practice Direction to Part 62, para 8.1.
78 Cf. Kallang Shipping SA v AXA Assurances Senegal, The Kallang [2006] EWHC 2825
(Comm); [2007] 1 Lloyds Rep 8 where the arrest proceedings were used for the purpose of
avoiding London arbitration.

79 Petromin SA v Secnav Marine Ltd [1995] 1 Lloyds Rep 603; Re Qs Estate [1999] 1 Lloyds
Rep 931, (unless there is a very broad Scott v Avery clause e.g. Mantovani v Carapelli SpA [1980]
1 Lloyds Rep 375).
80 A v B (No 2) [2007] EWHC 54 (Comm); [2007] 1 Lloyds Rep 358. The Court of Appeal
in C v D [2007] EWCA Civ 1282; [2008] 1 Lloyds Rep 239, accepted this decision but refrained
from treating such a costs order as general practice. Similar orders could be made where a party
had pursued vexatious or oppressive proceedings.

Chapter 9

Extending Agreed Time Limits for Beginning Arbitral Proceedings

Extending Agreed Time Limits for Beginning Arbitral Proceedings

1. Introduction
2. The application of the power to extend time
3. The test for granting an extension
4. When time begins to run
5. Practice

1. INTRODUCTION
It is very common for a charterparty or bill of lading to impose a contractual limitation period
within which arbitration must be commenced. For instance, the Centrocon arbitration clause
provides that:
All disputes from time to time arising out of this contract shall be referred to two
arbitrators . Any claim must be made in writing and the claimants arbitrator appointed within
three months of final discharge, and where this provision is not complied with the claim shall be
deemed to be waived and absolutely barred.
These time limits are usually much shorter than the ordinary English statutory limition period of
six years for claims in contract and tort (cargo claims are subject to a one-year limitation period
where the Hague-Visby Rules apply as a matter of statute). The purpose of these limits is normally
to allow commercial parties to draw a line under transactions at a much earlier stage than the
ordinary limitation period would allow. However, they may be seen to operate harshly where the
time limit is extremely short or where it applies before the cause of action has even accrued.
Before 1996, the courts had a wide statutory discretion to extend the time for commencing
arbitration where a contractual time limit created undue hardship.1 Under the 1996 Act it is much
more difficult to obtain an extension. Indeed, the courts power to intervene is now so much
narrower that applications have become quite rare. The change was made because the old law was
considered too interventionist and inconsistent with the principle of giving effect to the parties
bargain. The drafters of the 1996 Act decided that party autonomy required full justification for

any court intervention2 and that only a narrow power to extend in the following terms adopted in
section 12 of the 1996 Act could be justified:

(1) Where an arbitration agreement to refer future disputes to arbitration provides that a
claim shall be barred, or the claimants right extinguished unless the claimant takes within a
time fixed by the agreement some step
o (a) to begin arbitral proceedings, or
o (b) to begin other dispute resolution procedures which must be exhausted before arbitral
proceedings can be begun. the court may by order extend time for taking that step.
(2) Any party to the arbitration agreement may apply for such an order (upon notice to the
other parties), but only after a claim has arisen and after the applicant has exhausted any
available arbitral process for obtaining an extension of time.
(3) The court shall make an order only if satisfied
o (a) that the circumstances are such as were outside the reasonable contemplation of the
parties when they agreed the provision in question, and that it would be just to extend the
time, or
o (b) that the conduct of one party makes it unjust to hold the other party to the strict terms
of the provision in question.

2. THE APPLICATION OF THE POWER TO EXTEND UNDER SECTION 12

Section 12 is a mandatory provision; it applies regardless of the parties agreement to the contrary.
The courts power to grant an extension of time arises if the following threshold requirements are
present:

(a) there is an agreement to refer future disputes to arbitration;

(b) the seat of the arbitration is in England and Wales;3
(c) the agreement provides that a claim shall be barred, or the claimants right extinguished,
unless the claimant takes within a time fixed by the agreement some step
o (i) to begin arbitral proceedings, or
o (ii) to begin other dispute resolution procedures which must be exhausted before arbitral
proceedings can be begun;
(d) a claim has arisen;
(e) any available arbitral process for obtaining an extension of time has been extended;
(f) the statutory time limit for the commencement of arbitration has not expired.

An agreement to refer future disputes to arbitration

Section 12 applies to agreements to refer future disputes to arbitration. This reflects the previous
law which was intended to relieve hardship caused by time bars unwittingly agreed to in standard
form contracts.4 Such hardship is unlikely to arise where the parties agree to arbitrate after a
dispute has arisen.
Where an agreement provides for the resolution of disputes either by the court or by reference to
arbitration, section 12 would probably still apply to the commencement of arbitration since there
is an agreement, even if conditional, to refer future disputes to arbitration.5 An optional
agreement to arbitrate is valid even if the option is exercisable only by one party.6 If there is a

dispute as to the scope or existence of the arbitration agreement then the court will probably
proceed to determine that issue but it could leave it for the arbitral tribunal to decide.7

The arbitration agreement fixes a period for beginning

arbitral proceedings (or other dispute resolution
procedures which must be exhausted before arbitral
proceedings can be begun)
This requirement will ordinarily be satisfied because most contractual time limits for commencing
arbitration are contained within the arbitration clause. However, many tanker charterparties
contain an arbitration clause with a separate provision limiting the time allowed for presentation
of supporting documents for any claim, or for performance of some other act related to a claim.
Section 12 will probably not relieve a claimant who has failed to comply with such a provision
unless the act required by that provision can be construed as taking a step to begin arbitral
proceedings or to begin other dispute resolution procedures which must be exhausted before
arbitral proceedings can be begun. Generally, provisions of this sort in shipping contracts have
not satisfied this requirement.
In The Oltenia 8 a vessel was chartered on the Asbatankvoy form providing for arbitration in
London and containing an additional clause in the following terms:
Charterers shall be discharged and released from all liability in respect of any claims Owners
may have under this Charter Party (such as, but not limited to, claims for deadfreight, demurrage,
shifting expenses or port expenses) unless a claim has been presented to Charterers in writing with
all available supporting documents within 90 days from completion of discharge of the cargo
concerned under this Charter Party.
The Owners did not submit supporting documents to the Charterers for one claim and failed to
present another claim altogether within the 90-day period. The Court of Appeal held (with some
reluctance) that section 27 of the 1950 Act could not be invoked since the presentation of a claim
within the above clause could not be treated as a step in commencing arbitration.
The DAC made clear that the reference in section 12 to other dispute resolution procedures is
intended to cover hybrid provisions which call for some other method of dispute resolution (e.g.,
mediation or expert determination) to precede recourse to arbitration; it is not intended to widen
the scope of the power to extend time beyond this.9
Section 12 would probably apply where a party had failed to make a claim in writing for the
purposes of the Centrocon arbitration clause since performance of this step is so closely associated
with the obligation to arbitrate that it should be regarded as part of the beginning of
arbitration.10 The authorities under the old law suggest that where a party has [1986] 2 Lloyds
Rep 328. been in default of a time limit for doing something other than commencing arbitration,
the courts power to extend time will only be available if the provision containing the time limit
and the arbitration agreement can be construed as going hand in hand.11 Factors tending to
favour the application of the power to extend time might include the fact that the notice provision

and arbitration agreement are contained in the same clause, that these provisions are subject to the
same time limit, and that the notice is to be given by the same party who is claiming arbitration.12

A claim has arisen

The court will take a fairly flexible approach to the requirement of a claim. It need not be a
cause of action in the strict sense of that word.13 It is, however, implicit that the power to extend
time for commencing arbitration would only be exercised if the claimant is asserting a claim
which, at least arguably, comes within the scope of the arbitration agreement. If an issue arose as
to whether the claim was within the scope of the arbitration clause the court would probably
determine the issue of jurisdiction.14

Any available arbitral process for obtaining an extension

of time has been exhausted
Many commodities contracts incorporate a time limit for commencing arbitration but expressly
give arbitrators discretion to extend that time.15 It is clear from section 12(2) that in such a case
the claimant must apply first to the tribunal for an extension of time. Where the tribunal has
refused an extension of time the claimant is clearly not precluded from applying to the court for an
extension. However, the DAC considered that the prospect of such an application being successful
was slight.
It would be a rare case indeed where the court extended the time in circumstances where there
was such a process which had not resulted in an extension, for it would in the ordinary case be
difficult if not impossible to persuade the court that it would be just to extend the time or unjust
not to do so, where by an arbitral process to which ex hypothesi the applying party had agreed, the
opposite conclusion had been reached.16
It is arguable, however, that the court should not consider the tribunals decision as an overriding
factor in exercising its own discretion, as the 1996 Act has expressly qualified party autonomy by
making mandatory provision for the court to grant an extension even where the tribunal itself had
power to extend time.17

The time provided by statute for commencing arbitration

has not expired
Section 12 does not affect time limits imposed by statute.18 This means that it will not provide
relief where a party has failed to commence arbitration within the statutory limitation period
imposed by the Limitation Act 1980.19 If the Hague-Visby Rules (or the Hague Rules) apply as a
matter of statute by reason of the Carriage of Goods by Sea Act 1971 or a foreign law20 then the
one-year time limit from the date of delivery will apply and cannot be extended.21 The HagueVisby Rules will apply as a matter of English statute to many claims under bills of lading for loss
or damage of goods.22
Where parties incorporate the Hague Rules into their contract, for instance by means of a clause
paramount,23 this will generally mean that those Rules apply as a matter of contract, not statute.
Accordingly, the court would have power to grant an extension,24 although it may be reluctant to

exercise its discretion to extend such a well-established time limit. Where the Hague-Visby Rules
are incorporated into a bill of lading it is unlikely that section 12 would apply since such
incorporation is given statutory force under section 1(6)(a) of the Carriage of Goods by Sea Act
1971.

3. THE TEST FOR GRANTING AN EXTENSION

If the court has jurisdiction to grant an extension it will then consider whether to exercise its
discretion in favour of extending time. Under section 12(3) the court may grant an extension only
if satisfied that:

(a) the circumstances are such as were outside the reasonable contemplation of the parties
when they agreed the provision in question and it would be just to extend time; or
(b) the conduct of one party makes it unjust to hold the other party to the strict terms of the
provision in question.

If the court is satisfied that the case satisfies the requirements of either sub-section 12(3)(a) or (b)
then an extension should ordinarily be granted. The use of the word only in section 12(3)
suggests that these requirements are the essential threshold conditions for the power to grant an
extension but the courts discretion to refuse an extension is not defined by the matters set out
therein.25 The courts discretion may be influenced by other considerations relevant to whether an
extension of time is appropriate (e.g., the existence of other proceedings by which the claim could
be more appropriately pursued). The courts discretion is further widened by the fact that an
extension under section 12 may be granted on such terms as it thinks fit.

The circumstances are such as were outside the

reasonable contemplation of the parties when they
agreed the provision in question
The test for deciding whether circumstances are outside the parties reasonable contemplation is
one of fact and each case will depends on its facts.
The court is concerned not only with what the parties actually contemplated but what they
reasonably would have contemplated. This must involve a consideration of the relevant
transaction, of ordinary practices within that type of transaction and with the reasonable
expectations of parties involved in such a transaction.26
The first requirement under section 12(3)(a) is said to be designed to reflect the overall
philosophy of Part I of the 1996 Act so that, in effect, the parties can only escape from their
arbitration bargain if events arise which can, in effect, clearly be said to fall outside that
bargain.27 It is a novel test and conceptually quite different28 from the previous law. The
nearest analogy is with the principles governing remoteness of damages for breach of contract
under which a party is only entitled to damages for losses which the parties reasonably
contemplated at the time of contracting as liable to result from breach.
The reasonable contemplation of the parties

Waller LJ attempted to provide some guidelines for applying the test in Harbour and General
Works Ltd v The Environment Agency. 29 He considered that section 12(3)(a) was concerned with
party autonomy: it is concerned not to allow the court to interfere with a contractual bargain
unless the circumstances are such that if they had been drawn to the attention of the parties when
they agreed to the provision, the parties would at the very least have contemplated that the time
bar might not applyit then being for the court finally to rule as to whether justice required an
extension of time to be given. This suggests that the court will apply a variant of the officious
bystander test30 to see whether, if asked at the time of contracting, the parties would have
envisaged the time bar applying in the circumstances arising. In practice, the test suggested
in Harbour and General Works will not be much easier to apply than the wording of the statute
because the parties evidence as to how they would have reacted if the circumstances had been
drawn to their attention at the time of contracting will be influenced by hindsight as to the legal
significance of what has happened. In particular, the circumstances giving rise to the failure to
commence arbitration within time will very often be mishaps arising after the parties have handed
over the case to their P&I Club or solicitors. In concluding a contract, most commercial parties
will not contemplate the range of mistakes which might arise after handing the case over to
lawyers. Accordingly, the judge will have to make a difficult, and somewhat artificial, assessment
of whether the parties would reasonably have considered it acceptable for the time bar to apply if
the circumstances had been drawn to their attention and they had been advised of their legal
consequences.31
The probability of the circumstances in question arising is relevant in deciding whether they are
outside the parties reasonable contemplation at the time of contracting. Most types of situation
could reasonably be contemplated as possible but it is much more questionable whether parties
would contemplate that the time limit would apply in that situation. For example, parties could
reasonably contemplate that a claim could be sent by a motor bike which could be involved in a
crash.32 However, such circumstances are so improbable that they would quite possibly be treated
as outside the parties bargain. It is likely that the courts will implicitly incorporate a similar test
of probability to that used in the contractual rules of remoteness of damage;33 for instance, if
circumstances are reasonably contemplated as a serious possibility then it is likely that they will
be treated as within the parties contemplation for the purposes of section 12. The Court of Appeal
in Harbour and General Works Ltd v Environment Agency 34 accepted that an extension of time
should not be given because the circumstances which had arisen (overlooking a time bar due to an
administrative oversight) were far from being so uncommon as to be treated as beyond the
parties reasonable contemplation.
The relevant circumstances
The circumstances to be considered are not defined but the court may look at all the circumstances
in which the application arises, including those relating to the way the claim has arisen and also
those leading to the application for the extension.35 The relevant circumstances must include those
which cause or contribute to the claimants failure to comply with the time bar.36 The court will
take account of the underlying commercial purpose of the time-bar provisions in issue.37 If the
applicant caused or controlled the circumstances in question this will be a material factor in
assessing the circumstances, but such control would not preclude the giving of an extension. For

example, if a notice to arbitrate was put through the wrong letterbox the fact that this was within
the control of the claimant would not rule out an extension.38 However, in Korbetis v Transgrain
Shipping BV 39 Toulson J considered that an extension would be more likely to be available where
the time limit was missed due to an extraneous event rather than an internal error within one
partys control.

It would be just to extend time

The second requirement for section 12(3)(a) is that it would be just to grant an extension.
In Vosnoc Ltd v Trans Global Ltd 40 the judge appeared to equate this requirement with the test of
undue hardship under section 27 of the 1950 Act. However, the decision not to retain the test of
undue hardship suggests that the courts discretion is broader. Usually there should be no need
to enter into a full enquiry as to the balance of justice where the first requirement of section
12(3)(a) is satisfied. If events have arisen outside the parties contemplation which have resulted
in a time bar being missed then this will ordinarily be sufficient in itself to make it unjust to hold
the parties to the bargain.41 If an enquiry is to be made into the balance of justice for the purpose
of the second requirement of section 12(3)(a), the following matters are likely to be of relevance:

(a) The merits of the claim. If a claim has no merit then there will be no injustice if it is shut
out. However, the court will not consider the merits beyond assessing whether the claim or
defence is plainly doomed since otherwise the application would become a pre-trial of the
dispute agreed to be referred to arbitration.42
(b) The length of the delay after the expiry of the time limit and whether the claimant has
acted promptly in seeking an extension of time.43
(c) The amount at stake.
(d) Whether the delay was due to the fault of the claimant or to circumstances outside his
control and the degree of such fault.
(e) Whether the other party has been prejudiced by the delay, and if so, the degree of such
prejudice.

These are the main factors which were used in applying the test of undue hardship under the
1950 Act.44 The factor which will probably continue to be considered most important is whether
the delay has caused prejudice to the other party.

The conduct of one party makes it unjust to hold the

other party to the strict terms of the provision in
question
The courts power to intervene under this part of section 12 is based upon preventing injustice
arising from the conduct of the party relying upon the time bar. However, in view of the DACs
insistence upon full justification for any court intervention to override the parties bargain, the
discretion to extend time on this ground is exercised sparingly. On an application under this part
of section 12, the court will focus on the conduct of the other party. The conduct need not be
wrongful or blameworthy,45 but mere silence in not taking a time-bar point would not ordinarily

suffice to justify an extension of time.46 Similarly, the mere fact that a party took part in settlement
negotiations would not be conduct making it unjust for him to rely upon the time bar.47
A party seeking to rely upon this provision is most likely to succeed if he can bring himself within
the established doctrines of waiver and estoppel recognised under English law, or an applicable
foreign law doctrine based on good faith, under which a party to a contract is precluded by his
conduct from relying on its strict contractual terms. Waiver and estoppel are matters of substantive
contract law, details of which are beyond the scope of this book.48 In brief, under English law, a
claimant must show unequivocal conduct or representations on the part of the defendant that a
time limit will not be enforced, or a shared understanding that no time limit applies, in
circumstances where it would be unjust to allow reliance on the contracts strict terms. If there is a
binding agreement to override the time bar then this would mean that section 12 is not strictly
necessary since the time bar would not be applicable (see section 5 below).
Issues of estoppel, waiver, or collateral agreement going to the enforceability of the time limit are
ordinarily matters within the tribunals jurisdiction (an issue as to the effectiveness of a time limit
will not usually affect the tribunals jurisdiction49) and if such issues are raised the defendant
could probably insist that the tribunal decides the issues within its jurisdiction.50

Application of the test under section 12(3)

There is little authority on section 12 and given the strictness of the test applications are rare.
Overall, the authorities suggest that it will be extremely difficult to satisfy and an extension would
probably only be granted if the circumstances are entirely out of the ordinary. The discussion in
the cases gives some guidance on circumstances which might give rise to an extension of time.
An unusual failure of communication, or sudden illness of the person handling the matter for
the claimant might be within section 12(3)(a).51
The lawyer handling the claim suffering a heart attack just before serving notice of the claim,
or the vehicle from which the written claim was to be served being involved in a serious
accident.52
A loss only materialising or becoming significant after the time bar had expired might possibly
justify an extension unless that situation ought to have been foreseen.53
In The Catherine Helen,54 a voyage charter contained the Centrocon arbitration clause with a oneyear time limit from final discharge. Shortly after discharge, the owners P&I club had provided a
guarantee against third-party cargo claims and there had been correspondence with charterers
relating to this indemnity. The owners did not make a claim for an indemnity within time although
they did make a claim for demurrage and berthing expenses. The section 12 application was in
respect of the owners claim for an indemnity against cargo claims. Brice QC, sitting as a deputy
High Court judge, found that it was not outside the parties contemplation that owners would seek
an indemnity against cargo claim or that the owners might make a mistake as to the correct way of
making a claim and appointing arbitrators. The application under section 12 was dismissed.
A mistaken view of the legal situation is unlikely to justify an extension of time unless the
circumstances are exceptional.

In Vosnoc Ltd v Trans Global Projects Ltd 55 one of the first cases on section 12, Judge Raymond
Jack QC gave a broad interpretation of the test in section 12(3)(a). A letter intended to commence
arbitration was ineffective because it failed expressly to call for the appointment of an arbitrator.
Judge Raymond Jack QC called this a near miss which would not have been in the parties
contemplation at the time of contracting and justified an extension under section 12(3)(a).
This case is a rare example of a successful application for an extension under section 12(3)(a) and
has been distinguished as turning on its own facts.56 Subsequent cases have adopted a narrower
approach which will probably be preferred. A change in the law is unlikely to justify an extension
unless, perhaps, it is wholly unexpected.57 In Harbour and General Works Ltd v The Environment
Agency 58 the Court of Appeal held that a failure to read the time-bar provision properly could not
trigger the courts power to extend time.
A mistake of law was also considered in The Seki Rolette. 59 The applicants were time charterers
of a vessel which had sunk. They sought an extension of time for a claim for loss of property
including lashing equipment, a fork lift truck, a car deck and bunkers. Neither party had
considered that the Hague Rules applied to the claim for loss of this property until after the one
year time bar had expired. Mance J expressly reserved the question of whether a misunderstanding
as to the scope of application of the time bar or as to the need to commence arbitration could be
within section 12(3)(a) because it might be shown that awareness of the correct legal position was
outside the parties contemplation. However, on the facts before him he found that the existence
and application of the Hague Rules time bar was not outside the parties reasonable
contemplation. The Hague Rules were incorporated into the parties charter and once they were
found to apply to the claims then it would be difficult to show that the circumstances were outside
the parties reasonable contemplation.

4. WHEN TIME BEGINS TO RUN

The operation of the time bar will depend on the terms of the arbitration clause in question but
some forms are particularly common. Under Article III, rule 6 of the Hague Rules (and the HagueVisby Rules), suit in respect of goods carried must be brought within one year of their delivery or
of the date when they should have been delivered. This means arbitration must be
commenced60 within one year from when the goods were, or should have been, completely
delivered.
Under many arbitration clauses (e.g., the arbitration clause in the Centrocon charter-party form)
time runs from the date of final discharge and this generally means the date when all the goods
carried under the relevant contract are completely discharged from the vessel. The term has been
held to require actual discharge, so that time will not run if no cargo was ever discharged.61 Where
there is a charterparty for several consecutive voyages then time will run from completion of
discharge on the voyage out of which the claim arises.62 The time agreed for commencing
arbitration may often be shorter than the time allowed under the Hague Rules (or Hague-Visby
Rules). The question of which time limit prevails depends on the proper construction of the
contract but the arbitration clause will normally prevail as the dominant provision.63

5. PRACTICE

The arbitration claim

Once a claimant realises that he may be out of time he is expected to act promptly in issuing a
claim form so as to put the other side on notice of his intention to claim arbitration.64 In shipping
cases the application should usually be made in the Commercial Court or the Mercantile List of
the Central London county court by means of an arbitration claim form,65 (see the flow chart on
court applications at Appendix L).

Alternative applications based on the time-bar being

inapplicable
Under the old law it was common practice for a party to apply for an extension of time under
section 27 of the 1950 Act, with an alternative application for a declaration that the other party
was not entitled to rely upon the time limit (e.g., by reason of waiver or a collateral agreement).
This enabled the claimant to make his primary case that the time bar was not applicable (usually
based on arguments such as the proper construction of the time bar or estoppel), failing which he
could seek a statutory extension of time.
The Civil Procedure Rules recognise this practice by stating that where the claimant applies for
an order under section 12 of the 1996 Act he may include in his arbitration claim form an
alternative application for a declaration that such an order is not needed.66 However, the practice
is no longer as straightforward. First, the courts powers to grant an extension under section
12(3)(b) cover cases based on waiver or estoppel so that granting declaratory relief on these
grounds would probably now be regarded as inconsistent with section 12 and accordingly no
longer available.67 A more significant obstacle is that the court is being asked to resolve issues
which the parties agreed to arbitrate. The decision in The Seki Rolette 68 has made clear that the
other party would be entitled to a stay of those parts of the proceedings which raise issues falling
within the arbitration agreement. This means that where a party wants to contend that the time bar
does not apply, but that if it does the court should grant an extension of time, the court may only
be able to decide the application for an extension of time.
In The Seki Rolette 69 time charterers made claims for lashing equipment, a car deck and bunkers
lost when the vessel sank. Owners relied on the Hague Rules time limit. Charterers sought
declaratory relief as to whether the Hague Rules were incorporated into the charter and also as to
whether the goods lost were goods within the Hague Rules. Alternatively, they contended that if
there was such a time bar, the court should extend time under section 12 of the 1996 Act. Owners
sought a stay of the claim for declaratory relief under section 9 of the 1996 Act on the ground that
it raised issues agreed to be referred to arbitration. Mance J found that it was for the arbitrators to
resolve the matters raised in the application for declaratory relief. He approached the application
for an extension on the assumption, agreed without prejudice to any contrary case that might be
made in the arbitration, that the time bar applied.
This type of situation raises substantial practical difficulties and the court will be keen to resolve
the dispute efficiently.70 Particular problems may arise with timing since a party is expected to
make his application for an extension under section 12 as soon as possible after he discovers he is
out of time, but the extension application may be unnecessary if the time bar is not applicable. In

addition, the two forms of relief sought may mean that a party has to run inconsistent cases before
each tribunal: the extension of time can only be granted on the basis that the Hague Rules apply,
yet before the tribunal the claimant may be seeking to show that the Hague Rules do not apply.
In The Seki Rolette, Mance J provided important guidance as to the various approaches that can be
adopted in such a situation. First, the claimant may secure the defendants agreement that both
issues (i.e., applicability of the time bar and the extension of time) may be determined by the
court: this is consistent with CPR Part 62, rule 62.4(3) and will probably minimise costs and
delay. If the defendant refuses to agree then it is likely that he will obtain a stay of the claim for
declaratory relief. In such a situation the claimant must decide how best to pursue his alternative
contentions. If he wishes to have the issue as to whether there is any applicable time bar decided
first, then he can ask the defendant to agree to the postponement of the application for an
extension. (This may also be appropriate if at the outset the claimant wants the arbitral tribunal to
resolve the issue as to the applicability of the time bar.) Alternatively, the claimant can protect his
position by issuing an application for an extension of time and asking to the court to stay it
pending the arbitrators decision on whether the time bar applies.
If the arbitrators are asked to determine whether the time bar applies first then this should
ordinarily be determined as a preliminary issue and the tribunal should not make a final award on
the substance of the claim which would prejudice the claimants right to seek an extension under
section 12. The claimant may, however, wish to have the application for an extension decided first
or concurrently with the proceedings before the arbitrators. The claimant may ask the court to
proceed on the assumption that there is an applicable time bar. If, however, the claimant will seek
to adopt a case before the court that is inconsistent with his case before the arbitrators (e.g., that
the Hague Rules do or do not apply) then it would be advisable to ask the defendant to agree that
the section 12 application should proceed without prejudice to the position adopted before the
arbitrators. If such an agreement is not forthcoming then it may be appropriate to ask the court to
stay the section 12 application pending the tribunals decision.

Permission to serve a claim form out of the jurisdiction

If the defendant to the arbitration claim is an overseas party and has not authorised English
solicitors or other agents to accept service on his behalf, it may be necessary to obtain permission
to serve the arbitration claim form out of the jurisdiction pursuant to CPR Part 62, rule 62.5. The
application for permission to serve out of the jurisdiction is usually made by a separate application
notice. (Once permission is granted the claim form can be served on the defendant.)

Costs
The claimant will normally be ordered to pay the costs of the court application, whether successful
or not, because he is seeking the indulgence of the court and is prima facie at fault for allowing a
time limit to expire. However, in special circumstances the court may award costs to the
claimant,71 for instance, where the defendant has unreasonably resisted the application.

Conditions and length of extension

Under section 12, the court may extend time on such terms as it thinks fit. This would appear to
give the court jurisdiction to make the extension conditional upon a payment into court or
provision of security for the claim.72 The court would probably not make an extension of time
conditional on the giving of security for the costs of the arbitration since this is ordinarily a matter
for the arbitral tribunal to decide.73 The extension of time will normally be for a short period to
complete the appointment process (such as seven days) unless special circumstances justify a
longer period. It may be prudent to re-confirm the notice of appointment of an arbitrator even if
steps were taken to appoint an arbitrator before the application was made.

Appeals
The permission of the court of first instance is required for any appeal from a decision under
section 12.74 The grant of an extension of time is ordinarily a matter of discretion and the court
will generally only give permission to appeal if it considers that the question raised is one of
general importance. The Court of Appeal will only interfere with the judges discretion if he has
erred in principle by failing to apply the correct test or by failing to take into account some
material matter (or by taking into account an immaterial matter), or if the judges exercise of
discretion is outside the ambit of reasonable disagreement. The Court of Appeal will not interfere
merely because it would have come to a different decision. However, if the judge has erred in law
then it would probably review the whole decision.75
1 Section 27 of the Arbitration Act 1950.
2 Paragraph 69 of the DAC Report.
3 Sections 2(1) and 84(2) of the 1996 Act. If arbitral proceedings have not commenced then the
Act would apply to an application for an extension of time by virtue of the Arbitration Act
(Commencement No 1) Order 1996, SI 1996/3146.
4 See the McKinnon Committee Report (1927) Comd No 2817.
5 Navigazione Alta Italia SpA v Concordia Maritime Chartering AB, The Stena Pacifica [1990] 2
Lloyds Rep 234.
6 Pittalis v Sherefettin [1986] QB 868.
7 Al-Naimi v Islamic Press Agency Inc. [2000] 1 Lloyds Rep 522 discussed in Chapter 7
and Grimaldi Compagnia di Navigazione SPA v Sekihyo Lines Ltd, The Seki Rolette [1998] 2
Lloyds Rep 638 discussed below.
8 Babanaft International Co SA v Avant Petroleum Inc [1982] 1 WLR 871.
9 Paragraph 74(i) of the DAC Report.
10 Jadranska Slobodna Plovidba v Oleagine SA, The Luka Botic [1984] 1 Lloyds Rep 145, see
also Mariana Islands Steamship Corporation v Marimpex Mineraloel-Handelsgesellschaft GmbH
& Co, The Medusa

11 Pittalis v Sherefettin [1986] QB 868; Richurst v Pimenta [1993] 1 WLR 159, the courts power
to extend time applied to a time limit for a tenant giving notice of election of rent assessment by
an independent surveyor but not to the time limit for a landlord giving notice of rent review.
12 Richurst v Pimenta [1993] 1 WLR 159.
13 Sioux Inc v China Salvage Co, The American Sioux [1980] 2 Lloyds Rep 224.
14 Al-Naimi v Islamic Press Agency Inc [2000] 1 Lloyds Rep 522, discussed in Chapter 7.
15 GAFTA and FOSFA contracts provide such a discretion.
16 Paragraph 74(ii) of the Report, see also Grimaldi Compagnia di Navagazione SPA v Sekihyo
Lines Ltd, The Seki Rolette [1998] 2 Lloyds Rep 638 at 645.
17 In Comdel Commodities Ltd v Siporex Trade SA [1991] AC 148 at 170 Lord Bridge considered
that the court should make its assessment of whether to grant an extension and should not be
unduly influenced by the tribunals decision, particularly where no reasons are given for the
tribunals refusal.
18 Section 12(5) of the 1996 Act.
19 Section 14(1) of the 1996 Act defines what steps must be taken to commence arbitration for the
purposes of the Limitation Act. This definition is applicable generally unless the arbitration clause
sets out the steps to be taken, in which case these must apply. The requirements of the 1996 Act
must be satisfied but a legalistic approach to construing the notice claiming arbitration will be
avoided: Nea Agrex SA v Baltic Shipping Co Ltd, The Agios Lazaros [1976] 2 Lloyds Rep 47 at
51; Vosnoc Ltd v Trans Global Projects Ltd [1998] 1 Lloyds Rep 711; Allianz Versicherungs
Aktiengesellschaft v Fortuna Co Inc, The Baltic Universal [1999] 1 Lloyds Rep 497; See Chapter
10 on appointments.
20 Foreign Limitation Periods Act 1984.
21 Kenya Railways v Antares Co Pte Ltd, The Antares (No 2) [1987] 1 Lloyds Rep 424.
22 Carriage of Goods by Sea Act 1971.
23 A clause paramount generally incorporates the Hague Rules, Seabridge Shipping AB v AC
Orssleffs EFTFS A/S [1999] 2 Lloyds Rep 685.
24 Nea Agrex SA v Baltic Shipping Co Ltd, The Agios Lazaros [1976] 2 Lloyds Rep 47.
25 However, the word shall is used rather than the more permissive provision in section 1(c)
that the courts should not intervene except as provided by the Act, see Vale Do Rio Doce
Navegacao SA v Shanghai Bao Steel Ocean Shipping Co Ltd [2000] 2 Lloyds Rep 1 at 11.
26 Cathiship SA v Allanasons Ltd, The Catherine Helen [1998] 2 Lloyds Rep 511 at 520.
27 The DACs July 1995 Consultative Paper.
28 Harbour and General Works Ltd v Environment Agency [2000] 1 Lloyds Rep 65 at 71,
approved in the Court of Appeal at 81.

29 [2000] 1 Lloyds Rep 65 at 81 approved in Thyssen Inc v Calypso Shipping Corporation, The
Markos N [2000] 2 Lloyds Rep 243 at 248. In Korbetis v Transgrain Shipping BV [2005] EWHC
1345 (QB), Toulson J restricted the test further to suggest that section 12(3)(a) only covers
circumstances which were not only beyond the reasonable contemplation of the parties, but were
also such that if the parties had contemplated them, they would also have contemplated that the
time bar might not apply. However he considered that this restriction would make little difference
in practice.
30 See Chitty on Contracts (30th edn) para 13-007.
31 This type of assessment arose in Grimaldi Compagnia Di Navagazione Spa v Sekihyo Lines
Ltd [1998] 2 Lloyds Rep 638 at 649.
32 Cathiship SA v Allanasons Ltd, The Catherine Helen [1998] 2 Lloyds Rep 511 at 520.
33 Koufos v C Czarnikow Ltd, The Heron II [1969] 1 AC 350.
34 [2000] 1 Lloyds Rep 65.
35 Vosnoc Ltd v Trans Global Projects Ltd [1998] 1 Lloyds Rep 711 at 719, The Catherine
Helen [1998] 2 Lloyds Rep 511 at 520. The relevant circumstances may not, however, include
the coming into force of sectionp 12Grimaldi Compagnia Di Navagazione Spa v Sekihyo Lines
Ltd, The Seki Rolette [1998] 2 Lloyds Rep 638 at 650.
36 Harbour and General Works Ltd v Environment Agency [2000] 1 Lloyds Rep
65, Monella v Pizza Express (Restaurants) Ltd [2003] EWHC 2966 (Ch), (2004) 12 EG 172.
37 Clarke J in Fox & Widley v Guram [1998] 3 EG 142.
38 Harbour and General Works Ltd v Environment Agency [2000] 1 Lloyds Rep 65 at 81.
39 [2005] EWHC 1345 (QB)
40 [1998] 1 Lloyds Rep 711.
41 See Lord Justice Saville in [1995] 61 Arbitration 157 at 162. In Grimaldi
Compagnia v Sekihyo Lines Ltd, The Seki Rolette [1998] 1 Lloyds Rep 638 at 650, Mance J
found there would have been no injustice even if the first part of section 12(3)(a) had applied.
However, this was in the context of an argument that the parties ignorance of the change in the
law was outside the parties reasonable contemplation.
42 Mediterranea Raffineria Siciliana Petroli SpA v Kuwait Oil Tanker Co SAK, The Al
Faiha [1981] 2 Lloyds Rep 99 at 105; First Steamship Co Ltd v CTS Commodity Transport
Shipping Schiffahrtsgesellschaft mbH, The Ever Splendour[1988] 1 Lloyds Rep 245 at 250.
43 Thyssen Inc v Calypso Shipping Corporation, The Markos N [2000] 2 Lloyds Rep 243 at 248.
44 See Moscow V/O Exportkhleb v Helmville Ltd, The Jocelyne [1977] 2 Lloyds Rep 121.
45 The Catherine Helen [1998] 2 Lloyds Rep 511 at 522.

46 Vosnoc Ltd v Trans Global Projects Ltd [1998] 1 Lloyds Rep 711 at 719; Grimaldi
Compagnia Di Navagazione Spa v Sekihyo Lines Ltd, The Seki Rolette [1998] 2 Lloyds Rep 638
at 650.
47 Mustill & Boyd (2nd edn) p 208.
48 See contract texts such as Chitty on Contracts.
49 Leif Hoegh & Co A/S v Petrolsea Inc, The World Era [1992] 1 Lloyds Rep 45; Grimaldi
Compagnia Di Navagazione Spa v Sekihyo Lines Ltd, The Seki Rolette [1998] 2 Lloyds Rep 638
at 644.
50 Grimaldi Compagnia Di Navagazione Spa v Sekihyo Lines Ltd, The Seki Rolette [1998] 2
Lloyds Rep 638 (discussed below).
51 Vosnoc Ltd v Trans Global Projects Ltd [1998] 1 Lloyds Rep 711 at 719.
52 Cathiship SA v Allanasons Ltd [1998] 2 Lloyds Rep 511 at 520.
53 Vosnoc Ltd v Trans Global Projects Ltd [1998] 1 Lloyds Rep 711 at 718.
54 Cathiship SA v Allanasons Ltd, The Catherine Helen [1998] 2 Lloyds Rep 511 at 520.
55 [1998] 1 Lloyds Rep 711.
56 Cathiship SA v Allanasons Ltd, The Catherine Helen [1998] 2 Lloyds Rep 511 at
521; Harbour and General Works Ltd v Environment Agency [2000] 1 Lloyds Rep 65 at 72-81.
57 Monella v Pizza Express (Restaurants) Ltd [2003] EWHC 2966 (Ch), (2004) 12 EG 172.
58 [2000] 1 Lloyds Rep 65.
59 Grimaldi Compagnia Di Navagazione Spa v Sekihyo Lines Ltd [1998] 2 Lloyds Rep 638 at
650.
60 See section 14 of the 1996 Act and Chapter 10.
61 Denny, Mott & Dickson Ltd v Lynn Shipping Co Ltd [1963] 1 Lloyds Rep 339.
62 Richmond Shipping Ltd v Agro Co of Canada, The Simonburn (No 2) [1973] 1 Lloyds Rep
392.
63 Metalfer Corporation v Pan Ocean Shipping Co Ltd [1998] 2 Lloyds Rep 632.
64 Irish Agricultural Wholesale Society Ltd v Partenreederei MS, The Eurotrader [1987] 1
Lloyds Rep 418; Thyssen Inc v Calypso Shipping Corporation, The Markos N [2000] 2 Lloyds
Rep 243 at 249.
65 High Court and County Courts (Allocation of Arbitration Proceedings) Order 1996 (SI No
3215). See generally CPR, Part 62 and the Arbitration Practice Direction, paragraph 14.1.
66 CPR, Part 62, rule 62.4(3).
67 Sections 1(c) and 81 of the 1996 Act.

68 Grimaldi Compagnia Di Navagazione Spa v Sekihyo Lines Ltd [1998] 2 Lloyds Rep 638.
69 Ibid.
70 See by analogy, Al-Naimi v Islamic Press Agency Inc. [2000] 1 Lloyds Rep 522 discussed in
Chapter 7.
71 Mediterranea Raffineria Siciliana Petroli SpA v Kuwait Oil Tanker Co SAK, The Al
Faiha [1981] 2 Lloyds Rep 99 at 106.
72 Sioux Inc v China Salvage Co, The American Sioux [1980] 2 Lloyds Rep 224.
73 Section 38(3) of the 1996 Act, see also section 1(c).
74 Section 12(6) of the 1996 Act.
75 Cast Shipping Ltd v Tradex Export SA, The Hellas in Eternity [1979] 2 Lloyds Rep 280.

Chapter 10

Appointment of Arbitrators and Umpires

Appointment of Arbitrators and Umpires

1. Introduction
2. Number of arbitrators to be appointed
3. Procedure for appointment of arbitrators
4. Default procedure where one party fails to co-operate
5. Appointment of umpires
6. Substituting arbitrators and umpires
7. Remedies for defective appointments
8. Commencing arbitration for the purpose of time limits
9. Terms of appointment

1. INTRODUCTION
It is important to ensure that an arbitrator is properly appointed, as failure to make a valid
appointment may have far-reaching consequences: an award made by an incorrectly appointed
tribunal may be set aside as invalid and the defective appointment may be incurable if the time
limit for commencing arbitration has expired.1 The first place to look in order to determine the
correct steps for appointing an arbitrator is the arbitration clause. In many cases, however, the
arbitration clause (or the rules which it incorporates) will provide no express assistance. In the
absence of any other agreement it is necessary to rely on the statutory rules governing
appointment. Under English law, the appointment of an arbitrator is based on consent; no special
formalities are required and it is essentially a matter of obtaining the arbitrators agreement to act
and then notifying the other side of that agreement.2

The statutory provisions on appointment are contained in a single section of the 1996 Act entitled
The Arbitral Tribunal. These provisions give priority to the parties choice: section 16(1) makes
clear that the parties are free to agree on the procedure for appointing the arbitrator or
arbitrators. The statutory rules are only applicable in the absence of agreement otherwise and
court intervention is minimised to cases where the parties cannot agree and the statutory
framework fails to provide a solution. Any agreement on appointment of arbitrators or umpires
must be in writing to be given effect under the 1996 Act (see section 5 of the Act).

2. NUMBER OF ARBITRATORS TO BE APPOINTED

The starting point is the parties agreement on how many arbitrators are to be appointed. This will
ordinarily be found in the arbitration clause. Section 15 of the 1996 Act provides that:

(1) The parties are free to agree on the number of arbitrators to form the tribunal and whether
there is to be a chairman or umpire.
(2) Unless otherwise agreed by the parties, an agreement that the number of arbitrators shall
be two or any other even number shall be understood as requiring the appointment of an
additional arbitrator as chairman.
(3) If there is no such agreement, the tribunal shall consist of a sole arbitrator.

Section 15(1) follows Article 10 of the Model Law and reflects the principle of party autonomy
underlying the Act. Section 15(2) gives statutory recognition to the office of chairman whilst
section 20 sets out the role of the chairman (see Chapter 19 on decision making). The LMAA
Terms largely follow sections 15 and 20 of the Act in providing that if the tribunal is to consist of
three arbitrators, the third arbitrator shall be the chairman (unless agreed otherwise) and his view
shall prevail in relation to a decision in which there is neither unanimity nor a majority.3 The
LMAA Intermediate Claims Procedure provides that in the absence of agreement the tribunal is to
consist of three arbitrators.
Section 15(3) retains the previous rule that the tribunal should consist of a sole arbitrator in the
absence of agreement on the number of arbitrators.4 For example, where a contract simply
provides for arbitration in London with no reference to the size of the tribunal there is a
statutory presumption that a sole arbitrator is to be appointed. However, if the clause specifies
arbitration in London in the customary manner or in the usual way this may amount to a
choice excluding the statutory presumption.
In The Laertis,5 Bingham J found that arbitration in London in the customary manner was a
reference to two arbitrators. Evidence from nine London arbitrators had been given which
indicated that this type of tribunal was most frequently used in London arbitrations. It would
probably now be found that tribunals of three arbitrators (rather than two arbitrators plus an
umpire) are most common in maritime arbitrations. In particular, there are many three arbitrator
arbitration clauses (e.g., the NYPE Charter) and it is the invariable practice of LMAA arbitrators
to ask the parties to agree that any umpire be treated as a third arbitrator.

3. PROCEDURES FOR THE APPOINTMENT OF ARBITRATORS

Section 16 of the 1996 Act provides as follows:

(1) The parties are free to agree on the procedure for appointing the arbitrator or arbitrators,
including the procedure for appointing any chairman or umpire.
(2) If or to the extent that there is no such agreement, the following provisions apply.
(3) If the tribunal is to consist of a sole arbitrator, the parties shall jointly appoint the
arbitrator not later than 28 days after receipt of a request in writing by either party to do so.
(4) If the tribunal is to consist of two arbitrators, each party shall appoint one arbitrator not
later than 14 days after receipt of a request in writing by either party to do so.
(5) If the tribunal is to consist of three arbitrators
o (a) each party shall appoint one arbitrator not later than 14 days after service of a request
in writing by either party to do so, and
o (b) the two so appointed shall forthwith appoint a third arbitrator as the chairman of the
tribunal.

(7) In any other case (in particular, if there are more than two parties) section 18 applies as in
the case of a failure of the agreed appointment procedure.

Once again, the starting point is the parties agreement. Case law suggests that a broad and
flexible approach should be taken to the interpretation of section 16 (and section 14), and the
focus should be on the substance of relevant communications between parties rather than their
form.6
The existing common law principles will be of relevance in giving full effect to the parties
agreement or the statutory provisions applicable in the absence of agreement. For instance, in the
absence of written agreement to the contrary, an appointment of an arbitrator by one party is
probably only complete if communicated to the other party.7 Proper notification of an appointment
to the other side is essential for a valid appointment and extreme caution should be exercised
where notice is given to a chartering broker or any other agent who may not have authority to
accept the notice.8

Appointment of a sole arbitrator

Section 16(3) of the 1996 Act deals with the position where a sole arbitrator is to be appointed.
The written notice to be given under section 16(3) does not have to be in any special form (e.g., it
could simply require the respondent to concur in the appointment of an arbitrator for a given
dispute). Atlanska Plovidba makes clear that, when interpreting section 16(3), the substance of
communications should be prioritised over their form.9 In that case, a solicitors letter referring to
disputes arising under a bill of lading (when the dispute actually arose under a booking note) was
a sufficient notice for the purposes of section 16(3). However, if the notice is not complied with a
court application may be necessary. Accordingly, in the interests of clarity, it should usually:

(a) refer briefly to the subject matter of the dispute and the relevant contract (the respondent
can reasonably argue that his approval of an arbitrator will depend on the matter to be
determined);10
(b) require the respondent to agree to the appointment of an arbitrator to determine the
dispute, normally offering the respondent names of possible arbitrators for agreement within a
given time limit of at least 28 days. (The parties can agree on the method of reckoning time

for the purpose of such time limits, but otherwise section 78 of the Act will apply to
calculation of time limits);
(c) state the claimants intention to apply to court if no joint appointment is agreed within the
time limit given.

The parties may agree on the method of service of the notice requesting an appointment but in the
absence of such agreement the notice may be served by any effective means; this would certainly
include delivery by post to the addressees last known business address or, if a company, its
registered or principal office.11 Fax and email are now extremely common methods of
communication in relation to commencing an arbitration and would generally be treated as
effective means of notice. However, the burden lies on the sender to show that receipt of the email
has occurred: notice may not be effective if the system rejects the email.12 Paragraph 27 of the
LMAA Terms provides that where a party is represented by a lawyer or other agent in connection
with any arbitral proceedings, service of a notice on that lawyer or agent will be treated as
effectively served. This paragraph may be of limited use in making notices to appoint since it will
only be of binding effect where the parties have already agreed that the LMAA Terms are to apply
to the arbitral proceedings and the intended respondent has already authorised his lawyer or agent
to act on his behalf in the dispute.
If there is agreement on a particular arbitrator, the parties should then send a joint written request
asking him to decide the disputes to be submitted. The appointment is only valid and binding
when the chosen arbitrator has agreed to act.13 Written confirmation of the appointment is prudent
since the terms of any appointment will be relevant to any future dispute as to the scope of matters
referred to arbitration.14

Appointment of tribunals of two arbitrators

An agreement for the appointment of two arbitrators will, in the absence of any other agreement,
be treated as requiring the appointment of an additional arbitrator as chairman.15 Accordingly, the
procedure for appointment of three arbitrators set out in section 16(5) of the 1996 Act will
ordinarily apply where the parties have not agreed otherwise. The normal procedure is for the
claimant to:

(a) ask an arbitrator to accept appointment;

(b) obtain the arbitrators acceptance of the appointment;
(c) give notice of the appointment and the identity of the arbitrator to the respondent;
(d) serve a written notice that a responding appointment is required within at least 14
days.16 (Paragraphs 8 and 9(a) of the LMAA Terms require each party to appoint one
arbitrator not later than 14 days after service of a request in writing by either party to do so.)
The notice should preferably make clear that in the absence of a notice of a responding
appointment within the given time limit a default appointment will be made.

The respondent should then:

(a) appoint a willing arbitrator within 14 days (or the period of time given); and
(b) notify the claimant of the appointment.17

If the respondent fails to make the requested appointment, he risks the claimants arbitrator being
made sole arbitrator under section 17 described below. Each arbitrator asked to act must have
actually agreed to act in order for notification to the other side of his appointment to be
effective.18 The two arbitrators should then, in the absence of any other agreement, appoint a third
arbitrator as chairman of the tribunal.19 However, paragraph 8(b) of the LMAA Terms gives the
arbitrators full discretion as to when such an appointment is made so long as they do so before
any substantive hearing or forthwith if they cannot agree on any matter relating to the arbitration.
In practice, arbitrators often seek to reduce costs by refraining from making a third appointment
until they reach the stage where a hearing or an award is required. It is implicit that the arbitrators
should inform the parties of the appointment of the third arbitrator.

Appointment of tribunals of three arbitrators

It is common for an arbitration clause to provide for three arbitrators. For example, clause 17 of
the New York Produce Exchange charterparty form provides:
That should any dispute arise between Owners and Charterers the matter in dispute shall be
referred to three persons at [London],20 one to be appointed by each of the parties hereto, and the
third by the two so chosen; their decision or any two of them, shall be final.
Often the arbitration agreement will not set out clearly the procedure for appointing the three
arbitrators, in which case section 16(5) provides that each party will appoint an arbitrator and the
two so appointed will forthwith appoint a third arbitrator as the chairman of the tribunal.
Decisions may be made by all or a majority of the tribunal and the tribunals decision shall prevail
in the absence of unanimity or a majority.21 The procedure will follow that set out in the section
above. Paragraph 8 of the LMAA Terms largely follows the statutory procedure for appointment
of the tribunal but it is important to note that the LMAA Terms will only govern the constitution
of the tribunal if both parties have already agreed to the application of the LMAA Terms or both
of the original arbitrators accepted appointment subject to LMAA Terms; the appointment of a
single arbitrator subject to the LMAA Terms will not be sufficient in itself to incorporate the
Terms.22
If no hearing is required and the two arbitrators find that they are in agreement, they can ask the
parties for consent to make an award as a two-man tribunal in order to dispense with the need for a
third appointment. However, express consent from both parties would be necessary for the
decision of the two arbitrators to be binding in such a situation since the arbitration clause
specifically provides for a tribunal of three arbitrators. The tribunal would thus be technically
incompetent to make any valid order or award until it had been completed by the appointment of a
third member, even if the two arbitrators appointed by the parties are in agreement.23 Paragraph
8(d) of the LMAA Terms avoids this technical difficulty by expressly providing that even where
the arbitration agreement is for three arbitrators, the two original arbitrators shall have power to
make valid orders and awards even where a third arbitrator has not been appointed.

Appointment of tribunals of more than three arbitrators

and other cases

Agreements for more than three arbitrators usually arise where the parties have chosen arbitration
pursuant to rules requiring a panel of arbitrators. The arbitration rules will normally provide a
procedure for nomination of arbitrators. Typically, there is provision for the selection of
arbitrators by a trade association. In the absence of any such agreement the parties would have to
apply to court for directions under section 18 of the 1996 Act (see below on default
appointments).24 Section 18 also allows for appointments by the court where the parties have not
agreed on the appointment procedure and the case is not specifically dealt with under section 16
for example, where there are more than two parties and no agreed mechanism for appointing
arbitrators.

4. DEFAULT PROCEDURE WHERE ONE PARTY FAILS TO APPOINT AN

ARBITRATOR

Where a sole arbitrator is to be appointed

The disadvantage of providing for a sole arbitrator (or making no agreement on the number of
arbitrators so that it is presumed that the tribunal shall consist of a sole arbitrator25) is that if the
other party fails to appoint an arbitrator then it will ordinarily be necessary to make a court
application. Section 18 of the 1996 Act provides that:

(1) The parties are free to agree what is to happen in the event of a failure of the procedure
for the appointment of the arbitral tribunal.
There is no failure if an appointment is duly made under section 17 (power in case of default
to appoint sole arbitrator), unless that appointment is set aside.
(2) If or to the extent that there is no such agreement any party to the arbitration agreement
may (upon notice to the other parties) apply to the court to exercise its powers under this
section.
(3) Those powers are
o (a) to give directions as to the making of any necessary appointments;
o (b) to direct that the tribunal shall be constituted by such appointments (or any one or
more of them);
o (c) to revoke any appointments already made;
o (d) to make any necessary appointments itself.
(4) An appointment made by the court under this section has effect as if made with the
agreement of the parties.
(5) The leave of the court is required for any appeal from a decision of the court under this
section.

Section 18 will apply where a party has failed to respond to a notice requesting agreement to the
appointment of a sole arbitrator under section 16(3). The claimant should wait for the expiry of the
period given for agreeing on an appointment before applying to the court. If a notice does not
clearly inform the respondent of what is being asked, the court may refuse to intervene until the
respondent has been given a more informed opportunity to act. An application under section 18 in
relation to a maritime arbitration should be made by way of an arbitration claim form to the
Commercial Court or the Mercantile List (see the flow charts for an arbitration application at
Appendix L). If the respondent is resident outside the jurisdiction and declines to authorise

solicitors to accept service within the jurisdiction then it will probably be necessary to obtain leave
from the court to serve out of the jurisdiction under Part 6 of the Civil Procedure Rules.
Relief under section 18 is discretionary and the court must consider whether an appointment
would be appropriate in the circumstances of the case.26 The court, however, should err on the side
of constituting the tribunal (thus giving effect to the agreed clause), except in the small number of
cases where the arbitral process cannot result in a fair resolution of the dispute.27 The courts
discretion does not, however, extend to deciding to appoint more than one arbitrator since the
number of arbitrators to be appointed is stipulated by agreement or statute.28 Generally the court
will be keen to implement the parties agreement to arbitrate by making an appointment or giving
directions for the appointment, for instance by an arbitration association.29 However, if a claimant
has failed to make any real effort to obtain the respondents agreement to an appointment or the
existence of an agreement to arbitrate is being challenged, the court may refuse to make an
appointment.30 In The Sargasso,31 one of the reasons Hobhouse J gave for refusing to appoint an
arbitrator was that the matters in dispute were already the subject of pending court proceedings
between the claimant and another party. However, the courts have not adopted a consistent
approach in this regard. In Atlanska Plovidba,32 the fact that proceedings had already been
commenced in Spain did not prevent the court exercising its discretion pursuant to section 18, and
indeed was not considered a strong reason for declining to give effect to what was in effect an
exclusive jurisdiction clause.
As regards other factors that the court will take into consideration in exercising its discretion, case
law provides some guidance. In The Villa,33 Mance J took into account the nature of the dispute
and the availability of the arbitrators proposed by the parties. The court may also take into account
factors such as delay and prejudice which may arise out of an appointment.34 However,
in Atlanska Plovidba, the court made clear that factors normally considered in relation to forum
conveniens (e.g., the location of witnesses) were of scant relevance to the interpretation of
arbitration agreements, particularly international arbitration agreements falling within the scope of
the New York Convention.
In R Durtnell & Sons Ltd v Secretary of State for Trade and Industry 35 a dispute under a building
contract had crystallised by December 1993. There was further correspondence and in July 1997
the claimants made a formal request for arbitration, which the DTI rejected on grounds of delay.
Judge Toulmin QC allowed the claimants application for the appointment of an arbitrator under
section 18 of the 1996 Act. He held that the court has a discretion whether or not to intervene
under section 18. It should refuse to intervene if it considers that it would be impossible to obtain
a fair resolution of the dispute without undue delay or expense. In the present case the delay was
not such that it would be wrong for the court to intervene.
A more surprising case was Indescon Ltd v Ogden 36 where ten years elapsed between the issuing
of a notice of arbitration and the appointment of an arbitrator but the respondent did not claim that
the delay caused prejudice. Wilcox J considered that the right to apply for appointment of an
arbitrator was not lost with the passage of time. There was no express provision that the parties
should proceed without delay in appointing an arbitrator, and there were no grounds for implying
such a term into the contract.

Section 18 of the 1996 Act also gives the court power to revoke any appointment already made.
This power was intended to enable the court to act where one of the parties could claim unfair
treatment on the ground that his arbitrator had been imposed on him by the court while the other
had been able to choose his own arbitrator.37 It remains unclear why the term revoke is used in
section 18. The term set aside is used in section 17 but both terms would appear to have the
same effect. Under section 19 of the 1996 Act the court will take into account the parties
agreement as to the arbitrators qualifications in deciding whether and how, to exercise its powers
under section 18 (this provision follows from Article 11(5) of the Model Law).

Where two or three arbitrators are to be appointed

An arbitration agreement providing for two or three arbitrators offers the advantage that each
party can choose its own arbitrator and an easy method is usually available for progressing the
arbitration where there has been default in appointment. Section 17 of the 1996 Act provides a
simple default procedure in cases involving two parties where each party is to appoint an
arbitrator. (In other cases section 18 would apply.) It enables a party to appoint its arbitrator as
sole arbitrator where the other party has failed to appoint an arbitrator. Sub-section 17(3) enables
the party in default to apply to the court to set aside the default appointment. The grounds for
exercising the power to set aside an appointment are not set out. The court would have a wide
discretion to take into account the specific circumstances of the case and also the parties
intentions.38 The factors most likely to be relevant are whether the respondent had been given the
requisite notice to justify a default appointment and if the appointment was within the terms of the
arbitration agreement. The time limits for enabling the respondent to make his own appointment
under section 16 may be extended by the court under section 79 of the Act, but in the ordinary
case time would not be extended.39 Section 17 provides that:

(1) Unless the parties agree otherwise, where each of two parties to an arbitration agreement
is to appoint an arbitrator and one party (the party in default) refuses to do so, or fails to do
so within the time specified, the other party, having duly appointed his arbitrator, may give
notice in writing to the party in default that he proposes to appoint his arbitrator to act as sole
arbitrator.
(2) If the party in default does not within 7 clear days of that notice being given(a) make
the required appointment, and (b) notify the other party that he has done so.
(3) Where a sole arbitrator has been appointed under subsection (2) the party in default may
(upon notice to the appointing party) apply to the court which may set aside the appointment.

The procedure set out in section 17 for a default appointment will apply where there has been a
breakdown in the agreed or statutory procedure for appointment and there is no agreed mechanism
for default appointments. A failure of the statutory appointment procedure will arise where the
respondent has failed (or refused) to appoint his own arbitrator within the time specified (at least
14 days) in a notice given under section 16 of the 1996 Act (see above on the procedure for
appointment).
The claimant must then serve a further notice that he proposes to appoint his arbitrator to act as
sole arbitrator. The notice should state that if the party does not make the required appointment
and also notify the claimant of the appointment within seven clear days, the claimant may appoint

his arbitrator as sole arbitrator.40 This will ordinarily involve returning to the arbitrator to obtain
his consent to act as sole arbitrator and giving the respondent notice that the arbitrator originally
appointed is now to act as sole arbitrator. The requirements of both sections 16 and 17 should be
carefully observed, otherwise the default appointment risks being set aside under section
17(3).41 However, the court will not unravel a default appointment that has been made according
to these requirements or the parties agreement.
In Minermet SpA v Luckyfield Shipping Corporation,42 M, a ship charterer, applied for an
extension of time for the appointment of an arbitrator pursuant to section 79 of the 1996 Act. Ms
agreement with L had contained an arbitration clause permitting each party to nominate an
arbitrator within 14 days of being informed that the other party had done so. This clause provided
that the two arbitrators thus appointed would then themselves appoint a third arbitrator, resulting
in a three-person tribunal. The clause further provided that if a party failed to appoint an arbitrator
then the decision of the single arbitrator appointed should be final. M commenced a claim against
L, but failed to appoint an arbitrator within 14 days. L nominated O as its arbitrator and therefore,
Ls lawyers asserted that O would be sole arbitrator. M then purported to appoint S as its
arbitrator. Subsequently, O ruled he had been properly appointed as sole arbitrator and M
challenged this, claiming there had been a serious irregularity, namely a failure to comply with the
general duty of fairness laid down by section 33 of the 1996 Act. M also contended that O lacked
substantive jurisdiction to make the ruling that he had jurisdiction and sought an extension of time
for the appointment of its arbitrator pursuant to section 79 of the 1996 Act.
The court refused the application for an extension of time, on the grounds that the parties had
arrived at their own agreement as to the arbitration procedure set out in the arbitration clause.
Section 17 of Arbitration Act 1996 had no application, since it only applied unless the parties
otherwise agree. The terms of the arbitration clause were clear and valid, especially given the
absence of any waiver by L or its lawyers of Ls right to adopt the procedure set out therein. The
appointment of O as sole arbitrator was therefore valid, given the expiry of the 14-day period.
There was no obligation to agree to the late appointment of an arbitrator by the defaulting party,
nor was there any risk of substantial injustice arising from the appointment of O as sole
arbitrator so as to justify any extension of time.

Where there are to be more than three arbitrators and

other cases
Section 18 allows for application to court for a default appointment in cases where the parties
have not agreed on the default procedure and where the case does not fall within section 17 (i.e.,
each party is to appoint his own arbitrator).

5. APPOINTMENT OF UMPIRES
Arbitration clauses in shipping contracts often provide for the appointment of two arbitrators and
an umpire in the case of any disagreement. The role of the umpire is to take over decision making
from the disagreeing arbitrators and act as if he were sole arbitrator.43 Once the arbitrators have
disagreed and referred the dispute to an umpire they are no longer able to make binding decisions
(it is said that they are functus officio). In commodity arbitrations it used to be common practice

that if the dispute was referred to an umpire, the original arbitrators would act as advocate on
behalf of the parties who appointed them. In maritime arbitrations this practice has not applied for
many years.44Instead the original arbitrators will ordinarily cease to act in the arbitration once they
have referred the dispute to the umpire.
Section 16(6) of the 1996 Act will apply for the appointment of umpires in the absence of
agreement by the parties on the procedure for appointment. It provides that:
If the tribunal is to consist of two arbitrators and an umpire

(a) each party shall appoint one arbitrator not later than 14 days after service of a request in
writing by either party to do so, and
(b) the two so appointed may appoint an umpire at any time after they themselves are
appointed and shall do so before any substantive hearing or forthwith if they cannot agree on
any matter relating to the arbitration.

Section 21 of the 1996 Act makes clear that the parties are free to agree on the functions of the
umpire; in particular whether he is to attend the proceedings and when he is to replace the other
arbitrators. Unless agreed otherwise, the umpire should attend the proceedings (i.e., oral hearings)
and should be supplied with the same documents as the arbitrators. This will save time and money
by avoiding the need for a re-hearing if the original arbitrators disagree. The umpire should not,
however, participate in decision making or drawing up of the award unless the arbitrators
disagree.45 Paragraph 9 of the LMAA Terms largely follows the statutory scheme except that it
expressly provides that the umpire may take part in the hearing (as opposed to merely attending it)
and may also deliberate with the original arbitrators.46 This means that the umpire may ask
questions in the hearing and join the arbitrators in their discussions over decision making. He may
therefore influence the decision making even if he does not have the power actually to make
decisions. In practice it is very common for the arbitrators to ask the parties to agree (shortly
before the hearing, or even at the hearing itself) that the umpire should be treated as a third
arbitrator because he can then participate fully in the decision making.
An arbitration agreement contains an implied term empowering two arbitrators to appoint an
umpire before they disagree,47 and in the absence of agreement otherwise they will be required to
appoint an umpire before a substantive hearing.48 The reference in section 16(6)(b) to a
substantive hearing is probably intended to distinguish a hearing on the merits of the dispute
from a hearing on an interlocutory matter (e.g., security for costs). Where the arbitration is on
documents alone the arbitrators invariably try to save costs by waiting until a disagreement has
arisen before appointing an umpire.
It would appear that the dispute should be referred to an umpire if the arbitrators fail to agree on
an interlocutory matter. (The reference to a matter in section 16(6) makes it clear that an umpire
should be appointed if the arbitrators disagree on any single issue.49) If deadlock occurs at an
interlocutory stage the umpire will normally take over the entire arbitration unless the parties
agreed that the original tribunal should resume authority. In choosing an umpire the arbitrators
must consider who would be suitable: random selection is not valid unless it is from a panel of
potential umpires that have already been agreed as suitable.50

Default appointments of umpires

If the arbitrators disagree but fail to give notice of their disagreement or fail to appoint an umpire,
any of the parties to the arbitration may apply to court under sections 18 or 21(5) of the 1996 Act
for an order that an umpire should be appointed to replace the arbitrators as the tribunal.

6. SUBSTITUTING ARBITRATORS AND UMPIRES

A vacancy in the tribunal may arise for a number of reasons, in particular: resignation, refusal to
act, removal by the court, incapacity or death. The parties agreement is the starting point for
dealing with a vacancy. The LMAA Terms provide for filling vacancies where an arbitrator
resigns because he is unable to provide a hearing date within a reasonable time (see Chapter 11).
In the absence of such agreement, section 27 of the 1996 Act provides a clear and comprehensive
code applicable to appointments where the parties have not agreed on how to deal with a vacancy.
It provides that:

(1) Where an arbitrator ceases to hold office, the parties are free to agree
o (a) whether and if so how the vacancy is to be filled,
o (b) whether and if so to what extent the previous proceedings should stand, and
o (c) what effect (if any) his ceasing to hold office had on any appointment made by him
(alone or jointly).
(2) If or to the extent that there is no such agreement, the following provisions apply.
(3) The provisions of section 16 (procedure for appointment of arbitrators) and 18 (failure of
appointment procedure) apply in relation to the filling of the vacancy as in relation to an
original appointment.
(4) The tribunal (when reconstituted) shall determine whether and if so to what extent the
previous proceedings shall stand.
This does not affect any right of a party to challenge those proceedings on any ground which
had arisen before the arbitrator ceased to hold office.
(5) His ceasing to hold office does not affect any appointment by him (alone or jointly) of
another arbitrator, in particular any appointment of a chairman or umpire.

Section 27 is modelled on Article 15 of the Model Law and will apply when an arbitrator ceases
to hold office. This would cover death, resignation and removal by the court.51 In summary, the
parties can agree on how to fill a vacancy in the tribunal but, in the absence of such an agreement
in writing,52 section 27 provides that the procedure for appointing a substitute should be the same
as that by which the original arbitrator was appointed. The parties may apply to court under
section 18 if there is default in this appointment procedure and the court will generally give effect
to the parties agreement on the original appointment procedure as far as possible.53
The reconstituted tribunal may decide whether and if so to what extent, the previous proceedings
should stand.54 Existing interim awards would probably remain binding but the status of previous
proceedings may be disputed. In any substantial arbitration the parties would be well advised to
agree in advance the terms on which the arbitration may proceed (both as to replacing the
arbitrator and also as to the status of the previous proceedings). They might even attempt to obtain
insurance to cover the risk of increased costs.

7. REMEDIES FOR DEFECTIVE APPOINTMENTS

Where a party has reason to argue that a tribunal has been incorrectly appointed it may seek to
challenge the appointment. The main methods of challenge in relation to appointments are:

(1) applying to the court to set aside the default appointment of a sole arbitrator under section
17(3) of the 1996 Act;
(2) applying to the tribunal itself for a ruling on whether the tribunal has been properly
constituted under section 30(1)(b) of the Act; and then possibly applying to the court to
dispute the tribunals ruling under section 67 of the Act;
(3) applying to the court for a ruling on whether the tribunal has been properly constituted
under section 32 of the Act if that sections conditions are satisfied (see Chapter 6 above).

A party could also object to an appointment being made under section 18. The grounds for
challenging an appointment under sections 17 and 18 of the Act are not listed and the court would
have a wide discretion as to whether or not an appointment should be set aside. The main grounds
for challenge might include that the appointment:

(a) was made without the required notice;

(b) was outside the terms of the arbitration clause; or
(c) could be challenged on grounds of bias or unsuitability.

Challenge to the appointment of an arbitrator could also be made by seeking his removal under
section 24 on the grounds of:

(a) impartiality;
(b) lack of qualification;
(c) physical or mental incapacity.

Permission to appeal to the Court of Appeal is required for any appeals from judicial remedies
governing appointment.55
A party must act promptly in making any objection to an appointment as failure to do so may
preclude an objection being raised at a later stage56 (see section 73 discussed in more detail in
Chapter 11). This means that challenges to the appointment of an arbitrator should generally be
made as soon as the ground for objection comes to light. Subject to this substantial limitation,
challenge is available after an award is made by:

(a) challenging the award on the ground of lack of substantive jurisdiction (see sections 67
and 72 of the 1996 Act discussed in Chapter 6);
(b) challenging the award for serious irregularity (see section 68 discussed in Chapter 22).57

Apart from relief sought under section 72, these challenges are subject to a 28-day time limit from
the date of the award, or if there has been any arbitral process of appeal or review, from the date
when the applicant was notified of the result of that process (see section 70(3)).

8. COMMENCING ARBITRATION FOR THE PURPOSE OF TIME LIMITS

The steps required to make a valid appointment for the purposes of ensuring that an arbitrator has
power to bind the parties (i.e., for the purposes of jurisdiction) are not the same as the steps
necessary for a claimant to interrupt a time limit for making a claim. The statutory definition of
the commencement of an arbitration for the purpose of statutory time limits remains largely
unchanged under the 1996 Act. Section 14 provides that:

(1) The parties are free to agree when arbitral proceedings are to be regarded as commenced
for the purposes of this Part and for the purposes of the Limitation Acts.
(2) If there is no such agreement the following provisions apply.
(3) Where the arbitrator is named or designated in the arbitration agreement, arbitral
proceedings are commenced in respect of a matter when one party serves on the other parties
a notice in writing requiring him or them to submit that matter to the person so named or
designated.
(4) Where the arbitrator or arbitrators are to be appointed by the parties, arbitral proceedings
are commenced in respect of a matter when one party serves on the other party or parties
notice in writing requiring him or them to appoint an arbitrator or to agree to the appointment
of an arbitrator in respect of that matter.
(5) Where the arbitrator or arbitrators are to be appointed by a person other than a party to the
proceedings, arbitral proceedings are commenced in respect of a matter when one party gives
notice in writing to that person requesting him to make the appointment in respect of that
matter.

Paragraph 4 of the LMAA Terms makes clear that section 14 of the 1996 Act shall apply for the
purpose of determining what dates arbitral proceedings are to be regarded as having commenced.

What notice is required to commence arbitration?

Section 14 was intended to restate the previous law and the notice requirement closely follows the
wording of the previous legislation.58 In the absence of any other agreement, a party will only
have effectively interrupted time for the purpose of statutory time limits if he gives the other side
notice in writing requiring him or them to appoint an arbitrator or to agree to the appointment of
an arbitrator in respect of the matter. There has been considerable case law on this issue but it is
now clear that the courts will not take a strict or technical approach in interpreting a notice
purporting to commence arbitration. They will be influenced by the fact that notices to commence
arbitration are often given by parties whose first language is not English or business people who
have little understanding of the technicalities of English law.59 Moore Bick J in Atlanska
Plovidba 60 stated that If a notice of arbitration is to be effective, it must identify the dispute to
which it relates with sufficient particularity and must also make it clear that the person giving it is
intending to refer the dispute to arbitration, not merely threatening to do so if his demands are not
met. It is likely that the court will not require an express request for the appointment of an
arbitrator: instead it will look to see whether, regardless of its strict language, the notice makes
clear to the addressee that the claimant is invoking the arbitration agreement and requires steps to
be taken to constitute a tribunal.
In Seabridge Shipping AB v AC Orssleffs EFTFs A/S,61 Thomas J held that a notice sent to the
claimants arbitrator, but also copied to the respondents, asking them to attend to the appointment

of their arbitrator was sufficient to amount to commencement with section 14. In earlier case law,
there had been two distinct schools of thought and Thomas J expressly avoided entering the debate
as to which strand in earlier case law adopted the correct approach. He emphasised that section 14
should be interpreted broadly and flexibly. A strict and technical approach to this section has no
place in the scheme of the 1996 Act. Notices are given by international traders and businessmen
who often use shorthand expressions or ways of doing things, which are objectively clear in
giving notice to the other party of a reference and of the requirement to appoint an
arbitrator.62 He refused to rely on the pre-1996 Act cases. Instead he suggested that in
interpreting the 1996 Act, the court should look to its language and not have recourse to the earlier
law unless the Act did not cover the point or there was a specific point upon which it would be
desirable to examine the earlier case law.
The House of Lords endorsed Thomas Js approach to the relevance of pre-1996 Act cases
in Lesotho Highlands Authority v Impregilo SA 63 and his approach on section 14 has also been
followed in subsequent cases.64 This may render the earlier case law somewhat academic.
However, the following pre-1996 Act case law has also been relied upon in those cases to support
what now appears to be the prevailing view.
In Nea Agrex SA v Baltic Shipping Co,65 the claimants had sent a notice stating, please advise
your proposals in order to settle this matter, or name your arbitrators. The Court of Appeal
considered that this was sufficient to commence arbitration for the purposes of the applicable
Limitation Act (worded similarly to section 14 of the 1996 Act), even though the notice was
conditional and the arbitration clause was to be construed as providing only for a sole arbitrator.
Lord Denning MR held that a notice requiring a matter to be referred to arbitration would include
a request by implication to agree to the appointment of an arbitrator.66 Shaw LJ considered that
it was necessary for the notice in substance to communicate that the claimant was invoking the
arbitration agreement and required the other party to do something towards setting the arbitration
in train.67
In The Baltic Universal,68 the claimants sent a notice notifying the shipowners P&I Club that they
had appointed an arbitrator in respect of the parties dispute. Moore-Bick J suggested that a notice
would be sufficient to commence arbitration if it makes it clear by whatever language that the
sender is invoking the arbitration agreement and is requiring the recipient to take steps in response
to enable the tribunal to be constituted.69
In The Smaro,70 the claimants had sent a notice to their arbitrator, copied to the other side, asking
him to accept appointment. Rix J decided that this was sufficient to commence arbitration since it
was an implicit request to the other side to appoint an arbitrator. He considered that there were
strong policy reasons in favour of a more flexible commercial approach. He rejected a strict or
formulaic approach, holding instead that the question is whether the notice sufficiently, or in
substance, makes clear that the respondent is expected to act on the claimants submission of a
dispute to arbitration.
By contrast, the more restrictve view found in Vosnoc Ltd v Trans Global Projects Ltd 71 is less
likely to be followed. Here, HHJ Raymond Jack QC held that a notice stating that by this letter
the dispute between our respective companies is referred to the arbitration of three arbitrators in

London was not sufficient to amount to commencement of arbitration within the meaning of
section 14.
The court will probably take a flexible approach in giving effect to agreements as to what is
required to commence arbitration for the purpose of section 14, for instance paragraph 10 of the
LMAA Terms would probably cover new claims that arise subsequently to the tribunals
appointment. However, it appears that section 14 will be treated as a comprehensive code in the
absence of such agreement.72
If a party failed to comply with the requirements of section 14 (or an agreed procedure) but the
other side appointed an arbitrator or continued to participate without objection in the arbitration
after the appointment of a sole arbitrator by default, then it is likely that the respondent would be
precluded from raising objections based on an irregularity in the tribunals appointment.73 The
same rules on giving notice for commencing arbitration will apply to interrupt the statutory time
limit for commencing a counterclaim.74

Service of the notice

The parties may agree on the method of serving notices for the purpose of commencing
arbitration, but in the absence of such agreement in writing, sections 76(3) to (5) of the 1996 Act
explain how service is effected. Essentially the notice must be served by effective means, which
includes delivery by post to the addressees last known business address or, if a company, its
registered or principal office. It would probably also include fax, telex and email if these were
reasonably effective in the circumstances.
In Bernuth Lines Ltd v High Seas Shipping Ltd 75 the claimant sent an email asking the respondent
to agree to the appointment of an arbitrator. The email was sent to an address that had been
published as the respondents only address in Lloyds Maritime Directory and on their website. It
(and subsequent emails) generated a receipt confirming delivery to the respondent but due to an
internal failing the emails had been ignored. Cooke J held that the arbitration had been validly
commenced, email is habitually used by businessmen and having held out the email address as its
only email address the respondent could not be surprised to find official emails sent to it.
If the LMAA Terms apply (see below) and solicitors have been authorised to act in connection
with the proceedings then service on the solicitor would also be sufficient (see paragraph 27 of the
LMAA Terms).

Contractual time-bars
Where there is a contractual time-bar it is more common for the contract to set out the steps
required to commence arbitration, or to take some other required step within the given time. For
instance, the Centrocon arbitration clause requires the claimant to make a written claim and
appoint an arbitrator within the given time. The courts discretion to extend contractual time limits
is discussed in Chapter 8. Where there is an arbitration clause, the commencement of arbitration
will usually amount to suit for the purposes of interrupting the Hague Rules time limits.
However, commencing court proceedings or a foreign arbitration within time would probably be

ineffective to stop time running where the contract provides for arbitration in London since
incompetent proceedings do not amount to suit.76
Paragraph 3(b) of the LMAA Small Claims Procedure (2006) provides that payment of the Small
Claims fee, as fixed from time to time by the LMAA within 14 days of agreement being reached
upon a sole arbitrator under paragraph 2(a) shall be a condition precedent to the valid
commencement of proceedings under the Small Claims Procedure. It is arguable that if an
arbitration clause expressly provided for the LMAA Small Claims Procedure then this clause
could operate as a time-bar for any claim subject to the Procedure. It is doubtful, however, that it
would be construed as such. First, paragraph 2(a) provides that if a dispute has arisen and the
parties have agreed that it should be referred to arbitration under the Small Claims Procedure then,
unless a sole arbitrator has already been agreed on, either party may start the arbitration by giving
notice to the other party requiring him to join in appointing a sole arbitrator. Second, it would be
difficult to use paragraph 3(b) as a time-bar if it is unclear whether or not the claim is within the
Small Claims Procedure. However, claimants should err on the side of caution if a claim might be
time-barred: possibly making a payment of fees to the tribunal without prejudice as to whether the
claim is subject to the Procedure. If the parties have not agreed on the Small Claims Procedure
then the normal method for commencing arbitration should be sufficient to interrupt the limitation
period.

9. TERMS OF APPOINTMENT
An arbitrator may be validly appointed without prior agreement as to the terms upon which he will
act. It is often agreed that an appointment is made expressly pursuant to the Arbitration Acts.
These words probably have little legal effect since if the seat of the arbitration is in England and
Wales, any appointment of an arbitrator will ordinarily be governed by the 1996 Act.77 A
reference to the 1950 Arbitration Act and any subsequent alterations would be treated as a
referring to the 1996 Act.78 An arbitration clause may specify the rules according to which the
arbitration is to be conducted (e.g., by referring to the LMAA Terms). This will amount to an
agreement binding the parties and the arbitrator (although the arbitrator could refuse or resign the
appointment if, exceptionally, he objected to those rules79). In the absence of provision in the
arbitration clause, or an agreement on procedure made on appointment, the parties are free to
adopt any procedure unless it conflicts with the mandatory provisions of the 1996 Act (in
particular, section 33).
Maritime arbitrators commonly accept appointment on LMAA Terms and this will certainly mean
that such appointments are subject to those terms (e.g., concerning the right to booking fees).
Accepting the appointment as such may not, in itself, mean that the arbitration is subject to the
LMAA Terms and their application to an arbitration is discussed in detail in Chapter 1. Terms of
payment are sometimes specifically agreed on appointment (typically by non-LMAA arbitrators
such as barristers) or by reference to arbitration rules to which the tribunal and parties agree. It is
not common for LMAA arbitrators to make express agreements on fees at appointment. In the
absence of an agreement as to fees the arbitrator is entitled to a reasonable fee.80
1 See Chapter 9 on extending the time for commencing arbitration.

2 Itex Shipping Pte Ltd v China Ocean Shipping Co, The Jing Hong Hai [1989] 2 Lloyds Rep
522 at 524 per Steyn J.
3 LMAA Terms, paragraph 8.
4 Paragraphs 78-79 of the DAC Report.
5 Laertis Shipping Corporation v Exportadora Espanola de Cementos Portland SA, The
Laertis [1982] 1 Lloyds Rep 613.
6 Atlanska Plovidba v Consignaciones Asturianas SA [2004] EWHC 1273 (Comm); [2004] 2
Lloyds Rep 109 at paragraph 17.
7 Tradax Export SA v Volkswagenwerk AG [1970] 1 Lloyds Rep 62, followed in Charles M
Willie & Co Ltd v Ocean Laser Shipping Ltd [1999] 1 Lloyds Rep 225 at 236.
8 Bruce Harris, Michael Summerskill and Sara Cockerill, [1993] 9 Arbitration International 275
at 281.
9 Atlanska Plovidba v Consignaciones Asturianas SA [2004] EWHC 1273 (Comm); [2004] 2
Lloyds Rep 109.
10 Farrar v Cooper (1890) 44 Ch D 323.
11 Section 76(1) of the 1996 Act.
12 Bernuth Lines Ltd v High Seas Shipping Ltd [2005] EWHC 3020 (Comm); [2006] 1 Lloyds
Rep 537.
13 Tradax Export SA v Volkswagenwerk AG [1970] 1 Lloyds Rep 62. There may be special cases
where an arbitrator has given consent in advance.
14 Casillo Granni v Napier Shipping Co, The World Ares [1984] 2 Lloyds Rep 481 where claims
not contemplated in the original appointment subsequently became time-barred.
15 Section 15(2) of the 1996 Act.
16 Section 16(5) requires 14 days to be given from service of the request to appoint. The required
method of service of a notice can be agreed but will usually be governed by section 76. The
calculation of time will be governed by section 78 unless the parties agree otherwise.
17 Thomas v Fredericks (1847) 10 QB 775.
18 Tradax Export SA v Volkswagenwerk AG [1970] 1 Lloyds Rep 62, followed in Charles M
Willie & Co (Shipping) Ltd v Ocean Laser Shipping Ltd, The Smaro [1999] 1 Lloyds Rep 225.
19 Section 16(5) of the 1996 Act.
20 The NYPE form specifies New York as the venue but London may be substituted.
21 Section 20(3) and (4) of the 1996 Act.
22 See section 9 below on application of the LMAA Terms and Fal Bunkering v Grecale
Incorporated [1990] 1 Lloyds Rep 369.

23 Cf. Termarea SRL v Rederiaktibolaget Sally, The Dalny [1979] 2 Lloyds Rep 439, a case
under the old section 9 of the 1950 Act under which a reference to three arbitrators was deemed to
have effect as if it provided for appointment of an umpire and not a third arbitrator. Mocatta J
relied on section 9 and held that the award of two arbitrators was valid even though no third
arbitrator had been appointed as agreed. See also Fletamentos Maritimos SA v Effjohn
International BV [1995] 1 Lloyds Rep 311.
24 Section 16(7) of the 1996 Act.
25 Section 15(3) of the 1996 Act.
26 Villa Denizcilik Sanayi VE Ticaret AS v Longen SA, The Villa [1998] 1 Lloyds Rep 195; R
Durtnell & Sons Ltd v Secretary of State for Trade and Industry [2001] 1 Lloyds Rep 275.
27 Atlanska Plovidba v Consignaciones Asturianas SA [2004] EWHC 1273 (Comm); [2004] 2
Lloyds Rep 109, paragraph 24 per Moore-Bick J.
28 Villa Denizcilik Sanayi VE Ticaret AS v Longen SA, The Villa [1998] 1 Lloyds Rep 195 at
198.
29 R Durtnell & Sons Ltd v Secretary of State for Trade and Industry [2001] 1 Lloyds Rep 275;
See also Atlanska Plovidba v Consignaciones Asturianas SA [2004] EWHC 1273 (Comm); [2004]
2 Lloyds Rep 109, paragraph 24 per Moore-Bick J.
30 See, by analogy, Al-Naimi v Islamic Press Agency Inc [2000] 1 Lloyds Rep 522 for the courts
approach when jurisdictional issues arise on an application for a stay.
31 Petredec Ltd v Tokumaru Kaiun Co Ltd [1994] 1 Lloyds Rep 162.
32 Atlanska Plovidba v Consignaciones Asturianas SA [2004] EWHC 1273 (Comm); [2004] 2
Lloyds Rep 109.
33 Villa Denizcilik Sanayi VE Ticaret AS v Longen SA, The Villa [1998] 1 Lloyds Rep 195.
34 R Durtnell & Sons Ltd v Secretary of State for Trade and Industry [2001] 1 Lloyds Rep
275; Frota Oceanica v Steamship Mutual Underwriting Association, The Frotanorte [1996] 2
Lloyds Rep 461 and Secretary of State for Foreign and Commonwealth Affairs v Percy Thomas
Partnership [1998] 65 Con LR 11 (decided under the 1950 Act).
35 [2001] 1 Lloyds Rep 275. See the comments of Mustill & Boyd, 2001 Companion, p. 285
querying whether the delay in commencing arbitration should be penalised by the courts.
36 [2004] EWHC 2326; [2005] 1 Lloyds Rep 31.
37 Paragraph 88 of the DAC Report.
38 Paragraph 85 of the DAC Report suggests that the court would take into account the overall
philosophy of the Act, this is probably represented by the principles set out in section 1 of the
Act.
39 Paragraph 81 of the DAC Report.

40 In the absence of agreement otherwise the computation of seven clear days will be assessed in
accordance with section 78(4) and (5) of the 1996 Act.
41 Ministry of Food Government of Bangladesh v Bengal Liner Ltd, The Bengal Pride [1986] 1
Lloyds Rep 167 is an example of possible problems.
42 [2004] EWHC 729; [2004] 2 Lloyds Rep 348.
43 Section 21(4) of the Act.
44 Paragraph 3 of the LMAA Terms makes clear that an original arbitrator is in no sense to be
considered as the representative of his appointer.
45 Section 21(4) of the 1996 Act, see Fletamentos Maritimos SA v Effjohn International
BV [1995] 1 Lloyds Rep 311 at 313.
46 Paragraph 9(d) of the LMAA Terms. This provision was probably a reaction to challenges such
as that in Fletamentos Maritimos v Effjohn International BV [1997] 2 Lloyds Rep 302. It was not
intended that section 21 of the 1996 Act would allow umpires to take part in proceedings
(Paragraph 92 of the DAC Report).
47 Fletamentos Maritimos SA v Effjohn International BV [1995] 1 Lloyds Rep 311. Section
16(6)(b) of the 1996 Act reflects the common law position.
48 Section 16(6)(b) of the 1996 Act.
49 DAC Supplementary Report on the Arbitration Act 1996, paragraph 22.
50 Mustill and Boyd, 2nd edn, p 192.
51 See Mustill & Boyd, 2001 Companion, p. 294. Article 15 of the Model Law covers withdrawal
and the DAC (paragraph 117 of the DAC Report) intended that section 27 should reflect that
provision, accordingly it probably covers resignation.
52 Section 5 of the 1996 Act.
53 Section 27(3), see Federal Insurance Co v Transamerica Occidental Life Insurance Co [1999]
2 Lloyds Rep 286.
54 Section 27(4) of the 1996 Act.
55 See sections 17(4), 18(5), 21(6), 24(6), 32(6) and 67(4).
56 Section 73 of the 1996 Act. A party could possibly preserve its right to object on grounds of
jurisdiction (see Chapter 6) if it took no part in the arbitration, see section 72.
57 Although defects in the appointment process are more likely to fall within section 67
see Bernuth Lines Ltd v High Seas Shipping Ltd [2005] EWHC 3020 (Comm); [2006] 1 Lloyds
Rep 537.
58 Paragraph 76 of the DAC Report and section 27(3) of the 1939 Limitation Act and section
34(3) of the 1980 Limitation Act.

59 Allianz Versicherungs-Aktiengesellschaft v Fortuna Co Inc, The Baltic Universal [1999] 1

Lloyds Rep 497 at 503; see also Seabridge Shipping AB v AC Orssleffs EFTFs A/S [1999] 2
Lloyds Rep 685 at 690 and Atlanska Plovidba vConsignaciones Asturianas SA [2004] EWHC
1273 (Comm); [2004] 2 Lloyds Rep 109 at para 10.
60 Atlanska Plovidba v Consignaciones Asturianas SA [2004] EWHC 1273 (Comm); [2004] 2
Lloyds Rep 109.
61 [1999] 2 Lloyds Rep 685.
62 Ibid. at 690.
63 [2005] UKHL 43; [2006] 1 AC 221.
64 Atlanska Plovidba v Consignaciones Asturianas SA [2004] EWHC 1273 (Comm); [2004] 2
Lloyds Rep 109, paragraph 17, Taylor Woodrow Construction v RMD Kwikform Ltd [2008]
EWHC 825 (TCC), Bulk & Metal Transport (UK) LLP vVoc Bulk Ultra Handymax Pool
LLC [2009] EWHC 288 (Comm); [2009] 1 Lloyds Rep 418.
65 [1976] 2 Lloyds Rep 47, Bulk & Metal Transport (UK) LLP v Voc Bulk Ultra Handymax Pool
LLC [2009] EWHC 288 (Comm); [2009] 1 Lloyds Rep 418 also involved a conditional notice.
66 [1976] 2 Lloyds Rep 47 at 51, Goff LJ agreed at 55 but did not consider it necessary to decide
the point.
67 [1976] 2 Lloyds Rep 47 at 58.
68 Allianz Versicherungs-Aktiengesellschaft v Fortuna Co Inc, The Baltic Universal [1999] 1
Lloyds Rep 497.
69 Ibid., at 503.
70 Charles M Willie & Co v Ocean Laser Shipping Ltd [1999] 1 Lloyds Rep 225.
71 [1998] 1 Lloyds Rep 711.
72 Seabridge Shipping AB v AC Orssleffs EFTFs A/S [1999] 2 Lloyds Rep 685 at 691.
73 Section 73 of the 1996 Act.
74 Interbulk Ltd v Ponte dei Sospiri Shipping Co, The Standard Ardour [1988] 2 Lloyds Rep
159.
75 [2005] EWHC 3020 (Comm); [2006] 1 Lloyds Rep 537.
76 For example, The Havhelt [1993] 1 Lloyds Rep 523 at 525 and Government of Sierra
Leone v Marmaro Shipping Co Ltd, The Amazona [1989] 1 Lloyds Rep 130 at 135; Thyssen
Inc v Calypso Shipping Corporation SA [2000] 2 Lloyds Rep 243.
77 Sections 2(1) and 4 of the 1996 Act.
78 The Villa, Villa Denizcilik Sanayi VE Ticaret AS v Longen SA [1998] 1 Lloyds Rep 195.
79 In relation to resignation see Chapter 11 on the arbitrator.

80 Section 28(1) of the 1996 Act and see Chapter 20 on fees.

Chapter 11

The Arbitrator
The Arbitrator

1. The arbitrators status

2. Qualifications
3. Bias
4. Remedies against an arbitrator
5. Loss of the right to object to an arbitrator
6. Arbitrators immunity
7. Resignation of an arbitrator

1. THE ARBITRATORS STATUS

The relationship between the parties to an arbitration and the tribunal is most commonly analysed
as a contract. In broad terms this analysis is appropriate, as an arbitrators jurisdiction is based on
consensus and an arbitrators appointment is properly treated as an enforceable contract. The
contractual analysis cannot, however, fully explain the role of an arbitrator.1 For example,
regardless of the terms of his appointment he is under a duty to act fairly and impartially between
the parties and to adopt procedures suitable to the circumstances of the case.2 An arbitrator also
enjoys immunity from claims for breach of this duty or any contractual term of his
appointment.3 Furthermore, the relationship between an arbitrator and the party who did not
appoint him cannot easily be analysed as an orthodox contract concluded by acceptance of an
offer.4 In understanding an arbitrators rights and duties it is necessary to consider his judicial role
as well as his contractual relationship with the parties. The courts have analysed the arbitral
process as based on a trilateral contract existing between the two parties and the tribunal, pursuant
to which an arbitrator assumes a quasi-judicial status.5 An arbitrators judicial role in deciding
disputes impartially explains some of the more unusual aspects of his relationship, such as his
immunity and his mandatory duty to act fairly.
In addition to status and contract, restitutionary principles may assist in explaining some aspects
of an arbitrators relationship with the parties.6 If the parties have made no agreement as to the
arbitrators fees, then an arbitrators statutory right to fees and expenses is based on principles of
restitution: he is entitled to reasonable remuneration for services provided to the parties.7

2. QUALIFICATIONS
Anyone can be an arbitrator. No special qualification is required unless the parties have so agreed.
In practice, most maritime arbitrators are experienced professional people who have worked in the
shipping trade (e.g., master mariners, brokers, surveyors, superintendents) or as commercial
lawyers. A number of maritime arbitrators arbitrate full time as a profession.

Qualifications required by the arbitration clause

If an express provision in an arbitration agreement relating to the qualifications or characteristics
of the arbitrator is not complied with, the appointment will fall outside the arbitration agreement
and the arbitrator will lack the power to make the decisions binding on the parties. Although the
position is not entirely clear, failure to comply with a requirement in the arbitration clause for a
particular qualification or attribute might enable the other party to challenge the arbitrators
jurisdiction on the grounds that the tribunal is not properly constituted.8 It is clear though that a
party can apply to remove an arbitrator on grounds that he lacks the qualifications required by the
arbitration agreement under section 24(1)(b). However, a party may lose the right to challenge on
this ground if it fails to raise the objection at the first reasonable opportunity (see below on loss of
the right to object). Contractual requirements relating to qualifications are also relevant in
applications to court for the appointment of arbitrators.9
It is common practice for an arbitration agreement to include express requirements relating to
qualifications, for example that arbitrators shall be engaged in the shipping trade or
commercial men. The courts generally give these provisions a broad interpretation and
deliberately avoid laying down any strict or detailed definition of such terms. The term
commercial man or engaged in the shipping trade would almost certainly cover a full member
of the LMAA engaged in arbitration as his principal occupation.10 Commercial man has a broad
meaning except that it excludes practicing lawyers.11 The term commercial man conversant with
shipping would require the arbitrator to have some experience in the shipping trade. If an
arbitrator was suitably qualified at the date of appointment, then a subsequent change of job, or
retirement, would not in itself disqualify him.12
In The Bede 13 a ship sale agreement provided that arbitrators and umpire shall be commercial
men and not lawyers. The arbitrators appointed a practising barrister as an umpire. Roskill J
allowed a challenge to the umpires award, stating that although it was not necessary to consider
what exactly the words commercial men meant or to define precisely who fell within or without
them, it was clear that they did not include practising lawyers.
In Pando Compania Naviera v Filmo SAS 14 an arbitration clause provided that arbitrators should
be commercial men. The claimants appointed a solicitor, Mr R A Clyde, who had been a fulltime commercial arbitrator for 15 years after leaving practice as a senior partner in the city firm of
his name. He was also a director of various shipping companies. Donaldson J upheld the award,
stating that:

Mr. Clyde was a commercial lawyer before he ceased to practise, but this fact cannot
disqualify him from becoming a commercial man thereafter if he would otherwise be
qualified. I have no doubt that a member of the LMAA practising as a full-time maritime
arbitrator would be regarded by most ship-owners and charterers throughout the world as a
commercial man. The fact that he had also had practical experience of another aspect of the
commercial side of the shipping trade by virtue of having been a director of shipping
companies merely reinforces this view.

In Sumukan Ltd v Commonwealth Secretariat,15 the arbitration agreement required consultation

with Commonwealth governments before any arbitrator was appointed. Failure to comply with
this requirement had the result that the appointment was invalid.

Membership of arbitral organisations

There are numerous arbitral organisations and institutions, for example:

the LMAA;
the Grain and Feed Trade Association (GAFTA);
the London Court of International Arbitration (the LCIA);
the International Chamber of Commerce (ICC); and
the Chartered Institute of Arbitrators.

Some of these organisations, notably the LCIA, ICC and GAFTA, administer arbitrations in
accordance with their rules; typically in relation to appointing arbitrators, arranging timetables and
dealing with fees.
The LMAA does not administer arbitrations: the arbitrators conduct the proceedings without any
direct aid from an administering body (although LMAA Terms provide for the President of the
LMAA to appoint arbitrators in very limited circumstances and about 100 appointments are made
each year, mainly under the Small Claims Procedure). This more independent nature of arbitration
under the LMAA Terms allows it to be more flexible and cuts down on the costs of having the
arbitration administered. Accordingly, the LMAA is not an arbitral institution in the same sense as
the ICC or the LCIA, but it would be treated as an institution under section 74 of the 1996 Act
for the purposes of claiming immunity in respect of making appointments.
The majority of arbitrators conducting London maritime arbitrations are members of the London
Maritime Arbitrators Association (the LMAA). Membership of the LMAA is often a
requirement imposed by the arbitration clause and would require the arbitrators to be full or
supporting members of the LMAA. However, if the arbitration agreement merely provides that
LMAA Terms should apply to the arbitration, this does not mean that only members of the LMAA
can be arbitrators. Some maritime disputes, for instance commodity disputes or those arising
under large-scale shipbuilding contracts, are commonly referred to arbitration under other rules,
for example those of GAFTA or the LCIA. Again, this sort of provision refers to the rules
governing the arbitration and does not in itself require the arbitrators to be members of an
organisation (unless the rules so provide).
The appointment of an arbitrator from one of these organisations will often be conditional on an
agreement that its rules of arbitration will apply to the appointment and to the arbitration (e.g.,
LMAA arbitrators usually accept appointments on the condition that the LMAA Terms apply: see
Chapter 1). Reference of disputes to arbitrators belonging to arbitral organisations, or on condition
that arbitration rules apply, offers significant advantages for the parties. In particular, members of
such organisations will have experience of conducting an arbitration and they will be obliged to
observe the standards of conduct required by their organisation.

Although certain aspects of arbitration rules may not suit the parties entirely (and can usually be
excluded by the contract) they do provide a structure within which the arbitration can progress.
The LMAA Terms are generally flexible and the parties may agree that certain provisions should
be omitted or varied. Such an agreement should be concluded before an appointment is made or as
soon as possible thereafter with notice to the arbitrator.16 If the arbitrator objects to such an
agreement he may refuse the appointment or resign (see below on resignation). In the absence of
agreed arbitration rules, the precise procedure to be adopted will be uncertain. Arbitration rules
also provide some indication of the fees. Booking fees are published in the LMAA Terms and
there is usually some degree of consistency in the rates charged by arbitrators of similar
experience from the same organisation.

3. BIAS
The fundamental principle that a party is entitled to a hearing by an impartial tribunal applies to
arbitration.17 Arbitrators are under a mandatory duty to act impartially as between the parties, and
may be removed if circumstances give rise to justifiable doubt as to their impartiality.18 Awards
may also be challenged on the ground that the arbitrator has failed to act impartially.19 Under
English law, unlike the Model Law and the position under most international arbitration rules,
there is no additional requirement of independence unless the arbitration agreement incorporates
it. The DAC formed the view that in consensual arbitrations where parties ordinarily appoint their
own arbitrators it was neither necessary nor desirable to impose an extra requirement for
independence.20 The DAC gave the example of barristers in chambers at the English Bar as an
example: it is common for barristers to be instructed in cases where one or more of the arbitrators
is at the same chambers. This lack of independence does not, of itself, give rise to any right of
challenge as a matter of English law.21 However, the courts have recognised that a lack of
independence may give rise to the appearance of bias. For example, where a barrister appears in
an arbitration pursuant to a conditional fee agreement, and the arbitrator is a member of the same
chambers, the manner in which that chambers is funded may give rise to a finding of bias.22
Although Article 6 of the European Convention on Human Rights (enacted in English law by the
Human Rights Act 1998) requires an independent and impartial tribunal this has not affected the
interpretation of the 1996 Act since English arbitral practice is regarded as a consensual
derogation from the requirement of independence, and does not breach Article 6.23
In maritime arbitration, a commercial arbitrator is commonly selected by one of the parties on the
basis of personal acquaintance. Often the arbitration agreement may require an arbitrator to have
practised in the same trade as the parties and he may know them. This does not ordinarily create
problems of bias since it is something which the parties must be taken to have had in mind.24 It is
also acceptable for a party to have a continuing relationship with a single arbitrator or for an
arbitrator to be appointed frequently by shipowners or by charterers.
If, however, an arbitrator considers that his relationship with the parties to the dispute may make it
difficult for him to approach the dispute fairly, he should decline appointment (or resign if the
matter comes to light after appointment). If he thinks that it will not influence his judgment but it
may raise doubts as to his impartiality, then it would be prudent for him to make a disclosure of
his interest at the earliest opportunity. Under the LMAA Terms (unlike the ICC Rules) there is no
obligation on an arbitrator to make disclosure of interests which might call into question his

impartiality.25 However, disclosure in such circumstances will avoid the risk of wasted costs since
it will enable an objection to be raised, or waived at the outset (see below on loss of the right to
object). If an objection on the grounds of bias is raised by one of the parties then the arbitrator
may choose to resign as a matter of preference or practice. This would usually be regarded as
reasonable and in no sense an admission of bias. Court challenges based on bias usually only arise
where the parties reach an impasse over the issue of impartiality or one of the parties asserts bias
after an award has been published.

The test for bias

The 1996 Act provides a test for establishing whether bias is established. Section 24(1)(a) of the
Act provides that a party may apply to remove an arbitrator on the grounds that:
the circumstances give rise to justifiable doubts as to his [the arbitrators] impartiality.
The test is objective: the court must be satisfied that the alleged circumstances exist and they
justify any doubts as the arbitrators impartiality.26 Ordinarily, the same test will be applied in
considering whether an award may be set aside under section 68(2)(a) on the grounds that an
arbitrator has failed to act impartially.27 Furthermore, it is clear that the same test for bias is
applied to arbitrators as to judges.28 In applying section 24, the emphasis is on whether the
material circumstances give rise to a reasonable apprehension of bias from the view of an
objective onlooker, rather than passing judgment on the likelihood that the tribunal was in fact
biased. The test is whether in all the relevant circumstances a fair-minded and informed observer
would conclude that there was a real possibility that the tribunal was biased.29 In practice, the
court will approach this in two stages: first, it must ascertain all the circumstances which have a
bearing on the suggestion that the tribunal was biased. Then it must determine whether those
circumstances would lead a fair minded and informed observer to conclude that there was a real
possibility that the tribunal was biased.30
Whether bias (or the danger of bias) is established in any given case will always depend on all the
circumstances of the reference. The burden of proof is generally difficult to discharge and the vast
majority of applications are unsuccessful. The courts are ready to award costs on an indemnity
basis against a party who pursues an allegation of bias without reasonable grounds.31 By way of
example, the following situations have not been regarded as giving rise to bias.

(1) The arbitrator was in the same chambers as counsel for one of the parties.32
(2) An arbitrator was a director of firms owed money by a party to the arbitration.33
(3) An arbitrator was the director of a company which in a similar transaction had been in a
similar position to one of the parties.34
(4) An arbitrator had been involved as a party in a dispute with a key witness two years before
the arbitration.35
5) An arbitrator was a non-executive director and held shares in a company competing for the
contract that formed the background to the arbitration.36
(6) An arbitrator had made a statement criticising the solicitor acting for one of the parties.37

Each arbitrator must be considered separately: there is no rule that where one member of a
tribunal is tainted by apparent bias, all the other members are likewise tainted.38

The courts appear to accept that the law is based both on the individuals right to have an impartial
tribunal and the public interest of maintaining confidence in the administration of justice.39 They
have distinguished three situations where bias may be relied upon to challenge a tribunal:

(a) an arbitrators personal interest in the outcome;

(b) proven or conscious bias;
(c) apparent or unconscious bias.

An arbitrators personal interest in the outcome

An application may be made to remove an arbitrator or challenge his award if it is shown that he
has a personal interest in the outcome of the case. The principle here is that a person must not be a
judge in his own cause. An allegation of this sort is typically based on the arbitrator having a
financial interest in the outcome (e.g., holding shares in one of the parties), but it may also extend
to a non-financial interest such as involvement in a charitable cause.40 Where the arbitrator has a
direct and material financial interest in the outcome, bias is presumed and the arbitrator (or the
award) can be challenged without further investigation. Where a challenge is not based on a direct
financial interest the court has to assess whether the arbitrator is so closely connected to the cause
in question that he may be said to be acting for his own cause.41 The issue to be determined is
whether the outcome of the arbitration will realistically affect the arbitrators interest.42 The mere
fact of membership of an association with a linked interest will not usually be enough to establish
a sufficient interest. In assessing what interest will disqualify an arbitrator the courts will probably
resort to the underlying test of real possibility of bias.43 Once the necessary type of interest is
established, it gives rise to a presumption of bias and automatically justifies the challenge without
further investigation. The automatic nature of the challenge is based on maintaining public
confidence in the administration of justice.44
In AT & T Corporation v Saudi Cable Company,45 the Court of Appeal found that an arbitrators
non-executive directorship of one of the partys competitors was too indirect a connection to
justify challenge on the basis of a personal interest.
Proven or conscious bias
Bias is established by showing that the arbitrator is incapable of approaching the matter fairly and
has a pre-disposed preference towards one party.46 This is sometimes called actual or
conscious bias and is generally very difficult to prove. It was established
in Catalina v Norma.47
The arbitrator was found guilty of actual bias amounting to misconduct because he was overheard
to comment on the evidence of one partys witnesses The Italians are all liars in these cases and
will say anything to suit their book. The same thing applies to the Portuguese. But the other side
here are Norwegians, and in my experience the Norwegians generally are a truthful people.
Apparent or unconscious bias
The most common sort of challenge is where a party does not suggest that the arbitrator is
consciously biased against him but seeks to establish a real possibility of bias. The principle here
is that justice must be manifestly seen to be done, so that the appearance of bias may be a relevant

consideration.48 The test is intended to ensure that the court is looking at the possibility rather than
the probability of bias.49
In Laker Airways Inc v FLS Aerospace Ltd,50 the respondent appointed as its arbitrator a barrister
from the same set of chambers as the applicants barrister. Rix J dismissed the application to
remove the respondents arbitrator, finding that chambers are made of self-employed barristers
each working for their own clients, not sharing a common interest. The organisation of chambers
did not give rise to the danger of accidental or improper dissemination of confidential information
between the arbitrator and the barrister who shared chambers.
In Save and Prosper Pensions Ltd v Homebase Ltd 51 an arbitrator was removed for apparent bias
under section 24 because the firm of which he was a salaried partner had been instructed by a
company associated with one of the parties in respect of a very substantial (but separate) matter. It
was relevant that the arbitrator knew about these instructions and the companies were closely
associated.
In Sphere Drake Insurance v American Reliable Insurance Co 52 the arbitrator had acted as an
advising expert in relation to underwriting issues which were at issue in the arbitration.
Specifically, he had given advice to persons now called as witnesses in the arbitration, had
received confidential information from them, and had probably formed a view about them. It was
held that apparent bias was established.
In Norbrook Laboratories Ltd v A Tank and anor53 the arbitrator made direct contact with
witnesses who might have been disparaging about one of the parties. He was removed pursuant to
section 24.
In ASM Shipping Ltd of India v TTMI Ltd of England54 an arbitrator had been marginally involved
as counsel in a previous case in which allegations of dishonesty and non-disclosure had been made
against a witness who appeared in the present case. Although the application was one to set aside
an award, and not to remove the arbitrator, the court held that he should have recused himself, and
that there were grounds for removal under section 24. However, on the facts the claimant had
waived the right to object.
The terms imputed,55 apparent,56 or unconscious57 bias have been used to describe
situations where there may be reasonable apprehension of bias. The term unconscious bias is not
very helpful since a court is not well equipped to investigate the arbitrators unconscious mind and
such a subjective approach is inconsistent with the objective test of justifiable doubts. The term
apparent bias is not entirely apt because the mere appearance of bias will not in itself justify a
challenge if the court is satisfied on all the available evidence that there could be no real
possibility of bias.58 The court will examine all relevant material, including evidence that may not
have been available at the time the decision was made, to determine whether in the circumstances
there could be any reasonable apprehension of bias.59 When applying the test for bias it may be
appropriate to enquire if the arbitrator knew about the matter relied upon as appearing to
undermine his impartiality. If he was unaware, it is unlikely to have influenced his
judgement.60 Mere involvement by an arbitrator in a connected cause or adverse comment on a
witnesss evidence in an earlier dispute would not usually be sufficient to give rise to a real
possibility of bias. However, personal animosity between an arbitrator and a party involved in the

case, or outspoken criticism of a party or witness in terms which might throw doubt on his ability
to approach such a persons evidence, might justify doubts as to the arbitrators partiality.61 Lapse
of time between the event relied upon and the decision challenged is likely to weaken an
allegation of bias.62

4. REMEDIES AGAINST AN ARBITRATOR

Unless it can be proved that he has acted in bad faith an arbitrator is immune from damages claims
for negligence or breach of contract (except in the case of resignation). However, an arbitrators
authority may be revoked, he may be removed by the court, or his award may be set aside on
various grounds, including serious irregularity, error of law and want of jurisdiction. Some
personal remedies (e.g., repayment of fees) may also be available against an arbitrator if he
resigns or is removed.

Pre-award remedies
The principal methods of recourse are:

(a) resisting applications for court appointments under section 18 of the 1996 Act or applying
to court to set aside default appointments made under section 17(3) (see Chapter 10);
(b) revocation of the arbitrators authority by agreement, as allowed under section 23 (see
below);
(c) removal by the court of an arbitrator under section 24 for impartiality, lack of
qualifications, physical or mental incompetence, failure properly to conduct the proceedings
and failure to use all reasonable despatch (see below);
(d) challenging jurisdiction under section 31 by application to the tribunal or under section 32
by application to the court, or by applying for injunctive or declaratory relief as allowed under
section 72 (see Chapter 6).
(e) remedies for resignation (damages and disentitlement to fees, see section 6 above and
Chapter 20 for the consequences of resignation).

A party risks losing its right to make an objection to an arbitrator if it fails to act promptly in
making that objection (see below on loss of the right to object).
Revocation of an arbitrators authority
Under section 23 of the 1996 Act the parties are free to agree in advance on the circumstances in
which the arbitrators authority to act can be revoked. In the absence of agreement, the arbitrators
authority can only be revoked by the parties acting jointly or by a person (typically an arbitral
institution) vested with such powers.63 Revocation must be in writing unless the parties also agree
to terminate the arbitration agreement.64 The revocation of authority under section 23 requires no
intervention by the court but it does not affect the courts power to remove under section 2465 and
this may be of practical use if the parties seek directions for adjustment of the arbitrators
entitlement to fees. In the absence of such directions an arbitrator whose authority had been
revoked would still be entitled to claim all fees recoverable by him under an agreement or by
statute under section 28(1) (see Chapter 20).
Removal of an arbitrator

Section 24 defines the four grounds justifying removal of an arbitrator by the court.

(1) A party to arbitral proceedings may (upon notice to the other parties, to the arbitrator
concerned and to any other arbitrator) apply to the court to remove an arbitrator on any of the
following grounds
o (a) that circumstances exist that give rise to justifiable doubts as to his impartiality;
o (b) that he does not possess the qualifications required by the arbitration agreement;
o (c) that he is physically or mentally incapable of conducting the proceedings or there are
justifiable doubts as to his capacity to do so;
o (d) that he has refused or failed
(i) properly to conduct the proceedings, or
(ii) to use all reasonable despatch in conducting the proceedings or making an award,
and that substantial injustice has been or will be caused to the applicant.

The courts power of removal is regarded as draconian.66 It will only be exercised after the
applicant has exhausted avenues of recourse vested by the parties in an arbitral institution or any
another person.67 To ensure that court applications cannot be used as a delaying device, section
24(3) expressly provides that the tribunal may continue the arbitral proceedings and make an
award while an application for removal is pending. It is important to note that all the parties and
arbitrators must be given notice of the application (by making them defendants to the application)
and the arbitrators are entitled to appear and to serve evidence at the hearing if they wish.68
Where the court removes an arbitrator it may give directions with respect to that arbitrators
entitlement to fees or expenses or repayment of fees.69 Such directions may take into account
whether the arbitrators conduct prevents him from charging for his services and would probably
override any agreement reached as to fees. An arbitrators removal will not, however, affect his
immunity from suit under section 29.70 Section 27 will govern appointment of a substitute to fill
the vacancy (see Chapter 10).
Removal on grounds of circumstances raising justifiable doubts as to the impartiality of the
arbitrator
This is discussed above under bias. The further requirement under section 24 of proof of
substantial injustice is not, in practice, addressed separately in cases of bias: proof of bias is
presumed to involve substantial injustice.71
Removal on grounds that the arbitrator does not possess the qualifications required by the
arbitration agreement
This is discussed above under qualifications.
Removal for mental or physical incapacity
The alleged incapacity would generally need to be supported by firm evidence, preferably from an
independent expert witness. If the court is satisfied that the arbitrator is mentally or physically
unfit to continue with the arbitration (or there are justifiable doubts as to his capacity) then it is
unlikely that a party would be treated as having lost the right to object under section 73. As a
matter of practice an arbitrator should not continue to act in such circumstances and the court

would probably find that section 73 would not preclude a challenge on the basis of a continuing
and irremediable irregularity in the tribunal.
Removal for failure or refusal properly to conduct the proceedings
This is not defined. It probably has a fairly wide scope, including failure to treat the parties fairly
or adopt suitable procedures so as to avoid unnecessary delay or expense (see the tribunals
general duty to the parties under section 33). To rely on this ground the applicant must also
establish that substantial injustice has been caused, or will be caused, by the arbitrators failure to
conduct the proceedings properly. Although this ground of removal is potentially wide the
DAC72 suggested that powers under this section (and in relation to failure to use reasonable
dispatch) would only be exercised where the conduct of the arbitrator is such as to go beyond
anything that could reasonably be defended and that substantial injustice has, or will, result. The
provision is not intended to allow the court to substitute its own view as to how the arbitral
proceedings should be conducted. The courts have exercised restraint in exercising the power to
remove an arbitrator on this ground, even where they may have disapproved of the arbitrators
conduct of the proceedings.73
Substantial injustice will also be fairly narrowly construed. The DAC74 suggested that having
chosen arbitration the parties cannot validly complain of substantial injustice unless what has
happened simply cannot in any view be defended as an acceptable consequence of that choice.
Failure or refusal to use all reasonable despatch in conducting the proceedings or making an award
To rely on this ground the applicant must establish failure to use reasonable despatch together
with substantial injustice. The DACs cautious approach to challenge for failing to properly
conduct the proceedings will apply and an arbitrator will not be removed unless the arbitration has
gone seriously wrong. The LMAA Terms make provision for arbitrators to resign if the tribunal
cannot fix a hearing date within a reasonable time (see Schedule 4 of the LMAA Terms).
Accordingly, if there is delay on the tribunals part, it is most likely to arise in the preparation of
an award following the close of submissions. Requests to the tribunal as to progress of the award
are common and will usually be acted on promptly. However, it would be exceptional for an
application to remove an arbitrator to be made or even threatened. In such an application a party
will ordinarily be expected first to have asked the arbitrator to proceed with the arbitration and he
will normally act on that, thus making the application for removal unnecessary. What amounts to
reasonable despatch will depend on the nature of the case. An arbitration of complex issues
involving interlocutory disputes and a long final hearing will reasonably take much more time
than a simple arbitration on documents only.
In Lewis Emanuel & Sons v Sammut,75 an arbitrator took four months from the date of hearing to
publish an award in a one-day arbitration over a sale contract. Pearson J held that the delay was
very considerable. The arbitrator was not removed because he published the award before the
hearing of the application. However, he was ordered to pay the costs of the application.
When an arbitrator is removed for unreasonable delay it may be appropriate to apply for directions
under section 24(4) which prevent him from claiming fees for work done with unreasonable delay
or work rendered useless by reason of the delay.

Post-award challenge
After an award is made recourse is only be possible by:

(a) challenging the award under section 67 on grounds of the tribunals lack of substantive
jurisdiction or seeking injunctive or declaratory relief under section 72 (see Chapter 22);
(b) challenging the award for serious irregularity under section 68 (on grounds including
failure to treat the parties fairly, uncertainty, ambiguity, public policy and admitted
irregularity (see Chapter 22));
(c) challenging an award on grounds of error of law (see Chapter 22).

Except for applications for declaratory, injunctive or other relief permitted by section 72,
challenges must be brought within 28 days of the date of the award76 or, if there has been any
arbitral process of appeal or review, of the date when the applicant was notified of the result of
that process.77 Again, a party may lose the right to object if it fails to make its objection as soon
as possible after it could reasonably have discovered the ground for challenge (see below).

5. LOSS OF THE RIGHT TO OBJECT TO AN ARBITRATOR

If a party objects to an arbitrator, for instance on the grounds of bias or lack of qualifications, he
must usually take up that objection as soon as possible after it becomes known to him, otherwise
he risks losing the right to object: he must put up or shut up.78 Section 73(1) of the 1996 Act
provides that:
If a party to arbitral proceedings takes part, or continues to take part, in the proceedings without
making, either forthwith or within such time as is allowed by the arbitration agreement or the
tribunal or by any provision of this Part, any objection

(a) that the tribunal lacks substantive jurisdiction,

(b) that the proceedings have been improperly conducted,
(c) that there has been a failure to comply with the arbitration agreement or with any
provision of this Part, or
(d) that there has been any other irregularity affecting the tribunal or the proceedings,

he may not raise that objection later, before the tribunal or the court, unless he shows that, at the
time he took part or continued to take part in the proceedings, he did not know and could not with
reasonable diligence have discovered the grounds for the objection.
This provision follows Article 4 of the Model Law79 and is intended to avoid delay and expense
arising out of an objection to the arbitrator being made at a late stage in proceedings, typically
after an award has been issued, where that objection could have been made at an earlier stage. As
a matter of fairness a party should not be allowed to keep an objection to the arbitrator up his
sleeve80 for use if dissatisfied with the final outcome, particularly where the objection could have
been remedied if raised at an earlier stage.

Scope of section 73

Section 73 is a far-ranging provision which goes further than the common law doctrines of waiver
and estoppel which were used under the previous law to prevent injustice in such circumstances.
Under section 73 (unlike the common law doctrine of waiver81) a party may lose the right to
object even where he lacks knowledge of the grounds of objection unless he can show that he
could not have discovered those matters with reasonable diligence. The burden is upon the
objecting party seeking to object to establish that he was not aware of the ground of objection, and
could not have discovered it with reasonable diligence.
This clearly covers objections to an arbitrator based on want of jurisdiction, and would include
challenges based on an arbitrator lacking an agreed qualification. Section 73(1) also covers
challenges based on unfairness of procedure- bias falls within the catch-all provision under section
73(1)(d) of any other irregularity affecting the tribunal or the proceedings.82 Section 73 applies
to parties who take part and continue to take part in arbitral proceedings. Section 72 expressly
preserves the right of a party who does not take part in proceedings because a person who disputes
that an arbitral tribunal has jurisdiction is entitled simply to ignore the arbitration.83 It is not clear
what amounts to taking part in the proceedings, but any positive step (e.g., appointing an arbitrator
or serving a statement) or affirmation of the arbitration (e.g., asking for further time to appoint an
arbitrator) would probably be sufficient. Once a party takes part in arbitral proceedings it may be
difficult for him to preserve his rights to object to the arbitrator without making an unequivocal
statement or an application to the court or tribunal. Not taking further steps in the proceedings
may not be sufficient to avoid losing the right to object under section 73, particularly during a
period in which no formal steps are called for from the parties.
In Rustal Trading Ltd v Gill & Duffus SA 84 one of the arbitrators was a director of a sugar trading
company and had been involved in an earlier dispute concerning an individual who took an active
role in one of the parties trading activities. Shortly after being informed of the arbitrators names,
that party wrote a letter to the tribunal raising concerns as to whether the arbitrator in question
would be able to judge the case objectively. There was no response from the tribunal and it
published an award. Moore-Bick J dismissed an application to set aside the award on grounds of
bias. The circumstances did not raise solid doubts about the arbitrators impartiality and in any
event, the applicant had lost its right to object. The letter to the tribunal was in general terms and
did not amount to an objection within section 73. The applicant could not claim that it had not
taken part in the proceedings after sending its letter to the tribunal. The mere fact that a party was
not required to take a formal step in the proceedings, for example in the period between the close
of the hearing and the publication of an award, did not mean that he was not taking part in the
proceedings. Unless a party makes it clear that he is withdrawing from the proceedings, he
continues to take part in them until they reach their conclusion.
In ASM Shipping Ltd of India v TTMI Ltd of England 85 a challenge under section 68 to a partial
award failed because, following an invitation to the arbitrator to recuse himself (which the
arbitrator declined), the applicant had continued with the arbitration and taken up the award
without objecting. Morison J noted that once the applicants had had an opportunity to instruct
their lawyers, they should have made an application to court to remove the arbitrator under section
24.

When and what sort of objection must be made?

If a party continues to take part in the proceedings he must raise an objection forthwith or within
such time as is allowed by the arbitration agreement or the tribunal or by any provision of this
Part. It is rare for arbitration agreements to contain such time limits,86 and parties will therefore
usually have to raise their objection forthwith. The court would require a party to act as soon as
possible,87 but would allow a reasonable time for a party to investigate the matter, take legal
advice and act on it.
It is not clear what sort of objection is necessary to prevent a party from losing the right to object.
Applying to the court is one obvious method. This will normally be the only means of objection if
the ground of challenge is discovered after an award is made (see Chapter 22 on challenging
awards). Before an award is made it is also possible to raise the objection before the tribunal:
indeed this would ordinarily be more appropriate than immediately applying to court as the
tribunal may be able to resolve the objection. Merely raising the matter in correspondence in a
general way will not be treated as sufficient. A party must alert the tribunal (and the other party) in
unequivocal terms that it regards the matters in question as giving ground for challenge.88
In Hussman (Europe) Ltd v Al Ameen Development & Trade Co,89 a jurisdictional challenge under
section 67 of the 1996 Act was successful. Thomas J held that the applicants had made sufficient
objection by raising their jurisdictional objection in opening submissions on the first day of the
oral hearing when they had incomplete information on the point in question, and then applying
later in the hearing to amend their request for arbitration and statement of case when further
information had made the point clearer.

The consequences of making an objection

If the objecting party makes an application to court, the tribunal may still continue with the
arbitration and proceed to an award if it considers this appropriate: for example, if it considers that
the challenge is a delaying tactic.90 If the objecting party makes an objection but does not apply to
the court, then the other parties (and the tribunal) may face some difficulty if they wish to resolve
the objection before proceeding with an arbitration which is vulnerable to challenge when an
award is produced. They cannot force the objecting party to apply to court to remove the arbitrator
and the court has no inherent jurisdiction to grant a declaration in the course of an arbitration to
the effect that there are no grounds for the objection.91 However, if the objection goes to the
arbitrators jurisdiction then it may be determined at an early stage by the tribunal (possibly of its
own motion if this would be the most efficient way of dealing with the issue92) and the objecting
party would then normally have to challenge the tribunals award (or ruling) within 28 days.93
If the objection relates to the arbitrators conduct of the proceedings then the objecting party can
make an objection and wait until an award is made before challenging the award on the grounds of
serious irregularity. However, if the objection is based on bias then the objecting party will have
difficulty in maintaining that there was a reasonable apprehension of bias if he was prepared to
carry on with the arbitration. If the objecting party fails to seek a decision at an early stage then
the tribunal may rely on the risk of challenge as a strong ground for proceeding promptly to an
award on a preliminary issue. This may enable the objection to be resolved at the earliest
opportunity, thereby minimising the risk of wasted time and costs.

Once an award (even on a preliminary issue) has been made, the objecting party has to pursue his
objection within 28 days. In addition to section 73, a failure to challenge the award at that stage
would probably be treated at common law as an election to waive the right to challenge on the
ground previously raised94 and reservation of rights by the objecting party would not necessarily
preclude a finding of waiver.95 The common law doctrine of estoppel might also be invoked in
situations where section 73 is not clearly applicable. An estoppel may arise where one party has
made an unequivocal representation (by words or conduct) that he will not rely on his strict rights
(e.g., by accepting an appointment made after a contractual time limit has expired) or where both
parties have proceeded upon a common but mistaken assumption and it would be inequitable to
allow one party to go back on his representation or the common assumption.96

6. ARBITRATORS IMMUNITY
Section 29 of the Act provides that:

(1) An arbitrator is not liable for anything done or omitted in the discharge or purported
discharge of his functions as arbitrator unless the act or omission is shown to have been in
bad faith.
(2) Subsection (1) applies to an employee or agent of an arbitrator as it applies to the
arbitrator himself.
(3) This section does not affect any liability incurred by an arbitrator by reason of his
resigning.

This provision introduces a very wide immunity and previously more restrictive views on the
scope of arbitrators immunity at common law are unlikely to be followed in determining the
precise scope of the statutory immunity.97
Immunity was conferred on arbitrators for the same reasons that judges are given immunity,
namely to give effect to their judicial role in acting impartially to make a binding decision to
resolve a dispute.98 It was also thought necessary to maintain arbitrators immunity to enable
arbitral tribunals to act independently and to promote finality of awards. The immunity does not
extend to liability incurred by reason of a premature or unjustified resignation (unless agreed
otherwise),99 nor would it prevent a court making orders for repayment of fees following the
removal of an arbitrator.100
The term bad faith has not been defined, but it has already been used in provisions conferring
immunity contained in regulatory statutes such as the Banking Act 1987.101 There is no
authoritative judicial statement as to the meaning of the term in this context but it is probably
intended to connote dishonest or malicious conduct. Mustill & Boyd consider that it involves
conscious and deliberate fault.102
The scope of the immunity is also limited to the discharge or purported discharge of his functions
as arbitrator. The word purported probably covers conduct which falls below the standard of
what would be expected of an arbitrator, but may also cover a person purporting to act as an
arbitrator but who is subsequently found not to have had jurisdiction. The functions of an
arbitrator are not defined but probably involve those functions which the parties have agreed that
he should discharge and functions conferred on him by the 1996 Act. They certainly include his

judicial function of deciding the dispute fairly and impartially and his duty to adopt procedures
suitable to the case.103 They also probably include administrative functions such as responding to
correspondence and fixing hearing dates. The scope of the immunity conferred on the arbitrators
servants and agents under section 29(2) is more unclear. It probably covers administrative
functions but is less likely to cover professional services (e.g., expert advice) as such services are
outside the expertise to be expected of an arbitrator.
Organisations such as the LMAA also enjoy immunity from civil proceedings in respect of the
appointment or nomination of arbitrators as section 74 provides that:

(1) An arbitral or other institution or person designated or requested by the parties to appoint
or nominate an arbitrator is not liable for anything done or omitted in the discharge or
purported discharge of that function unless the act or omission is shown to have been in bad
faith.
(2) An arbitral or other institution or person by whom an arbitrator is appointed or nominated
is not liable for anything done or omitted by the arbitrator (or his employees or agents) in the
discharge or purported discharge of his functions as arbitrator.
(3) The above provisions apply to an employee or agent of an arbitral or other institution or
person as they apply to the institution or person himself.

7. RESIGNATION OF AN ARBITRATOR
Once an arbitrator has accepted an appointment he is under a duty to proceed with due diligence
and adopt whatever procedures are necessary to determine the dispute.104 These duties arise as a
matter of statute and would probably also be implied into an arbitrators contract of appointment
as a matter of business efficacy. Resignation may amount to a breach of an arbitrators contract of
appointment or his statutory duties and his immunity does not cover liability arising from
resignation.105
It is generally accepted that an arbitrator is justified in resigning on reasonable grounds such as illhealth, bereavement or public commitments. It might also be reasonable for an arbitrator to resign
if the parties chose a procedure which was unacceptable to him in the light of his statutory duty to
act fairly and adopt efficient procedures, or where the arbitration had dragged on for far longer
than could reasonably have been contemplated on appointment.106Whether conflicting business
commitments would justify a resignation is more controversial; an arbitrator probably owes the
parties an implied duty to give the arbitration priority over subsequent professional or social
commitments. An arbitrator who resigned from an arbitration for no better reason than giving
priority to a competing professional commitment would risk forfeiting at least part of his
remuneration unless he could show that the resignation caused the parties no detriment, or that it
was reasonable, for instance because he had given the parties notice of that commitment before
accepting the appointment. Section 25 of the 1996 Act provides some guidance on the
consequences of a resignation, in particular as to the arbitrators entitlement to fees and any
liability in respect of resignation (see Chapter 20 for further explanation).

LMAA Terms on resignation

The LMAA Terms cover some of the consequences of the resignation of arbitrators where they are
unable to provide a hearing date within a reasonable time (the Terms set out a scale of reasonable
time for providing hearing dates, while for hearings longer than 10 days the tribunal itself can
decide what is appropriate). If a sole arbitrator cannot make time for a hearing within a reasonable
time then he will offer to retire and, if so requested, will retire upon being satisfied of a suitable
replacement. The parties may make a joint appointment of a substitute, failing which either party
may request the President of the LMAA to make a substitute appointment.107 In the case of
retirement for similar reasons by an arbitrator from a two- or three-person tribunal, a substitute
should be promptly appointed by the party who appointed him, failing which a substitute will be
appointed by the chairman or umpire (or the President if no umpire or chairman has been
appointed).108
The commentary to the Small Claims Procedure (2006) now makes clear that an arbitrator may
resign if he considers that the dispute is no longer suitable for the Procedure and the parties refuse
to agree to an appropriate variation of that Procedure. The LMAA Terms (2006) provide for
resignation if the parties fail to make payment of interim fees (see Chapter 20 for further
discussion).
1 See the discussion in Mustill & Boyd, 2001 Companion, p. 60.
2 Section 33 of the 1996 Act.
3 Section 29 of the 1996 Act (subject to possible liability following removal and resignation, see
sections 24(3) and 25 of the 1996 Act).
4 Alternative contractual analyses are offered in Fal Bunkering v Grecale Inc [1990] 1 Lloyds
Rep 369 at 373.
5 K/S Norjarl A/S v Hyundai Heavy Industries Co Ltd [1991] 1 Lloyds Rep 524 at 531 and 536
and 537; Turner v Stevenage Borough Council [1998] Ch 28 at 38. See also Fal
Bunkering v Grecale Inc [1990] 1 Lloyds Rep 369 at 373, Nurdin Jivraj v Sadruddin
Hashwani [2009] EWHC 1364 (Comm).
6 Mustill & Boyd (2nd edn) p. 224. The right to reasonable remuneration is analysed in terms of
an implied contract in K/S Norjarl A/S v Hyundai Heavy Industries Co Ltd [1991] 1 Lloyds Rep
524, but it is probably more properly analysed as a restitutionary right of quantum meruit.
7 Section 28(1) of the 1996 Act, see Chapter 20.
8 See Mustill & Boyd, 2001 Companion, p. 290 for a contrary view. However, this analysis does
not necessarily follow from the wording of section 30 and much will depend on the wording of the
arbitration clause. See, further, Sumukan Ltd v Commonwealth Secretariat [2007] EWCA Civ
1148; [2008] Bus LR 858, where a failure to comply with pre-appointment consultation
requirements had the consequence that the tribunal lacked jurisdiction.
9 Section 19 of the 1996 Act.
10 The Myron [1969] 1 Lloyds Rep 411 at 415.

11 Rahcassi Shipping Company SA v Blue Star Line Ltd, The Bede [1967] 2 Lloyds Rep 261 (a
lawyer who practised as a maritime arbitrator would be treated as a commercial man, see Pando
Compania Naviera v Filmo SAS [1975] 1 Lloyds Rep 560).
12 Pan Atlantic Group Inc v Hassneh Insurance Co [1992] 2 Lloyds Rep 120.
13 Rahcassi Shipping Co SA v Blue Star Line Ltd [1967] 2 Lloyds Rep 261.
14 [1975] 1 Lloyds Rep 560.
15 [2007] EWCA Civ 1148; [2008] Bus LR 858.
16 See Fal Bunkering v Grecale Inc [1990] 1 Lloyds Rep 369 where disputes arose as to whether
LMAA terms applied.
17 Section 33 of the 1996 Act, this provision is based on Article 18 of the Model Law. The same
principle applied at common law, e.g., Hagop Ardahlian v Unifert International SA, The
Elissar [1984] 2 Lloyds Rep 84.
18 Section 24(1)(a) of the 1996 Act.
19 Section 68(2)(a) of the 1996 Act.
20 Paragraph 101 of the DAC Report.
21 Laker Airways Inc v FLS Aerospace Ltd [1999] 2 Lloyds Rep 45. Paragraph 102 of the DAC
Report had contemplated that such a connection would not justify an allegation of bias and the
Court of Appeal in Locabail (UK) Ltd v Bayfield Properties Ltd [2000] 1 All ER 65 confirmed
that this connection would not justify a challenge. Compare Hrvatska
Elektroprivreda v Slovenia (ICSID Case No. ARB/05/24), in which a barrister was excluded on
such grounds.
22 Smith v Kvaerner Cementation Foundations Ltd [2006] EWCA Civ 242; [2007] 1 WLR 370.
23 Paul Stretford v Football Association [2007] EWCA Civ 238; [2007] 2 Lloyds Rep 31.
24 Rustal Trading Ltd v Gill & Duffus SA [2000] 1 Lloyds Rep 14 at 18.
25 See the (non-binding) guidance in the IBA Guidelines on the conflict of interest in international
arbitration and the Chartered Institute of Arbitrators Guidelines on the interviewing of
prospective arbitrators. These guidelines may be relied upon in support of an application to
remove an arbitrator (e.g., see ASM Shipping of India v TTMI Ltd of England [2005] EWHC 2238
(Comm); [2006] 1 Lloyds Rep 375.
26 Laker Airways Inc v FLS Aerospace Ltd [1999] 2 Lloyds Rep 45; Locabail (UK)
Ltd v Bayfield Properties Ltd [2000] 1 All ER 65; Porter v Magill [2002] 2 WLR 37 at 100.
27 Rustal Trading Ltd v Gill & Duffus SA [2000] 1 Lloyds Rep 14.
28 R v Gough [1993] AC 646 at 670; AT & T Corporation v Saudi Cable Co [2000] 2 Lloyds
Rep 127.

29 Porter v Magill [2002] 2 WLR 37 at 103, Re Medicaments and Related Classes of Goods (No
2) [2001] 1 WLR 700.
30 Flaherty v National Greyhound Racing Club Ltd [2005] EWCA Civ 1117, ASM Shipping
Ltd v Harris and ors [2007] EWHC 1513 (Comm); [2008] 1 Lloyds Rep 61.
31 Bremer Handelsgesellschaft mbH v Ets Soules et Cie [1985] 1 Lloyds Rep 160 at 172.
Indemnity costs are dealt with under CPR, Part 44.
32 Laker Airways Inc v FLS Aerospace Ltd [1999] 2 Lloyds Rep 45. Paragraph 102 of the DAC
Report had contemplated that such a connection would not justify an allegation of bias and the
Court of Appeal in Locabail (UK) Ltd v Bayfield Properties Ltd [2000] 1 All ER 65 confirmed
that this connection would not justify a challenge.
33 Cook International Inc BV v Handelmaatshappij Jean Delvaux [1985] 2 Lloyds Rep 225.
34 Bremer Handelsgesellschaft v Ets Soules & Cie [1985] 2 Lloyds Rep 199.
35 Rustal Trading Ltd v Gill & Duffus SA [2000] 1 Lloyds Rep 14.
36 AT & T Corporation v Saudi Cable Co [2000] 2 Lloyds Rep 127.
37 Fletamentos Maritimos v Effjohn International BV (No 2) [1997] 2 Lloyds Rep 302 at
312; Andrews v Bradshaw, 29 July 1999 (CA), The Times, 1 October 1999.
38 ASM Shipping Ltd v Harris and ors [2007] EWHC 1513 (Comm); [2008] 1 Lloyds Rep 61.
39 Locabail (UK) Ltd v Bayfield Properties Limited [2000] 1 All ER 65. In AT & T
Corporation v Saudi Cable Co [2000] 2 Lloyds Rep 127, the Court of Appeal applied this
decision to arbitration, while recognising the more private nature of arbitration.
40 R v Bow Street Metropolitan Stipendiary Magistrate, ex parte Pinochet Ugarte (No 2) [1999] 1
All ER 577.
41 Laker Airways Inc v FLS Aerospace Ltd [1999] 2 Lloyds Rep 45 at 49.
42 Locabail (UK) Ltd v Bayfield Properties Ltd [2000] 1 All ER 65.
43 In R v Bow Street Metropolitan Stipendiary Magistrate, ex parte Pinochet Ugarte (No
2) [1999] 1 All ER 577, a challenge on grounds of a judges personal interest was successful. The
House of Lords preference for applying the test of bias on the basis of a personal interest (giving
rise to automatic disqualification) and excluding the test of real danger of bias adopted
in R v Gough [1993] AC 646, may have arisen from a reluctance to enter into an investigation of
the likelihood of a fellow member of the House of Lords being biased.
44 R v Bow Street Metropolitan Stipendiary Magistrate, ex parte Pinochet Ugarte (No 2) [1999] 1
All ER 577; Locabail (UK) Ltd v Bayfield Properties Ltd [2000] 1 All ER 65.
45 [2000] 2 Lloyds Rep 127.
46 Mustill J in Bremer Handelsgesellschaft v Ets Soules & Cie [1985] 1 Lloyds Rep 160 at 164.
47 61 Ll L Rep 360.

48 R v Gough [1993] AC 646 at 668.

49 Ibid. at 670, subject to the adjustment in Porter v Magill [2002] 2 WLR 37.
50 [1999] 2 Lloyds Rep 45. The decision is authority is weakened by the applicants nonappearance at the hearing.
51 [2001] L & TR 11.
52 [2004] EWHC 796 (Comm).
53 [2006] EWHC 1055 (Comm); [2006] 2 Lloyds Rep 485.
54 [2005] EWHC 2238 (Comm); [2006] 1 Lloyds Rep 375. Permission to appeal was refused:
[2006] EWCA Civ 1341; [2007] 1 Lloyds Rep 136.
55 Fletamentos Maritimos v Effjohn International BV (No 2) [1997] 2 Lloyds Rep 302 at 312.
56 Laker Airways Inc v FLS Aerospace Ltd [1999] 2 Lloyds Rep 45 at 49; Porter v Magill [2002]
2 WLR 37.
57 R v Inner West London Coroner v Dallaglio [1994] 4 All ER 139 at 152 at 162.
58 Ibid. AT & T Corporation v Saudi Cable Co [2000] 1 Lloyds Rep 22 (Longmore J at first
instance). The Court of Appeal [2000] 2 Lloyds Rep 127 suggested that the court must consider
whether there was any real danger of unconscious bias. These decisions must be viewed in the
light of Porter v Magill [2002] 2 WLR 37, preferring the test of real possibility.
59 R v Gough [1993] AC 646 at 670, but the court will place emphasis on reasonable
apprehension rather than actual danger: see Porter v Magill [2002] 2 WLR 37 at 100; Re
Medicaments and Related Classes of Goods (No 2) [2001] 1 WLR 70 at 85.
60 Locabail (UK) Ltd v Bayfield Properties Ltd [2000] 1 All ER 65.
61 Ibid. Danger of bias in such circumstances was established in R v Inner West London
Coroner v Dallaglio [1994] 4 All ER 139 at 152.
62 Rustal Trading Ltd v Gill & Duffus SA [2000] 1 Lloyds Rep 14; Locabail (UK) Ltd v Bayfield
Properties Ltd [2000] 1 All ER 65 at 78.
63 Under the LMAA Terms there are no express powers to revoke.
64 The revocation need not be in writing where there is an agreement to terminate because it was
considered unfair to impose such a requirement where the parties have terminated the arbitration
agreement by allowing it to lapse, see paragraph 99 of the DAC Report.
65 Section 23(5)(b), given that revocation is intended to have the same effect as removal (see
paragraph 98 of the DAC Report) it is difficult to see how an arbitrator can be removed if his
authority has already been revoked.
66 Dredging and Construction Co v Delta Civil Engineering, 26 May 2000 (unreported).
67 Section 24(2) of the 1996 Act.

68 Section 24(1) and (5) of the 1996 Act, CPR Part 62, rule 62.6(1) & (3).
69 Section 24(4) of the 1996 Act.
70 DAC Supplementary Report on the Arbitration Act, paragraphs 24 to 25.
71 Norbrook Laboratories Ltd v A Tank and anor [2006] EWHC 1055 (Comm); [2006] 2 Lloyds
Rep 485, ASM Shipping of India v TTMI Shipping of India [2005] EWHC (Comm) 2238; [2006] 1
Lloyds Rep 375.
72 Paragraph 106 of the DAC Report.
73 Andrews v Bradshaw, 29 July 1999 (CA) The Times, 1 October 1999.
74 Paragraph 280 of the DAC Report, in relation to challenge for serious irregularity under section
68, including failure to conduct the proceedings properly. See Chapter 22 for further discussion of
the requirement of substantial injustice.
75 [1959] 2 Lloyds Rep 629.
76 Section 54 of the 1996 Act.
77 Section 70(3) of the 1996 Act.
78 Paragraph 105 of the DAC Report.
79 Unlike the Model Law it does not require actual knowledge of the ground of objection.
80 Rustal Trading Ltd v Gill & Duffus SA [2000] 1 Lloyds Rep 14 at 20; Hussman (Europe)
Ltd v Al Ameen Development & Trade Co [2000] 2 Lloyds Rep 83 at 91.
81 Motor Oil Hellas (Corinth) Refineries SA v Shipping Corporation of India, The
Kanchenjunga [1990] 1 Lloyds Rep 391 and see Locabail (UK) Ltd v Bayfield Properties
Ltd [2000] 1 All ER 65 at 78.
82 Wicketts and anor v Brine Builders and anor [2001] CILL 1805.
83 Paragraph 295 of the DAC Report.
84 Rustal Trading Ltd v Gill & Duffus SA [2000] 1 Lloyds Rep 14.
85 [2005] EWHC 2238 (Comm); [2006] 1 Lloyds Rep 375.
86 The LMAA Terms incorporate no express time limits for challenge.
87 This is the requirement for objections under section 31(2) of the 1996 Act.
88 Rustal Trading Ltd v Gill & Duffus SA [2000] 1 Lloyds Rep 14 at 20.
89 [2000] 2 Lloyds Rep 83.
90 Sections 24(3) and 67(2) of the 1996 Act.
91 Section 1(c) of the 1996 Act. At common law no such power exists: Bremer Vulkan Schiffbau
und Maschinenfabrik v South India Shipping Corporation [1981] 1 Lloyds Rep 253.

92 See the tribunals duty under section 33(1)(b)of the 1986 Act.
93 Sections 70(3) and 73(2) of the 1996 Act.
94 Motor Oil Hellas (Corinth) Refineries SA v Shipping Corporation of India, The
Kanchenjunga [1990] 1 Lloyds Rep 391.
95 Kerr LJ in Nichimen Corporation v Gatoil Overseas Inc [1987] 2 Lloyds Rep 46 at 51.
96 Promissory estoppel is explained in Motor Oil Hellas (Corinth) Refineries SA v Shipping
Corporation of India, The Kanchenjunga [1990] 1 Lloyds Rep 391 at 399. For estoppel by
convention, see Amalgamated Investment and Property Co v Texas Commerce International
Bank [1982] QB 84.
97 Sutcliffe v Thackrah [1974] 1 Lloyds Rep 318 and Arenson v Arenson [1976] 1 Lloyds Rep
179. See Lord Kilbrandon at pp. 192-193, Lord Fraser at p. 200 and Lord Salmon at p. 198
doubting the immunity of an arbitrator appointed in a quality dispute in a commodity sale. The
courts decision was not, however, on the scope of an arbitrators immunity and the judgments are
not clear. See the discussion in Mustill & Boyd (2nd edn) pp. 225-229.
98 Paragraph 132 of the DAC Report.
99 Section 29(3) of the 1996 Act. This is a mandatory provision but appears to be subject to any
agreement on liability for resignation recognised under section 25(3).
100 Section 24(4) of the 1996 Act.
101 Section 1(4) conferring immunity on the Bank of England, see also Melton Medes
Ltd v Securities and Investment Board [1995] Ch 157, referred to by the DAC.
102 2001 Companion, p. 300.
103 Section 33 of the 1996 Act.
104 Mustill & Boyd (2nd edn) p. 224; Mustill & Boyd, 2001 Companion, p. 112 and sections 33
and 24(1)(d)(ii) of the 1996 Act.
105 Section 29(3) of the 1996 Act which appears to be subject to the parties agreement under
section 25.
106 Paragraph 115 of the DAC Report. See for example paragraph 9 of the commentary to the
Small Claims Procedure (2006). However, see Mustill & Boyd, 2001 Companion, pp. 110-112 for
potential problems.
107 See paragraph 3 of the Fourth Schedule to the LMAA Terms, this agreement would ordinarily
preclude the court making a substitute appointment under section 27(3) of the 1996 Act.
108 See paragraph 4 of the Fourth Schedule to the LMAA Terms.

Chapter 12

Procedure and Evidence

Procedure and Evidence

1. Introduction
2. The source of control over procedure
3. Mandatory duties of the tribunal and of the parties
4. Agreement of the parties
5. Powers of the tribunal
6. Procedure in London maritime arbitration
7. Sanctions for failure to comply with procedural orders
8. Judicial sanctions and supportive powers

1. INTRODUCTION
Flexibility and privacy are among the main advantages of arbitration over litigation. Unlike court
proceedings, there are no formalised rules of practice binding the parties or the arbitrators:
procedure is governed by the parties agreement and certain essential requirements of procedural
fairness. Arbitration should therefore be able to provide the most efficient and convenient
procedure for resolution of any particular dispute. However, it can become unduly lengthy and
expensive if heavy interlocutory disputes arise or unnecessary evidence is introduced. A fine
balance must be maintained between conducting an arbitration efficiently and preserving each
partys right to a fair opportunity to present its case and meet the other sides case. This balancing
exercise forms the basis of the central mandatory provisions of the 1996 Act.

2. THE SOURCE OF CONTROL OVER PROCEDURE

The tribunal derives its power to control procedure from three sources:

(1) Its duties arising under the central mandatory provisions of section 33 of the 1996 Act, as
supplemented by the parallel duties placed upon the parties by section 40.
(2) The agreement of the parties, including any terms governing the arbitral proceedings.
(3) The powers conferred by the 1996 Act in the absence of agreement, in particular section
34.

It is important to recognise that one of the aims of the 1996 Act was to strengthen the position of
the arbitral tribunal, making it the master of procedure, subject, of course, to the mandatory
provisions of the Act and any agreement concluded by the parties.1

3. MANDATORY DUTIES OF THE TRIBUNAL AND THE PARTIES

Mandatory duty of the tribunal

Section 33 of the 1996 Act provides that:

(1) The tribunal shall

o (a) act fairly and impartially as between the parties, giving each party a reasonable
opportunity of putting his case and dealing with that of his opponent, and

(b) adopt procedures suitable to the circumstances of the particular case, avoiding
unnecessary delay or expense, so as to provide a fair means for the resolution of the
matters falling to be determined.
(2) The tribunal shall comply with that general duty in conducting the arbitral proceedings, in
its decisions on matters of procedure and evidence and in the exercise of all other powers
conferred on it.

Section 33 is one of the central provisions of the 1996 Act, and may be viewed as the practical
implementation of the general principles set out in section 1, in particular section 1(a), which
provides that the object of arbitration is to obtain the fair resolution of disputes by an impartial
tribunal without unnecessary delay or expense. Section 33 is intended to set out minimum
standards which are to apply in all arbitral proceedings. For this reason, the provision is
mandatory, and the parties may not contract out of it. As the DAC put it:
we fail to see how a proceeding which departed from the stipulated duties could properly be
described as an arbitration . It seems to us that the public interest dictates that [section] 33 must
be mandatory, i.e. that the parties cannot effectively agree to dispense with the duty laid on
arbitrators under [section] 33. In other words, they cannot effectively agree that the arbitrators can
act unfairly, or that the arbitrators can be partial, or that the arbitrators can decide that the parties
(or one of them) should not have a reasonable opportunity of putting his case or answering that of
his opponent, or indeed that the arbitrators can adopt procedures that are unsuitable for the
particular circumstances of the case or are unnecessarily slow or expensive, so that the means for
resolving the matters to be determined is unfair.2
The consequence of this is that any agreement as to procedure which would conflict with the
tribunals duty under section 33 is, in theory, ineffective.3 For example, a straightforward case can
often be determined without the need for full disclosure of documents, witness evidence, or an
oral hearing. If the parties nevertheless agree to proceed with full disclosure, exchange of witness
statements and an oral hearing, that agreement may contravene section 33. If so, it would be
ineffective and not binding on the tribunal. Were the parties to insist upon their proposed mode of
procedure, the tribunal can either go along with the parties agreement (in which case, the parties
would have no basis for complaining of the breach of section 33) or can resign.4
Despite the central role of section 33 in the 1996 Act, there are only two methods of enforcing it:

(a) an application to remove the arbitrator under section 24; and

(b) challenging the award for serious irregularity under section 68.

These remedies are discussed further in Chapters 11 and 22. In either case, it is necessary to show
substantial injustice, and the DAC5 indicated that these remedies are intended to provide a
longstop, addressing only those rare and exceptional cases where the tribunal has gone so wrong
in its conduct of the arbitration that justice calls out for it to be corrected. It is perhaps surprising
that such a central provision of the Act does not attract a more stringent remedy in the event of
breach.6
Section 33(a)

The first limb of section 33 requires the tribunal to act fairly and impartially and to give each party
a reasonable opportunity to put its case. This provision is based on Article 18 of the Model Law,
and is broadly intended to preserve the principles of natural justice as they apply in arbitration
proceedings. These principles are of particular practical importance where a party is aggrieved by
the procedure which has been adopted in an arbitration. Most applications for remission of an
award, removal of an arbitrator or setting aside of an award for serious irregularity are based on
alleged unfairness in procedure, although it should be noted that most are unsuccessful. The DAC
expressed the hope that the courts [would] take a dim view of those who try to attack awards
because of suggested breaches of this [section] which have no real substance.7 What justice and
fairness require in any given case will vary enormously depending on the circumstances of the
dispute and the particular procedure chosen by the parties. In a commercial arbitration it is
generally assumed that the parties have agreed to a more informal procedure than would prevail in
court. For instance, in a small arbitration on documents, formal disclosure of all documents
relating to the dispute will rarely be required.
Section 33(a) places two essential requirements upon the tribunal, each of which must be balanced
against the requirements of section 33(b):

(1) The arbitrator must act fairly and impartially. Bias and the judicial role of the arbitrator
are considered in Chapter 11.
(2) The arbitrator must give each party a reasonable8 opportunity both to put its case and to
reply to its opponents case.

The question of what constitutes a reasonable opportunity will depend on all the circumstances
and the nature of the dispute. However, the following general comments may be stated.
Oral hearings
There is no absolute right to, or presumption in favour of, an oral hearing in any arbitration.
Although a tribunal must give careful consideration to the question of whether an oral hearing is
appropriate or necessary, the majority of London maritime arbitrations raise issues which can be
determined without any hearing, and proceed on the basis of documents only.
Although there is no absolute right to an oral hearing, where such a hearing is ordered the tribunal
must ensure that each party is given reasonable notice of it, including:

(a) notice of when and where the hearing is to take place. Notice should be given to a party
even if all the circumstances suggest that it will not attend;9
(b) a reasonable opportunity to attend the hearing with witnesses and (where appropriate)
legal representatives. The question of what constitutes a reasonable opportunity depends on
all the circumstances: the arbitrator must balance each partys legitimate interests and if, for
example, a party is being unreasonable in refusing to agree to a convenient hearing date then
the arbitrator would be justified in fixing a date which is reasonable in all the circumstances.

Furthermore, where a hearing is ordered, the tribunal must ensure that each party is given a
reasonable opportunity to put forward evidence and argument. If an arbitrator excludes evidence
without proper grounds for doing so, this may constitute a serious irregularity (although a mere

error of law or fact in excluding evidencefor instance in deciding that documents were
privilegedwould not in itself do so10). In the absence of contrary agreement, arbitrators should
usually allow each party to cross-examine the other sides witnesses11 and present evidence and
argument in rebuttal.
Opportunity to put case
The guiding principle is that a party should not be taken by surprise by the tribunal or by the other
side. So, for example, the tribunal should not raise or rely upon new points without giving each
party a reasonable opportunity to comment upon them, and adduce evidence if appropriate.
In London Underground Ltd v Citylink Telecommunications Ltd,12 Ramsey J summarised the
applicable principles as follows:

(1) The underlying principle is that of fairness or, as it is sometimes described, natural
justice.
(2) There must be a sensible balance between the finality of an award and the residual power
of a court to protect parties against the unfair conduct of an arbitration.
(3) It will generally be the duty of a tribunal to determine an arbitration on the basis of the
cases which have been advanced by each party, and of which each has notice. To decide a
case on the basis of a point which was not raised as an issue or argued, without giving the
parties the opportunity to deal with it, will be a procedural irregularity.
(4) In relation to findings of fact:
o (a) A tribunal should usually give the parties an opportunity to address them on proposed
findings of major areas of material primary facts which have not been raised during the
hearing or earlier in the arbitral proceedings.
o (b) A tribunal has an autonomous power to make findings of fact which may differ from
the facts which either party contended for. This will often be related to inferences of fact
which are to be drawn from the primary facts which are in issue. Such findings of fact
will particularly occur where there are complex factual or expert issues where it may be
impossible to anticipate what inferences of fact might be drawn. In such a case the
tribunal does not have to give the parties an opportunity to address those findings of fact.
o (c) Where a tribunal has been appointed because of its professional legal, commercial or
technical experience, the parties take the risk that, in spite of that expertise, errors of fact
may be made or invalid inferences drawn without prior warning.
(5) In each case whether there is a procedural irregularity and whether it is serious is a matter
of fact and degree which requires a judgment to be made taking into account all the relevant
circumstances of the arbitration including an analysis of the substance of the arbitration and
its conduct viewed as a whole.

Caselaw provides several examples of situations in which arbitrators have breached section 33 by
hearing or relying upon points which were not raised by the parties, and upon which the parties
were not given an adequate opportunity to comment:
Fox v P G Wellfair Ltd 13 concerned a construction arbitration in which the arbitrator was a
barrister who had been an architect and quantity surveyor. The claim was undefended but the
arbitrator rejected a large part of the claimants evidence, substituting his own views for that of the

claimants expert witness. However, he gave no indication to the claimants counsel or their
expert witnesses that he was rejecting their evidence. The Court of Appeal allowed his award to be
set aside. The arbitrator was entitled to use his own expertise but he should not have acted on the
basis of his own private opinion without first disclosing it.
In Sanghi Polyesters Ltd (India) v The International Investor (KCFC)14 disputes arose under
agreements relating to the finance of polyester yarn exports, and these were referred to ICC
arbitration. The arbitration agreement expressly authorised the arbitrator to appoint an expert on
Islamic Sharia law, and the parties subsequently agreed to authorise the arbitrator himself to act
as such an expert. In his award, the tribunal referred to a number of textbooks and other works
which had not been referred to by either sides expert witnesses, or by the arbitrator, during the
hearing. It was held that although one might expect a judge in litigation to refer to authorities upon
which he intended to rely, the same was not necessarily true in arbitration. Furthermore, by
authorising the arbitrator to act as an expert in Sharia law, the parties were giving him more
scope for individual initiative than is usual. Sanghi was an unusual case, and is likely to be limited
to its facts: in most cases where an arbitrator intends to refer to or rely upon an authority, he
should give the parties an opportunity to comment on it.
In Cameroon Airlines v Transmet Ltd,15 the award departed from the way in which the case had
been presented by both parties. No warning was given to the parties, who therefore had no
opportunity to respond to the new arguments. The tribunal were held to have breached its section
33 duty.
Similarly, the tribunal must not talk to witnesses, or hear evidence, in the absence of either party.
In Hussman (Europe) Ltd v Al Ameen Development & Trade Co,16 a tribunal appointed to
determine disputes under a distributorship agreement appointed an expert to advise on Saudi law.
No written instructions were provided to the expert, but the chairman of the tribunal had a meeting
with him in which he identified the points upon which advice was required. The expert sent a draft
report to the tribunal and then, without informing the parties, the tribunal had a meeting with him,
following which the expert produced a final report in the same form as the initial draft. The
claimant in the arbitration complained that the tribunal had breached section 33, both in the mode
of instructing the expert and also by conducting meetings with him in the absence of the parties.
Thomas J held that, while it might have been preferable to consult with the parties before
providing instructions to the expert, the mode of instruction did not amount to a breach of section
33. However, the failure to inform the parties of the meeting with the expert did fall short of the
standards expected of arbitrators, and constituted a breach of section 33.
Similarly, in Norbrook Laboratories Ltd v A Tank & Moulson Chemplant Ltd,17 an arbitrator
conducted unilateral and unrecorded telephone conversations with witnesses. The award was set
aside on this basis.
Arbitrations on documents only
Where an arbitration proceeds on documents only, the basic rule that a party must be given a
reasonable opportunity to submit its evidence and arguments is of particular sig-nificance. An
arbitrator should take reasonable steps to ensure that a party is aware of the case being put against
it and to ascertain whether it wishes to supplement its case. The LMAA Terms18 provide a

timetable for an arbitration on documents which will usually apply and which provides a helpful
starting point for determining an appropriate procedure. However, a tribunal conducting a
documents-only arbitration must always take particular care to ensure that each party is given a
real opportunity to put its case.
In Pacol Ltd v Joint Stock Co Rossakhar,19 a dispute arising under sugar sale contracts was
referred to arbitration. The respondent sellers admitted breach of contract and this issue was not
addressed any further by the claimant buyers. The tribunal dealt with the matter as a documentsonly arbitration, and in their award decided that the sellers were not in breach of contract. The
claimant buyers applied to set aside the award on the ground that the failure to warn them that the
question of liability was to be re-opened was a serious irregularity. Their application succeeded.
Colman J offered the following general guidance as to the proper approach in documents-only
arbitrations:
It is particularly important in arbitrations which are conducted on documents alone that
arbitrators should be alive to the dangers of introducing into their awards matters which have
never been, or have ceased to be, matters in issue between the parties. This case is a particularly
glaring example of the arbitrators simply ignoring the definition of issues which had been arrived
at prior to the time when they had to determine the issues then referred to them. In a paper
arbitration the temptation to arrive at a conclusion which may not have been envisaged by either
party by reference to matters upon which the parties have not had the opportunity of addressing
the arbitrators or in respect of which they have not had an opportunity of adducing further
evidence, may be a particular temptation which arbitrators should be careful to avoid. It is
important for the continuation of the standing and quality of international commercial arbitration
in London, particularly in the commodity fields, that arbitrators should have this problem very
clearly in mind.
In BTC Bulk Transport Corp v Glencore International AG,20 the claimant reserved the right to
make further submissions, if appropriate, on a written application to dispose of a counterclaim on
a summary basis. The tribunal instead determined the counterclaim in a partial final award. The
court held that this was a breach of section 33 and remitted the award.
Non-participating parties
If a party (normally the respondent) fails to participate in an arbitration then, assuming that it has
been given reasonable notice of the proceedings, it will be treated as having voluntarily given up
its right to be heard, at least on the merits of the dispute. (Rights to challenge the jurisdiction of
the tribunal will be preserved pursuant to section 72 of the Act.) In such circumstances the
participating party should take particular care to ensure that the non-participating party has
received proper notice of any hearing at its official and actual address, and by any other available
channels. The arbitrator should also take reasonable steps to warn the non-participating party that
he is proceeding to make an award. What amounts to reasonable notice will depend on the
circumstances21 and whereabouts of the absent party but, assuming that reasonable notice has been
given, the award will bind the non-participating party unless objections on jurisdiction are
successfully pursued in the courts.

It should be noted that mere non-participation by a respondent in an arbitration is not thought to

entitle an arbitrator to proceed automatically to an award in favour of a claimant without
considering the underlying merits of the claimants case. In other words, there is no arbitral
equivalent of a court default judgment, which can be entered automatically when a defendant
fails to serve a defence. An arbitral tribunal should make an award in favour of a claimant only
where it has examined the underlying merits and decided that on the balance of probabilities the
sums or remedies claimed are due. This view is consistent with section 41(4) of the 1996 Act,
which entitles the tribunal (in the case of default) to proceed to an award on the basis of the
evidence before it.
Other aspects of section 33(a)
The arbitrators duties are generally considered to include the duty to inform the parties of his
intention to proceed to an award in default of defence or appearance.22 However, if a party has
actively participated in an arbitration the arbitrator is not required to notify that party of his
intention to proceed to an award where it would be reasonable to conclude that the case has
closedthough it will often be prudent to do so.
Section 33(b)
The second limb of section 33 requires the tribunal to adopt suitable procedures so as to avoid
unnecessary delay and expense. An important aim of the 1996 Act was to ensure that tribunals
tailored arbitral procedures to the requirements of the particular case, and to explode the theory
that an arbitration has always to follow court procedures, as well as preventing lawyers from
bullying non-legal arbitrators into adopting unnecessarily complex (and expensive)
procedures.23 The tribunal is entitled, and obliged, to consider what procedure would be
appropriate, dispensing with any unnecessary steps.
For example, the tribunal should consider whether it would save money to determine one or more
of the issues in advance of the other. It may be possible to identify issuesespecially issues of
law, or issues which raise limited factual disputeswhich will determine the proceedings, or
which are likely to lead to a settlement of the case. Similarly, in a straightforward case where
issues of fact are limited, the tribunal should take care to ensure that the parties do not adopt an
unnecessarily technical approach to disclosure of documents. It will often be appropriate to limit
the disclosure of documents (which can be expensive and time-consuming) to specified categories.
The LMAA Terms expressly limit the scope of general disclosure to documents upon which a
party relies or which adversely affects its case, as well as documents which either support or affect
the other partys case. In most cases, therefore, documents which may simply lead to a chain of
enquiry, but which do not themselves affect the cases being put, need not be disclosed. However,
wider, or even narrower, disclosure may be appropriate, depending on the circumstances of the
case.
Similarly, the tribunal should take care to consider whether or not an oral hearing is necessary. In
many cases, particularly where the dispute turns on questions of law or on the construction of
documents, oral argument is unnecessary, and time and money can be saved by dispensing with it.
There is no absolute right under the Act to an oral hearing. Even if an oral hearing is thought to be
appropriate, the tribunal may decide to limit the number of witnesses attending to give evidence.

Alternatively, the tribunal may limit the time allowed for cross-examination or argumentfor
example, giving each side 50 per cent of the time allotted for the hearing.
In RC Pillar & Sons v Edwards,24 the arbitrator permitted the parties to call an excessive number
of witnesses, failed to limit the time for cross examination and failed to ensure that the issues in
the case were clearly defined. The court held that the arbitrator had breached section 33 and the
award was remitted to the arbitrator pursuant to section 68.

Section 40: Duty of the parties

The requirements of section 33 are buttressed by section 40, which places parallel duties on the
parties in the following terms:

(1) The parties shall do all things necessary for the proper and expeditious conduct of the
arbitral proceedings.
(2) This includes
o (a) complying without delay with any determination of the tribunal as to procedural or
evidential matters, or with any order or directions of the tribunal, and
o (b) where appropriate, taking without delay any necessary steps to obtain a decision of
the court on a preliminary question of jurisdiction or law (see sections 32 and 45).

Like section 33, section 40 is mandatory. However, the only remedy for breach of section 40 is
provided by section 41, which confers power upon the tribunal to make orders in the event of
failure to take the necessary steps for the proper and expeditious conduct of the
arbitration.25 These powers include the making of peremptory orders (i.e., orders which, if
breached, will result in the imposition of a sanction upon the defaulting party, including, in serious
cases, the striking out of its case, resulting in an award against it). These powers are considered
further below. The separate power to dismiss a claim for inordinate delay is considered further in
Chapter 14.

4. AGREEMENT OF THE PARTIES

Subject to the mandatory provisions of sections 33 and 40, the parties are entitled to agree how
their arbitration will proceed. It is rare for an arbitration clause itself to contain any detailed
provisions governing procedure, though it may refer to arbitration rules which themselves contain
such provisions. Where the LMAA Terms apply to an arbitration (because they are specified in
the arbitration clause, or the tribunal has accepted appointment on LMAA Terms, or the parties
have agreed to their application), various specific provisions apply.

The LMAA Terms (2006)

Paragraph 12 of the Terms provides:

(a) It shall be for the tribunal to decide all procedural and evidential matters subject to the
right of the parties to agree any matter. However, the normal procedure to be adopted is as set
out in the Second Schedule.
(b) In the absence of agreement it shall be for the tribunal to decide whether and to what
extent there should be oral or written evidence or submissions in the arbitration. The parties

should however attempt to agree at an early stage whether the arbitration is to be on

documents alone (i.e. without a hearing) or whether there is to be an oral hearing.
This paragraph provides a basic procedure which will normally be adopted, unless the parties or
the tribunal decide that the particular circumstances of the case require the procedure to be
changed. The main features of the procedural provisions of Schedule 2 are discussed in section 6
below.

5. POWERS OF THE TRIBUNAL

Section 34 of the 1996 Act sets out a non-exhaustive list of the powers enjoyed by the tribunal and
these may properly be regarded as the tools used by the tribunal to comply with its duty under
section 33. While these can be excluded by agreement, to do so would be rare. The LMAA Terms
do not seek to exclude the powers arising under section 34 and, indeed, some of those powers
(e.g., the power to decide whether or to what extent there should be oral or written evidence or
submissions) are expressly adopted in the Terms. Section 34 provides:

(1) It shall be for the tribunal to decide all procedural and evidential matters, subject to the
right of the parties to agree any matter.
(2) Procedural and evidential matters include
o (a) when and where any part of the proceedings is to be held;
o (b) the language or languages to be used in the proceedings and whether translations of
any relevant documents are to be supplied;
o (c) whether any and if so what form of written statements of claim and defence are to be
used, when these should be supplied and the extent to which such statements can be later
amended;
o (d) whether any and if so which documents or classes of documents should be disclosed
between and produced by the parties and at what stage;
o (e) whether any and if so what questions should be put to and answered by the respective
parties and when and in what form this should be done;
o (f) whether to apply strict rules of evidence (or any other rules) as to the admissibility,
relevance or weight of any material (oral, written or other) sought to be tendered on any
matters of fact or opinion, and the time, manner and form in which such material should
be exchanged and presented;
o (g) whether and to what extent the tribunal should itself take the initiative in ascertaining
the facts and the law;
o (h) whether and to what extent there should be oral or written evidence or submissions.
(3) The tribunal may fix the time within which any directions given by it are to be complied
with, and may if it thinks fit extend the time so fixed (whether or not it has expired).

As is clear from the use of the word include in subsection (2), the list of powers is not to be
considered as exhaustive. If a particular procedural power is not listed it does not mean that it is
excluded.

6. PROCEDURE IN LONDON MARITIME ARBITRATION

This section will consider the most important features of procedure in London maritime
arbitrations against the background of the LMAA Terms and the provisions of section 34. Flow
charts setting out the procedure under a typical arbitration are set out in Appendix L.

Statements of case
Statements of case (sometimes also called pleadings) are the documents in which a party sets
out its case in a formal way. Under section 34, the tribunal may decide whether any and if so
what form of written statements of claim and defence are to be used, when these should be
supplied and the extent to which such statements can be later amended. The disadvantages of
formal statements of case are that they are usually drafted with the assistance of lawyers and do
not necessarily isolate the important issues in dispute because every alternative case (however
weak) may be advanced. Furthermore, the traditionally terse style of formal statements of case
may provoke lengthy and expensive requests for further information which are not always
necessary to clarify the live issues. However, in a substantial and complex dispute it may be
advantageous to use formal statements of case since they can be the most clear and precise means
of identifying a partys case. If lawyers are going to be instructed to present the parties cases in
any event, statements of case may be preferred since they have the great benefit of furnishing a
ready made procedure which all lawyers understand26 and also allow any amendments to a
partys case to be made clearly and simply if further allegations arise.
Where the LMAA Terms apply, the Second Schedule provides that the normal procedure is for
service of claim submissions with supporting documents attached. The use of formal pleadings
(with disclosure of documents at a later stage) is intended to be the exception rather than the rule,
and requires special permission to be obtained from the tribunal. The Terms do recognise,
however, that in some more complex cases the more traditional procedure will be appropriate.27 In
other cases (for example, urgent cases in which there is no time for the exchange of submissions
or pleadings) the tribunal may order a case to proceed to a hearing immediately without service of
any written statements of case. For most cases, though, the Terms set out a timetable for the
service of submissions. The starting point is the service by the claimant of claim submissions or
pleadings. Defence submissions or pleadings are to be served within 28 days of receipt of the
claim submissions or pleadings; reply submissions or pleadings are to be served within 14 days of
receipt of the defence submissions or pleadings.28 The submissions or pleadings should set out
every relevant fact relied upon in support of the partys case, cross-referencing where appropriate
to the underlying documents. When serving submissions, a party should check with the tribunal to
see whether it wishes to receive copies of supporting documentation at that stage. In any case it
should not overburden a tribunal with too much documentation at the start of a reference.29 Parties
must also ensure that all submissions and pleadings contain full paragraph numbering30 as this
makes subsequent submissions and arguments much easier to prepare and cross-reference.
The LMAA Terms have adopted some of the features of court proceedings. For example, the
tribunal may31 require a statement of case to be verified by a statement of truth.32 This is a
signed statement by a person representing the party to the arbitration (usually a lawyer or a
company officer) that the allegations made in the statement of case are true. The Terms also
provide that a bare denial is not an appropriate response to an allegation.33 This means that

where a party wishes to deny an allegation, it must give reasons explaining why. This provision
ensures that the real issues between the parties are articulated at an early stage.
Where the LMAA Terms timetable does not apply, or where it has not been adhered to, either
party may ask the tribunal for an order requiring service of submissions or pleadings by a certain
date. The tribunal will normally make such an order, giving the other side a reasonable period to
remedy its default in serving the pleading. Sanctions for default of such interlocutory rulings are
discussed at section 7 below.
It is common for a party to an arbitration to reconsider its pleaded case in the light of new
evidence and to apply to amend its pleadings or submissions. Arbitrators generally allow
amendments, even at a late stage, but almost always on terms that the party seeking to amend pays
the costs of and occasioned by the amendment in any event. Amendments are only likely to be
refused if a party is simply attempting to delay an arbitration, or if any prejudice caused to the
other party cannot be compensated by costs, or if the amendments try to introduce a claim which
is time-barred, or raise questions that are outside the tribunals jurisdiction. The prejudice relied
upon to resist an amendment application normally relates to evidence (e.g., the opposing party
may allege that the evidence needed to answer the amended case is no longer available or that
finding such evidence would cause undue delay at a late stage in the arbitration).

Disclosure
In English court proceedings, each party must disclose documents in its possession or control to
the other side even where they may be detrimental or have no relevance to their own case. This
procedure is called disclosure and it usually takes place after statements of case have been
exchanged. Lists of documents are exchanged specifying which documents are available for
inspection, which are privileged (see below), or which are no longer available for inspection.
Disclosure is a time-consuming exercise but it promotes settlements and reduces the chances of a
party being taken by surprise. It also assists the tribunal by giving it access to contemporaneous
documentary evidence which may be more valuable than oral evidence.34
Under section 34 of the 1996 Act, the tribunal has the power to determine whether any and if so
which, documents or classes of documents should be disclosed between and produced by the
parties and at what stage. As discussed above, the LMAA Terms have eschewed the traditional
procedure of pleadings followed by disclosure in favour of the use of submissions with documents
attached. However, this procedure may not result in disclosure of all the relevant documents. The
LMAA Terms therefore entitle the parties to ask each other for any missing documentation and, if
necessary, to apply to the tribunal for an order requiring disclosure of documents.35
In general, the tribunal will not require the parties to provide broader disclosure than would be
required in court proceedings. Generally, a party will be required to disclose documents upon
which it relies, as well as those which adversely affect its own case, and those which support or
affect its opponents case.36 This reflects the general scope of disclosure in court proceedings,
where documents which merely form the background to the story, but which do not themselves
materially affect either partys case, are not disclosable. If the factual issues in a case are fairly
well defined, the arbitrator may order disclosure to be limited still further to certain categories of
documents. A disclosure order will usually incorporate an order for inspection of the documents

disclosed. After inspection of the documents, the inspecting party will decide which documents to
copy.
Privileged documents
The arbitrators power to order disclosure will generally not be exercised so as to require
disclosure of documents which are privileged (unless such privilege has been waived). Privilege is
the legal term used to describe the protection enjoyed by a party over documents which he is
entitled to withhold from disclosure. Privilege may be claimed on the basis that the documents to
be produced are self-incriminatory, that their production is contrary to the public interest, or that
they are subject to legal professional privilege. Given the private nature of arbitration, public
interest privilege will rarely be invoked. Disputes relating to privilege will usually be concerned
with legal professional privilege. In summary, that privilege attaches to documents which were
produced for the purpose of obtaining legal advice or for the purpose of contemplated or actual
litigation.37 Legal professional privilege covers most correspondence between a client and his
solicitor and between the solicitor and counsel or an expert. Correspondence with a P&I Club
would not generally be privileged unless it was created for the purpose of giving legal advice with
a view to litigation.
Privilege also attaches to without prejudice negotiations which may not be disclosed to the
tribunal during the arbitral proceedings.38 This rule applies where the document is shown to be
part of genuine and bona fide negotiations: the use of the words without prejudice is not
conclusive of this question. Difficulties may arise if the parties disagree over whether a document
is truly privileged. Although in theory the tribunal must consider the document for the purpose of
deciding whether it is admissible,39 this presents the obvious difficulty that the tribunal has then
seen the contents of a document which may be privileged. Disputes relating to privilege can be
extremely difficult to determine in the context of arbitration.
Disputed disclosure
Disclosure can be the most time-consuming part of the preparation for an arbitration, and
interlocutory disputes relating to disclosure often arise. The most common complaints are that a
party has failed to disclose all relevant documents; that claims to privilege are unjustified; or that
disclosure requests amount to illegitimate fishing expeditions in search of irrelevant but
prejudicial documents. If the disclosure of documents or their inspection is in dispute, the parties
may make submissions in writing and a short interlocutory hearing may be necessary to enable the
arbitrator to determine the dispute.
There is very limited recourse against an arbitrators ruling on disclosure: an error of fact or law
(e.g., in admitting a privileged document) does not in itself amount to a serious irregularity. Even
where some form of serious irregularity can be established, the court would only intervene where
substantial injustice has resulted. An appeal is extremely unlikely to be possible since the
arbitrators ruling will probably not be given in a reasoned award and disclosure is a discretionary
matter in respect of which appeals are difficult.
In The Anangel Peace 40 (a pre-1996 Act case) charterers had pressed for disclosure of the vessels
scrap logs which the owners contended had been destroyed. The arbitrators had failed to order
disclosure of the scrap logs and relied instead on other evidence. Charterers sought to rely on this

as misconduct justifying setting aside the award but Robert Goff J dismissed their application. He
held that although arbitrators were under an overriding duty to act fairly as between the parties,
they were basically the masters of their own procedure. There had been attempts to get the
relevant information and the arbitrators had not acted unfairly.
Similarly, in The Robin,41 an award was challenged under section 68 on the basis that an arbitrator
had refused to order production of the vessels logs in a demurrage dispute which had been
referred to the LMAA Small Claims Procedure. The application failed, Toulson J commenting that
the court would be extremely slow to conclude that such a decision could amount to a serious
irregularity, particularly in the context of the Small Claims Procedure which has no provision for
disclosure as such.

Evidence
The tribunal is entitled under section 34 of the 1996 Act to decide whether to apply strict rules of
evidence (or any other rules) as to the admissibility, relevance or weight of any material (oral,
written or other) sought to be tendered . In maritime arbitration, the main effect of this
provision is to confirm that the tribunal is entitled to admit hearsay evidence. It is doubtful
whether section 34 is intended to permit the tribunal to override privilege, which is probably better
regarded as a procedural right rather than merely an evidential rule. In practice, privileged
material is not admitted in London maritime arbitrations.
Witness statements
Witness statements may contain the most important factual evidence in a dispute. A witness
statement should be an accurate representation of the witnesss own recollection of the relevant
events and it should be signed and dated by that witness. In the interests of accuracy it is important
that any statements are prepared as soon as possible after the events in dispute have occurred. It is
common and permissible for a statement to be drafted with the assistance of a solicitor or barrister.
However, a statement which has simply been drafted by a lawyer on the basis of contemporaneous
documents will carry little weight.
Witness statements must usually be exchanged prior to any hearing.42 Exchange of witness
statements between the parties (including experts reports which are considered in more detail
below) is usually simultaneous, but should precede the service of the statements on the arbitrator
to allow sufficient time for any objections (e.g., that the statements refer to without prejudice
negotiations) to be formulated. A witness statement will usually stand as evidence-in-chief,
thereby avoiding the cost and time of examining that witness in chief, on matters covered in the
statement. Although a witness may be asked by the party calling him or her to cover points which
are not dealt with in the statement (e.g., by dealing with points which have arisen during the
hearing itself), it should be remembered that large sections of oral evidence which have not been
touched upon in the witness statement may carry less weight with the arbitrator unless there are
good reasons for such evidence being called at a late stage. To allow substantial new oral evidence
is objectionable because it may take the other side by surprise and deprive them of a reasonable
opportunity to deal with the new points.
Absent witnesses

Witness statements can be adduced as evidence even where no hearing is to take place. If so, the
tribunal must use its experience and expertise to determine the weight to be given to each
statement by assessing it against the evidence and documents as a whole. Where a hearing is
ordered, this will usually be for the purpose of cross-examining witnesses, and some or all of the
witnesses whose statements have been served will therefore attend the hearing. There are two
principal remedies where the witness is unable, or refuses, to attend a hearing. First, a party may
apply for an order from the court (called a witness summons) compelling the attendance of that
witness. An application to court is necessary since the arbitrator has no power to compel the
witnesss attendance. In this connection, section 43 of the 1996 Act provides that a party to
arbitral proceedings may apply to court for such an order in the same way as a party to court
proceedings. However, the court has no power to compel the attendance of a witness who is
abroad, and in the context of maritime arbitrations this may often preclude such an order being
made. The second option is to adduce the absent witnesss evidence as hearsay evidence. For this
purpose, hearsay notices should, strictly, accompany the statements, though this requirement is
rarely observed in arbitration and the absence of a hearsay notice will not usually dissuade a
tribunal from admitting relevant evidence. Where a witness does not attend a hearing and the
tribunal has therefore been unable to hear that witnesss evidence tested by cross-examination,
less weight tends to be attached to that evidence than would otherwise be the case.
Expert evidence
Expert evidence is usually crucial in the context of maritime arbitrations which involve technical
disputes. In The Ikarian Reefer 43 Cresswell J laid down the following guidelines in relation to
expert evidence:

(1) Expert evidence should be, and should be seen to be, the independent product of the
expert uninfluenced as to form or content by the exigencies of the arbitration.
(2) An expert witness should provide independent assistance and should never assume the
role of an advocate.
(3) An expert witness should state the facts upon which his opinion is based, and should not
omit to consider material facts which detract from his concluded opinion.
(4) An expert witness should make it clear when a matter falls outside his expertise.
(5) If an experts opinion is not properly researched because he considers that insufficient
data is available, then this should be stated with an indication that his opinion is no more than
a provisional one.
(6) If after an exchange of reports an expert changes his view on a material matter this should
be communicated to the other side without delay and, when appropriate, to the tribunal.
(7) Where expert evidence refers to photographs, plans, calculations, survey reports or other
similar documents, these must be provided to the opposite party at the same time as the
report.

It is essential that the expert should be seen to be independent and that the experts witness
statement should contain the whole of his evidence. However, a tension exists between the
theoretical independence of the expert witness and the fact that, in practice, the expert will become
one of the team and will often advise his party on privileged documents and documents
obtained on discovery. For this reason, it would be very unusual for an expert witness to give

evidence for both parties. A tribunal has power to order that a single expert should give evidence
on particular topics;44 however, this power should only be exercised when consistent with the duty
under section 33 to give the parties a reasonable opportunity to put their case. Appointment of a
single expert may be appropriate where the costs of party-appointed experts are likely to be
disproportionate, or where the issue to which expert evidence is to be directed is not of primary
importance. For example, where a party alleges that ships logs have been forged, a tribunal may
well decide that the appropriate method of determining that particular issue is by way of
appointment of a single expert. In practice, though, the power to appoint a single expert is rarely
exercised.
Procedurally, expert evidence is treated in the same manner as any other oral evidence. This will
invariably involve the exchange of reports as directed by the arbitrators. The arbitrator is entitled
to exclude expert evidence, or to limit the number of expert witnesses.45 He may also order
meetings between experts so that issues may be agreed or differences in methodologies and
approaches identified. The outcome of these meetings will usually be informally recorded and the
meetings may be open or without prejudice. It would be improper (and probably a breach of
section 40 of the 1996 Act) for a party to attempt to prevent his expert from reaching agreement
with the opposing expert.46 Following the exchange of experts reports it is common for the
experts to produce supplementary reports dealing with issues raised by the other sides expert
evidence.

Oral Hearings
There is no absolute right to an oral hearing. In accordance with its duties under section 33, it is
always for the tribunal to determine whether an oral hearing is necessary or appropriate. Where
the LMAA Terms apply, the Second Schedule sets out the procedure whereby such a
determination is made. A prescribed questionnaire must be completed and submitted to the
tribunal within 14 days of the service of the final submissions or pleadings, so that consideration
can be given to the question of whether a hearing is appropriate. The questionnaire requires the
parties to state, for example, the quantum of the claim, its nature, whether witnesses of fact or
expert witnesses will be called and the estimated length and cost of the proposed hearing.47 Once
these steps have been performed, the tribunal will then decide whether an oral hearing is necessary
or appropriate. This will also be considered by the tribunal at any preliminary meeting ordered
pursuant to paragraph 15 of the LMAA Terms. In practice, it would be rare for a tribunal to refuse
a hearing if both parties insisted that one was necessary.
Fixing hearing dates
Where a hearing is ordered, a date will be fixed by reference to the convenience and prior
commitments of the tribunal, the parties and their representatives and witnesses. Upon fixing, a
booking fee becomes payable. This is discussed in more detail in Chapter 20.
Adjournment applications
Applications for adjournments are commonly made on various groundsfor instance, because
new evidence has arisen or because amendments have altered the nature of the dispute. Arbitrators
will be reluctant to adjourn a hearing at a late stage when time has been set aside for it and

preparations have been made, particularly if the application appears to be a delaying tactic by a
recalcitrant respondent. Each case will, however, depend on its circumstances and the arbitrator
has a very wide discretion to adjourn the hearing. Unless the need for the adjournment was
brought about by both parties or by the default of the other party it is common for the party
obtaining an adjournment to be ordered to pay the costs of, and occasioned by, the adjournment.
Where a case is adjourned part-heard, the LMAA Terms entitle the tribunal to an interim payment
for fees and expenses incurred to date (with credit being given for any booking fee already paid).48
Documents for the hearing
Usually the claimant will prepare files (commonly called bundles) containing the documents
which the parties have agreed should be placed before the tribunal. If the parties cannot agree on
which documents are to be used at the hearing, the arbitrator will make an order requiring one or
both parties to prepare bundles containing all the documents on which each party wishes to rely.
Legible page-numbering and clear lettering of files are extremely obvious, but often ignored,
means of saving time at the hearing. The parties should also ensure that documents included in the
bundles are legible copies and that they are set out in an orderly manner (usually chronologically).
An agreed dramatis personae, chronology (with page references to relevant documents) and core
bundles containing essential documents can also be helpful. In larger cases it will often be helpful
to prepare a list of issues.49
The hearing
Arbitrations are more flexible and informal than trials in court, though the course of the hearing
will usually bear some similarity to a Commercial Court trial. Privacy is one important distinction.
Each party may admit its witnesses and representatives (including lawyers and experts), but
outsiders are only admitted by consent and on the basis that they will maintain the privacy of the
proceedings.50
Unlike court trials, witnesses are rarely sworn in and the order of a hearing will often depend on
the commitments of the arbitrators, witnesses or counsel. Counsel are often instructed to appear in
LMAA hearings (in contrast to commodity arbitrations, for example under the GAFTA Rules, in
which legal representation at hearings is relatively rare). The claimant (usually represented by its
barrister) will briefly open its case by reference to the documents and go on to call its factual
witnesses. Each witness will be cross-examined by the respondent and the tribunal may also ask
questions. The claimants factual witnesses are normally followed by the respondents factual
witnesses and the experts follow in similar order. Each party will then make closing submissions
on the evidence and issues of law. Use of written skeleton arguments and submissions is
extremely common. Although each party must be given a reasonable opportunity to put its case,
this does not necessarily mean that the available time must be divided equally between them. One
party may bear the burden of proof on most or all of the issues and may therefore naturally expect
to require more time to put its case than a party which adopts a less proactive stance and merely
seeks to challenge the points put against it.51
The order of witnesses will usually be agreed between the parties. The arbitrator, who is usually
chosen for his general expertise in maritime matters, will often intervene and may, for example,
lead cross-examination of a witness. If an interpreter is used, the arbitrator should make clear to

him that his function is to translate only and that the witnesss evidence must not be altered or
prompted. Discussions between witness and interpreter should not be permitted.
Where the admissibility of documentary evidence is challenged at the hearing, the arbitrator will
usually make a ruling immediately; alternatively, he may admit the evidence provisionally.
Objections to authenticity will be dealt with in a similar manner, although the arbitrator may ask
the maker of the document in question to give evidence relating to its authenticity.
New evidence tendered before an award is made
The hearing is the occasion on which the parties should present all of their evidence52 and an
arbitrator would be justified in refusing to allow evidence which could have been put forward
during a hearing to be adduced afterwards. However, if fresh and material evidence arises after the
end of the hearing but before an award has been made, the arbitrator will generally allow it to be
admitted and will give the parties the opportunity to make submissions on it. It is common for the
parties and arbitrators to agree that certain issues should be dealt with by written submissions after
the hearing because there is insufficient time at the hearing or because resolving those issues does
not require an oral hearing. To avoid delay in producing an award, a timetable for such
submissions should be set by the arbitrator (or agreed by the parties) at the end of the hearing.
New evidence tendered after an award
Unless the circumstances in which the new evidence is produced amount to a procedural
irregularity within section 68, the court has no power either to set aside the award or to remit the
award to the arbitrator so that the new evidence can be considered.
In Profilati Italia SrL v Paine Webber Inc 53 a dispute was referred to arbitration under the rules of
the London Metal Exchange. After the award was produced, the claimant in the arbitration sought
to challenge the award under section 68 of the Act, arguing that the respondent had failed to
disclose two material documents which would have supported its case. It was held that in the
absence of any evidence that the documents had been deliberately withheld (which might arguably
amount to the obtaining of the award by fraud or in a manner which was contrary to public policy
falling within section 68), the court had no power to intervene. Moore-Bick J commented that the
court has no general jurisdiction to interfere with the working of the arbitral process the court
no longer has the power to remit an award simply on the grounds that new evidence has come to
light.54

Documents-only procedure
Where an arbitration is proceeding on documents only, paragraph 13(c) of the LMAA Terms
provides that following the completion of submissions, the tribunal will give notice of its intention
to proceed to its award and will so proceed unless either party within seven days requests, and is
thereafter granted, leave to serve further submissions and/or documents. Before proceeding to an
award, however, the tribunal must always be sure that the parties have been given a reasonable
opportunity to put their case: see section 3 above.

Interlocutory applications

The LMAA Terms make clear that a party should not approach the tribunal with an interlocutory
application unless it has first taken steps to agree the point in dispute with its opponent.55 This rule
is particularly important in connection with directions or timetabling the future progress of the
arbitration. The parties can usually agree an appropriate timetable and, assuming that the proposed
timetable does not itself contravene section 33, the tribunal will usually be content to adopt it.
Arbitrators usually prefer not to be copied in on every piece of routine interlocutory
correspondence and the LMAA Terms state expressly that tribunals will not acknowledge receipt
of such correspondence unless there is particular reason to do so.56
In larger cases, the tribunal may order a preliminary meeting at which all interlocutory issues
and disputes can be aired and determined. Paragraph 15(a) of the LMAA Terms provides:
The tribunal may decide at any stage that the circumstances of the arbitration require that there
should be a preliminary meeting to enable the parties and the tribunal to review the progress of the
case; to reach agreement so far as possible upon further preparation for, and the conduct of the
hearing; and, where agreement is not reached, to enable the tribunal to give such directions as it
thinks fit.
Before the meeting, the parties should provide the tribunal with information sheets setting out
progress to date, including estimates of readiness for the hearing and the likely duration of the
hearing. The Third Schedule of the LMAA Terms sets out topics which may appropriately be
considered at a preliminary meeting.

Inquisitorial role
Section 34 of the 1996 Act confirms that the tribunal may decide whether and to what extent the
tribunal should itself take the initiative in ascertaining the facts and the law. In maritime
arbitrations, for example, it is common for a tribunal to pursue its own line of questioning (often
arising from the tribunals particular expertise) with factual and expert witnesses. It is rare,
however, for the tribunal to adopt a purely inquisitorial role. Furthermore, where the tribunal does
decide to take the initiative in ascertaining facts and law, it must give the parties an opportunity to
respond to any particular points which arise as a result.57 However, notwithstanding this, an
arbitrator may use his personal or expert knowledge to draw inferences and need not always refer
back to the parties when drawing inferences from the primary facts in issue.58

LMAA Small Claims Procedure

The Small Claims Procedure is intended for cases involving claims or counterclaims of less than
US$50,00059 which do not raise any complex legal or factual issues. Although the Small Claims
Procedure does not differ fundamentally from the normal procedure set out in Schedule 2 to the
LMAA Terms, it includes many features designed to save money and time. The dispute is
determined by a sole arbitrator, and there is a fixed arbitrators fee of 2,000 plus VAT where
applicable, which covers appointment fee, interlocutory proceedings, a hearing (if appropriate) of
up to one day, the writing of the award and the assessment of costs (if any). If any counterclaim
exceeds the claim, a further fee of 1,250 plus VAT becomes payable. Save in exceptional
circumstances, the reference will proceed upon the basis of documents only, with each side setting

out its case in letters with documents attached. The arbitrator has the power to order disclosure of
further documents if in his opinion a party has failed to produce any relevant documents. All
rights of appeal are excluded, and therefore the award (which the arbitrator will seek to publish
within one month from receipt of all relevant documents and submissions) will not be reasoned.
There is a cap of 2,750 (2,500 for arbitrations commenced before 1 July 2008) on recoverable
costs of a claim.

LMAA Intermediate Claims Procedure

The LMAA Intermediate Claims Procedure was introduced in March 2009 and is designed for
disputes involving claims of between US$50,00060 and US$400,000, where the costs of an
ordinary LMAA arbitration might be disproportionate. To this end, the Procedure incorporates a
costs cap on the recoverable costs of the parties of 30 per cent of the claim (and counterclaim, if
any), rising to 50 per cent if there is an oral hearing. Similarly, the tribunals costs are capped at
one-third (in the case of a sole arbitrator) or two-thirds (in the case of a two or three man tribunal)
of the total amount by which the parties costs are capped.
The Intermediate Claims Procedure incorporates a presumption in favour of a three-man tribunal
(though the parties are free to agree on the composition of the tribunal). There is a tight timetable
for the service of written submissions, and no formal disclosure stage (parties are instead obliged
to produce relevant documents with submissions). The Procedure envisages limited factual and
expert witness evidence. There is no automatic right to an oral hearing, and only exceptionally
will one be held. If a hearing takes place, it will be limited to a maximum of five hours.
Perhaps most strikingly, rights of appeal are conditional upon the tribunal certifying that the
dispute between the parties involves a question of law of general interest or importance to the
trade or industry. This provision is intended to avoid differences in view between the court and the
tribunal, and also avoids the costs of an application for permission to appeal.

7. SANCTIONS FOR FAILURE TO COMPLY WITH PROCEDURAL ORDERS

Costs orders and orders disentitling a party from relying on the evidence or argument in relation to
which they have been in default are the most common sanctions imposed by arbitrators. Where a
party, typically the respondent, disobeys an interlocutory order and is delaying the arbitration for
its own purposes then expediting the proceedings by fixing an early hearing date may also be a
fair and effective sanction. If a party fails to comply with an order to give further particulars it
may be appropriate to direct that the statements or submissions of which further particulars are
sought should be struck out unless the requested particulars are served within a given time. For
failure to serve a witness statement or expert report the most effective sanction is to direct that
such evidence will not be admissible and that the relevant witness cannot give evidence. For
default in giving disclosure the arbitrator may fairly draw adverse inferences from the failure to
disclose documents.
If the tribunals directions are breached, then it is empowered by section 41 of the 1996 Act to
make peremptory orders. (Peremptory orders are final orders providing a sanction for noncompliance which will be enforced with no opportunity for another chance to comply. They are
appropriate where a party has, without excuse, failed to comply with the arbitrators orders.) In the

event of failure to comply with a peremptory order requiring provision of security for costs,
section 41 entitles the tribunal to make an order dismissing the claim. In addition, in LMAA
arbitrations, paragraph 14(c) of the Terms provides that where a party fails, in breach of an order,
to provide security for costs, the tribunal may stay the whole or part of its claim. For breach of
other peremptory orders, the tribunal may direct that the defaulting party is not entitled to rely on
a specified allegation or material, may direct the payment of costs, or may proceed to an award on
the basis of the evidence before it. Alternatively, the court has power to enforce compliance with
the peremptory order under section 42 of the 1996 Act.

8. JUDICIAL SANCTIONS AND SUPPORTIVE POWERS

Judicial sanctions
Recourse to the courts for rulings on procedural issues made by the arbitrator during the course of
an arbitration is extremely difficult. As a matter of policy, the courts are reluctant to intervene
where parties have chosen an arbitrator to resolve their disputes: judicial remedies are seen as
contrary to the parties choice of one-stop adjudication by the arbitrator.61 As a matter of
jurisdiction, the courts do not have general supervisory powers over arbitrators or arbitrations. The
main methods of recourse are:

(a) removal of the arbitrator for breach of section 33 under section 24 of the Act;
(b) remission and setting aside of an award for breach of section 33 under section 68 of the
Act.

These remedies are discussed further in Chapters 11 and 22.

Supportive powers of the court

The 1996 Act aims to ensure that the courts powers of intervention are clearly and narrowly
defined so that the role of the court is limited to those occasions when it is obvious that either the
arbitral process needs assistance or there has been, or is likely to be, a clear denial of justice.
Section 1(c) provides that in matters governed by this Part the court should not intervene except
as provided by this Part. It is important to note that this provision uses the word should which
connotes a duty on the court not to intervene but does not exclude all the courts residual powers
to intervene (the word shall, which was adopted in Article 5 of the Model Law, would have
deprived the court of all powers to intervene).62
Section 44 (which corresponds to Article 9 of the Model Law) provides a narrow range of fallback powers exercisable by the court in support of an arbitration. It provides:

(1) Unless otherwise agreed by the parties, 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.
(2) Those matters are:
o (a) the taking of the evidence of witnesses;
o (b) the preservation of evidence;

(c) making orders relating to property which is the subject of the proceedings or as to
which any question arises in the proceedings
(i) for the inspection, photographing, preservation, custody or detention of the
property, or
(ii) ordering that samples be taken from, or any observation be made or experiment
conducted upon, the property, and for that purpose authorising any person to enter
any premises in the possession or control of a party to the arbitration;
o (d) the sale of any goods the subject of the proceedings;
o e) the granting of an interim injunction or the appointment of a receiver.
(3) If the case is one of urgency, the court may, on the application of a party or proposed party
to the arbitral proceedings, make such orders as it thinks necessary for the purpose of
preserving evidence or assets.
(4) If the case is not one of urgency, the court shall act only on the application of a party to
the arbitral proceedings (upon notice to the other parties and to the tribunal) made with the
permission of the tribunal or the agreement in writing of the other parties.
(5) In any case the court shall act only if or to the extent that the arbitral tribunal, and any
arbitral or other institution or person vested by the parties with power in that regard, has no
power to act or is unable for the time being to act effectively.
(6) If the court so orders, an order made by it under this section shall cease to have effect in
whole or in part on the order of the tribunal or of any such arbitral or other institution or
person having power to act in relation to the subject-matter of the order.

Section 44 is discussed in more detail in Chapters 8 and 18 on injunctions and security since this
is the context where it is most commonly applied. Although it would appear to give the court
fairly wide powers, it has been construed restrictively in accordance with the Acts overall policy
of reducing court intervention in the arbitral process. In particular the court can only act where the
tribunal is unable to act effectively. If the case is one of urgency then the court has power to
make orders for the purpose of preserving evidence or assets, but not for other purposes.63 If the
case is not shown to be urgent then the court would only act upon the agreement of the parties or
the permission of the tribunal.
The meaning of unable to act effectively is unclear although it is likely to encompass any
inability of arbitrators to make orders with some practical effect, as well as the situation where the
tribunal is not yet fully constituted or fully available.64 Similarly, an arbitrator who is unwell or
absent would probably fall within this formula.
Finally, the court can intervene to ensure the effective service of documents. Section 76 makes
provision for service of notices in arbitral proceedings as follows:

(1) The parties are free to agree on the manner of service of any notice or other document
required or authorised to be given or served in pursuance of the arbitration agreement or for
the purposes of the arbitral proceedings.
(2) If or to the extent that there is no such agreement the following provisions apply.
(3) A notice or other document may be served on a person by any effective means.
(4) If a notice or other document is addressed, pre-paid and delivered by post

o
o

(a) to the addressees last known principal residence or, if he is or has been carrying on a
trade, profession or business, his last known principal business address, or
(b) where the addressee is a body corporate, to the bodys registered or principal office, it
shall be treated as effectively served.

Section 77 provides the court with fall-back powers in relation to service of documents where the
service of a document in the manner agreed by the parties or in accordance with section 76 is not
reasonably practicable:

(2) Unless otherwise agreed by the parties, the court may make such order as it thinks fit
o (a) for service in such manner as the court may direct; or
o (b) dispensing with service of the document.

1 For a detailed discussion of the innovative nature of the mandatory and non-mandatory
provisions of internal arbitration law, see Mustill & Boyd, 2001 Companion, pp. 52-65.
2 Paragraphs 150 at 155 of the DAC Report.
3 In the sense of not being given effect under the Act. Mustill & Boyd, 2001 Companion, pp. 103105, raise the interesting question of whether an arbitration agreement which breached the
mandatory provisions of the Act (and was therefore entirely unrecognised under the Act) could
nevertheless be enforced at common law outside the Act. This difficult question is unlikely to
arise frequently in practice.
4 Paragraphs 154-163 of the DAC Report. See Chapter 11 for further discussion of resignation.
5 Paragraph 280 of the DAC Report.
6 For further discussion, see Mustill & Boyd, 2001 Companion, pp. 62-65 and 306-307 (where
sections 33 and 40 are described as imposing duties of imperfect obligation and where the
possibility of a claim by one party against the other for breach of statutory duty is raised). The
longstop nature of the available remedies has been stressed by the courts: see, e.g., Petroships
Pte Ltd v Petec Trading and Investment Corporation, The Petro Ranger [2001] 2 Lloyds Rep
348, Warborough Investments Ltd v S. Robinson & Sons Ltd [2004] P&CR 6, ABB AG v Hochtief
Airport GmbH and Ors [2006] EWHC 388 (Comm); [2006] 2 Lloyds Rep 1, Bandwidth Shipping
Corp v Intaari, The Magdalena Oldendorff [2007] EWCA Civ 998; [2008] 1 Lloyds Rep
7; Elektrim SA v Vivendi Universal and ors [2007] EWHC 11 (Comm); [2007] 1 Lloyds Rep 693.
7 Paragraph 151 of the DAC Report.
8 The words full opportunity as used in the Model Law were deliberately changed to
reasonable opportunity so as to avoid any suggestion that a party was entitled to take as long as
it pleased in putting its case: paragraphs 164-165 of the DAC Report.
9 Section 76 of the Act provides a guide to the types of steps (e.g., service on registered address)
which should amount to proper notice.
10 K/S A/S Bill Biakh v Hyundai Corp [1988] 1 Lloyds Rep 187.
11 Cf. Chilton v Saga Holidays [1986] 1 All ER 841.

12 [2007] EWHC 1749 (TCC); [2006] 2 Lloyds Rep 1; see also Bulfracht (Cyprus) Ltd v Boneset
Shipping Company Ltd, The MV Pamphilos [2002] EWHC 2292 (Comm); [2002] 2 Lloyds Rep
681; see also Warborough Investments vRobinson [2004] P&CR 1. The authorities were
summarised by Tomlinson J in ABB AG v Hochtief Airport GmbH and anor [2006] EWHC 388
(Comm); [2006] 1 Lloyds Rep 1, and that summary was approved by the Court of Appeal
inBandwidth Shipping Corp v Intaari , The Magdalena Oldendorff [2007] EWCA Civ 998; [2008]
1 Lloyds Rep 7.
13 [1981] 2 Lloyds Rep 514; see also Interbulk Ltd v Aiden Shipping Co Ltd, The Vimeira [1984]
2 Lloyds Rep 66.
14 [2000] 1 Lloyds Rep 480.
15 [2004] EWHC 1824 (Comm); [2006] TCLR 1.
16 [2000] 2 Lloyds Rep 83.
17 [2006] EWHC 1055 (Comm); [2006] 2 Lloyds Rep 485.
18 Paragraph 13(c) and the Second Schedule.
19 [2000] 1 Lloyds Rep 109.
20 [2006] EWHC 1957 (Comm).
21 Guidance is provided by section 76 of the 1996 Act.
22 The Myron (Owners) v Tradax Export SA, The Myron [1969] 1 Lloyds Rep 411 at 416.
23 Paragraph 153 of the DAC Report.
24 [2001] CILL 1799.
25 In the 2001 Companion, the editors of Mustill & Boyd floated the possibility that section 40
took effect as an implied term of the arbitration agreement (with the result that a claim for
damages might lie in the event of breach). However, this analysis was rejected (obiter) by Aikens
J in Elektrim SA v Vivendi Universal SA [2007] EWHC 11 (Comm); [2007] 1 Lloyds Rep 693.
26 Mustill & Boyd, 2nd edn, p. 319.
27 Second Schedule, paragraph 1.
28 Ibid., paragraphs 2-3.
29 Ibid., paragraph 4.
30 Ibid., paragraph 5.
31 In court proceedings, all statements of case must be verified by a statement of truth. In
arbitration, it is rare in practice for a statement of truth to be required, though it may be
appropriate in relation to, for example, allegations of fraud or allegations which appear to have
little or no evidential basis.
32 Second Schedule, paragraph 11.

33 Ibid., paragraph 6.
34 Sunderland Steamship P&I Association v Gatoil International Inc, The Lorenzo
Halcoussi [1988] 1 Lloyds Rep 180 at 184.
35 Second Schedule, paragraphs 9 and 10.
36 Ibid., paragraph 9.
37 See, generally, Cross & Tapper on Evidence, 11th edn; Hollander, Documentary Evidence, 9th
edn.
38 Rush & Tompkins v GLC [1988] 3 All ER 737.
39 South Shropshire DC v Amos [1986] 1 WLR 1271.
40 [1981] 1 Lloyds Rep 452.
41 Ranko Group v Antarctic Maritime SA [1998] LMLN 492.
42 E.g., LMAA Terms, Second Schedule, paragraph 12.
43 National Justice Cia Naviera SA v Prudential Assurance Co Ltd [1993] 2 Lloyds Rep 68; see
also Goodall [1990] 56 Arbitration 159 and Franks [1994] 60 Arbitration 56.
44 See section 37 of the Act; for an example, see Hussman (Europe) Ltd v Al Ameen Development
& Trade Co [2000] 2 Lloyds Rep 83.
45 Section 34(2)(h) of the 1996 Act and paragraph 14(a) of the LMAA Terms.
46 Cf. CPR, Part 35.
47 Second Schedule, paragraph 8.
48 Paragraph 18 of the LMAA Terms.
49 Cf. Petroships Pte Ltd v Petec Trading & Investment Corp, The Petro Ranger [2001] 2 Lloyds
Rep 348 at 358.
50 See Chapter 13.
51 See Mustill & Boyd, 2001 Companion, p. 31.
52 Town & City v Wiltshier (1988) 44 Build LR 109; Jugoimport SPDR v Westacre
Investments [1999] QB 740.
53 [2001] EWHC 24 (Comm); [2001] 1 Lloyds Rep 715.
54 At 720.
55 Second Schedule, paragraph 13.
56 Ibid., paragraph 15: the provision is intended to prevent the wasting of unnecessary time and
costs.

57 E.g., Hussman (Europe) Ltd v Al Ameen Development & Trade Co [2000] 2 Lloyds Rep 83,
where a tribunal held discussions with an expert without conferring with the parties.
58 London Underground Ltd v Citylink Telecommunications Ltd [2007] EWHC 1749 (TCC);
[2006] 2 Lloyds Rep 1; and cases on section 68(2)(a) discussed in Chapter 22.
59 This limit is likely to rise to US$100,000: see below.
60 The current recommended limit for the LMAA Small Claims Procedure although this is likely
to rise to US$100,000.
61 E.g., dicta in Harbour Assurance Co Ltd v Kansa General International Ins Co [1993] QB 701
at 724.
62 Paragraphs 20-21 of the DAC Report; Vale do Rio Doce Navegacao SA v Shanghai Bao Steel
Ocean Shipping Co [2000] 2 Lloyds Rep 1 at 11.
63 Cetelem SA v Roust Holdings Ltd [2005] EWCA Civ 618; [2005] 1 Lloyds Rep 494, departing
from Hiscox Underwriting Ltd v Dixon [2004] EWHC 479 (Comm); [2004] 2 Lloyds Rep 438.
64 Starlight Shipping Co v Tai Ping Insurance Co Ltd [2007] EWHC 1893 (Comm); [2008] 1
Lloyds Rep 230.

Chapter 13

Confidentiality in Arbitration
Confidentiality in Arbitration

1. Introduction
2. Nature of the duty
3. Exceptions
4. Confidentiality of awards
5. Confidentiality and court proceedings
6. Practice and remedies

1. INTRODUCTION
Confidentiality is one of the most valued features of London arbitration. Litigation ordinarily
involves a public hearing and third parties will have access to court documents1 whereas the
privacy of arbitration enables the parties to avoid their disputes becoming known to competitors,
clients or the public. The Arbitration Act 1996 does not include any statutory principles of
confidentiality because the drafters considered that it was a difficult area which could be better
resolved by the courts on a pragmatic case by case basis.2 The parties to an arbitration agreement
are also better placed to define any duties of confidentiality more clearly, in particular by choosing
institutional rules with stipulations for confidentiality.3

2. THE NATURE OF THE DUTY

Under English law, unlike Australian law,4 it is clearly established that a general duty of
confidentiality exists in relation to arbitral proceedings. Leggatt J in The Eastern Saga 5 explained
that the concept of private arbitrations derives simply from the fact that the parties have agreed to
submit to arbitration particular disputes arising between them and only between them. It is implicit
in this that strangers shall be excluded from the hearing and conduct of the arbitration. Colman J
in Hassneh Insurance Co v Mew 6 commented that parties to an arbitration are entitled to assume
that the hearing will be in private and this assumption arises from a practice which has been
universal in London for hundreds of years. The Court of Appeal in Ali Shipping
Corporation v Shipyard Trogir identified the obligation of confidentiality in arbitration more
specifically as an implied term of the arbitration agreement that attaches as a matter of law as an
essential corollary of the privacy of arbitration.7 However, in Associated Electric Gas Insurance
Services Ltd v European Reinsurance Company of Zurich,8 the Privy Council expressed
reservations against categorizing the duty of confidentiality as a specific implied term subject to
exceptions because such an approach failed to reflect the different types of confidentiality which
may attach to different documents. The Court of Appeal in Emmott v Michael Wilson &
Partnerss 9 affirmed that the duty of confidentiality is implied into the arbitration agreement as a
matter of law but also emphasised that the scope of the duty would depend on the context in which
the dispute arise.
The concepts of privacy and confidentiality are closely related and the courts have generally used
the terms interchangeably.10 The main practical distinction is that the terminology of privacy is
readily attached to the hearing whereas confidentiality (with exceptions) is used with reference to
documents generated by the arbitration. The Court of Appeal in Emmott v Michael Wilson &
Partners 11 suggested that privacy in the conduct of an arbitration should be contrasted with more
specific aspects of the law of confidentiality such as the protection of inherently confidential
information (e.g., trade secrets) or the rule that documents disclosed in an arbitration can only be
used for the purpose of that arbitration.
Confidentiality attaches to all aspects of the arbitration, in particular the hearing, the documents
produced in the course of the arbitration and the award. It is more doubtful whether the duty
would extend to the mere fact of having commenced arbitration or obtained an award.
In Department of Economic Policy of the City of Moscow v Bankers Trust 12 it was common
ground that either party could disclose the end result of an arbitration. However, in most cases
parties may wish to prevent publicity as to the existence of an arbitration, its subject matter and
the end result.
The most common issue to arise is whether documents generated in an arbitration can be disclosed
to third parties. In defining the duty of confidentiality in arbitration the courts have sometimes
drawn an analogy with the position regarding documents obtained on disclosure in court
proceedings and also the duty of confidentiality owned by a banker to his customer.13 A person to
whom documents are disclosed under court rules is under an implied obligation to the court not to
use the documents for any purpose other than the proceedings in progress.14 The rationale for the
obligation is the fact that the disclosure is compelled purely for the purpose of the
proceedings.15 In arbitration a similar principle precludes the use of documents for any other
purpose than the dispute in which they were obtained.16

The duty of confidentiality is owed by the parties to the arbitration agreement to each other. It is
also owed by the arbitrator to the parties as an implied term of his appointment. A similar duty
would also be imposed on legal advisors and expert witnesses17 as an implied term in their
contract and also by reason of their notice of the confidential nature of arbitration.18 The duty of
confidentiality may also be owed by other witnesses but it would be advisable to give them
express advance notice of the confidentiality of the proceedings.

3. EXCEPTIONS
The duty of confidentiality in arbitration is not absolute. In Ali Shipping Corporation v Shipyard
Trogir 19 the Court of Appeal gave guidance on circumstances where exceptions would arise but
there are no blanket rules applicable to all documents: in particular an award may receive different
treatment and is dealt with separately below.20 The principal exceptions to the duty of
confidentiality are:

(a) the parties consent (express or implied);

(b) where there is an order or leave of the court;
(c) where it is reasonably necessary for the protection of the legitimate interests of an
arbitrating party;
(d) the interests of justice and probably also
(e) the public interest.21

Consent would cover cases where the parties had agreed institutional rules that allowed disclosure
to third parties (e.g., rule 14(b) of the LMAA Terms) or terms implied by custom or business
efficacy. This might include disclosing an award in non-contentious situations, for instance to
insurers, auditors or to comply with stock exchange regulations. It would also include practices
that had been established by custom.
In Owners of Hamtun v Owners of St John,22 Gross J found that the implied term of
confidentiality in LOF arbitration agreements was qualified by the custom of awards being made
available to judges, salvage arbitrators and lawyers with a view to promoting uniformity and
consistency.
Disclosure of documents by order or permission of the court might occur where a party is
compelled to make disclosurefor instance where the court orders disclosure of documents
generated by an earlier arbitration for use in a court action. Such an order would be made if the
court was satisfied that the documents were necessary for dealing with the case justly, normally
because they would adversely affect one partys case or support another partys case. In ordering
disclosure the court will take into account the confidentiality of the documents.23 Whether
documents disclosed in foreign proceedings will be disclosable in London arbitration may depend
on the basis upon which the documents were disclosed: if the documents were voluntarily
disclosed then they would be more readily disclosable than if they were disclosed under
compulsion.24 In Ali Shipping,25 Potter LJ focused on disclosure by order of the court, but it
appears likely that an arbitrator in a later arbitration could similarly order disclosure of documents
and that compliance with such an order would not breach confidentiality in the first arbitration.

The Court of Appeal has made clear that disclosure will be allowed when, and to the extent to
which, it is reasonably necessary for the protection of the legitimate interests of an arbitrating
party vis--vis a third party in order to found a cause of action against that third party or to defend
a claim (or counterclaim) brought by the third party.26 This would not justify disclosure simply
because it may have a commercially persuasive impact on the third party or would be merely
helpful, as distinct from reasonably necessary for the protection of rights.27 Accordingly, it is
doubtful that it is enough to establish merely that the third party has a legitimate interest in the
material (e.g., where disclosure of a successful award by a subsidiary to its parent company would
make it easier for the parent company to borrow money).28 Potter LJ considered that the concept
of reasonable necessity should be approached flexibly, taking into account the practicability and
expense of obtaining the evidence or information by other means. However, it is not enough that
disclosure would save time or expense: Potter LJ did not think that convenience and good sense
are in themselves sufficient to satisfy the test of reasonably necessity.29
In Ali Shipping Corporation v Shipyard Trogir 30 six Liberian shipping companies in common
beneficial ownership were parties to separate shipbuilding contracts with a shipyard. Under one of
the contracts the yard failed to complete the hull and the buyer, Ali Shipping, was successful in
obtaining an award for damages. The yards response was to activate three arbitrations previously
commenced against the other buyers before a different tribunal in which they claimed the first
instalment of the purchase price. The Court of Appeal upheld an injunction restraining the yard
from disclosing materials from the earlier arbitration in the later arbitrations, in particular the
award, written submissions and transcripts of oral evidence given by Ali Shipping. The disclosure
was not reasonably necessary for the yard in making its case on the merits even though disclosure
of transcripts of evidence in the earlier arbitration might have saved time and expense. Potter LJ
accepted, however, that if there was an application to dismiss the later arbitrations for want of
prosecution then the yard could rely on the transcripts to rebut any suggestion that the delay had
caused prejudice.
Similar considerations will apply where a party seeks to disclose documents generated in one
arbitration in other proceedings between the same parties (as opposed to third parties). Where no
third party is involved the court will be only considering the scope of the duty of confidentiality
and will not need to balance that duty against the interests of disclosure to the third party.31
The Court of Appeal in Ali Shipping and Emmott v Michael Wilson & Partners recognised that
disclosure of documents may also be justified in the interests of justice, in particular to ensure that
a judicial decision is reached upon the basis of truthful or accurate evidence.32
Emmott v Michael Wilson & Partners Limited 33 involved a bitterly fought dispute between two
solicitors who had formerly worked together. In a London arbitration Mr Wilsons firm had made
allegations of fraud against Mr Emmott but such allegations were subsequently struck out by the
tribunal. Related court proceedings were commenced by Mr Wilsons firm in New South Wales
against parties associated with Mr Emmott and he applied to the English court to disclose the
London arbitration pleadings and skeleton arguments in the Australian proceedings on grounds
that Mr Wilsons case in the different proceedings was inconsistent and presented those courts
with a misleading picture. The majority of the Court of Appeal allowed disclosure on grounds of

the interests of justice although Thomas LJ recognised this exception as an aspect of public
interest.
In London & Leeds Estate v Paribas Ltd 34 an issue arose as to whether the evidence of property
market values given by an expert witness in a rent review arbitration was consistent with his
evidence on the same issue in two earlier arbitrations. Mance J (as he then was) upheld an order
asking the expert to produce his reports from one of the earlier arbitrations. He considered that if a
witness were proved to have expressed his views differently when acting for different sides, this
would be a factor which should be brought out in the interests of the individual litigants involved
and in the public interest. This factor would outweigh objections on grounds of privacy and
confidentiality.
The majority in Emmott v Michael Wilson & Partners left open the question of whether the public
interest should be regarded as an independent exception to confidentiality. However, public
interest is generally accepted as justifying an exception to the duty to protect confidential
information in other contexts. This exception might apply where disclosure of something
disclosed in an arbitration is clearly necessary to protect the public (e.g., criminal practices). In
one exceptional arbitration, The Lena Goldfields Case,35 the hearing was open to the press in order
to defend the proceedings against malicious charges made by the USSR. There is little case law on
the scope of public interest defences in the context of arbitration but case law from other areas
may provide guidance.36
In Ali Shipping the Court of Appeal considered the exception to confidentiality in the context of
the court giving permission to disclose documents. However, it appears likely that an issue
between the parties to an arbitration as to whether documents generated in that arbitration may be
disclosed outside the arbitration (e.g., in court proceedings) will usually be within the jurisdiction
of the arbitral tribunal. Unless both parties are willing for the issue to be resolved in court then it
should be determined by the arbitral tribunal37 and any court proceedings will be subject to a stay
under section 9 of the 1996 Act.38

4. CONFIDENTIALITY OF AWARDS
Under English law an award is a confidential document unless the parties agree otherwise or can
establish an exception justifying disclosure. The position is to be contrasted with New York
arbitration where awards are commonly published.
Typically an agreement dealing with confidentiality will be in institutional rules: paragraph 22 of
the LMAA Terms makes special provision for confidentiality of reasons for awards (see Chapter
19 on awards).
In The Easy Rider 39 an award was made following a small claims arbitration and the parties
received privileged reasons separately.40 The award was challenged on grounds of serious
irregularity. Moore-Bick J found that notwithstanding any agreement that the reasons were not to
be used in court proceedings, the court should look at the reasons if they formed the evidence
upon which an allegation of serious irregularity was based.

The LMAA Terms also allow for publication of awards of general interest in such a way that the
anonymity of the parties is preserved. Such awards will normally be published in Lloyds
Maritime Law Newsletter. Paragraph 26 provides that:
If the tribunal considers than an arbitration decision merits publication and gives notice to the
parties of its intention to release the award for publication, then unless either or both parties
inform the tribunal of its or their objection to publication within 21 days of the notice, the award
may be publicised under such arrangements as the Association may effect from time to time.
Notice of intention to publicise an award will be given to the parties. The publication will be so
drafted as to preserve anonymity as regards the identity of the parties, of their legal or other
representatives, and of the tribunal.
Awards deserve particular consideration because they are the sort of document most commonly
disclosed to third parties and they are treated differently to other documents generated in an
arbitration.41 First, the award is subject to the courts supervisory jurisdiction under the 1996 Act,
and may become public if the hearing is open to the public. Secondly, the award may be enforced
by a court abroad under the New York Convention or in England by an application under section
66 of the 1996 Act and may thereby become public. Thirdly, the award contains the tribunals
determination of the issues referred to arbitration and gives rise to an independent obligation to
comply with the award. The awards effect in determining a partys liability and the role of the
reasons in setting out the grounds of that liability, gives them particular legal and commercial
significance. The authorities draw no firm distinction between the disclosure of an award and its
reasons. Generally disclosure of both will go hand in hand, unless, perhaps, the parties have
requested confidential reasons or there is no practical need for disclosure of the reasons (see
Chapter 19 on awards).
In Associated Electric Gas Insurance Services Ltd v European Reinsurance Company of
Zurich 42 two separate arbitrations were commenced between the same parties in relation to a
reinsurance agreement. The defendant sought to rely on the award in one of the arbitrations in the
other on grounds that it gave rise to an issue estoppel on an issue common to both arbitrations.
The Privy Council overturned an injunction restraining disclosure because an agreement on
confidentiality could not be construed as preventing one party from relying upon an award as
having given him rights against another.
In shipping disputes the issue often arises in the context of a chain of contracts: a head charterer
may be able to make good his claim against the shipowner only by reference to an arbitration
award made against the head charterer in favour of the sub charterer. A closely analogous position
might also arise as between the parties to commodity trade contracts whereby goods were sold and
purchased down a line of buyers and sellers.43
In The Sargasso 44 the claimants time-chartered the vessel from the defendants. The claimants
sub-chartered the vessel under a voyage charter for the carriage of propylene. Cargo was
contaminated and the sub-charterers were successful in obtaining an award of damages under the
voyage charter. The claimants then commenced proceedings in court for an indemnity under the
time charter. Clarke J held that in making the time charter it was in the parties reasonable
contemplation that any breach under the time charter would put the claimants in breach of the

voyage charter with the result that they would be liable to pay damages. The claimants were
entitled to recover damages in the amount of the award under the voyage charter, plus interest and
costs, unless it could be shown that the claimants had failed to mitigate their loss, or the award
was such that no reasonable arbitrators could reach on the evidence or perverse in some other
respect.
The significance of the award in determining legal rights and obligations means that disputes
commonly arise as to whether it should be disclosed. In some circumstances it may be
commercially advantageous to allow disclosure of an award to a third party since it may facilitate
payment of the award. Disclosure will typically be disputed if the award reveals sensitive trade
practices or makes it easier for claims to be made against related businesses.45 The exceptions to
confidentiality are explained above. Disclosure of an award in this context will usually only be
permitted if disclosure is reasonably necessary for the protection of the legitimate interests of an
arbitrating party vis--vis a third party in order to found a cause of action against that third party
or to defend a claim (or counterclaim) brought by the third party.46
In Hassneh Insurance Co v Mew,47 following an arbitration between a reassured and its reinsurers,
an award was issued in which the reassured was substantially unsuccessful. It then issued court
proceedings against its brokers claiming damages for negligence in placing the reinsurance. The
reassured wished to disclose to the brokers the award, its reasons, transcripts of witness
statements, statements of case and other documents from the arbitration. Colman J held that the
reassured was entitled to disclose the award and all its reasons but not the other documents.
In Insurance Company v Lloyds Syndicate,48 a reassured had obtained an award against its lead
reinsuring underwriter and sought to disclose that award to the other underwriters. Colman J held
that the leading underwriter was entitled to an injunction restraining disclosure of the award. The
other underwriters were not bound by the decision under the leading underwriters contract. The
purpose for which the award would be used would be to persuade the other underwriters to pay the
claim. The award was not a necessary element in establishing a claim against the other
underwriters and the granting of the injunction would not cause the reassured unconscionable
hardship.

5. CONFIDENTIALITY AND COURT PROCEEDINGS

A further situation where aspects of an arbitration may become public is where the award, the
arbitrator or the conduct of the proceedings are subject to judicial scrutiny. This would include
enforcement proceedings, either abroad or in the English courts.49 The general rule in the English
courts is that arbitration claims are heard in private except for appeals or preliminary issues on
points of law.50 This means that members of the public who are not parties to the proceedings will
not be admitted into the hearing and would not be entitled to obtain a transcript without the courts
permission.51
The practical issues that commonly arise are whether the court hearing should be open to the
public, whether documents used or generated in the proceedings can be made public and whether
any order or judgment should be published.

Court hearing in public or private

The general rule under English law is that court hearings should be in public.52 This reflects the
common law and also the right to a public hearing recognised under Article 6 of the European
Convention on Human Rights and Freedoms.53 However this general rule is subject to exceptions
such as where privacy is necessary to protect personal information or the interests of a child. In
relation to most arbitration claims, however, the starting point is privacy. CPR Part 62.10 provides
that:

(1) The court may order that an arbitration claim be heard either in public or in private.
(2) Rule 39.2 does not apply.
(3) Subject to any order made under paragraph (1)
o (a) the determination of
(i) a preliminary point of law under section 45 of the 1996 Act; or
(ii) an appeal under section 69 of the 1996 Act on a question of law arising out of an
award,
will be heard in public; and
o

(b) all other arbitration claims will be heard in private.

(4) Paragraph (3)(a) does not apply to
o (a) the preliminary question of whether the court is satisfied of the matters set out in
section 45(2)(b); or
o (b) an application for permission to appeal under section 69(2)(b).

In this context an arbitration claim is broadly defined to mean any application to court under the
1996 Act, a claim to determine whether a tribunal has substantive jurisdiction, a claim to declare
that an award is not binding and any other application affecting arbitration proceedings or an
arbitration agreement.54 The balance between the parties preference for privacy and the public
interest in publicity is drawn such that hearings on pure questions of law under sections 45 and 69
are to be heard in public while most other cases are heard in private. In every case however, the
court has discretion as to whether the matter should be heard in private and the parties may make
representations on this point.
The rules favour privacy on grounds of respecting the parties choice of private arbitration.
However as Mance LJ explained in the City of Moscow v Bankers Trust case,55 privacy is only a
starting point that may often give way to a public hearing:
The consideration that parties have elected to arbitrate confidentially and privately cannot dictate
the position in respect of arbitration claims brought to court under r62.10. Such proceedings are
no longer consensual. The possibility of pursuing them exists in the public interest. The courts,
when called upon to exercise the supervisory role assigned to them under the 1996 Act, are acting
as a branch of the state, not as a mere extension of the consensual arbitral process. Nevertheless,
they are acting in the public interest to facilitate the fairness and well-being of a consensual
method of dispute resolution, and both the Rules Committee and the courts can still take into
account the parties expectations regarding privacy and confidentiality when agreeing to
arbitrate.

Judgment published or private

Even if a hearing has been held in private this will not be determinative as to whether the resulting
judgment or order should be published. There is often greater public interest in having judgments
published than in having a hearing open to the public, for instance encouraging consistency of
approach. In addition, the parties privacy can often be protected in a judgment by using
anonymity or avoiding unnecessary disclosure of sensitive material. The distinction between the
privacy of a hearing and the resulting judgment is drawn at common law and in Article 6 of the
European Convention on Human Rights which, on its face, requires a judgment to be pronounced
publicly.
The leading case is City of Moscow v Bankers Trust.56 In the principal judgment Mance LJ
rejected any blanket rule against publication on grounds that it would undermine confidence in
London arbitration. He concluded that judgments should generally be given in public for
arbitration claims if this can be done without disclosing significant confidential information: The
desirability of a public judgment is particularly present in any case where a judgment involves
points or law or practice which may offer future guidance to lawyers or practitioners. He
considered that the public interest in ensuring appropriate standards of fairness in the conduct of
arbitrations militated in favour of a public judgment on applications challenging an award for
serious irregularity. At a practical level he suggested that lawyers could ask a judge to ensure that
reference to sensitive material was avoided in any public judgment.
In City of Moscow v Bankers Trust,57 an award was challenged for serious irregularity and the
hearing was held in private. The judgment was marked private but was mistakenly published in
summary form and in full on an online law reporting service. The case was then removed from the
website and the claimants objected claiming that the judgment should be publicly available. The
Court of Appeal decided that the judgment should remain private but the summary contained no
sensitive information and there should be no restriction on its publication.
The Court of Appeal gave useful guidance but did not draw an absolute rule: it suggested that
there was a broad spectrum of situations where the need for confidentiality would vary and a
judge would have discretion in every case. This means that the starting point is in favour of
publication of judgments but there is a degree of uncertainty as to whether publication of all or
part of a judgment could be prohibited since each case will depend on its facts.

Disclosure of court documents

In the interest of open justice the English rules of court58 allow non-parties (i.e., a person who is
not party to the proceedings) access to many documents on the court records. In relation to
arbitration claims the rules provide that:59An arbitration claim form may only be inspected [by a
non-party] with the permission of the court. In Glidepath v Thompson,60 Colman J explained that
the court would only grant access to arbitration claim forms to a non-party in circumstances where
he could show that the disclosure was reasonably necessary to protect or establish a legal right
(following the exception identified by the Court of Appeal in Ali Shipping Corporation v Shipyard
Trogir 61). The courts discretion to allow a non-party to inspect any court applications or
evidence on the court file should also be exercised by reference to the principles of confidentiality

attaching to arbitral proceedings. A party to the arbitration would normally be treated as a party to
the proceedings for the purpose of obtaining access to the court records, for instance where court
documents have not yet been served on that party.62
In Glidepath v Thompson 63 a dispute under a joint venture had initially been pursued in court and
a freezing order had been obtained in private hearings. The proceedings were then stayed under
section 9 in favour of arbitration. Part of the proceedings related to the transfer of another
company, X, that had employed the applicant. The applicant had a separate claim against X before
an employment tribunal and applied to court to inspect the particulars of claim, all applications
and orders in the proceedings and also the witness statements. Colman J refused the application
since the applicant had failed to show that the documents were reasonably necessary to establish
his claim in the employment tribunal. It was not enough to show that they would be deployed as
evidence.

6. PRACTICE AND REMEDIES

If a party wishes to disclose documents generated in an arbitration, or to invite strangers into a
hearing then the safest option is to seek the consent of the other party to the arbitration. The
consent of the arbitrators should also be sought in relation to hearings and possibly that of the
expert witness if his evidence is to be disclosed.64 If this is not practicable then the courts have
suggested that independent counsels advice to the arbitrating party that disclosure to a third party
is reasonably necessary should normally be conclusive.65 If further difficulties arise then the party
objecting to disclosure can refer the matter to the tribunal or the court (depending on whether the
matter is within the tribunals jurisdiction66 or the parties are willing to refer the matter to court).
If, on the other hand, a party is in control of documents generated in an arbitration and considers
that he may be obliged to disclose them as evidence in another court action (or in an arbitration)
he should ask for the consent of the other arbitrating party to disclose them. In the absence of such
consent he can decline to disclose them. It is for the other party in the court action (or arbitration)
to obtain an order for disclosure (from the court or tribunal as appropriate).67 If the original
arbitrating party continues to object to disclosure it could intervene and seek an injunction
restraining disclosure. A court injunction would probably be most appropriate because it could
bind parties other than the original parties to the arbitration.
The normal remedy for breach of confidence is an injunction restraining disclosure. Monetary
remedies are also available although damages may prove difficult to quantify. An arbitrator may
grant a final injunction and the court may make orders to restrain disclosure if the arbitrators
order would not be effective, for instance due to lack of coercive powers.68 In obtaining an
injunction it is unnecessary to establish prejudice caused by the disclosure since confidentiality is
usually regarded as a sufficient interest for an injunction.69
1 See CPR Part 5.4
2 DAC Report, paragraphs 11-17.
3 The LMAA Terms do not expressly provide for confidentiality except as regards confidentiality
of reasons (paragraph 22 discussed in Chapter 19) and disclosure of documents to third parties in
concurrent hearings (see paragraph 14(b) discussed in Chapter 15). See other institutional rules
(e.g., Article 30 of the LCIA Rules).

4 Esso Australia Resources Ltd v Plowman (Minister for Energy and Minerals) [1995] CLR 10.
5 Oxford Shipping Co Ltd v Nippon Yusen Kaisha [1984] 1 Lloyds Rep 373 at 379.
6 [1993] 2 Lloyds Rep 243 at 246.
7 Ali Shipping Corporation v Shipyard Trogir [1998] 1 Lloyds Rep 643 at 651. The Court of
Appeal rejected an argument that the term was implied as a matter of business efficacy (in contrast
to Colman J in Hassneh Insurance Co v Mew[1993] 1 Lloyds Rep 243 at 246) since this would
have involved investigating the circumstances at the time of contracting and presumed intentions
ascertained from the notional officious bystander. However the term implied in law is based on
the parties presumed intent in choosing to arbitrate (see Potter LJ at 651).
8 [2003] UKPC 11; [2003] 1 WLR 1041 with respect to Bermudan law but the approach would be
the same for English law.
9 Emmott v Michael Wilson & Partners Limited [2008] EWCA Civ 184; [2008] 1 Lloyds Rep
616, paragraphs 84 and 129.
10 E.g. Emmott v Michael Wilson & Partners Limited [2008] EWCA Civ 184; [2008] 1 Lloyds
Rep 616, paragraph 80. Indeed, in Esso Australia Resources Ltd v Plowman (Minister for Energy
and Minerals) [1995] CLR 10, the case that drew attention to the distinction, Toohey J found at
paragraph 25 that they were not distinct characteristics.
11 Emmott v Michael Wilson & Partners Limited [2008] EWCA Civ 184; [2008] 1 Lloyds Rep
616, paragraphs 79 and 129.
12 [2004] EWCA Civ 314; [2005] QB 207, para 6.
13 Ali Shipping Corporation v Shipyard Trogir [1998] 1 Lloyds Rep 643, Hassneh Insurance
Co v Mew [1993] 2 Lloyds Rep 243, Dolling-Baker v Merrett [1990] 1 WLR
1205, Emmott v Michael Wilson & Partners Limited [2008] EWCA Civ 184; [2008] 1 Lloyds
Rep 616.
14 CPR Part 31, rule 31.22.
15 Marcel v Commissioner of Police of the Metropolis [1992] Ch 225.
16 Hassneh Insurance Co v Mew [1993] 2 Lloyds Rep 243 at 250.
17 London & Leeds Estates Ltd v Paribas Ltd (No 2) [1995] 2 EG 134 at 137. Mance J (as he then
was) considered it likely that a qualified duty of confidence was also owed by the parties to the
expert witness. See also Neill, Confidentiality in Arbitration [1996] 12 Arbitration
International 287 at 309. However, in Esso Australia Resources Ltd v Plowman (Minister for
Energy and Minerals) [1995] CLR 10 it was common ground that no duty attached to witnesses.
18 Attorney-General v Guardian Newspapers Ltd (No 2) [1990] 1 AC 109 at 281.
19 [1998] 1 Lloyds Rep 643. See also Emmott v Michael Wilson & Partners Limited [2008]
EWCA Civ 184; [2008] 1 Lloyds Rep 616 at para 107.

20 Associated Electric Gas Insurance Services Ltd v European Reinsurance Company of

Zurich [2003] UKPC 11; [2003] 1 WLR 1041, para 20.
21 Emmott v Michael Wilson & Partners Limited [2008] EWCA Civ 184; [2008] 1 Lloyds Rep
616 at paragraph 107, Collins LJ and Carnwarth LJ left open whether there was a separate
exception based on the public interest.
22 [1999] 1 Lloyds Rep 883.
23 Science Research Council v Nasse [1980] AC 1028, Dolling-Baker v Merrett [1990] 1 WLR
1205.
24 Prudential Assurance v Fountain Page [1991] 1 WLR 756 at 765, Mahon v Rahn [1997] 3
WLR 1230 at 1240.
25 Ali Shipping Corporation v Shipyard Trogir [1998] 1 Lloyds Rep 643.
26 Ibid. at 651. Potter LJ drew an analogy with the implied obligation of confidentiality between
banker and customer. In Emmott v Michael Wilson & Partners Limited [2008] EWCA Civ 184;
[2008] 1 Lloyds Rep 616 the Court of Appeal referred to the Privy Councils reservations
regarding this approach in Associated Electric Gas Insurance Services Ltd v European
Reinsurance Company of Zurich [2003] UKPC 11; [2003] 1 WLR 1041 and considered that the
case law had placed too much reliance on the analogy.
27 Ali Shipping Corporation v Shipyard Trogir [1998] 1 Lloyds Rep 643 at 651.
28 In Ali Shipping Corporation v Shipyard Trogir [1998] 1 Lloyds Rep 643 the court maintained
that the duty of confidentiality applied to preclude disclosure of an award against an entity which
was in the same beneficial ownership as the other party to the arbitration. See the DAC Report,
paragraph 16, see S Males, Confidence in Arbitration, LMCLQ [1998] 251 at 257.
29 Ali Shipping Corporation v Shipyard Trogir [1998] 1 Lloyds Rep 643 at 654.
30 Ibid.
31 Emmott v Michael Wilson & Partners Limited [2008] EWCA Civ 184; [2008] 1 Lloyds Rep
616, paragraph 128.
32 Ali Shipping Corporation v Shipyard Trogir [1998] 1 Lloyds Rep 643 at 652, referring
to London & Leeds Estate v Paribas Ltd [1995] 2 EG 134.
33 [2008] EWCA Civ 184; [2008] 1 Lloyds Rep 616.
34 [1995] 2 EG 134.
35 See DAC Report paragraph 16.
36 E.g. Commonwealth of Australia v Cockatoo Dockyard Pty Ltd (1995) 36 NSWLR 662, Esso
Australia Resources Ltd v Plowman (Minister for Energy and Minerals) [1995] CLR 10 and ongoing proposals for amendment of the UNCITRAL arbitration rules to allow for greater publicity
in relation to arbitrations involving a state party (typically arising under bilateral investment
treaties).

37 Emmott v Michael Wilson & Partners Limited [2008] EWCA Civ 184; [2008] 1 Lloyds Rep
616, paragraphs 84, 119-124.
38 See Chapter 7.
39 Tame Shipping Ltd v Easy Navigation Ltd [2004] EWHC 1862 (Comm); [2004] 2 Lloyds Rep
626.
40 The applicable LMAA Small Claims Procedure did not provide for privileged reasons although
the judge was mistakenly led to proceed on that basis.
41 Colman Js judgment in Hassneh Insurance Co v Mew [1993] 2 Lloyds Rep 243 provides a
useful discussion relied upon here.
42 [2003] UKPC 11; [2003] 1 WLR 1041 with respect to Bermudan law, but the approach would
be the same for English law.
43 Hassneh Insurance Co v Mew [1993] 2 Lloyds Rep 243 at 248.
44 Stargas SpA v Petredec Ltd [1994] 2 Lloyds Rep 412, see also Sacor Maritima SA v Repsol
Petroleo SA [1998] 1 Lloyds Rep 518. The Sargasso was upheld in The Mass Glory, Glencore
Grain Ltd v Goldbeam Shipping Inc [2002] EWHC 27 (Comm); [2002] 2 Lloyds Rep 244.
45 E.g. Ali Shipping Corporation v Shipyard Trogir [1998] 1 Lloyds Rep 643.
46 Ibid. at 651.
47 [1993] 2 Lloyds Rep 242.
48 [1995] 1 Lloyds Rep 272.
49 This would arise most commonly under sections 24, 67, 68 and 69 of the 1996 Act, but also in
relation to other arbitration claims such as a challenge to the tribunals fees.
50 CPR Part 62.10(3).
51 CPR Practice Direction to Part 39.
52 CPR Part 39.2.
53 Given effect by the Human Rights Act 1998.
54 CPR Part 62.2.
55 Department of Economic Policy of the City of Moscow v Bankers Trust Co [2004] EWCA Civ
314; [2005] QB 207, paragraph 34.
56 Department of Economic Policy of the City of Moscow v Bankers Trust Co [2005] QB 207,
para 39.
57 Ibid.
58 CPR Part 5.4.
59 Practice Direction at CPR 62.4 paragraph 5.1.

60 [2004] EWCA Civ 314; [2005] 2 All ER (Comm) 833.

61 [1998] 1 Lloyds Rep 643.
62 Advance Specialist Treatment Engineering Ltd v Cleveland Structural Engineering (Hong
Kong) Ltd [2000] 2 All ER (Comm) 189.
63 [2004] EWCA Civ 314; [2005] 2 All ER (Comm) 833. Note under the amended CPR Rule
5.4C the applicant would no longer need permission to inspect the particulars of claim in the
original proceedings.
64 London & Leeds Estates Ltd v Paribas Ltd (No 2) [1995] 2 EG 134 at 137.
65 Ali Shipping Corporation v Shipyard Trogir [1998] 1 Lloyds Rep 643 at 653, Hassneh
Insurance Co v Mew [1993] 2 Lloyds Rep 243 at 249.
66 Usually the matter will be within the scope of the arbitration clause, see Emmott v Michael
Wilson & Partners Limited [2008] EWCA Civ 184; [2008] 1 Lloyds Rep 616.
67 Hassneh Insurance Co v Mew [1993] 2 Lloyds Rep 243 at 251-252.
68 1996 Act, sections 44 and 48(5).
69 Ali Shipping Corporation v Shipyard Trogir [1998] 1 Lloyds Rep 643 at 653, Hassneh
Insurance Co v Mew [1993] 2 Lloyds Rep 243 at 249. Department of Economic Policy of the City
of Moscow v Bankers Trust Co [2004] EWCA Civ 314; [2005] QB 207, paragraph 46.

Chapter 14

Remedies for Delay

Remedies for Delay

1. Introduction
2. Contractual provisions
3. The duty of the tribunal and the parties to avoid delay
4. Remedies under section 41 of the 1996 Act

1. INTRODUCTION
Delay is generally perceived to be a menace in arbitration. It is contrary to the intended purpose of
arbitration, namely speedy and efficient dispute resolution. Delay makes the arbitral process more
expensive and can compromise documentary and witness evidence.
Delay can arise at every stage of an arbitration, the usual causes being a lack of will or resources
to progress the arbitration, a deliberate tactical preference for allowing time to lapse, lack of
authority to settle or pursue the matter, or difficulties in gathering evidence.
Dealing with delays in arbitration was one of the specific objectives of the 1996 Act: as the DAC
stated, the avoidance of unnecessary delay in arbitration is a fundamental aspect of justice and, as

such, a necessary requirement of a dispute resolution system which is based upon obtaining a
binding decision from a third party.1 The provisions of the 1996 Act seek to prevent delays from
arising (by placing parallel duties on the parties and on the tribunal to progress the arbitration with
expedition) and also to provide remedies when delays do occur. In the context of LMAA
arbitrations, there are also contractual provisions (governing timetabling, peremptory orders and
the like) which aim to minimise delays. This chapter will seek to examine those provisions (both
statutory and contractual) that are relevant in maritime arbitration.

2. CONTRACTUAL PROVISIONS
The arbitration agreement, or more commonly any applicable arbitration rules, may include
provisions designed to address the problem of delay. Usually such terms are designed to prevent
delays from arising at all. Schedule 2 of the LMAA Terms, for example, sets out a fairly brisk
timetable, to be adhered to by the parties unless the tribunal orders otherwise. Schedule 2 also
includes provisions specifically aimed at minimising delays. Supporting documents relevant to the
issues between the parties are in most cases to be served with written submissions. An allegation
that the claimant has failed to disclose all supporting documents will not normally justify a delay
in service of defence submissions (paragraph 2). Similarly, Schedule 2 provides for written
witness statements to stand as evidence in chief (paragraph 12) and expressly requires all
communications regarding procedural matters to be made expeditiously (paragraph 14). These
provisions may be backed by peremptory orders (pursuant to the powers conferred by the 1996
Act) in appropriate cases. These provisions, all designed to avoid unnecessary delay, are discussed
in detail in Chapter 12.
Apart from the provisions of the LMAA Terms, it is relatively rare for the parties to agree express
provisions conferring specific powers upon the tribunal entitling it, for example, to dismiss a
claim in the event of delay. The tribunals powers in this respect will, in most arbitral proceedings,
derive from the supportive provisions of the 1996 Act rather than from expressly negotiated terms
in the arbitration agreement.2

3. THE DUTY OF THE TRIBUNAL AND THE PARTIES TO AVOID DELAY

The nature of the duty

The 1996 Act places parallel mandatory duties upon the tribunal and the parties to avoid delay in
the progress of the arbitral proceedings. Section 33 of the Act requires the tribunal to adopt
procedures suitable to the circumstances of the particular case, avoiding unnecessary delay or
expense. Section 40 requires the parties to do all things necessary for the proper and expeditious
conduct of the arbitral proceedings, including complying without delay with any determination
of the tribunal as to procedural or evidential matters, or with any order or directions of the
tribunal. The aim of each of these provisions is to give effect to the central principle behind the
Act, expressed in section 1, of obtaining a fair resolution of disputes without unnecessary delay or
expense. Sections 33 and 40 are considered in more detail in Chapter 12.
Although (as discussed below) the remedies conferred by the Act for breaches of these mandatory
provisions are relatively limited, the enactment of sections 33 and 41 has, in practice, helped to

reduce delays in maritime arbitrations. Tribunals are empowered to set firm deadlines or
timetables and to tailor the procedures of the arbitral reference to avoid any unnecessary delay.

Remedies for breach of duty

Breach of section 33
The remedies conferred by the 1996 Act for breach of the duties are fairly limited. In the case of a
breach by the tribunal of section 33, the remedies available to the parties are removal of the
tribunal pursuant to section 24, or (where an award has been made) challenging the award
pursuant to section 68. These remedies are available only where substantial injustice can be
established, and are intended to provide a long-stop.3
Breach of section 40
The remedies for breach of the parties duty under section 40 are not specifically prescribed by the
1996 Act, and have been the subject of some debate.4 In practice, the remedies provided by
sections 41 and 42 of the Act are the effective remedies for breach of the duties under section 40.
Enforcement of an award might also be resisted under section 66 or 101 of the 1996 Act where a
tribunal had failed to address a breach of section 40.5

4. REMEDIES UNDER SECTION 41 OF THE 1996 ACT

The main remedy for really serious delays in progressing an arbitration (where a claim has simply
been allowed to go to sleep) is provided by section 41(3) of the 1996 Act, which provides that:
If the tribunal is satisfied that there has been inordinate and inexcusable delay on the part of the
claimant in pursuing his claim and that the delay

(a) gives rise, or is likely to give rise, to a substantial risk that it is not possible to have a fair
resolution of the issues in that claim, or
(b) has caused, or is likely to cause, serious prejudice to the respondent, the tribunal may
make an award dismissing the claim.

Section 41(3) replicates, in almost identical terms, the provisions previously contained in section
13A of the Arbitration Act 1950, itself introduced by way of amendment to the 1950 Act in 1992.
Section 13A of the 1950 Act was intended to replicate the inherent power of the High Court to
dismiss a claim for want of prosecution. It was intended that the power conferred on the tribunal
should be applied and interpreted in the same way as the power of the High Court. This was clear
both from the wording of the provision (which adopted the phraseology used in the leading cases
on the courts power to dismiss claims6) and section 13A(3), which specifically conferred power
on the Secretary of State to amend section 13A by way of statutory instrument for the purpose of
keeping the provision made by this section and the corresponding provision which applies in
relation to proceedings in the High Court in step. The clear intention, at the time section 13A was
introduced, was for the power of arbitral tribunals to replicate the power of the High Court.
However, matters have moved on since 1992. In particular, one effect of the introduction of the
Civil Procedure Rules (CPR) in High Court proceedings was to do away with the old power to
dismiss for want of prosecution, and to replace it with a different, more flexible, power to deal

with delays or breaches of procedural orders. Following the introduction of the CPR, the High
Courts power to dismiss a claim no longer turns upon proof of inordinate or inexcusable
delay but, rather, upon failure to comply with the rules or orders of the court. Furthermore, the
prime focus of the court is no longer the question of whether either party has suffered prejudice as
a result of the delay but, rather, upon the more general question of whether it is still possible to
conduct a fair trial in accordance with the overriding objectives set out in the CPR, Part 1.7 In
the context of court proceedings, this involves considering whether the allocation of further court
time to the proceedings in question would be fair to other court users, having regard to the delays
or breaches of orders to date.8 Nor, under the CPR, is the High Court limited to a power to dismiss
a claim (or counterclaim): instead, the court is encouraged to tailor remedies to the particular
case.9 The old power to dismiss for want of prosecution (upon which section 13A and then section
41(3) were based) has been effectively superseded by a more wide-ranging and flexible basis of
intervention in court proceedings.
For these reasons, it is thought that the power of an arbitral tribunal to dismiss a claim for delay is
no longer in step with the broader power of the High Court post-CPR. This view is confirmed
by the fact that section 41(3) includes no provision empowering the Secretary of State to effect
amendments for the purpose of keeping the two regimes in step. Authorities on the CPR powers to
strike out claims will therefore be of limited relevance to the application and exercise of the
tribunals power under section 41(3). While CPR authorities may be of assistance upon some
specific points (for example, in identifying the factors that are relevant to the existence of
prejudice), on the more general approach to section 41(3), tribunals will, in practice, continue to
obtain guidance from pre-CPR authorities.
When first introduced, the tribunals powers to strike out were perceived as an important sanction
against delay. In practice, however, this power is now relatively rarely exercisedlargely because
arbitrators are more proactive in keeping arbitrations moving so that the type of delay attracting a
strike out will be less common

The application of section 41(3)

Section 41(3) applies to all arbitrations unless the parties have excluded it by agreement. The
LMAA terms contain no such agreement. Section 41(3) provides that:
If the tribunal is satisfied that there has been inordinate and inexcusable delay on the part of the
claimant in pursuing his claim and that the delay:

(a) gives rise, or is likely to give rise, to a substantial risk that it is not possible to have a fair
resolution of the issues in that claim, or
(b) has caused, or is likely to cause, serious prejudice to the respondent, the tribunal may
make an award dismissing the claim.

If the criteria set out in section 41(3) are established, then the tribunal has the discretion to decide
whether or not it should dismiss the claim. Section 41 only empowers the tribunal to dismiss or
not dismiss the claim: it does not allow an alternative remedy. However, there would seem to be
no reason why a tribunal could not impose alternative remedies as part of the exercise of its more
general procedural powers. For example, where a tribunal felt that the circumstances of the case

did not warrant the draconian remedy of dismissal of the claim, but felt that the claimant should
not get off scot free, then it would be open to the tribunal, pursuant to its general discretion to
award costs, to penalise the claimant by depriving it of part of its costs, or ordering it to pay costs
on an indemnity basis. Where a claimant has been responsible for delay the tribunal may also
exercise its discretion against allowing interest that could otherwise be awarded. A tribunal could
also exercise its general procedural powers by, for example, imposing conditions on the future
conduct of the claim. Ultimately, though, where there is a substantial risk that a fair trial is not
possible, a strike-out may be the most appropriate remedy. Similarly, if the tribunal feels that the
claimants claims should be allowed to proceed in part only, it would probably be open to the
tribunal to strike out individual causes of action or allegations, or to refuse to admit evidence on
certain issues or allegations, either pursuant to section 41(3) or its general procedural powers. In
this way, some of the flexibility conferred upon the High Court10 by the CPR regime can, in
practice, be achieved where justice so demands.

The principles governing section 41(3)

Pre-CPR authorities which address, for example, the meaning of inordinate and inexcusable
delay and prejudice remain relevant to applications under section 41(3). In particular, the
guidelines laid down by the Court of Appeal in Trillv Sacher 11 provide a useful and concise guide
to the factors which will be taken into account.
Inordinate delay
Inordinate means excessive. It is not a term which can be precisely defined: What is or is not
inordinate delay must depend upon the facts of each particular case.12 It will normally be
measured against what is regarded as acceptable according to the standards of those normally
involved in that type of arbitration (e.g., arbitrators and legal and P & I representatives), having
regard, of course, to the requirements of sections 33 and 41. The time limits or timetables
applicable under arbitration rules may provide helpful guidelines; however, regard must always be
had to the circumstances of the particular case. In a weighty dispute, for example, more time will
usually be permitted for the gathering of evidence than in a simple documents-only arbitration.
In The Finnrose,13 Rix J suggested that the question of whether delay should be regarded as
inordinate and inexcusable depended upon the intention of the parties as to the speed with which
the proceedings should be conducted. Where, as is common in maritime disputes, the parties have
agreed to a one-year time limit such as the Hague Rules one-year time-bar then they ought to
proceed with the despatch inherent in that timescale.
When applying under section 41(3), the respondent may not rely upon delay for which it is itself
responsible, including delay for which it is in part responsible.14 Similarly, where a respondents
conduct induces a claimant to incur further costs in the reasonable belief that the respondent
intends to exercise its right to proceed to a hearing notwithstanding the claimants previous delay,
then the respondent may be prevented from relying on that delay as a matter of discretion.15
The relevance of pre-commencement delay and limitation periods
Section 44(3) requires proof of delay in pursuing the claim. It is not clear if this wording would
encompass delay in the commencement of arbitration proceedings, or whether only post-

commencement delay in pursuing the arbitration falls within the provision. By analogy with preCPR authorities in the High Court, delay in the commencement of proceedings would probably
not in itself satisfy the threshold test of establishing that there has been inordinate and
inexcusable delay on the part of the claimant in pursuing his claim. It may, however, be of
relevance to the tribunals discretion if the section 41(3) criteria are established. The following
principles may be stated:

(1) Delay in commencing an arbitration cannot, as a general rule, be described as inordinate

if the arbitration was commenced within the relevant period of limitation. This results in part
from the fact that the claimant should be permitted to enjoy the period which Parliament has
allowed for making a claim unless the parties have expressly agreed to curtail that
period.16 Furthermore, it would be pointless to dismiss a claim before the limitation period
has expired because the claimant might be permitted simply to commence a new
reference.17 However, there may be exceptional cases in which a claim will be dismissed even
before the expiry of the limitation periodfor example, where the expiry of the limitation
period is open to serious argument,18 or where the respondent can show that the claimant
might not be able to commence a new reference.19
(2) Where a claimant delays the commencement of proceedings until towards the end of a
period of limitation, he then comes under a particular obligation to proceed with the case with
reasonable diligence.20 A tribunal is likely to look particularly strictly at any delay arising
after the expiry of the limitation period and may characterise such delay as inordinate even
though a similar lapse of time might have been treated less strictly had the arbitration been
commenced earlier.
(3) Once the limitation period has expired the tribunal is entitled to take account of all the
earlier periods of inexcusable delay since the commencement of the arbitration. These periods
can include:
o (a) periods of delay occurring before the expiry of the limitation period which, at an
earlier stage, could not be treated as inordinate;21 and
o (b) periods of delay upon which the respondent could not previously have relied because
it induced the claimant to incur further costs during that period in the reasonable belief
that the arbitration was going to proceed.22

Inexcusable delay
Inordinate delay is prima facie inexcusable, and once established, the tactical burden of proof
switches to the claimant to make out a credible excuse.23 For example, a claimant may be able
to show that the respondent agreed to allow an extension of time (though such an excuse would no
doubt need to be assessed in light of whether such an agreement was consistent with sections 33
and 41 and, therefore, enforceable). Evidence of the existence of without prejudice negotiations
during the relevant period is commonly relied upon as a credible excuse; however, the mere
desultory pursuit of such negotiations will not prevent a delay from being inexcusable.24 Although
evidence of the existence of without prejudice negotiations is admissible on a section 41(3)
application, the content of such negotiations should not normally be disclosed to the tribunal as
this might influence the tribunals views of the merits of the case.25 The usual solution is simply to
give details of the dates and duration of any correspondence or meetings.

Pre-commencement delay is relevant to excusability because a late start makes it more incumbent
upon a claimant to proceed with all due speed. A pace which might have been excusable if the
arbitration had been started sooner may be considered inexcusable due to the time that has already
passed prior to commencing the reference.26
Serious prejudice or substantial risk of unfair resolution of disputes
Assuming the respondent can establish inordinate and inexcusable delay on the part of the
claimant, he must then go on to satisfy one of two alternative threshold criteriaeither that the
delay gives rise, or is likely to give rise, to a substantial risk of unfairness, or that the delay has
caused, or is likely to cause, serious prejudice to the respondent. Obviously the two grounds
overlapin order for a resolution of issues to be carried out fairly, a tribunal must feel confident
that it can make an informed decision on the true facts.27 This will not be possible where one
partys ability to present its case has been prejudiced. In practice, a respondent will usually seek to
establish the existence of prejudice.
Serious prejudice
The one area in which no overlap occurs is where prejudice unrelated to the resolution of issues in
the arbitration may be found to exist, for example prejudice to business interests, damage to
professional reputation28 or a change in the respondents liability insurance during the period of
delay.29 However, these cases are relatively rare and the alleged prejudice will usually consist of
some element of procedural unfairness which has resulted from the delay. The requirement of
serious prejudice will usually be satisfied by proof that the delay has resulted in deterioration of
the evidence necessary to the respondents case. The question of whether serious prejudice exists
will largely depend on the particular type of issues at stake and the type of evidence relied on.
In many cases, a lapse of time will impair the memory of witnesses or make it more difficult to
trace relevant documents. In other cases, witnesses may die or become untraceable. There is a
distinction between issues which depend upon the credibility of witnesses and those which depend
upon the witnesses memory. Where a case turns upon conflicting testimony about an event which
is unlikely to have been forgotten(e.g., a fraudulent agreement or a conspiracy) the case falls
into the former category and it will be more difficult to show that the evidence has been affected
by the passage of time.30 By contrast, in relation to more routine events, uncorroborated witness
evidence may well have been impaired: the evidence of an eyewitness or of a witness who will
testify to the words used when an oral representation was made is likely to be much more
seriously impaired by the lapse of time than the evidence of somebody who can rely upon
contemporaneous documents.31
It is clear that the respondent must identify in some detail how the evidence will be impaired by
the delay.32 This will usually involve identifying particular witnesses or categories of unobtainable
documents. In relation to witness evidence, for example, the respondent should usually be able to
show that no statement has been taken, that there is no means of the witness refreshing his
memory, or that the witness has become unavailable.33 The risks inherent in making such
submissions are obvious: if the application fails, the applicant will be obliged to proceed to a
determination of the merits on the basis of evidence which he has himself sought to discredit.
However, the tribunal is not concerned to try the case at this stage and it is not necessary to

identify in which respects the witnesses memory is affected. Instead, the tribunal can and should
assess the likely general effect of the delay upon the witness and other evidence. In order to do so
it may draw inferences based on all the material before it.34 A tribunal may be willing to draw an
inference of prejudice from a relevant period of delay lasting more than a year but it is more
doubtful where the relevant period is only a few months against a total delay of several years.
The tribunal must be satisfied that there is a causal link between the inordinate delay relied on and
the prejudice complained of. The damaging effect of any delay is cumulative and prejudice arising
from pre-commencement delay will be relevant. Indeed, the additional prejudice arising from
delay after commencement need only be something more than minimal compared to the
prejudice which may have already been caused by pre-commencement delay.35 When assessing
prejudice, the tribunal should consider the increment in prejudice caused by the relevant period of
inordinate delay as against the total overall delay after the events in issue. The delay complained
of must cause some material prejudice (even if it is little more than minimal compared to existing
prejudice).
Substantial risk of unfair resolution of the dispute
This alternative ground overlaps to a large degree with the existence of prejudice. It will be rare
for a respondent to establish this ground without also establishing that the delay has prejudiced his
ability to present his case. But such cases do occasionally arise. For example, where the overall
costs of the trial have been substantially increased by the claimants delays, then the alternative
ground might, exceptionally, be established.36

Practice
If an application for an award dismissing the claim is made pursuant to section 41(3), the tribunal
should give each party the opportunity to make written or oral submissions (or both). It is usual
for both parties to serve detailed written submissions attaching relevant documents if necessary
and, possibly, affidavit or witness statement evidence. A decision or agreement can then be
reached as to whether the application should be dealt with on the basis of documents alone or in
an oral hearing. Where the reference forms part of a chain of arbitrations, and where applications
to dismiss the claims are being made in each reference in the chain, it will usually be advisable (if
at all possible) to seek to consolidate the references, or to agree upon concurrent hearings, to
minimise the possibility of inconsistent decisions (such as some, but not all, of the claims being
dismissed).37
Where both claims and counterclaims are raised in an arbitration and there are cross-applications
to dismiss each, the tribunal has power to dismiss either, both, or neither. A tribunal may exercise
its power under section 41(3) of its own initiative, because if the delay is such as to prevent it
from reaching a fair and safe award on the evidence then it would be unfair and a breach of
section 33 to attempt to do so.38 In such a situation (extremely rare in London maritime
arbitration) the tribunal should give the parties warning of its intention to dismiss the claims and
give an opportunity for submissions from each side.
Following submissions, it is important that the tribunal should reach its decision promptly, as any
further steps in the arbitration will usually be postponed until the determination of the dismissal

application. The tribunals decision will be contained in an award and will usually include an
order as to costs. If an award is made dismissing the claim, then both the costs of the application
to dismiss as well as the costs of the arbitration will usually be awarded to the successful
respondent. If an appeal is anticipated, then the parties should request a reasoned
award.39 However, because of the discretionary nature of the jurisdiction to dismiss claims,
permission to appeal will be only granted in the rarest cases.

Failure to make submissions: section 41(4)

Where a party fails to attend an oral hearing of which notice was given, or fails after due notice to
submit written arguments or evidence, then unless he can show sufficient cause, the tribunal is
specifically empowered by section 41(4) to proceed to an award on the basis of the evidence
before it. Of course, the tribunal would only do so where it was sure that each party had been
given a reasonable opportunity to put its case.40 If reasonable notice has been given, but the
party concerned has failed without good reason to avail itself of that opportunity, then the tribunal
is entitled to avoid any further delay by proceeding straight to an award. In practice, the tribunal
will usually want to be very certain that the party concerned has received and understood the
notice requiring submissions to be made. This is straightforward where the party concerned is
represented by English solicitors, but may be more difficult where, for example, those solicitors
have come off the record, or where the party concerned fails to acknowledge receipt of notice. In
such circumstances, the tribunal will usually ensure that more than one notice is given, possibly
served in a number of ways (e.g., registered post, e-mail, fax and/or telephone).

Peremptory orders: section 41(5)

Sections 41(5) to (7) of the 1996 Act provide as follows:

(5) If without showing sufficient cause a party fails to comply with any order or directions of
the tribunal, the tribunal may make a peremptory order to the same effect, prescribing such
time for compliance with it as the tribunal considers appropriate.
(6) If a claimant fails to comply with a peremptory order of the tribunal to provide security for
costs, the tribunal may make an award dismissing his claim.
(7) If a party fails to comply with any other kind of peremptory order, then, without prejudice
to section 42 (enforcement by court of tribunals peremptory orders), the tribunal may do any
of the following
o (a) direct that the party in default shall not be entitled to rely upon any allegation or
material which was the subject matter of the order;
o (b) draw such adverse inferences from the act of non-compliance as the circumstances
justify;
o (c) proceed to an award on the basis of such materials as have been properly provided to
it;
o (d) make such order as it thinks fit as to the payment of costs of the arbitration incurred in
consequence of the non-compliance.

These provisions empower the tribunal to make peremptory orders in the event of failure by a
party to comply with an order or direction. They also provide for the consequences of failure to

comply with the peremptory order itself, ranging from drawing adverse inferences to proceeding
to an award on the basis of materials before the tribunal. In arbitrations under LMAA Terms, these
provisions are supplemented by paragraph 14(c) of the Terms, which entitles the tribunal to stay a
claim in the event of breach of an order requiring the provision of security for costs.
Apart from the range of sanctions provided for by section 41(5), the tribunal cannot itself enforce
the peremptory order. However, section 42 of the 1996 Act provides for such orders to be
enforced by the court in appropriate cases.41The principal significance of this power is that where
the court makes an order under section 42, any further breach of the peremptory order will amount
to a contempt of court. The tribunal may itself apply to the court under section 42 (though
presumably it would in most cases be reluctant to do so unless given an indemnity in respect of
costs); alternatively, a party may apply with the permission of the tribunal or where the parties
have already expressly agreed that the section 42 powers should be available.
Peremptory orders are considered in more detail in Chapter 12.
1 Paragraph 18 of the DAC Report.
2 The LMAA Terms are something of a half-way house: they include no specific term
conferring remedies in the event of delay, but do expressly provide (at paragraph 7(a)) for the
applicability of the 1996 Actincluding the remedies conferred by the Act for dealing with delay.
3 See further, Chapters 11 and 22.
4 Mustill and Boyd, for example, have suggested that an action in damages for breach of an
implied term of the arbitration agreement would lie where section 40 has been breached: see
Mustill & Boyd, 2001 Companion, pp. 316-317. However, this analysis was rejected by Aikens J
in Elektrim SA v Vivendi Universal SA & ors [2007] EWHC 11 (Comm); [2007] 2 Lloyds Rep 8.
5 A suggestion made by Aikens J in Elektrim SA v Vivendi Universal SA & Ors, at paragraph 130
of the judgment.
6 In particular Birkett v James [1978] AC 297: see per Rix J in James Lazenby &
Co v McNicholas Ltd [1995] 1 WLR 615 at 629.
7 E.g., Moy v Peltman-Smith [2005] UKHL 71; [2005] 1 All ER 903.
8 E.g., Purefuture v Simmons & Simmons CA, 25 May 2000; Arrow Nominees Inc v Blackledge &
ors CA, 22 June 2000.
9 E.g., in Axa Insurance Company Ltd v Swire Fraser Ltd CA, 9 December 1999, the court
declined to strike out a claim, but penalised the claimant by ordering it to pay the costs of the
(unsuccessful) strike out application (which it had brought upon its own head) and also by striking
out some of the wider allegations in the Points of Claim.
10 Cf. Axa Insurance Co v Swire Fraser CA, 9 December 1999.
11 [1993] 1 WLR 1379 (subject to Roebuck v Mungovin [1994] 2 WLR 290 at 298); see
also Shtun v Zalejska [1996] 1 WLR 1270.

12 Allen v Sir Alfred McAlpine & Sons Ltd [1968] 2 QB 229, 268, cited in Trill v Sacher by Neill
LJ at 1398.
13 Fort Sterling v South Atlantic Cargo Shipping [1994] 1 Lloyds Rep 559 at 564.
14 Johnstone v Bloomsbury Health Authority 6 Dec 1993, unreported, Clarke J.
15 Allen v Sir Alfred McAlpine & Sons Ltd [1968] 2 QB 229 at 260; Trill v Sacher [1993] 1 WLR
1379 at 1398; Roebuck v Mungovin [1994] 2 WLR 290; Re Manlon Trading [1995] 3 WLR 271.
16 James Lazenby v McNicholas Construction Ltd [1995] 1 WLR 615 at 630.
17 See Birkett v James [1978] AC 297 at 320-321. However, the question of whether a claimant
could commence a new arbitration was left open in Lazenby v McNicholas [1995] 1 WLR 615 at
631. Under the CPR, such a second action may itself be struck out if inconsistent with the
overriding objectivein particular, the need to allot the courts limited resources to other cases:
see Securum Finance Ltd v Ashton [2000] 3 WLR 1400. Such considerations do not arise in
arbitration.
18 Barclays Bank v Miller [1990] 1 WLR 529.
19 Wright v Morris 25 October 1988, referred to in Barclays Bank v Miller, above.
20 Birkett v James at p 323, cited in Trill v Sacher at p 1398.
21 Rath v Lawrence & Partners [1991] 1 WLR 399.
22 Trill v Sacher (guideline 9).
23 Trill v Sacher (guidelines 2 and 4).
24 E.g. The Mouna [1991] 2 Lloyds Rep 221.
25 Cf. Family Housing Association v Michael Hyde [1993] 1 WLR 354 at 363: on an application
to dismiss court proceedings for want of prosecution (pre-CPR), without prejudice
communications were admissible because they would not be available to the trial judge. The same
is clearly not true of arbitrations, where the same tribunal hears both the dismissal application and
the substantive proceedings.
26 Birkett v James [1978] AC 297 at 322.
27 Wilson (Paal) & Co A/S v Partenreederei Hannah Blumenthal, The Hannah
Blumenthal [1983] 1 AC 854 at 919.
28 Bliss v Lambeth Southwark & Lewisham HA [1978] 1 WLR 782.
29 Antcliffe v Gloucestershire HA [1992] 1 WLR 1044.
30 Rath v Lawrence [1991] 1 WLR 399.
31 Trill v Sacher at 1399 (guideline 11).
32 Shtun v Zalejska [1996] 1 WLR 1270.
33 Hornagold v Fairclough, The Times, 3 June 1993; [1993] PIQR P400.

34 Shtun v Zalejska [1996] 1 WLR 1270.

35 Department of Trade & Industry v Chris Smaller (Transport) Ltd [1989] AC 1197.
36 Cf. Arrow Nominees v Blackledge & ors [2000] EWA Civ 200; [2000] 2 BCLC 167.
37 In LMAA arbitrations, the LMAA Terms permit the tribunal to order concurrent hearings: see
Chapter 15.
38 See per Beldam LJ in the judgment of the Court of Appeal in LOffice Cherifien des
Phosphates v Yamashita Shinnihon Steamship Co The Boucraa [1993] 3 WLR 266 at 283.
39 See Chapter 19 and paragraph 22 of the LMAA Terms.
40 Section 33 of the 1996 Act.
41 See further Chapter 23 on enforcement.

Chapter 15

Arbitration and Third Parties

Arbitration and Third Parties

1. Introduction
2. Consolidated and concurrent hearings
3. Practice in multi-party disputes
4. Costs and third parties
5. Agents and arbitration
6. Assignment
7. Insurers
8. Contracts (Rights of Third Parties) Act 1999
9. Effects of arbitration awards on third parties 10. Competition law issues

1. INTRODUCTION
Arbitration arises out of an agreement which is usually contained in a contract between two
parties. The arbitrators authority derives solely from that agreement. This offers a stark contrast
to the much wider inherent and statutory jurisdiction of the High Court which, in relation to court
proceedings, enables it to:

(a) join additional parties;

(b) make costs orders against third parties (i.e., parties who are not privy to the proceedings);
(c) order third parties to produce documents; and
(d) consolidate separate proceedings.

The essentially consensual basis of arbitrators powers means that they have no inherent powers to
make orders binding third parties (i.e., parties who are not privy to the arbitration agreement
pursuant to which the arbitrator is appointed). This can make it difficult to ensure a convenient

and streamlined procedure in disputes involving more than two parties. In addition, obligations of
confidentiality are implied into the arbitration agreementthis may raise difficult issues as to
whether an award or evidence disclosed in an arbitration can be shown to third parties.1
Multi-party disputes are extremely common in the context of maritime arbitration-there may be
several contracts between different parties relating to a particular transaction. Typically, a chain of
two or more contracts may be concluded on similar terms: for instance back-to-back charterparties
or a string of sale contracts. If a dispute arises between the parties to one of the contracts, then the
respondent will usually seek to pass liability up or down the chain. It is also common for two or
more claims arising out of the same facts to be asserted by or against the same party (e.g., cargo is
damaged at sea and claims are brought against the shipowner by both the bill of lading holder and
the charterer). Triangular claims also occasionally arise: for example a sub-charterer claims
against the shipowner and time-charterer, who then assert claims against each other. Multi-party
disputes may also arise where there are more than two parties to the relevant contract or
arbitration clause, for example in cases of assignment or where the Contracts (Rights of Third
Parties) Act 1999 is applicable. Situations can also arise where there are a number of disputes
between different parties, all relating to similar facts, for example the US soya-bean embargo.
The common feature of these types of dispute is that the claims between the various parties will
generally raise common issues of fact and law. Justice requires that the outcome of the claims
should be consistent as far as possible, particularly where a chain of contracts is on back-to-back
terms. Ideally, all the claims should be decided at the same time before the same tribunal to avoid
inconsistent findings and to minimise costs. The parties can agree to such a procedure (e.g., where
chain claims arise) and arbitration rules sometimes provide (more typically in commodities
disputes than shipping) for the parties in the middle to drop out of the arbitral process for practical
purposes such as serving submissions. However, procedural problems can arise in multi-party
disputes if one of the claims is not referable to arbitration (because it arises in tort or if the
contract does not contain an arbitration clause) or one of the parties refuses to co-operate in
appointing a common tribunal or in having the claims heard concurrently. The result may be two
separate sets of proceedings, with increased costs, difficulties in obtaining evidence and a risk of
inconsistent results.2 This sort of inconvenience is accepted as a common feature of commercial
life and an unavoidable consequence of the parties choice of arbitration to resolve their
disputes.3

2. CONSOLIDATED ARBITRATIONS AND CONCURRENT HEARINGS

The courts have wide powers for streamlining multi-party disputes in court (e.g. by joining third
parties to existing proceedings, or ordering separate proceedings to be consolidated or heard
concurrently). English courts (unlike those in the Netherlands) do not have any inherent or
statutory powers to intervene to make such orders in an arbitration.4 Arbitrators also have no
inherent powers to make orders for consolidated arbitrations or concurrent hearings as their
authority is derived solely from the arbitration agreement. The concept of private arbitrations
derives simply from the fact that the parties have agreed to submit to arbitration particular disputes
arising between them and only between them.5
The question of whether the courts (or an arbitral tribunal) should have statutory powers to make
orders for concurrent or consolidated hearings in arbitration has long been controversial.6 Such

powers would have the immediate attraction of avoiding inconsistent findings and the unnecessary
time and expense involved in separate, but related, proceedings. However, the 1996 Act expressly
excludes such a power on the part of the tribunal in the absence of consent by the parties and it
implicitly excludes court intervention.7 The DAC considered that the convenience of
consolidation and concurrent hearings did not justify the way in which such powers would
undermine the consensual and confidential nature of arbitration. It would amount to a negation of
the principle of party autonomy to give the tribunal or the court power to order consolidation or
concurrent hearings. Indeed, it would to our minds go far towards frustrating the agreement of the
parties to have their own tribunal for their own disputes.8 There may also have been fears that
court powers of intervention to consolidate arbitral proceedings might make London a less
attractive venue for international commercial arbitration.
It is clear, however, that consolidation and concurrent hearings may be achieved with the
agreement of all parties concerned (an agreement between the parties to just one of the arbitrations
could not bind third parties). Such agreement may be achieved in the arbitration clause, or the
arbitration rules under which the arbitrations are being pursued (see the LMAA Terms below) or
by means of an ad hoc agreement between the parties. Section 35 of the 1996 Act provides that:

(1) The parties are free to agree

o (a) that the arbitral proceedings shall be consolidated with other arbitral proceedings; or
o (b) that concurrent hearings shall be held on such terms as may be agreed.
(2) Unless the parties agree to confer such power on the tribunal the tribunal has no power to
order consolidation of proceedings or concurrent hearings.

The courts may not have the power to consolidate arbitral proceedings but they have other means
of influencing the conduct of multi-party disputes. For example, where a court is asked to exercise
its powers of appointment it can ensure that common arbitrators are appointed over related
references9 or refuse to appoint an arbitrator where one claim is already being litigated in
court.10 The court may also stay court proceedings pending determination of a related dispute in
arbitration.11

Arbitration under LMAA Terms

The LMAA Terms make express provision for separate but related disputes. Paragraph 14
provides that:
In addition to the powers set out in the [1996] Act, the tribunal shall have the following specific
powers to be exercised in a suitable case so as to avoid unnecessary delay or expense, and so as to
provide a fair means for the resolution of the matters falling to be determined.

(b) Where two or more arbitrations appear to raise common issues of fact or law, the tribunals
may direct that the two or more arbitrations shall be heard concurrently. Where such an order
is made, the tribunals may give such directions as the interests of fairness, economy and
expedition require including:

o
o

(i) that the documents disclosed by the parties in one arbitration shall be made available
to the parties to the other arbitration upon such conditions as the tribunals may determine;
(ii) that the evidence given in one arbitration shall be received and admitted in the other
arbitration, subject to all parties being given a reasonable opportunity to comment upon it
and subject to such other conditions as the tribunals may determine.

These provisions give LMAA arbitrators extremely wide discretionary powers to make orders for
concurrent hearings and directions requiring parties to one arbitration to disclose evidence to
parties in another. They represent a potential inroad on the principle of confidentiality in
arbitration as a wide range of third parties could be admitted to the hearing. However, in practice
only third parties closely linked to the transaction are admitted and the concurrent hearings will
remain confidential to the parties concerned.
These powers will only apply where both arbitrations are governed by LMAA Terms. They do not
require common tribunals, although they are unlikely to be exercised unless there is at least one
common arbitrator in each tribunal. Otherwise there will be fewer savings of costs and a greater
risk of inconsistent findings between tribunals. Saving time and costs, together with acting fairly
as between the parties, are the principal factors to be taken into account when deciding to make
orders for concurrent hearings. In the vast majority of cases, concurrent hearings will be quicker
and cost less than two separate sets of proceedings. In such circumstances, an order for concurrent
hearings is likely to be made unless one of the parties can establish real and irreparable prejudice.
The precise scope of the arbitrators powers under paragraph 14(b) is unclear although it appears
to be very wide. In practice, the exchange of submissions and disclosure as between parties to all
the affected arbitrations is usually ordered, and the parties are then frequently able to agree on
how other matters should be dealt with. It is likely that, in appropriate cases (which are relatively
rare) tribunals can agree on concurrent hearings on certain common issues, leaving other issues to
be decided separately: this certainly happens in practice. If there is an order for concurrent
hearings then any directions affecting both arbitrations (for example, orders within (i) and (ii) of
paragraph 14(b)) will normally be agreed by both tribunals. Each tribunal must remain free to
make its own orders for matters directly affecting only its own arbitration (for example, costs in
that arbitration) and any such orders would probably prevail in the unusual case of inconsistency
with joint orders made by both tribunals. However, where there are concurrent hearings it would
be contrary to paragraph 14(b) for one tribunal to make orders which are plainly contrary to orders
made jointly which affect both arbitrations (e.g., inconsistent time limits for disclosure).

Express agreements to consolidate proceedings

In sale contracts (typically commodities contracts) it is common for the parties to agree expressly
to the consolidation of a chain of claims by providing, for example:
If a contract forms part of a string of contracts which contain materially identical terms (albeit
that the price may vary under each contract), a single arbitration determining a dispute as to
quality and/ or condition may be held between the first seller and the last buyer in the string as
though they were parties who had contracted with each other.

Any award made in such proceedings shall, subject only to any right of appeal pursuant to Rule
10, be binding on all the parties in the string and may be enforced by an intermediate party against
his immediate contracting party as though a separate award had been made pursuant to each
contract.12
The question of whether third parties are covered by such provisions is one of construction, but
the courts will usually give effect to such clauses even if the contracts in a chain are not on
identical terms.13

3. PRACTICE IN MULTI-PARTY DISPUTES

Appointment
To avoid duplication of costs and the risk of inconsistent findings in multi-party disputes priority
should be given to ensuring a common tribunal is appointed as soon as possible. This is most
easily achieved by co-operation among the parties when appointing common arbitrators, but it can
be achieved even if one of the parties refuses to co-operate.
In The Smaro 14 a ship sale agreement was entered into by Sellers with Buyers or a company to
be nominated. Buyers eventually nominated X to take delivery. A dispute arose and arbitrators
were appointed by Sellers and Buyers. X then also appointed the arbitrator already appointed by
Buyers. Sellers disputed whether X had validly commenced arbitration and an issue arose as to
whether X could join the existing arbitration between the Buyers and Sellers. Rix J decided that X
had properly joined the arbitration by obtaining the arbitrators consent to act as their arbitrator
and by giving notice to Sellers and the other arbitrators. He considered that where a claim under a
contract has been submitted to arbitration under that contracts arbitration clause, another claim
based on identical facts brought by another party to the contract could be referred to the same
arbitration, even if one of the parties to the arbitration did not consent to this. The position would,
however, be different if the claimants could not agree on a single arbitrator or a single arbitration.
Arbitrators will generally be willing to co-operate in achieving common membership of tribunals
in related disputes, by accepting appointments in related disputes or making the appointment of a
third arbitrator or umpire. If the courts default powers are invoked in relation to an appointment
they will also assist in ensuring common tribunals are appointed.15 If there are more than two
parties to an arbitration (e.g., in some cases where the Contracts (Rights of Third Parties) Act
1999 applies) but no agreed mechanism for the appointment of a tribunal, the courts default
powers under section 18 of the 1996 Act may be invoked (see Chapter 10).

The conduct of the arbitration

The main priority in the conduct of a multi-party dispute should be to secure all the parties cooperation in working towards a streamlined procedure. It is usually helpful to ensure that each of
the related claims is commenced closely in time so they can run in parallel. It is not uncommon for
a respondent who is to be claimant in a second arbitration to appoint, in that arbitration, the
arbitrator appointed by the claimant in the first, and then to appoint in the first arbitration the
arbitrator that is appointed against him in the second, thus ensuring identical tribunals. Where

there is a string of related contracts time extensions for the appointment of arbitrators may be
agreed to enable this to happen throughout the string.
In a single arbitration involving more than two parties (e.g., where arbitrations have been
consolidated by consent, although this happens very rarely in maritime disputes) then the tribunal
may clearly impose suitable and efficient procedures upon all the parties under section 33 of the
1996 Act.
Problems are more likely to arise where there are related, but separate, disputes. As a general rule,
an arbitrator acting in one arbitration cannot make an order against a party to another unless all
parties concerned have agreed (e.g., by incorporating the LMAA Terms or by each party
appointing arbitrators on the basis of those Terms, as discussed above) to confer power to make
directions binding third parties. In those rare cases where there is an absence of such express
agreement arbitrators can still take some steps to streamline procedure in multi-party disputes
for example, appointment of an umpire or third arbitrator may ensure wholly or substantially
common tribunals deal with common disputes. They may also express their preference for
concurrent hearings and co-operation between parties to related disputes. Their duty under section
33 of the 1996 Act to adopt procedures suitable to the circumstances of the particular case,
avoiding unnecessary delay or expense may justify taking steps to reduce duplicated expense or
inconsistent findings in related disputes, for example, by deferring a decision on a certain issue
until it has been resolved in related hearings. Such steps may also be consistent with the parties
duty under section 40 to do all things necessary for the proper and expeditious conduct of the
arbitral proceedings.
In general, an arbitrator should not penalise a party for exercising his contractual right to conduct
the arbitration solely with the other party to the contract. If the arbitrator considers that one of the
parties insistence on its contractual right to exclude third parties from the arbitration is
inconsistent with his duty to adopt efficient procedures, he can resign.16 An arbitrator who
imposes sanctions on a party for refusing to co-operate in concurrent hearings or uses evidence
disclosed in related arbitrations may risk applications for removal or challenges to awards on the
grounds of serious irregularity. The complaint would be that he has failed to conduct the
proceedings properly or in accordance with the procedure agreed by the parties.17 It may be said
that by allowing a third party (such as an arbitrator or a party involved in another arbitration) to
have access to documents (or the hearing) the arbitrator has acted outside his agreed
powers.18 However, the success of any such application would depend upon establishing
substantial injustice. This may be difficult to establish unless the private nature of arbitration has
been wholly disregarded so that what has happened is so far removed from what could
reasonably be expected of the arbitral process that the court should intervene.19
In The Capricorn I,20 two arbitrations arising out of the same facts but different charters
proceeded in parallel. The two-man tribunals had one arbitrator in common. Each tribunal
produced an award but both awards were supported by the same set of reasons drafted by the
common arbitrator. One of the parties unsuccessfully challenged the award on grounds that the
reasons given for it would have been based on evidence or submissions in the other arbitration to
which they had not been given access. The court accepted that the course adopted by the
arbitrators was procedurally defective because there had been no agreement to concurrent

arbitrations. However, the application failed because no injustice had been established. The
arbitrators would not have reached a more favourable result even if the applicants had been given
an opportunity to respond to the evidence served in the other arbitration.

Submissions and evidence

In a chain of claims the party in the middle will usually try to minimise its costs by passing the
allegations made against it up and down the line. However, it may sometimes have to take the
initiative in serving submissions. This may entail serving inconsistent submissionse.g., a
charterer may deny unseaworthiness against the sub-charterer, but plead unseaworthiness against
the shipowner. This is permissible because the two arbitrations are technically quite separate and
the middle party must wear a different hat in each of them. Sometimes a middle party may
decide, as a matter of tactics, to join sides with one party, for instance because of a hire
differential in the two charters, or because the party at one end of the chain is insolvent.
As regards documents, the general rule is that an arbitrator can only order parties to an arbitration
to make disclosure of documents. He has no authority to bind third parties. This means that in the
absence of agreement to the contrary (e.g., under the LMAA Terms discussed above) a party to
one arbitration (the first arbitration) in a chain of claims cannot obtain documents disclosed in
another arbitration unless they are in the control of the other party to the first arbitration. Even
then, such documents will not usually be disclosable in the first arbitration, because if they have
been disclosed in another arbitration such documents are only to be used for the purpose of that
arbitration and the person to whom disclosure is made is under an implied obligation of
confidentiality.21
An order for production of documents (formerly known as a subpoena duces tecum) from a third
party can, however, be obtained by applying to the court under section 44 of the 1996 Act. Such
orders are only available against a third party within the jurisdiction and the application should be
carefully worded to require the production of relevant documents only.22 Further, section 43 of the
1996 Act does not give a court power to order general disclosure against a third party and a third
party could rely on the confidentiality of the documents to resist producing them. Confidentiality
of evidence and awards is discussed in Chapter 13.

4. COSTS AND THIRD PARTIES

Sections 61 and 63 of the 1996 Act recognise the tribunals power (in the absence of any
agreement otherwise23) to make an award allocating the costs of the arbitration as between the
parties and to determine by award the recoverable costs of the arbitration on such basis as it
thinks fit. It is implicit from the wording of both these provisions and the consensual nature of
arbitrators powers that, in the absence of any agreement otherwise, the tribunal only has the
power to make an award of costs for the costs incurred in the arbitration in question and he may
only make such an award as between the parties to the arbitration in question. This follows from
the previous law under which the tribunal only had power to award the costs of the reference,
meaning the costs of the reference of the particular arbitration in question.24 There appears to have
been no intention in the 1996 Act to give arbitrators wider statutory powers to make costs orders
against third parties or for costs incurred in another arbitration.

Costs in multi-party disputes

Recovery of costs incurred in related arbitrations may cause problems. The most common
situation occurs where there is a dispute in a chain of contracts on similar terms. For example,
sub-charterers sue charterers for damage to goods and charterers sue disponent owners on back-toback terms. The general rule is that an arbitrator cannot make an order against one party requiring
it to indemnify the other party for costs incurred in another arbitration further up the line.
In The Takamine,25 owners commenced arbitration against charterers claiming for damage to the
vessel and unpaid hire. Charterers in turn commenced arbitration against sub-charterers for an
indemnity. By consent the arbitrations were held concurrently. The arbitrator held that the subcharterers were entitled to their costs and that the owners should bear one-third of those costs
while the charterers should bear the remaining two-thirds. Robert Goff J held that although the
two arbitrations were held together it was not open to the arbitrator to make an order that the
owners in one arbitration should have to pay the costs of the sub-charterers who were party to
another arbitration. He commented that the arbitrator could legitimately have reached the desired
result by ordering the owners to indemnify charterers against one-third of the cost which they had
been ordered to pay the sub-charterers. However, in The Antaios,26 he said that this was based on a
concession made by the parties.
The Antaios 27 involved four concurrent arbitrations arising out of back-to-back charterparties.
Robert Goff J upheld the arbitrators decision that the losing party in each of the four arbitrations
should pay the costs of the successful party in that arbitration. This meant that a party who had
been successful in one arbitration but unsuccessful in another could not pass on liability for costs
he had to pay to the successful party in the arbitration in which he had been unsuccessful.
Costs incurred in one dispute may, however, be recovered in another arbitration if they can be
claimed as damages for breach of contract.28 However, this is a limited remedy. First, such costs
can only be recovered as if they were within the parties reasonable contemplation as a loss likely
to result from breach. Second, such damages will only be recoverable if a claimant establishes a
breach of contract or duty; a party who has successfully defended a claim cannot recover costs as
damages. Furthermore, where the substantive claim is not one for damages (e.g., where the claim
is for a debt only), no costs in the guise of damages can be awarded.29
The law in this area may lead to perceived injustice where an unsuccessful claimant has initiated a
chain of arbitrations. The head claimant will only have to pay the costs incurred by the next party
down the line and these may not properly represent the cost of defending the claim as that party
may have simply passed submissions up and down the line. That party will, however, be liable for
the costs of the successful respondent in the claim he pursues down the line but will not, by reason
of the ruling in The Antaios,30 be able to pass that liability back to the head claimant. The party in
the middle would be less vulnerable to irrecoverable costs if the other parties agreed that he could
drop out of the arbitration, or that the arbitrations be consolidated. However, it is doubtful whether
such consent would be forthcoming unless there are other advantages in such an arrangement.
Alternatively, the party in the middle could reasonably argue that in quantifying the true cost of
defending the head claim, account should be given for the costs incurred in the arbitration below,
for example defending the head claim may have required reliance on the expert report adduced by

the respondent in the arbitration below.31 However, arbitrators are more likely to apply The
Antaios strictly, taking the view that parties who charter ships in and out take the commercial risk
of becoming liable for costs that they cannot pass on.

LMAA Terms and recovery of costs against third parties

Paragraph 14(b) of the LMAA Terms (set out above) enables tribunals in related arbitrations to
make orders for concurrent hearings where both arbitrations are governed by LMAA Terms. It is
doubtful whether these provisions could be construed as enabling LMAA arbitrators to order that
parties to one arbitration pay the costs of the parties to another arbitration where orders for
concurrent hearings are made. These provisions are primarily concerned with enabling the
tribunals to make directions for the expeditious conduct of concurrent hearings, for instance in
relation to disclosure of evidence. They do not attempt to enable arbitrators to consolidate
arbitrations, or to make awards binding a party in one arbitration to pay damages (or costs) to a
party in another. If this had been the intention then it would have been made clear. The authorities
suggest there is no ground for implying that an arbitrator has jurisdiction to grant a costs order
against a party to a separate arbitration. In The Antaios,32 Robert Goff J considered that such
orders would not be permissible (in the absence of an express agreement between all parties)
where the arbitrations had been heard concurrently, but had not been consolidated.

Security for costs

Under section 38(3) of the 1996 Act the tribunal has jurisdiction to order a claimant to provide
security for the costs of the arbitration. As with sections 61 and 63 (discussed above), it is
implicit that this confers the power to order a party to the arbitration in question to provide
security for costs. It also seems clear (for the reasons discussed above) that paragraph 14(b) of the
LMAA Terms would not enable an LMAA arbitrator to make an order requiring the party to one
arbitration to provide security for the costs of another. By contrast, in court proceedings (e.g., to
challenge an award), the court may make orders against third parties, typically where the third
party has assigned the right to the claim to the claimant, or has contributed to the claimants
costs.33

Costs orders against third parties maintaining an

arbitration
Genuine injustice may arise in cases where a third party, such as a bank, insurance company or
P&I Club, maintains a claim asserted by an insolvent company. The maintainer will be able to
take the benefit of a successful claim but escape the burden of a costs order if the claim fails. In
court proceedings the courts have statutory powers under section 51 of the Supreme Court Act
1981 to make costs orders in court proceedings against third parties where such an order would be
just.34 Arbitrators do not have such powers and security for costs is the only clear safeguard
available to protect a successful respondent from having to bear its own costs.35
Section 51 enables the court to make orders against third parties for costs incurred in court
proceedings relating to an arbitration (e.g., an appeal against an award).

In The Vimeira,36 owners claimed against charterers for damage to the vessel. The charterers
claimed against sub-charterers and two sets of arbitrators made awards. Owners in the head
charter arbitration and charterers in the sub-charter arbitration applied for remission of the awards.
Hirst J dismissed the applications and ordered the owners to pay the charterers costs of the
remission application, such costs to include any costs paid by charterers to the sub-charterers in
the application relating to the sub-charter. The House of Lords upheld this costs order on the basis
of the High Courts wide jurisdiction under section 51 of the Supreme Court Act 1981.
It is unlikely, however, that a court would have the power under section 51 (or otherwise) to make
an order against a third party (such as an insurer) to pay costs incurred in arbitral proceedings. The
court only has power under section 51 to make orders as to the costs of proceedings in court.
Furthermore, under section 61 of the 1996 Act, the power to make awards allocating the costs of
the arbitration lies with the tribunal not the court. The courts only clear powers of intervention
regarding the costs of an arbitration are under section 63(4) which allows it to determine the
recoverable costs of the arbitration (similar powers relate to the arbitrators fees and expenses
under section 64(2)). This provision is limited to conferring power to assess the amount of costs
recoverable. It is doubtful whether its wording would enable the court to decide which party
should be liable for those costs; this decision lies with the tribunal under section 61. It is also
unlikely that this provision would be construed broadly so as to enable the court to make powers
ordering third parties to pay the costs of the arbitration. Such powers were not recognised under
the previous law and would depart from the policy of the 1996 Act in minimising court
intervention in arbitration.37

Costs orders against lawyers

The courts have statutory powers to make personal costs orders against legal representatives of
parties for costs incurred in litigation as a result of improper, unreasonable or negligent acts or
omissions. Arbitrators do not share these powers as they are conferred in relation to civil
proceedings by section 51(6) of the Supreme Court Act 1981.38 This provision gives effect to the
courts longstanding inherent powers to make wasted costs orders against solicitors based upon a
solicitors duties as an officer of the court.39 It is difficult to see how an arbitrator could make an
order for costs against a solicitor (or a P&I Club or barrister) unless that solicitor had given
personal undertakings as to costs or had put up security or otherwise participated personally in the
arbitration (as opposed to representing his client). This point is considered in further detail in
Chapter 20 in relation to the question of whether an arbitrator might recover fees from a solicitor
who appointed him.

5. AGENTS AND ARBITRATION

In charterparty or bill of lading contracts it is extremely common for the contract to be signed or
concluded by an agent. Usually it is quite clear who the principal parties are, but it is important to
take every precaution to ensure that any claim is asserted against the proper party. Any dispute as
to the identity of the proper party to sue (or be sued) can normally be categorised as a
jurisdictional issue (see Chapter 6) in that one party (normally the respondent) denies that it was
party to the arbitration agreement or that the claim made is within the scope of the arbitration

agreement. The nature and effect of relationships of agency depend on substantive law beyond the
scope of this book.40

6. ASSIGNMENT
Assignment of contractual rights is a matter of the law of contract.41 In English law where a party
to a contract (the assignor) assigns his rights under a contract to a third party (the assignee)
the assignors rights under the contract are transferred to the assignee. Assignment is common in
the maritime context, for example a shipowner may assign his rights to freight and demurrage
under a charter, or a seller of goods may assign the benefit of a marine insurance policy for those
goods. If the contract contains an arbitration clause then this will apply to regulate the way in
which the assignee can enforce the assigned right.42 If the claims made by the assignee are ones
which the original party would have been obliged to refer to arbitration then the assignee is bound
by the arbitration clause, and also has the right to enforce it. The assignee is bound by the
arbitration clause in the sense that he cannot assert the assigned right without also accepting the
obligation to arbitrate.43 This means that the assignee may be subject to a stay of proceedings
under section 9 of the 1996 Act44 and may also be restrained by injunction from pursuing foreign
proceedings in breach of the arbitration clause.45
In The Jay Bola,46 a voyage charter contained a London arbitration clause. Bills of lading were
issued in Brazil evidencing shipment of steel bars. The cargo was damaged in a fire. Charterers
insurers paid the charterers and, through subrogation, became assignees of the charterers rights in
respect of the damaged cargo against disponent owners. The insurers commenced proceedings
against the disponent owners in Brazil. The Court of Appeal held that the rights being asserted by
the insurers in the Brazilian proceedings were subject to the arbitration clause in the voyage
charter. The insurers were not entitled to assert those rights inconsistently with the arbitration
agreement and disponent owners were entitled to an injunction restraining the insurers from
pursuing the Brazilian proceedings. The Jay Bola has been cited with approval in more recent
cases47
Problems may arise in practice as to whether the assignor or assignee has title to sue, and whether
the assignee is properly to be regarded as a party to the arbitration. It is usually safer to commence
arbitration in the name of both the assignee and assignor, particularly if any question of time bar
may arise.48 If the respondent is given full notice of the assignment then this should minimise
jurisdictional problems since if he fails to raise jurisdictional objections before the tribunal or the
court when he becomes aware of the grounds for such objections he will lose the right to
object.49 If the assignment takes place after an arbitration has commenced the assignee may still
rely on the appointment of the arbitrator by the assignor and could intervene in the pending
arbitration to enforce the assigned rights.
In The Jordan Nicolov,50 charterers claimed against owners for alleged short delivery and
appointed an arbitrator in accordance with the arbitration clause in the charterparty. Shortly
afterwards the charterers insurers (who had already paid the claim) gave owners notice that they
were the charterers assignees. The arbitrators were not satisfied that the charterers still had title to
sue and found that if any award was to be made in favour of the insurers a fresh arbitration would
have to be started (by then the claim was time-barred). Hobhouse J disagreed and found that the
insurers, as assignees, could succeed to the rights of the assignor in a pending arbitration. He made

clear that notice of the assignment must be given to the arbitrators as well as to the other party
because the appointment of an arbitrator gives rise to a tripartite relationship.
It is important to note that the assignee of a claim will not become a party to a pending arbitration
simply by virtue of the assignment. He must perfect the assignment by giving notice to the other
side and must intervene in the arbitration by giving notice to the arbitrator. Accordingly, it is
important that express notice of the assignment is given promptly to the other party and the
arbitrator.
In Baytur SA v Finagro Holding SA,51 a dispute arising out of a sale contract was referred to
GAFTA arbitration. The buyers subsequently transferred their assets to the defendant company
and simultaneously dissolved, thereby ceasing to exist. The defendant continued the arbitration in
the name of the buyers and failed to give notice to the sellers. An arbitration award was then made
and the Court of Appeal held that it was a nullity since the defendant assignees had failed to give
notice to the sellers or to submit to the jurisdiction of the arbitrators. The arbitration had lapsed
because there could not be a valid award when one of the two parties had ceased to exist.
However, the courts will not readily find that an arbitration is a nullity since this would enable a
party to terminate difficult litigation by simply merging or dissolving and Baytur v Finagro was
distinguished by Longmore J in Eurosteel Ltdv Stinnes AG.52
Similarly, Baytur v Finagro was distinguished in The Republic of Kazakstan v Istil Group
Inc. 53 In this case, a British Virgin Island company, Metalsrussia, commenced arbitration
proceedings in London. The tribunal issued a partial award affirming its jurisdiction, whilst
unaware that Metalsrussia had merged with a parent company and had ceased to exist. David Steel
J considered that Metalsrussias merger with its parent company did not render the partial award a
nullity. BVI law provided for universal succession in respect of all proceedings, including
arbitration proceedings. So, under BVI law, no notice of merger was required to establish a right
to claim in proceedings. The award was also valid under English law, since once notice of the
merger was given, the arbitral tribunal could continue and re-instate orders and awards previously
made by the tribunal.
Where the assignee takes over as a party to the arbitration the assignor remains liable for costs
incurred prior to the involvement of the assignee. The assignee will be liable for costs arising after
the assignment because his intervention is regarded as a submission to the arbitrators jurisdiction
to award costs.54 Indeed, it is likely that since the assignee is agreeing to be treated as party to the
arbitration he will be subject to the tribunals jurisdiction to award costs for the entire arbitration.
Otherwise, there would be scope for injustice if an insolvent assignor could assign away the
benefit of a claim in arbitration while remaining solely liable for the burden of the respondents
counterclaim or previous costs incurred in the arbitration.55 In Baytur SA v Finagro Holding
SA,56 Lloyd LJ suggested that for an assignment to be effective in a pending arbitration the
consent of the other party and the arbitrator might be necessary to prevent this sort of injustice.

7. INSURERS
The legal position of insurers in relation to arbitral proceedings to which the insured is a party is
beyond the scope of this book. However, the means by which third parties can obtain rights to
arbitrate against insurers pursuant to an insurance contract deserve brief comment. Most P&I Club

rules contain arbitration clauses for referring disputes between a member and the Club to
arbitration. If the member of the P&I Club (or any other insured) is made bankrupt, subject to a
winding up order or put into receivership, then under section 1(1) of the Third Parties (Rights
Against Insurers) Act 1930, the members rights against the Club for any insured liability will be
transferred to and vested in the third party to whom the liability was so incurred. However, the
third party will be bound by any arbitration clause in the P&I Club rules.57
In The Felicie,58 Phillips J held that where the member of a P&I Club had commenced an
arbitration against its Club, a third party subsequently invoking rights under section 1(1) of the
1930 Act was not entitled to be automatically substituted in that arbitration; it was obliged to
commence a fresh arbitration. He held that an automatic substitution of a third party in an
arbitration would be unsound in law and impossible in practice for the following reasons:

(a) The 1930 Act cannot have the effect of making a third party automatically a party to a
dispute which is not of his making.
(b) Some of the rights that arise out of a reference to arbitration are personal to the parties and
cannot properly be the subject of a transfer to a third party under the 1930 Act, e.g. costs
incurred prior to the transfer.
(c) It would be a startling concept if a third party became a party to an arbitration without
notice or any procedural mechanism of substitution.
(d) Unacceptable practical complications would arise if the arbitration also raised claims not
transferred to the third party.

It remains to be seen whether this approach will be maintained in the light of The Jordan
Nicolov.59 Hobhouse J considered that a third party could be substituted without undue practical
complications if notice was given to the other party and the arbitrator. More recent cases such
as The Republic of Kazakstan v Istil Group Inc,60 although not dealing directly with the point,
would appear to follow the approach adopted in The Jordan Nicolov.

8. CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999

Introduction
The general rule in English law is that contracts, including arbitration agreements, can only be
enforced by or against parties to them. This follows from the doctrine of privity of contract.
However, section 1 of the Contracts (Rights of Third Parties) Act 1999 (the 1999 Act) enacts an
exception to the doctrine of privity by enabling a third party to enforce, in his own right, terms in a
contract either where there is an express provision allowing such enforcement or where, subject to
a contrary intention, the term purports to confer a benefit on him. In the maritime context the 1999
Act has had a significant impact. It makes it easier for brokers to sue for commission under
charterparties or ship sale contracts. Independent contractors such as stevedores are now more
likely to be able to rely on exclusion or limitation clauses inserted into bills of lading or
charterparties for their benefit (sometimes called Himalaya clauses). However, parties may
expressly agree to contract out of the 1999 Act. In such cases it will be necessary to refer to
various techniques developed prior to the 1999 Act for giving effect to third party rights, for
instance treating the independent contractor as having entered into a contract on those terms.61

It is important to note, however, that the 1999 Act confers no rights on a third party in the case of
a contract for the carriage of goods by sea, defined to cover bills of lading, sea waybills (or
corresponding electronic transactions) and ships delivery orders, but not charterparties.62 These
contracts are excluded to avoid disruption of the carefully regulated scheme of transfer of rights
(and liabilities) under the Carriage of Goods by Sea Act 1992. The exception does not, however,
preclude a third party availing himself of an exclusion or limitation clause in a bill of lading.63
The question of how far third parties should be bound by arbitration clauses was one of the most
difficult issues that faced the Law Commission in proposing reform of privity of contract.64 The
conflict arises out of enabling a third party to enforce a benefit conferred by a contract in
accordance with its terms (including an arbitration clause) yet also respecting the principle that a
person should not be bound by an arbitration agreement unless he has agreed to arbitrate. An
arbitration agreement ordinarily has the effect of excluding the parties access to court to resolve
disputes covered by the agreement. If a third party were bound by an arbitration agreement
without consent it might be said to deprive him of his fundamental right to a fair and public trial to
determine his respective rights and obligations.65 The Law Commissions initial view was that a
third party should generally only be bound by an arbitration agreement if he had agreed to be so
bound.66 Ultimately, however, the approach adopted means that if parties to a contract agree that
enforcement of a benefit conferred on a third party is to be subject to arbitration then the third
party will be bound by the arbitration clause in the sense that he cannot enforce that term without
also accepting the obligation to arbitrate. The Law Commission called this the conditional benefit
approach and it is similar to the law on assignment of contracts containing arbitration
clauses.67 The main provision relating to arbitration provides as follows:

8. (1) Where
68
o (a) a right under section 1 to enforce a term (the substantive term) is subject to a term
providing for the submission of disputes to arbitration (the arbitration agreement); and
o (b) the arbitration is an agreement in writing for the purposes of Part I of the Arbitration
Act 1996,

the third party shall be treated for the purposes of that Act as a party to the arbitration
agreement as regards disputes between himself and the promisor relating to the enforcement
of the substantive term by the third party.

Application of the Contracts (Rights of Third Parties) Act

1999
Parties to a contract may expressly exclude the application of the 1999 Act but this is not common
in shipping contracts. The usual situation where a third partys entitlement (or duty) to arbitrate
under the 1999 Act will be in issue is if he attempts to enforce a term (the substantive term) in a
contract to which he is not a party and that contract contains an arbitration clause (e.g., a broker
enforcing a term in a charter recording his entitlement to commission). For section 8(1) to apply it
must be shown that the substantive term is within section 1 and that the third partys right to
enforce that term is subject to the arbitration agreement. Under the 1999 Act a third party

attempting to enforce the substantive term is treated analogously to a statutory assignee of the
benefit of the substantive term (i.e., it is treated as if standing in the shoes of the original
promisor). On that basis, the third partys right to enforce the term is treated as subject to the
arbitration agreement so long as that agreement is wide enough to cover a dispute between the
original parties to the contract regarding enforcement of the substantive term. The scope and effect
of these provisions of the 1999 Act was tested in Nisshin Shipping Co Ltd v Cleaves & Company
Ltd.69
In Nisshin Shipping Co Ltd v Cleaves & Company Ltd,70 a series of charterparties, which
contained arbitration clauses, provided for commission to be payable to shipbrokers. The
shipbrokers were not, however, party to the said charterparties. The shipbrokers wanted to pursue
claims for the commission in arbitration. They referred the claims to arbitration, despite not being
party to the arbitration agreements. It was common ground that the wording of the arbitration
clause was wide enough to cover a claim being brought by charterers against owners for failing to
pay the brokers. In the arbitration, the arbitrators took jurisdiction on the basis of sections 1 and 8
of the Contract (Rights of Third Parties) Act 1999. The shipowners contested jurisdiction under
section 67 of the Arbitration Act 1996, arguing that the charterparties did not purport to confer a
benefit on the brokers within the meaning of section 1(1)(b) of the Contracts (Rights of Third
Parties) Act 1999 and secondly, the brokers rights (if any) could not be enforced via the
arbitration agreements.
Colman J found that the charterparties did contain a provision conferring the benefit of
commission on the brokers. He further considered that the charterparty terms were neutral in the
sense that they did not indicate any intention that the shipbrokers should not be entitled to enforce
the commission terms. Therefore, the brokers were entitled to enforce the commission clauses
under section 1 of the 1999 Act. Further, the brokers were entitled, and in fact obliged, to bring
their claim in arbitration.
It should be noted that Colman J departed from the view adopted in the previous edition of this
book71 to the effect that the application of section 8(1) depended on whether the wording of the
arbitration clause was apt to cover third parties. He considered that under section 1 of the 1999
Act, a third party was effectively treated as a statutory assignee of the promisees right of action
against the promisor. The parties intentions as to whether a third party should arbitrate were
relevant only to the limited extent that it was necessary that the arbitration agreement was wide
enough to cover a dispute between the original parties as to performance of the substantive term.
He concluded at paragraph 43 of the judgment that:
For the reasons which I have given, whether they [the parties] did or did not express a mutual
intention that the third party should be entitled to avail himself of the arbitration agreement for the
purpose of enforcing his rights under the substantive term in relation to which the 1999 Act has
transferred to him a right of action is not relevant.
Colman J also specifically held that the statutory requirement for the third party to arbitrate did
not infringe the third-partys rights under Article 6(1) of the European Convention on Human
Rights. On the contrary, sections 1 and 8 of the 1999 provided a third party with a remedy which
would otherwise have been denied to him.

Jurisdictional issues
Issues may arise as to the scope of the third partys right (or obligation) to arbitrate as even if his
rights are subject to an arbitration agreement, he is only treated as party to the arbitration
agreement under section 8(1) as regards disputes between himself and the promisor relating to
the enforcement of the substantive term by the third party. Section 8(1) primarily contemplates
proceedings in which the third party is claimant and is taking positive steps to enforce his rights in
proceedings in court or arbitration. For instance, if the third party seeks to enforce a substantive
term in court proceedings this will usually be apparent from his particulars of claim and the
promisor can seek a stay of those proceedings under section 9 of the 1996 Act. Similarly, if the
third party commences arbitration, it should be reasonably clear from his submissions whether or
not he is entitled to arbitrate on the ground that he is enforcing a substantive term subject to an
arbitration agreement. Jurisdictional issues are more likely to arise where the third party has not
commenced proceedings in court and has not voluntarily submitted to arbitration. The issue will
be whether the dispute relates to enforcement of the substantive term by him within the meaning
of section 8(1). Enforcement probably requires some positive step of reliance on the term by the
third party, but would not require the third party to commence arbitral or court proceedings.72
For example, under a charter the parties might agree that owners will indemnify stevedores against
claims by receivers for damage to cargo on loading, and that all disputes arising out of the charter
be referred to arbitration. Receivers make a claim against the stevedores for damage to cargo on
loading and the owners then commence arbitration against the stevedores seeking a declaration of
non-liability. The stevedores could probably contest the tribunals jurisdiction on grounds that
they should not be treated as party to the arbitration agreement because the dispute did not relate
to enforcement of an indemnity by them. However, if the stevedores made a claim for an
indemnity it would be referable to arbitration.

Appointment of the tribunal

Most arbitration clauses are designed for disputes between two parties (e.g., each of the parties is
to appoint an arbitrator and the two arbitrators are to choose a chairman). However, such wording
can be read consistently with section 8(1) of the 1999 Act by treating the third party as a party to
the arbitration agreement and the ordinary default powers for such appointments should be
available.73 If a third-party right is treated as subject to an arbitration clause which makes no
provision for the number of arbitrators, then the default provisions of the 1996 Act should
similarly allow for the appointment of a sole arbitrator.74 If, however, a clause is only designed to
accommodate disputes between the original contracting parties (e.g., one arbitrator to be
appointed by the Owner, one by the Charterer, and one by the two so chosen) then if a dispute
arises, the court will have to consider whether the third partys rights are subject to the clause
within the meaning of section 8(1) of the 1999 Act, and if so, it would probably give effect to the
appointment provision by treating the third party as the other party to the arbitration agreement.75

Can disputes between all the parties be joined?

Difficult issues may arise regarding the relationship between a dispute between the parties to the
contract, and a dispute between one or both of those parties and a third party. Such disputes will

usually raise related issues. Ideally, the disputes should be decided at the same time before the
same tribunal to minimise costs and to avoid the risk of inconsistent findings. However, the 1999
Act does not affect the general rule that arbitral proceedings cannot be consolidated or heard
concurrently in the absence of consent from all parties to the proceedings.76 If the LMAA Terms
apply and arbitrations raise common issues of fact or law the tribunal may make orders for them to
be heard concurrently (see above at section 2).
Section 8(1) of the 1999 Act provides that the third party will be treated as party to the arbitration
agreement in the contract as regards disputes between himself and the promisor relating to the
enforcement of the substantive term by the third party. This may give rise to a tripartite
arbitration agreement if the disputes between the third party and the promisor relating to the
enforcement of the substantive term overlap with the disputes agreed to be referred to arbitration
between the original parties. If the third party and the original parties to the contract are involved
in the dispute from the outset and all the disputes relate to enforcement of the substantive term by
the third party, then it should be possible for a single tribunal to be appointed for all disputes even
if one party is uncooperative. This would be done by ensuring the appointment of the same
tribunal for all relevant disputes arising between the three parties. Typically, this will be achieved
by co-operation between the arbitrators and at least two of the parties, or by using the courts
default powers.77 More difficulty will arise if arbitrators have already been appointed for one
dispute and the arbitration has progressed before disputes are raised concerning the other party
(i.e., the third party or original party not already involved in the arbitration). Unless all the parties
co-operate, the existing arbitration is likely to be treated as separate from any possible arbitration
involving the other party.78 The tribunal already appointed would not be obliged, and indeed
might not be invited, to accept appointment in relation to the dispute concerning the other party.
In addition, the other party would not be obliged to accept the tribunal already appointed, and
could probably insist on the appointment of at least one arbitrator of his choice.79 Arguments
could also be raised against the third party being joined because the existing arbitration may raise
other disputes than those relating to the enforcement of the substantive term by the third party.
In relation to such other disputes he would not be treated as party to the arbitration agreement and
the existing parties could exclude him from the arbitration on that ground.

Enforcement of terms enabling a third party to arbitrate

The 1999 Act will most commonly be invoked where the parties to the contract intend to confer
substantive benefits on a third party such as the right to claim a payment. Section 8(2) of the Act
provides for the situation (probably rare in practice) where the only term which the third party is
seeking to invoke is an arbitration clause intended to cover disputes arising between him and one
or both of the parties to the contract. In such circumstances the third party has the option of
whether or not to arbitrate, but if he does exercise the right to rely on the arbitration agreement,
then he will be treated as if he were a party to the arbitration agreement from that point. Section
8(2) provides as follows:

(2) Where

o
o

(a) a third party has a right under section 1 to enforce a term providing for one or more
descriptions of dispute between the third party and the promisor to be submitted to
arbitration (the arbitration agreement);
(b) the arbitration agreement is an agreement in writing for the purposes of Part I of the
Arbitration Act 1996; and
(c) the third party does not fall to be treated under subsection (1) as a party to the
arbitration agreement,

the third party shall, if he exercises the right be treated for the purposes of that Act as a party
to the arbitration agreement in relation to the matter with respect to which the right is
exercised and be treated as having been so immediately before the exercise of the right.
This provision is intended to cover situations where the contracting parties give the third party a
right to arbitrate a dispute other than one concerning a right conferred on the third party under
section 1, for example the contracting parties give the third party a right to arbitrate a tort claim
made by the promisor against the third party. To require the third party to arbitrate where there is
no other benefit to him was considered to impose a pure burden on him, contrary to the
philosophy of the 1999 Act.80 Accordingly, the third party is only subject to such an arbitration
clause if he has chosen to exercise the right to arbitrate. It has also been explicitly held that the
fact that a third party was required to arbitrate a claim to enforce a promise which, had the
promisee wished to pursue it, he would have had to refer to arbitration, pursuant to sections 1 and
8 of the 1999 Act, did not infringe the third partys rights under Article 6(1) of the European
Convention on Human Rights (incorporated into English law pursuant to the Human Rights Act
1998).81

9. EFFECTS OF ARBITRATION AWARDS ON THIRD PARTIES

An arbitration award is generally only binding on the parties to the arbitration agreement
itself.82 One application of this principle is that a finding in an award only creates an issue
estoppel as between the parties to an award For example, an arbitration award on a particular issue
arising between X and Y will not be binding if the same issue arises between Y and Z.83
In Sun Life Assurance Company v Lincoln National Life Insurance Co,84 Sun Life appealed to the
Court of Appeal against a judgment that an arbitral decision on a particular point was binding on
arbitrators in a subsequent arbitration between different parties. The Court of Appeal found that an
issue estoppel would only be effective between the same parties, or their privies. It was unfair to
bind someone who was not a party to the arbitration, and by the principle of mutuality, Lincoln
should not be able to take advantage of an earlier award to which it was not a party.
A further aspect of the principle is that arbitrators have no jurisdiction to make rulings on the
substantive rights of third parties, or impose obligations on such third parties.
In Samsun Logix Corporation v Oceantrade Corporation,85 the Commercial Court held
ineffective an arbitration award purporting to determine the ownership of an asset to which there
was a third party claimant, who was not a party to the arbitration. Gross J considered that it would
be very difficult to conceive of a situation where a decision could be taken on rights in

rem without the affected parties having a right to be heard. Further, the arbitration award should
only be binding on the parties to the arbitration. Otherwise, on the facts of the case itself, a right in
rem would have been created impacting on a third party, and thus leap-frogging over the
established English case law on contractual liens.
In addition to the underlying principle that only parties to the arbitration agreement will be bound
by an award, there has been focus on another principle: namely, the right to be heard. As third
parties would have no right to be heard in an arbitration, they should not be affected by the
ultimate award. As outlined above, this was the first ground put forward in the reasoning of Gross
J in Samsun Logix Corporation v Oceantrade Corporation. 86 This is also consistent with
established case law to the effect that an arbitration award cannot order interference with the rights
of a third party.87 Merkin88 draws a distinction between the type of scenario arising in Samsun
Logix, concerning an ownership dispute involving a third party who had asserted a prior claim,
and an arbitration award which establishes a right which is enforceable against the world at large,
such as a decision on a copyright issue. However, this distinction seems questionable and Samsun
Logix would suggest that third parties would not be bound by such an award.
Further, a third party cannot challenge an arbitration award if it was not party to the arbitration
agreement pursuant to which the arbitration was held.89
The general principle is, however, subject to exceptions and there are certainly situations where an
award may have a binding effect on third parties:

(a) If the third party has entered into an agreement with the parties to the arbitration to be
bound by the award, even if it is not a party to the dispute.
(b) In circumstances where there is an agency relationship between the third party and the
party to the proceedings. This type of scenario has been considered above at section 5 of this
Chapter.
(c) Under section 82(2) of the Arbitration Act 1996, the award is binding on the parties and
the persons claiming under or through them.

There are further scenarios where an arbitration award in a proceedings between parties A and B
can have impact in proceedings between either A or B and a third party, C. For instance an
arbitration award may be disclosed in proceedings involving a third party where disclosure is
necessary for the protection of the legitimate interests of a party.90 Most typically an award will be
relevant against a third party to establish loss where a party in a chain of contracts is claiming an
indemnity against damages incurred further up the chain.91

10. COMPETITION LAW ISSUES

The position of third parties is particularly relevant when competition law issues are raised in an
arbitral forum since the issues will normally involve third parties. As discussed in Chapter 1
competition law is increasingly being raised in maritime arbitrations. Given the restricted impact
of arbitration awards, particularly in terms of confidentiality and failing to bind third parties, it is
questionable whether arbitral tribunals will provide sufficiently effective remedies to deal with
competition-related problems. It is beyond the scope of this book to deal with the issues that arise
but it may be necessary to manage client expectations as to the possible outcomes of the

arbitration process. It is certainly the case that an arbitral tribunal will not be able to provide the
range of remedies, sanctions or punitive measures which would be open to the official competition
regulators in an EU context. Much may depend on a partys intention in raising a competition law
point. Should a party wish to complain that an agreement is anti-competitive under Article 81, vis-vis the other party to the arbitration, this contractually focused dispute could be apt for
resolution and an appropriate remedy by an arbitral tribunal. However, should a party wish to raise
broader issues of competition law (e.g., involving market analysis in respect of abuse of dominant
position under Article 82), an arbitral body may have significantly more difficulty in either
analysing the entire dispute or providing an appropriate remedy. For instance, a party to a shipping
joint venture may wish to allege that the entire joint venture was anti-competitive, and that the
other party had colluded with port authorities and other bodies in an abusive fashion. It may be
difficult for an arbitral tribunal to deal properly with the latter accusation if the third party is
unwilling to take part in the arbitration. Further, there is no obvious remedy available to the
arbitral tribunal to prevent the conduct complained of since the tribunal cannot make orders
against third parties or interfere with their rights.
1 See Chapter 13 on confidentiality.
2 For detailed discussion of problems see Sir Michael Mustill and Anthony Diamond QC in
[1991] 7 Arbitration International 393 and 403 respectively. For an example of potential problems
see Petredec Ltd v Tokumaru Kaiun Co Ltd, The Sargasso [1994] 1 Lloyds Rep 162 and Sacor
Maritima SA v Repsol Petroleo SA [1998] 1 Lloyds Rep 518.
3 Appendix C to Second DAC Report [1991] 7 Arbitration International 390; Wealands v CLC
Contractors Ltd [1999] 2 Lloyds Rep 739 at 749.
4 Bremer Vulkan Schiffbau und Maschinenfabric Ltd v South India Shipping Corporation [1981]
AC 909; [1981] 1 Lloyds Rep 253; 1996 Act, sections 1(c), 35 and 44.
5 Oxford Shipping Co Ltd v Nippon Yusen Kaisha, The Eastern Saga [1984] 2 Lloyds Rep 373 at
379.
6 DAC Report on the Arbitration Bill, paragraphs 177-181; Appendix C to the DACs Second
Report on Consolidation, [1991] 7 Arbitration International 390.
7 1996 Act, sections 35 and 1(c).
8 Paragraph 180 of the DAC Report.
9 Abu Dhabi Gas Liquefaction Co Ltd v Eastern Bechtel Corporation [1982] 2 Lloyds Rep 425.
10 Petredec Ltd v Tokumaru Kaiun Co, The Sargasso [1994] 1 Lloyds Rep 162.
11 Reichhold Norway ASA v Goldman Sachs International [1999] 2 Lloyds Rep 567.
12 GAFTA Arbitration Rules Form No. 125, effective 1 July 2007. See also virtually identical
rules in FOSFA Rules, rule 6(c); Cocoa Association of London Rules, rule 8; Sugar Association of
London Rules, rule 403. There are procedural variations between the rules, but the core aim
remains the same.

13 Burkett Sharp & Co v Eastcheap Dried Fruit Co [1962] 1 Lloyds Rep 267. However, a
foreign court may be less willing to enforce an award except as between parties named in the
award.
14 Charles M. Willie & Co (Shipping) Ltd v Ocean Laser Shipping Ltd [1999] 1 Lloyds Rep 225.
15 Abu Dhabi Gas Liquefaction Co Ltd v Eastern Bechtel Corporation [1982] 2 Lloyds Rep 425.
16 Paragraph 159 of the DAC Report.
17 1996 Act sections 24(1)(d) and 68(2)(a) or (c).
18 Oxford Shipping Co Ltd v Nippon Yusen Kaisha, The Eastern Saga [1984] 2 Lloyds Rep 373.
19 Paragraph 280 of the DAC Report (see also paragraph 106).
20 Aquator Shipping Ltd v Kleimar NV [1998] 2 Lloyds Rep 379 (decided under the Arbitration
Act 1950).
21 See Chapter 13 on confidentiality, Dolling-Baker v Merrett [1990] 1 WLR 1205 at 1213.
22 Sunderland Steamship P. and I. Association v Gatoil International Inc, The Lorenzo
Halcoussi [1988] 1 Lloyds Rep 180.
23 Sections 61 and 63 are not mandatory.
24 Arbitration Act 1950, section 18(1), as explained by Robert Goff J in Maritime
Transport v Unitramp Salen Rederierna, The Antaios [1981] 2 Lloyds Rep 284.
25 Wilh Wilhelmsen v Canadian Transport Co, The Takamine [1980] 2 Lloyds Rep 204.
26 Maritime Transport Overseas GmbH v Unitramp Salen Rederierna, The Antaios [1981] 2
Lloyds Rep 284.
27 Ibid.
28 Hammond & Co v Bussey (1880) 20 QBD 79.
29 Maritime Transport Overseas GmbH v Unitramp Salen Rederierna, The Antaios [1981] 2
Lloyds Rep 284.
30 Ibid.
31 However, this would run contrary to the decision in The Antaios and a similar type of argument
failed in Aiden Shipping Co Ltd v Interbulk Ltd, The Vimeira (No 2) [1986] AC 965 at 981.
32 Maritime Transport Overseas GmbH v Unitramp Salen Rederierna, The Antaios [1981] 2
Lloyds Rep 284 at 299. This case was decided under the Arbitration Act 1950 but sections 61 and
63 of the 1996 Act do not give a wider jurisdiction over third parties in this respect (see below at
section 4).
33 CPR Part 25, rule 25.14.

34 See CPR, Part 48.2; Singh v The Observer Ltd [1989] 2 All ER 751; Symphony Group
plc v Hodgson [1993] 3 WLR 830; Tharros Shipping Co Ltd v Bias Shipping Ltd [1995] 1 Lloyds
Rep 541; Nordstern Allgemeine Vericherungs AG vInternav Ltd [1999] 2 Lloyds Rep 139.
35 E.g. Coppee Lavalin NV (SA) v Ken-Ren Chemicals and Fertilizers Ltd [1995] 1 AC 38; [1994]
2 Lloyds Rep 109. Under the 1996 Act power to make orders for security for costs lies with the
tribunal (see Chapter 17).
36 Aiden Shipping Co Ltd v Interbulk Ltd [1986] AC 965; [1986] 2 Lloyds Rep 117.
37 1996 Act, section 1(c), as regards the courts reluctance to intervene except as expressly
provided; see Walker v Rowe [2000] 1 Lloyds Rep 116 on awarding interest on an award of costs.
38 CPR Part 48.7.
39 Ridehalgh v Horsefield [1994] 1 WLR 462.
40 See Bowstead & Reynolds on Agency, 18th edn.
41 See Treitel on the Law of Contract, 12th edn, Chapter 15.
42 Socony Mobil Oil Co Inc v West of England Shipowners Mutual Insurance Association
(London) Ltd, The Padre Island (No 2) [1990] 2 Lloyds Rep 191 at 200.
43 Montedipe SpA v JTP-TO Jugotanker, The Jordan Nicolov [1990] 2 Lloyds Rep 11.
44 Rumput (Panama) SA v Islamic Republic Shipping Lines, The Leage [1984] 1 Lloyds Rep 259
(decided under the Arbitration Act 1975). An assignee would similarly be treated as a party to the
arbitration agreement for the purpose of a stay application under the 1996 Act on grounds that he
is claiming under or through a party to the agreement within the meaning of section 82(2) of
that Act.
45 Schiffahrtsgesellschaft Detlev Von Appen GmbH v Voest Alpine Intertrading GmbH, The Jay
Bola [1997] 2 Lloyds Rep 279; Charterers Mutual Assurance Association Limited v British &
Foreign, 15 September 1997 (Diamond QC) 1998 Int L Proc 838. Here, the third party sued the
insurers in the French courts in reliance on French law allowing a third party to bring an action
directe. See also Charterers Mutual v ATICAM, 4 August 1998 (Clarke J) unreported.
46 [1997] 2 Lloyds Rep 279.
47 Starlight Shipping v Tai Ping Insurance Co Ltd Hubei Branch [2007] EWHC 1893 (Comm);
[2008] 1 Lloyds Rep 230; West Tankers Inc v Ras Riunione Adriatica di Sicurta, The Front
Comor [2005] EWHC 454 (Comm) [2005] 2 Lloyds Rep 257; Navigation Maritime
Bulgare v Rustal Trading Ltd, The Ivan Zagubanski [2002] 1 Lloyds Rep 106.
48 Where there has been an equitable assignment the usual (but not essential) practice is for the
assignee to join the assignor as a party to proceedings and the same principles would apply in
arbitration, see Sim Swee Joo Shipping vShirlstar Container Transport (Mance J) [1994] LMLN
374. If there has been a statutory assignment the assignee can sue in his own name.
49 1996 Act, section 73.

50 Montedipe SpA v JTP-TO Jugotanker [1990] 2 Lloyds Rep 11.

51 [1992] 1 Lloyds Rep 134.
52 [2000] 1 All ER Comm 964.
53 [2006] 2 Lloyds Rep 370; [2006] EWHC 448 (Comm).
54 Montedipe SpA v JTP-TO Jugotanker, The Jordan Nicolov [1990] 2 Lloyds Rep 11 at 19.
55 Baytur SA v Finagro Holding SA [1992] 1 Lloyds Rep 134 at 151; see also Charles M.Willie
& Co (Shipping) Ltd v Ocean Laser Shipping Ltd, The Smaro [1999] 1 Lloyds Rep 225 at 243.
56 [1992] 1 Lloyds Rep 134 at 151.
57 Socony Mobil Oil Co Inc v West of England Shipowners Mutual Insurance Association
(London) Ltd, The Padre Island [1984] 2 Lloyds Rep 408.
58 London Steamship Owners Mutual Insurance Association v Bombay Trading [1990] 2 Lloyds
Rep 21.
59 Montedipe SpA v JTP-RO Jugotanker [1990] 1 Lloyds Rep 11. See also doubts raised by Rix J
in Charles M. Willie & Co (Shipping) Ltd v Ocean Laser Shipping Ltd, The Smaro [1999] 1
Lloyds Rep 225 at 242.
60 [2006] EWCH 448 (Comm); [2006] 2 Lloyds Rep 370.
61 See, e.g., New Zealand Shipping Co Ltd v A.M. Satterthwaite & Co Ltd, The
Eurymedon [1975] AC 154; [1974] 1 Lloyds Rep 534; for use of the doctrine of bailment on
terms in the context of reliance on a jurisdiction clause see K.H. Enterprise v Pioneer
Container, The Pioneer Container [1994] 2 AC 324 at 340; [1994] 2 Lloyds Rep 593 and The
Mahkutai [1996] AC 650; [1996] 2 Lloyds Rep 1.
62 The definition of contract of carriage by sea is made by reference to its definition in the
Carriage of Goods by Sea Act 1992.
63 Contracts (Rights of Third Parties) Act 1999, section 6(5).
64 Privity of Contract: Contracts for the Benefit of Third Parties: Law Com No 242, paragraph
14.14.
65 Article 6(1) of the European Convention for the protection of Human Rights and Fundamental
Freedoms, now given domestic effect in the UK by the Human Rights Act 1998.
66 Law Commission Report, paragraph 14.15.
67 Explanatory Notes to Contracts (Rights of Third Parties) Act 1999, paragraph 34. For the
courts approach to assignment see section 6 above (e.g., Schiffahrtsgesellschaft Detlev Von
Appen GmbH v Voest Alpine Intertrading GmbH,The Jay Bola [1997] 2 Lloyds Rep 279 at 285286); Charterers Mutual Assurance Association Limited v British & Foreign (15 September
1997). (Judge Diamond QC) [1998] 1 L Pr 838, Montedipe SpA v JTP-RO Jugotanker, The
Jordan Nicolov [1990] 1 Lloyds Rep 11 at 15.

68 Section 1 sets out in detail the scope of third-party rights, section 1(1) provides that: Subject
to the provisions of this Act, a person who is not a party to a contract (a third party) may in his
own right enforce a term of the contract if(a) the contract expressly provides that he may, or (b)
subject to subsection (2) the term purports to confer a benefit on him.
69 [2003] EWHC 2602; [2004] 1 Lloyds Rep 38, applied in London Arbitration 7/2006 [2006]
LMLN 688.
70 [2003] EWHC 2602; [2004] 1 Lloyds Rep 38.
71 See also, When can a Third Party Enforce an Arbitration Clause?, Ambrose [2001] JBL 415
at 421-424.
72 Section 1 of the 1999 Act confers rights on a third party to enforce a term of the contract and
it cannot have been intended that such enforcement would necessarily entail litigation. Such a
narrow construction would also be contrary to the wider purpose of section 8(1) which was to bind
the third party to arbitrate if he takes the benefit of the contract.
73 1996 Act, section 17.
74 Ibid., section 15(3).
75 See Nisshin Shipping Co Ltd v Cleaves & Company Ltd [2003] EWHC 2602; [2004] 1 Lloyds
Rep 38 on the application of section 8(1), although no issue arose as to appointment procedures in
that case. Case law on incorporation of charterparty arbitration clauses into bills of lading may
assist by analogy in determining the extent to which the courts may manipulate the appointment
provisions in an arbitration clause, e.g., Siboti K/S v BP France SA [2003] EWHC 1278 (Comm);
[2003] 2 Lloyds Rep 364). Appointments in three party cases may also raise issues of equal
treatment (see Siemens AG/BKMI Industrienlagen GmbH v Dutco Construction Company XVIII
YBCA 140 (1993)).
76 Ibid., section 35.
77 See above under section 3. It is unlikely that one of the parties could insist that the third partys
claim should be referred to a different tribunal, see Charles M. Willie & Co (Shipping)
Ltd v Ocean Laser Shipping Ltd [1999] Lloyds Rep 225 at 242-243.
78 Merkin, Arbitration Law, paragraph 15.28.
79 Charles M. Willie & Co (Shipping) Ltd v Ocean Laser Shipping Ltd [1999] Lloyds Rep 225 at
243.
80 Explanatory Notes to Contracts (Rights of Third Parties) Act 1999, paragraph 35.
81 Nisshin Shipping Company v Cleaves & Co [2003] EWHC 2602; [2004] 1 Lloyds Rep 38.
82 The interrelationship between confidentiality, and the use of material from an arbitration in
other proceedings involving a third party is considered elsewhere at Chapter 13. Similarly, the
costs implications in relation to third parties have been considered earlier in this chapter.
83 Sun Life Assurance Co v Lincoln National Life Insurance Co [2004] EWCA Civ 1660; [2005]
1 Lloyds Rep 606.

84 [2004] EWCA Civ 1660; [2005] 1 Lloyds Rep 606.

85 [2007] EWHC 2372 (Comm); [2008] 1 Lloyds Rep 450.
86 [2007] EWHC 2372 (Comm); [2008] 1 Lloyds Rep 450.
87 Turner v Swainson (1836) 1 M & W 572.
88 Arbitration Law, paragraph 17.17e.
89 For a Commonwealth (New Zealand) case discussing this principle see Methanex
Motonui v Spellman [2004] 1 NZLR 95.
90 Ali Shipping Corporation v Shipyard Trogir [1998] 1 Lloyds Rep 643, see Chapter 13 on
Confidentiality.
91 E.g. Stargas SpA v Petredec Ltd, The Sargasso [1994] 2 Lloyds Rep 412.

Chapter 16

Preliminary Issues
Preliminary Issues

1. Introduction
2. The arbitrators determination of preliminary issues
3. The courts determination of preliminary issues of law

1. INTRODUCTION
The resolution of a dispute referred to arbitration often depends, at least in part, on the
determination of a question of law which can be isolated from factual issues (e.g., the proper
application of a time-bar or the meaning of a contract term). Questions of fact which are
commercially determinative of a dispute (or parts of a claim) may also be separated from other
issues. Deciding these issues at the outset or in separate stages may avoid the need for a much
more costly and time-consuming investigation of the evidence. These sorts of question are often
referred to as preliminary issues. Preliminary issues can be of tactical significance since they
offer an opportunity to make or break a case at an early stage. As a result, the question of
whether the issue raised should be isolated and decided separately may give rise to considerable
disagreement. A preliminary issue may be dealt with in several ways:

(i) the arbitrator may decide it in an award;

(ii) a question of law may be referred to court1 under section 45 of the 1996 Act;
(iii) a question of law may be raised by way of appeal to the court from an award under
section 69 of the 1996 Act;
(iv) the tribunal or the court may rule on it as a jurisdictional issue.

Disputes as to an arbitrators jurisdiction often raise questions of law and fact which should
normally be decided before the arbitrator proceeds to an award on the merits. Otherwise there is a
risk of wasting time and expense on an award which is open to challenge for want of jurisdiction.
It is also common for both jurisdiction and liability to be disputed on the ground that there was no
binding contract or agreement to arbitrate. This sort of issue may be suitable for a preliminary
issue and when an arbitrator is confronted by this situation he must consider how he should
comply with his duty to resolve the parties dispute fairly and efficiently.2 The jurisdictional issue
will usually be decided by the tribunal under section 30 of the 1996 Act. That ruling may then be
challenged in court under section 67. Alternatively, the issue may be decided at first instance by
the court under section 32 of the 1996 Act. Means of resolving preliminary points of jurisdiction
are discussed in more detail in Chapter 6.

2. THE ARBITRATORS DETERMINATION OF PRELIMINARY ISSUES

Section 47 of the 1996 Act expressly empowers the tribunal to determine preliminary issues. It
provides that:

(1) Unless otherwise agreed by the parties, the tribunal may make more than one award at
different times on different aspects of the matter to be determined.
(2) The tribunal may, in particular, make an award relating
o (a) to an issue affecting the whole claim, or
o (b) to a part only of the claim or cross-claims submitted to it for decision.
(3) If the tribunal does so, it shall specify in its award the issue, or the claim or part of a
claim, which is the subject matter of the award.

This provision is also considered in Chapter 19. It gives the tribunal a very wide discretion as to
whether to determine different issues separately. This power is a counterpart to the tribunals duty
under section 33 to adopt procedures suitable to the circumstances of the particular case avoiding
unnecessary delay or expense. An arbitrator would be acting properly in proposing that an issue
be determined as a preliminary issue. However, he should give the parties an opportunity to make
submissions on such a proposal. The main factor in deciding whether to decide a question
separately from other issues is whether this will save time and costs without jeopardising the
parties right to a fair resolution of the dispute with a reasonable opportunity to put their
respective cases.3 The merits of the preliminary issue may be relevant in this context if its
determination will only save time if decided in favour of one party. The tribunal is not bound to
follow the approach that would be adopted in court proceedings.4 The DAC referred to the
particular ability of an arbitral tribunal (as opposed to a court) to tailor the procedure of the
arbitration to the circumstances of the dispute, thus enabling it to adopt novel ways of dealing with
disputes.5
The approach taken by the courts does, however, provide a useful guide to the appropriate factors
to be taken into account in deciding whether to determine a preliminary issue. In proposing
section 47, the DAC referred to the advantages of the case management role of the court in
selecting issues for early determination where they may be commercially determinative of the
dispute. The Civil Procedure Rules impose a duty of active case management upon a court. The
court is required to identify the issues in a case at an early stage, and is empowered to direct a

separate trial of any issue.6 The courts powers of case management should be exercised for
furthering the overriding objective of dealing with a case justly and the parties are required to
help the court in furthering this objective.7 Dealing with a case justly includes ensuring that the
parties are on an equal footing, saving expense, dealing with the case proportionately,
expeditiously and fairly, and allotting a proportionate share of the courts resources to the case.
Save for the last factor, these principles are very similar to the duty of an arbitrator under section
33 of the 1996 Act to act fairly and to adopt procedures suitable to the case to avoid unnecessary
delay and expense. They are also consistent with the parties duty to do all things necessary for the
proper and expeditious conduct of the arbitration.8
This climate of active case management favours the use of preliminary issues. However, there is
still weight in Lord Scarmans warning that orders for the determination of preliminary issues are
too often treacherous short cuts, their price can be delay, anxiety and expense.9 Similarly,
caution is urged in making decisions to try preliminary issues on assumed facts, as this may prove
to be a false economy.10
Most cases will turn on their particular circumstances but the previous case law gives some useful
guidance. A preliminary issue may be regarded as useful even if it would only be decisive if
decided in one way.11 The arbitrator may also be justified in refusing to rule on hypothetical
scenarios where the outcome of the evidence is uncertain.12 As already stated, consideration must
be given to whether the use of assumed facts is actually counter-productive.13 The most common
reason for refusing to order the determination of a preliminary issue is where it is inextricably
bound up with other extensive factual disputes.14 Indeed, the Court of Appeal has specifically
expressed concern about the trial of preliminary issues relating to points of mixed fact and law.
In Dudarec v Andrews, Lord Justice Waller, having quoted Tilling v Whiteman, stated:
what is true of points of law is even more true of points of mixed law and fact. It can of course
sometimes be beneficial to try an issue where there is a clear demarcation between it and other
issues; that can often be the case in respect of liability being tried separately from damages. To try
one issue relating to the quantification of damage, particularly where the quantification relates to
the loss of a chance, must stand a very grave risk of being a long way round.15

Procedure
If one or both parties (or the tribunal) propose the hearing of a preliminary issue, the normal
course is for each party to put forward its respective views and if agreement cannot be reached,
then an application is made in writing to the tribunal. The tribunal will then decide if the question
should be decided as a preliminary issue and on what terms. The tribunal has a wide discretion in
deciding the proper procedure to be adopted. Whether or not an oral hearing or a comprehensive
investigation of the evidence is appropriate depends on the circumstances and the tribunal must
comply with its duty to decide disputes fairly and efficiently.16 If the tribunal agrees to decide a
preliminary issue, the parties (or the tribunal) will usually fix a timetable for written submissions
and an oral hearing if necessary. The parties will often compile an agreed statement of facts or file
statement evidence upon which the tribunal will rule on the preliminary issue. The tribunal may
even decide the issue on basis of certain assumptions, for example that certain allegations are
proved. The costs of deciding whether to have a preliminary issue and the determination of it, are

in the tribunals discretion. The successful party in the preliminary issue will usually recover its
costs in any event, but costs are in the tribunals discretion. It may order that the costs follow the
outcome of the arbitration or reserve costs until further disputes in the arbitration have been
decided.

3. THE COURTS DETERMINATION OF PRELIMINARY ISSUES OF LAW

Determination under section 45 of the 1996 Act

The courts power to decide preliminary issues is limited to questions of law except as regards
jurisdictional issues (considered in Chapter 6). By choosing to arbitrate, the parties want the
dispute to be decided by the arbitral tribunal, not the court. English law gives the court the power
to decide questions of law in limited circumstances set out in sections 45 (determination of
preliminary points of law), 67 in relation to jurisdictional issues and 69 (appeal for error of law).
The DAC considered that the courts jurisdiction to decide preliminary points of law served a
useful purpose, for example where a question of law arises which may affect a large number of
arbitrations (typically, where a major event has occurred such as the closure of the Suez
Canal).17 However, it is clear that the parties can contract out of the courts powers under section
45 and are treated as having done so where they have agreed to dispense with the reasons for the
tribunals award.18 Paragraph 22(b) of the LMAA Terms provides that the parties may agree to
dispense with reasons in which case notice shall be given to the tribunal before the award is
made. Accordingly, the courts jurisdiction is available under LMAA Terms unless the parties
have agreed to dispense with reasons. Section 45 provides that:

(1) Unless otherwise agreed by the parties, the court may, on the application of a party to
arbitral proceedings (upon notice to the other parties), determine a question of law arising in
the proceedings which the court is satisfied will substantially affect the rights of one or more
of the parties.
(2) An application under this section shall not be considered unless
o (a) it is made with the agreement of all the other parties to the proceedings, or
o (b) it is made with the permission of the tribunal and the court is satisfied
(i) that the determination of the question is likely to produce substantial savings in
costs to the parties, and
(ii) that the application was made without delay.
(3) The application shall identify the question of law to be determined and, unless made with
the consent of all the other parties to the proceedings, shall state the grounds on which it is
said that the question should be decided by the court.
(4) Unless otherwise agreed by the parties, the arbitral tribunal may continue the arbitral
proceedings and make an award while an application to the court under this section is
pending.
(5) Unless the court gives leave, no appeal lies from a decision of the court whether the
conditions specified in subsection (2) are met.

This provision is based on section 2 of the Arbitration Act 1979 with some changes. (Its wording
also follows that of section 32 of the 1996 Act discussed in Chapter 6.19) Section 45 is fairly self-

explanatory. It sets out a number of requirements to be satisfied, but even if those matters are
established the court retains the discretion whether or not to determine the question raised.
It is a requirement that the application raises a question of law, defined in section 82(1) as a
question of the law of England and Wales. The question must arise in the course of the
proceedings and substantially affect the rights of one or more of the parties. A decision as to
whether the rights of a party are substantially affected does not necessarily require a detailed
quantification of how much money is at stake depending on the answer to the preliminary question
asked.20 These requirements follow similar requirements in section 69.21 The application must be
made either with the consent of all the parties to the arbitration in writing, or the tribunal.22 If the
application is made with the consent of the tribunal, but not all the parties, then two further
requirements under section 45(2)(b) must be met (i.e., saving of costs and no delay). The main
issue is whether the determination of the question is likely to produce substantial savings in
costs. This is stricter than the requirement under the 1979 Act that the determination might
produce a saving in costs: accordingly, case law on this provision may be of limited
relevance.23 Whether this requirement is satisfied will depend on the circumstances of the parties
dispute. Evidence of the arbitrators views on the saving of costs may assist the court. Saving
costs in the arbitration in question will be the primary consideration but the potential saving of
costs in other arbitrations raising similar questions may also be a relevant factor.24 The further
requirement to be satisfied is that the application was made without delay.25 Delay will probably
be measured from when the question of law could first reasonably be identified. The courts will
certainly rely on this provision where an application is made as a delaying tactic. However, delay
which can be justified is unlikely to prevent the court determining the issue if this will make a
substantial saving in costs.
If the requirements set out in section 45 are satisfied, the court will usually allow the question of
law to be determined in court but it retains an overall discretion on whether to decide the
preliminary point of law. This discretion will be exercised broadly in accordance with the
principles it would apply in deciding whether to allow a trial of a preliminary issue of law in civil
proceedings (see section 2 above). The court may be more cautious in intervening to decide an
issue arising in an arbitration because it will also take into account the principle underlying the
1996 Act that the object of arbitration is determination of the parties disputes by the arbitral
tribunal rather than the court.26 Even if all threshold criteria of section 45 are met, the court retains
a discretion as to whether to consider the preliminary issue.27 The court will, however, be more
willing to intervene where all the parties have consented to the determination of a preliminary
point of law.28 Court in the context of section 45(5) means the trial judge, and not the Court of
Appeal.29

Procedure on making an application under section 45

An application under section 45 is to be made on an arbitration claim form which must identify
the question of law to be determined. The application (or arbitration claim under the
terminology of the new court rules) will usually be made in the Commercial Court.30 Where the
arbitration claim is made with the consent of the tribunal, but not that of all the parties, the
claimant should serve its claim form and supporting evidence on all the parties to the arbitration
and they should be made parties to the claim.31 The arbitration claim form must set out the

grounds relied upon in stating that the question should be decided by the court.32 The claimant
must also serve a witness statement (or affidavit) setting out evidence of the tribunals permission
and any evidence relied upon in support of their contention that the court should consider the
claim. If the claim is made with the agreement of all the parties then the witness statement should
give evidence of that agreement, and if there is any doubt as to the desirability of the claim it
should set out any grounds and evidence relied upon in contending that the court should decide the
issue.
The claim is considered in two stages. First, the court will decide whether it should determine the
proposed question. This will be decided without an oral hearing, unless the court otherwise
directs. (This would be unusual but might happen, for instance, if the matter was before the court
in any event or the statement evidence raised issues of credibility.)33 If the court decides that a
preliminary issue is appropriate an oral hearing will be fixed to determine it. The court will
usually fix the hearing as a matter of priority to avoid delay in the arbitration. Section 45(4)
expressly allows the tribunal to continue the proceedings while an application is pending. Progress
in the proceedings will probably only continue for issues that are independent from the
preliminary issue. The parties may be given a short time to compile an agreed statement of facts or
file witness evidence providing the factual background upon which the court will decide the
preliminary issue. This should already be clear at the first stage of the application.
The courts ruling on the preliminary issue will usually be contained in a declaratory judgment
which the arbitrators should take into account when making their award.34 However, the judgment
will probably not create an issue estoppel because its application may depend on the facts.35 Leave
to appeal against an award made on the basis of the declaratory judgment would be possible in
theory but unlikely in practice as it would be extremely difficult to persuade the court that the
tribunal was wrong. The parties right of appeal to the Court of Appeal from the courts ruling
under section 45 is restricted by the same limitations contained in the regime governing appeals
from arbitration awards under section 69 (see Chapter 22).

Costs
The costs of an application under section 45 are within the courts discretion. The normal rule is
that costs follow the event. The determination of the preliminary issue may not clearly identify the
successful party and the court will often order that the costs of the claim should be treated as costs
of the arbitration. The arbitrator can then award them to the successful party in the arbitration.
However, in any event the court is likely to make a summary assessment of the amount of
recoverable costs of the application.

Appeal on a question of law under section 69 of the 1996

Act
This procedure is explained in full in Chapter 22. It is not subject to the same requirements as
section 45, for instance it does not require the consent of all parties or the consent of the tribunal.
However, it can only be invoked when the tribunal has made an award deciding the issue in
question, and is subject to the requirements of section 69. It may be more time-consuming and
costly than a claim under section 45 as the courts ruling can only be obtained after the arbitrator

has formed a reasoned decision in an award and, in the absence of consent, permission to appeal
has been granted.
1 Under section 105 of the 1996 Act, court is defined to mean the High Court or the county
court. In the High Court the Commercial Court has primary responsibility for arbitration claims,
see the Commercial Court Guide and paragraph 2.3 of the Arbitration Practice Direction. The
county court would ordinarily be the Mercantile List in Central London County Court, see High
Court and County Courts (Allocation of Arbitration Proceedings) Order SI 1996/3215.
2 AOOT Kalmneft v Glencore International AG, [2002] 1 Lloyds Rep 128.
3 1996 Act, sections 1(a) and 33(1)(b).
4 Paragraph 153 of the DAC Report.
5 Paragraphs 153 and 229 of the DAC Report.
6 CPR Parts 1.4 and 3.1(2), in particular 3.1(2) (e), (i), (j), (k) and (l).
7 CPR Part 1.1. and 1.2.
8 1996 Act, section 40.
9 Tilling v Whiteman [1980] AC 1 at 25. See also, Steel v Steel, 30 April 2001 (Neuberger
J); Dudarec v Andrews [2006] EWCA Civ 256; [2006] 1 WLR 3002 at paragraph 15.
10 London Borough of Southwark v OSullivan [2006] EWCA Civ 124.
11 Everett v Ribbands [1952] 2 QB 198 at 206.
12 Sumner v William Henderson & Sons Ltd [1963] 2 All ER 712.
13 London Borough of Southwark v OSullivan [2006] EWCA Civ 124.
14 Worsley v Tambrands Ltd, The Times, 11 February 2000.
15 London Borough of Southwark v OSullivan [2006] EWCA Civ
124; Dudarec v Andrews [2006] EWCA 256; [2006] 1 WLR 3002 at paragraph 15.
16 AOOT Kalmneft v Glencore International AG [2002] 1 Lloyds Rep 128.
17 Paragraph 218 of the DAC Report.
18 Section 45(1) of the 1996 Act.
19 In ABB Lummus Global Ltd v Keppel Fels Ltd [1999] 2 Lloyds Rep 24 Clarke J treated the
two provisions as materially similar.
20 Taylor Woodrow Holdings v Barnes and Elliott [2006] EWHC 1693 (TCC); [2006] 2 All ER
(Comm) 735 at paragraph 54. In that instance, it was considered sufficient that more than half of
one sides pleaded claim turned on the answer to the question asked.
21 For further discussion of these requirements, see Chapter 22 on challenging awards.

22 This would require the consent of the majority of the tribunal, it would not be enough for any
one arbitrator in a tribunal of two or more arbitrators to consent. This is to be contrasted with the
requirement that an arbitrator consent under section 2 of the Arbitration Act 1979.
23 E.g., The Vasso [1983] 2 Lloyds Rep 346 under which this requirement was not strictly
applied.
24 Paragraph 218 of the DAC Report.
25 1996 Act, sections 45(2)(b)(ii) and 40(2)(b).
26 1996 Act, section 1(a).
27 Taylor Woodrow Holdings v Barnes and Elliott [2006] EWHC 1693 (TCC); [2006] 2 All ER
(Comm) 735.
28 This is apparent from the fact that under section 45(3) the parties in such circumstances are not
required to set out the grounds for contending that the question should be decided by the court.
29 By analogy with section 69, see Henry Boot Construction (UK) Ltd v Malmaison Hotel
(Manchester) Ltd [2001] 1 QB 388; Virdee v Virdi [2003] EWCA Civ 41.
30 See fn 1 at the start of this chapter.
31 CPR Part 62, rule 62.6(3).
32 1996 Act section 45(3).
33 Arbitration Practice Direction, paragraph 10.1.
34 Fidelitas Shipping Co Ltd v V/O Exportchleb [1966] 1 QB 630 at 645; applied in Associated
Electric and Gas Insurance Services Ltd v European Reinsurance Company of Zurich [2003]
UKPC 11; [2003] 1 All ER (Comm) 253.
35 Ibid., Babanaft International Co SA v Avant Petroleum, The Oltenia [1982] 2 Lloyds Rep 99
at 107.

Chapter 17

Security for Costs

Security for Costs

1. Introduction
2. Arbitrators powers to grant security for costs
3. Discretion on security for costs
4. The courts power to grant security for costs of court applications
5. Practice in applications for security for costs
6. Form and amount of security for costs
7. Challenging an order for security for costs
8. Consequences of failing to give security

1. INTRODUCTION
In London arbitrations the successful party is generally awarded its costs. An order that one party
must provide security for costs (normally in the form of a bank guarantee or P&I Club letter of
undertaking) may be granted during the reference to ensure that a successful respondent (or
claimant who has successfully defended a counterclaim) will be able to enforce an award of costs
with ease. Such an order is typically given to ensure that an insolvent or brass-plate company with
no assets within the English jurisdiction is not allowed to pursue a claim in arbitration and yet, if
unsuccessful, escape responsibility for the respondents costs. An order for security for costs not
only protects the respondent but may also be an important tactical weapon, as it can bring an
arbitration to a halt where a claimant lacks the funds or other financial support needed to put up
the security ordered. If a peremptory order for security for costs is not complied with then the
claim may be dismissed.1

2. ARBITRATORS POWERS TO GRANT SECURITY FOR COSTS

Section 38(3) of the 1996 Act empowers the tribunal to order a claimant to provide security for
the costs of the arbitration. This power will lie with the tribunal unless the parties agree otherwise
and the LMAA Terms expressly confirm the existence of such power.2 The claimant is defined
to include a counter-claimant3 and the costs of the arbitration include legal or other costs, the
arbitrators fees and the expenses of any arbitral institution.4
Section 38(3) introduced a major change in the law by empowering the arbitral tribunal to award
security for costs. Under the previous law the tribunal only had such power where the parties
agreed to it. In the absence of such agreement, applications were made to court under section
12(6) of the Arbitration Act 1950. Under the law in force since the 1996 Act, the courts power to
order security for the costs of an arbitration has been removed as the DAC considered that the
issue of whether a claimant in an arbitration should provide security for costs should lie with the
arbitral tribunal chosen by the parties to resolve their dispute, not the court.5 The court may,
however, make orders for security for the costs of court applications relating to an arbitration, for
example for applications for permission to appeal (see section 4 below).
It is clear that arbitrators may make orders for security for their own fees and expenses, which are
regarded as part of the costs of arbitration.6 This power is needed because, even if successful, a
respondent will remain liable for the arbitrators fees as a matter of statute (under section 28(1) of
the 1996 Act or by reason of an agreement with the tribunal). Accordingly, a respondent is
exposed to a risk of having to pay the tribunals costs if pursued by an unsuccessful claimant with
no available funds. The tribunal may exercise its powers to grant security for costs of its own
volition. This is most likely to occur where security for the tribunals own fees is uncertain. If the
tribunal proposes making an order for security for costs it must ensure that it gives both parties a
fair opportunity to put their case on the issue. Schedule 1(E) of the LMAA Terms (2006) makes
express provision for security for the tribunals fees (see Chapter 21 for further discussion).

3. DISCRETION ON SECURITY FOR COSTS

Section 38 confers a very wide discretion on arbitrators in making orders for security. Arbitrators
must, however, act in accordance with their duty to act fairly under section 33. This provision is

primarily intended to ensure fairness in procedure but the scope of the duty is discussed in more
detail in section 7 below.
In court proceedings a judges discretion to make orders for security for costs is guided by wellestablished principles as developed in the Civil Procedure Rules. An earlier draft of section 38 had
provided that the arbitrators powers would be exercised on the same principles as the
court.7 However, this provision was removed because it was not user-friendly, in particular for
foreign users or lay arbitrators who might have difficulty in locating or understanding the relevant
law. Accordingly, it is clear that the tribunals discretion need not be exercised in the same way as
that of the court. In practice, however, it is likely that parties and arbitrators will have recourse to
the principles used in court in relation to security for costs because they are of general application,
based on justice and the underlying rationale for security for costs.
The main restriction on arbitrators power to make order for security for costs is that it
shall not be exercised on the ground that the claimant is

(a) an individual ordinarily resident outside the United Kingdom; or

(b) a corporation or association incorporated or formed outside the United Kingdom, or
whose central management and control is exercised outside the United Kingdom.8

This restriction was imposed because it was thought to be damaging to the UKs position as the
leading centre for international arbitration for foreigners to be singled out for special
treatment.9 This restriction means that the place of residence or central management of a claimant
may not be taken into account as a factor in deciding an application for security for costs.10 The
tribunal would, however, be entitled to take it into account if there would be substantial difficulty
in enforcing an award for costs against the claimant.11
The purpose of an order for security for costs is to ensure that if a respondent defeats the claim
brought against him he will have funds available within the jurisdiction against which he can
enforce an award of costs. The courts have repeatedly stated that security for costs must be
granted on a case-by-case basis; individual circumstances must be taken into account in deciding
whether it would be fair to order security. The matters likely to be relevant to the exercise of
discretion may usefully be considered under the following headings.

Difficulty of enforcement of an award of costs

The availability of assets against which an award of costs can readily be enforced by the applicant
will usually be the primary consideration in deciding whether an order for security for costs
should be made. In Azov Shipping Co vBaltic Shipping Co,12 Longmore J stated that cases will be
rare in which a court or indeed an arbitrator would think it right to order security for costs if an
applicant for relief has sufficient assets to meet any order for costs and if those assets are available
for satisfaction of any such order for costs. The fact that the claimant has substantial assets within
the jurisdiction (something more permanent than a bank account will usually be necessary) or that
a co-claimant13is resident in the jurisdiction are decisive factors weighing against the granting of
security. Evidence showing that the claimant has few assets (within or outside the jurisdiction) or

has taken steps in relation to his assets making it more difficult to enforce an order for costs is
relevant as it indicates that there is a real risk that a costs order will not be honoured.
The mere fact that the claimants assets are based in another jurisdiction is unlikely to justify
security for costs in the absence of very cogent evidence of substantial difficulty in enforcing
judgment in that jurisdiction.14 If a claimant has established assets abroad then international
conventions governing the enforcement of judgments and arbitration awards will be a relevant
factor in deciding if it would be just to order security for costs.
However, the fact that a claimant is not domiciled in a state covered by a relevant convention
would not in itself be a permissible ground for ordering security for costs.15
In Somerset-Leeke v Kay Trustees Ltd 16 a claimant in court proceedings was domiciled in
Monaco, outside both the EU and EFTA (and therefore not governed by the major conventions on
enforcement of judgments). However, there was evidence that the claimant had substantial assets
and also that English judgments were readily enforceable in Monaco. Therefore, it was
inappropriate to make an order for security for costs against him.
Even if a convention on enforcement of judgments or awards is applicable to the claimant,
arbitrators and judges will take account of the practical difficulties involved in invoking foreign
enforcement procedures.17
In Azov Shipping Co v Baltic Shipping Co,18 a jurisdictional dispute arose between two former
Soviet shipping companies. Baltic applied under section 70(6) of the 1996 Act for security for the
costs of an application to determine the jurisdictional issue under section 67. There had been a full
hearing before the arbitrator, who had concluded that Azov was a party to the arbitration
agreement. Longmore J considered that the fact that the arbitrator had decided against Azov was
relevant but much less important than the question of whether Azov had sufficient assets available
for the purposes of execution. Security for costs was ordered because although Azov had property
in the Ukraine there was real doubt as to whether a foreign costs order could be effectively
enforced there.
If there is evidence to suggest that the claimants want of means has been brought about by the
respondents conduct then this will weigh against an order for security for costs being made.19 The
availability of security for the amount claimed in a counterclaim is not generally to be regarded as
adequate protection for the costs of the claim.
In Flender Werft AG v Aegean Maritime Ltd 20 the respondents were German shipbuilders who
agreed to build two liners for the claimants, two Isle of Man companies. The respondents had
obtained injunctions preserving security for their counterclaim. Saville J held that further security
for the costs of the claim would be necessary to protect the respondents in the event that they were
successful in defending the claim and pursuing the counterclaim. He decided that it would be
fairer to make an order that each side should secure the costs of the other.

The nature of the arbitration

Security for costs is a common feature of most maritime arbitrations (unlike some international
commercial arbitrations whose only connection with England is the choice of London as a

convenient, neutral forum21). LMAA arbitrators will generally be willing to consider an

application for security for costs unless the parties have agreed to exclude their powers under
section 38(3) of the 1996 Act. The tribunal may be more reluctant to make orders for security for
costs in arbitrations on documents unless the dispute is complex or lawyers are involved as this
would be inconsistent with the purpose of such an arbitration, which is to minimise delay, expense
and complexity.22

Counterclaiming respondents
Security for costs may be ordered to be provided by a counter-claimant as well as a
claimant.23 The question of whether such an order should be made arises commonly in maritime
arbitrations, which often involve counterclaims. Orders for security for costs are not generally
granted against respondents because, as a matter of principle, a party should be allowed to defend
any claim unhampered by an obligation to give security.24 This means that if a counterclaim
constitutes a defence of set-off and nothing more, then normally the discretion should not be
exercised in favour of awarding security for costs against a counter-claiming respondent.
However, if a counterclaim amounts to a distinct and substantive claim which raises new issues
then it may be reasonable to grant security since the respondent is properly to be treated as the
claimant for the counterclaim. A simple method of testing whether a counterclaim is a mere
defence or a distinct claim is to assess whether the counterclaim will stand independently of the
claim.
In some cases, however, the claim and counterclaim arise out of the same facts and transaction but
it is nevertheless appropriate to treat the respondent as a claimant for the purpose of security for
costs. Typically, security for costs will be ordered where the respondent would have prosecuted
the counterclaim in any event and it was mere chance who first commenced the arbitration as
claimant.25 The fact that a respondent is mounting a counterclaim which arises out of the same
facts as the claim does not mean that the respondent only has to give security for the extra costs
which will be incurred solely by reason of the counterclaim.26
The Silver Fir 27 involved a charterparty dispute where the claim and counterclaim arose out of the
respondent charterers refusal to load a vessel. The same issues arose in the the claim and
counterclaim. The history of the arbitration was a decisive reason for the Court of Appeal to allow
security against both the claimants and the respondents: Both [parties] were spoiling for a fight
against the other. At the beginning it mattered not who started first it was mere chance that one
started the arbitration before the other could get in a claim. Lawton LJ considered that as a matter
of fairness both parties should be treated alike and given security for costs.
In Hitachi v Viafiel,28 a dispute arose out of a contract for building three ships. The builders sued
the buyers for wrongful repudiation and the buyers counterclaimed, on the ground, inter alia, that
the ships could not have been delivered in accordance with the contract. The Court of Appeal
distinguished the special circumstances of The Silver Fir, holding that the respondents were to be
treated as substantive defendants to the claim and that no order for security for costs should be
made against them.

If an order for security for costs is made against a respondent who is unable to comply with it, the
respondent can withdraw its counterclaim and simply defend the claim, thus avoiding the need to
give security for costs.

Merits of the claim (or counterclaim)

The arbitrator should avoid entering into a detailed examination of the merits as any decision
relating to security for costs is necessarily made before the evidence has been fully investigated.
The relative merits of the case are only relevant if there is clearly a high probability of success or
failure.29 An admission of liability or an open offer to settle made by the respondent may be relied
upon by the claimant as a factor against ordering security since the amount admitted or offered
may be treated as security for costs awarded if other parts of the claim are unsuccessful.30 The fact
that a sealed offer to settle the case has been made (see Chapter 20) may also be disclosed to the
arbitrator, although he should attempt to ensure that it does not influence him when considering
the merits of the case.31

Oppressive use of an application for security

The purpose of an order for security for costs is to protect the respondent, not to make it difficult
for a claimant to pursue an arbitration. Security for costs will not be granted if it sought only for
the purpose of stifling a bona fide claim. The mere fact that a claimant has no assets will not
necessarily mean that an order for security for costs will be treated as oppressive, as in the normal
case the claimant can use third party assets or a loan to satisfy the order.32 The party resisting an
order for security for costs on the ground that it would unfairly stifle the claim must produce
evidence to satisfy the tribunal that it is impossible to raise the necessary funds from associated
parties or by loan.33

Delay in making the application

An application for security for costs may be made at any stage in the arbitration. However, if
made at a late stage (e.g., just before a hearing) and if ordering security as a condition for
continuing with the reference would cause the claimant undue hardship (e.g., if the delay deprives
the claimant of a fair opportunity to obtain security), then this may weigh against granting
security.34

4. THE COURTS POWER TO GRANT SECURITY FOR COSTS OF COURT

APPLICATIONS
Section 70(6) of the 1996 Act provides that in respect of any application under sections 67, 68 and
69 (jurisdictional disputes, serious irregularity and appeals for error of law):
The court may order the applicant or appellant to provide security for the costs of the application
or appeal, and may direct that the application or appeal be dismissed if the order is not complied
with.
The power to order security for costs shall not be exercised on the ground that the applicant or
appellant is

(a) an individual ordinarily resident outside the United Kingdom, or

(b) a corporation or association incorporated or formed outside the United Kingdom, or
whose central management and control is exercised outside the United Kingdom.

Similar powers could be exercised in relation to applications under other sections of the 1996 Act,
for example for removal of the arbitrator. The court has a wide discretion in making an order for
security for costs. The relevant principles are set out in the Civil Procedure Rules but the most
common requirement for granting security for costs is showing that the claimant will be unable to
pay the defendants costs if ordered to do so.35 The availability of security for the costs of
challenging enforcement of a foreign award was considered in Gater Assets Ltd v NAK Naftogaz
Ukrainiy 36 and the decision has relevance to both foreign and domestic awards.
In Gater Assets Ltd v NAK Naftogaz Ukrainiy 37 the claimant had obtained an order under section
101 of the 1996 Act permitting it to enforce a Russian award. The defendant sought to set aside
that order on grounds, inter alia, that the award was procured by fraud. It also applied for security
for its costs in the enforcement proceedings. The majority of the Court of Appeal (Buxton LJ
dissenting) decided that no order for security for costs should be made. Rix LJ refused security for
costs on the grounds that security should only be awarded against an award creditor seeking
enforcement in an exceptional case. As a matter of discretion there were no exceptional factors
justifying the order. Rix LJ considered that the highly summary nature of an application to enforce
an award and the fact that an award debtor must make a positive challenge to an award under
sections 67-69 suggest that an award debtor challenging enforcement should be regarded as the
substantive claimant and would therefore not be entitled to security for costs. More decisively,
section 66 of the 1996 Act shows that an award debtor challenging enforcement of a domestic
award should be regarded as a claimant. Article III of the New York Convention requires that
enforcement of a foreign award be placed under no more onerous condition than that of domestic
awards. Accordingly, to require an award creditor to provide security for costs as a condition of
enforcing his award would run counter to that Convention. Rix LJ was prepared to assume that the
court did have jurisdiction to make an order against an award creditor although his preferred view
was that there was no jurisdiction in summary enforcement proceedings. Moses LJ decided the
case on the basis that the court had no jurisdiction to make an order for security for costs (largely
for the same reasons given by Rix LJ for refusing security as a matter of discretion). The different
rationales for the majority decision leaves some uncertainty as to the correct legal analysis.
However, at a practical level the decision means that a court is very likely to refuse to make an
order for security for the costs of challenging enforcement of a domestic or foreign award.

5. PRACTICE IN APPLICATIONS FOR SECURITY FOR COSTS

Agreeing security
As soon as costs begin to accrue it is normal for parties to correspond on what level of security for
costs, if any, would be appropriate. If this correspondence does not produce an agreement then it
may be necessary to apply to the tribunal for an order as to security for costs. A request for
security (with a reasonable time in which to respond and comply) should be made before making
an application to the tribunal so as to avoid incurring unnecessary costs.

Applications for security

The normal procedure under the LMAA Terms (2006) is set out in the Second Schedule and
provides that:
7. Applications for security for costs will not be considered until after service of defence
submissions (or points of defence, if formal pleadings have been permitted). Any application must
be accompanied by a justification for it and a breakdown of the costs which it is reasonably
anticipated will be incurred up to the stage of the reference for which security is sought. In the
light of paragraph E of the First Schedule it will not be appropriate for security for costs to include
any provision for the fees of a tribunal.38
Applications for security are commonly made in the form of a letter to the arbitrators, possibly
including a statement and supporting evidence (e.g., from a foreign lawyer as to difficulties of
enforcement). The arbitrators normally require a breakdown of the costs for which security is
sought. If complications arise, or if a directions hearing is being held in any event, it may be
appropriate to decide the matter at an oral hearing. The costs of the application for security are at
the tribunals discretion. They will generally be awarded to the successful party and the tribunal
may order that they be paid forthwith. The tribunal may also order the costs of the application to
be costs in the arbitration (i.e., recoverable by the party who is ultimately awarded their costs of
the arbitration). Such an order might be appropriate if both parties are ordered to provide security.
The practice in relation to applications to court for security for costs is governed by CPR, Part 25.
To safeguard the respondent against incurring the irrecoverable costs of a court application it is
usually necessary to fix the application for security in advance of the hearing of that application.

6. FORM AND AMOUNT OF SECURITY FOR COSTS

The parties will usually agree on a suitable form of security such as a solicitors letter of
undertaking, a P&I Club undertaking or a bank guarantee. Otherwise the arbitrator (or court) will
order the form of security to be provided. It is normal to order that security be provided within two
or three weeks of the application being granted. In cases where both parties are to provide security
it is usual to make the order conditional on the other party also giving security. Where the
respondent asserts a counterclaim, the order for security for costs usually expressly preserves the
right to pursue the counterclaim if the claim is dismissed in default of security.
The amount of security awarded is at the discretion of the tribunal (or court). Both parties should
provide a skeleton bill of costs as a guide to what would be appropriate. Where a tribunal orders
security for its own fees, it should not order each party to provide security for the full amount, as
that would result in the tribunal being over-secured.39 Security is not necessarily confined to future
costs and will usually be extended to cover costs already incurred. If an application is made at an
early stage in the proceedings a discount may be given to take into account the possibility that the
case may settle before hearing. It is often more appropriate for an arbitrator to make an order for
security for costs up to a certain stage of the arbitration (for example the completion of disclosure)
and to give leave to re-apply. In any application it is prudent to ask for leave to re-apply, since
costs often escalate.

7. CHALLENGING AN ORDER FOR SECURITY FOR COSTS

Any serious irregularity in the procedure of the application (e.g., not hearing one sides case)
would enable a party to apply for the arbitrator to be removed under section 24 of the 1996 Act if
there was evidence of substantial injustice. If an issue arose as to whether the tribunal had
jurisdiction to make an order for security for costs, then the matter could be raised under sections
30-32 of the 1996 Act (see Chapter 6). Jurisdictional challenge under section 67 would only be
available if the tribunal had made an award.40
Injustice or error in the content of a decision (e.g., deciding that the existence of substantial assets
within the jurisdiction was irrelevant) would be much more difficult to challenge. Arbitrators
usually make orders for security for costs in the form of a procedural order and such orders will
not generally be treated as an award.41 This means that challenge under sections 67 to 69 of the
1996 Act will not be available. However, an arbitrator has discretion as to whether he makes an
award and could chose to make an award on an application for security for costs, for example if an
important point of law was involved.42
Challenge to an award on the ground of serious irregularity would require clear evidence of
substantial injustice. Mere error of law or of fact would not in itself amount to a serious
irregularity and would not render a decision outside an arbitrators jurisdiction.43 It can be argued
that an arbitrators duty to act fairly includes exercising his discretion judicially in accordance
with principles of justice.44 This would require as a minimum standard that arbitrators act
rationally and not on irrelevant evidence. Only in exceptional cases would an arbitrators decision
be found to be beyond what a reasonable arbitrator could decide.45
Appeal for error of law under section 69 would only be possible, if, unusually, the arbitrators
decision on security for costs is contained in a reasoned award. Even if the decision is made in an
award, it would remain difficult to obtain permission to appeal as section 38(3) leaves security for
costs in the tribunals discretion and the courts would be very reluctant to interfere. Similarly, in
the case of a judges order, an appeal to the Court of Appeal would only be possible if it could be
shown that the judge misdirected himself in law or reached a conclusion outside the ambit of
reasonable disagreement.46
It may, exceptionally, be possible to remove an arbitrator pursuant to section 24 of the 1996 Act
where his conduct in relation to an application for security for costs amounts to a failure properly
to conduct the proceedings, within the meaning of subsection (1)(d).47

8. CONSEQUENCES OF FAILING TO GIVE SECURITY

Section 41 of the 1996 Act provides that:

(1) The parties are free to agree on the powers of the tribunal in case of a partys failure to
do something necessary for the proper and expeditious conduct of the arbitration.
(2) Unless otherwise agreed by the parties, the following provisions apply.
(5) If without showing sufficient cause a party fails to comply with any order or directions of
the tribunal, the tribunal may make a peremptory order to the same effect, prescribing such
time for compliance with it as the tribunal considers appropriate.
(6) If a claimant fails to comply with a peremptory order of the tribunal to provide security for
costs, the tribunal may make an award dismissing his claim.

Under the previous law the steps that could be taken by arbitrators if a party failed to provide
security were uncertain. It appeared that the tribunal could not stay the proceedings but could
make orders excluding evidence or adjourning the proceedings.48 Section 41(6) makes clear that
the tribunal can now dismiss the claim if the claimant fails to comply with a peremptory order to
provide security for costs. A peremptory order is generally understood to be final and absolute,
admitting no excuse for non-compliance.49 Section 41(5) implies that a peremptory order will be
made after a party has failed to comply with an order and will repeat the terms of the original
order, prescribing the time for compliance. It may be helpful expressly to identify the order as
peremptory and make clear the sanction for non-compliance. On the ordinary meaning of section
41(5) it is questionable whether a tribunal could, without making an initial order, proceed directly
to make a peremptory order for security for costs, non-compliance with which would result in
dismissal of the claim. However, the courts are unlikely to intervene if such an order was made, as
there would probably be no substantial injustice because the tribunal could usually remedy the
irregularity by making a further peremptory order. In any event, the potential inconvenience or
delay of applying for two orders can be avoided if the tribunal makes clear in its initial order that
if security is not given by a certain date it will proceed immediately to make a peremptory order
with a short time limit, breach of which will give rise to dismissal of the claim. Under the LMAA
Terms (2006) the sanction of staying the claim is available in addition to dismissal; paragraph
14(c) provides that:
If a party fails to comply with a peremptory order of the tribunal to provide security for costs,
then without prejudice to the powers granted by section 41(6) of the [1996] Act, the tribunal shall
have power to stay that partys claim or such part of it as the tribunal thinks fit in its sole
discretion.
Staying the claim might be appropriate if there were good reason for allowing the respondent a
more extended period to find means to provide security.
In London Arbitration 20/05 50 the claimant charterers incurred significant delay in pursuing their
claim. An order for security for costs was made against them by the tribunal. When they failed to
comply, the tribunal ordered that their claims be permanently stayed. The tribunal then permitted
(quite exceptionally) the claims to proceed on provision of agreed security, payment of costs on an
indemnity basis, and the instruction of new solicitors for the charterers. Subsequently, the matter
dragged on for some further years and the tribunal ultimately dismissed the charterers claims for
want of prosecution.
If a court makes an order for security for the costs of a court application it will usually order that
the application be stayed pending the provision of security, and dismissed if security is not
provided within the time given.51
1 1996 Act, section 41(6) discussed below.
2 LMAA Terms, paragraph 14.
3 1996 Act, section 82(1).
4 1996 Act, section 59(1), also the costs of determining costs, section 59(2).
5 Paragraphs 190-194 of the DAC Report.

6 1996 Act, section 59(1).

7 Paragraph 366 of the DAC Report.
8 1996 Act, section 38(3). A claimants residence outside the jurisdiction in circumstances where
a court order cannot be enforced under the Brussels I Regulation or the Brussels or Lugano
Conventions remains a ground for the courts jurisdiction to grant security for costs under Part 25.
9 Paragraph 366 of the DAC Report.
10 DAC Supplementary Report on the Arbitration Act, paragraph 28.
11 See, by analogy, Fitzgerald v Williams [1996] 2 All ER 171. CPR Part 25, rule 25.13 provides
that a condition for giving an order for security for costs is that the claimant has taken steps in
relation to his assets that would make it difficult to enforce an order for costs against him.
12 [1999] 2 Lloyds Rep 39 at 41.
13 Corfu Navigation Co v Mobil Shipping Co Ltd, The Alpha [1991] 2 Lloyds Rep 52.
14 Fitzgerald v Williams [1996] 2 All ER 171 at 182.
15 Nasser v United Bank of Kuwait [2001] EWCA Civ 556; [2002] 1 All ER 401.
16 [2003] EWHC 1243 (Ch).
17 Porzelack KG v Porzelack UK Ltd [1987] 1 WLR 420; the Brussels I Regulation on
enforcement of judgments does not apply to arbitration or the enforcement of arbitration awards as
judgmentssee paragraph 65(c) of the Schlosser Report.
18 [1999] 2 Lloyds Rep 39 at 41.
19 Sir Lindsay Parkinson & Co v Triplan [1973] QB 609 at 626.
20 [1990] 2 Lloyds Rep 27.
21 E.g. Coppee-Lavalin SA/ NV v Ken-Ren Chemicals and Fertilizers Ltd [1994] 2 Lloyds Rep
109 involving an ICC arbitration. The courts intervention to award of security for costs in this
case under the old law was much criticised, see paragraph 193 of the DAC Report. Cf. Article 25.2
of the LCIA Rules provides: The Arbitral Tribunal shall have the power, upon the application of
a party, to order any claiming or counterclaiming party to provide security for the legal or other
costs of any other party by way of deposit or bank guarantee or in any other manner and upon
such terms as the Arbitral Tribunal considers appropriate.
22 Mavani v Ralli Brothers Ltd [1973] 1 All ER 555.
23 1996 Act, section 82(1).
24 Hitachi Shipbuilding & Engineering Co Ltd v Viafiel Compania Naviera SA [1981] 1 Lloyds
Rep 498 at 502.
25 Petromin SA v Secnav Marine Ltd [1995] 1 Lloyds Rep 603 at 606.
26 Ibid., at 609.

27 Samuel J. Cohl Co v Eastern Mediterranean Maritime Ltd [1980] 1 Lloyds Rep 371.
28 Hitachi Shipbuilding & Engineering Co Ltd v Viafiel Compania Naviera SA [1981] 2 Lloyds
Rep 498.
29 Porzelack KG v Porzelack UK Ltd [1987] 1 WLR 420 at 423.
30 Sir Lindsay Parkinson & Co v Triplan [1973] QB 609.
31 Paragraphs 195-196 of the DAC Report. In court the problem does not arise as ordinarily a
different judge would consider the application for security for costs and the hearing of the merits.
Evidence of without prejudice negotiations should not be admitted without consent: Simaan
Contracting Co v Pilkington Glass Ltd [1987] 1 WLR 516.
32 Flender Werft v Aegean Maritime Ltd [1990] 2 Lloyds Rep 27.
33 Petromin SA v Secnav Marine Ltd [1995] 1 Lloyds Rep 603 at 608; Flender Werft
AG v Aegean Maritime Ltd [1990] 2 Lloyds Rep 27 at 29.
34 Jenred Properties Ltd v ENIT, Financial Times, 29 October 1985, CA; Cf. Artibell Shipping
Co Ltd v Markel International Insurance Co Ltd [2008] EWHC 811 (Comm); (2008) 743 LMLN
1. An application for security for costs by a defendant was initially dismissed. However, after the
claimants then failed to take any further steps in the action for two years, and did not fix a CMC
for a considerable period of time, the defendants renewed application for security for costs
succeeded. The primary responsibility for the severe delay lay with the claimants.
35 CPR, Part 25.13.
36 [2007] 2 Lloyds Rep 588; [2007] EWCA Civ 988.
37 Ibid
38 Paragraph E enables the tribunal to make orders for security for their own fees, discussed in
more detail in Chapter 20.
39 Wicketts v Brine Builders & Siederer [2001] CILL 1805.
40 Michael Wilson & Partners Limited v Emmot [2008] EWHC 2684 (Comm); [2009] 1 Lloyds
Rep 162.
41 E.g. Charles M Willie & Co (Shipping) Ltd v Ocean Laser Shipping Ltd, The Smaro [1999] 1
Lloyds Rep 225 and Michael Wilson & Partners Limited v Emmot [2008] EWHC 2684 (Comm);
[2009] 1 Lloyds Rep 162.
42 See Chapter 19 on awards and Exmar BV v National Iranian Tanker Co, The Trade
Fortitude [1992] 1 Lloyds Rep 169.
43 Weldon Plant Ltd v Commission for the New Towns [2000] BLR 496 at 505; see also under the
Arbitration Act 1950, K/S A/S Bill Biakh v Hyundai Corporation [1988] 1 Lloyds Rep 187.
44 Paragraph 366(iii) of the DAC Report; see also Aiden Shipping Co Ltd v Interbulk Ltd, The
Vimeira [1986] 2 Lloyds Rep 117 at 124 per Lord Goff commenting on the courts discretion to
make orders for costs under section 51 of the Supreme Court Act 1981.

45 See paragraph 280 of the DAC Report. The courts have also suggested that they could
exceptionally intervene in such circumstances, e.g. Weldon Plant Ltd v Commission for the New
Towns [2000] BLR 496 at 505;
46 K/S Bill Biakh v Hyundai Corporation [1988] 1 Lloyds Rep 187 at 189.
47 See White Book notes to CPR Part 52.11.
48 Wicketts v Brine Builders & Siederer [2001] CILL 1805. 48. E.g. paragraph 191 of the DAC
Report.
49 Section 82 of the 1996 Act rather unhelpfully defines a peremptory order as an order made
under section 41(5) or made in exercise of any corresponding power conferred by the parties.
50 (2005) 676 LMLN 3(2).
51 CPR, Rule 25.12; Azov Shipping Co v Baltic Shipping Co [1999] 2 Lloyds Rep 39, an order to
stay the application if security is not given within time would be rare given the courts concern to
prevent any delay in resolving disputes referred to arbitration.

Chapter 18

Security for Claims in Arbitration

Security for Claims in Arbitration

1. Introduction
2. Freezing injunctions
3. Arrest of vessels
4. Other means of securing claims

1. INTRODUCTION
The decision to refer a dispute to arbitration will inevitably be influenced by the prospects of
enforcing any award which may ultimately be obtained. Unless security has been obtained in
advance, the process of issuing enforcement proceedings, whether in England or abroad, may be
disproportionately expensive or time-consuming, particularly where it is difficult to locate assets.
In practical terms it may be pointless to arbitrate if there is no machinery for securing claims.
This chapter considers security for claims (or counterclaims) advanced in London maritime
arbitrations. It will focus in particular on two main areas: freezing injunctions and ship arrests.
These have generally been the most commonly adopted methods of obtaining security in the
context of London maritime arbitrations (although a freezing injunction does not strictly secure
the claim; it merely prevents dissipation of assets). Other methods of securing claims are
considered in section 4 of this chapter. The relevant principles are quite distinct from those
governing the grant of security for the costs of defending a claim or counterclaim, which are
discussed in Chapter 17. In recent years many parties have secured funds by means of a Rule

B1 attachment obtained in the US courts but this remedy is a matter of US law and not dealt with
here.

Power of tribunal and of court

One of the general principles underlying the 1996 Act was the vesting of procedural powers in the
arbitral tribunal, with the court fulfilling a supportive fall-back role. However, the impact of this
general principle on the area of security has been relatively limited. The parties to arbitration may,
of course, agree to confer on the tribunal the power to make orders securing claims,2 but there are
doubts about whether the parties could confer on the tribunal the power to grant freezing
injunctions. More generally, there are obvious issues concerning the enforceability of orders
where they are granted on a without notice basis, or against third parties. As a result, maritime
arbitrators would generally refuse to grant a freezing order.
In default of agreement, the 1996 Act confers upon the tribunal a limited statutory power to make
orders preserving the subject matter of the dispute (section 38(4)), and further confers upon the
court powers to make orders which have the effect of securing claims (section 44). The powers
conferred under sections 38 and 44 of the 1996 Act apply unless otherwise agreed. In the
context of London maritime arbitration, the usual methods of securing claims are to apply to court
under section 44 for a freezing injunction, or to arrest a vessel, or to obtain an attachment order in
a foreign court.

Courts powers to make orders against third parties

Where a tribunal has the power to make an order securing a claim, this is necessarily limited to the
making of orders addressed to the parties to the arbitral proceedings. The courts powers under
section 44 are not so limited and in theory would extend to making orders against third parties,
(e.g., banks or companies associated with the parties). However, for such orders to be made it is
necessary for the jurisdiction of the English Court to be established independently of the
jurisdictional rules contained in CPR, Part 62.53 (e.g., by showing that the third party bank is
resident within the jurisdiction).

2. FREEZING INJUNCTIONS
A freezing injunction is an order restraining a party from removing or dealing (or causing other
parties to remove or to deal) with assets. Such orders were in the past known as
Mareva injunctions4 but were renamed freezing injunctions under the Civil Procedure Rules.
A freezing injunction is one of the most important and potent remedies available to a claimant
who fears that his opponent will attempt to evade enforcement by hiding his assets.5

Jurisdiction
The tribunal
The question of whether the parties may confer jurisdiction on the tribunal to make a freezing
injunction remains uncertain. It is arguable that the parties are able to do so pursuant either to
section 48 of the Act (which provides that the parties may agree on the powers exercisable by the
tribunal as regards remedies; unless otherwise agreed, the tribunal may order a party to do or

refrain from doing anything) or section 39 (which entitles the parties to agree that the tribunal
shall have power to order on a provisional basis any relief which it would have power to grant in a
final award. In Kastner v Jason,6 Rix LJ noted that most commentators took the view that section
48 was concerned with final remedies (and therefore could not be relied upon in connection with
freezing injunctions).7 He noted, however, that views were divided on the question of whether
section 39 might be relied upon. Some take the view that section 39 applies only to remedies
which could be granted in a final award (which would not therefore encompass freezing
injunctions).8 The issue remains undecided, though in Econet Wireless Ltd v Vee Networks
Ltd 9 Morison J apparently assumed that the LCIA Rules conferred on the tribunal the power to
grant a freezing injunction.
In any event, this issue is unlikely to be of practical significance in London maritime arbitration.
The LMAA Terms do not contain any provision conferring on the tribunal the power to grant
provisional relief, and the invariable practice is to apply to the court, not the tribunal, for a
freezing injunction.
The court
Section 44(2)(e) of the 1996 Act (which is based upon articles 9 and 31 of the Model Law) gives
the court the same power to grant an interim injunction (including a freezing injunction), or the
appointment of a receiver,10 as it would have in court proceedings. Section 44 provides as follows:

(1) Unless otherwise agreed by the parties, 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.
(2) Those matters are

(e) the granting of an interim injunction or the appointment of a receiver.

(3) If the case is one of urgency, the court may, on the application of a party or proposed party
to the arbitral proceedings, make such orders as it thinks necessary for the purposes of
preserving evidence or assets.
(4) If the case is not one of urgency, the court shall act only on the application of a party to
the arbitral proceedings (upon notice to the other parties and to the tribunal) made with the
permission of the tribunal or the agreement in writing of the other parties.
(5) In any case the court shall act only if or to the extent that the arbitral tribunal, and any
arbitral or other institution or person vested by the parties with power in that regard, has no
power or is unable for the time being to act effectively.
(6) If the court so orders, an order made by it under this section shall cease to have effect in
whole or in part on the order of the tribunal or of any such arbitral or other institution or
person having power to act in relation to the subject-matter of the order.
(7) The leave of the court is required for any appeal from a decision of the court under this
section.

The courts power to make freezing injunctions in court proceedings is itself conferred by section
37 of the Supreme Court Act 1981. Under that section, the court also has power to make any
ancillary orders which may be thought appropriate.11 Section 44 applies regardless of the seat of
the arbitration,12 though the court is entitled to refuse to act under section 44 if a foreign seat

would make intervention inappropriate.13 This is, obviously, not an issue in London maritime
arbitration. However, section 44 imposes three important limitations upon the courts jurisdiction
to make orders in support of arbitral proceedings: it may be excluded by agreement, it requires
(save in cases of urgency) the agreement of the parties or the permission of the tribunal, and it
entitles the court to act only in so far as the tribunal is unable to do so effectively.
Unless otherwise agreed
First, the courts power to act may be excluded by agreement. This raises the question of whether
the courts jurisdiction to act has been excluded by the arbitration agreement itself. Such an
argument may arise where the arbitration agreement takes the form of a Scott v Avery clause,
which prohibits the parties from bringing court proceedings until the tribunal has issued an
award.14 In Mantovani v Carapelli 15 it was held that a Scott v Avery clause which precluded any
action or other legal proceedings prior to the issue of an award operated to prevent the court
from entertaining applications for security. However, Mantovani v Carapelli has been restrictively
interpreted16 and, in general the courts are reluctant to reach the conclusion that an arbitration
agreement has the effect of excluding the parties rights to apply to the court for ancillary
supportive orders.
In In Re Qs Estate,17 a lawyers retainer agreement contained an English arbitration clause which
provided that any disputes deriving [from] or in connection with this agreement will be submitted
to the exclusive jurisdiction of arbitration in London. It was argued that the reference to
exclusive jurisdiction effectively operated so as to prevent the court from making a freezing
injunction. Rix J rejected this argument. He held that if the parties wished to exclude the right to
apply to court for assistance (including the right to apply for a freezing injunction), then they
should have done so by express words. Mantovani v Carapelli should be confined to its true ratio,
namely that the clause in that case was extremely widely worded, excluding both any action and
also any other legal proceedings.18
In Vertex Data Science Ltd v Powergen Retail Ltd 19 a Master Services Agreement contained a
complex hybrid expert determination and arbitration clause. The clause expressly excluded
powers under certain specified provisions of the 1996 Act, including the power under section
48(5) to grant injunctions. The clause also contained an agreement conferring on the tribunal the
power, under section 39, to order provisional relief, and provided that the parties were entitled to
apply to court for relief in relation to a genuine dispute which is not capable of being referred
to this Clause for resolution. The court held that the exclusion of the tribunals power to act
under section 48(5) did not mean that the courts power to grant injunctions had also been
excluded. On the contrary, reading the clause as a whole, the power to grant interim injunctive
relief had been reserved to the court.
The question of whether the parties have excluded the courts powers under section 44 raises a
preliminary issue going to the jurisdiction of the court, and is not a decision under this section
for the purposes of the restrictions on appealing under section 44(7).20 It follows that both the first
instance court and the Court of Appeal could grant permission to appeal on the issue of whether
there was an agreement excluding the section 44 powers; whereas a decision under section 44
itself could only be appealed with the permission of the first instance judge.

Urgency and the relationship between sections 44(3) and 44(4)

The effect of sections 44(3) and (4) is that, unless the case is one of urgency, the court may not
act without the approval of the tribunal or the written agreement of the other parties to the
arbitration. The likelihood of immediate dissipation of assets is probably relevant in establishing
urgency, though the DAC Report21 suggests that the ability of the tribunal to act quickly and
effectively is also a relevant factor. For example, urgency may be established if the tribunal cannot
be constituted within time to deal with the matter.22 In practice, the question of whether an
application is urgent is likely to overlap to some extent with the issue of whether there are
grounds for making the application without notice. If giving notice of the application would be
likely to defeat its purpose (by providing the respondent with an opportunity to remove or hide
assets), then an applicant is entitled to make his application without giving notice of it23 and there
will also be grounds for considering that the application is urgent for the purposes of section
44.24
The relationship between sections 44(3) and 44(4) raises some difficulties but has now been
clarified by the Court of Appeal. Section 44(3) provides that in a case of urgency, the court may
make such orders as it thinks necessary for the purpose of preserving evidence or assets. Section
44(4) provides that in non-urgent cases, the court may intervene only with the permission of the
tribunal or the agreement in writing of the other parties. The question which arose was whether
section 44(3) was intended to be permissive,25 or whether the words necessary for the purpose of
preserving evidence or assets were intended to restrict the situations in which the court was
entitled to act. The Court of Appeal has now held that the latter interpretation is correct, though
the meaning of assets for these purposes is very broad and includes causes of action.
Cetelem SA v Roust Holdings Ltd 26 was concerned with a sale and purchase agreement which was
subject to English law and ICC arbitration in London. The buyer applied to court under section 44
for a freezing injunction. The sellers argued that the court had no jurisdiction to make the order
because it was not necessary for the purpose of preserving evidence or assets. The Court of
Appeal accepted that establishing such necessity was a necessary precondition of the jurisdiction
under section 44. However, for these purposes, assets was interpreted broadly and included
choses in action. Here, the freezing injunction was necessary for preserving a cause of action, and
so the courts jurisdiction was established.
Inability of tribunal to act effectively
Finally, sections 44(5) provides that the court shall act only if and to the extent that the tribunal
has no power or is unable for the time being to act effectively. This requirement is likely to be
satisfied in most applications for freezing injunctions, because it is rare for the parties to have
conferred upon the tribunal the power to make a freezing injunction: accordingly, the tribunal will,
in such cases, be unable to act within the meaning of section 44. In addition, an arbitral tribunal
could not make effective orders against third parties such as banks and it cannot back its orders
with the threat of punishment for contempt of court.
Similarly, section 44(6) provides that the court may make an order which ceases to have effect on
the order of the tribunal. The intention here was to allow the court to act as a stop gap, with the
tribunal taking over when able to do so. However, for the reasons discussed, this policy does not

apply in relation to freezing injunctions, where it is only the court which can act effectively.
Parties who have not yet commenced arbitral proceedings may be required by the court to explain
why not, and to indicate their intention to do so forthwith.27

The effect of a freezing injunction

A freezing injunction will, in broad terms, prohibit dealing with, or removal from the jurisdiction
of, named assets or a named sum of money. The injunction will typically operate over funds
retained in a bank account and will freeze the account up to a certain limit (usually fixed by
reference to the probable amount which the claimant will recover). However, the jurisdiction to
grant a freezing injunction is very flexible and could even be exercised to prevent the removal of a
ship from the jurisdiction in circumstances where an arrest would not be permissible or
appropriate.28 The terms of the freezing injunction will usually follow the standard form appended
to the Commercial Court Guide, with amendments where necessary.
From the moment the order is made, it takes effect over every asset referred to in the body of the
order. Every person with knowledge of the injunction must comply with it; knowingly acting in
breach of a freezing injunction will place a third party, such as a bank, in contempt of court.29
It should be noted that a freezing injunction does not give the claimant any priority over other
creditors asserting claims over the defendants assets. The injunction will not prevent a bank from
discharging its obligations under letters of credit, or from exercising its own rights of set-off
against funds in the account. For a full discussion of the effect of freezing injunctions, reference
should be made to specialist texts.30
Ancillary orders
The court is empowered to make orders ancillary to the freezing injunction. Ancillary orders
frequently include orders requiring disclosure of assets within or outside the jurisdiction and may
also incorporate orders requiring the disclosure of documents, the provision of other information,
or even the appointment of a receiver to realise the value of assets (most commonly when those
assets are perishable). The court may even order a third party such as a bank to disclose the
existence and scope of the respondents assets.31 The aim of all such ancillary orders is to enhance
the effectiveness of the freezing injunction.
In Gidrxslme Shipping Co v Tantomar-Transportes Lda,32 owners obtained two arbitration awards
against charterers, and then obtained a freezing injunction in aid of execution. The injunction was
limited to assets within the jurisdiction, but incorporated ancillary orders requiring the charterers
to identify their assets worldwide. In the meantime, one award was converted to a judgment.
Colman J upheld and continued the injunction. He held that there was power to make an order for
disclosure of worldwide assets as an aid to execution, whether or not the award had been
converted into a judgment. Moreover, such an order could be sought as independent, free-standing
relief: there was no need for it to be ancillary to a freezing injunction. The question of whether the
freezing order extended worldwide was therefore irrelevantalthough Colman J recognised that
there is authority which suggests that pre-award freezing orders and disclosure orders should be of
identical scope.33

When to apply for a freezing injunction

It is usually advisable for the claimant (or counter-claimant) to apply for a freezing injunction as
early as possible and usually before the reference gets under way. However, as with all types of
injunction, the freezing injunction is available only where there is an existing cause of action: no
injunction will be granted for an anticipated claim which may or may not materialise in the
future.34 In A v B,35 Saville LJ recognised a limited exception to this rule, by granting a freezing
injunction which was expressly conditional upon a cause of action arising and which would not
come into force unless and until this occurred. However, despite the convincing reasons of
convenience justifying the grant of such an injunction, A v B was not followed in The Veracruz 1,
and in Fourie v Le Roux 36 the House of Lords confirmed that an existing and formulated claim is
a necessary precondition to the grant of a freezing injunction. An unformed and inchoate claim
will not suffice.
In The Veracruz 1,37 the defendants agreed to sell their vessel to the claimants, but failed to meet
the contractual delivery date. In addition, the claimants feared that there were defects in the vessel
and alleged an apprehended breach of the obligation to deliver in good order. The ensuing dispute
was referred to arbitration. The claimants were concerned that the defendants only asset was the
purchase price (payable in London on delivery) and that the defendants would remove this for the
purpose of evading enforcement of any award. When the defendants gave notice of their intention
to deliver the vessel, the claimants accordingly sought and obtained a freezing injunction
restraining the defendants from dealing with the purchase price once it had been paid over. The
Court of Appeal set aside the injunction in so far as it related to the apprehended defects, holding
that there was, as yet, no cause of action in relation thereto. However, the injunction was
continued in limited form so as to cover the accrued cause of action in respect of late delivery.
In In Re Qs Estate,38 Rix J sanctioned a procedure which avoids many of the practical problems
arising from The Veracruz 1. In that case, the applicant appeared before the court on the day
before the relevant cause of action would accrue and explained the basis of the application and the
evidence. The next day the judge was able, with the assurance of the applicants counsel that
nothing material had altered in the meantime, to grant the injunction promptly. Rix J commented
that this was a valid procedure, though cautioned that the court would be astute to seek to ensure
that it was used properly and without abuse.

How to apply for a freezing injunction

The application
Freezing injunctions are usually required as a matter of urgency (before the defendant can remove
or conceal its assets). Accordingly, the initial application for an injunction is usually made without
notice to the defendant. If there is no reason to believe that the defendant would take action to
defeat the purpose of the freezing injunction pending the hearing, then it will be appropriate to
give notice of the application and the hearing to the respondent.39 However, in such a case, there
may be questions as to whether the case is urgent within the meaning of section 44 of the 1996
Act.40

The procedure for making the application is described in Part 25 of the CPR (including the
Practice Direction to Part 25) and the Commercial Court Guide. The application must be
supported by written evidence in the form of an affidavit,41 setting out the facts relied upon in a
clear and concise manner. The applicant must also provide a draft order, which should be based
upon the standard form appended to the Commercial Court Guide. The application is then heard
by a commercial judge in chambers. It is necessary for the applicants legal representative to
attend at court to explain the evidence to the judge and to deal with any questions which the judge
may have.
It is essential that the applicant should make full and frank disclosure to the court, including
disclosure of any fact which might lead the court to refuse the order. Full and frank for these
purposes includes disclosure of any applicable legal principles or authorities.42 Failure to make
full disclosure may well result in the discharge of the freezing injunction.43
The terms of the order
The claimant will almost invariably be required, as a condition of the grant of a freezing
injunction, to offer an undertaking to compensate the respondent in damages for any loss caused
by complying with the order. The Commercial Court will usually require an undertaking in
damages to be backed either by proof of assets within the jurisdiction or (more usually) by the
provision of adequate security. The applicant must be ready to show the court that such security is
available. The undertaking in damages becomes relevant if the freezing order is later discharged,
in which case the respondent may be entitled to compensation if it has suffered loss as a result of
the injunction. However, the undertaking is one made to the court, not to the respondent, and the
court always has discretion to decline to enforce it. If the applicant has not yet commenced
arbitration proceedings, an undertaking to do so immediately may be required.44
Where a freezing injunction is intended to operate over a particular bank account, the injunction
will usually identify that account. The order will also incorporate a proviso allowing the bank to
exercise its right of set-off over the account which is frozen and will also usually allow the
respondent to withdraw a named sum each week to cover legal advice and representation, living
expenses (in the case of an individual) and sometimes legitimate business expenses. The order will
also usually incorporate an undertaking to indemnify third parties for any loss suffered as a result
of compliance with the order. The courts are extremely reluctant to interfere with the legitimate
business interests of third partiesit is only in exceptional cases (e.g., where there is a clear case
of fraud) that a freezing injunction would be permitted to interfere with the operation of bankers
irrevocable credits.45 However, knowing breach of the order by a bank (or, indeed, by any third
party) will constitute a contempt of court, and the receipt of a freezing injunction by a bank
overrides any other instructions received from its customer.
Where (as is usual) the injunction is granted at a hearing without notice, the order will usually
specify a return date on which the respondent or any affected third party may attend at court and
advance any arguments in favour of the discharge of the injunction. Once the order is made, it
must be served promptly on the respondent and on affected third parties, together with the
supporting written evidence and full notes of the hearing.46

If the injunction is upheld following a hearing on the return date, it will usually incorporate a
provision permitting the parties to apply to the court at any time should circumstances arise which
require the terms of the order to be amended. To avoid the necessity of protracted interlocutory
hearings, it is wise to include in the order a proviso allowing the performance of acts which would
otherwise be a breach of the freezing injunction on the written consent of the applicants
solicitors.

The principles governing the grant of a freezing

injunction
The principles governing the grant of freezing injunctions are well established. Applications for
freezing injunctions form a routine part of the business of the Commercial Court. For a full
discussion of the principles applied by the court, reference should be made to specialist texts.47 In
brief, the grant of the injunction involves the exercise of a wide-ranging discretion, but the
claimant must generally satisfy two basic criteria:

(a) that he has a good arguable case, and

(b) that there is a real risk that assets of the respondent will be removed or dissipated.

Even if these criteria are satisfied, the court may refuse the order as a matter of discretionfor
example, if the order would interfere unduly with the business interests of the respondent or of
third parties.48
Good arguable case
The requirement of a subsisting cause of action has already been discussed above. The applicant
must also satisfy the court that the claim made constitutes a good arguable case.49 It is not
necessary to show that the claim is bound to succeed,50 or that the case is strong enough to justify
the grant of summary judgment,51 or even that the chances of success are better than 50 per
cent.52 Nor will the court attempt to reach a decision on the merits, or to determine difficult
questions of fact or law.53 Although the threshold requirement is not particularly difficult to
satisfy, it is important to remember that the relative merits of each partys case (particularly where
one partys case is overwhelmingly strong) will continue to be relevant to the overall exercise of
the discretion. If the claimants claim is time-barred, but the claimant intends to apply to the court
pursuant to section 12 of the 1996 Act to obtain an extension of time, the court will also take into
account the claimants prospects of obtaining a section 12 time extension and may grant a freezing
injunction pending the hearing of the section 12 application.54
Real risk that the award will not be satisfied
Having satisfied the first threshold requirement, the applicant must also show that there is a real
risk that a judgment or award in favour of the [claimant] would remain unsatisfied.55 Relevant
factors include the domicile of the respondent; the respondents financial standing and credit
record; the nature of the assets over which the freezing order is sought; and the respondents
conduct (in particular any evidence of its willingness or otherwise to satisfy any award). However,
it is not necessary to prove an intention on the part of the respondent to evade the award. In court
proceedings, the possibility of enforcing the judgment abroad pursuant to the Brussels Regulation

is a relevant factor and presumably the same must be true of the possibility of enforcing an
arbitration award pursuant to the New York Convention.

3. ARREST OF VESSELS
Arresting the respondents vessel represents another extremely common method of securing
claims which are being arbitrated. Arrests of vessels have long been granted to secure proceedings
brought in the Court of Admiralty. The scope of the Admiralty jurisdiction is defined by section
20 of the Supreme Court Act 1981. It includes claims in relation to damage to or by a ship, loss or
damage to goods carried in a ship and agreements relating to carriage of goods in a ship or for the
use or hire of a ship. Admiralty proceedings may take the form of claims in personam (i.e., claims
against a person) or claims in rem (i.e., claims advanced against a thingusually a ship).
Proceedings in rem are commenced by issuing an in rem claim form; a further application for the
arrest of the vessel may then be filed with the Admiralty Court.56 For a detailed discussion of the
procedures and principles in the Admiralty Court, reference should be made to CPR Part 61 and
the accompanying Practice Direction, as well as to specialist texts.57

Stay of the proceedings

Where the claim in respect of which the vessel is arrested is subject to an arbitration clause, the
court will invariably stay the in rem proceedings in so far as they raise substantive issues falling
within the scope of the arbitration agreement. However, the courts have drawn a distinction
between suits brought for the purpose of determining the merits of the underlying claims and suits
brought solely to obtain security. It has long been recognised by the courts that commencing in
rem proceedings for the sole purpose of obtaining security for the claims to be arbitrated will not
be regarded as a breach of the arbitration clause. Where those proceedings are stayed, the stay will
be on terms that alternative security is provided for the claims being arbitrated. The position was
summarised by Colman J in Petromin SA v Secnav Marine Ltd:58
Where, however, the sole purpose of the commencement of proceedings is to accomplish the
arrest of a vessel in order to provide security in respect of a claim which by reason of an
arbitration clause must be referred to arbitration, it has long been the practicecertainly in the
Admiralty Courtfor a stay of English proceedings only to be granted on terms that alternative
security is provided by the party applying.59
Nor is it an abuse of process to arrest a vessel after the commencement of arbitral proceedings, for
the sole purpose of obtaining security for the claims being arbitrated.60
Where, however, arrest proceedings are commenced with the ulterior purpose of forcing a party
from relinquishing rights under an arbitration clause, they will amount to a breach of the
arbitration clause.
In Kallang Shipping SA Panama v Axa Assurances Senegal and ors 61 and Sotrade Denizcilik
Sanayi Ve Ticaret SA v Amadou LO and ors,62 cargo receivers (acting through insurers) arrested
vessels in Senegal and then refused to release them unless a guarantee providing for Senegalese
law and jurisdiction was provided by the owners. This was held by Jonathan Hirst QC (sitting as a
deputy High Court judge) to amount to a breach of the London arbitration clause in the bills of
lading.

Power to continue arrests

The power of the court to grant a stay on terms that the arrest of the vessel shall continue, or that
alternative security be provided, is set out in section 11 of the 1996 Act, which provides:

(1) Where Admiralty proceedings are stayed on the ground that the dispute in question
should be submitted to arbitration, the court granting the stay may, if in those proceedings
property has been arrested or bail or other security has been given to prevent or obtain release
from arrest
o (a) order that the property arrested be retained as security for the satisfaction of any
award given in the arbitration in respect of that dispute, or
o (b) order that the stay of those proceedings be conditional on the provision of equivalent
security for the satisfaction of any such award.
(2) Subject to any provision made by rules of court and to any necessary modification, the
same law and practice shall apply in relation to property retained in pursuance of a order as
would apply if it were held for the purposes of proceedings in the court making the order.

Section 11 reproduces, with one significant alteration, section 26 of the Civil Jurisdiction and
Judgments Act 1982. It is likely that cases on section 26 will remain relevant. Before the
enactment of section 26, the courts recognised that there was jurisdiction to continue arrests as
security for judgments, but not as security for arbitration awards. Thus, arrests could be continued
in respect of claims referred to arbitration, despite the fact that there was no power to do so
directly, only on the theoretical basis that if the respondent was unable to satisfy the award, the
claimant would revive the stayed proceedings. The arrest was therefore maintained for the
possible judgment to be granted in the in rem proceeding and the vital consideration in the
exercise of the courts discretion was whether or not the respondent would be able to satisfy any
award. However, when section 26 was enacted the discretion to maintain the arrest was regarded
as having been assimilated to the discretion governing the maintenance of arrests in court
proceedings63 and this is now made expressly clear in section 11(1). Accordingly, the crucial
question is not whether the respondent will honour any award but whether the respondent is able
to offer alternative security.
Section 26 had permitted the court to impose conditions upon the stay of judicial proceedings: this
power was interpreted as applying only to discretionary, not to mandatory stays.64 Under the 1996
Act, however, all stays are mandatory and therefore there is no scope for imposing conditions. The
Admiralty Court has no power to maintain an arrest, or to order the provision of alternative
security, where an award has already been granted.
In The Bumbesti,65 judgment creditors obtained two awards in Romanian arbitrations for damages
suffered as a result of early termination of charterparties. The judgment creditors arrested
the Bumbesti in Liverpool to enforce payment of one of the awards. Aikens J granted the judgment
debtors application to set aside the arrest. He held that a claim to enforce an award arose out of a
separate implied agreement to honour the arbitration award and that such a cause of action was not
sufficiently directly in relation to the use or hire of a ship to found the jurisdiction to arrest. The
question of whether it was possible to effect an arrest based upon the original underlying cause of

action (namely, in this case the early redelivery of the vessels under the relevant charterparty) was
left open.66
It would appear, however, that the court may maintain an arrest in proceedings other than those in
relation to which the arrest was originally granted:
In The Silver Athens,67 the defendants vessel was originally arrested before the coming into force
of section 26. An order was granted staying the court proceedings and releasing the vessel. Section
26 then came into force. The claimants commenced a separate action claiming identical relief and
rearrested the vessel. It was held that the second action was an abuse of process: the correct
procedure was to apply to lift the stay of the first action, retaining the security given in the second
action as security for any arbitration award.

4. OTHER MEANS OF SECURING CLAIMS

The 1996 Act provides a number of alternative, though less commonly used, means of obtaining
security for claims.

Power to make order for preservation of property

Tribunals power
Section 38(4) of the 1996 Act provides that:
The tribunal may give directions in relation to any property which is the subject of the
proceedings or as to which any question arises in the proceedings, and which is owned by or is in
the possession of a party to the proceedings

(a) for the preservation, custody or detention of the property by the tribunal, an expert or a
party.

The precise extent of this power is unclear. The primary focus of the provision is property which
is the subject matter of the dispute, but the section also extends to property as to which any
question arises in the proceedings. These words, if broadly construed, might, therefore, permit a
tribunal in a shipbuilding or ship sale dispute to make an order for the detention of the ship to
which the contract related to secure claims. However, it is doubtful that this is what was intended.
It is more likely that the section will be construed as permitting the tribunal to make orders
preserving property in relation to which there is a dispute as to ownership or possession, with a
view that any final award that is made is not rendered nugatory by the intervening loss or
dissipation of the relevant property.
Courts power
Section 44(2)(c) of the 1996 Act confers a materially identical power upon the court, with the
additional provision that the court may also make an order authorising a person to enter premises
for the purpose of carrying out the order for preservation or detention. Under section 44, however,
the court may only act if the case is one of urgency or, if not urgent, if the tribunal or the parties
agree (see above).

In Copsa Enterprises Ltd v Tecnomarine Spa,68 a vessel was the subject of the arbitration. The
arbitrators ordered the sellers of the vessel to store and insure it pending their award. The court
made a supportive order in similar terms pursuant to section 44(2)(c)

Sale of Goods
Section 44(3) of the 1996 Act entitles the court to make an order for the sale of any goods the
subject of the proceedings. Again, however, unless the case is urgent, the court may make such
an order only with the agreement of the parties or the tribunal.69

Discretionary orders
Finally, there is a method by which a tribunal may make an indirect order for security. Where a
respondent to a claim seeks the tribunals indulgence or the exercise of the tribunals discretion in
relation to some matter arising in the arbitration (e.g., an application for an interim award), it is
always open to the tribunal to refuse to exercise its discretion except on terms, which may include
the provision of security.
In Japan Line Ltd v Aggeliki Charis Compania Maritima SA (The Angelic Grace),70 Owners let
their vessel to Charterers under three consecutive charterparties. Owners then advanced claims
under each of the charters. The claim under the third charter was for around US$31,000, whereas
that under the first charter was for around US$1 million. The Charterers counterclaimed
US$80,000 under the third charter but gave credit of US$31,000 in respect of Owners claim
under that charter. Charterers sought an interim award for their claim under the third charter. The
tribunal refused to grant the award unless security was put up for all the Owners claims.
However, this method of obtaining security from the tribunal is limited in scope: in most cases it
will be necessary for a claimant or counter-claimant to approach the court.
1 Supplemental Rule for Certain Admiralty and Maritime Claims B, Federal Rules of Civil
Procedure
2 E.g., Article 23 of the ICC Rules of Arbitration entitles the tribunal to make interim and
conservatory orders, which include injunctions of all kinds, orders for provisional payment
the posting of guarantees and the like; see Derains & Schwartz, A Guide to the New ICC Rules
of Arbitration, p. 274. See also article 17 of the UNCITRAL Model Law, which confers power on
the tribunal to grant interim measures as a means of preserving assets out of which a subsequent
award may be satisfied.
3 See Unicargo v Flotec Maritime S de R.L, The Cienvik [1996] 2 Lloyds Rep 395; Tate &
Lyle v CIA Usina Bulhoes [1997] 1 Lloyds Rep 355; Vale do Rio Doce Navegacao v Shanghai
Bao Steel Ocean Shipping Co [2000] EWHC 205 (Comm); [2000] 2 Lloyds Rep 1.
4 Originating from the name of the case in which the power to make such an order was first
recognised: Mareva Compania Naviera v International Bulk Carriers SA, The Mareva [1975] 2
Lloyds Rep 509.
5 Kastner v Jason [2004] EWHC 592 (Ch); [2004] 2 Lloyds Rep 233; [2004] EWCA Civ 1599;
[2005] 1 Lloyds Rep 233.

6 [2004] EWCA Civ 1599; [2005] 1 Lloyds Rep 233.

7 This was also the view of the first instance judge, Lightman J, who held that in any event,
section 48 was intended to confer on the tribunal those powers which could be exercised by the
court. Since the court is defined in section 105 as meaning the High Court or a county court,
and county courts cannot grant freezing injunctions, it followed that section 48 did not confer such
power on an arbitral tribunal.
8 In Starlight Shipping Co v Tai Ping Insurance Co Ltd [2007] EWHC 1893 (Comm); [2008] 1
Lloyds Rep 230, Cooke J held that arbitrators acting under LMAA Terms would not have power
to grant an interim injunction.
9 [2006] EWHC 1568 (Comm); [2006] 2 Lloyds Rep 1.
10 Orders appointing receivers would be rare in the context of London maritime arbitrations, and
will not be considered further here.
11 Gidrxslme Shipping Co v Tantomar Transportes Maritimos Lda [1994] 2 Lloyds Rep 392.
12 Section 2(3) of the 1996 Act.
13 As to factors relevant to this, see Commerce and Industry Insurance Co of Canada v Lloyds
Underwriters [2002] 1 Lloyds Rep 219, Econet Wireless Ltd v Vee Networks Ltd [2006] EWHC
1568 (Comm); [2006] 2 Lloyds Rep 1.
14 See, further, Chapter 4.
15 [1980] 1 Lloyds Rep 375.
16 E.g. Re Qs Estate [1999] 1 Lloyds Rep 931; Toepfer International GmbH v Socit Cargill
France [1998] 1 Lloyds Rep 379; Petromin SA v Secnav Marine Ltd [1995] 1 Lloyds Rep 603.
17 [1999] 1 Lloyds Rep 931.
18 At 937-938. See also Toepfer International GmbH v Socit Cargill France [1998] 1 Lloyds
Rep 379; Petromin SA v Secnav Marine Ltd [1995] 1 Lloyds Rep 603.
19 [2006] EWHC 1340 (Comm); [2006] 2 Lloyds Rep 591.
20 Sumukan Ltd v The Commonwealth Secretariat [2007] EWCA Civ 243; [2007] 2 Lloyds Rep
87.
21 Paragraph 215.
22 Starlight Shipping Co v Tai Ping Insurance Co Ltd [2007] EWHC 1893 (Comm); [2008] 1
Lloyds Rep 230.
23 See below.
24 E.g., Petroleum Investment Company Ltd v Kantupan Holdings Company Ltd, [2002] 1 All ER
(Comm) 124, in which Toulson J held both that an application for a freezing injunction was not
urgent within the meaning of section 44 and also that the application should not have been made
without notice.

25 This was initially assumed to be the case: Hiscox Underwriting Ltd v Dixon Manchester Co
Ltd [2004] EWHC 479 (Comm); [2004] 2 Lloyds Rep 438.
26 [2005] EWCA Civ 618; [2005] 2 Lloyds Rep 494.
27 Econet Wireless Ltd v Vee Networks Ltd [2006] EWHC 1568 (Comm); [2006] 2 Lloyds Rep
1.
28 The Rena K [1978] 1 Lloyds Rep 545; Bank Melli v Helleniki Techniki SA [1984] QB 425.
29 E.g., Z Bank v D1 [1994] 1 Lloyds Rep 656, in which a bank which had been under the
impression that a freezing injunction affected only named banks and had continued to operate the
frozen account was held guilty of contempt of court.
30 In particular, Gee, Commercial Injunctions, 5th edn, 2004.
31 Bankers Trust Co v Shapira [1980] 1 WLR 1274.
32 [1995] 1 WLR 299.
33 At 310, citing Ashtiani v Kashi [1987] QB 888 and the obiter suggestion of Neill LJ in Derby
& Co v Weldon [1990] Ch 65 at 90.
34 Veracruz Transportation Inc v VC Shipping Co Inc, The Veracruz 1 [1992] 1 Lloyds Rep
353; Siporex Trade SA v Comdel Commodities Limited [1986] 2 Lloyds Rep 428; The P [1992] 1
Lloyds Rep 470; Zucker v Tyndall Holdings [1992] 1 WLR 1127; In Re Qs Estate [1999] 1
Lloyds Rep 931; Petroleum Investment Company Ltd v Kantupan Holdings Company Ltd [2002]
1 All ER (Comm) 124.
35 [1989] 2 Lloyds Rep 423.
36 [2007] UKHL 1; [2007] 1 WLR 320.
37 [1992] 1 Lloyds Rep 353.
38 [1999] 1 Lloyds Rep 931.
39 Commercial Court Guide, paragraph F2.1, Ian Franses (Liquidator of Arab News Network
Ltd) v Somar Al Assad & ors [2007] EWCH 2442 (Ch); [2007] B.P.I.R. 1233.
40 Petroleum Investment Company Ltd v Kantupan Holdings Company Ltd [2002] 1 All ER
(Comm) 124 in which similar factors were relevant to the issues of whether an application should
have been made on notice and whether it was urgent for the purposes of section 44.
41 25 PD para 3.1.
42 Swift Fortune Ltd v Magnifica Maritime SA [2007] EWCH 1630; [2008] 1 Lloyds Rep 54.
43 CPR, rule 25.3.5.
44 Econet Wireless Ltd v Vee Networks Ltd [2006] EWHC 1568 (Comm); [2006] 2 Lloyds Rep
1.
45 Bolvinter Oil v Chase Manhattan Bank [1984] 1 WLR 391.

46 Interoute Telecommunications (UK) Ltd v Fashion Gossip Ltd, The Times, 10 November 1999
(Lightman J).
47 E.g., Gee, Commercial Injunctions, 5th edn, 2004.
48 E.g., Polly Peck International plc v Nadir [1992] 2 Lloyds Rep 238.
49 Ninemia Corporation v Trave Schiffahrtsgesellschaft GmbH und co KG, The
Niedersachsen [1983] 2 Lloyds Rep 600.
50 Polly Peck International plc v Nadir [1992] 2 Lloyds Rep 238.
51 Rasu Maritima SA v Perusahaan Pertambangan [1978] QB 644.
52 Ninemia Corporation v Trave Schiffahrtsgesellschaft GmbH und co KG, The
Niedersachsen [1983] 2 Lloyds Rep 600 at 605; Petroleum Investment Company
Limited v Kantupan Holdings Company Limited [2002] 1 All ER (Comm) 124.
53 Derby & Co v Weldon [1990] Ch 48 at 57-8.
54 This was thought to be the position under the old law (see Gee, Mareva Injunctions and Anton
Piller Relief, 3rd edn, pp. 145-146) and there would seem to be no reason why the same should
not apply under the 1996 Actthough, of course, the prospects of obtaining a time extension
under the 1996 Act will be considerably reduced.
55 Ninemia Corporation v Trave Schiffahrtsgesellschaft GmbH und co KG, The
Niedersachsen [1983] 2 Lloyds Rep 600.
56 See, generally, CPR Part 61 and the accompanying Practice Direction.
57 E.g., Meeson, Admiralty Jurisdiction and Practice, 3rd edn.
58 [1995] 1 Lloyds Rep 603.
59 See also The Lisboa [1980] 2 Lloyds Rep 546; Ultisol Transport Contractors Ltd v Bouygues
Offshore SA [1996] 2 Lloyds Rep 140; In Re Qs Estate [1999] 1 Lloyds Rep 931.
60 The Jalamatsya [1987] 2 Lloyds Rep 164.
61 [2008] EWHC 2761 (Comm); [2009] 1 Lloyds Rep 124.
62 [2008] EWHC 2762; [2009] 1 Lloyds Rep 145.
63 The Bazias 3 [1993] 1 Lloyds Rep 101.
64 The World Star [1986] 2 Lloyds Rep 274.
65 [1999] 2 Lloyds Rep 481.
66 At pp. 489-90. The argument is based upon dicta in The Rena K [1979] QB 377 to the effect
that a claim in rem to arrest a vessel does not merge with a judgment or award made in personam,
but survives, thereby enabling the judgment creditor to arrest the vessel so long as the award or
judgment remains unsatisfied.
67 [1986] 2 Lloyds Rep 583.

68 Unrep, Cresswell J, 25 September 1998

69 For an example, see Stelios B Maritime Ltd v Ibeto Cement Co [2007] 711 LMLN 2.
70 [1980] 1 Lloyds Rep 288.

Chapter 19

Arbitration Awards
Arbitration Awards

1. Introduction
2. Decision making
3. Types of award
4. When is a decision an award?
5. Formalities of an award
6. Remedies
7. Agreed awards
8. Certainty and completeness
9. Reasons for an award
10. Correcting mistakes
11. The effect of an award
12. Interest on awards
13. Currency of an award

1. INTRODUCTION
An award is the final and binding decision of an arbitrator. It is important that an award should be
final since this reflects the choice of the parties to use arbitration to resolve their disputes and not
merely as a precursor to court proceedings. Moreover, as a matter of policy, finality is important
since the object of arbitration is to provide an efficient and speedy means of resolving a dispute
once and for all. The importance of finality in arbitration means that the procedures available for
challenging an award in court have become increasingly limited (see Chapter 22). The courts are
always reluctant to allow challenges to be used to prolong a dispute and to this end they are
inclined to adopt a generous approach to the interpretation of awards.1
The making of an award has important legal consequences. The arbitrator has discharged his duty
and except for limited powers to correct mistakes (discussed below) no longer has jurisdiction to
make binding decisions in respect of the matters decided in the awardhe is described as functus
officio (having discharged his duty). The successful party will also be able to enforce the award,
invoking, if necessary, the enforcement procedures discussed in Chapter 23. Awards are
confidential to the parties and may not ordinarily be disclosed to third parties (confidentiality of
awards is discussed in Chapter 13).

2. DECISION MAKING

In the interests of candour, the deliberations of arbitrators when forming their decisions are
confidential. Apart from the reasons given with an award the parties are not entitled to know how
the decision was reached.2 If a dispute is determined by a sole arbitrator, then he clearly acts alone
in deciding the case and writing the award. Decision making is less simple where there is more
than one arbitrator. The position of dissenting arbitrators and their reasons is considered below.
The governing principle is that after the end of the hearing (or close of written submissions) the
parties are entitled to an impartial and fair consideration of all the issues in the case by all the
arbitrators acting together.3 This may take place by correspondence and it is usual practice for one
arbitrator to volunteer to draft the award and then to circulate it to the other arbitrators for
comments and eventual approval.4
In European Grain & Shipping Ltd v Johnston,5 one of the arbitrators went to Australia after
submissions were made but before an award had been drawn up. He signed three blank award
forms and left these with a letter stating his views with the third arbitrator. The other two
arbitrators disagreed with his views and issued a majority award on the signed forms. The Court of
Appeal held that, subject to a defence of waiver, the award should have been set aside since an
arbitration conducted by a tribunal of several arbitrators necessarily requires a joint process of full
and complete adjudication by all of them, so that the ultimate award represents the state of mind
of all of them at the time when they sign it.
However, Lord Denning MR commented that it was unnecessary for the members of a tribunal to
meet together to sign an award.6 The normal practice is for an award to be drawn up and sent to
the others for consideration. Once the draft is agreed it is then sent round and signed separately.
When all have signed, it becomes a final document. If one of those who sign first should change
his mind, then he can tell the others before they sign so that any amendments can be made before
the final signature.
Where an agreement provides for two arbitrators to determine their dispute then a third arbitrator
is to be appointed as chairman.7 Decisions, orders and awards will be made by a majority of the
tribunal, unless otherwise agreed, but the view of the chairman prevails in the absence of
unanimity or a majority.8 Under the LMAA Terms the two original arbitrators have power to
make binding decisions, awards and orders if this has been agreed.9 If an arbitration proceeds on
documents only then the two original arbitrators will commonly not appoint a third arbitrator
unless there is disagreement, thereby saving costs and time.
Where the agreement provides for an umpire, the original arbitrators have the power to make
decisions unless and until they cannot agree on a matter relating to the arbitration. In that event the
umpire will replace them as the tribunal with power to make decisions.10 In an arbitration on
documents the arbitrators will usually only appoint an umpire if they cannot agree. However, if
there is to be an oral hearing the umpire will be appointed at an earlier stage so that he can attend
the hearing. Under the LMAA Terms the umpire may take part in the arbitrators
deliberations.11 In the unlikely case of an agreement for two or more arbitrators with no umpire or
chairman the parties are free to agree how the tribunal is to make decisions and if the tribunal is
not in agreement, decisions will be made by a majority.12

Paragraph 20 of the LMAA Terms states that The time required for preparation of an award must
vary with the circumstances of the case. The award should normally be available within not more
than six weeks from the close of the proceedings.13 The six-week period is merely a guideline
and many awards take considerably more time. After the six-week period it would be reasonable
for a party to make enquiries as to progress on an award. However, parties have little means of
ensuring a prompt award although it may help to agree on a timetable when appointing the
tribunal. Parties will rarely be willing or able to invoke the ultimate sanction under section 24 of
the 1996 Act of removing an arbitrator for delay in making an award (see Chapter 11 on removal
of an arbitrator). When the award is ready the tribunal will notify the parties that it is ready for
collection upon payment of their outstanding fees and expenses.14

3. TYPES OF AWARD

Awards on different issues

A dispute may raise a number of issues and it may be appropriate to deal with them separately, to
save time and expense. For example, it may be possible to decide a claim for unpaid hire at a short
hearing without entering into a costly investigation of more complex factual disputes. If
jurisdictional objections are raised it may be appropriate for the tribunal to make an award on its
own jurisdiction and this may be subject to challenge under section 67 (see Chapter 22). Some
aspects of a case may also be urgent or commercially or legally determinative of the parties
dispute (see Chapter 16 on preliminary issues). The arbitrators power to make an award on part of
the claim at an early stage of the proceedings may be of particular tactical significance where a
party can establish that a minimum sum (typically hire or freight) is indisputably due to him.
It is clear that a tribunal has a wide discretion to decide different aspects of a case at different
stages in different awards. Indeed, it is now part of its duty to adopt procedures suitable to the
circumstances of the case.15 Each case will depend on its facts but matters relevant to the exercise
of the discretion include the saving of time and costs and also whether making (or refusing to
make) an award will cause undue prejudice to either party, for instance if one party is being
deprived of money which is needed urgently and which is undoubtedly due.16 An arbitrator can
also grant a declaratory award on the issue of whether one party is entitled to an indemnity against
future liabilities: however, in the interests of certainty, such an award should not generally be
made unless those liabilities can be assessed.17 Section 47 of the 1996 Act clarifies the position
regarding arbitrators powers by providing that:

(1) Unless agreed otherwise by the parties, the tribunal may make more than one award at
different times on different aspects of the matters to be determined.
(2) The tribunal may, in particular, make an award relating
o (a) to an issue affecting the whole claim,
o (b) to a part only of the claims or cross-claims submitted to them for decision.
(3) If the tribunal does so, they shall specify in their award the issue, or the claim or part of a
claim, which is the subject matter of the award.

Awards issued at interim stages of an arbitration have commonly been called interim or interim
final awards but this terminology was avoided in the legislation because these awards are final on

the matters decided.18 The term partial award is now sometimes used as a title to indicate that
the tribunal may make further awards on further issues.
When making an award it is important that the arbitrator specifies the issues decided since the
award on that issue is final: it is not a temporary financial adjustment and an arbitrator cannot
change his mind on matters decided in it.19 It is common for a tribunal to reserve some issues,
such as costs, for consideration after the main award on the merits.20 In these circumstances it is
helpful for the tribunal to identify the matters that are reserved for a further decision. If the
arbitrator also states provisional views on an issue not decided in that award he should make this
clear.21 Since the decision to make an award at an early stage is discretionary an arbitrator may
impose conditions when making it, for instance by requiring one party to put up security for a
cross-claim.22
It would be extremely difficult to challenge an arbitrators decision on whether to make an award
on a specific issue as it is a discretionary matter as to the most appropriate way to conduct the
proceedings. Clearly, arbitrators must respect their duty to act fairly between the parties but only
very exceptionally could their decision be challenged on the grounds of failure properly to
conduct the proceedings or serious irregularity or lack of jurisdiction.23 Appeal for error of law
would also be difficult by reason of the discretionary nature of the decision and it would only be
possible if the decision was contained in a reasoned award.24
In The Trade Fortitude,25 a voyage charter dispute arose in which there were claims for demurrage
and cross-claims for cargo shortage and excess discharging times. The owners asked for an
immediate interim award of demurrage they regarded as indisputably due. The majority of the
tribunal decided that it would be inappropriate to make an award pending decision on the crossclaims. Their decision was embodied in a formally drawn up document called an interim final
award against which charterers sought to appeal. Judge Diamond QC dismissed the appeal on the
ground that no question of law was raised by the manner in which the arbitrators discretion was
exercised. He held that the arbitrators had a complete discretion as to whether or not to issue an
interim award.

Provisional orders
Awards are to be distinguished from provisional orders, which can be adjusted in the tribunals
final award. Section 39 of the 1996 Act expressly recognises the power of the parties to vest the
tribunal with the power to order relief on a provisional basis, including orders for interim
payments for the costs of the arbitration and provisional orders for the payment of money or
disposition of property. However, any such provisional order remains subject to the tribunals
final determination and are not enforceable under the New York Convention. A provisional order
would not be subject to appeal or other judicial challenges, a pre-condition of which is the
exhaustion of available arbitral processes of review. The power to make provisional orders only
arises where the parties have agreed on it. There is no such agreement in the LMAA Terms and
provisional orders are not common in maritime arbitration, as there may be practical difficulties in
enforcing any variations of such orders.

4. WHEN IS A DECISION AN AWARD?

The question of whether a decision is an award is of practical importance because an award has
legal consequences which a mere ruling does not:

(a) the arbitrator will be precluded from making any further ruling or changing his mind on a
matter decided in an award;
(b) the parties will be precluded from raising the matter determined in future litigation;
(c) an award must be reasoned (unless agreed otherwise) and it will attract the courts
supervisory powers over awards under the 1996 Act (e.g., leave to appeal or remission on
grounds of serious irregularity);
(d) time limits will apply for challenging an award under the 1996 Act;
(e) only awards are enforceable under the New York Convention.

In The Smaro,26 arbitrators made an order (without reasons) giving the claimants permission to
amend their claim. Two months later they advised the parties that on reconsideration, they had
decided not to allow one of the amendments. Rix J held that the tribunal had jurisdiction to change
their minds; if arbitrators are clear in their own mind that they have erred, it is no bad thing that
they should have the courage to say so. The order was not an award because it was not a decision
on the merits, nor did it dispose of the matter in issue, nor was it expressed to be an award.
During an arbitration, many procedural issues need to be decided (e.g., as to whether to hold an
oral hearing). This sort of decision is often called an interlocutory decision and it is usually made
informally, typically by an oral order at the end of a meeting or in a letter addressed to the parties.
The 1996 Act recognises that arbitrators may make decisions of different sorts by referring to the
tribunals power to make rulings, orders, decisions, declarations, directions and awards.27 There is
no definition of an award in the 1996 Act, although section 52 identifies the formal requirements
of an award. As a matter of substance an award is a decision finally disposing of a relevant matter
in dispute.28 An important consideration when identifying what an award is will be whether the
arbitrators intended to make an award conclusively determining the issue.29 Where one of the
parties has applied under section 41(3) of the 1996 Act for an award dismissing a claim for want
of prosecution (see Chapter 14) the tribunals decision will generally be treated as an award even
if the application is refused. Where jurisdictional or procedural issues are raised the issue of
whether the decision is an award will depend on the circumstances and in particular whether the
recipients of the decision would reasonably have understood it to be a final determination of the
matter in dispute.
In The Robin,30 the arbitrator sent the parties a letter making rulings on the existence of an
arbitration agreement. The letter was not described as an award but Toulson J found that it was an
award on the tribunals substantive jurisdiction. The question to my mind is whether the letter
would have been understood by its recipients as intended to be the arbitrators adjudication on the
disputed question. In my judgment it would.
In Michael Wilson & Partners Limited v Emmott,31 the tribunal made a written procedural order
dealing with an amendment application. The claimant applied under section 67 to challenge the
decision contained in the procedural order on grounds that it was an award on jurisdiction. Teare J
decided that the decision was not an award subject to challenge under section 67 because the

parties had not requested a ruling on jurisdiction and a reasonable recipient would not have
understood it to be an award.
If parties are contemplating an appeal against any procedural decision they must ask the arbitrator
to make his decision in the form of a reasoned award. An arbitrator can probably make procedural
decisions in the form of an award but he is certainly entitled to exercise his discretion not to.32 It is
correct (and desirable) that such a decision should generally not be treated as an award unless the
tribunal clearly so intended. The courts will generally be reluctant to recognise procedural
decisions as awards as this would expose them to challenge and the courts wish to keep judicial
intrusion to a minimum.33
In practice, it would be very unusual for arbitrators to consider it appropriate to make a procedural
decision into an award, since many of these decisions are not be intended to be final, and the
tribunal may be willing to revisit the matter if circumstances change. It might, however, be
appropriate to make an award if the issue was of particular significance to the outcome of the
claim, or the tribunal considered that the subject-matter was suitable for appeal because it raised
legal issues of general importance.

5. FORMALITIES OF AN AWARD
Section 52 of the 1996 Act provides that:

(1) The parties are free to agree on the form of an award.

(2) If or to the extent there is no such agreement, the following provisions apply.
(3) The award shall be in writing, signed by all the arbitrators or all those assenting to the
award.
(4) The award shall contain the reasons for the award unless it is an agreed award, or the
parties have agreed to dispense with reasons.
(5) The award shall state the seat of the arbitration and the date when it is made.

This provision follows article 31 of the Model Law. The principal purpose of these formal
requirements is to assist enforcement of awards. If an award is lacking in a formal requirement
(e.g., it does not state the seat of the arbitration) then it would be technically invalid. However,
apart from the requirement that the award be in writing, a formal defect would not affect
enforceability under the New York Convention and it would be unlikely to give rise to challenge
in the English courts as the defect is unlikely to cause substantial injustice. The defect will usually
be curable by issuing a new award (making a formally invalid award would probably not render
the tribunal functus officio), a correction under section 57 (discussed at section 9 below), or by
applying to the court for remission under section 68(2)(h) (discussed in Chapter 22 on challenges).
The parties may wish to ask the tribunal to set out the award so as to deal with separate heads of
claim so as to allow for part enforcement if other parts of the award are challenged.34
Under section 53 of the 1996 Act it is presumed that, unless otherwise agreed, an award is made at
the seat of the arbitration regardless of where it is signed, despatched or delivered to any of the
parties. This removes potential legal problems which might otherwise arise where an award is
signed abroad.35 Unless the parties agree otherwise, the tribunal may decide what is to be taken to
be the date on which the award was made and in the absence of any such decision, the date of the

award shall be taken to be the date on which it is signed by the arbitrator or, where more than one
arbitrator signs the award, by the last of them.36
Where more than one arbitrator makes the award it is not necessary for the arbitrators to sign an
award together at the same time and place.37 They are seldom together when they sign and it is
common practice to discuss in writing or by phone before reaching consensus. They will then
circulate the signature page between them. Section 52(3) makes clear that an award will be valid if
it has the signature of the assenting arbitrators or all the arbitrators (including the dissenters).38

Recitals
It is common for an award to set out recitals (introduced by the term whereas) setting out
matters that are not in dispute, such as the relevant arbitration agreement and the terms of the
arbitrators appointment. Normally these do not strictly form part of the award or its reasons and
simply set out the basis upon which the arbitrator was acting.

6. REMEDIES
It is an implied term of an arbitration agreement that, subject to the parties contrary agreement
and certain exceptions, a remedy available to a court can be awarded by an arbitrator.39 Any
exceptions to this will arise by reason of the status of arbitrators, for example they lack coercive
powers available to the courts to punish for breach of their orders and lack jurisdiction to make
orders binding third parties. Section 48 of the 1996 Act clarifies the law by providing that:

(1) The parties are free to agree on the powers exercisable by the arbitral tribunal as regards
remedies.
(2) Unless otherwise agreed by the parties, the tribunal has the following powers.
(3) The tribunal may make a declaration as to any matter to be determined in the proceedings.
(4) The tribunal may order the payment of a sum of money, in any currency.
(5) The tribunal has the same powers as the court
o (a) to order a party to do or refrain from doing anything
o (b) to order specific performance of a contract (other than a contract relating to land)
o (c) to order the rectification, setting aside or cancellation of a deed or other document.

The most common remedy is the award of a sum of money (whether by way of damages, debt or
indemnity) but section 48 makes clear that arbitrators have extensive powers to grant other
remedies. In particular, the parties may agree to confer power on the tribunal to award different
remedies to those available in court (e.g., wider powers to award punitive damages). Even if the
parties do not expressly agree to confer specific powers, it is likely that the tribunal will be treated
as having greater flexibility than a court in exercising its powers under section 49 (except in
relation to injunctions, specific performance and rectification which are expressly limited under
section 49(5) to the same powers as available in court). However, the tribunal will be required to
decide the dispute in accordance with the law chosen by the parties.40
Section 48(5)(a) makes clear that tribunals may grant injunctions. This only gives the tribunal
power to grant final injunctive relief and would preclude the grant of interim relief on a
provisional basis unless the parties have agreed on such powers under section 39 (regarding power

to make provisional awards).41 This construction of the Act reduces the practical usefulness of
arbitrators powers to grant injunctions since injunctive relief is commonly sought on an interim
basis (typically pending a final hearing which will finally determine the parties rights). This
restriction on arbitrators powers is not obvious from the face of the Act or the DAC Report42 but
it was applied in Starlight Shipping Co vTai Ping Insurance Co Ltd 43 where Cooke J held that
arbitrators had power under the LMAA Terms to make a final award restraining the pursuit of
foreign proceedings, but not an interim award.44
There are, however, more practical problems with tribunals granting injunctive relief. In
particular, arbitrators may not be able to act at extremely short notice (e.g., where a tribunal has
not yet been constituted) and LMAA arbitrators will ordinarily refuse to hear an application made
without notice to the other party.45 Arbitrators also lack the courts strong powers to punish for
breach (including imprisonment for contempt) and the injunction of an arbitral tribunal would not
bind third parties such as banks. For these reasons it may be preferable, and possible, to obtain a
court injunction under section 44 (see Chapters 8 and 18 on injunctions and security for the
claim).

7. AGREED AWARDS
If the parties settle their dispute before an award is made then it may be convenient for the
arbitrators to make an award (sometimes called a consent award) recording the settlement: in
particular the award may facilitate enforcement of the settlement agreement. This practice is
common and is recognised under section 51 of the 1996 Act which follows Article 30 of the
Model Law. It provides that:

(1) If during the arbitral proceedings the parties settle the dispute, the following provisions
apply unless otherwise agreed by the parties.
(2) The tribunal shall terminate the substantive proceedings and, if so requested by the parties
and not objected to by the tribunal, shall record the settlement in the form of an agreed award.
(3) An agreed award shall state that it is an award of the tribunal and shall have the same
status and effect as any other award on the merits of the case.
(4) The following provisions of this Part relating to awards (sections 52 to 58) apply to an
agreed award.
(5) Unless the parties have also settled the matter of the payment of the costs of the
arbitration, the provisions of this Part relating to costs (sections 59 to 65) continue to apply.

It is important to note that the tribunal may refuse to make an agreed award, for example because
it contains an arrangement designed for money laundering or to evade tax or defraud an insurance
company. The agreed award need not be named as such but at the enforcement stage the court
should be informed if the award is agreed.46

8. CERTAINTY AND COMPLETENESS

To be enforceable, an award must satisfy certain minimum requirements of certainty and
completeness. For instance, it should not leave some issues to be decided by a third party.
However, it is common for the tribunal to specify rates and periods of interest but leave the
calculations for the parties to complete.

In River Plate Products Netherlands BV v Etablissement Coargrain,47 an award was remitted to

arbitrators as, on the face of it, it was uncertain and unenforceable in that it provided for an award
to the sellers of a certain sum less an unidentified and unquantified deduction.
Section 68 of the 1996 Act enables an award to be challenged on grounds of uncertainty or
ambiguity as to the effect of the award and failure by the tribunal to deal with all the issues that
were put to it. These provisions are discussed in more detail in Chapter 22 on challenging
awards.
In practice, the tribunal may decide that there are some issues, typically relating to quantum,
which could be more economically determined by an agreement between the parties. They may
leave over these issues in their award but it should be made clear that no award is made in respect
of them. The arbitrators jurisdiction is reserved in case the parties fail to agree on these matters.

9. REASONS FOR AN AWARD

The requirement to give reasons

Section 52(4) of the 1996 Act imposes a general rule that reasons should be given for the award.
This was introduced to follow the Model Law and also because it is a basic rule of justice that
those charged with making a binding decision affecting the rights and obligations of others should
(unless those others agree) explain the reasons for making that decision.48
Reasons are not required if the parties agree on a different form of award or if the award is agreed
under section 51 of the 1996 Act (see above at section 6), or where the parties agree in writing to
dispense with reasons. An agreement to dispense with reasons is treated as an agreement to
exclude the courts jurisdiction on appeals.49 Paragraph 22 of the LMAA Terms expressly
provides that an award will contain reasons unless the parties agree otherwise. If the parties agree
to dispense with reasons then the tribunal will issue an award without reasons together with a
separate document (called privileged reasons) which gives an outline of the reasons for the
tribunals decision.50 The privileged reasons will usually expressly state that they are issued only
for the information of the parties and are not to be used in connection with any proceedings related
to the award. Their main use is to inform the parties of the arbitrators reasoning and to enable
them to check for mistakes of calculation.51
If reasons are requested then these will be provided in a separate document, normally expressly
stating that the reasons form part of the award.
Awards and their reasons (whether privileged or not) are confidential: they may only be disclosed
to third parties in limited circumstances, for example where it is necessary to pursue a claim for an
indemnity against a third party or where an appeal is made (see Chapter 13 on confidentiality).
Privileged reasons are given greater confidentiality than ordinary awards or reasons since unless
the court shall otherwise determine they may not be relied upon or referred to by either party in
any proceedings relating to the award. This means that they may not be referred to in a court
application to challenge an award on grounds of lack of jurisdiction or serious irregularity.
However, the parties agreement on confidentiality of such reasons cannot oust the courts
jurisdiction and the courts will consider such reasons if this is necessary as a matter of public

interest, in particular if this is required in order to investigate an allegation of serious

irregularity.52

What reasons are expected?

No definition of a reason is given in the 1996 Act. The reasons which arbitrators are required to
give should be a simple plain statement of why the arbitrators reached the conclusions they did;
arbitrators will not be expected to enter into detailed analysis of the law and the authorities.53 The
courts will tend to take a benevolent approach in interpreting reasons so as to give effect to the
finality of arbitration.54 However, it is clear that the reasons for the award must be given in
sufficient detail for the court to consider any question of law arising from them if asked to give
permission to appeal.55 Mance J explained what is expected of a reasoned award
in Transcatalana vINCOBRASA:56
The function of a reasoned award is not simply to identify and determine a point which the
arbitrators ultimately considered to be decisive. It is to enable the parties and the court

(a) to understand the facts and general reasoning which led the arbitrators to conclude that this
was the decisive point, and
(b) to understand the facts, and so consider the position with respect to appeal, on any other
issues which arose before the arbitrators.

Where distinct issues have been argued, the award should thus indicate the nature of the findings
and reasoning on each, including those which the arbitrators may not themselves have thought to
be determinative.
If an arbitrator is asked to state the reasons for his decision, he should state his conclusions on all
important issues even though several reasons may lead to the same result, as this may avoid
unnecessary remissions.57 However, in relation to challenges under the 1996 Act on the basis that
the tribunal has failed to deal with the issues put to it, the courts have generally taken the view that
a tribunal is not required to decide all issues raised by the parties but only those which are
essential to determine the claim.58
Arbitrators should avoid drawing up awards consisting of lengthy recitations of the facts and the
parties submissions followed by an extremely brief summary of the arbitrators findings and the
reasoning upon which those findings were based.59 Sometimes, it can be useful for arbitrators to
attach or incorporate relevant documents such as contracts or fixture telexes to awards, but
arbitrators are generally justified in refusing one partys request to attach documents to an award.
In The Apollonius,60 an issue arose as to whether charterers delay in making hire payments
amounted to repudiatory breach. The charterers had asked the arbitrators to annex to the award
copies of telexes relevant to the alleged breach but they had refused to do so. The charterers
unsuccessfully applied for the award to be remitted and for leave to appeal. Bingham J held that
whether arbitrators annex documents to their award is very much their own choice. It may be
useful to annex documents to avoid extensive summary, or it may not. However it may be more
desirable for the arbitrators to summarize the conclusions they draw from primary documents
rather than merely annexing them. If material is annexed it is very hard indeed for the court to

resist the temptation to put its own construction on, and thus make its own evaluation of, such
documents. That is not the courts task.

Relief if no reasons are given or the reasons are

inadequate
If the tribunal forgets to give reasons (or privileged reasons are given by mistake) then it can
remedy the error under section 57 of the 1996 Act (discussed at section 9 below). If the tribunal
refuses to give reasons then a party can apply to have the award remitted to the tribunal under
section 68(2)(h) on the grounds of serious irregularity in the form of the award. The reasons could
also be challenged on the grounds that the tribunal has failed to deal with the issues that were put
to it under section 68(2)(d). These methods of challenge are considered in Chapter 22. If,
however, the parties have agreed to dispense with reasons then it will be very difficult to establish
that there has been any serious irregularity.
Section 70(4) of the 1996 Act gives the court further power to require the tribunal to give reasons.
It provides that:
If on any application or appeal it appears to the court that the award:

(a) does not contain the tribunals reasons, or

(b) does not set out the tribunals reasons in sufficient detail to enable the court properly to
consider the application or appeal,
(c) the court may order the tribunal to state the reasons for its award in sufficient detail for
that purpose.

The court may exercise this power of its own volition but ordinarily one of the parties to the
application will seek an order requiring the tribunal to state its reasons or to give more detailed
reasons. The application should ordinarily be made before the hearing of the main application
challenging the award.61 If parties have agreed to dispense with reasons it is very unlikely that the
courts powers under section 70(4) would be exercised, since the parties are treated as having
excluded the courts jurisdiction on appeals. The 1996 Act has extended the courts ability to
order reasons beyond appeals on points of law since section 70(4) enables it to make such orders
on application under sections 67 or 68.62 However, reasons are less likely to be necessary for a
challenge based on serious irregularity under section 68 or want of jurisdiction under section 67
(since this involves a re-hearing, not a review of the tribunals reasoning).
The courts have generally exercised their jurisdiction to order the tribunal to give further reasons
extremely sparingly. First, applications for reasons are costly, incur delays and are inconsistent
with the purpose of the 1996 Act of conferring finality on awards.63 In addition, asking arbitrators
for reasons weeks or months after they have prepared an award is oppressive. (This latter factor
has less force where the arbitrators have given privileged reasons for an award or the application
for further reasons is made very promptly.) The court would only make such an order if the
reasons were likely to be of substantial use in the application or appeal in issue. Such orders
should never be made simply on the basis of let us wait and see what the arbitrator will
say.64 Given the parties broad power to ask the tribunal to clarify ambiguity in the award or give

further reasons65 under section 57 of the 1996 Act (see below), parties should always invoke
section 57 if there is a mistake that could properly be corrected. Although the courts power to
order further reasons does not overlap entirely with the tribunals powers to correct an award
under section 57, an application under section 70(4) may face difficulties if no request has been
made under section 57.66
When deciding whether to make an order for reasons the court will probably be reluctant to look
beyond the award itself unless there is ambiguity on its face67 or the application in question relates
to the conduct of the arbitration.68Extrinsic evidence of correspondence between the parties or
matters raised during the course of the arbitration would ordinarily be irrelevant and inadmissible
in relation to an appeal against an award on grounds of error of law.69Otherwise the application for
reasons could be used as a means of enabling the court to consider questions of fact or matters
which were not raised in the arbitration. It is arguable, however, that the party opposing the
application for reasons may adduce evidence of what was put before the arbitrator to show that the
reasons requested could not lead to a different outcome.70

Reasons of a dissenting arbitrator

Where there is more than one arbitrator there is room for disagreement and the dissenting
arbitrator must be given an opportunity to put forward his views and consider the views of the
majority.71 The appointment of an umpire to decide the dispute is one means of dealing with
disagreements. Otherwise the view of the majority, or the chairman, will usually prevail (see
above under section 2). Where a reasoned award is issued the reasons of the dissenting arbitrator
are generally included as a matter of courtesy. The dissenting arbitrator is not entitled to have
these reasons attached and they do not form part of the reasons for the award.72 The reasons given
by the dissenting arbitrator cannot be treated as findings of fact or law, although they may be
persuasive on a point of law.73 The reasoning of a dissenting arbitrator may also be relevant in an
application to challenge an award for serious irregularity, for example to show that the majority
took an argument into consideration or that an important point was decided without reference to
the parties.74 If arbitrators come to the same conclusion by different reasoning then it is likely that,
in accordance with section 20(4) of the 1996 Act, the reasons of the majority or the chairman
would prevail and should be given as the reasons for the award.75

10. CORRECTING MISTAKES

A published award is final and the arbitrator cannot alter it since he is functus officio. However, it
would lead to unnecessary inconvenience if an arbitrator could not correct obvious mistakes and
section 57 of the 1996 Act expressly provides for this.

(1) The parties are free to agree on the powers of the tribunal to correct an award or make an
additional award.
(2) If or to the extent that there is no such agreement, the following provisions apply.
(3) the tribunal may on its own initiative or on the application of a party
o (a) correct an award so as to remove any clerical mistake or error arising from an
accidental slip or omission or clarify or remove any ambiguity in the award, or
o (b) make an additional award in respect of any claim (including interest or costs) which
was presented to the tribunal but omitted from the award.

These powers shall not be exercised without first affording the other parties a reasonable
opportunity to make representations to the tribunal.

(4) Any application for the exercise of those powers must be made within 28 days of the date
of the award76 or, in either case, such longer period as the parties may agree.
(5) Any correction of an award shall be made within 28 days of the date the application was
received by the tribunal or, where the correction is made by the tribunal on its own initiative,
within 28 days of the date of the award or, in either case, such longer period as the parties
may agree.
(6) Any additional award shall be made within 56 days of the date of the original award.
(7) Any correction of an award shall form part of the award.

This provision reflects Article 33 of the Model Law but its wording also closely follows that of the
previous slip rule for correction of errors.77 It appears to allow the arbitrator the power to
remedy the award in four principal respects:

(a) to correct clerical mistakes;

(b) to correct errors arising from an accidental slip or omission;78
(c) to clarify ambiguities; and
(d) to make an additional award in respect of claims not dealt with.

These powers would allow for correction or clarification of the tribunals reasons for the award
which are likely to be treated as part of the award for this purpose. (It is common for the tribunal
to state expressly that reasons are part of the award.) Clerical mistakes cover typographical errors
and mistakes in transcription or even of accounting (e.g., referring to the wrong party or adding an
extra zero). Errors arising from an accidental slip or omission cover a wider range of mistakes
but it is important to note that section 57 does not allow an arbitrator to change his mind to correct
a mistaken appreciation of fact or law.79 It can sometimes be difficult to distinguish between an
accidental error (which can be corrected under section 57) and a deliberate but mistaken judgment
(which cannot) but the court will tend to construe section 57 to allow corrections of obvious
mistakes by an arbitrator.
In The Montan,80 the arbitrator accepted the expert evidence of charterers on fuel consumption,
but calculated the balance of account incorrectly, treating the owners calculation as that of
charterers. The Court of Appeal found that this was a mental lapse which could have been
corrected by the arbitrator under the slip rule.
In Gannet Shipping Limited v Eastrade Commodities Inc 81 the umpire awarded owners $21,000
in loadport demurrage plus their costs. In fact the parties had agreed a figure of $860 for loadport
demurrage and the error was accepted by both parties. The umpire published a correction to the
award and also varied his original costs order to require charterers to pay half, not the whole, of
the owners costs. The owners claimed that the umpire had no jurisdiction to vary his costs order.
Langley J decided that the error in the amount of demurrage awarded was an accidental slip and
the correction of the costs award was a consequence of that slip. The wording of section 57(3)(a)
and the powers conferred to correct awards under the LMAA Terms were wide enough to cover
both corrections.

The tribunals power under section 57(3)(a) to clarify or remove any ambiguity in the award
enables the tribunal to improve its award to make it clearer and enables a party to request further
reasons from the arbitrator, or even to give reasons where none have previously been
given.82 However, its purpose is not to enable a party to require the tribunal to deal with every
argument put forward or explain each step taken in arriving at a conclusion.83
Section 57(3)(b) makes clear that the tribunal has power to make a further award on any claim
presented to the tribunal but not dealt with in the award (typically costs or interest84). This
provision has been more restrictively interpreted to cover a head of claim which has been
presented as opposed to an issue put forward as part of a claim.85 It would not cover a situation
where the tribunal expressly reserved their decision on costs for consideration in a further
award.86 Section 57 does not make any express provision for the parties costs relating to an
application for a correction but if the tribunal does make an additional award pursuant to section
57 then it could award the costs of the additional award.87
The courts broad construction of section 57 means that there is substantial overlap between the
sort of errors which could be corrected by the tribunal under section 57 and serious irregularities
that would attract relief from court under section 68. Given that a party must exhaust recourse
available within the arbitral process before applying to court (section 70(2) of the Act) this means
that recourse to section 57 should generally be made before attempting to apply to the court for an
award to be remitted on grounds of uncertainty or failure to deal with an issue.88
In Torch Offshore LLC v Cable Shipping Inc charterers claimed the right to rescind a charter on
grounds of two misrepresentations. They challenged the award under section 68(2)(d) on grounds
that the arbitrator had failed to address the question of whether the second misrepresentation had
induced the charter. Cooke J held that failure to address the question of inducement would have
amounted to a serious irregularity. However, the challenge failed under section 70(2) (failure to
exhaust available recourse under section 57) because charterers could have used section 57 to ask
the tribunal to clarify whether it had decided against them on inducement.
Where an application has properly been made under section 57 then the 28-day time limit for
making an application to challenge the award (e.g., for uncertainty or on grounds of error of law)
most probably runs from the date when the parties are notified of the result of the section 57
application.89 However, if a court later finds that the mistake did not properly fall within section
57 then the subsequent section 68 application may be found to be out of time. This risk may put
parties in some dilemma as to whether to make an application under sections 57 or 68, or even
both. There is sometimes a fine distinction between a situation where the award is ambiguous
(justifying an application under section 57) and one where the tribunal has simply failed to deal
with a particular step in an argument (outside the scope of section 57). However, the dilemma is
unlikely to cause real prejudice since if a mistake would not justify correction under section 57 it
is unlikely to merit relief under section 68.90 To avoid arguments on time limits where there is
potential relief under section 57 it will usually be safest to obtain an agreement to extend time for
challenging the award from the other side,91 or to make an application both under section 57 and
section 68 within the 28-day time limit.

If the arbitrator refuses to correct an error or omission within the scope of the slip rule then the
parties can apply for the award to be remitted under section 68 on grounds of serious irregularity
(typically for uncertainty or failing to deal with issues put to him). If the mistake is not within the
scope of section 57 but the arbitrator has admitted that he has made an error then the matter could
probably also be remitted under section 68.92 In agreeing to arbitrate, the parties cannot have
intended to be bound by a decision which the arbitrator has himself accepted as wrong.93 If the
arbitrator refuses to admit a mistake, for instance a mathematical error, then arguably the court
may remit the award on grounds of failure to act fairly between the parties94 as the flaw in the
tribunals process is outside that which could be reasonably expected of an arbitrator. It cannot
have been intended that the parties would be bound by obvious mathematical errors.95 However,
the court will only intervene in such circumstances where the tribunals mistake cannot be treated
as an acceptable consequence of arbitrating, otherwise it would be substituting its judgment on a
question of fact for that of the chosen tribunal.
If the arbitration is conducted under the LMAA Terms then paragraph 25 of the Terms will also be
applicable to govern corrections. It provides that:

(a) In addition to the powers set out in Section 57 of the Act, the tribunal shall have the
following powers to correct an award or to make an additional award:
o (i) The tribunal may on its own initiative or on the application of a party correct any
accidental mistake, omission or error of calculation in its award.
o (ii) The tribunal may on the application of a party give an interpretation of a specific
point or part of the award.
(b) An application for the exercise of the powers set out above and in Section 57 of the Act
must be made within 28 days of the award unless the tribunal shall think fit to extend the
time.
(c) The powers set out above shall not be exercised without first affording the other parties a
reasonable opportunity to make representations to the tribunal.
(d) Any correction or interpretation of an award may be effected in writing on the original
award or in a separate memorandum which shall become part of the award. It shall be effected
within 90 days of the original award unless all the parties agree a longer period.

This provision differs from section 57 in that it appears to give the tribunal wider power to expand
on its reasons or give its views on a particular point. It also enables the tribunal to extend the time
limit for requesting a correction (under section 57 such an extension of time is ordinarily only
available from the court under section 7996) and allows the tribunal a longer period (90 days) to
issue a correction or interpretation of an award.
If an application to court under section 79 is necessary for an extension of time for requesting a
correction under section 57 then the court must be satisfied that substantial injustice would be
done if no extension were granted. This will involve an assessment of the explanation of the delay,
potential prejudice caused to the other party and the prospects of obtaining a correction (although
the fact there is an admitted mistake in the award does not in itself justify an extension of
time).97 If the tribunal is considering whether to grant an extension of time it will take into account
the same considerations of fairness but will not be bound by the statutory requirements in section
79.

11. THE EFFECT OF AN AWARD

Under section 58 of the 1996 Act:

(1) Unless otherwise agreed by the parties, an award made by the tribunal pursuant to an
arbitration agreement is final and binding both on the parties and on any persons claiming
through or under them.98
(2) This does not affect the right of a person to challenge the award by any available arbitral
process or appeal or review or in accordance with the provisions of this Part.

This provision restates the general principle that an award is final and binds the parties to the
arbitration. An award is presumed to be entirely valid until it (or any part of it) has been
successfully challenged (for example by being declared void, set aside, remitted or varied). A
valid award has a number of significant consequences.

(1) The arbitrator is rendered functus officio. He no longer has jurisdiction to make binding
decisions in relation to the matters decided in the award.
(2) The successful claimant (including a successful counterclaiming respondent) can invoke
the available enforcement procedures to obtain the fruits of the award.
(3) The successful claimant has a right to sue on the award which supersedes the right
founding the arbitrated claim. He cannot bring a fresh action or commence an arbitration
raising claims which were within the tribunals jurisdiction, whether or not they were brought
to its attention. This follows from the rule of public policy that a person should not be
punished twice for the same fault. Once a matter has been decided between parties, then
neither party can re-litigate it again: the parties are bound, or estopped, by the decision. This
doctrine is sometimes called res judicata and this particular aspect is called cause of
action estoppel.99
(4) Both parties are also precluded from contradicting, as between themselves, the decision of
the arbitrator on questions of fact or law in any subsequent proceedings. This is a further
aspect of the doctrine of res judicatasometimes referred to as issue estoppel.100 Issue
estoppel arises from determinations of issues that are necessary to the tribunals decision; it
would not arise from findings that are obiter or collateral.101 A party relying on an issue
estoppel must establish that the decision is final and conclusive.102 The doctrine is also not
applicable to procedural rulings.103
(5) A further aspect of the doctrine of res judicata is that a party cannot raise in subsequent
proceedings matters which could, and therefore should have been litigated in earlier
proceedings. This principle of longstanding authority was set out
in Henderson v Henderson:104

The court requires the parties to that litigation to bring forward their whole case, and will not
(except under special circumstances) permit the same parties to open the same subject of litigation
in respect of matter which might have been brought forward, only because they have, from
negligence, inadvertence, or even accident, omitted part of their case. The plea of res
judicata applies, except in special cases, not only to points upon which the court was actually
required by the parties to form an opinion and pronounce a judgment, but to every point which

properly belonged to the subject of litigation, and which the parties, exercising reasonable
diligence, might have brought forward at the time.
These principles are based on the public interest in having finality in court litigation and not
having a party vexed twice in the same matter105 but also give effect to a partys private law right
to enforce the first ruling.106 These principles are applied generally in arbitration even though
there is weaker public interest in preventing re-litigation and parties may have chosen to exclude
certain issues from the arbitrators jurisdiction or postpone them for later determination.107
An argument based on the doctrine of res judicata can be raised as a defence in any subsequent
claim, or could be used to challenge an arbitrators jurisdiction.108 Determining the question of
whether an award has given rise to an issue estoppel raises difficult questions beyond the scope of
this book (e.g., whether two claims raise the same issues).
The application of the rules set out above may cause injustice in individual cases; for instance a
party may be precluded from recovering damages for losses which only came to light after the
award was made. They may also be inconvenient, for instance unless agreed otherwise109 an
arbitrator cannot correct mistakes or omissions in an award unless they fall within section 57
(discussed above) or the parties agree. Despite these disadvantages the rules are justified by
expediency and the policy of finality in arbitration; a party should not be allowed to re-open the
subject matter of an arbitration and should only be entitled to bring a single claim against another
party for a particular cause of action. These principles will most readily be applied to prevent
conduct verging on abuse of the arbitral process.110 They will be applied flexibly, often as a matter
of procedure to suit the circumstances of the case and thus would be difficult to challenge in court.
For example, in London Arbitration 11/01,111 the tribunal made an award on liability arising out of
a vessels defective condition but it was willing to allow the claim to be amended to add a new
claim for damages for loss of income arising out of the vessels condition.
The most obvious application of the rule that the award supersedes the original right giving rise to
the claim is that once a claimant has obtained an award of damages it is precluded from pursuing a
further arbitration for the same cause of action to recover loss not claimed in the first arbitration,
even if that loss had not materialised at the time of the original arbitration. This is known as the
rule in Conquer v Boot.112
In The Caroline P 113 cargo receivers had obtained judgment for damages in respect of cargo
damage against owners in the Iraqi courts. Meanwhile other disputes (concerning off-hire and
slow-steaming) between owners and charterers were referred to arbitration in London and the
arbitrators published a final award. Lloyd J held that owners were entitled to bring a subsequent
claim against charterers for an indemnity in respect of the cargo loss. The rule
inConquer v Boot applied to arbitration, but the claim for an indemnity was a separate cause of
action which was not referred to the original arbitrators.
However, an unsatisfied award of damages granted pursuant to a claim in personam (i.e., against a
person or a company) will not preclude a claimant pursuing an Admiralty action in rem (e.g.,
against a vessel) based on the same facts.114

It appears that an award ordering payment of a debt (as opposed to damages) does not operate as a
bar to subsequent proceedings claiming damages, or a claim under a guarantee of that debt.
However, the award will constitute a final assessment of the quantum of liability of the
debtor.115 For similar reasons, an award declaring the existence of a right does not preclude a party
bringing proceedings to enforce that right.
In Compagnie Graniere SA v Kopp AG,116 buyers had obtained an award declaring liability for
non-delivery and subsequently referred their claim for damages to arbitration. Donaldson J held
that serial claims for damages based upon the same cause of action were not permissible, but that
the buyers claim for damages was distinct from their original claim which was confined to the
issue of the alleged breach. The original declaration disposing of the issue of liability did not
preclude the buyers from claiming damages.
Principles of res judicata apply only between the parties to the original award (or judgment). They
cannot be invoked by a third party in subsequent proceedings. For example, an arbitration award
on a particular issue arising between X and Y will not be binding if the same issue arises between
Y and Z. However, an arbitration award may be of some evidential value in a subsequent dispute
with a third party, in particular it may provide powerful evidence that X is liable to Y but it will
not be conclusive as to the findings therein in proceedings between Y and Z.117

12. INTEREST ON AWARDS

A successful party will usually be awarded interest on the sum payable under an award. The basic
rule is that the parties can agree on the tribunals powers as to the award of interest but in the
absence of such agreement the arbitrator will have powers as set out in section 49 of the 1996 Act.
Section 49 provides as follows:

(1) The parties are free to agree on the powers of the tribunal as regards the award of
interest.
(2) Unless otherwise agreed by the parties the following provisions apply.
(3) The tribunal may award simple or compound interest from such dates, at such rates and
with such rests as it considers meets the justice of the case
o (a) on the whole or part of any amount awarded by the tribunal, in respect of any period
up to the date of the award;
o (b) on the whole or part of any amount claimed in the arbitration and outstanding at the
commencement of the arbitral proceedings but paid before the award was made, in
respect of any period up to the date of payment.
(4) The tribunal may award simple or compound interest from the date of the award (or any
later date) until payment, at such rates and with such rests as it considers meets the justice of
the case, on the outstanding amount of any award (including any interest under subsection (3)
and any award as to costs).
(5) References in this section to an amount awarded by the tribunal include an amount
payable in consequence of a declaratory award by the tribunal.
(6) The above provisions do not affect any other power of the tribunal to award interest.

This provision gives the tribunal very wide118 powers to award such interest as it considers
meets the justice of the case. Such powers are subject to the parties agreement but the parties

choice of a foreign law in their contract (where such law may restrict the recovery of interest)
would not of itself amount to an agreement restricting the tribunals powers for the purpose of
section 49.119 In particular, arbitrators, unlike the courts,120 have general powers to award
compound interest. The DAC considered that this power was important to avoid delay and
injustice caused by a party delaying payment, as simple interest might not properly reflect the
claimants cost of being kept out of its money.121 LMAA arbitrators now usually award compound
interest unless there are reasons for not awarding it. The normal practice of maritime arbitrators in
London is to award interest at the three month Eurodollar rate plus 2 or 2.5 per cent, depending on
the circumstances of the case and the length of period for which interest is payable. Monthly
average interest rates are published in the LMAA Newsletter. If the claimant is a US company or
trades there substantially then it may be appropriate to take the US dollar prime rate and uplift by
about 2 per cent. Where other currencies are involved, higher or lower rates may be awarded if
evidence is given of the going rate. Interest on sterling awards is usually made on the basis of the
Base Lending Rate plus about 2 per cent. It is normal for the tribunal to award a rate midway
between what the claimant might have earned had the money been on deposit and what he would
have paid had he borrowed it. This explains the approximate 2 per cent uplift. Arbitrators will
generally award interest from the date on which the money should reasonably have been paid but
if a claimant has delayed in pursuing the arbitration the arbitrators may reduce the rate of interest
or the period for which interest is awarded.122
The tribunal should ordinarily award interest for the time for which the sum awarded has been
outstanding unless good reason is shown for not awarding it.123 The purpose of awarding interest
is to compensate the claimant for not having the benefit of the money to which he was entitled and
it should not be awarded to penalise the losing party.124 However it is clear that the tribunal has
been given wide discretion to award interest as it considers meets the justice of the case. It
would be extremely difficult to challenge an award of interest on the grounds of an error of law or
serious irregularity unless, possibly, it was shown that the arbitrator acted outside his reasonable
boundaries.125
If the tribunal fails to award interest then the matter can be referred back to it under section
57(2)(a) of the 1996 Act if it is a clerical or accidental error (see section 9 above), or the tribunal
can make a new award on interest under section 57(3)(b). However, if the tribunal is not willing to
remedy the omission it will be much more difficult to recover interest. Given the discretionary
nature of the tribunals powers under section 49, its omission is unlikely to be regarded as an
appealable error of law and the most appropriate remedy is likely to be remission on grounds that
the arbitrator failed to deal with the issue of interest.126 It is clear, however, that if the arbitrator
does not award interest as empowered under section 49, then the court has no jurisdiction to award
it.
Under the previous legislation, interest at the judgment rate accrued in any event on amounts
awarded. However, section 49 of the 1996 Act leaves it to the arbitrators to decide whether (and if
so what) interest should be granted on an outstanding sum; if the arbitrators do not award postaward interest then the court may not add it because this would not be warranted by the 1996 Act
and it would be contrary to the general principle against court intervention.127Accordingly, a party
should ensure that he applies to the tribunal for interest under section 49 and if the tribunal forgets

to award it then he must immediately apply for a correction or a further award.128 However, once
an award is entered as a judgment then judgment interest would normally run from that date.129
In Walker v Rowe,130 the tribunal made an award ordering the reinsured to pay the tribunals fees
and expenses by a given date. No application had been made at the hearing for interest on the fees
due but unpaid (post-award interest). The reinsurer applied for leave to enforce the award and
for an order that the reinsured pay post-award interest. Somewhat reluctantly Aikens J found that
the court had no power to award interest on sums awarded but remaining unpaid when entering an
award as a judgment where there was no reference to interest on the sum awarded.
In considering the interest which may be awarded it is sometimes necessary to draw distinctions
between different types of interest.

Interest payable up to the date of the award on an

amount awarded (section 49(3)(a))
This will normally be the most significant aspect of the award of interest.

Interest payable from the date of the award on an

amount awarded (section 49(4))
This is sometimes known as post-award interest. Under the previous law the tribunal only had
power to award interest at the judgment rate; now it has freedom to fix this type of interest at any
rate it considers meets the justice of the case. It is also clear from section 49(4) that the tribunal
can award interest on costs although this will only be payable from the date of the award (or a
later date).

Interest on an amount claimed in the arbitration but paid

before the award is made (section 49(3)(b))
Section 49(3)(b) follows the previous law131 in allowing for interest (now simple or compound) on
moneys paid during the course of the arbitration but prior to the making of the award. However,
like the previous law, it does not allow for recovery of interest on sums paid late but before
arbitration is commenced.132

Interest pursuant to agreed powers or on other grounds

Section 49(1) expressly enables the parties to confer further powers on the tribunal to award
interest. Section 49(6) preserves the tribunals power to award interest as a matter of contractual
right, for instance, where the contract expressly (or impliedly) provides for payment of interest.
Under English common law interest is not awardable by way of general damages for delay in
payment of a debt beyond the date when it was contractually due.133 However, interest on a debt
paid late could be recoverable as special damages if the loss suffered by reason of late payment
arose in the particular circumstances of the case and was within the parties reasonable
contemplation at the time of contracting.134 If the claim for interest as damages or as a debt is
proved it should be awarded as a matter of right rather than pursuant to the arbitrators discretion.

Statutory interest is also recoverable on certain debts under the Late Payment of Commercial
Debts (Interest) Act 1998.

13. CURRENCY OF AN AWARD

Under section 48(4) of the 1996 Act the tribunal may, unless agreed otherwise, order the payment
of a sum of money in any currency. In Lesotho Highlands Development Authority v Impregilo
SpA 135 a majority of the House of Lords held that this provision does not give the tribunal
unfettered discretion as regards the currency of an award. The tribunal must decide on the
currency of the award in accordance with established principles of English law as to the proper
currency recoverable.136
If the contract is governed by English law, it is necessary to ascertain whether there is an intention
that damages for breach should be awarded in a particular currency. The mere fact that hire or
freight is payable under a charter in US dollars will not necessarily mean that damages should be
paid in that currency although that will usually be the presumption. If, from the terms of the
contract, it appears that the parties have agreed on a currency of account and payment for all
transactions then it will generally be proper to give judgment in that currency, although the
overriding principle is to award damages in the currency which most truly expresses the
claimants loss. In the absence of clear intention as to the currency in which damages should be
payable the damages should be calculated in the currency in which the loss was felt by the
claimant. In ascertaining this currency the tribunal should ask which currency would properly
compensate the claimant and whether the parties would reasonably have had this currency in
contemplation at the time of contracting. Having established the appropriate currency for the
award of damages, it should ordinarily also award interest in that currency. The currency of an
award is unlikely to be subject to appeal for error of law since the tribunals decision on what
currency the loss was borne in is a matter of discretion as to what currency appropriately reflects
the recoverable loss.137
In The Despina R 138 claimant charterers settled a cargo claim in Brazilian cruzeiros; hire
payments under the charter were to be made in US dollars. The House of Lords held that
respondent owners were liable to indemnify charterers against the cargo claim in French francs
since this was the currency in which the charterers ordinarily conducted their business and in
which they had purchased the Brazilian cruzeiros.
In The Texaco Melbourne 139 the claimants sought damages in US dollars for non-delivery of a
cargo to Ghana. By the date of judgment the value of Ghanaian cedis had dropped drastically. The
Court of Appeal held that the claimants were only entitled to damages in Ghanaian cedis since this
was the currency in which they would have sold the cargo, and there was no evidence that they
had bought a replacement cargo in US dollars. The claimants had to bear the risk of any currency
fluctuations taking place after the breach.
1 General Feeds Inc Panama v Slobodna Plovidba Yugoslavia [1999] 1 Lloyds Rep 688 at
696; Zermalt Holdings SA v Nu-Life Upholstery Repair Ltd (1985) 275 EGLR 1134.
2 Hussman (Europe) Ltd v Al Ameen Development & Trade Co [2000] 2 Lloyds Rep 83 at 100.
3 Bank Mellat v GAA Development and Construction Ltd [1988] 2 Lloyds Rep 44 at 50.

4 European Grain & Shipping Ltd v Johnston [1982] 2 Lloyds Rep 550; Aquator Shipping
Ltd v Kleimar NV, The Capricorn 1 [1998] 2 Lloyds Rep 379 where the objection was not that
one arbitrator had drafted the award, but that he had access to documents not available to the other
arbitrators.
5 [1982] 2 Lloyds Rep 550.
6 This is expressly provided for in paragraph 22 of the LMAA Terms.
7 1996 Act, section 15(2); LMAA Terms, paragraph 8(c). It is common, however, for the party
appointed arbitrators to ask the parties to agree that they make a valid award without a third
arbitrator (see Chapter 10 on appointments).
8 1996 Act, section 20(4); LMAA Terms, paragraph 8(e) & (f).
9 LMAA Terms, paragraph 8(d).
10 1996 Act, section 21(4); LMAA Terms, paragraph 9(e).
11 LMAA Terms, paragraph 9(d); see generally Chapter 10 on appointments.
12 1996 Act., section 22 (subject to contrary agreement).
13 The LMAA Intermediate Claims Procedure also suggests that an award should be available
within six weeks of the last submissions served. The LMAA Small Claims Procedure suggests that
the award will be produced within one month of close of submissions.
14 1996 Act, section 56; LMAA Terms paragraph 23, see Chapter 20 on fees.
15 1996 Act, section 33(1); paragraph 230 of the DAC Report.
16 HHJ Diamond QC provides a helpful explanation in Exmar BV v National Iranian Tanker
Co, The Trade Fortitude [1992] 1 Lloyds Rep 169.
17 Trans Trust SPRL v Danubian Trading Co [1952] 2 QB 297.
18 Paragraph 233 of the DAC Report.
19 SL Sethia Liners Ltd v Naviagro Maritime Corporation, The Kostas Melas [1981] 1 Lloyds
Rep 18; paragraph 231 of the DAC Report; Charles M Willie & Co (Shipping) Ltd v Ocean Laser
Shipping Ltd, The Smaro [1999] 1 Lloyds Rep 225.
20 Sea Trade Maritime Corporation v Hellenic Mutual War Risks Association (Bermuda)
Ltd [2006] EWHC 578 (Comm); [2006] 2 Lloyds Rep 147.
21 Hagop Ardahalian v Unifert International SA, The Elissar [1984] 1 Lloyds Rep 206
(provisional orders for the payment of money are discussed below).
22 Japan Line Ltd v Aggeliki Charis Compania Maritima SA, The Angelic Grace [1980] 1 Lloyds
Rep 288; Exmar BV v National Iranian Tanker Co, The Trade Fortitude [1992] 1 Lloyds Rep
169 at 177.
23 Minerals & Metals Trading Corporation of India Ltd v Encounter Bay Shipping Co Ltd, The
Samos Glory [1988] 1 Lloyds Rep 51. This decision is unlikely to be followed given the wide

discretion conferred under section 47 and the courts current reluctance to intervene in the
procedural decisions of arbitrators. In the absence of clear agreement limiting powers to make
separate awards, it is unlikely that a decision to make an award would be challengeable on the
grounds of want of jurisdiction, see K/S A/S Bill Biakh v Hyundai Corporation [1988] 1 Lloyds
Rep 181 at 190. In relation to serious irregularity see Chapter 22 on challenges.
24 SL Sethia Liners Ltd v Naviagro Maritime Corporation, The Kostas Melas [1981] 1 Lloyds
Rep 18; Exmar BV v National Iranian Tanker Co, The Trade Fortitude [1992] 1 Lloyds Rep 169;
see also Charles M Willie & Co (Shipping) Ltd vOcean Laser Shipping Ltd, The Smaro [1999] 1
Lloyds Rep 225, discussed below.
25 Exmar BV v National Iranian Tanker Co [1992] 1 Lloyds Rep 169.
26 Charles M Willie & Co (Shipping) Ltd v Ocean Laser Shipping Ltd [1999] 1 Lloyds Rep 225.
27 Sections 20-22, 30, 31, 34, 67 of the 1996 Act. Toulson J accepted that there was no
significance in the different terminology in sections 30 and 67 between a ruling and an award
in Ranko Group v Antarctic Maritime SA, The Robin[1998] LMLN 492, see transcript, 12 June
1998.
28 Cargill Srl Milan v Kadinopoulos SA [1992] 1 Lloyds Rep 1; Charles M Willie & Co
(Shipping) Ltd v Ocean Laser Shipping Ltd, The Smaro [1999] 1 Lloyds Rep 225; section 58(1)
of the 1996 Act.
29 Exmar BV v National Iranian Tanker Co, The Trade Fortitude [1992] 1 Lloyds Rep 169.
30 Ranko Group v Antarctic Maritime SA [1998] LMLN 492, see transcript, 12 June 1998.
31 [2008] EWHC 2684 (Comm); [2009] 1 Lloyds Rep 162.
32 Exmar BV v National Iranian Tanker Co, The Trade Fortitude [1992] 1 Lloyds Rep 169.
Sections 34 and 47 of the 1996 Act may also be relied upon.
33 Exmar BV v National Iranian Tanker Co, The Trade Fortitude [1992] 1 Lloyds Rep 169.
Comments by Lloyd J in The Vasso [1983] 2 Lloyds Rep 346 at 348 suggesting that an
interlocutory order raising a point of law should be regarded as an award are unlikely to be
followed. See Charles M Willie & Co (Shipping) Ltd v Ocean Laser Shipping Ltd, The
Smaro [1999] 1 Lloyds Rep 225 at 247 where Rix J expressed doubts as to whether a procedural
decision could properly be treated as the subject matter of an award. See also Mustill & Boyd,
2001 Companion, pp. 106, 208, 235. However, it is submitted that arbitrators have the legal power
to make an award on procedural matters; to suggest otherwise would be inconsistent with the spirit
and wording of sections 34, 47 and 48 of the 1996 Act. The DAC did not suggest that such awards
could not be made and this type of restriction would raise difficult distinctions between procedural
and substantive decisions, possibly leading to uncertainty as to the status of awards deciding both
procedural and substantive issues (e.g., whether or not an interim award for hire should be made
or whether or not a claim may be amended to add a further claim).
34 Part enforcement of an award is permissible under the 1996 Act, but in order to be enforceable
it must be possible to enter judgment in terms of the awardNigerian National Petroleum
Corporation v IPCO (Nigeria) Ltd [2008] EWCA Civ 1157; [2009] 1 Lloyds Rep 89.

35 See paragraph 253 of the DAC Report. Section 53 is intended to reverse the decision
in Hiscox v Outhwaite [1992] 1 AC 562.
36 1996 Act, section 54.
37 LMAA Terms, paragraph 21, see above on decision making.
38 Cf. Cargill International SA Antigua v Sociedad Iberica de Molturation SA [1998] 1 Lloyds
Rep 489 where the arbitration rules required all arbitrators to sign the award.
39 Chandris v Isbrandtsen-Moller Co Inc [1951] 1 KB 240 at 262; La Pintada CNSA v President
of India, La Pintada [1985] AC 104 at 119, affirmed under the 1996 Act in Wealands v CLC
Contractors Ltd [1999] 2 Lloyds Rep 739 at 748.
40 1996 Act sections 46(1)(a) and 69.
41 Mustill & Boyd, 2001 Companion, p. 315.
42 DAC Report, para 202it appears that the drafters of the Act were considering provisional
relief in the sense of interim payment orders that were subject to entire reversal.
43 [2007] EWHC 1893 (Comm); [2008] 1 Lloyds Rep 230, paragraph 26.
44 Interim award in this context would mean a provisional award.
45 However, without notice applications are now permitted under the UNCITRAL Model Law
17B(1), as amended in 2006.
46 Paragraphs 241-244, 378 of the DAC Report and DAC Supplementary Report on the 1996 Act,
paragraph 34, CPR Part 62, rule 62.18(5).
47 [1982] 1 Lloyds Rep 628.
48 Paragraph 247 of the DAC Report.
49 1996 Act, section 69(1), paragraph 22(b) of the LMAA Terms.
50 Paragraph 22(c) of the LMAA Terms.
51 Mutual Shipping Corporation v Bayshore Shipping Co, The Montan [1985] 1 Lloyds Rep 189.
52 Ibid. [1984] 1 Lloyds Rep 389, Tame Shipping Ltd v Easy Navigation Ltd [2004] EWHC
1862; [2004] 2 Lloyds Rep 626.
53 Mafracht v Parnes Shipping Co SA, The Apollonius [1986] 2 Lloyds Rep 405 at 412; Bremer
Handelsgesellschaft mbH v Westzucker GmbH [1981] 2 Lloyds Rep 130 at 132, see, also, Al
Hadha Trading Company v Tradigrain SA [2002] 2 Lloyds Rep 512.
54 E.g. Hussman (Europe) Ltd v Al Ameen Development & Trade Co [2000] 2 Lloyds Rep 83 at
97.
55 Trave Schiffahrtsgesellschaft mbH & Co KG v Ninemia Maritime Corporation, The
Niedersachsen [1986] 1 Lloyds Rep 393.

56 Transcatalana de Commercio v INCOBRASA Industrial e Commercial Brazileira SA [1995] 1

Lloyds Rep 215 at 217, although subsequent cases (see below) suggest that the courts are more
lenient on a section 68 challenge.
57 Universal Petroleum Co v Handels Und Transportgesellschaft mbH [1987] 1 Lloyds Rep 517
at 528.
58 Agrokor AG v Tradigrain SA [2000] 1 Lloyds Rep 497 at 503; see also Hussman (Europe)
Ltd v Al Ameen Development & Trade Co [2000] 2 Lloyds Rep 83 at 97, Petroships Pte
Ltd v Petec Trading & Investment Corporation of Vietnam, The Petro Ranger [2001] 2 Lloyds
Rep 348 at 357, Margulead Ltd v Exide Technologies [2004] EWHC 1019 (Comm); [2005] 1
Lloyds Rep 324, Ascot Commodities NV v Olam International Ltd [2002] 2 Lloyds Rep 277 at
284,World Trade Corporation v C Czarnikow Sugar Ltd [2004] EWHC 2332 (Comm); [2005] 1
Lloyds Rep 422.
59 Transcatalana de Commercio v INCOBRASA Industrial e Commercial Brazileira SA [1995] 1
Lloyds Rep 215 at 217.
60 Mafracht v Parnes Shipping Co SA [1986] 2 Lloyds Rep 405 at 412.
61 Transcatalana de Commercio v INCOBRASA Industrial e Commercial Brazileira SA [1995] 1
Lloyds Rep 215; Cefetra BV v Alfred C Toepfer International GmbH [1994] 1 Lloyds Rep 93
(decided under the Arbitration Act 1979 and the applicable court rules, however similar principles
would apply under the 1996 Act).
62 Petroships Pte Ltd v Petec Trading & Investment Corporation of Vietnam, The Petro
Ranger [2001] 2 Lloyds Rep 348.
63 Universal Petroleum Co Ltd v Handels-Und Transportgesellschaft mbH [1987] 1 Lloyds Rep
517.
64 Ibid.
65 Al Hadha Trading Company v Tradigrain SA [2002] 2 Lloyds Rep 512, Torch Offshore
LLC v Cable Shipping Inc [2004] EWHC 787 (Comm); [2004] 2 Lloyds Rep 446.
66 Torch Offshore LLC v Cable Shipping Inc [2004] EWHC 787 (Comm); [2004] 2 Lloyds Rep
446 where the failure to make an application under section 57 was fatal to an application under
section 68.
67 E.g. Chiswell Shipping Ltd v State Bank of India, The World Symphony (No 2) [1987] 1
Lloyds Rep 157 at 158.
68 Athens Cape Naviera SA v Deutsche Dampfschiffahrtsgesellschaft, The Barenbels [1985] 1
Lloyds Rep 528.
69 Ibid.
70 Universal Petroleum Co v Handels Und Transportgesellschaft mbH [1987] 1 Lloyds Rep 517
at 528.

71 Bank Mellat v GAA Development and Construction Ltd [1988] 2 Lloyds Rep 44; European
Grain & Shipping v Johnston [1982] 2 Lloyds Rep 550.
72 Cargill International SA Antigua v Sociedad Iberica de Molturation SA [1998] 1 Lloyds Rep
489.
73 Dolphin Hellas Shipping SA v Itemslot Ltd, The Aegean Dolphin [1992] 2 Lloyds Rep 178 at
182; Stinnes Interoil GmbH v Halcoussis & Co, The Yanxilas [1982] 2 Lloyds Rep 445 at
450; Whistler International Ltd v Kawasaki Kisen Kaisha Ltd, The Hill Harmony [1998] 2
Lloyds Rep 367 at 369; see also Schelde Delta Shipping BV v Astarte Shipping Ltd, The
Pamela [1995] 2 Lloyds Rep 249 at 254 where the judge agreed with the dissenting arbitrator.
74 F Ltd v M Ltd [2009] EWHC 275 (TCC).
75 The correct approach in such a situation was left open in Cargill International SA
Antigua v Sociedad Iberica de Molturation SA [1998] 1 Lloyds Rep 489. It appears likely that the
arbitrators who agreed with the result, but not the reasoning, of the majority would be required to
sign the award as arbitrators assenting to the award under section 52(4). There might be stronger
grounds for attaching the different reasons in such circumstances as they provide further reasons
for upholding the award.
76 See 1996 Act, section 54.
77 Arbitration Act 1950, section 17, based on the rule in court, now CPR, Part 40, paragraph
40.12. The case law on both these rules would still be of some relevance.
78 Section 57 is probably to be read disjunctively separating clerical mistakes from errors arising
from accidental slips or omissions, Mutual Shipping Corporation v Bayshore Shipping Co, The
Montan [1985] 1 Lloyds Rep 189 at 198.
79 Mutual Shipping Corporation v Bayshore Shipping Co, The Montan [1985] 1 Lloyds Rep 189
(decided under the 1950 Act but similar principles would apply under the 1996 Act); see, also Al
Hadha Trading Company v Tradigrains SA[2002] 2 Lloyds Rep 512 and CNH Global NV v PGN
Logistics Limited [2009] EWHC B8 (Comm).
80 Mutual Shipping Corporation v Bayshore Shipping Co [1985] 1 Lloyds Rep 189.
81 [2002] 1 Lloyds Rep 713, see also Omnibridge Consulting Ltd v Clearsprings (Management)
Ltd [2004] EWHC 2276 (Comm) where substantial mistakes were assumed to be accidental.
82 Groundshire v VHQ Construction [2001] BLR 395, Al Hadha Trading Company v Tradigrain
SA [2002] 2 Lloyds Rep 512, Torch Offshore LLC v Cable Shipping Inc [2004] EWHC 787
(Comm); [2004] 2 Lloyds Rep 446.
83 World Trade Corporation v C Czarnikow Sugar Ltd [2004] EWHC 2332 (Comm); [2005] 1
Lloyds Rep 422, however in Margulead Ltd v Exide Technologies Ltd [2004] EWHC 1019
(Comm); [2005] 1 Lloyds Rep 324 at para 43 Colman J found an overlap between claims and
issues in the context of section 68(2)(d).
84 E.g. Pirtek (UK) Ltd v Deanswood Ltd [2005] EWHC 2301 (Comm); [2005] 2 Lloyds Rep
728.

85 Torch Offshore LLC v Cable Shipping Inc [2004] EWHC 787 (Comm); [2004] 2 Lloyds Rep
446.
86 Sea Trade Maritime Corporation v Hellenic Mutual War Risks Association (Bermuda)
Ltd [2006] EWHC 578 (Comm); [2006] 2 Lloyds Rep 147.
87 Norwich Union v Whealing Horton & Toms [2008] EWHC 370 (TCC).
88 1996 Act, section 68(2)(d) and (f), Al Hadha Trading Company v Tradigrain SA [2002] 2
Lloyds Rep 512 and Torch Offshore LLC v Cable Shipping Inc [2004] EWHC 787 (Comm);
[2004] 2 Lloyds Rep 446, see Chapter 22 on challenges.
89 There is conflicting first instance authority: Blackdale Ltd v McLean Homes South East Ltd, 2
November 2001 (Judge Humphrey Lloyd QC); RC Pillar & Sons v Edwards, 11 January 2001
(Judge Anthony Thornton QC) and Al Hadha Trading Company v Tradigrain SA [2002] 2 Lloyds
Rep 512. See Chapter 22 on time limits for making challenges for further discussion.
90 For example, World Trade Corporation v C Czarnikow Sugar Ltd [2004] EWHC 2332
(Comm); [2005] 1 Lloyds Rep 422.
91 The time limit under section 70 is mandatory, but where the parties have agreed an extension
the court would be unlikely to find that the challenge should fail for being out of the time.
92 Section 68(2)(i) of the 1996 Act, see Gannet Shipping Limited v Eastrade Commodities
Inc [2002] 1 Lloyds Rep 713, and discussion in CNH Global NV v PGN Logistics Limited [2009]
EWHC B8 (Comm), paras 49 -52.
93 Under the previous law there was a recognised jurisdiction to remit in such circumstances,
(e.g., Mutual Shipping Corporation v Bayshore Shipping Co, The Montan [1985] 1 Lloyds Rep
189). Such application would have to be made within the 28-day time limit otherwise the court
may be reluctant to interfere if the award has been relied upon.
94 Gannet Shipping Limited v Eastrade Commodities Inc [2001] 1 Lloyds Rep 713, para 29.
95 1996 Act, section 68(2)(a); paragraph 280 of the DAC Report; e.g. Danae Air Transport
ASA v Air Canada [1999] 2 Lloyds Rep 547, decided under the 1950 Act, but Tuckey LJ
considered that broadly similar issues would arise under the 1996 Act.
96 Gold Coast Ltd v Naval Gijon SA [2006] EWHC 1044; [2006] 2 Lloyds Rep 4000.
97 Ibid., see also Pirtek (UK) Ltd v Deanswood Ltd [2005] EWHC 2301 (Comm); [2005] 2
Lloyds Rep 728.
98 See Chapter 7 on stays for consideration of who is treated as any persons claiming through or
under the parties.
99 For detailed consideration see Spencer, Bower, Turner & Handley on Res Judicata (4th edn). A
useful introduction to the doctrine is provided in the judgment of Bingham J in Siporex Trade
SA v Comdel Commodities Ltd [1986] 2 Lloyds Rep 428.
100 Fidelitas Shipping Co Ltd v V/O Exportchleb [1965] 1 QB 630.

101 Sun Life Assurance Co v Lincoln National Life Insurance Co [2004] EWCA Civ 1660; [2005]
1 Lloyds Rep 606.
102 Svenska Petroleum Exploration AB v Government of Lithuania [2005] EWHC 9 (Comm);
[2005] 1 Lloyds Rep 515.
103 Charles M Willie & Co (Shipping) Ltd v Ocean Laser Shipping Ltd, The Smaro [1999] 1
Lloyds Rep 225.
104 (1843) 3 Hare 100. The principle has been applied as an aspect of issue estoppel in Fidelitas
Shipping Co Ltd v V/O Exportchleb [1965] 1 QB 630 and Siporex Trade SA v Comdel
Commodities Ltd [1986] 1 Lloyds Rep 428. However, in Johnson v Gore Wood [2002] 2 AC 1
the House of Lords regarded it as a distinct doctrine.
105 Johnson v Gore Wood [2002] 2 AC 1.
106 Associated Electric & Gas Insurance Services Limited v European Reinsurance Company of
Zurich [2003] UKPC 11; [2003] 1 WLR 1041.
107 E.g. Compagnie Grainiere SA v Fritz Kopp AG [1978] 1 Lloyds Rep 511, Excomm
Ltd v Guan Guan Shipping (Pte) Ltd, The Golden Bear [1987] 1 Lloyds Rep 330.
108 Previously, the defence of res judicata was raised in court applications to restrain parties
proceeding with an arbitration (e.g., Telfair Shipping Corporation v Inersea Carriers SA [1983] 2
Lloyds Rep 351); Siporex Trade SA v Comdel Commodities Ltd [1986] 2 Lloyds Rep 428. Given
the courts more restrictive approach towards intervening in the arbitral process (see Chapter 8 on
injunctions), the issue would now probably more properly be raised as a question going to the
tribunals jurisdiction, which would ordinarily be first brought before the arbitral tribunal (see
Chapter 6 on jurisdictional disputes) and then challenged under section 67, see for
example Republic of Kazakhstan v Istil Group Inc [2007] EWHC 2729 (Comm). If the point was
raised as a substantive defence then the only means of challenge would be under section 69.
109 E.g. LMAA Terms, paragraph 25 discussed above under section 10.
110 E.g. Siporex Trade SA v Comdel Commodities Ltd [1986] 2 Lloyds Rep 428 at 435.
111 LMLN [2001] 561.
112 [1928] 2 KB 336. An arbitral tribunal in London Arbitration 11/01 LMLN [2001] 561 decided
that this rule did not apply save where an arbitration had been finally concluded. However, if an
award is intended to deal finally with a particular cause of action, then in principle the rule should
apply to that aspect of the claim, whether or not the rest of the arbitration has been finally
concluded.
113 Telfair Shipping Corporation v Inersea Carriers SA [1983] 2 Lloyds Rep 351.
114 The Rena K [1978] 1 Lloyds Rep 545, see Republic of India and Others v India Steamship
Company Ltd, The Indian Grace [1997] UKHL 40; [1997] 3 WLR 818 as to the limitations of this
rule.

115 Richard Adler v Soutos Hellas Maritime Corporation, The Argos Hellas [1984] 1 Lloyds
Rep 296.
116 [1978] 1 Lloyds Rep 511.
117 Sun Life Assurance Co v Lincoln National Life Insurance Co [2004] EWCA Civ 1660; [2005]
1 Lloyds Rep 606. Issues of confidentiality may also arise in relation to disclosing an award to a
third party, see Chapter 13.
118 Lesotho Highlands Development Authority v Impregilo SpA [2005] UKHL 43; [2005] 2
Lloyds Rep 310 at paragraph 43.
119 Ibid.
120 Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] AC 669,
but see also Sempra Metals Ltd v Inland Revenue Commissioners [2007] UKHL 34; [2008] 1 AC
561.
121 Paragraph 236 of the DAC Report.
122 Antclizo Shipping Corporation v Food Corporation of India, The Antclizo (No 2) [1991] 2
Lloyds Rep 485; Derby Resources AG v Blue Corinth Marine Co Ltd (No 2) The Athenian
Harmony [1998] 2 Lloyds Rep 425.
123 Panchaud Freres SA v Pagnan & Fratelli [1974] 1 Lloyds Rep 394.
124 Paragraph 237 of the DAC Report; Kemp Ltd v Tolland [1956] 2 Lloyds Rep 681 at 691.
125 Paragraph 280 of the DAC Report, Lesotho Highlands Development Authority v Impregilo
SpA [2005] UKHL 43; [2005] 2 Lloyds Rep 310.
126 1996 Act, section 68(2)(d) & (h) and section 52(4). Interest is not ordinarily expressly put in
issue in submissions but it is invariably claimed but not admitted, and thereby put in issue.
127 Walker v Rowe [2000] 1 Lloyds Rep 116.
128 Ibid. Under the previous law (section 20 of the Arbitration Act 1950) this sort of interest was
payable unless the tribunal awarded otherwise.
129 Gater Assets Limited v Nak Naftogaz Ukrainiy [2008] EWHC 1108 (Comm); [2008] 2
Lloyds Rep 295. Beatson J decided the point in relation to a foreign award but and suggested that
judgment interest would also be payable once an English award had been entered as a judgment,
relying in part on Pirtek v Deanswood [2005] 2 Lloyds Rep 728 at paragraph 47.
130 [2000] 1 Lloyds Rep 116. This case concerned interest under section 49(4) on sums awarded
but unpaid (post-award interest) but the same principles would be applicable to any type of
interest within the tribunals jurisdiction. The court could only exceptionally award interest if it
varied an award following a successful appeal under section 69 or application under section 67.
131 Arbitration Act 1950, section 19A.
132 La Pintada Compania Navegacion v President of India, La Pintada [1984] 2 Lloyds Rep 9;
[1985] AC 104, sets out the common law position.

133 Ibid.
134 Ibid. If the loss claimed is not interest (e.g., currency exchange losses) then the ordinary rules
of damages apply to recovery: President of India v Lips Maritime Corporation [1987] 2 Lloyds
Rep 311; [1988] AC 395.
135 [2005] UKHL 43; [2005] 2 Lloyds Rep 310.
136 The relevant principles explained here are set out in Services Europe Atlantique
Sud v Stockholms Rederiaktiebolag Svea, The Despina R [1979] AC 685 and Attorney General of
Ghana v Texaco Overseas Tankships Ltd, The Texaco Melbourne [1994] 1 Lloyds Rep 473.
137 Services Europe Atlantique Sud v Stockholms Rederiaktiebolag Svea, The Despina R [1979]
AC 685, 702-703.
138 [1979] AC 685, the contractual claim was one of several claims considered by the House of
Lords.
139 [1993] 1 Lloyds Rep 471.

Chapter 20

Arbitrators Fees and Expenses

Arbitrators Fees and Expenses

1. Introduction
2. Agreements on fees
3. The amount of fees recoverable
4. Who pays an arbitrators fees?
5. How an arbitrator will secure payment of fees
6. Fees on settlement, resignation, death, removal or where no valid award is made
7. Challenging fees

1. INTRODUCTION
Arbitrators are entitled to be paid for their services. This entitlement may arise from contract: the
arbitrator has a right to fees agreed by the parties. It is surprisingly common, however, in maritime
arbitrations for arbitrators to be appointed without any agreement as to fees. For example, the
LMAA Terms do not fix fees other than appointment and booking fees. In the absence of such an
agreement, an arbitrator is entitled by statute to claim from either party such reasonable fees and
expenses as are appropriate in the circumstances.1 The arbitrator is entitled to decide in his award
the level of fees and expenses recoverable by him unless the parties have agreed otherwise and he
can withhold the award pending payment.2 It is usual practice for the tribunal to make its
assessment of what are reasonable fees, and request payment as a condition for releasing the
award. Arbitrators are also entitled to claim expenses incurred in the course of the arbitration, for
instance the cost of accommodation for a hearing.

2. AGREEMENTS ON FEES
An agreement on fees may be made personally with the arbitrator or by reference to arbitration
rules. It need not be in writing to be enforceable, but the 1996 Act applies only to agreements on
fees which are in writing. This would include an agreement by reference to written arbitration
rules.3 Even though not within the scope of the 1996 Act, an oral agreement on fees would be very
relevant in assessing what fees could be claimed as reasonable and appropriate in the
circumstances.4
Agreements relating to the level of fees should be made at the time of appointment with both
parties as otherwise there is a risk that one party will challenge the fees agreed independently by
the other. An arbitrators duty to act fairly and impartially between the parties means that he must
take particular care to act even-handedly in negotiating fees, otherwise he may be exposed to
allegations of bias or improper conduct. Once appointed, it would be improper for him to enter
into an agreement on fees with one party without the consent of the other.5 He must also not take
advantage of his position by attempting unilaterally to insist on a variation in the terms of his
appointment, or even proposing a variation where this would place the parties in an unfair
bargaining position.6 He may, however, request interim payments or commitment or increased
fees on the ground that the nature of the arbitration or the work involved has altered, but all
negotiations in this respect must be conducted with both parties.7
At common law the liability of a party to pay the fees of an arbitrator whom he did not appoint is
based on an implied agreement that the parties will honour the arbitrators award of costs in
consideration of the arbitrators on their part proceeding with the arbitration.8 The appointment of
an arbitrator is also sometimes treated as creating a trilateral contract binding the arbitrator, his
appointor and the other party, under which the parties impliedly agree to pay reasonable fees or
fees expressly agreed.9 Under the scheme of the 1996 Act, however, it is unlikely that a party
would be held liable as a matter of contract to pay excessive fees agreed between the arbitrator
and the other party. In the absence of an agreement made on his own behalf a party would
probably be held liable to pay reasonable fees.10

3. THE AMOUNT OF FEES RECOVERABLE

There are no strict rules as to what is considered a reasonable fee. If there is no express agreement
as to fees the parties may find it difficult to challenge them (see section 7 below). The appropriate
amount will depend on factors such as:

(a) the experience and expertise of the arbitrator;

(b) the time involved in dealing with the dispute;
(c) its complexity and importance;
(d) the number of documents to be considered;
(e) the length of hearing; and (f) the amount at stake.

Taking steps to ensure that only reasonable fees are incurred may be regarded as part of an
arbitrators duty to ensure that arbitration is a fair resolution of the dispute without unnecessary
expense.11 Challenges to arbitrators fees and expenses are rare but provide some indication as to
relevant considerations.

In Hussman (Europe) Ltd v Al Ameen Development & Trade Co 12 the claimants challenged the
tribunals fees and expenses amounting to more than 85,000, principally on the basis that the
time spent was excessive in relation to the complexity of the dispute. Thomas J accepted that the
fees were quite extraordinarily high for what appeared to be a straightforward dispute. However,
the tribunal had acted conscientiously and spent a large amount of time. Accordingly, he did not
adjust the fees but did not allow the tribunals claim for typing expenses: it is inconceivable that
a professional person charging at a rate of 140 per hour would charge extra for typing services.
In Kurkjian (Commodity Brokers) Ltd v Marketing Exchange for Africa 13 a party applied (under
the previous legislation) to set aside the award of fees of the Board of Appeal of the Cocoa
Association on grounds that the tribunals hourly rate and the fees incurred by their legal adviser
were excessive. Staughton J considered that the hourly rate was not extravagant when assessed
against other comparable arbitrators and also the likely salary of board members. However, he
considered that the Board had failed to assess whether the legal advisers fees were justified and
ordered that they be assessed.
In Agrimex v Tradigrain SA 14 a GAFTA Board of Appeal had appointed a London solicitor to
draft the award. The amount awarded was around US$54,000 but the costs of the tribunal
amounted to around 19,000 (including 9,000 in legal fees for the solicitor). The legal fees were
successfully challenged. Thomas J held that they were excessive and that the tribunal was only
entitled to receive 5,000 in respect of them. He emphasised the principle of proportionality and
suggested that it would be rare that a tribunal could justify appointing a lawyer to draft the award.
Some institutional rules provide that arbitrators fees are based on a percentage of the amount at
stake,15 but in arbitrations under LMAA Terms fees are charged on the basis of work done,
usually on an hourly or daily rate. (The arbitration rules of some commodity associations fix
deposits and arbitrators hourly fees in their rules but the LMAA Terms do not.) The level of fees
charged in a maritime arbitration will vary hugely depending on the nature of the case and how
long it takes to resolve. The LMAA Small Claims Procedure provides the distinct advantage of a
fixed fee (currently 2,000 plus 1,250 if there is a counterclaim which exceeds the claim).16 In
the LMAA Intermediate Claims Procedure (2009), the tribunals costs (excluding the appointment
fee and hearing expenses) are capped, save for exceptional circumstances, at one-third (in the case
of a sole arbitrator) or two-thirds (in the case of a two or three man tribunal) of the total amount
by which the parties recoverable costs are capped. This procedure is discussed in more detail in
Chapter 1, but in broad terms the parties recoverable costs are capped so that neither party is
entitled to recover more than a sum equivalent to 30 per cent of the claim as advanced, or 50 per
cent where there is an oral hearing.
It may be useful to seek some guidance from an arbitrator as to his hourly and daily rates. Except
in the Small Claims Procedure, LMAA members will not agree to a lump sum fee in advance or
make any binding estimate of their total fees (although they may give a non-binding estimate if
they request security for their own fees: see section 5 below). The LMAA Terms allow arbitrators
to claim some payment in advance (appointment and booking fees) and also payment at intervals
(interim payments).

Where arbitrators disagree and appoint an umpire (or where arbitrators appoint a third arbitrator)
they have the power to commit the parties to pay the umpire (or third arbitrator) reasonable fees
and expenses without seeking the parties consent.17 Generally, principles governing fees payable
to an umpire are identical to those applying to arbitrators fees.18

Fees and expenses in LMAA arbitrations

If an arbitrator is appointed on LMAA Terms then the following charges may be incurred. Fixed
charges are published on the LMAA website. (Of course, if the dispute settles then, apart from
booking fees, fees will only be incurred up to the date of notification of the settlement to the
arbitrator.) This is discussed in more detail below.

(1) An appointment fee,19 currently fixed at 150, which is debited to the appointing party.
The claimant initially pays the appointment fee of an umpire or third arbitrator. The
appointment fee of an agreed sole arbitrator is payable by each party in equal shares. Prompt
payment is expected since the fee covers the costs of giving consideration to the question of
appointment, setting up and monitoring a file and allowing the arbitrators name to be used
when presenting the matter to the other side.20 The appointment fee will be credited against
the tribunals total fees.
(2) Charges for dealing with interlocutory applications by the parties, reading documents and
generally handling the arbitration. For matters dealt with in correspondence LMAA
arbitrators generally charge on an hourly rate in the same manner as solicitors. Hourly rates
may vary in that more experienced arbitrators may charge a higher rate on the basis of their
expertise and ability to work faster. Arbitrators often have a unit charge, to cover dealing with
routine correspondence, the time for which is too short conveniently to be measured. For
example, one unit for each piece of incoming correspondence and perhaps five units for each
piece of outgoing correspondence.
(3) A booking fee will be payable in advance if the parties require an oral hearing to be fixed.
This will then be deducted from the overall fees payable. Booking fees are currently fixed at
500 per day of the hearing for each arbitrator (plus an umpire if appointed) for up to 10 days.
For hearings of up to 15 days the booking fee may be increased by 30 per cent and for a
hearing up to 20 days an increase of 60 per cent may be made. The tribunal may call for it to
be paid in non-returnable instalments.21 For longer hearings further booking fees are
negotiable. The booking fee becomes payable within two weeks of a confirmed booking or
six months before the first day reserved, whichever is later. The LMAA Terms provide for
some reimbursement if the hearing is adjourned or does not take place. If the hearing is
vacated three months or more before the first day reserved then 50 per cent of the booking fee
will be forfeited. If the hearing is cancelled or postponed after that date the entire booking fee
may be retained by the tribunal. Arbitrators may also charge for expenses incurred in
arranging accommodation for a hearing which is then cancelled, or may request security for
such expenses in advance.22
(4) The costs of the hearing, if one takes place, including hiring a room and catering. The
arbitrators will ordinarily charge for time spent in hearings at a daily rate, which simply
reflects an approximate multiple of the hourly rate. The LMAA encourages a practice
whereby each member of an arbitral tribunal is paid the same rate for days spent at a
hearing.23 However, rates may vary and if an arbitrator practises another profession (e.g., as a

lawyer) the level of fees is more likely to be the rate he would charge for similar work
undertaken in his practice. Some arbitrators charge different hourly rates for interlocutory
paper work on the one hand and for hearing time on the other.
(5) Any other expenses incurred in the arbitration, for example for the appointment of a legal
expert24 or travel to visit a ship.
(6) The cost of preparation of the award: again, fees are normally based on an hourly rate.
(7) VAT will usually be payable on arbitrators fees if the party held liable in the award is
registered to pay VAT within the UK.25

4. WHO PAYS AN ARBITRATORS FEES?

The starting point in determining who is responsible for payment of fees is any agreement
between the arbitrators and the parties. The 1996 Act does not alter such contractual
rights;26 instead it attempts to regulate two other aspects of liability for fees. First, section 28 deals
with the parties liability to pay fees and expenses in the absence of express contractual liability.
Second, and quite separately, the question of responsibility for those fees and expenses as between
the parties is dealt with at sections 59-61 (see Chapter 21 on costs). Section 28(1) of the 1996 Act
provides that:
The parties are jointly and severally liable to pay to the arbitrators such reasonable fees and
expenses (if any) as are appropriate in the circumstances.
This mandatory provision restates the common law, whereby the arbitrator may sue any, or all, of
the parties to recover his fees. Paragraph 11 of the LMAA Terms reproduces this principle. It
means that either party could be held liable for all or part of the tribunals reasonable fees. If the
arbitrator only pursues one party, that party may pursue the other parties for their contribution to
the fees recovered. The question of liability for fees as between the parties is considered in
Chapter 21, but the general rule is that the tribunal will order the unsuccessful party to pay all its
fees. It is customary for an award to contain a direction to the effect that a successful party who
has collected (and paid for) an award is entitled to an immediate refund of the tribunals fees.

5. HOW AN ARBITRATOR WILL SECURE PAYMENT OF FEES

An arbitrators lien over awards

The most common way in which arbitrators obtain payment is by withholding their award until
their fees and disbursements have been paid. This right to withhold the award is called a lien. It is
long established at common law and given mandatory effect in section 56(1) of the 1996 Act:
The tribunal may refuse to deliver an award to the parties except upon full payment of the fees
and expenses of the arbitrators.
In practice, the tribunal will assess its own fees in the award. This will be included in the letter
informing the parties that the award is ready for collection. This procedure is incorporated into
paragraph 23 of the LMAA Terms. Parties usually have an incentive for collecting and paying
promptly for an award since any challenge for error of law or serious irregularity or want of
jurisdiction must be made within 28 days of the date of the award.27 If a party is confident that it
has succeeded in the arbitration it may choose to delay in collecting the award in the hope that

time will run out for any challenge, although by so doing this party will also risk losing its own
right of challenge.
Paragraph 24 of the LMAA Terms expressly provides that if the award has not been paid for and
collected within one month of the date of publication, the tribunal may give notice to either party
requiring payment of the costs of the award, whereupon such party shall be obliged to pay for and
collect the award. It is doubtful, however, whether exercise of this power would override specific
agreements as to payment of fees or the parties joint and several liability under the 1996 Act.

Payment in advance: booking fees and commitment fees

A professional arbitrator may be reluctant to set aside time for an arbitration hearing without some
protection against loss of income if the dispute settles, in which event he may find that he is
wholly or partially unemployed for that time. The most effective means to achieve such protection
is by specific agreement with both parties before appointment. Arbitration rules may also provide
a mechanism for securing some or all of the recoverable fees before an award is made; for
example, the LMAA Terms provide for booking fees to be paid in advance by the party (or
parties) seeking to fix a hearing. One party may become obstructive by refusing to pay its share of
the booking fee: in such a case the other party may pay the outstanding amount of the booking fee
to secure a hearing date.28
It is also common for non-LMAA arbitrators to charge commitment fees in return for setting
aside time for a hearing. Typically, the terms of an arbitrators acceptance of appointment may
provide that he is entitled to be paid half his fees for attending an oral hearing in any event unless
the hearing is cancelled an agreed length of time before the hearing date. This would be a
legitimate requirement since an arbitrator is not generally required to make all dates available and
is only obliged to sit on such dates as may reasonably be required of him having regard to the
circumstances, in particular the other demands of his practice.29 However, in the absence of such
agreement on appointment, an arbitrator would be open to challenge (on grounds of bias or
improperly conducting the proceedings) if he insisted on a commitment fee as a condition of
continuing with the arbitration or agreed with one party for payment of commitment fees without
the other partys consent.
K/S A/S Norjarl v Hyundai Heavy Industries Co Ltd 30 involved a substantial dispute over the sale
of a drilling rig. Three arbitrators, including two Queens Counsel, were appointed. On
appointment no agreement as to fees was made, but it was understood that the hearing would last
three to five weeks. Three years later the parties asked the arbitrators to reserve 12 weeks for the
hearing. To protect themselves against loss in case of settlement the two silks asked, as a
condition for reserving time, for a commitment fee payable in any event amounting to their fees
for a 60-day hearing. Neither party would agree to this but further negotiations resulted in
proposals which were acceptable to the defendants and the arbitrators (but not the claimants). The
arbitrators refused to agree to the proposals unless the claimants also agreed with them. Rulings
were sought as to:

(i) whether it was misconduct for the arbitrators to propose a commitment fee;

(ii) whether it would be misconduct for the arbitrators to conclude an agreement for a
commitment fee with the defendants (but not the claimants).

The Court of Appeal (and Phillips J at first instance) held that once an arbitrator had accepted an
appointment no term could be implied that entitled him to insist unilaterally on a commitment fee.
However, the proposal of a commitment fee would not in itself amount to misconduct as long as
the negotiations were conducted with both parties. An arbitrator is under no absolute obligation to
make particular dates available and taking into account his professional circumstances it may not
be improper for him to ask for some safeguard against the matter settling. It was also held that the
arbitrators acted properly in refusing to conclude an agreement with only the defendants since
there was a danger that such an agreement might lay the arbitrator open to allegations of bias.

Interim payments
An arbitration may be lengthy or simply last longer than originally expected. In such
circumstances the arbitrator may reasonably want to be paid at intervals for work done rather than
having to wait until an award is delivered, particularly if one or both of the parties is financially
insecure. Again, the arbitrators best protection is provision for interim payments in his terms of
appointment.
In the absence of agreement, an arbitrator can probably insist upon interim payment of expenses
incurred (e.g., obtaining legal advice or booking accommodation) since these could be treated as
expenses incurred on behalf of the parties.31 In relation to fees, an arbitrator could insist upon
interim payments for work done if expressly agreed, for example, under the LMAA Terms
discussed below. In the absence of an express agreement, there may, depending on the
circumstances, be an implied term allowing him to request such payment, but he should ensure
that the request could not be regarded as an unfair use of his position of authority over the parties.
In Turner v Stevenage Borough Council,32 a rent review arbitration was taking much longer than
expected. The arbitrator asked each party to make a payment on account of fees incurred but
indicated that this was not a condition for continuing with the arbitration. One party paid but the
arbitrator returned the money three months later after taking legal advice. The other side applied
unsuccessfully to have the arbitrator removed for bias and misconduct (under the 1950 Act). The
Court of Appeal found that it was not improper for the arbitrator to request an interim payment.
Staughton LJ (with whom Mummery LJ agreed) found that commitment fees were to be
distinguished from interim payments for work actually done. He found that there was an implied
term in the arbitrators contract of appointment that entitled him to make a reasonable demand for
an interim payment and to enforce it with the sanction of resignation. He commented that the
demand could not be made after the parties were so committed to his services that they would be
in an inferior bargaining position to refuse. He left open whether an arbitrator could agree to
accept a fee from one party where the other party refused to pay. Pill LJ doubted the existence of
such an implied term since it was not necessary for the contract to work and it could not be
assumed that the parties must have agreed to it.
LMAA Terms on interim payment

LMAA arbitrators are exposed to problems in recovering fees and expensesmost commonly
where neither party collects the award or the case settles. In such circumstances, the claim for fees
is often not easily enforceable (typically because neither party has assets within the jurisdiction).
The Small Claims Procedure enables the arbitrator to expect payment of the Small Claims fee as a
condition precedent to the valid commencement of arbitration under that procedure. More
significantly, the First Schedule of the LMAA Terms contains express terms allowing arbitrators
to recover interim payments with the strong sanction of resignation in the event of non-payment:
(B) An arbitrator may in his discretion require payment of his fees to date (which expression
shall for these purposes include any expenses) at appropriate intervals (which shall not be less
than three months). Any such demand for payment shall be addressed to the arbitrators
appointing party and shall be copied to any other member of the tribunal and other parties. A third
arbitrator or umpire shall require payment from the parties in equal shares. Any such demand for
payment is without prejudice (a) to ultimate liability for the fees in question and (b) to the parties
joint and several liability therefor.
(C) Right to resign for non-payment
If any amount due under (A) or (B) above remains unpaid for more than 28 days after payment
has been demanded, the arbitrator in his sole discretion may give written notice to his appointor
and to the other parties and arbitrators that he will resign his appointment if such amount still
remains unpaid 14 days after such notification. Without prejudice to ultimate liability for the fees
in question, any other party may prevent such resignation by paying the amount demanded within
the said 14 days. Upon any resignation under this paragraph the arbitrator will be entitled to
immediate payment of his fees to date, and shall be under no liability to any party for any
consequences of his resignation.
These provisions place the initial burden of paying the tribunals accrued fees upon the appointing
party. However, it is reasonable to require parties to pay fees as they are incurred rather than
months or years later. Parties may also welcome being kept better informed about the actual costs
of their cases.
It is more controversial whether resignation will be the most appropriate or effective sanction for
non-payment. It appears to enable a party to engineer the resignation of an arbitrator where that
party refuses to pay his interim fees and the other party is not in a position to pay them.
Resignation will usually cause a delay in the arbitration and may enable a party to pick a new
arbitrator.33 This may operate harshly on a party with a strong case, but weak cash flow.
Obviously, arbitrators will be alert to such abuse but they may also be reluctant to risk nonpayment. In such circumstances it might be more appropriate to propose that the parties provide
security for the tribunals fees under paragraph E of the First Schedule (discussed below).
In some cases, resignation may be regarded as an unattractively harsh weapon since the arbitrator
appears to have absolute discretion as to when he might resign for non-payment and all liability
whatsoever for resignation under this paragraph is excluded. This provision is almost certainly
permissible under section 25(1) of the 1996 Act. However, the arbitrators sole discretion must
be exercised judicially. A party might seek to challenge the exercise of discretion by applying to
remove the arbitrator for improper conduct disentitling him to part of his fees, or seek damages for

the resignation.34 It would be open to the court to find that a request for payment was unjustified
because it was not made at an appropriate interval and that accordingly the resignation was not
justified by the LMAA Terms. In such circumstances, damages for wrongful resignation might
possibly be recoverable. However, a resignation would probably only be held to be wrongful in an
exceptional case. For example, a resignation might be treated as unjustified if the first request for
an interim payment was only made a month before a long hearing in an arbitration that had been
proceeding for several years. A notice to resign in such circumstances might also be regarded as
inconsistent with the tribunals judicial role and amounting to improper conduct of the
proceedings. The arbitrator might also be estopped from resigning under this provision where he
had led one or both of the parties to believe that he would not be requiring them to make interim
payments. Overall, arbitrators should probably exercise the power to resign cautiously,
particularly where it would cause disproportionate prejudice to one of the parties.
The LMAA provisions for interim payment may make it more unattractive for parties to challenge
arbitrators fees. Such challenges are extremely rare in maritime arbitration, but the existence of
an accessible and effective means of challenging fees is a reassuring safeguard. A party may fear
that a challenge to interim fees might predispose the tribunal against him. Such fears are very
likely to be groundless but arbitrators may be more sensitive to challenges to their fees than to
court applications based on an alleged error of law or procedural irregularity. If a party waits until
the end of the arbitration to challenge an interim payment then it will have to establish that it
would be reasonable to require the arbitrator to make repayment.35 Challenge may also be
awkward where there is more than one arbitrator but not all members of the tribunal ask for
interim payments. In such circumstances it may be difficult to assess the reasonableness of the fee
against the overall charges of the tribunal to date and (if this be relevant) against the overall cost
of the arbitration. Any risk of difficulty should be largely avoidable if the arbitrator requesting
interim payment gives a breakdown of fees incurred.

An arbitrators right to sue for fees

An arbitrator may commence an action in court against one or all the parties to recover fees. These
proceedings will be based on an express or implied agreement to pay the fees,36 or pursuant to the
parties liability under section 28(1) of the 1996 Act. The arbitrators right at common law to
claim reasonable remuneration for work requested (sometimes termed a quantum meruit or a
restitution claim) will now usually be superseded by his rights under section 28.37 An arbitrator is
only likely to pursue proceedings to claim fees where no award is made or both parties fail to take
up an award. In most cases the arbitrator can secure payment of fees by relying on his lien over
the award, or powers to order security for fees or to request interim payment under the LMAA
Terms.
Solicitors or P&I Clubs who appoint an arbitrator on behalf of their client or member would not be
liable to pay that arbitrators fees because they are clearly acting as a disclosed agent for the party.
A firm of solicitors would only become liable to an arbitrator for fees if it had given him a
personal undertaking.38

Security for fees

An arbitrator may require security for his fees to be provided as a condition of his appointment.
Even in the absence of specific agreement entitling him to such security he has a statutory power
to make an order requiring one of the parties to provide security for costs including his fees.
Section 38(3) of the 1996 Act empowers the arbitrator (unless agreed otherwise) to order a
claimant to provide security for the costs of the arbitration. The costs of the arbitration include
the tribunals fees and expenses.39 Normally such an order will only be made against a claimant
(or counterclaimant) on application by the other party (see Chapter 17). However, it is possible
that the tribunal could make an order of its own volition for security for its expenses if this
conformed with its duty to adopt procedures most suitable to the case and it gave the parties a
reasonable opportunity to make submissions on whether the order should be made. For example, if
it was appropriate for the arbitrator to appoint an expert it might be reasonable to require both
parties to provide security for the cost of appointing the expert. However, the arbitrator must
ensure that he acts even-handedly in making orders relating to his fees, otherwise he risks being
removed for improper conduct.
In Wicketts v Brine Builders 40 an arbitrator was removed on grounds, inter alia, that he ordered
each party to provide security for costs where there was no evidence that the claimant was unable
to pay and indeed had substantial assets and he also ordered each party to provide security for all
his fees (in effect double security).
LMAA Terms on security for the tribunals fees
The First Schedule of the LMAA Terms makes express provision for orders for security for the
tribunals fees:

(1) Without prejudice to the rights provided for in (A), (B) and (D) above, a tribunal is
entitled to reasonable security for its estimated costs (including its fees and expenses) up to
the making of an award. In calculating such amount credit will be given for any booking fees
paid. Such security is to be provided no later than 21 days before the start of any oral hearing
intended to lead to an award or, in the case of a documents-only arbitration, no later than
immediately before the tribunal starts reading and drafting with a view to producing an award.
(2) If a tribunal exercises the right to request security under (1) above, it shall advise the
parties of its total estimated costs (a) in the case of an oral hearing, usually when such hearing
is fixed and in any event no later than 28 days before the security must be in place, and (b) in
the case of a documents-only arbitration 28 days before the tribunal intends to start reading
and/or drafting with a view to producing an award.
(3) Requests for security hereunder shall be addressed to the party requesting any oral
hearing, and to the claimant in the case of a documents-only arbitration. If such party fails to
provide such security within the time set any other party will be given 7 days notice in which
to provide it, failing which the tribunal may vacate any hearing dates or, in the case of a
documents-only arbitration, refrain from reading and/or drafting.
(4) In any case where time does not allow for the periods in sub-paragraphs (1)-(3) above, the
tribunal shall be entitled at its discretion to set such shorter periods as are reasonable in the
circumstances.
(5) The form of such security shall be in the tribunals discretion. Normally an undertaking
from an appropriate firm of lawyers or a P&I Defence Association will be acceptable.
However, a tribunal may require a cash deposit or bank guarantee. Any undertaking or

guarantee must undertake to pay the sum covered no later than five weeks after publication of
the relevant award and shall not be conditional upon the award being released unless the costs
thereof are wholly covered by the relevant security.
(6) No estimate given hereunder shall prejudice the tribunals entitlement to its reasonable
fees and expense.
(7) Any security provided or payment made in accordance with these provisions shall be
without prejudice to ultimate liability as between the parties for the fees and expenses in
question, and to the parties joint and several liability to the tribunal until all outstanding fees
and expenses have been paid in full.

These provisions have the benefit of bringing home to the parties the likely cost of pursuing an
arbitration to the award stage. It is important to note that the claimant is the party first expected to
provide security unless the respondent has requested an oral hearing (in which case the respondent
will be first asked to provide security). If both parties request an oral hearing then the tribunal
could probably ask for security for its fees from both parties.
This provision may go beyond the tribunals statutory powers under section 38 of the 1996 Act to
order the claimant41 to provide security for costs. The statutory powers do not enable arbitrators
to make orders against respondents because English law takes the view that whereas a claimant
takes the risk that the party he decides to sue may not be good for the money, the respondent has
no comparable choice and needs the protection of security for costs. However, in the context of
arbitration it may be argued that by choosing to arbitrate, the respondent has accepted liability to
pay the chosen tribunal for resolving his disputes. Giving the respondent a reasonable
opportunity of putting his case does not entitle him to do so in such a way that the tribunal may
be left unpaid.42
The tribunals powers under this provision should always be exercised with a view to acting fairly
between the parties. For example, if a respondent with a realistic defence but weak credit has
reasonably requested an oral hearing, then it might be unfair to ask him to provide substantial
security as a condition for proceeding to a hearingit might be more appropriate to ask both
parties. The tribunal should always ensure that it gives both parties a reasonable opportunity to
make submissions on whether an order should be made and, if so, in what terms and for what
amount. For this purpose the tribunal would need to give the parties a reasonably detailed
breakdown of its estimated costs.
In some circumstances the tribunals powers under this provision must be construed together with
the power to request interim payments (see above). It would be inappropriate for a tribunal to
maintain security for costs that have already been paid by means of interim payment (although it
would be reasonable for it to insist upon security for the balance of fees envisaged).

6. FEES ON SETTLEMENT, RESIGNATION, DEATH, REMOVAL OR WHERE

NO VALID AWARD IS MADE

Settlement of the dispute

Paragraphs 16 and 17 of the LMAA Terms make some provision for the consequences of
settlement:

16. It is the duty of the parties (a) to notify the tribunal immediately if the arbitration is settled or
otherwise terminated and (b) to make provision in any settlement for payment of the fees and
expenses of the tribunal and (c) to inform the tribunal of the parties agreement as to the manner in
which payment will be made of any outstanding fees and expenses of the tribunal (e.g., for
interlocutory work not covered by any booking fee paid). The same duty arises if the settlement
takes place after an interim award has been made. Upon being notified of the settlement or
termination of any matter the tribunal may dispose of the documents relating to it.
17. Any booking fee paid will be dealt with in accordance with the provisions of paragraph
(D)(1)(d) of the First Schedule. Any other fees and expenses of the tribunal should be settled,
promptly and at latest within 28 days of presentation of the relevant account(s). Notwithstanding
the terms of any settlement between them the parties shall remain jointly and severally responsible
for all such fees and expenses of the tribunal until they have been paid in full.
These provisions have the effect of creating a contractual right to accrued fees in the event of
settlement and would probably cover fees incurred up to the notification of the settlement.
However, in the absence of advance payments or security for costs, the arbitrator has little means
of securing the payment of such fees and may have to commence court proceedings to recover
them. In the event of settlement under the LMAA Small Claims Procedure the arbitrator is entitled
to retain from the Small Claims fee a sum sufficient to compensate him for services rendered.
The parties joint and several liability to the arbitrator for reasonable remuneration under section
28(1) of the 1996 Act is enforceable even when an arbitration is settled. This liability will remain
notwithstanding any agreement to the contrary, because section 28 is a mandatory provision. It is
important for any settlement agreement to take this into account. Paragraph 16 of the LMAA
Terms requires that parties make provision for payment of fees to the tribunal. Settlement
agreements which provide for payment of costs will normally be treated as including the
arbitrators fees and expenses but it is prudent to make express provision for them. If the parties
make no provision as to costs in their settlement agreement then both parties would remain liable
to the tribunal for reasonable fees under section 28. The position between the parties would then
probably be a question as to the scope and effect of the settlement agreement. The tribunal may
retain jurisdiction to allocate liability for costs under section 61.43
Section 28 governs accrued fees and in the absence of prior agreement it is unlikely that an
arbitrator could claim compensation for the loss of future fees which would have been earned but
for the premature end of the arbitration.44
Where the arbitration comes to an end due to fault on the part of the arbitrator (e.g., unreasonable
delay) then this may be relevant to any claim for agreed fees or reasonable remuneration (see
below on the consequences of removal45).

Resignation
An arbitrator is under an implied duty to proceed with an arbitration and resolve the parties
dispute by making an award.46 Accordingly, an unjustified resignation may amount to a breach of
contract. In the absence of agreement to the contrary, an arbitrators immunity does not cover

liability incurred by reason of resignation.47 This may provide a strong disincentive against
resignation unless the consequences have been agreed or there is clear justification for it.
Section 25 of the 1996 Act allows the parties to agree on the consequences of a resignation. For
instance, the LMAA Terms provide that an arbitrator will offer his resignation if requested by
either party where he is unable to offer a hearing date within a reasonable time. In such a case, the
arbitrator will be under no liability for his resignation and is entitled to immediate payment of fees
and expenses incurred up to the resignation. A substitute arbitrator should be appointed by the
original appointor.48 The LMAA Terms also expressly allow an arbitrator to resign without
liability on grounds of non-payment of interim fees. The arbitrator will then be entitled to
immediate payment of his fees to date. Section 25 provides general guidance on the consequences
of a resignation:

(1) The parties are free to agree with an arbitrator as to the consequences of his resignation
as regards
o (a) his entitlement (if any) to fees or expenses, and
o (b) any liability thereby incurred by him.
(2) If or to the extent that there is no such agreement the following provisions apply.
(3) An arbitrator who resigns his appointment may (upon notice to the parties) apply to the
court
o (a) to grant him relief from any liability thereby incurred by him, and
o (b) to make such order as it thinks fit with respect to his entitlement (if any) to fees or
expenses or the repayment of any fees or expenses already paid.
(4) If the court is satisfied that in all the circumstances it was reasonable for the arbitrator to
resign, it may grant such relief as is mentioned in subsection (3)(a) on such terms as it thinks
fit.

To the extent that the parties have not agreed on the consequences of resignation, section 25
enables an arbitrator to apply to court for an order relieving him from such liability and
confirming or adjusting his entitlement to fees or repayment of fees already paid. The courts
order will depend on whether it is satisfied that in all the circumstances it was reasonable for the
arbitrator to resign.49 The court has a wide discretion and the precise extent of the arbitrators
rights to fees and his possible liability for breach of contract will always depend on the
circumstances. For example, his entitlement to fees may be barred from the date when he should
reasonably have resigned. The court would probably only order a reduction or repayment of fees
where the resignation was unjustified or flowed from a breach of his duties to the parties, for
instance if he was shown to be biased or to have adopted unreasonable procedures.50
Reasonable fees incurred up to the date of resignation would ordinarily be recoverable where an
arbitrator resigns because of ill-health or pre-existing professional commitments justifying the
resignation. Ill-health may amount to a frustration of the arbitrators contract of appointment and
the court may take into account the applicable principles of contract law in considering his
entitlement to agreed fees (or possible repayment of such fees).51 The DAC recognised other
circumstances where it might be reasonable for an arbitrator to resign, for instance where the
arbitration drags on far longer than originally expected and places an unfair burden on him or
where the parties seek to impose an unreasonable procedure.52

Death or illness
If an arbitrator dies then his personal representatives would be entitled to claim agreed fees or
reasonable remuneration under section 28(1) of the 1996 Act. Debilitating illness will ordinarily
lead to resignation (as discussed above) although if an arbitrator refused to resign he could be
removed under section 24 of the 1996 Act on the grounds of physical or mental incapacity (see
Chapter 11). The LMAA Terms provide in the First Schedule (D)(1)(d) that:
Where (iv) by reason of the indisposition or death of any arbitrator or umpire a hearing is
adjourned or a hearing date vacated prior to or on or after the start date, then unless non-returnable
instalment or other payments have been agreed, the booking fee will be retained by (or if unpaid,
shall be payable to) the tribunal (i) in full if the date is adjourned or vacated less than three months
before the start date or on or after that date (ii) as to 50 per cent if the date is adjourned or vacated
three months or more before the start date.
Thus the booking fee payable to each member of the tribunal, including the deceased or
indisposed arbitrator is forfeited (wholly or as to 50 per cent depending on the period of notice).
However, if that arbitrator is replaced then he, or his personal representative, would be responsible
for the transfer of his booking fees to the person appointed to act in his place.53 The LMAA Terms
go on to provide that:
Where by reason of the indisposition or death of any arbitrator a hearing is adjourned or a
hearing date is vacated and a new hearing date is fixed, a further booking fee will be payable.54
Thus the parties must pay a further booking fee to each arbitrator for fixing a hearing that was
adjourned or vacated due to the death or illness of one of the original arbitrators. (It must be
assumed that the new arbitrator would have to credit the original fee against the new fee,
otherwise the appointment would give a windfall.)

Removal or no valid award made

Where an arbitrator is removed the court may make orders as to his entitlement to fees (and
expenses) or repayment of any fees already paid.55 The exercise of this power, like that available
on resignation, will depend on the circumstances of the case. The arbitrators conduct and how it
has affected the proceedings will be relevant, in particular whether his removal will result in
additional costs to the parties in having a rehearing. Where the arbitrator is removed on
blameworthy grounds (for instance, unreasonable delay) then the court may consider that his right
to reasonable fees,56 which is essentially based on principles of restitution, is defeated by the
arbitrators own wrongdoing as the parties have not been unjustly enriched by the services of the
arbitrator and it would not be reasonable to reward him. If the fees were claimed under an
agreement for fees then his conduct might amount to a defence to such a claim.57
In Wicketts v Brine Builder 58 an arbitrator was removed on grounds of improper conduct and he
was not allowed to recover of fees for work that was either unnecessary or should have been done
more expeditiously.
If an arbitrator has been removed or an award set aside for lack of jurisdiction it might be
supposed that the parties could avoid paying fees as they never had the benefit of the services of

an arbitrator with jurisdiction to make a binding decision. However, ordinarily, the arbitrator
would be entitled under section 28 to reasonable fees from parties who took part in the
proceedings. Such remuneration would be justified on principles of restitution on the basis of
a quantum meruit claim for the value of work performed pursuant to the request of the parties.
If a party has taken no part in the proceedings and establishes that the arbitrator had no jurisdiction
over the dispute then it is unlikely that the arbitrator could recover fees. Clearly, there would be no
enforceable agreement to pay and it is unlikely that fees would be recoverable from that party
under section 28(1) since that party would not be a true party to the arbitral proceedings for the
purposes of that section59 and had not requested the arbitrator to act.

7. CHALLENGING FEES
The arbitrators power to assess his costs must be exercised fairly and judicially and with full
regard to the interests of those who will ultimately have to pay those fees.60 An umpire is also
required to assess the arbitrators fees and his own fees on the same basis.61 Where there is an
agreement on fees the parties can rely upon it and resist paying amounts in excess of those agreed.
In the absence of such agreement the parties may find it difficult to challenge fees since the courts
will be reluctant to intervene in the arbitral process unless the fees are clearly excessive.
Challenges to fees in maritime arbitrations are very rare indeed. Most experienced arbitrators, if
advised of a complaint, will produce a basic breakdown to justify their charges and expenses. If
the parties still have some valid reason for disputing any item, an arbitrator may correct the charge
for that item. It would, however, be extremely unusual for arbitrators to negotiate fees after an
award has been made. Before making any formal challenge, the complaining party should always
ask the arbitrator to explain how his fees were calculated since the reply may obviate the need for
a challenge.

Challenging the amount of fees payable

Section 28 of the 1996 Act provides a mechanism for any party to apply to court for a review of
the tribunals fees and expenses before or after they have been paid. It provides that:

(2) Any party may apply to the court (upon notice to the other parties and to the arbitrators)
which may order that the amount of the arbitrators fees and expenses shall be considered and
adjusted by such means and upon such terms as it may direct.
(3) If the application is made after any amount has been paid to the arbitrators by way of fees
or expenses the court may order the repayment of such amount (if any) as is shown to be
excessive, but shall not do so unless it is shown that it is reasonable in the circumstances to
order repayment.
(4) The above provisions have effect subject to any order of the court under section 24(4) or
25(3)(b) (order as to entitlement to fees or expenses in case of removal or resignation of
arbitrator).
(5) Nothing in this section affects any liability of a party to any other party to pay all or any of
the costs of the arbitration (see sections 59 to 65) or any contractual right of an arbitrator to
payment of his fees and expenses.

The court has a wide discretion to assess the costs itself or to order an assessment by a costs judge
or some other form of review. In deciding whether to adjust the fees the court will make a broad
assessment of whether they are reasonable (see section 3 above). The fact that the arbitrator may
have made an error in the award or the conduct of the proceedings would not ordinarily be a
ground for adjusting fees.62
It is important to note that section 28(5) means that where the parties have agreed on the fees, the
court cannot review them under section 28(2).63 Where the tribunals fees have already been paid,
the court may order repayment but will consider the circumstances. For example, if an application
is made after delay it may consider that it would be unfair to order repayment because the
arbitrator may have already spent the money in good faith. However, if an objection to the fees is
made promptly, the arbitrator may be treated as spending the money at his own risk and the court
may still make an order for repayment.64
Section 56 of the Act provides a further method of challenge where a party considers that the
arbitrator is asking too much for the release of the award. It enables a party to obtain the release of
the award by making a payment into court. Ordinarily the court will order payment of the amount
demanded by the arbitrators, but it might order payment of a lesser sum if it considered that the
amount demanded was excessive. The court may then order an assessment of the fees the
arbitrator is entitled to claim (either by agreement or under section 28). That amount will be paid
to the arbitrator out of the money paid into court and the balance will be repaid to the applicant. A
party retains the right to challenge under section 28 even if the method under section 56 is used.
Section 56 provides that:

(1) The tribunal may refuse to deliver an award to the parties except upon full payment of
the fees and expenses of the arbitrators.
(2) If the tribunal refuses on that ground to deliver an award, a party to the arbitral
proceedings may (upon notice to the other parties and the tribunal) apply to the court, which
may order that
o (a) the tribunal shall deliver the award on the payment into court by the applicant of the
fees and expenses demanded, or such lesser amount as the court may specify,
o (b) the amount of the fees and expenses properly payable shall be determined by such
means and upon such terms as the court may direct, and
o (c) out of the money paid into court there shall be paid out such fees and expenses as may
be found to be properly payable and the balance of the money (if any) shall be paid out to
the applicant.
(3) For this purpose the amount of fees and expenses properly payable is the amount the
applicant is liable to pay under section 28 or any agreement relating to the payment of the
arbitrators.
(4) No application to the court may be made where there is any available arbitral process for
appeal or review of the amount of the fees or expenses demanded.
(5) References in this section to arbitrators include an arbitrator who has ceased to act and an
umpire who has not replaced the other arbitrators.

Practice

An application under sections 28 or 56 should be made by an arbitration claim form on notice to

the other parties and members of the tribunal (see the flow chart on court applications at Appendix
L). The other parties and the tribunal are made defendants to the application and the claim form
and evidence are served on them.65 If the matter proceeds, the tribunal is likely to serve a defence,
file evidence and be represented at the hearing. For section 56 applications, the claimant must
show that it has exhausted any available arbitral process for appeal or review of the amount of fees
demanded. The costs of the application (and the assessment of fees) are in the courts discretion.
An arbitrator who has acted unreasonably in overcharging or refusing to justify his charges would
risk being held responsible for the costs of the application.
In Kurkjian (Commodity Brokers) Ltd v Marketing Exchange for Africa 66 a party challenged the
tribunals fees and expenses. Although the court upheld the tribunals hourly rate it held that the
arbitrators had not properly assessed the fees of their legal advisers. Although the challenge had
not been entirely successful it had raised an important issue: the applicant and the tribunal were
required to bear their own costs.

Other means of challengejurisdiction, appeals,

removal and serious irregularity
An award of fees could possibly be challenged on grounds of want of jurisdiction. In practice, it
would be exceptional for an issue to arise as to the arbitrators jurisdiction to award fees as distinct
from his jurisdiction to make an award on the merits. It would also be exceptional for an award of
fees to be open to an appeal for error of law as reasons are rarely given for this part of the award
and the award of fees is a matter of discretion with which the courts would be extremely reluctant
to interfere.67
An application to remove an arbitrator or set aside an award on the grounds of serious irregularity
regarding fees would only be successful if the complaint came clearly within the grounds of
sections 24 or 68 (e.g., bias) and substantial injustice could be established.68 An arbitrator should,
however, act carefully and even-handedly in relation to fees. An arbitrators right to fix his own
fees is not easy to reconcile with his judicial status and places him in a somewhat difficult and
invidious position.69 For example, in Andrews v Bradshaw 70 an arbitrator was criticised (although
ultimately not removed) because of the ill-judged tone of his correspondence regarding one
partys failure to pay his appointment fee. In Wicketts v Brine Builder 71 an arbitrator was
removed partly on grounds of inappropriately seeking security for his own fees. The court will,
however, be reluctant to interfere in the arbitral process and would not remove the arbitrator or set
aside the award simply because it would have acted differently: it would be necessary to show that
the arbitration had gone seriously wrong.72
Following a successful challenge for a serious irregularity, the court would ordinarily set aside the
part of the award relating to arbitrators fees (unless, exceptionally, the irregularity justified
setting aside the entire award) and remit the matter back to the arbitrator. If this is not possible or
appropriate, it would give directions for assessment by the court.
1 Section 28(1) of the 1996 Act.
2 Sections 56 and 63(3) of the 1996 Act.

3 Section 5 of the 1996 Act.

4 Sections 28(1) and 64(1) of the 1996 Act.
5 K/S A/S Norjarl v Hyundai Heavy Industries Co Ltd [1991] 1 Lloyds Rep 524 at 533; Mustill &
Boyd, 2001 Companion, p. 168.
6 Turner v Stevenage Borough Council [1998] Ch 28.
7 Town Centre Securities plc v Leeds City Council [1993] ADRLJ 54; Turner v Stevenage
Borough Council [1998] Ch 28; K/S A/S Norjarl v Hyundai Heavy Industries Co Ltd [1991] 1
Lloyds Rep 524 (discussed below).
8 Cohen v Baram [1994] 2 Lloyds Rep 138 approving Crampton & Holt v Ridley (1887) 20 QBD
48.
9 K/S A/S Norjarl v Hyundai Heavy Industries Co Ltd [1991] 1 Lloyds Rep 524 at 531, 536537; Fal Bunkering of Sharjah v Grecale Inc of Panama [1990] 1 Lloyds Rep 369 at 373-374.
10 Section 28(1) of the Act, this is a mandatory provision. See paragraphs 123 and 128 of the
DAC Report.
11 Hussman (Europe) Ltd v Al Ameen Development & Trade Co [2000] 2 Lloyds Rep 83 at 100.
12 [2000] 2 Lloyds Rep 83 at 100.
13 [1986] 2 Lloyds Rep 618.
14 [2003] EWHC 1656 (Comm); [2003] 2 Lloyds Rep 537.
15 The International Chamber of Commerce (the ICC) is a notable example.
16 If a jurisdictional challenge arises in a Small Claims or Intermediate Claims Procedure
arbitration the arbitrator may charge fees on a quantum meruit basis for work done, see paragraph
3 of the Commentary to the Small Claims Procedure and paragraph 17(d) of the Intermediate
Claims Procedure.
17 John Tackaberry v Phaidon Navegacion [1993] ADRLJ 112.
18 Section 28(6) and 56(5) of the 1996 Act.
19 LMAA Terms, First Schedule, paragraph (A).
20 [1993] 9 Arbitration International 275 at 282
21 See Schedule 1, D(1)(c) of the LMAA Terms for payment of booking fees to an umpire or third
arbitrator.
22 LMAA Terms, First Schedule (Booking Fees and Accommodation).
23 [1994] 60 Arbitration 112 at 113.
24 The fees and expenses of an expert appointed by the tribunal are expenses of the arbitrators
under section 37(2) of the 1996 Act.

25 In Case C-145/96 von Hoffmann v Finanzamt Trier [1997] All ER (EC) 852, the European
Court of Justice held that arbitrators established in the EU were required to charge VAT under
Council Directive EEC 77/388 regardless of the parties residence. This approach has not yet been
implemented by HMRC, but the position may be reviewed.
26 Section 28(5) of the 1996 Act, paragraph 121 of the DAC Report.
27 Section 70(3) of the 1996 Act.
28 LMAA Terms, First Schedule (D).
29 K/S A/S Norjarl v Hyundai Heavy Industries Co Ltd [1991] 1 Lloyds Rep 524 at 533.
30 [1991] 1 Lloyds Rep 524.
31 Mustill & Boyd (2nd edn) p. 242.
32 [1998] Ch 28.
33 Section 27(3) of the 1996 Act.
34 Section 24(4) of the 1996 Act. In such circumstances the courts removal of the arbitrator
would relate to his status before resignation, see Mustill & Boyd, 2001 Companion, p. 110.
35 Section 28(3) of the 1996 Act.
36 Cohen v Baram [1994] 2 Lloyds Rep 138 approving Crampton & Holt v Ridley (1887) 20
QBD 48.
37 Section 81 of the 1996 Act, only reasonable remuneration would be available under an implied
contract, see paragraph 128 of the DAC report.
38 See costs and third parties discussed in Chapter 15 above.
39 Section 59(1)(a) of the 1996 Act.
40 [2001] CILL 1805.
41 Section 38 of the 1996 Act, claimant is defined to include counterclaimant in section 82.
42 By analogy with Mustill & Boyd, 2001 Companion, p. 313.
43 Section 51(5) of the 1996 Act.
44 See Mustill & Boyd (2nd edn) pp. 243-244.
45 There is no express provision in the 1996 Act allowing for adjustment of an arbitrators fees
where the dispute settles. The existence of the power to adjust entitlement to fees under section
25(3) and 24(4) suggests that the arbitrators conduct could be taken into account when
determining the parties liability for fees.
46 This might be treated as a contractual duty with limited remedies, see Mustill & Boyd (2nd
edn), p. 231, or deriving from the tribunals statutory duty to avoid unnecessary delay, see Mustill
& Boyd, 2001 Companion, p. 112.

47 Section 29 is mandatory but it appears to be subject to section 25 under which the parties are
free to agree on what liability should arise from a resignation. Mustill & Boyd, 2001 Companion,
p. 292, suggest that anomalously, an arbitrator may preserve his immunity if he waits to be
removed under section 24 rather than resigning under section 25. See also, DAC Supplementary
Report, paras 23 to 25.
48 LMAA Terms, Fourth Schedule.
49 Section 25(4) of the 1996 Act.
50 Mustill & Boyd, 2001 Companion, p. 292 appear to suggest that the courts should ensure that
sections 24 and 25 of the 1996 Act are construed so as to ensure that sanctions for removal and
resignation are consistent.
51 The LMAA Terms provide express provision as to booking fees where ill health has caused a
hearing to be vacated or adjourned, see below.
52 Paragraph 162 of the DAC Report. Mustill & Boyd, 2001 Companion, pp. 110-111.
53 First Schedule (D)(2).
54 First Schedule (D)(1)(e).
55 Ibid.
56 Section 28(1) of the 1996 Act.
57 There is no express exception in the 1996 Act to an arbitrators immunity in such situations
(Cf. section 29(3)) but the existence of the courts power under section 24(4) would enable the
court to make allowance for such a defence.
58 [2001] CILL 1805
59 See section 72 of the 1996 Act and paragraph 126 of the DAC Report. If the party participates
in the arbitration it would be treated as a party, see Mustill & Boyd, 2001 Companion, p. 298.
60 Rolimpex Centrala Handluzagranicznego v Haji E Dossa & Sons Ltd [1971] 1 Lloyds Rep
380 at 384 and Government of Ceylon v Chandris [1963] 1 Lloyds Rep 214.
61 Government of Ceylon v Chandris [1963] 1 Lloyds Rep 214.
62 Hussman (Europe) Ltd v Al Ameen Development & Trade Co [2000] 2 Lloyds Rep 83 at 100.
63 Ibid., at 99. Thomas J left open whether section 28(5) also included an agreement to pay fees in
accordance with the terms of an arbitral institution, rather than an agreement with the arbitrators.
64 Paragraph 124 of the DAC Report. Hussman (Europe) Ltd v Al Ameen Development & Trade
Co [2000] 2 Lloyds Rep 83 at 101.
65 CPR Part 62, rule 62.6.
66 [1986] 2 Lloyds Rep 618.
67 President of India v Jadranska Slobodna Plovidba [1992] 2 Lloyds Rep 274.

68 The strict approach in relation to challenges of costs orders under the previous law would be
adhered to, see Blexen Ltd v Percy Trentham [1990] 42 EG 133 and President of
India v Jadranska Slobodna Plovidba [1992] 2 Lloyds Rep 274 at 277.
69 K/S A/S Norjarl v Hyundai Heavy Industries Co Ltd [1991] 1 Lloyds Rep 524 at
531; Rolimpex v Haji E Dossa & Sons Ltd [1971] 1 Lloyds Rep 380 at 384.
70 (1999) The Times, 1 October.
71 June 8, 2001, HHJ Seymour QC (QB, TCC).
72 Paragraphs 106 and 280 of the DAC Report. See the courts approach
in Andrews v Bradshaw (1999) The Times, 11 October.

Chapter 21

Costs
Costs

1. Introduction
2. Meaning of costs
3. Controlling the costs of an arbitration
4. Agreements governing costs
5. Tribunals power to decide who pays costs
6. Offers to settle
7. The amount of costs recoverable
8. Challenging costs awards

1. INTRODUCTION
The questions of which party is to pay the costs of the arbitration, and the amount which that party
is to pay, are of vital importance to the parties. Unless the parties and the arbitrator take steps to
control them, the costs incurred in pursuing an arbitration may become disproportionate to (and
possibly even exceed) the sums at stake. Not only does this mean that issues as to costs may be as
hard-fought as the substantive issues referred to arbitration, it also means that cost may be a
powerful factor in assessing whether to settle a case.
Under the 1996 Act, the tribunal can exercise control over the costs of the arbitration, as well as
award and assess which costs are recoverable. There are steps which can be taken by the parties
with a view both to placing a limit on the costs incurred and protecting a party who has reasonably
attempted to settle the claims referred to arbitration.
The approach to costs under the 1996 Act reflects in several respects the approach to the costs of
litigation under the Civil Procedure Rules. Accordingly, both older authorities dealing with the
costs of arbitration, as well as newer rules and authority addressing costs under the Civil
Procedure Rules, are of some assistance when considering the powers of the tribunal in respect of
costs. However, such authorities are persuasive only, and (unless the parties have agreed

otherwise) the tribunal enjoys a wide discretion as to costs, with the consequence that challenging
a finding or award on costs is extremely difficult.
It is necessary at the outset to draw a distinction between the incidence and the recoverability of
costs. The incidence of costs relates to the identification of which party is to pay for the costs of
the arbitration. The recoverability of costs relates to the question of ascertaining the amount which
that party is to be required to pay (i.e., what used to be called taxation). The 1996 Act addresses
both questions.

2. MEANING OF COSTS
Section 59 of the 1996 Act defines the costs of the arbitration as follows:

(1) References in this Part to the costs of the arbitration are to

o (a) the arbitrators fees and expenses;
o (b) the fees and expenses of any arbitral institution concerned; and
o (c) the legal or other costs of the parties.
(2) Any such reference includes the costs of or incidental to any proceedings to determine the
amount of the recoverable costs (see section 63).

The arbitrators fees and expenses (sub-paragraph (a)) are discussed in Chapter 20. In the context
of London maritime arbitration these are likely to vary considerably, depending upon whether the
arbitration has proceeded on documents only, the number of arbitrators in the tribunal, the length
of any hearing, and the complexity of the issues raised. It is important to note that the question of
the allocation of costs between the parties does not in any way affect the entitlement of the
tribunal to recover the entirety of its fees and expenses from either or both parties (see Chapter
20).
The LMAA does not administer arbitrations and therefore does not, itself, charge fees to
arbitrating parties. Therefore, in most maritime arbitrations sub-paragraph (b) will not apply
(though it may occasionally do so in the context of maritime claims which are referred to GAFTA
or LCIA arbitration).
The legal costs of the parties (sub-paragraph (c)) are likely to represent the bulk of the costs of the
arbitration. The reference to other costs would encompass the costs of obtaining evidence or of
investigating the other partys case, for example, witnesses travelling expenses or the costs
charged by expert witnesses. The costs incurred by the parties may also encompass costs incurred
before arbitral proceedings were commenced. However, if they are to be recoverable such costs
must be shown to be referable to the arbitration itself.
In Socit Anonyme Pcheries Oestendaises v Merchants Marine Insurance Co Ltd 1 an action
was brought under a marine insurance policy following the sinking of the plaintiffs trawler. Costs
were incurred by the plaintiff before the commencement of proceedings in obtaining evidence
from the master and crew of the sunk vessel and also in obtaining expert evidence from consulting
engineers and marine surveyors. It was held that such costs would be allowed since they were in
respect of materials ultimately proving of use and service in the action, and related to activity as
would contribute to the success of the party ultimately.

It is not entirely clear if the costs of obtaining security (e.g., the costs of arresting a vessel in a
foreign jurisdiction, or the costs of corresponding with an opponents P&I Club with a view to
obtaining security by consent) could be said to be costs of the arbitration within section 59. The
better view is probably that such costs, which are not referable to the matters to be determined by
the tribunal in the arbitration, are not recoverable as costs within section 59. This view was
adopted by the tribunal in London Arbitration 05/04.2
Section 59(2) makes clear that the costs of the arbitration include any costs incurred in
proceedings to determine the amount of recoverable costs. This is a reference to what used to be
called taxation (i.e., the process whereby the costs recoverable by one or more parties are
quantified). Under the 1996 Act, either the tribunal or the court may make such a determination
(section 63, discussed further below). The costs of that process must then themselves be allocated
between the parties.

3. CONTROLLING THE COSTS OF AN ARBITRATION

One of the central aims of the 1996 Act is to ensure that disputes are dealt with in a cost-efficient
manner.3 There are several methods by which this may be achieved.

Procedural steps
Under section 33 of the 1996 Act, the tribunal is under a duty to ensure that unnecessary expense
is avoided. This requires the tribunal to consider whether there are any steps which can be taken to
limit costs, or any procedural limits which should be placed upon the parties in the presentation of
their cases. For example:

(1) If the fees to be charged by the tribunal are not clearly set out in the arbitration agreement
or rules, it may be helpful for the tribunal to make clear at the outset what rates it intends to
charge. Those rates should not be inconsistent with the object of avoiding unnecessary
expense.4 (It is not, however, usual practice for LMAA arbitrators to indicate their rates on
appointment unless asked).
(2) The tribunal should consider whether or not the arbitration should proceed on the basis of
documents only. If a dispute does not require the cross-examination of witnesses, a
documents-only procedure may well be the most cost-effective method of determining the
dispute. On the other hand, where written submissions are getting out of hand and showing no
sign of drawing to a close, a short oral hearing may have the effect of concentrating the minds
of the parties on the points at issue. Where the LMAA Terms apply, these require the parties
to complete a questionnaire (which expressly addresses the likely cost of the reference) so
that this question can be considered properly by the tribunal.5
(3) The tribunal should consider whether or not the dispute merits full disclosure of
documents (usually one of the most expensive elements of an arbitration), or whether it is
more appropriate to limit disclosure to particular issues, or simply to require the parties to
produce the documents upon which they rely. A further possibility in larger arbitrations is to
order disclosure in stages, with the tribunal reviewing the scope of disclosure at each stage, in
the light of the circumstances then prevailing. In arbitrations under LMAA terms, disclosure
will generally be limited to documents upon which a party relies, together with documents

which either support or affect the other partys case,6but even more limited disclosure may be
appropriate in the interests of saving costs.
(4) Where expert evidence is proposed, the tribunal should consider whether such evidence is
truly necessary or appropriate. Consideration may be given to the appointment of a single
expert, though in practice such appointments have been rare and are generally resisted by
parties. Where the parties are permitted to appoint experts and rely upon their evidence, it will
usually be appropriate to define closely the issues upon which such evidence should
focus.7 Meetings of experts can often be invaluable in narrowing the issues still further,
thereby reducing costs in the long term, and will usually be ordered by the tribunal where
expert evidence is to be heard.
(5) In larger cases, it will usually be appropriate to consider whether there are any issues
which can be hived off and dealt with as preliminary points. For example, there may be an
issue of law which could be disposed of at relatively limited cost, thereby avoiding the need
for further investigation of complex factual or expert evidence. Or it may be appropriate to
hive off issues of quantum, leaving these to be agreed or (if necessary) determined in the light
of the tribunals decision on liability.
(6) Similarly, in larger cases it may often be appropriate to convene a short meeting for
procedure and other issues to be discussed, before the costs of proceeding with the arbitration
are incurred. The LMAA Terms expressly provide for such a meeting in appropriate cases.8

Power to limit recoverable costs

Section 65 of the 1996 Act provides:

(1) Unless otherwise agreed by the parties, the tribunal may direct that the recoverable costs
of the arbitration, or of any part of the arbitral proceedings, shall be limited to a specified
amount.
(2) Any direction may be made or varied at any stage, but this must be done sufficiently in
advance of the incurring of the costs to which it relates, or the taking of any steps in the
proceedings which may be affected by it, for the limit to be taken into account.

The primary aim of this provision is to make arbitration more cost-effective by limiting the legal
and other costs incurred by the parties. In particular, the aim of the provision was to discourage
those who wish to use their financial muscle to intimidate their opponents into giving up through
fear that by going on they might be subject to a costs order which they could not sustain.9
In practice, the provision means that where there are concerns that excessive costs are being, or
are likely to be, incurred, a tribunal can (either on the application of either party, or more
unusually by giving notice to the parties of its intention to do so) place a ceiling on the
recoverability of those costs. This means that, while a party remains entitled to incur whatever
costs it wishes in presenting its case, the recovery of those costs from its opponent will be limited
to the advance ceiling imposed by the arbitrators. It is unclear whether section 65 entitles the
tribunal to impose a ceiling upon one party only, or to impose different ceilings upon different
parties, though it seems doubtful whether either possibility was intended by the legislature.10 In
the maritime context, section 65 has rarely been invoked in practice, partly because of resistance
from arbitrating parties.

Multi-party situations
In a multi-party situation, there is usually a risk that costs will be disproportionate because of the
need to determine the same issue in more than one arbitration. The parties can take steps to limit
the overall costs of the dispute (and also to limit the risk of incompatible findings) by agreeing to
concurrent hearings or (less commonly) to consolidate the proceedings. Where the LMAA Terms
apply, these confer power on the tribunal to order concurrent hearings, which will usually result in
a saving of costs.11

4. AGREEMENTS GOVERNING COSTS

The 1996 Act recognises the power of the parties to enter into agreements which govern both the
incidence and the recoverability of costs. In the maritime context, conditional fee agreements
(which provide for legal representatives to be paid fees only upon the satisfaction of a prescribed
conditionusually the winning of the case) are relatively uncommon. However, parties may often
reach agreement between themselves as to the recoverability or incidence of costs.

Agreements governing the incidence of costs

The 1996 Act places limits upon the parties ability to make agreements governing the incidence
of costs. Section 60 provides:
An agreement which has the effect that a party is to pay the whole or part of the costs of an
arbitration in any event is only valid if made after the dispute in question has arisen.
The purpose of this mandatory provision is to prevent a party from being unable to pursue a claim
in arbitration because he has already entered into an agreement which provides that he is to pay
the costs of the arbitration whether he wins or loses. The primary focus of the provision is to
protect parties who may have concluded such agreements as a result of weakness in bargaining
powerfor example, by agreeing to a companys standard terms at the time of entering the
relevant contract. However, it is possible that the section may be of relevance to maritime
arbitrations. The reference to part of the costs may conceivably preclude an agreement
preventing a party from recovering the costs of instructing lawyers. (This type of provision is
sometimes found in the arbitration rules of commodities associations, but is rarely encountered in
purely maritime arbitration agreements.12) However, this is not the purpose of section 60, and it is
more likely that such an agreement is permitted by section 63.

Agreements governing the recoverability of costs: LMAA

Small Claims and Intermediate Claims Procedures
Section 63(1) of the 1996 Act provides that the parties are free to agree what costs of the
arbitration are recoverable. Such agreements may be made on an ad hoc basis or may be set out
in the arbitration clause or in any applicable institutional rules. Good examples of the latter are
provided by the LMAA Small Claims and Intermediate Claims Procedures.
Paragraph 8 of the LMAA Small Claims Procedure limits the recoverability of costs to a
maximum of 2,500, or 2,000 for arbitrations commenced before 1 March 2007. Where there is a
claim and counterclaim, and the counterclaim exceeds the claim, costs are limited to 3,000 for

both (or 2,500 for arbitrations commenced before 1 March 2007). Although the arbitrator in a
Small Claims Procedure arbitration has a discretion to vary or depart from the provisions of the
Procedure in exceptional cases (see paragraph 9) this discretion does not extend to varying the
amount of legal costs recoverable under paragraph 8. Unless the arbitrator requests it, the parties
in a Small Claims Arbitration are not required to submit detailed schedules of costs: costs are
entirely in the discretion of the arbitrator.
Similarly, paragraph 15 of the LMAA Intermediate Claims Procedure provides that costs will be
awarded on a summary and commercial basis. In addition, recoverable costs are capped at 30 per
cent of the amount of the claimants claims (plus any counterclaims which the tribunal considers
to be distinct from the claims). The percentage is increased to 50 per cent if there is an oral
hearing. These percentages are maximum figures for recoverable costs, and the tribunal is entitled
to impose a lower cap in its discretion. In addition, paragraph 17 provides that a sole arbitrators
recoverable fees and expenses shall not, save in exceptional circumstances, amount to more than
one-third of the total at which a partys costs have been capped under paragraph. For a two or
three man tribunal, the tribunals recoverable fees and expenses shall not exceed two thirds of the
amount at which a partys costs have been capped. The costs of the venue and catering are not
taken into account under either paragraph 15 or 17. The use of costs capping mirrors relatively
recent initiatives in court proceedings, where (under CPR 44.18-20) the court is entitled to make
an order capping costs where the risk of disproportionate costs cannot be adequately controlled by
case management or detailed assessment.
Alternatively, the parties may conclude an agreement which addresses specific elements of costs,
for example by agreeing that lawyers costs shall not be recoverable, or that the recoverable costs
of instructing experts shall be limited to a certain level.

5. TRIBUNALS POWER TO DECIDE WHO PAYS COSTS

Power to make an award

Section 61 of the 1996 Act provides:

(1) The tribunal may make an award allocating the costs of the arbitration as between the
parties, subject to any agreement of the parties.
(2) Unless the parties otherwise agree, the tribunal shall award costs on the general principle
that costs should follow the event except where it appears to the tribunal that in the
circumstances this is not appropriate in relation to the whole or part of the costs.

In most arbitrations under LMAA terms the tribunal will be called upon to make an award
allocating the costs of the arbitration.

Procedure
Final hearings
Given the importance to the parties of costs, it is vital that the tribunal ensures that there is
adequate opportunity, once the substantive issues in the arbitration have been determined, for
arguments on costs to be addressed. In many cases, it will be common ground between the parties

that costs should follow the event. In such cases, the parties will indicate their views to the
tribunal and the tribunal will usually proceed to award costs at the same time as making its award
on the merits. However, where issues of costs are likely to be more complicated (e.g., because
there are various discrete issues, or because of the manner in which the arbitration has been
pursued by one or more parties, or because one or both parties have made sealed offers), the
prudent course is usually for the tribunal to reserve jurisdiction to deal with issues of costs (costs
reserved). The parties can then be invited to make such submissions as they think appropriate in
the light of the tribunals decision on the substantive issues. Usually, it will be appropriate for
such submissions to be made in writing. In larger cases, however, it may be necessary for a short
hearing to be convened.
Interlocutory applications
The costs of interlocutory applications are usually awarded at the time the application is decided.
Often the order will be costs in the reference, in which case the interlocutory costs will be
subsumed within the order made at the end of the arbitration. Sometimes, though, it may be
appropriate for the arbitrator to award a party its costs of the interlocutory application
particularly where one party has unreasonably made or resisted an application, thereby
necessitating the exchange of written submissions or perhaps even a hearing.
As well as deciding, at that stage, who pays the costs of the interlocutory application, the tribunal
has power to assess what amount of costs should be recovered. However, this power is very rarely
invoked.

General principle: costs follow the event

Where the tribunal does make an award, section 62(2) of the 1996 Act provides that the tribunal
should apply the general principle that costs follow the event except where it appears that this is
not appropriate. This provision reflects the similar provisions in the Civil Procedure Rules (and
indeed reflects the previous position at common law13) by recognising that, in general, it will be
appropriate to award a winning party its costs, but by further empowering the tribunal to depart
from that general principle whenever appropriate.
Although this general principle is easy enough to state, it may be more difficult to apply in
practice. In maritime arbitrations, where parties frequently advance numerous claims against each
other, with varying degrees of success, the question of who has won an arbitration, or of
identifying the event, may be far from straightforward. In many cases the tribunal will seek to
depart from the usual rule by adjusting the parties entitlements and liabilities in relation to costs.
Departing from the general principle
It should be noted that section 61 speaks in terms of a general principle rather than a rule which
must be applied. This reflects the fact that the award of costs is, fundamentally, a matter of
discretion to be exercised in the light of the facts of a particular case. The inflexible application of
any rule would amount to a failure to exercise discretioneach case must turn upon its own
facts.14

In the context of court proceedings, since the introduction of the CPR, courts have generally been
more willing to make partial costs orders, reflecting partial success on different issues, as well as
the parties conduct (in particular pre-action conduct) more generally.15 The provisions of the
Civil Procedure Rules provide helpful outline guidance as to the factors relevant to the question of
whether to depart from the general rule. CPR 44.3 contains a provision analogous to section 66(2)
as follows:

(2) If the court decides to make an order about costs

o (a) the general rule is that the unsuccessful party will be ordered to pay the costs of the
unsuccessful party, but
o (b) the court may make a different order.

CPR 44.3 then lists the factors which are of relevance to the question of costs in the following
terms:

(4) In deciding what order (if any) to make about costs, the court must have regard to all the
circumstances, including:
o (a) the conduct of all the parties;
o (b) whether a party has succeeded on part of his case, even if he has not been wholly
successful; and
o (c) any payment into court or admissible offer to settle
(5) The conduct of the parties includes
o (a) conduct before, as well as during, the proceedings
o (b) whether it was reasonable for a party to raise, pursue or contest a particular allegation
or issue;
o (c) the manner in which a party has pursued or defended his case or a particular
allegation or issue;
o (d) whether a claimant who has succeeded in his claim, in whole or in part, exaggerated
his claim.

Although this list does not purport to be exhaustive, it does provide a useful summary of the
factors which will usually be relevant to take into account. However, when dealing with costs,
tribunals should ensure that the costs and time incurred in dealing with arguments on costs are not
disproportionate to the amounts in issue. In some, if not most, cases, a fairly broad-brush approach
to costs will be appropriate. Furthermore, in practice, tribunals tend to avoid split costs orders
(where each party is awarded costs attributable to specific issues) because this can significantly
complicate the process of assessment. Instead, most tribunals will tend to apportion costs on a
percentage basis.
The conduct of the parties
The conduct of the parties is relevant in several respects. Where, for example, costs have been
incurred as a result of the successful claimants unreasonable conduct of the proceedings, he may
be deprived of all or part of the costs which he would otherwise have recovered. Such a situation
may arise where:

 a party has unreasonably refused to co-operate in a time and cost-saving procedure; or if he

has obstinately and unreasonably refused to admit the obvious, so increasing the costs overall; or
if he has unnecessarily brought other parties into the proceedings; or if by obstructive behaviour
he has protracted the proceedings. A party is not, however, to be penalised because he took steps
reasonable in the circumstances to protect his means.16
Similarly, the calling of evidence which is irrelevant or unnecessary in the light of the pleaded
issues may result in a reduction of costs.17 The LMAA Terms18 expressly provide that:
If a tribunal considers that any unnecessary costs have been incurred at any stage of the
arbitration, it may of its own volition or on the application of the other party, make rulings as to
the liability for the relevant discrete costs that will be payable in any event. Tribunals should not
be copied in unnecessarily on correspondence. Unnecessary costs may also be incurred by, e.g.,
inappropriate applications having been made or not agreed, excessive photocopying or
unnecessary communications being generated by the same message being sent by fax and/or email, and mail and/or courier. Tribunals may order that any unnecessary costs be assessed and
paid immediately.
However, as the Civil Procedure Rules make clear, it is also possible for the conduct of the parties
prior to the proceedings to be of relevance to a costs order. For example, in Grupo Torras v AlSabah,19 Mance J reduced the costs recovered by the successful defendants because of their
conduct of the proceedings (untruthful evidence at trial) but also because of their conduct prior to
the proceedings (deliberate backdating of documents to deceive auditors and other improper
conduct). Although such orders are relatively rare, they may be appropriate in maritime
arbitrationsfor example, where the tribunal accepts an argument that logbooks or other
documents have been forged, but nevertheless makes an award in favour of the party relying upon
them. In court proceedings, the Civil Procedure Rules encourage parties to settle their disputes: for
instance, pre-action protocols may require the parties to take various steps such as attempting
ADR before issuing proceedings, and a partys unreasonable failure to attempt to mediate may be
penalised in costs. In arbitration the parties and the tribunal are under no duty to facilitate
settlement so that ordinarily a failure to attempt settlement will not be relevant to costs. However,
in some circumstances the tribunal may consider it appropriate to encourage settlement (e.g., by
allowing a stay for the purposes of mediation) and if a party unreasonably refused to take up an
offer to mediate then this could be relevant in deciding whether there is reason for departing from
the general rule as to costs.20
Partial success
It is common for a number of discrete issues to be referred to a tribunal in a single reference. For
example, on a balance of hire dispute each side may assert against the other several discrete and
disparate claims. In such a case it will often be appropriate for the parties success or failure on the
various issues to be reflected in a costs order, though this will depend ultimately upon the precise
facts, including the reasonableness of a party in pursuing an issue on which he was defeated, the
extent to which the unsuccessful point was linked to the successful issues and the fairness of
disallowing the successful party some of his costs.21 It will usually be easier to obtain a partial
costs order where the various issues are discrete and unconnected.

In The Aghios Nicolaos,22 the dispute between the parties centred on two separate berthings at the
same port. During each, damage was caused to the claimants vessel. The arbitrator held that the
respondent charterers had ordered the vessel to an unsafe port, but that on the second berthing the
damage had been caused by the masters negligence. The claimants therefore recovered damages
only in relation to the first berthing, and the arbitrator held that each party should bear its own
costs. The Court of Appeal refused to set aside this award. In this case there were two issues to be
determined, and each party had only been partly successful.
In The Rozel,23 disputes arising under a bareboat charterparty were referred to arbitration. Owners
claimed that charterers were in breach of their redelivery obligations by reason of damage to the
vessel. The arbitrator ordered the charterers to pay damages to the owners. He further ordered that
the charterers should pay all their own costs and half the owners costs of the reference and that
the costs of the award should be apportioned three fourths/one fourth in favour of the owners.
Potter J upheld this award on the basis that, although the owners had been ultimately successful,
the claims which they had advanced divided into a large number of discrete factual claims and
issues, some of which had failed. He commented that the mere fact that a claimant recovers less
than he claims is not a good ground for reducing that claimants costs. However, if a claimant
advances claims which are grossly exaggerated, or if he takes substantial time to pursue discrete
issues of fact on which he is unsuccessful, costs may legitimately be reduced.
Counterclaims
Counterclaims may raise particular questions in relation to costs. As a general rule, where a
counterclaim qualifies as a set-off (and therefore operates as a defence to the claim), but does not
extinguish the claim entirely, then the successful claimant will recover his costs.24 Where the
counterclaim is a discrete separate claim rather than a defence, it will usually be categorised as a
separate issue, and if the respondent succeeds in proving his counterclaim, he should recover his
costs, whether or not the claimant also succeeds.25 Similarly, where both parties fail in their
respective claims, each will usually recover from the other the costs of the claim in which they
succeeded.26

6. OFFERS TO SETTLE
Offers to settle a dispute will often be made during the course of, or prior to the commencement
of, an arbitration. Depending upon their precise terms and the circumstances in which they are
made, such offers may affect the final award of costs. This will usually occur where the claimant
has refused the offer of a sum of money to settle the claim, but then ultimately recovers less than it
was offered. Settlement offers fall into three categories: without prejudice, open and sealed.

Without prejudice offers

These are offers which are not intended to be considered by the tribunal and they should not be
brought to the attention of the arbitrator when he is awarding costs.27 What amounts to an
inadmissible without prejudice offer depends on the intention of the offeror, as illustrated by the
content of the offer and the circumstances in which it was made, rather than upon the use of the
label without prejudice.

Open offers

Open offers are intended to be disclosed to the tribunal and can legitimately be taken into account
when making orders as to costs. However, they have the undesirable effect of indicating to the
arbitrator exactly how strong (or weak) the offeror believes his case to be.

Sealed offers
These are the most common method by which attempts to settle are made and reflect comparable
court practice that is now set out in Part 36 of the CPR. A written offer which is expressed to be
without prejudice save as to costs is made to the other party. A copy is placed in a sealed envelope
and given to the arbitrator after the hearing or close of submissions. The arbitrator may open the
envelope after reaching his decision on the substantive issues of liability and quantum. Where the
sum offered is greater than the amount that the claimant is awarded (ignoring costs but taking into
account principal and interest up to the date of the offer) the claimant will be held liable for the
costs of the arbitration incurred after the offer was made (including the costs of the award).
In the past, arbitrators have seldom departed from this practice and the sealed offer procedure thus
provides an invaluable method of protection from costs liability. Only in exceptional casesfor
example, where the offeree did not have sufficient time to consider the offer, or where the offer
was in ambiguous terms28 have arbitrators refused to award costs where the offer was lower
than the amount recovered.29
In The Maria,30 charterers had made an offer one month before a hearing to settle a claim for
$15,000 plus interest and owners costs up to the date of the offer. The offer was rejected but it
was placed in a sealed envelope and given to the arbitrators. Owners recovered $16,215.99 plus
interest in the arbitration, thereby beating the sealed offer. Under the principles applicable to
payments into court, where costs are not taken into account in assessing whether a plaintiff has
beaten an offer, the offer was not high enough to deprive the owners of their costs. However, the
arbitrators ruled that the owners were liable to pay the costs of the award and the charterers costs
incurred after the date of the offer because by taking into account the costs incurred, the owners
had not in fact achieved more by rejecting the offer than going on with the arbitration. The Court
of Appeal (Sir Thomas Bingham MR dissenting) ruled that the arbitrators award should be varied
so as to allow owners to recover their costs. One factor which influenced the Court of Appeal was
the difficulty of assessing whether a sealed offer was greater than the claimants likely recovery
plus the (as yet unquantified) costs.
However, a difficult question arises, under the 1996 Act, as to whether or not the tribunal should
take into account a sealed offer which just misses the amount recovered. It appears that under
the 1996 Act, and by analogy with the CPR, the tribunal could take such an offer into account.
Reasonable attempts to settle a case amicably should, in principle, be relevant to the exercise of
the discretion to award costs. Furthermore, where a claim was grossly inflated, and a sealed offer
was made which failed to beat the amount recovered, but was nevertheless a much closer
reflection of the true value of the claim than the amount sought by the claimant, there would seem
no reason why the sealed offer could not be taken into account in favour of the respondents.31 An
arbitral tribunal has broad discretion over costs and is not bound by the rules of the CPR. The fact
that a partys sealed offer may not comply with the strict requirements of CPR Part 36 will not
ordinarily mean that the offer lacks effect if the tribunal is satisified that it would be fair to take it

into account. For example, in Lindner Ceilings Floors Partitions plc v How Engineering Services
Ltd 32an offer that did not include costs was properly taken into account since the arbitrator could
accurately assess its effect.
One disadvantage of the sealed offer procedure is that the handing of an envelope to the arbitrator
will alert him to the fact that an offer to settle has been made and this may allow him to conclude
that the offeror is in a weak position. One possibility which has been canvassed (but not widely
adopted) is a procedure whereby a sealed envelope is handed to the tribunal as a matter of
course.33 Another option, more widely adopted, is to ask the tribunal to reserve costs to a later
date.
It is important to take care if time limits for acceptance of sealed offers are imposed. An offeror
who fails to specify a time limit is at risk of the offer being accepted after considerable extra costs
have been incurred or following a material change in circumstances (for example, the service of
damaging witness statements or expert reports). Stipulating a time limit means that, in effect, the
offer is unilaterally withdrawn upon expiry of the specified time and ceases to offer any protection
to the offeror. In one London arbitration,34 the tribunal decided that an arbitral tribunal should
have regard to an offer open for a limited period of time provided that the time given was
reasonable. This conclusion was supported by High Court authority35 and by practical
considerations: if a claimant chose to pursue a claim once an offer had been made, it thereby took
a chance of recovering more than had been offered and, if it failed, should be at risk as to costs.
The tribunal commented that the policy of the law was to give effect to settlements: if a
respondent made a reasonable and realistic offer it should be taken into consideration.

7. THE AMOUNT OF COSTS RECOVERABLE

Once a party has obtained an award entitling him to recover his costs from his opponent, the
question arises of how those costs should be quantified. It is almost unheard of for a party to
recover all of the costs which it has actually incurred.
Section 63 of the 1996 Act addresses the issue of which costs actually incurred will be
recoverable. Section 63(1) provides that the parties may agree what costs of the arbitration are
recoverable. In practice, it is quite common for such agreements to be reached largely because
the costs of assessing recoverability are often disproportionate and it is cheaper for the parties to
agree a figure. Paragraph 15 of the LMAA Intermediate Claims Procedure is one example of such
an agreement (see above.) However, if no such agreement can be reached, then section 63
provides for either the tribunal or, failing that, the court, to assess the recoverability of costs. It
will often be cost-effective for the tribunal, which is familiar with the facts of the case and the
background to it, to assess costs. However, if the tribunal does not assess the recoverability of
costs, then the court may do so itself, or may order some other procedure for determination of the
issues arising. For example, the court could refer such issues to an independent costs draftsman, or
to some other third party.
Where the assessment is performed by the tribunal, section 63(3) requires that the tribunals
decision should be contained in award, and further provides that:
[the tribunal] shall specify:

(a) the basis on which it has acted, and

(b) the items of recoverable costs and the amount referable to each.

Section 63(5) sets out a prima facie basis for determination of recoverability, which applies
unless the tribunal or the court determines otherwise. It provides:
(5) Unless the tribunal or the court determines otherwise:

(a) the recoverable costs of the arbitration shall be determined on the basis that there shall be
allowed a reasonable amount in respect of all costs reasonably incurred, and
(b) any doubt as to whether costs were reasonably incurred or were reasonable in amount
shall be resolved in favour of the paying party.

This roughly equates to what in court proceedings are called standard costs.36 In practice,
standard costs generally means that approximately two-thirds (or perhaps even more) of the
costs incurred will in fact be recovered. In most cases, standard costs will be appropriate.
However, the tribunal retains a discretion to award costs on a different basis. For example,
indemnity costs (where any doubts as to reasonableness are resolved against the paying party,
thereby resulting in payment of a higher sum) may be appropriate where a party has conducted
proceedings unreasonably or in such a manner that costs have been wasted.
Arbitral tribunals are not bound to choose between standard and indemnity costs. In practice,
though, most London maritime arbitral tribunals will be familiar with the distinction, and it is
often applied. Although not binding on the tribunal, and not exhaustive of the matters that may be
taken into account in an arbitration, CPR 44.5 sets out a useful guide to the sorts of factors which
are generally of relevance in assessing recoverability:

(a) the conduct of all the parties, including in particular conduct before, as well as during the
proceedings;
(b) the efforts made, if any, before and during the proceedings in order to try to resolve the
dispute;
(c) the amount or value of any money or property involved;
(d) the importance of the matter to all the parties;
(e) the particular complexity of the matter or the difficulty or novelty of the questions raised;
(f) the skill, effort, specialised knowledge and responsibility involved;
(g) the time spent on the case;
(h) the place where and the circumstances in which work or any part of it was done.

8. CHALLENGING COSTS AWARDS

It is extremely difficult to mount a challenge to a tribunals decision on costs, because any
decision is discretionary in nature, and the court is traditionally reluctant to interfere in any
exercise of discretion by an arbitral tribunal.
In theory, a costs award could be challenged by means of an appeal on a point of law. However,
this will be possible only in exceptional cases. First, any challenge would depend upon the
tribunal having given reasons for its decision. Second, the decision on costs is discretionary.

Unless the applicant is able to point to some failure properly to apply the relevant legal principles
set out in section 61(2) of the 1996 Act37 (which would occur only extremely rarely), or is able to
persuade the court that the exercise of the tribunals discretion was so unreasonable that no
reasonable tribunal could have reached the decision which it did (again, a test which is extremely
difficult to satisfy), then it will be impossible to establish any error of law. Even if an error of law
could be shown, a decision on costs is, by its very nature, a one-off and the court would be
extremely reluctant to grant permission to appeal.
The only other method of challenge would be pursuant to section 68 of the 1996 Act (procedural
irregularity). However, pre-1996 Act authority confirms that a complaint as to the way in which
the tribunals discretion has ultimately been exercised (rather than as to the procedures adopted by
the tribunal in reaching its decision) does not constitute a procedural irregularity. In such a case,
unless the exercise of the discretion discloses some error of law which can be appealed, no
challenge is possible.
In President of India v Jadranska Slobodna Plovidba38 an interim award in favour of owners was
granted. Thereafter, charterers were ordered by the arbitrators to pay their own costs and also twothirds of owners costs. Charterers attempted to challenge the award by seeking an order remitting
it for misconduct. Hobhouse J rejected the application, holding that the proper method of
challenge, in the absence of some distinct procedural irregularity or misconduct, was by way of
appeal.
In King v Thomas McKenna Ltd,39 counsel for the respondents (who had made a sealed offer)
mistakenly failed to indicate to the arbitrator or to the claimants that she wished the issue of costs
to be deferred until after the questions of liability and quantum had been determined. The
arbitrator, unaware of the existence of the sealed offer, made an award in favour of the claimants
which included an award of costs. Since the claimants counsel had mistakenly believed that her
wish to defer consideration of costs had been communicated to the arbitrator, the award was
remitted on the basis of procedural mishap under the old Arbitration Acts.
These cases establish that the only options for challenge are either by way of appeal or, if there is
some clear and distinct procedural irregularity, by way of challenge under section 68.
In Gbangbola v Smith & Sherriff,40 the arbitrator in a construction arbitration made an award
ruling in favour of the claimants on some issues and in favour of the respondents on others. He
also ordered that the claimants should pay the respondents costs. In making his costs order, he
relied upon two matters which the parties had not raised or addressed in argument. The court held
that the arbitrator had acted in breach of section 33 in failing to bring these factors to the attention
of the parties so that they could make submissions on them, and allowed an application
challenging the award of costs pursuant to section 68 of the 1996 Act.
However, as Gbangbola makes clear, the procedural irregularity must also have caused
substantial injustice. This means, in most cases, that the applicant must be able to make a
reasonably arguable case that, but for the procedural irregularity, a different costs order (more
favourable to himself) would have been made.41 Given the discretionary nature of costs, this will
also be a difficult requirement to satisfy.

1 [1928] 1 KB 750; see also Frankenburg v Famous Lasky Service Ltd (1931) 144 LT 534.
2 (2004) 635 LMLN 3(2).
3 See section 1(c) of the 1996 Act.
4 Hussman (Europe) Ltd v Al Ameen Development & Trade Co and others [2000] 2 Lloyds Rep
83 at 99 -100.
5 See, further, Chapter 12.
6 See the Second Schedule of the LMAA Terms.
7 See the comments of Thomas J in Hussman (Europe) Ltd v Al Ameen Development & Trade Co
and others at pp. 93-94, in the context of expert evidence of foreign law.
8 Paragraph 15 and the Third Schedule.
9 Paragraph 272 of the DAC Report.
10 Cf the discussion at Mustill & Boyd, 2001 Companion, pp. 46 and 348.
11 See Chapter 15.
12 Cf. paragraph 6 of the Commentary on the LMAA Small Claims Procedure: The use of
lawyers is not excluded, but it is thought that in many cases they will not be necessary.
13 E.g., Unimarine SA v Canadian Transport Co. Ltd, The Catherine L [1982] 1 Lloyds Rep 484.
14 Cf. James Allen (Liverpool) Ltd v London Export Corporation Ltd [1981] 2 Lloyds Rep 632.
15 AEI Rediffusion Music Ltd v Phonographic Performance Ltd [1999] 1 WLR
1507; R v Secretary of State for Transport, ex p. Factortame, 6 July 1998.
16 Per Bingham J, The Catherine L at p. 489.
17 Rosen & Co v Dowley & Selby [1943] 2 All ER 172 at 174; Lewis Emanuel v Sammut [1959] 2
Lloyds Rep 629 at 635.
18 Second Schedule, paragraph 17.
19 Mance J [1999] CLC 1469
20 See Chapter 3.
21 Antonelli v Allen, The Times, 8 December 2000; Quadrant Holdings (Cambridge)
Ltd v Quadrant Research Foundation (Costs) [1999] FSR 918; Scholes Windows Ltd v Magnet
Ltd (No 2) [2000] ECDR 266.
22 Blue Horizon Shipping Co SA v ED & F Man Ltd [1980] 1 Lloyds Rep 17.
23 Channel Islands Ferries Ltd v Cenargo Navigation Ltd [1994] 2 Lloyds Rep 161.
24 E.g. Eleftheria Niki Cia Naviera SA v Eastern Mediterranean Marine Ltd, The Eleftheria
Niki [1980] 2 Lloyds Rep 252 at 259-60.

25 Tramountana Armadora v Atlantic Shipping Co SA [1978] 1 Lloyds Rep 391.

26 James v Jackson [1910] 2 Ch 92.
27 Tramountana Armadora v Atlantic Shipping Co SA, above.
28 Argolis Shipping Co SA v Midwest Steel & Alloy Corp, The Angeliki [1982] 2 Lloyds Rep 594
at 597.
29 Kastor Navigation Company Limited v Axa Global Risks (UK) Limited [2004] EWCA Civ 277;
[2004] Lloyds Rep IR 481.
30 Everglade Maritime v Schiffahrtsgesellschaft Detlef von Appen [1993] QB 780.
31 Painting v University of Oxford [2005] EWCA Civ 161; [2005] 3 Costs LR. See also the
approach to offers which have been withdrawn (see below).
32 [2001] BLR 90.
33 See Lord Donaldson MR in King v Thomas McKenna Ltd [1991] 2 QB 480 at 492-3.
34 London Arbitration 14/94, [1994] LMLN 389.
35 Huron Liberian Company v Rheinoeil GmbH, The Concordia C [1985] 2 Lloyds Rep
58; Ahrenkiel Liner Service v Wilhelm Wilhelmsen Enterprises, 26 September 1988; Cf. The
Toni [1974] 1 Lloyds Rep 489.
36 CPR 44.2, setting out similar principles.
37 See Gbangbola v Smith & Sherriff [1998] 3 All ER 730 at 739.
38 [1992] 2 Lloyds Rep 274.
39 [1991] 2 QB 480.
40 [1998] 3 All ER 730.
41 See Chapter 22.

hapter 22

Challenging an Award in the English Courts

Challenging an Award in the English Courts

1. Introduction
2. Appeals
3. Challenging an award for serious irregularity
4. Challenging an award for lack of jurisdiction
5. Time limits and loss of the right to challenge
6. The effect of a challenge
7. Appeals to the Court of Appeal

8. Practice in making an arbitration claim

9. Service out of the jurisdiction

1. INTRODUCTION
The starting point under English law is that an award is final and binding on the parties unless
challenge is possible in accordance with the 1996 Act.1 The 1996 Act and the courts current
approach to arbitration is firmly in favour of the finality of awards. Time-consuming and costly
challenges in the courts are directly contrary to the parties objective in choosing arbitration as an
efficient means of dispute resolution by their chosen tribunal. The 1996 Act is founded on the
principle that the object of arbitration is to give effect to the parties choice to refer their dispute to
arbitration and that the courts should only intervene to support the arbitral process rather than
displace it.2 Accordingly, there are strict limits on remedies for challenging awards (for example,
time limits and the requirement of leave to appeal) and the court will not interfere except as
provided by that Act. The 1996 Act aims to balance the interest of ensuring a right to challenge
where the award or arbitration is plainly outside what the parties could reasonably have
expected3 against the principle of giving effect to the parties agreement to arbitrate. The Act is
designed to ensure that challenges are not used as illegitimate delaying devices (for example, the
court may require a challenging party to provide security for the costs of the application). Under
the Act there are four main methods of challenging an award in the courts:

(a) appeal for error of law;

(b) challenging an award on grounds of serious irregularity;
(c) challenging an award for want of jurisdiction;
(d) challenging an award at the enforcement stage (see Chapter 23).

A successful challenge at the enforcement stage would result in the court refusing to enforce the
award. The other methods of challenge may result in the award (or part of it) being confirmed,
varied, remitted, set aside or even declared to be of no effect. Remission generally involves
sending back the award (or part of it) to the tribunal for further consideration. Setting aside
involves a decision that the award (or part of it) should have no binding effect.

2. APPEALS
The jurisdiction of the English courts to correct some errors of law in awards is a recognised, if
not always welcome, feature of English arbitration. The 1996 Act maintains a limited right of
appeal because the DAC considered that parties generally contemplate that the law will be
properly applied by the arbitrators in the resolution of their dispute.4 The rights of appeal are
strictly limited, largely following the scheme of the Arbitration Act 1979, which was intended to
inject speed and finality into the arbitral process in preference to meticulous legal accuracy.5 The
system adopted under the 1996 Act maintains two hurdles which must be overcome by the
appealing party. First, leave6 to appeal must be obtained in accordance with section 69(3) unless
all the other parties to the arbitration agree7 that an appeal can be made. Ordinary contractual
principles would apply to determine whether parties have agreed that an appeal on law may be
made without permission.8 Under paragraph 14 of the LMAA Intermediate Claims Procedure
(2009) there is express agreement that there will be a right of appeal where the tribunal certifies

that the dispute involves a question of law of general interest or importance to the trade or industry
in question (otherwise any right of appeal is excluded). This provision would clearly count as an
agreement for the purposes of section 69(2)(a) and is intended to avoid the cost of applying for
permission to appeal where the tribunal is satisfied that there is a question of general
importance.9 It has not yet been tested and issues will probably arise as to the scope of the agreed
right of appeal, in particular where a party seeks to appeal on questions beyond those the tribunal
has clearly certified. As the second hurdle, the appealing party must then succeed at a substantive
appeal hearing. Even if the parties agree that an appeal can be made, the courts jurisdiction will
be subject to the conditions of sections 69 and 70 (for example the appeal must relate to a question
of English law and the applicant must exhaust available arbitral processes of appeal).

Agreements excluding the right of appeal

The existence of a right of appeal under section 69 (albeit subject to the requirement of obtaining
leave) is justified on the basis of the parties expectations of an award being correct on the law; it
is not based on public interest in the legal accuracy of awards. Accordingly, the parties can
agree10 to exclude the right to appeal under section 69. An agreement to dispense with reasons for
the tribunals award is considered as an agreement to exclude the courts jurisdiction on
appeals.11 For example, the right to appeal is excluded under the LMAA Small Claims Procedure
and also under the Intermediate Claims Procedure (except where the tribunal certifies that the
dispute involves a question of general importance).12 General principles of contract law will
determine whether parties have agreed to exclude the right to appeal and such an agreement may
be incorporated by reference to another contract.13 A provision that the tribunals decision shall be
final, conclusive and binding will not be construed as an exclusion agreement.14

Questions of law arising out of the award

An appeal is only possible for questions of law arising out of the award and the question must be
one of English law.15 Thus, if the question is governed by a foreign law (or principles of justice
and fairness, or non-national systems of law such as Sharia law) an appeal under section 69 will
not be available. The tribunals findings on issues of fact are final unless the award can be
challenged on independent grounds, such as serious irregularity or want of jurisdiction. The
distinction between questions of law and fact can sometimes be difficult to draw. Questions of law
normally relate to the identification of the correct rules and tests which ought to be applied to
determine the legal consequences of given facts or words.16 These include:

the interpretation of contracts and statutes;

the determination of the applicable burden of proof;
the identification of the appropriate rules governing the recovery of damages; and
the interpretation of the principles governing the existence and scope of a partys duties in
contract or tort.

Questions of fact, by contrast, relate to the particular facts and circumstances giving rise to the
dispute, including what was said or intended and how those facts should be regarded. These
include issues such as:

the condition of a vessel;

the cause of an accident; or
whether a master acted unreasonably.

A question of mixed fact and law may arise where a particular issue requires an assessment of
both law and fact, for example whether:

a contract has become frustrated by delay;

damages are too remote to be recoverable; and
a party owes a duty of care.

Such mixed questions can be the subject of an appeal but the court would ordinarily only interfere
with the arbitrators decision if it was obviously wrong (see below under the discretion to grant
permission to appeal).
The requirement that the question of law must arise out of the award means that a party may not
use section 69 to challenge an error of law made during the arbitral proceedings (e.g., if an
amendment is refused on the mistaken ground that the amended claim would be time-barred)
unless that error forms part of the award. The rule also means that the court will not usually look
beyond the award in assessing whether the arbitrator made an error of law. The parties cannot reopen the proceedings by raising subsequent correspondence or extrinsic evidence relating to
matters raised before the arbitrator.17
The courts are vigilant to ensure that parties are not allowed to re-open the tribunals findings of
fact by dressing them up as questions of law, for example by alleging that a finding was made on
the basis of no evidence. Steyn LJ inThe Baleares 18 suggested that an appeal on such grounds
would be regarded as a transparent tactic to circumvent the rule that the arbitrators findings of
fact are conclusive. This approach was firmly endorsed in Demco Investments & Commercial
SA v Se Banken Forsakring Holding Aktiebolag 19 where Cooke J considered that the requirement
under section 69(3) for the court to assess the tribunals alleged error of law on the basis of the
findings of fact in the award was conclusive to preclude an appeal against findings of fact under
the 1996 Act.20 The court would also reject any attempt to challenge the tribunals findings of fact
as a serious irregularity on grounds that making a mistake of fact is a breach of the tribunals duty
to act fairly as between the parties.21

Discretion to grant permission to appeal

Section 69(3) of the 1996 Act provides that:
Leave to appeal shall be given only if the court is satisfied

(a) that the determination of the question will substantially affect the rights of one or more of
the parties,
(b) that the question is one which the tribunal was asked to determine,
(c) that, on the basis of the findings of fact in the award
o (i) the decision of the tribunal on the question is obviously wrong, or

(ii) the question is one of general public importance and the decision of the tribunal is at
least open to serious doubt, and
(d) that, despite the agreement of the parties to resolve the matter by arbitration, it is just and
proper in all the circumstances for the court to determine the question.

These conditions are largely based on the House of Lords interpretation of the previous law,
commonly known as the Nema guidelines.22 On this basis, a court may find the pre-1996 Act
case law on the application of these guidelines useful. However, section 69 lays down statutory
guidelines and they will not always be interpreted identically to the Nema guidelines.23 In most
cases a court will look to the language of the Act itself or authority arising out of it.24
The determination of the question will substantially affect the rights of one or more of the
parties
This requirement means that permission cannot be granted where the error of law is academic or
the error of law only affects liability for a minimal amount. The question of whether a partys
rights are substantially affected ultimately depends on the amount at stake and possibly other
circumstances, for example if a persons reputation was in issue. In practice, the amount at stake is
the most important factor. A question arising out of an award would usually only be considered
substantially to affect the rights of a party if it affected the overall outcome, including liability for
costs.
The question is one which the tribunal was asked to determine
This provision limits appeals to questions the tribunal was asked to determine.25 In making an
application for permission to appeal the applicant must serve a witness statement setting out any
evidence relied upon for the purpose of satisfying the grounds set out in section 69 of the 1996
Act. This will usually include a brief statement that the tribunal was asked to determine the point
raised in the appeal. The court will prefer to look principally to the award in considering an
application for permission to appeal and will be reluctant to re-open the conduct of the arbitration.
However, if it is not clear from the face of the award that the point in issue was raised before the
tribunal then it may be necessary to introduce additional evidence such as submissions in the
arbitration. The court will apply this requirement flexibly; it would not allow a new or wider
argument to be raised which might have raised further issues before the tribunal.26 However, it
will take into account the fact that all issues of law may not have been clearly identified in the
arbitration, particularly if the parties are not legally represented or the arbitrators are not lawyers.
In such circumstances the court may be willing to grant permission to appeal if the point of law
was integral to the case of one or other of the parties even though not specifically raised.27 If the
appeal raises questions of European Community law this requirement will probably not be applied
strictly; the ECJ has suggested that this type of procedural requirement should not preclude the
court reviewing an award contrary to fundamental provisions of European Community law, such
as the prohibition on anticompetitive practices.28
The tribunal was obviously wrong or the question is one of general public importance and the
decision of the tribunal is at least open to serious doubt

This provision is intended to codify the House of Lords ruling (the Nema guidelines29) on the
proper exercise of discretion to grant permission to appeal under the previous law. In an attempt to
maintain a balance between the rival merits of finality in arbitration and certainty in English
commercial law, the House of Lords drew a distinction between one-off points, where
permission should only be granted if the judge forms the view that the arbitrator was obviously
wrong;30 and questions of general public importance, where permission can be granted if a
strong prima facie case has been made that the arbitrator was wrong. The distinction remains
largely intact under the 1996 Act; permission to appeal will only be granted under section 69
where an arbitrator is obviously wrong, unless the question is of general public importance in
which case permission may be given if the arbitrators decision is open to serious doubt.
One-off cases might involve construction of non-standard clauses, an assessment of
circumstances which are particular to the facts of the case, or the application of standard
contractual terms to unusual events. Similarly, the question of how a well-recognised legal test
should be applied to particular factual circumstances will normally be treated as a one-off case
unless the scope or meaning of the test itself is disputed.31 A question of mixed fact and law (e.g.,
whether delay has frustrated a contract) will ordinarily be treated as one-off since it depends on
the factual circumstances. The test which determines whether permission to appeal should be
granted in relation to such questions has been stated as turning upon whether the arbitrator (i)
misdirected himself in point of law; or (ii) the decision was such that no reasonable arbitrator
could reach.32 Permission to appeal will be difficult to obtain in such circumstances since it will
be necessary to establish that the arbitrators decision falls outside the permissible range of
solutions open to him.33 By contrast, cases of general public importance may involve the
construction of standard terms, issues of general application or events of a general character that
affect similar transactions. Past examples include the closing of the Suez Canal, the US soya bean
embargo and the war between Iran and Iraq.34 This category also includes cases in relation to
which there are conflicting decisions by judges or experienced maritime arbitrators and where
further guidance would be useful.35 A question is more likely to be regarded as of general public
importance if it is made against a background of conflicting decisions, or even differing dicta or
schools of judicial thought.36
The issue of whether the arbitrators decision was obviously wrong or open to serious doubt
will depend on the individual circumstances of the case. Relevant factors may include the area of
expertise of the arbitrator,37 the materials relied upon as the basis of the decision,38 the seriousness
for the parties of the consequences of the arbitrators error and whether the contractual term in
dispute is commonly encountered.39
Under the 1979 Act appeals on questions of European Community law were treated as a special
case, not strictly subject to the Nema guidelines. In Bulk Oil AG v Sun International Ltd (No
1) 40 Bingham J suggested that leave should be allowed even in one-off cases if the point of EC
law raised was open to serious argument. This approach was justified on the ground that national
courts were under a duty imposed by Community law to supervise arbitral proceedings in order to
ensure observance of Community law. The same approach is likely to be maintained under the
1996 Act, probably by categorising questions of Community law as of general public importance
by reason of the courts obligation under the European Community Treaty to give effect to EC

law. The European Court of Justice maintains that, in the interests of uniform interpretation,
questions of EC law should be open to examination by national courts in considering challenges to
an award, thereby making it possible for the questions to be referred to the ECJ for a preliminary
ruling.41 The approach of the English courts probably goes beyond what would be strictly required
under Community law which recognises the public interest in efficient arbitration. In Eco Swiss
China Time Ltd v Benetton International BV,42 the ECJ was willing to recognise Dutch procedural
rules which limited the scope of review of awards but considered that a national court should
allow a challenge on grounds of public policy where an essential provision of Community law
(namely the prohibition against anti-competitive practices) was at stake.
Despite the agreement of the parties to resolve the matter by arbitration, it is just and proper in
all circumstances for the court to determine the question
This further requirement was introduced because the DAC considered that the fact that the
parties chose to arbitrate rather than litigate is an important and powerful factor deserving
specific consideration.43 This provision has been described as a long stop provision which
underlines again the need for the court to respect the decision of the tribunal of the parties
choice.44 If all the other criteria under section 69 were established then it is unlikely that it would
stand in the way of granting permission if the tribunal was obviously wrong on an important legal
question.45 However, it will usually be considered as a catch all provision together with the
other criteria,46 to be used as a further ground for refusing permission to appeal, in the same way
that the presumption in favour of finality 47 was relied upon under the old law.
The court would be likely to take this provision into account in an application for permission to
appeal where finality was one of the parties express priorities, for instance where the parties
agreed to an urgent arbitration as a means of speedily resolving disputes as to a future right (such
as withdrawal of a ship for non-payment of hire).48 Where the dispute raises a specific question of
law and the parties chose a lawyer as their arbitrator it will be argued that the parties had good
reason for submitting to his expertise and it may well be more difficult in such circumstances to
rebut the presumption of finality on the point of law decided.49 (It might also be argued to the
contrary that such a choice indicates that the parties wished the point of law to be decided
according to legal principle, and justice requires the error to be corrected.50) Where a dispute
centres on an issue which calls for non-legal expertise or the parties have chosen a tribunal for its
knowledge of the commercial background and usages the courts will be particularly reluctant to
intervene if the tribunal possesses that expertise.51
In Icon Navigation Corporation v Sinochem International Petroleum (Bahamas) Co.
Ltd 52 owners sought permission to appeal against an award on grounds of an error in the
construction of a charter. Charterers opposed the application, partly on the ground that there had
been a serious irregularity in the tribunals approach to the issue of construction because it had not
given them a fair opportunity of dealing with the issue in evidence. Moore-Bick J considered that
the appropriate way to raise an argument of this type would be to oppose the appeal on grounds
that it is not just and proper in all the circumstances for the court to determine the question in
accordance with section 69(3)(d).

The permission to appeal application

General points of practice relating to challenges are raised in section 8 below, but some points are
specific to applications for permission to appeal. In particular the application will be decided by
the judge without an oral hearing unless it appears to the court that a hearing is required.53 This
is intended to avoid the delay and expense of an oral hearing. Either party may request a hearing
but the court would generally only require one if the application was particularly complex, raised
issues of credibility, or there was to be an oral hearing in any event (e.g., for a concurrent
application based on serious irregularity54). The courts expect that any written submissions put
forward in support of the application for permission to appeal should normally be capable of being
read and digested by the judge within 30 minutes and a party who adds unnecessary material may
face costs penalties.55
The party opposing the permission to appeal application (called the defendant in the court
proceedings) may serve statement evidence setting out his grounds for opposing the application
and the evidence relied upon in opposing the application (for instance, on whether the question is
one of general importance). He may also contend that the award should be upheld for reasons not
expressed (or not fully expressed) in the award: this part of the statement is sometimes called a
respondents notice. A defendant cannot justify an award on the basis of facts not established in
the award and the court will be reluctant to allow evidence to be admitted for this purpose.56 The
court may also be reluctant to justify an award on the basis of new legal points that were not put
forward in the arbitration since this may risk usurping the arbitrators role and re-opening factual
issues.57 However, it could be argued that it is in the interests of finality for a court to uphold an
award on the basis of points of law not argued before the tribunal or found in the award.58 It is
important that these points are made before the permission application is determined since the
court will be reluctant for them to be raised at a later stage.59
The court will give short reasons for its decision on a permission to appeal application. This
practice was introduced following the Court of Appeals decision in North Range Shipping
Ltd v Seatrans Shipping Corporation.60 The Court of Appeal held that the previous practice of
giving no reasons was incompatible with a partys right to a fair hearing under the Human Rights
Act 1998. At the very least, the unsuccessful applicant for permission should be told which of the
tests under section 69(3) he had failed on. Whether or not the judge must go further and explain
why the application failed under that test would depend on the circumstances. On some issues, for
example whether the question is of general importance, it may be sufficient simply to identify the
test but on whether the arbitrator was wrong it may require more to show why the party has lost.
However, it may be enough for the judge to state his agreement with the arbitrators or otherwise
give very brief reasons.

Evidence admissible on a permission to appeal

application
Evidence may be introduced from both sides (typically by a statement from an experienced
solicitor or trader in the areas in question) as to whether the question raised is of general public
importance. However, apart from evidence as to whether the tribunal was asked to determine the
question raised (see above), the court will be extremely reluctant to consider other evidence such
as correspondence, pleadings, submissions or witness statements from the arbitration. Colman J

suggested that such evidence would be entirely inadmissible in an application for permission to
appeal under the 1979 Act61 and a similar approach has been applied under the 1996 Act.62 There
is reluctance to consider such evidence because the court will not reconsider findings of fact and
permission can only be granted in relation to questions of law arising out of the award.
Accordingly, the question of whether or not to grant permission should ordinarily be decided only
on the basis of the award and its reasons.
It is generally accepted that the court may not rely upon the decision or findings of a dissenting
arbitrator (which have no binding effect) although his reasons are normally attached to the award
in the arbitration claim form and may be relied upon by the court as persuasive on the legal
issues.63

The substantive appeal hearing

If permission to appeal is granted there will be an oral hearing to decide the substantive appeal.
This hearing will ordinarily be open to the public unless considerations of confidentiality justify a
private hearing.64 Different judges will usually consider the permission application and the
substantive appeal because the judge granting permission will probably have formed a provisional
view that the arbitrator was wrong and there is a danger he will prejudge in favour of the
appeal.65 For similar reasons, the judge on the substantive appeal may refuse to consider the
reasons given for granting permission to appeal.66 In exceptional circumstances, however, the
judge who granted permission to appeal may hear the substantive appeal itself. Such
circumstances would include cases of extreme urgency, or where there was an oral hearing with
full argument at the permission to appeal application and a further hearing would be
unnecessary.67
As with the permission to appeal application, the general rule is that evidence extrinsic to the
award is inadmissible since the court is concerned only with errors of law arising out of the
award.68 The question of what evidence is admissible on appeal is often dealt with by agreement
or by imposing terms on the grant of permission to appeal. The court can exceptionally justify the
admission of documents or evidence relevant to the award if it has some patent ambiguity69 or if it
could be shown that the relevant document had been impliedly incorporated into the award, for
example by reference to a standard form. In general, the court will be more willing to consider
evidence outside the award if it can be shown that this would not lead the court to substitute its
view for the arbitrators finding of fact.
The Mexico I 70 concerned a demurrage dispute. An issue on appeal arose as to whether contracts
made with the same charterers for other cargoes affected the commencement of laytime. Evans J
read telex messages relating to these cargoes which had not been attached to the award. He said he
was entitled to look at these documents, in which contract terms were to be found, where the
award (or its reasons) identified them. To proceed otherwise would have involved either the costly
formality of remission to the arbitrators for the sole purpose of producing the documents, or the
court having to decide a question of law without sight of the relevant contract.
In Kershaw Mechanical Services Ltd v Kendrick Construction Limited,71 Jackson J was willing to
admit correspondence relevant to the proper construction of the contract under appeal as evidence
in the substantive appeal hearing. He considered that the court could admit any document referred

to in the award which needed to be read in order to determine the question of law raised. This is a
fairly broad approach and many judges will take a more restrictive view as to the admissible
documents.
On appeal, the court will not interfere with the factual findings in the award;72 it will only
determine whether the arbitrator applied the correct legal principles. If the arbitrator has applied
the right legal test the judge will not intervene, even if he might have arrived at a different
conclusion, unless it can be said that no reasonable arbitrator could have reached that
decision.73 Even if the dispute raises a pure question of law the court may be reluctant to alter a
commercial arbitrators ruling on the effect of a contract, particularly where it is based on
commercial judgment or expertise.74 In Kershaw Mechanical Services Ltd v Kendrick
Construction Limited,75 Jackson J laid down two basic principles applicable on a substantive
appeal:

1. The court should read an arbitral award as a whole in a fair and reasonable way. The court
should not engage in minute textual analysis.
2. Where the arbitrators experience assists him in determining a question of law, such as the
interpretation of contractual documents or correspondence passing between members of his
trade or industry, the court will accord some deference to the arbitrators decision on that
question. The court will only reverse that decision if it is satisfied that the arbitrator, despite
the benefit of his relevant experience, has come to the wrong answer.

Costs of an appeal
If permission to appeal is not granted the applicant will usually be ordered to pay the costs of the
application. If permission to appeal is granted, liability for the costs of the permission to appeal
application and the substantive appeal hearing will usually fall on the party who loses the
substantive appeal.

3. CHALLENGING AN AWARD FOR SERIOUS IRREGULARITY

Challenge for serious irregularity covers a wide range of irregularities affecting the tribunal, the
award and the proceedings. Section 68 of the 1996 is a mandatory provision which cannot be
contracted out of. It replaces the previous statutory powers to remit an award and the term
misconduct has been removed. The Act deliberately departs from the old law, which allowed
intervention for a procedural mishap or technical misconduct, and this area of case law is now of
limited authority.76 There is no longer power to remit for the admission of new evidence.77
Challenge on grounds of serious irregularity can only be made upon the closed list of grounds set
out in section 68 of the 1996 Act.78 Furthermore, relief will not be given on any ground of
irregularity unless the court considers it has caused or will cause substantial injustice to the
applicant. In addition, a 28-day time limit after the date of the award applies to applications on
grounds of serious irregularity (see below). More significantly, the right to challenge may be lost
long before an award is made if the applicant should reasonably have known of the ground of
complaint but continued to take part in the proceedings and did not immediately raise an objection
at that stage.79

A major purpose of the 1996 Act was to reduce drastically court intervention in the arbitral
process and section 68 was designed to achieve this.80 The requirement of a serious irregularity
is intended to set a high threshold for intervention and the courts have repeatedly enforced
this.81 However, perhaps because there is no permission requirement and unsuccessful parties
perceive that section 68 may be their only means of recourse or might assist in delaying
enforcement, court applications under section 68 remain common,82 although the vast majority fail
to meet the strict standards for intervention.

Substantial injustice
An irregularity affecting the award, the tribunal or the proceedings will only be treated as a
serious irregularity justifying relief if it has caused or will cause substantial injustice to the
applicant. This provision is designed to eliminate technical and unmeritorious challenges.83 The
meaning of substantial injustice is not defined but the DAC84 suggested that:
The test of substantial injustice is intended to be applied by way of support of the arbitral
process, not by way of interference with that process. Thus it is only in those cases where it can be
said that what happened is so far removed from what could reasonably be expected of the arbitral
process that we would expect the court to take action. The test is not what would have happened
had the matter been litigated. To apply such a test would be to ignore the fact that the parties have
agreed to arbitrate, not litigate. Having chosen arbitration, the parties cannot validly complain of
substantial injustice unless what has happened simply cannot on any view be defended as an
acceptable consequence of that choice. In short, Clause 68 is really designed as a long stop, only
available in extreme cases where the tribunal has gone so wrong in its conduct of the arbitration
that justice calls out for it to be corrected.
This passage has been frequently relied upon in subsequent application of the test and expressly
approved by the Court of Appeal.85 The courts have repeatedly affirmed that relief will be
available only in the most serious and extreme cases.86
The DACs explanation provides little concrete guidance on what would be so extreme that
justice calls out for it to be corrected. It is not sufficient to establish that the arbitrators
behaviour is open to criticism, even to the extent that it fell below the standard ordinarily to be
expected of arbitrators.87 Dyson J in Conder Structures v Kvaerner Construction Ltd 88 stated that,
an applicant who invokes section 68 must show that the irregularity has caused, or will cause him
to suffer concrete or substantive prejudice. It is not sufficient to show that the irregularity has
demonstrated incompetence on the part of the arbitrator and has undermined the confidence of the
applicant in the ability of the arbitrator. The court will be looking for a genuine and substantial
grievance and will be vigilant against applications made as a delaying tactic.
The question of whether the irregularity is likely to have affected the outcome will usually be
relevant in considering substantial injustice.89 However, this does not mean that the court must
conclude that the tribunal would have come to a different conclusion in the absence of the
irregularity. Nor would it be appropriate to embark upon a detailed investigation of the likely
outcome but for the serious irregularity.90 The required degree of likelihood that the outcome
would have been different has varied in the cases91 but the test adopted by Colman J in Vee
Networks Ltd v Econet Wireless International Ltd92 appears to be the preferred approach:

The element of serious injustice in the context of section 68 does not in such a case depend on
the arbitrator having come to the wrong conclusion as a matter of law or fact but whether he was
caused by adopting inappropriate means to reach one conclusion whereas had he adopted
appropriate means he might well have reached another conclusion favourable to the applicant.
Thus where there has been an irregularity of procedure, it is enough if it is shown that it caused
the arbitrator to reach a conclusion unfavourable to the applicant which, but for the irregularity, he
might well never have reached, provided always that the opposite conclusion is at least reasonably
arguable. Above all it is not normally appropriate for the court to try the material issue in order to
ascertain whether substantial injustice has been caused. To do so would be an entirely
inappropriate inroad into the autonomy of the arbitral process.
In practice this means that a party challenging the award under section 6893 need not show that the
arbitrator would have reached a different outcome provided it is reasonably arguable that he might
have done so. However, substantial injustice is unlikely to be established if the other side can
show that the arbitrator would have reached the same conclusion in any event.
In cases where there has been a serious breach of basic requirements of fairness the courts may be
more willing to find substantial injustice has occurred than in cases where the irregularity is of a
more technical nature. In particular, where a court is satisfied that an arbitrator was biased (even a
case of apparent bias) then this will in itself amount to substantial injustice and the court will not
inquire further as to whether the bias has caused prejudice.94
The amount at stake may also be a relevant consideration: for instance, in Gbangbola v Smith &
Sheriff Ltd95 the court rejected part of a challenge under section 68 because of the small amounts
involved, but allowed a challenge which affected liability for the costs of the arbitration.
Substantial injustice is not a requirement for challenging an award on grounds of error of law. It
might be said that the same requirements for intervention should apply to both grounds of
challenge since the parties expectation of fairness and the agreed procedure should be given the
same effect as their expectation that English law will be properly applied. However, as a matter of
policy the system for appeals was not considered to be an unacceptable interference with the
arbitral process whereas the previous law on misconduct was regarded as more open to
abuse.96 Accordingly, a stricter regime applies to challenges for serious irregularity.
The court may take a robust approach to a challenge on grounds of serious irregularity and may
summarily dismiss the application on its own initiative (or upon application) without hearing the
parties or giving them an opportunity to make representations. The Commercial Court Guide
states that if the nature of the challenge itself or the evidence filed in support of it leads the court
to consider that the claim has no real prospect of success, the court may exercise its powers under
rule 3.3(4) to dismiss the application summarily. In such cases the applicant will have the right to
apply to the court to set aside the order and to seek directions for the hearing of the application.97
In most cases the application will lead to a hearing and the court has a very wide discretion in
deciding whether a serious irregularity has been established, and what relief would be appropriate,
although remission is expressly given preference (see below on the effect of a challenge). In some
cases, the court has disposed of an application by proceeding immediately to the question of
whether substantial injustice has been established.98 In other cases it has considered substantial

injustice as an element of the serious irregularity.99 More commonly, it considers first whether the
applicant can establish an irregularity then whether substantial injustice has been established.100

The grounds of irregularity under section 68

Section 68 sets out a closed list of irregularities which taken alone might allow very wide grounds
of challenge. However, in relation to all the grounds it should be remembered that the requirement
of substantial injustice and the fact that a party may lose the right to object under section 73 will
strictly limit interventions.
(a) Failure by the tribunal to comply with its general duty under section 33
This type of complaint is most likely to be invoked as an irregularity because it relates to the
fairness of the procedure. It is potentially a wide ground for relief since section 33 provides a farreaching duty in the following terms:
(1) The tribunal shall

(a) act fairly and impartially as between the parties, giving each party a reasonable
opportunity of putting his case and dealing with that of his opponent, and
(b) adopt procedures suitable to the circumstances of the particular case, avoiding
unnecessary delay or expense, so as to provide a fair means for the resolution of the matters
falling to be determined.

Intervention on grounds of failing to act impartially is discussed under bias in Chapter 11 and the
scope of the tribunals duty to act fairly and adopt efficient procedures is discussed in Chapter 12.
The question of whether a party has been treated fairly will always depend on the specific facts of
the case but the courts have been strict in applying section 68(2)(a); the vast majority of
applications have failed on the ground that the applicant cannot establish that substantial injustice
has been caused.
Challenges have typically involved allegations that the tribunal has decided the case on a basis not
argued, or at least not clearly drawn to the parties attention.101 As a general rule, if an arbitrator is
impressed by a point that has not been raised by either side he should give the parties an
opportunity to comment.102 However, it is certainly unnecessary for the tribunal to refer back
every legal or factual inference it intends to draw from the facts; therefore it may make findings
that have not been put by either party.103 In practice, whether a party has been treated fairly will
depend on the importance of the point and also whether the parties should reasonably have
realised that it was in issue.
The Magdalena Oldendorff 104 was a charter dispute involving a two week oral hearing with
leading counsel, followed by written closing submissions and an additional oral hearing on
Saturday at which the barristers were subject to a two-hour guillotine. The tribunal decided in
favour of charterers on the basis of a narrow point that had only emerged, somewhat unclearly, at
the Saturday hearing, and which Owners advocate had not dealt with in the short time available.
Owners challenged the award under section 68(2)(a) on grounds that they had not had a
reasonable opportunity to deal with the point. In particular, the tribunal had failed to ask Owners
barrister what his case on the point was. The Court of Appeal confirmed that the challenge had

been correctly dismissed. If an arbitrator appreciates that a party has missed a point then fairness
requires the arbitrator to raise it so that the party can deal with it. But here the tribunal had no such
appreciation and it was not unfair to leave it to counsel, particularly highly experienced counsel, to
take the points he wished.
In Pacol Ltd v Joint Stock Co Rossakhar,105 a dispute arose under a sale contract and the
respondents admitted in correspondence that they were in default. An arbitration on documents
followed in which the parties raised issues of the quantum of the claim. In the award, however, the
tribunal dismissed the claim on the grounds that there had been no breach of contract. Colman J
set aside the award on grounds of serious irregularity because the tribunal had not given the
parties reasonable notice that they were re-opening the question of liability, nor had they given the
parties a chance to address that issue. It was not fair for the arbitrator to decide a case against a
party on an issue never raised in the case without drawing the point to his attention.
Another related ground of complaint is that the arbitrator has used his own personal or expert
knowledge without giving the parties a fair opportunity to deal with it.106 In this respect, the
relevant principles were summarised by HHJ Coulson QC in JD Wetherspoon plc v Jay Mar
Estates:107
The arbitrator is fully entitled to make use of his own experience in reaching his conclusions,
provided that it is of a kind and in the range of knowledge that one would reasonably expect the
arbitrator to have, and providing that he uses it to evaluate the evidence called and not to introduce
new and different evidence (see Checkpoint Limited v Strathclyde Pension Fund 108). It is
important to note that the arbitrator cannot:

(a) use his expertise to introduce new evidence which he then fails to allow the parties to
address (see Eastcheap Dried Fruit & Co v NV Gerbroedus Catz Handelsvereeniging;109 and
(b) make an award based upon arguments or evidence that were not presented to him, or upon
a basis that is contrary to the common assumption of the parties as represented to him.

Parties may also challenge awards on broader grounds that the tribunal has not given them
sufficient opportunity to put their case or investigate that of their opponent. Two examples of the
courts approach are provided for illustration.
In Margulead Ltd v Exide Technologies110 Colman J rejected a challenge to an award on grounds
that the claimant had been denied the opportunity to make oral submissions in reply at the end of
the hearing. Such procedure was common in international arbitrations and the arbitrator had made
clear in advance what submissions were to be permitted.
The Robin111 was a challenge based on an arbitrator allegedly acting unfairly by refusing to order
production of the vessels logs in a demurrage dispute referred to the LMAA Small Claims
Procedure. Toulson J rejected the application with little hesitation. He took into account that the
Small Claims Procedure has no provision for disclosure as such and the arbitrator has wide power
to make such procedural decisions under section 34 of the 1996 Act. He considered that the court
would be extremely slow to conclude that such a decision constituted a serious irregularity.
(b) The tribunal exceeding its powers (otherwise than by exceeding its substantive jurisdiction)

This provision is of narrow scope since jurisdictional challenges will most commonly relate to
substantive jurisdiction and must be raised under sections 67 or 72 or at an early stage in the
proceedings under sections 31 or 32 (see section 4 below and Chapter 6). It can be used to
challenge procedural decisions which are outside the tribunals powers112 and this may lie close to
a challenge based on want of jurisdiction under section 67113 or for error of law under section
69.114
In Gulf Import & Export Co v Bunge SA 115 section 68(2)(b) was used to challenge a decision of a
FOSFA Board of Appeal that under FOSFA arbitration rules it had power to allow a lapsed claim
to be renewed. It was argued that any challenge had to be made under section 67 but Flaux J held
that the issue was properly raised under section 68(2)(b) since it concerned the scope of the
tribunals powers under the rules, not the tribunals substantive jurisdiction.
The scope of section 68(2)(b) also came before the House of Lords in Lesotho Highlands
Development Authority v Impregilo SpA.116 A contract for the construction of a dam was governed
by the law of Lesotho but the parties referred their dispute to ICC arbitration in London. Under
ICC arbitration rules the parties had excluded the right to appeal for error of law. The claim was
for various payments due under the contract, mainly in Lesotho maloti. However the maloti had
substantially devalued between the date when the payments were due and the date of the award.
Relying on broad powers to make awards in any currency under section 48(4) of the Arbitration
Act 1996 the tribunal made its award in hard foreign currency. The Lesotho authority challenged
the award under section 68(2)(b) on grounds that the tribunal had exceeded its powers by
expressing its award in currencies other than that stipulated in the contract. The majority
considered that the tribunal probably made a mistake on the currency of award but at highest it
was an error of law and could not be treated as an excess of power under section 68(2)(b): an
erroneous exercise of a power available to the tribunal could not by itself amount to an excess of
power. Their lordships held that section 68(2)(b) was to be interpreted restrictively (in the same
way as Article V(1)(c) of the New York Convention upon which it was based) and did not permit
a challenge on the ground that the tribunal reached a wrong conclusion as a matter of law or fact.
Lord Phillips dissented on the ground that, in purporting to exercise a discretionary power they did
not in fact have, the tribunal had been acting in excess of power. The House of Lords was correct
to ensure that section 68(2)(b) could not be used as a back-door means to challenge an error of
law but Lord Phillipss dissent illustrates how it may be difficult in practice to distinguish between
a tribunals erroneous exercise of an available power and purported exercise of a power that it
does not have.
(c) Failure by the tribunal to conduct the proceedings in accordance with the procedure agreed by
the parties
This allows a challenge where the arbitrator has failed to comply with an agreement in writing on
procedure, typically arbitration rules.117 This ground of challenge might be invoked where the
arbitrator ignored the parties agreement on procedure, for example where the arbitrator proceeded
to make an award on the basis of documents only when the parties had agreed that an oral hearing
was required. It may, however, be more difficult to establish substantial injustice where the
arbitrator has indicated, on reasonable grounds, that the parties agreed procedure would conflict
with his duty under section 33 (i.e., to act fairly and to adopt procedures suitable for the case). In

such a conflict the DAC has suggested that the arbitrator may resign.118 However, an arbitrator
may decide against resigning, possibly because the parties agreement is not clear and his
resignation would mean that they have to start again. If the case is not entirely straightforward he
may also be reluctant to resign because he risks being exposed to liability under section 25.119 If
the arbitrator does not resign and refuses to adopt the agreed procedures on grounds that they are
not fair or appropriate to the case then it is difficult to see how the parties could establish
substantial injustice. If the arbitrator was acting broadly within his duties then it cannot be said
that what has happened simply cannot on any view be defended as an acceptable consequence
of the choice to arbitrate.120
(d) Failure by the tribunal to deal with all the issues that were put to it
This sort of irregularity will ordinarily relate to the award but it may also be directed to the
proceedings, for instance, if the tribunal refused to hear evidence on certain issues raised by the
parties (this might overlap with a challenge under section 68(2)(a)). It may be appropriate to raise
this matter with the tribunal first and ask them to correct the award or issue an additional award
under section 57 of the 1996 Act.121 This ground of challenge has been frequently invoked but
rarely succeeds because the courts have approached applications strictly. The courts general
approach is summarised below and good explanations are also to be found in World Trade
Corporation v Czarnikow Sugar Ltd122 and Fidelity Management SA v Myriad International
Holdings BV.123

(1) The courts tend to uphold awards by interpreting them benevolently, even to the extent of
holding that the tribunal made implicit findings.124 Arbitrators are not expected to produce
awards with perfect legal precision.125 The following dictum of Bingham J has been
frequently approved in applications under section 68:126

As a matter of general approach, the courts strive to uphold arbitration awards. They do not
approach them with a meticulous legal eye endeavouring to pick holes, inconsistencies and faults
in awards and with the objective of upsetting or frustrating the process of arbitration. Far from it.
The approach is to read an arbitration award in a reasonable and commercial way, expecting, as is
usually the case, that there will be no substantial fault that can be found with it.127

(2) Section 68(2)(d) is not to be used as a means of launching a detailed inquiry into the
manner in which the tribunal considered the dispute or to investigate whether the tribunal has
reached the correct result.128 In this respect the courts have been vigilant to ensure that it is
not used as a back-door route for re-opening the tribunals findings of fact and law.129 The
Commercial Court Guide130 also makes clear that an application challenging an award on the
ground of serious irregularity should not be regarded as an alternative to, or a means of
supporting, an application for permission to appeal.
(3) Section 68(2)(d) is concerned to remedy an omission in failing to deal with an issue which
is essential or critical to the tribunals decision.131
(4) It will not cover a tribunals failure to set out each step in their reasoning or to give
reasons dealing with every argument raised.132 Failure to deal with an issue under section
68(2)(d) is not equivalent to failure to deal with an argument raised and therefore to have

omitted reasons for rejecting it.133 The appropriate remedy for lack of sufficient reasons
would be under section 70(4) of the 1996 Act.134
(5) To establish substantial injustice under this head the applicant would probably need to
show that it was reasonably arguable that the overall result would have been materially
different if the issues had been dealt with.135Toulson J in Ascot Commodities NV v Olam
International Ltd136 considered that a failure to make finding on a central issue would be
likely to be a source of serious injustice unless, possibly, the outcome on that issue was selfevident.

(e) Any arbitral or other institution or person vested with powers in relation to the proceedings or
the award exceeding its powers
This is intended to prevent injustice caused by a party or institution (other than the tribunal)
exceeding its mandate, for instance in making an appointment. This ground of challenge may
overlap with a challenge based on want of jurisdiction under section 67.
(f) Uncertainty or ambiguity as to the effect of the award
An award must satisfy minimum standards of certainty and completeness to be enforceable (see
Chapter 19 on awards). However, in accordance with giving effect to the parties choice to
arbitrate, the courts will give awards a benevolent construction.137 To challenge on this ground it
is not sufficient to show that the reasoning of the award is uncertain or ambiguous (which might
possibly give grounds for seeking further reasons). Instead, it is necessary to show that there is
uncertainty or ambiguity as to the result.138
To challenge the award on this ground the applicant should ordinarily take up the matter first with
the tribunal under section 57 which allows for correction of ambiguities or clerical errors in an
award139 (see Chapter 19). Under the LMAA Terms,140 the parties have further rights to apply for
the tribunal to correct any accidental mistake and give an interpretation of a specific point or
part of an award. In applications under section 57 or under the LMAA Terms the application to
the tribunal must normally be made within 28 days of the award141 and the powers shall not be
exercised without first affording the other parties a reasonable opportunity to make
representations to the tribunal. The tribunals power to clarify ambiguities may give rise to
difficulties as to when time begins to run for a challenge under section 68 (these are considered
further in section 5 of this chapter).
(g) The award being obtained by fraud or the award or the way in which it was procured being
contrary to public policy
This provision enables relief to be granted where an award has been obtained by fraud, not where
the content of the award is based on allegations of fraud.142 It might cover dishonesty in the
appointment of the tribunal or the conduct of the proceedings. Fraud is a grave allegation to make
against any party as it may amount to a criminal offence. Accordingly, the burden of proving
fraud is not easily discharged in practice and where serious allegations are made the court may
require a trial of the issues.143 The phrase obtained by fraud should be restrictively construed
and refers to an award being obtained by the fraud of a party to the arbitration or a person privy to

that party.144Fraud in itself is not sufficient to justify relief: the party applying must establish a
causative link between the fraud relied upon and the decision challenged.145
Relief on the ground of public policy will rarely be granted because most grievances relating to an
arbitration are based on allegations of unfair treatment. These are properly remedied under section
68(2)(a). Public policy is an indeterminate term but the following comment of Lord Donaldson
MR has been applied in relation to section 68:
Considerations of public policy can never be exhaustively defined, but they should be
approached with extreme caution. It has to be shown that there is some element of illegality or
that the enforcement of the award would be clearly injurious to the public good or, possibly, that
enforcement would be wholly offensive to the ordinary reasonable and fully informed member of
the public on whose behalf the powers of the state are exercised.146
In the context of European Community law, public policy may have a wider context. The
European Court of Justice has suggested that if an award, or the underlying contract, is contrary to
fundamental provisions of European Community law such as the prohibition on anti-competitive
practices, then Community Law would probably require an English court to set aside the award on
grounds of public policy.147
In Eco Swiss China Time Ltd v Benetton International BV 148 a licensing agreement provided for
arbitration in Holland. An award was made against Benetton and it sought annulment of the award
under Dutch law on grounds that it was contrary to public policy as the agreement was contrary to
Article 81 of the EC Treaty. This issue was not raised in the arbitration. The Dutch court sought a
preliminary ruling from the ECJ on several issues. The ECJ ruled that if domestic law provides a
remedy for failure to observe public policy then the national court must grant an application based
on that ground where it considers that the award is contrary to Article 81.
Section 68(2)(g) covers cases where the award itself is contrary to public policy, for example if it
ordered a party to do an act which was criminal in the place of performance. It also covers cases
where the way in which the award was procured is fraudulent or contrary to public policy. This
would include cases where some form of dishonest or unconscionable conduct contributed in a
substantial way to the award being obtained, for example perjury or if a party deliberately
withheld evidence and as a result obtained an award in his favour.149 Where a party bases his
complaint on the manner in which the other has conducted the proceedings it is doubtful whether
anything short of deliberate, unconscionable conduct would justify intervention, and it makes little
difference whether fraud or public policy is relied upon.150 If it is alleged that the award was
obtained by perjury then it will usually be necessary to produce evidence newly discovered since
the hearing, which could not reasonably have been produced at the hearing, and which is so
material that it would probably have been decisive to the result.151
In Profilati Italia SRL v Paine Webber Inc,152 Moore-Bick J dismissed an application to set aside
an award on grounds that it had been procured in a way contrary to public policy. The applicant
relied on the fact that the other side had failed to disclose two documents in the arbitration. There
was no evidence of deliberate or improper failure to disclose and an innocent failure could not be
treated as acting contrary to public policy. In addition, substantial injustice had not been

established because it had not been shown that there was a substantial likelihood that disclosure of
the documents would have resulted in the tribunal reaching a different conclusion.
In The Marie H,153 charterers challenged a default award on the basis that they had been misled by
owners into believing that no award would be made while the parties were negotiating and they
had accordingly failed to prepare a defence. Moore-Bick J dismissed the application because the
charterers had not established that owners had acted in a devious or underhand manner, and it was
insufficient to show that charterers had been misled inadvertently.
Section 68(2)(g) would also apply if the challenge was based on an allegation that the award arose
out of a contract which was contrary to public policy. However, the court will be reluctant to reopen an award that deals with allegations of illegality and the courts have generally drawn a
distinction between the award and the underlying contract from which it is derived.154 This
follows from the fact that the tribunal may have ruled on the public policy issues and illegality in
the underlying contract will not always taint the arbitration clause (the principle of separability is
discussed in Chapter 6). The courts approach will depend on the nature of the public policy issue;
in disputes involving other systems of law it will recognise different public policy requirements.
However, certain types of conduct will be unacceptable regardless of the governing law: the
English court would not recognise an agreement between highwaymen to arbitrate their
differences any more than it would recognise the original agreement to split the
proceeds.155 Accordingly, it might be willing to set aside an arbitration award procured by parties
who illegally smuggled carpets out of Iran and agreed to use arbitration to resolve disputes which
had arisen out of the illicit enterprise.156 However, it is unlikely that a challenge under section 68
would succeed on grounds of illegality in the arbitration agreement since the power to challenge is
premised on there being a valid arbitration agreement; if the arbitration agreement itself is affected
by illegality then jurisdictional challenge or challenge at the enforcement stage would be the usual
remedy.
In most situations the complaining party will be aware of the public policy issue at an early stage
in the arbitration and unless an objection is made at that stage it will have lost the right to
challenge (see section 73 discussed below in section 5). The applicants participation in an
arbitration tainted by public policy objections may also be a factor in considering whether
substantial injustice has been caused, although the wider public interest remains an important
factor in an application based on public policy.157
If a public policy objection is raised the court may have to balance the public interest in giving
effect to an arbitration award against the public interest that arrangements tainted by illegality
should not be enforced.158 If the tribunal has ruled on the public policy issue (for example the
legality of the contract), this will be a strong factor against re-opening that issue and the court
would be reluctant to allow fresh evidence to be admitted.159 However, the court will look at the
nature of the illegality, the strength of the case on the illegality involved, the extent to which the
issue was addressed by the tribunal, whether the arbitrator was competent and if there was any
evidence of collusion or bad faith in obtaining the award.160
(h) Failure to comply with the requirements as to the form of the award

The formal requirements for an award are set out in section 52 of the 1996 Act (see Chapter 19 on
awards). It will be rare that a formal or technical defect in an award will justify intervention since
the applicant would ordinarily be expected first to ask the tribunal to remedy the defect under
section 57.161 Even if the tribunal fails to correct the defect, the requirement of substantial
injustice will be a further obstacle. For instance, if the award is to be enforced within the
jurisdiction then the tribunals failure to state the seat of the award will be unlikely to cause
substantial injustice.162
(i) An irregularity in the conduct of the proceedings or in the award which is admitted by the
tribunal or by any arbitral institution or party vested with powers
The courts power to give relief for an admitted irregularity in the proceedings might apply where
the tribunal made an award but then realised that one of the parties had reasonably expected to
make further submissions. It is not clear whether the tribunals admission of an error of fact or law
(as opposed to some procedural irregularity) would enable the award to be challenged under this
head.163 Clear evidence of an admission of irregularity by the tribunal will be requirednormally
a letter from the tribunal would be sufficient. Relief for admitted irregularities in the award will
probably largely follow the previous law on the courts jurisdiction to remit for admitted
errors.164 It will be rarely invoked since the remedy for most admitted errors should ordinarily first
be sought by recourse to the tribunals power to correct ambiguities or clerical mistakes or errors
under section 57 of the 1996 Act165 (see Chapter 19 on awards). Where LMAA Terms apply the
parties would also be expected to ask the tribunal to correct any accidental mistake in the award
before applying to court.

4. CHALLENGING AN AWARD FOR LACK OF JURISDICTION

Challenge under section 67 of the 1996 Act

The issues of whether an arbitrator has jurisdiction to make binding decisions and how that
question should be determined are discussed in more detail in Chapter 6. Section 67(1) of the 1996
Act is the ordinary method for challenging an award on grounds of lack of jurisdiction. It provides
that:
A party to arbitral proceedings may (upon notice to the other parties and to the tribunal) apply to
the court

(a) challenging any award of the arbitral tribunal as to its substantive jurisdiction; or
(b) for an order declaring an award made by the tribunal on the merits to be of no effect, in
whole or in part, because the tribunal did not have substantive jurisdiction.

Section 30 defines the issue of whether a tribunal has substantive jurisdiction. It covers whether:

(a) there is a valid arbitration agreement;

(b) the tribunal is properly constituted; and
(c) the matters have been submitted to arbitration as agreed.

This embraces most types of jurisdictional complaint: challenges based upon the tribunal
exceeding its procedural powers must be raised under section 68(2)(b).166
Section 67(1) differentiates between two different sorts of award in order to take into account the
tribunals power under the 1996 Act to rule on its own jurisdiction before proceeding to decide the
merits of a dispute. First, section 67(1)(a) applies to awards (or rulings167) in which the tribunal
has determined its own jurisdiction pursuant to section 31 of the Act (see Chapter 6) and second,
section 67(1)(b) applies to awards made on the merits.
The most important limitation on the right to challenge an award under section 67 is that a party
may lose the right to challenge at a much earlier stage under section 73 if it fails to raise its
objection to the tribunals jurisdiction as soon as possible after it could reasonably have
discovered it (see below). Section 73(2) also specifically limits challenges to awards (or rulings)
made by the tribunal on its own jurisdiction, it provides that:
Where the arbitral tribunal rules that it has substantive jurisdiction and a party to arbitral
proceedings who could have questioned that ruling

(a) by any available arbitral process of appeal or review; or

(b) by challenging the award,

does not do so, or does not do so within the time allowed by the arbitration agreement or any
provisions of this Part he may not object later to the tribunals substantive jurisdiction on any
ground which was the subject of that ruling.
This means that once the tribunal has ruled on its jurisdiction a party will lose the right to
challenge any subsequent award on grounds of lack of jurisdiction which were subject of that
ruling. Whether a matter was subject of a previous ruling is largely a matter of construction of the
award, although the surrounding circumstances of the award and principles of issue
estoppel168 may also be relevant. Section 73(2) means that a party only has one chance to raise any
particular ground for alleging lack of jurisdiction before the tribunal and the court.

Challenge under sections 68 or 69 of the 1996 Act

It would be highly exceptional for a party to use section 69 of the 1996 Act (rather than section
67) to appeal against an award on jurisdiction since this would be subject to the greater statutory
restrictions under section 69 (e.g., permission to appeal is needed). An application under section
68 would probably only be appropriate where the challenge was aimed at the procedure adopted
rather than the merits of the ruling itself. The court would generally be reluctant to interfere with
an arbitrators discretion as to how he should make a decision on jurisdiction. In AOOT
Kalmneft v Glencore International AG,169 Colman J commented that: unless he has arrived at a
conclusion which no reasonable arbitrator could have arrived at in the case in question having
regard to his duties under section 33 it cannot be said that his decision is capable of being
characterised as a serious irregularity. Under section 68 the applicant would have to establish that
the alleged serious irregularity had caused substantial injustice and the availability of an
alternative remedy under section 67 will be relevant to the question of whether the party has
suffered a substantial injustice.170

Declaratory, injunctive and other relief

A party who does not take part in the arbitral proceedings171 has further means of challenging an
award for want of jurisdiction: he can question the tribunals jurisdiction by applying to court for a
declaration172 or injunction or other relief.173 These remedies are available under the courts
jurisdiction at common law (although expressly recognised under section 72 of the Act) and are
not subject to the 28-day time limit applicable to section 67 applications. A party who does not
take part in the proceedings will not lose the right to object under section 73 because he should not
have to play any role in an arbitration if he has legitimate grounds for disputing the tribunals
power to make binding decisions.174 However, the court has a wide discretion in granting
declaratory or injunctive relief and it may be refused on grounds of lapse of time and the common
law doctrines of waiver and estoppel.
Prior to the 1996 Act the court had an established inherent jurisdiction at common law to set aside
an award for lack of jurisdiction.175 Under the 1996 Act, this jurisdiction has been largely
extinguished since in matters governed by this Part the court should not intervene except as
provided by this Part.176 The courts residual jurisdiction has not, however, been entirely
removed, since section 81(1) provides that nothing in this Part shall be construed as excluding
the operation of any rule of law consistent with the provisions of this Act. The court is likely to
refuse to grant declarations at common law to parties who take part in the arbitral proceedings
since this would be inconsistent with the scheme under sections 32 and 67 of the 1996 Act.177 In
practice, the court would probably not recognise an inherent jurisdiction to set aside an award
unless there was a gap in the statutory provisions and intervention would be consistent with the
scheme of the Act.

5. TIME LIMITS AND LOSS OF THE RIGHT TO CHALLENGE

Statutory time limits

Mandatory time limits are imposed on challenges under sections 67-69 of the 1996 Act to avoid
delay and give effect to finality of awards. Section 70 of the 1996 Act provides that:

(2) An application or appeal may not be brought if the applicant or appellant has not first
exhausted
o (a) any available arbitral process of appeal or review, and
o (b) any available recourse under section 57 (correction of award or additional award).
(3) Any application or appeal must be brought within 28 days of the date of the award, or if
there has been an arbitral process of appeal or review, of the date when the applicant or
appellant was notified of the result of that process.

Time will usually run from the date of the award and unless this is otherwise agreed by the parties
or the tribunal decide what is to be taken to be the date, this will be the date on which it is signed
by the arbitrator or, where more than one arbitrator signs the award, by the last of them.178 The
28-day period will be reckoned according to court rules and will not include the date of the award
(or notification of the arbitral process of appeal),179 for example, if the award is dated 2 July then
the application must be brought on or before 30 July.

Unless otherwise agreed, an arbitrator should notify the parties of the award without delay after
the award is made.180 However, this duty is subject to the arbitrators right to withhold the award
unless he is paid his fees in full and this will normally be exercised by notifying the parties that
the award has been made and will be delivered on payment of outstanding fees.181 Under
paragraph 23 of the LMAA Terms the tribunal shall notify the parties of the award as soon as
possible after it is made by serving a notice informing them that the award is available upon full
payment of the tribunals fees and expenses. Once the fees are paid, the arbitrator should disclose
the award to both parties.182This means that when the arbitrator notifies the parties that the award
is ready for collection on payment of his fees they have to decide whether to pay the arbitrators
fees and to take up the award. This is a tactical decision: by waiting more than 28 days before
taking up the award a claimant (or respondent) may obtain an award in its favour against which a
challenge is out of time; however, it also risks losing its own right of challenge. The courts have
regarded a failure by a party to take up an award within the time limit as a conscious decision to
confer additional finality on the award and to lose the right to challenge the award in court.183
The 28-day time limit does not cover applications made by parties who took no part in the arbitral
proceedings but now seek declaratory or injunctive relief to the effect that the tribunal lacked
jurisdiction.184 An invalid award made without jurisdiction should not be given final and binding
effect just because 28 days has passed since it was signed.185 However, if a party chooses to take
part in the proceedings it may be said that it loses its unlimited right to challenge the validity of an
award produced in those proceedings. A time limit is reasonable in these circumstances as there
would otherwise be a potentially open-ended right to challenge an award on grounds of lack of
jurisdiction.

Time limits where corrections are sought from the

tribunal
Some ambiguities and errors in awards can be corrected by the tribunal under section 57 of the
1996 Act (considered in more detail in Chapter 19). Such a correction may obviate the need for a
challenge but the tribunals power to correct the award may raise difficulties as to when time
begins to run for a court challenge against the award. There is conflicting first instance authority
as to whether time runs from when the award under challenge is made,186 or from when the parties
have been notified of the result of the section 57 application.187 It is suggested that the decision of
HHJ Humphrey Lloyd in Blackdale Ltd v McLean Homes South East Limited,188 finding that time
only runs from when the parties are notified of the outcome of the section 57 application, is the
preferred approach. Otherwise, parties would have to incur costs in making a section 68
application even though it may ultimately be unnecessary if the tribunal makes the requested
correction. This would be contrary to the purpose of section 70(2) in requiring parties to exhaust
available recourse before challenging an award and the Acts overall purpose in minimising court
intervention and avoiding unnecessary cost. However, in light of the uncertainty in the case law,
the safest option will be to obtain an agreement on an extension of time or issue a precautionary
application within the 28-day time limit, as well as requesting a correction from the tribunal.
In practice, the section 57 application may generate correspondence with the tribunal and in some
cases it may be difficult to ascertain when the outcome of the section 57 application has been

notified for the purposes of section 70(3). A party should probably ensure that any challenge is
made within 28 days of a response from the tribunal that could reasonably be treated as final.

Extension of time limits

The 28-day time limit for making challenges under sections 67, 68 and 69 of the 1996 Act is not
absolute. Under section 80(5) of the 1996 Act the court may grant an extension of time for making
such challenges pursuant to court rules.189 An application for an extension of time may be made
before or after the expiry of the 28-day time limit. Applications are most commonly made after
time has expired since a party will usually be able to issue an application if it has anticipated
making a challenge and instructed lawyers within the time limit. A party cannot preserve time by
simply serving an outline application without full particulars since an extension of time will be
required for service of the full particulars and underlying evidence.190 If an application is made
before the expiry of the 28-day time limit it can be made in a Part 23 application notice without
notice to the other party.191
If an application to extend time is made after the expiry of the time limit then it should be made by
an arbitration claim form setting out the grounds for requesting an extension of time in addition to
the grounds for seeking the substantive relief.192 The defendant will have an opportunity to oppose
the extension of time and can serve a witness statement setting out the basis for his
opposition.193 The court will rule on whether time should be extended without an oral hearing
unless it considers that a hearing is required.194 This would only arise if, for example, the matter
was already before the court or the application raised issues of the credibility of the witnesss
evidence. The issue of whether there should be an extension of time is within the courts
discretion and it will consider all factors. The need to avoid delay in arbitration will be treated as a
distinct public policy factor against indulgence towards late applications.195 The Commercial
Court Guide notes that it is important that any challenge to an award be pursued without delay
and the court will require cogent reasons for extending time.196 The court will approach an
application for an extension of time to challenge an award under section 67 more strictly than
other grounds of challenge, in particular on grounds of finality of arbitration awards.197 The
following considerations are likely to be relevant198although the Court of Appeal in Nagusina
Naviera v Allied Maritime Inc 199 indicated that the primary factors are the length of the delay, its
causation and the reasonableness of both parties conduct.

(1) The length of the delay and whether there is an adequate explanation for it. The shorter the
delay, the more easily it will be excused. Applications for short extensions sought on
reasonable grounds before the time limit has expired may be considered favourably, for
instance if an extension is sought on grounds that the only party who is able to give relevant
evidence will not be available until shortly after time has expired.
(2) Whether in permitting the time limit to expire and the subsequent delay to occur, the
applicant was acting reasonably in all the circumstances. Delay may be justified if the
applicant could not reasonably have discovered the grounds of challenge at an earlier
stage.200 Some allowance for inexperience of London arbitration may be made, but this in
itself will not usually provide a sufficient justification for delay.
(3) Whether the defendant or arbitrator caused or contributed to the delay.

(4) Whether the other party will suffer irremediable prejudice (in addition to the mere loss of
time and the loss of the protection of the time limit) if the extension is granted, for example if
it will have greater difficulty in obtaining evidence to oppose the challenge.
(5) Whether the arbitration has continued during the period of delay and, if so, what impact a
court application might have on the arbitration.
(6) The strength of the challenge. This is not a primary factor; usually it will be sufficient to
show that an application has a real prospect of success.201 The court will not attempt to
evaluate the evidence in any detail but an intrinsically weak case will count against the
application for an extension while a strong case will assist.202
(7) Whether in the broadest sense it would be unfair to the applicant for him to be denied the
opportunity of having the application determined. This appears to be a catch-all consideration
and will usually involve taking into account the importance of finality of arbitration
awards.203 In assessing unfairness the court may also consider whether substantial amounts
are at stake and whether the applicant has a clearly strong or weak case.

Loss of the right to challenge an award

Section 73 of the 1996 Act is a further significant restriction on challenges to an award. It
provides that:

(1) If a party to arbitral proceedings takes part, or continues to take part, in the proceedings
without making, either forthwith or within such time as is allowed by the arbitration
agreement or the tribunal or by any provision of this Part, any objection
o (a) that the tribunal lacks substantive jurisdiction,
o (b) that the proceedings have been improperly conducted,
o (c) that there has been a failure to comply with the arbitration agreement or with any
provision of this Part, or
o (d) that there has been any other irregularity affecting the tribunal or the proceedings, he
may not raise that objection later, before the tribunal or the court, unless he shows that, at
the time he took part or continued to take part in the proceedings, he did not know and
could not with reasonable diligence have discovered the grounds for the objection.

This means that a party will usually lose the right to challenge an award on grounds of serious
irregularity or lack of jurisdiction if it fails to raise that objection as soon as it reasonably could.
This provision is dealt with in more detail in Chapters 6 and 11. Section 73(1)(a) covers
challenges for lack of jurisdiction and section 73(1)(b) and (d) cover challenges for serious
irregularity.204 Section 73 does not apply to a party who does not take part in the arbitration even
where it is aware of the ground of challenge at an early stage. Such a party will be able to
challenge an award under section 67 and 68 within the 28-day time limit, or seek common law
declaratory or injunctive relief based on the tribunals lack of jurisdiction (this relief is not subject
to a statutory time limit).205

Striking out an application for breach of court rules

Where a claimant has delayed in pursuing an application to challenge an award then the defendant
may apply to strike it out on grounds that the applicant has failed to comply with the Civil

Procedure Rules, for example the time limit for service of a claim form.206 In light of the policy in
favour of finality of arbitration awards, the courts power to strike out will probably be exercised
more readily in the context of an appeal from an arbitration award than in a claim started in the
courts. The party applying to dismiss the appeal need not show any prejudice and the test probably
remains whether there has been a failure to conduct and prosecute the application with all
deliberate speed.207 In Huyton SAv Jakil SpA 208 a seven-month delay in pursuing a remission to
the tribunal was sufficient to justify striking out the underlying appeal and the courts would
probably be somewhat more willing to strike out under the current Civil Procedure Rules which
place greater importance on dealing with cases expeditiously. This approach is justified by the
policy of speedy finality in arbitration awards and by the fact that the parties have already had
their disputes resolved (striking out an appeal will usually cause less prejudice to an appellant than
dismissing an action which has not been tried).

6. THE EFFECT OF A CHALLENGE

Pending decision on the challenge

Although the existence of an application to challenge an award is not a defence to enforcement it
may be used as a means to prevent or delay enforcement of an award: in particular, the court may
take a challenge into account in deciding whether to enforce an award (see Chapter 23). However,
a successful party can take measures to protect the fruits of the award pending a challenge by
asking the court to order that the application to challenge be conditional upon payment into court
(or provision of other security) of any money payable under the award.209 It would also be
possible to apply for permission to enforce the award as a judgment, and arrange for the
application to be heard immediately after the hearing of the challenge to the award. If an award is
challenged this will not preclude the tribunal continuing with the reference for matters not yet
decided. However, some court applications may affect subsequent decision-making and it will
often be appropriate to resolve challenges based on lack of jurisdiction or serious irregularity
before continuing with the arbitration.

Remission
The court has a wide discretion in dealing with an application to challenge an award. Ordinarily it
can confirm, vary, remit or set aside an award. In cases of lack of jurisdiction or a serious
irregularity it can also declare the award (in whole or part) to be of no effect. Remission will
generally be the first remedy to consider following a successful appeal or challenge for serious
irregularity because the court shall not exercise its power to set aside an award, in whole or in
part, unless it is satisfied that it would be inappropriate to remit the matters in question to the
tribunal for reconsideration.210 This provision reflects the 1996 Acts philosophy of giving effect
to the parties choice for the dispute to be resolved by their chosen tribunal.211
The courts decision to remit may be of great tactical importance since remission to the original
tribunal is more likely to give the same substantive result than a new tribunal coming to the matter
afresh. Following an appeal, the court can simply remit the award for reconsideration of the
defective part or it can set aside the defective part and then remit it. The latter course may be
preferable for the purposes of enforcement abroad in order to make clear that the defective part of

the award has no effect. The court is likely to vary the award rather than remit if the correct result
is obvious and it is more efficient for the court to make the correction. If further issues remain to
be decided then it may be appropriate to combine an application to remove the arbitrator with a
challenge on grounds of serious irregularity.
In Van der Giessen-de-Noord Shipbuilding Division BV v Imtech Marine & Offshore BV 212 parts
of an award were affected by serious irregularity. An umpire had not yet been appointed even
though the arbitration agreement provided for it and the judge considered that an umpire was
required. Largely for this reason the award was set aside for fresh consideration by the arbitrators
and an umpire rather than remitted for reconsideration by the original tribunal.
Remission to the original tribunal will be appropriate in cases of serious irregularity where the
tribunal has admitted its mistake or there has been some technical irregularity that can be
corrected. A new tribunal would only be necessary where there was an incurable irregularity in the
tribunal or a party had reasonable grounds for having lost confidence in the tribunal. The question
to be asked is whether there exist grounds from which a reasonable person would conclude that, if
asked to reconsider the matter, there was a real likelihood that the tribunal would not perform its
duty to act fairly and impartially and to decide the issue in accordance with the submissions and
evidence.213
Where an award is remitted to the original tribunal it is under an obligation to make a fresh award
covering all remitted matters within three months of the date of the order for remission (or such
longer or shorter period as the court may direct).214 The arbitrators jurisdiction to make a fresh
award is only revived for the matters remitted. Unremitted matters should be referred to or
reproduced in their original form in the new award. The scope of the arbitrators jurisdiction on a
remission depends on the courts order of remission (which is to be construed in the light of the
courts judgment and its surrounding circumstances).215 Ordinarily, a remission will involve
reconsideration only of the issues raised in the original arbitration and cannot be used as an
opportunity to raise new matters.216
An order for remission will mean that the remitted part of the award is suspended pending
publication of a fresh award on the remitted matters, at which point the remitted part will be
nullified.217 If the unremitted parts of the award are clearly severable from the remitted parts then
they could probably be enforced in the English courts.218 On an application for remission it may
be prudent for the resisting party to ask the court to make the remission conditional on provision
of security or payment of any undisputed part of the award.

Confirmation
Confirmation of an award will be appropriate where the challenge is entirely unsuccessful
(although the court may simply dismiss the application unless the parties need an order of
confirmation). Where the challenge is only partly successful then it may be appropriate to confirm
the unaffected parts of the award to facilitate their enforcement. An award might also be
confirmed where an arbitrator is found to have erred on a question of law in his reasons but the
conclusion and orders made remain correct on other grounds.

Variation

Variation may be appropriate where the courts decision on appeal would lead to an inevitable and
obvious change in the award, for example if the court differed from the arbitrator on the issue of
the date when laytime commenced under a charterparty. This would save the expense and delay
involved in a remission and would probably prevail over the statutory preference for
remission.219 A variation takes effect as part of the tribunals award. However, where a court is
considering variation of an award it may avoid problems in enforcement abroad if the court orders
that the award be remitted with directions for the tribunal to reproduce it in a varied form.220

Setting aside and declaring the award to be of no effect

Setting aside an award without remission is unusual since it means that the award is deprived of
all legal effect and may mean that the parties must recommence arbitration with a new tribunal in
order to obtain a final resolution of the dispute.221 Setting aside an award may be appropriate,
however, where it is plain that the tribunal (or a newly constituted tribunal) will have to consider
the entire matter afresh or where the award should never have been made. The extra expense and
delay of a rehearing and the possible appointment of a new tribunal would probably only be
justified where the hearing must be started again in any event or the original tribunal cannot cure
the irregularity; for instance, if the arbitrator cannot divorce his mind from a pre-existing point of
view or the parties have reasonable grounds for having lost confidence in him.222
In Pacol Ltd v Joint Stock Co Rossakhar 223 one of the parties had admitted liability and the issues
in dispute related to the quantum of the claim. The tribunal, however, re-opened the issue of
liability and dismissed the claim in its entirety. The claimants successfully challenged the award
for serious irregularity under section 68(2)(a) and Colman J found that it was a paradigm case for
setting aside the award: in practice this whole arbitration is going to have to be re-opened and repleaded. There is probably going to have to be further evidence and a whole new series of
submissions and orders made for the purpose of arriving at a conclusion on the question of
liability.
In Van der Giessen-de-Noord Shipbuilding Division BV v Imtech Marine & Offshore
BV 224 Christopher Clarke J found that an award produced by a tribunal of two arbitrators was
affected by serious irregularity. He concluded that an umpire should have been appointed before
the hearing. He decided to set aside parts of the award affected by irregularity for consideration
afresh by the original tribunal and an umpire. In order to avoid the risk of the applicants raising
new points he required an undertaking that they would not seek to widen the points taken on
challenge.
On a successful challenge for lack of jurisdiction under section 67 of the 1996 Act, remission is
not available since such a challenge involves a finding that the tribunal did not have jurisdiction to
make the award (or part of the award) in question. Where a successful challenge is made to a
tribunals award (or ruling) on its own jurisdiction the court will ordinarily set aside that
award.225 The effect of such an order is that the arbitration reverts to the position in which it stood
immediately before the award was published (i.e., the tribunal remains seized of the
reference).226 If the court finds that the tribunal lacked jurisdiction to make an award on the merits
then the court will ordinarily make a declaration that the award (in whole or part) be of no effect.
This remedy is also available where a serious irregularity has been established, most probably on

the ground that the tribunal has exceeded its powers. This avoids the illogicality of setting aside
something with no legal effect (i.e., an award on the merits made without jurisdiction).227 The
court also retains a wide inherent jurisdiction to grant declaratory or injunctive relief on grounds
of want of jurisdiction where a party has not taken part in the arbitral proceedings and may also
retain a narrow residual inherent jurisdiction to set aside an award.228

7. APPEALS TO THE COURT OF APPEAL

Usually an appeal to the Court of Appeal will not incur vast extra cost since only legal arguments
will be raised and further preparation of evidence is rarely required. However, an appeal will
probably substantially delay the final resolution of the dispute, thus presenting a further obstacle
to final enforcement. The 1996 Act largely maintains the restrictions on appeals introduced in the
Arbitration Act 1979 and introduces further restrictions (e.g., under the 1996 Act permission to
appeal against a challenge based on serious irregularity is only available from the first instance
court).

General requirements for appeals under sections 67, 68

and 69 of the 1996 Act
The permission of the court of first instance is required for an appeal from a decision under
sections 67, 68 and 69.229 If the first instance court grants permission then there is no additional
hurdle of obtaining the permission of the Court of Appeal.230 Ordinarily permission to appeal to
the Court of Appeal is to be sought from the judge who made the relevant order as soon as
possible after that order is made.231 The judge would only grant permission if he considered that
his decision raised a question of importance worthy of consideration by the Court of Appeal. The
philosophy of the 1996 Act in giving effect to the parties choice to arbitrate rather than litigate is
a further consideration in favour of refusing permission to appeal to the Court of Appeal. If
permission to go to the Court of Appeal is given it could be made subject to conditions such as the
provision of security for the costs of the challenge.232
The decision of the first instance court on whether to grant permission to appeal to the Court of
Appeal is discretionary and could only be challenged in exceptional circumstances. It has long
been recognised that the Court of Appeal has a residual jurisdiction to intervene where it could be
shown that the judge had reached his conclusion unfairly or by misconduct, possibly through bias,
chance, whimsy or personal interest.233 More recently, the Court of Appeal has affirmed this
residual jurisdiction to review the misconduct or unfairness of a first instance judges decision to
refuse or grant permission to appeal.234 In light of the Human Rights Act 1998, the statutory
restrictions on appeals under sections 67, 68 and 69 are not to be extended to unfairness in the
decision-making process. However, the Court of Appeal emphasised that this residual jurisdiction
would only be used in exceptionally rare cases and would not be exercised on grounds of
perversity since intervention would only be justified by arbitrariness in the decision-making
process rather than simply the wrong result.235
In North Range Shipping Ltd v Seatrans Shipping Corporation 236 the Court of Appeal applied its
residual jurisdiction and accepted jurisdiction to intervene where the first instance judge had
refused permission to appeal. The appeal against the judges decision was made on the basis that

his failure to give reasons was in breach of article 6 of the European Convention on Human
Rights.

Appeals for error of law under section 69 of the 1996 Act

Under the Nema guidelines237 there was a high threshold for allowing appeals to the Court of
Appeal on the decision to refuse or grant leave to appeal. This approach has been largely
maintained under the 1996 Act and a judge is only likely to allow permission to appeal from the
decision to grant or refuse leave to appeal under section 69(3) if the application raised a new point
calling for the proper approach to that provision to be
amplified or clarified.238
An appeal from the courts decision on the substantive appeal is also subject to permission being
obtained from the first instance court,239 but further stringent conditions are imposed on the
granting of permission. Section 69(8) of the 1996 Act provides that no appeal shall lie without
the leave of the court which shall not be given unless the court considers that the question is one
of general importance or is one which for some other special reason should be considered by the
Court of Appeal. The wording is designed to favour the finality of awards and draws a distinction
between cases of general public importance and other one-off cases where permission should
generally not be given.240
The fact that a judge has reached a different conclusion from very experienced arbitrators
probably does not amount to a special reason for the point to be referred to the Court of
Appeal.241 What amounts to a special reason or general public importance is effectively left to
the judges discretion. The law on general public importance under section 69(3) of the 1996
Act may be of some help in interpreting the meaning of that phrase. Public will usually be
interpreted as referring not to the man on the Clapham omnibus but instead to the man in the
Baltic Exchange or the section of the trade affected by the decision.242 A special reason
probably entails some other reason, for instance the question might have become of little general
importance in the light of changes in the law, but in the special circumstances of the case justice
requires the matter to be resolved by the Court of Appeal.

Appeals from other challenges

Where a challenge is made at the enforcement stage (e.g., under section 66(3) of the 1996 Act) or
where a party is seeking declaratory or injunctive relief against an award on grounds of want of
jurisdiction (as allowed under section 72 of the 1996 Act) then appeal to the Court of Appeal is
subject to permission being obtained either from the court of first instance or the Court of Appeal
itself.243

The approach of the Court of Appeal on an appeal

The Court of Appeal will review the decision of the first instance judge in accordance with its
normal practice but may take into account the fact that the parties agreed to have their disputes
decided by an arbitral tribunal and that the tribunal may have had a good understanding of the
trade in question or the factual circumstances.244 The Court of Appeal can confirm, vary, set aside
or remit the award back to the judge or the arbitrators.245

If the Court of Appeal is reviewing a discretionary decision (e.g., the decision to grant or refuse
permission to appeal), it will first consider whether the judge applied the correct principles. If the
correct principles were not applied then the Court of Appeal will consider the principles which
should have been applied, approach the decision afresh and it may substitute its decision for that
of the judge (or remit the matter back to him). If, however, the judge applied the correct principles
the Court of Appeal will not intervene even if it would have reached a different conclusion in
applying those principles, unless it could be shown that no reasonable person applying the correct
test could have reached the conclusion reached by the judge.246 If the decision does not depend on
the exercise of discretion (e.g., the proper construction of a clause in a standard form) it may be
more ready to substitute its judgment for that of the judge, or it may identify the correct legal
principles and remit the matter back to the judge for reconsideration.

8. PRACTICE IN MAKING AN ARBITRATION CLAIM

An application to challenge an award under sections 67-69 of the 1996 Act (or to seek declaratory
or injunctive relief as permitted under section 72) must be made by an arbitration claim form
which must be served by the claimant.247 It is quite common for an arbitration claim form to
include more than one type of challenge, typically a challenge by way of appeal and on the ground
of serious irregularity. In such circumstances the applications should be set out in separate
sections of the claim form and the judge is likely to give directions as to how the matters should
be dealt with. It may be more appropriate to decide the serious irregularity challenge before
considering the application for permission to appeal.248 However, in some cases it may be sensible
for the section 69 application to be determined before the section 68 application since that
application may be determinative of the second.249 If a section 69 application is combined with a
section 67 or 68 application (or both) then it may be appropriate to request an oral hearing for the
section 69 application.250
The information to be provided in the claim form and the methods of service are explained in the
Civil Procedure Rules, the Practice Direction 62 and the Commercial Court Guide. The procedure
for making an arbitration claim is also set out in the flow chart on court applications at Appendix
L. An application for an injunction or a declaration should usually be made using an arbitration
claim form and would usually be covered by the Practice Direction covering arbitration
applications.251
Applications under sections 67-69 of the 1996 Act must be made on notice to the other parties
and the tribunal.252 Notice to the other parties is given by making them defendants to the
application and serving on them the claim form and the supporting evidence.253 Notice to the
tribunal under the CPR is given by sending them a copy of the claim form and any written
evidence in support.254 However, in practice it is generally sufficient to send the tribunal the claim
form and ask if it wishes to be sent copies of the supporting evidence. The arbitrator may then
request to be made a party to the claim or to make written representations.255 Normally an
arbitrator will not take any part in the court application unless a serious allegation is made against
him or he considers that there is a significant factual issue in the application upon which he can
assist. The other party to the claim may serve evidence in response, normally within 21 days of the
time allowed for acknowledging service and the claimant may respond to that evidence, normally

within seven days.256 The court will then usually proceed to arrange a hearing (save for
applications for permission to appeal which are generally decided on paper).
Where an arbitration claim has been made and it appears that the claimant may be unable (or
unwilling) to pay the costs if unsuccessful, then the defendant may apply to court (normally by an
application notice under CPR Part 23) for an order that the claimant provide security for the costs
of the claim. The court has a wide discretion to make orders for security costs but it may not make
them simply on the ground that the claimant is based outside the jurisdiction.257The court may also
require the claimant to make a payment into court (or provide other security) of any money
payable under the award.258 This is important to preserve the enforceability of an award pending a
time-consuming challenge by an insolvent or financially unstable claimant.

9. SERVICE OUT OF THE JURISDICTION

If any of the parties to the challenge is domiciled outside the United Kingdom jurisdiction259 then
it may be necessary to obtain permission to serve the arbitration claim form outside the
jurisdiction. Normally this will be unnecessary since the other side (usually acting by its UKbased solicitors or P&I Club) will agree to accept service within the jurisdiction. This is generally
advantageous for both parties as it saves the unnecessary cost of making an application for
permission which is likely to succeed on the ground that the award is made in England. (Under
section 53 of the 1996 Act an award is treated as being made in England where the seat of the
arbitration is in England: this will invariably be the case in an LMAA arbitrationsee Chapter 5.)
In some cases the other party may be obstructive and refuse to allow service on the London
solicitors (or agent such as a P&I Club) who acted in the arbitration. In these circumstances it will
be necessary to apply to court for permission to serve the claim form outside the jurisdiction.
Permission is even necessary for service within the European Union because arbitration is outside
the scope of the provisions for service created under Council Regulation (EC) No 44/2001.260
To obtain permission to serve a claim form outside the jurisdiction the claimant must show that
the award is made within the jurisdiction pursuant to section 53 of the 1996 Act261 and probably
also that England is the proper place to bring the claim.262 The application for permission to serve
the claim form out of the jurisdiction should usually be made in the arbitration claim form or by
an application notice to the Commercial Court (notice to the other parties is not required).263 An
application notice should normally include a brief statement of the nature of the challenge and
grounds for alleging that the award is made in England pursuant to section 53 of the 1996 Act. In
order to show that England is the proper place to decide the claim it is necessary to satisfy the
court that the award is made within the jurisdiction and probably also that the claim has a real
prospect of success.264 The application must be supported by written evidence showing the
grounds on which the application is made and the address (or country) of the person to be
served.265 The evidence should probably also set out the claimants belief that he has a real
prospect of success.266 If a claimant anticipates that it may be necessary to seek an order for
service on the defendant by an alternative method (often referred to as substituted service) then
this application can ordinarily be made simultaneously.267
In practice, the application for permission to serve out will usually be served with a draft order
and the arbitration claim form itself (together with supporting evidence) so that the court can form

a view of the application. To satisfy time limits it is possible to issue the arbitration claim form
before permission to serve on the other party is given. However, the claim form must be served on
the defendant within one month of issue unless the court orders otherwise268and the claimant must
file a certificate of service within seven days of service.269 If the judge is satisfied that permission
for service out should be given he will simply initial the draft order and an oral hearing will be
unnecessary unless the courts jurisdiction is subsequently challenged.
Permission to serve out of the jurisdiction is ordinarily required (unless the party agrees
otherwise) even where an overseas party has been represented by a UK solicitor (or other
representative) in the arbitration. However, the court may permit service of an arbitration claim
form by an alternative method on a party at the address of that solicitor (or other representative) if
the claimant can show good reason for this,270 (e.g., if it would be impracticable to serve the
defendant within the required timescale and the solicitor remains in communication with him).
In Dept of Civil Aviation of the Kyrgyz Republic v Finrep GmbH 271 the defendant to a section 67
application was an Austrian corporation that had instructed New York attorneys for an arbitration
and also a senior barrister based in London as advocate at the hearing. Tomlinson J set aside an
order for service by an alternative method on the senior barrister because such service would not
ordinarily represent the most reliable manner of bringing the proceedings to the attention of the
party in question. He indicated that a more appropriate order would have been to authorise service
on the New York attorneys by fax. He stated that it was the almost invariable practice of the
Commercial Court to permit service upon a partys solicitor who has acted for that party in the
arbitration, provided that the solicitor had not been disinstructed or absent other special
circumstances.
1 Sections 1(c) and 58 of the 1996 Act. Residual common law remedies are preserved under
section 81(1) so far as consistent with the 1996 Act.
2 Section 1(a) & (b) of the 1996 Act; see also Paragraph 22 of the DAC Report.
3 Paragraphs 280 and 285 of the DAC Report.
4 Paragraph 285 of the DAC Report.
5 Pioneer Shipping Ltd v BTP Tioxide Ltd, The Nema [1982] AC 724 at 739.
6 The 1996 Act refers to leave to appeal, but in accordance with practice under the Civil
Procedure Rules the term permission is now generally used.
7 Section 69(2)(a) of the 1996 Act. The agreement would need to be in writing (see section 5 of
the 1996 Act). An agreement to appeal may be made before or after a dispute has arisen, see
paragraph 292 of the DAC Report, Poseidon Schiffahrt GmbH v Nomadic Navigation Co Ltd, The
Trade Nomad [1998] 1 Lloyds Rep 57.
8 Royal & Sun Alliance Insurance plc v BAE Systems (Operations) Ltd [2008] EWHC 743; [2008]
1 Lloyds Rep 712.
9 See commentary to the Intermediate Claims Procedure.
10 Such an agreement must be in writing, see section 5 of the 1996 Act.

11 Section 69(1) of the 1996 Act.

12 Paragraph 22 of the LMAA Terms, see Chapter 19.
13 Sumukan Limited v Commonwealth Secretariat [2006] EWHC 304 (Comm); [2006] 2 Lloyds
Rep 53.
14 Al Hadha Trading Company v Tradigrain SA [2002] 2 Lloyds Rep 512, Essex County
Council v Premier Recycling Ltd [2006] EWHC 3594; [2007] BLR 233.
15 Section 82(1) of the 1996 Act; see Egmatra AG v Marco Trading Corporation [1999] 1
Lloyds Rep 862; Sanghi Polyesters Ltd (India) v International Investor (KCFC) (Kuwait) [2000]
1 Lloyds Rep 480; Reliance Industries v Enron Oil & Gas India Ltd, [2002] 1 All ER (Comm)
59.
16 Vinava Shipping Co Ltd v Finelvet AG, The Chrysalis [1983] 1 Lloyds Rep 503 at 507,
applied in London Underground Ltd v Citylink Telecommunications Ltd [2007] EWHC 1749
(TCC); [2007] 2 All ER (Comm) 694 and White Young Green Consulting v Brooke House Sixth
Form College [2007] EWHC 2018.
17 Athens Cape Naviera SA v Deutsche Dampfschiffahrtsgesellschaft Atkiengesellschaft, The
Barenbels [1985] 1 Lloyds Rep 528 at 532; Foleys Ltd v City & East London Family &
Community Services [1997] ADRLJ 401; Agrokor AG vTradigrain SA [2000] 1 Lloyds Rep 497
at 501; Surefire Systems Ltd v Guardian ECL Limited [2005] EWHC 1860 (TCC); [2005] BLR
534, see below on evidence admissible in an application for permission to appeal or the
substantive appeal.
18 Geogas SA v Trammo Gas Ltd, The Baleares [1993] 1 Lloyds Rep 215 at 228-232.
19 [2005] EWHC 1542 (Comm); [2005] 2 Lloyds Rep 650, applied in London Underground
Ltd v Citylink Telecommunications Ltd [2007] EWHC 1749 (TCC); [2007] 2 All ER (Comm) 694.
Cooke J disagreed with the decision of HHJ Thornton QC in Fence Gate Ltd v NEL Construction
Ltd [2001] 82 Con LR 41 which had allowed room for such an appeal.
20 See also paragraph 286(iii) of the DAC Report.
21 Weldon Plant Ltd v Commission for the New Towns [2000] BLR 496.
22 Pioneer Shipping Ltd v BTP Tioxide Ltd, The Nema [1982] AC 724, see paragraph 286(iv) of
the DAC Report.
23 E.g. CMA CGM SA v Beteiligungs-Kommanditgesellschaft MS, The Northern Pioneer [2002]
EWCA Civ 1878; [2003] 1 Lloyds Rep 212.
24 Lesotho Highlands Development Authority v Impregilo SpA [2005] UKHL 43; [2005] 2
Lloyds Rep 310, paragraph 19.
25 Thus overruling Petraco (Bermuda) Ltd v Petromed International SA [1988] 2 Lloyds Rep
357, under which the court had a discretion to allow appeals on issues that had not been put to the
arbitral tribunal. See also Stx Pan Ocean Co Ltd v Ugland Bulk Transport AS, The Livanita [2007]
EWHC 1317 (Comm); [2008] 1 Lloyds Rep 86.

26 China Shipbuilding Corporation v Nippon Yusen Kabukishi Kaisha, The Seta Maru [2000] 1
Lloyds Rep 367 at 377.
27 Dwr Cymru Cyf v Jones Brothers (Henllan) Ltd, The Times, 26 November 1998; similar
comments were made in a section 68 application in Bottiglieri Di Navigazione SpA v COSCO
Qingdao Ocean Shipping Company, The Bunga Saga Lima [2005] EWHC 244 (Comm); [2005] 2
Lloyds Rep 1 at paragraph 22.
28 C-126/97 Eco Swiss China Time Ltd v Benetton International BV [1999] 2 All ER (Comm) 44
(Dutch procedural law did not allow a fresh question as to the validity of the arbitration agreement
to be raised in annulment proceedings), see further below.
29 Paragraph 286(iv) of the DAC Report; Pioneer Shipping Ltd v BTP Tioxide Ltd, The
Nema [1982] AC 724.
30 BVS v Kerman Shipping Corporation, The Kerman [1982] 1 Lloyds Rep 62 at 65 where
Parker J suggested that the judge may still grant leave in a one-off case even if he could not
exclude the possibility that he might be persuaded that the arbitrator might be right. This case was
considered and not disapproved in Antaios Compa ni a Naviera SA v Salem Rederierna AB, The
Antaios [1985] 1 AC 191. Akenhead J in Braes of Doune Wind Farm (Scotland) Ltd v Alfred
McAlpine Business Services Ltd [2008] EWHC 426; [2008] 1 Lloyds Rep 68 considered,
however, that if the judge reached a view that the decision was wrong just on balance then it
would not be obviously wrong.
31 Kansa General Insurance Co Ltd v Bishopsgate Insurance plc [1988] 1 Lloyds Rep 503 at
511.
32 Pioneer Shipping Ltd v BTP Tioxide Ltd, The Nema [1982] AC 724 at 744.
33 Sinclair v Woods of Winchester Ltd [2006] EWHC 3003; 109 Con LR 14, at paragraph
8; Benaim (UK) Ltd v Davies Middleton & Davies Ltd [2005] EWHC 1370 (TCC), 102 Con LR 1
at para 108.
34 Pioneer Shipping Ltd v BTP Tioxide Ltd, The Nema [1982] AC 724 at 744.
35 Aden Refinery Co Ltd v Ugland Management Co Ltd [1986] 2 Lloyds Rep 336 at 341.
36 CMA CGM SA v Beteiligungs-Kommanditgesellschaft MS, The Northern Pioneer [2002]
EWCA Civ 1878; [2003] 1 Lloyds Rep 212, departing from the stricter approach adopted
in Antaios Compania Naviera SA v Salen Rederierna AB,The Antaios [1985] 1 AC 191 at 204.
37 Kershaw Mechanical Services Ltd v Kendrick Construction Limited [2006] EWHC 727; [2006]
4 All ER 79, at paras 55-57.
38 Egmatra AG v Marco Trading Corporation [1999] 1 Lloyds Rep 862 at 864.
39 Ipswich Borough Council v Fisons plc [1990] 1 All ER 730 at 734.
40 [1983] 1 Lloyds Rep 655.
41 C-126/97 Eco Swiss China Time Ltd v Benetton International BV [1999] 2 All ER (Comm) 44.

42 Ibid.
43 Paragraphs 289-290, of the DAC Report.
44 Egmatra AG v Marco Trading Corporation [1999] 1 Lloyds Rep 862 at 864.
45 Braes of Doune Wind Farm (Scotland) Ltd v Alfred McAlpine Business Services Ltd [2008]
EWHC 426; [2008] 1 Lloyds Rep 68, para 31.
46 Ibid.
47 Ipswich Borough Council v Fisons plc [1990] 1 All ER 730 at 734; Pioneer Shipping
Ltd v BTP Tioxide Ltd, The Nema [1982] AC 724 at 734-735.
48 Pioneer Shipping Ltd v BTP Tioxide Ltd, The Nema [1982] AC 724 at 734.
49 Braes of Doune Wind Farm (Scotland) Ltd v Alfred McAlpine Business Services Ltd [2008]
EWHC 426; [2008] 1 Lloyds Rep 68, Ipswich Borough Council v Fisons plc [1990] 1 All ER 730
at 734 and Seaworld Ocean Line Co v Catseye Maritime Co, The Kelaniya [1989] 1 Lloyds Rep
30 (where the arbitrator was a judge).
50 Braes of Doune Wind Farm (Scotland) Ltd v Alfred McAlpine Business Services Ltd [2008]
EWHC 426; [2008] 1 Lloyds Rep 68, at para 31.
51 Ipswich Borough Council v Fisons plc [1990] 1 All ER 730 at 734.
52 [2002] EWHC 2812; LMLN [2003] 607 2(2).
53 Section 69(5) of the 1996 Act. The absence of an oral hearing would not be incompatible with
the Human Rights Act 1998; BLCT (13096) Ltd v J Sainsbury plc [2003] EWCA Civ 884; [2004]
1 CLC 24.
54 Sanghi Polyesters Ltd (India) v International Investor (KCFC) (Kuwait) [2000] 1 Lloyds Rep
480 at 481.
55 CMA CGM SA v Beteiligungs-Kommanditgesellschaft MS, The Northern Pioneer [2002]
EWCA Civ 1878; [2003] 1 Lloyds Rep 212, para 23.
56 TA Shipping Ltd v Comet Shipping Ltd, The Agamemnon [1998] 1 Lloyds Rep 675.
57 Universal Bulk Carriers Ltd v Andre et Cie SA [2000] 1 Lloyds Law Rep 459 at 463.
58 E.g. Glencore Grain Rotterdam BV v Lebanese Organisation for International Commerce
(LORICO) [1997] 2 Lloyds Rep 386.
59 Acada Chemical Ltd v Empresa Nacional Pesquera SA [1994] 1 Lloyds Rep 428 at 433,
decided under the 1979 Act but the same approach is likely to be applied under the 1996 Act.
60 [2002] EWCA Civ 405; [2002] 2 Lloyds Rep 1. 26
61 Foleys Ltd v City & East London Family & Community Services [1997] ADRLJ 401.

62 Hok Sport Limited v Aintree Racecourse Company Limited [2002] EWHC 3094 (TCC); [2003]
BLR 155; Surefire Systems Ltd v Guardian ECL Limited [2005] EWHC 1860 (TCC); [2005] BLR
534; Agrokor AG v Tradigrain SA [2000] 1 Lloyds Rep 497 at 501.
63 The Aegean Dolphin [1992] 2 Lloyds Rep 178 at 182 and Stinnes Interoil
GmbH v Halcoussis, The Yanxilas [1982] 2 Lloyds Rep 445 at 450; Whistler International
Ltd v Kawasaki Kisen Kaisha Ltd, The Hill Harmony [1998] 2 Lloyds Rep 367 at 369, see
also The Pamela [1995] 2 Lloyds Rep 249 at 254 where the judge agreed with the dissenting
arbitrator and, in the context of section 68, F Ltd v M Ltd [2009] EWHC 275 (TCC); [2009] 1
Lloyds Rep 537.
64 CPR 62.10(3), see Chapter 13 on Confidentiality.
65 Hiscox v Outhwaite (No 2) [1991] 2 Lloyds Rep 553.
66 Matthew Hall Ortech Ltd v Tarmac Roadstone Ltd 87 BLR 96.
67 Tor Line AB v Alltrans Group of Canada Ltd, The TFL Prosperity [1982] 1 Lloyds Rep 617 at
627; Hiscox v Outhwaite (No 2) [1991] 2 Lloyds Rep 553.
68 Agrokor AG v Tradigrain SA [2000] 1 Lloyds Rep 497 at 501; Athens Cape Naviera
SA v Deutsche Dampfschiffahrtsgesellschaft Aktiengesellschaft, The Barenbels [1985] 1 Lloyds
Rep 528.
69 Chiswell Shipping Ltd v State Bank of India, The World Symphony (No 2) [1987] 1 Lloyds
Rep 157.
70 Transgrain Shipping BV v Global Transporte Oceanico SA, The Mexico I [1988] 2 Lloyds
Rep 149 at 157.
71 [2006] EWHC 727; [2006] 4 All ER 79, applied in White Young Green Consulting v Brooke
House Sixth Form College [2007] EWHC 2018.
72 It may, however, order remission for further findings of fact, see section 70(4) discussed in
Chapter 19 on awards.
73 Pioneer Shipping Ltd v BTP Tioxide Ltd, The Nema [1982] AC 724 at 752; Benaim (UK)
Ltd v Davies Middleton & Davies Ltd [2005] EWHC 1370 (TCC), 102 Con LR 1 at paragraph
107, London Underground Ltd v Citylink Telecommunications Ltd [2007] EWHC 1749 (TCC);
[2007] 2 All ER (Comm) 694, paragraphs 53-59.
74 For comments to this effect, see Kershaw Mechanical Services Ltd v Kendrick Construction
Limited [2006] EWHC 727; [2006] 4 All ER 79, paragraphs 55-57; Universal Bulk Carrier
Ltd v Andre et Cie SA [2000] 1 Lloyds Rep 459 at 465.
75 [2006] EWHC 727; [2006] 4 All ER 79, applied in Sinclair v Woods of Winchester Ltd [2006]
EWHC 3003, 109 Con LR 14.
76 Paragraphs 281-282 of the DAC Report; citing King v Thomas McKenna Ltd [1991] 2 QB 480
and Indian Oil Corporation v Coastal (Bermuda) Ltd [1990] 2 Lloyds Rep 407.
77 Profilati Italia SRL v Paine Webber Inc [2001] 1 Lloyds Rep 715.

78 Lesotho Highlands Development Authority v Impregilo SpA [2005] UKHL 43; [2005] 2
Lloyds Rep 310, para 26.
79 Section 73 of the 1996 Act, see below on loss of the right to reject.
80 Lesotho Highlands Development Authority v Impregilo SpA [2005] UKHL 43; [2005] 2
Lloyds Rep 310, para 28.
81 Ibid., see ABB AG v Hochtief Airport GmbH [2006] EWHC 388 (Comm); [2006] 2 Lloyds
Rep 1 at para 63 for further references.
82 ABB AG v Hochtief Airport GmbH [2006] EWHC 388 (Comm); [2006] 2 Lloyds Rep 1, para
87.
83 Lesotho Highlands Development Authority v Impregilo SpA [2005] UKHL 43; [2005] 2
Lloyds Rep 310, para 28.
84 Paragraph 280 of the DAC Report.
85 E.g. Conder Structures v Kvaerner Construction Ltd [1999] ADRLJ 305; Egmatra
AG v Marco Trading Corporation [1999] 1 Lloyds Rep 862; Sanghi Polyesters Ltd
(India) v International Investor (KCFC) (Kuwait) [2000] 1 Lloyds Rep 480;Hussman (Europe)
Ltd v Al Ameen Development & Trade Co [2000] 2 Lloyds Rep 83; Brandeis Brokers v Black
Ltd [2001] 2 Lloyds Rep 359; Petroships Pte Ltd v Petec Trading and Investment Corporation,
The Petro Ranger [2001] 2 Lloyds Rep 348, Benaim (UK) Ltd v Davies Middleton & Davies
Ltd [2005] EWHC 1370 (TCC), 102 Con LR 1, ABB AG v Hochtief Airport GmbH [2006] EWHC
388 (Comm); [2006] 2 Lloyds Rep 1, Warborough Investments Ltd v S Robinson & Sons
Ltd [2003] EWCA Civ 751 at paragraph 59, Checkpoint Ltd v Strathclyde Pension Fund [2003]
EWCA Civ 84; [2003] 14 EG 124 at paragraph 59 and Bandwidth Shipping Corporation v Intaari,
The Magdalena Oldendorff [2007] EWCA Civ 998; [2008] 1 Lloyds Rep 7 at paragraph 46.
86 Profilati Italia SRL v Paine Webber Inc [2001] 1 Lloyds Rep 715, see ABB AG v Hochtief
Airport GmbH [2006] EWHC 388 (Comm); [2006] 2 Lloyds Rep 1 at paragraph 63 for further
references as to the requirement of an extreme case.
87 Andrews v Bradshaw, The Times, 11 October 1999 (substantial injustice under section
24); Conder Structures v Kvaerner Construction Ltd [1999] ADRLJ 305; Hussman (Europe)
Ltd v Al Ameen Development & Trade Co [2000] 2 Lloyds Rep 83 at 95.
88 [1999] ADRLJ 305, applied in Sinclair v Woods of Winchester Ltd [2006] EWHC 3003; 109
Con LR 14.
89 Profilati Italia SRL v Paine Webber Inc [2001] 1 Lloyds Rep 715.
90 Checkpoint Ltd v Strathclyde Pension Fund [2003] EWCA Civ 84; [2003] 14 EG 124, CNH
Global NV v PGN Logistics Ltd [2009] EWHC B8 (Comm).
91 Compare Icon Navigation Corporation v Sinochem International Petroleum (Bahamas) Co
Ltd [2002] EWHC 2812; LMLN [2003] (likely to have affected the decision) with OAO
Northern Shipping Co v Romolcadores de Marin SL [2007] EWHC 1821 (Comm); [2007] 2
Lloyds Rep 302 (not hopeless).

92 [2004] EWHC 2909 (Comm); [2005] 1 Lloyds Rep 192, para 90, applied in ABB
AG v Hochtief Airport GmbH [2006] EWHC 388 (Comm); [2006] 2 Lloyds Rep 1, OAO
Northern Shipping Co v Romolcadores de Marin SL [2007] EWHC 1821 (Comm); [2007] 2
Lloyds Rep 302 and Van der Giessen-de-Noord Shipbuilding Division BV v Imtech Marine &
Offshore BV [2008] EWHC 2904 (Comm); [2009] 1 Lloyds Rep 273.
93 Save under section 68(2)(g) which expressly requires a stronger causative link between the
irregularity and the outcome, see below.
94 ASM Shipping Ltd of India v TTMI Ltd [2005] EWHC 2238; [2007] 2 Lloyds Rep 155,
paragraph 39 (this aspect of the decision was not subject to appeal). Morison J disagreed with the
approach of HHJ Bowsher in Groundshire v VHQ[2001] 1 BLR 395 suggesting that a court must
be satisfied that unfairness has also caused additional substantial injustice before intervening.
Morison Js approach was applied in Norbrook Laboratories Ltd v A Tank [2006] EWHC 1055;
[2006] 2 Lloyds Rep 285, paragraph 145 and ASM Shipping Ltd v Harris [2007] EWHC 1513
(Comm); [2008] 1 Lloyds Rep 61.
95 [1998] 3 All ER 730.
96 Compare the different emphasis in paragraphs 280-282 and 285 of the DAC Report.
97 Paragraph O8.8.
98 Conder Structures v Kvaerner Construction Ltd [1999] ADRLJ 305; Egmatra AG v Marco
Trading Corporation [1999] 1 Lloyds Rep 862.
99 Sanghi Polyesters Ltd (India) v International Investor (KCFC) (Kuwait) [2000] 1 Lloyds Rep
480 at 485.
100 Profilati Italia SRL v Paine Webber Inc [2001] 1 Lloyds Rep 715, Bulfracht (Cyprus)
Ltd v Boneset Shipping Co Ltd, The Pamphilos [2002] EWHC 2292 (Comm); [2002] 2 Lloyds
Rep 681.
101 E.g. Bulfracht (Cyprus) Ltd v Boneset Shipping Co Ltd, The Pamphilos [2002] EWHC 2292
(Comm); [2002] 2 Lloyds Rep 681, Warborough Investments Ltd v S Robinson & Sons
Ltd [2003] EWCA Civ 751, OAO Northern Shipping Co vRomolcadores de Marin SL [2007]
EWHC 1821 (Comm); [2007] 2 Lloyds Rep 302 and Bandwidth Shipping Corporation v Intaari,
The Magdalena Oldendorff [2007] EWCA Civ 998; [2008] 1 Lloyds Rep 7. This type of
allegation may also give rise to a challenge under section 68(2)(d), e.g. Bottiglieri Di Navigazione
SpA v COSCO Qingdao Ocean Shipping Company, The Bunga Saga Lima [2005] EWHC 244
(Comm); [2005] 2 Lloyds Rep 1 at para 22.
102 Zermalt Holdings v Nu-Life Upholstery Repairs [1985] 2 EGLR 14, an authority frequently
relied upon in 1996 Act cases, e.g. OAO Northern Shipping Co v Romolcadores de Marin
SL [2007] EWHC 1821 (Comm); [2007] 2 Lloyds Rep and Vee Networks Ltd v Econet Wireless
International Ltd [2004] EWHC 2909 (Comm); [2005] 1 Lloyds Rep 192.
103 London Underground Ltd v Citylink Telecommunications Ltd [2007] EWHC 1749 (TCC);
[2007] 2 All ER (Comm) 694, ABB AG v Hochtief Airport GmbH [2006] EWHC 388 (Comm);

[2006] 2 Lloyds Rep 1 and Bulfracht (Cyprus) Ltd vBoneset Shipping Co Ltd, The
Pamphilos [2002] EWHC 2292 (Comm); [2002] 2 Lloyds Rep 681.
104 Bandwith Shipping Corporation v Intaari [2006] EWHC 2432 (Comm); [2008] 1 Lloyds
Rep 7.
105 [2000] 1 Lloyds Rep 109.
106 E.g. Checkpoint Ltd v Strathclyde Pension Fund [2003] EWCA Civ 84; [2003] 14 EG 124
and Bulfracht (Cyprus) Ltd v Boneset Shipping Co Ltd, The Pamphilos [2002] EWHC 2292
(Comm); [2002] 2 Lloyds Rep 681.
107 [2007] EWHC 856 TCC; [2007] BLR 285, see also Fox v PG Wellfair Ltd [1981] 2 Lloyds
Rep 514.
108 [2003] EWCA Civ 84; [2003] 14 EG 124.
109 [1962] 1 Lloyds Rep 283.
110 [2004] EWHC 1019 (Comm); [2005] 1 Lloyds Rep 324.
111 Ranko Group v Antarctic Maritime SA [1998] LMLN 492; for similar facts see Anangel
Peace Compa ni a Naviera SA v Bacchus International Commerce Corporation, The Anangel
Peace [1981] 1 Lloyds Rep 452.
112 In the context of ICC arbitration, see CNH Global NV v PGN Logistics Ltd [2009] EWHC B8
(Comm), in which Burton J discussed the distinction between lack of jurisdiction and exceeding
powers.
113 Paragraph 278 of the DAC Report contemplated that there might be difficulty in categorising
some applications between sections 67 and 68 of their report.
114 In Sea Trade Maritime Corporation v Hellenic Mutual War Risks Association (Bermuda)
Ltd [2006] EWHC 578 (Comm); [2006] 2 Lloyds Rep 147 a party relied upon sections 67,
68(2)(b) and 69 to challenge a tribunals decision to award costs outside the statutory time limits.
115 [2007] EWHC 2667 (Comm); [2008] 1 Lloyds Rep 316.
116 [2005] UKHL 43; [2005] 2 Lloyds Rep 310.
117 Section 5(1) of the 1996 Act; see Chapter 4 on agreements.
118 Paragraph 115 of the DAC Report.
119 See Chapters 11 and 20 on the right to resign and consequences as regards fees. See also
Mustill & Boyd, 2001 Companion, pp. 110-111 and 292.
120 Paragraph 280 of the DAC Report.
121 See Chapter 19 on awards and also below on section 68(2)(f).
122 [2004] EWCH 2332 (Comm); [2005] 1 Lloyds Rep 422.
123 [2005] EWHC 1193 (Comm); [2005] 2 Lloyds Rep 508.

124 E.g. Hussman (Europe) Ltd v Al Ameen Development & Trade Co [2000] 2 Lloyds Rep 83 at
96 and Bottiglieri Di Navigazione SpA v COSCO Qingdao Ocean Shipping Company, The Bunga
Saga Lima [2005] EWHC 244 (Comm); [2005] 2 Lloyds Rep 1 at para 22.
125 General Feeds Inc v Slobodna Plovidba Yugoslavia [1999] 1 Lloyds Rep 688 at 695.
126 E.g. ABB AG v Hochtief Airport GmbH [2006] EWHC 388 (Comm); [2006] 2 Lloyds Rep
1, Fidelity Management SA v Myriad International Holdings BV [2005] EWHC 1193 (Comm);
[2005] 2 Lloyds Rep 508.
127 OAO Northern Shipping Co v Romolcadores de Marin SL [2007] EWHC 1821 (Comm);
[2007] 2 Lloyds Rep 302, referring to Zermalt Holdings v Nu-Life Upholstery Repairs [1985] 2
EGLR 14.
128 Weldon Plant Ltd v Commission for the New Towns [2000] BLR 496, approved in most of the
subsequent authorities on section 68(2)(d).
129 E.g. Egmatra AG v Marco Trading Corporation [1999] 1 Lloyds Rep 862 at 865.
130 Paragraph O8.6(b).
131 Checkpoint Lt v Strathclyde Pension Fund [2003] EWCA Civ 84; [2003] 14 EG 124, Ascot
Commodities NV v Olam International Ltd, The Agra [2002] 2 Lloyds Rep 277, World Trade
Corporation v C Czarnikow Sugar Ltd [2004] EWHC 2332 (Comm); [2005] 1 Lloyds Rep
422, Agrokor AG v Tradigrain SA [2000] 1 Lloyds Rep 497 at 503.
132 Hussman (Europe) Ltd v Al Ameen Development & Trade Co [2000] 2 Lloyds Rep 83 at 97
applied in Petroships Pte Ltd v Petec Trading and Invesment Corporation, The Petro
Ranger [2001] 2 Lloyds Rep 348 at 351.
133 Margulead Ltd v Exide Technologies [2004] EWHC 1010 (Comm); [2005] 1 Lloyds Rep
324, World Trade Corporation v C Czarnikow Sugar Ltd [2004] EWHC 2332 (Comm); [2005] 1
Lloyds Rep 422, Van der Giessen-de-Noord Shipbuilding Division BV v Imtech Marine &
Offshore BV [2008] EWHC 2904 (Comm).
134 Ibid.
135 Vee Networks Ltd v Econet Wireless International Ltd [2004] EWHC 2909 (Comm); [2005] 1
Lloyds Rep 192, para 90, applied in ABB AG v Hochtief Airport GmbH [2006] EWHC 388
(Comm); [2006] 2 Lloyds Rep 1 and OAO Northern Shipping Co v Romolcadores de Marin
SL [2007] EWHC 1821 (Comm); [2007] 2 Lloyds Rep 302.
136 [2002] 2 Lloyds Rep 277.
137 Zermalt Holdings SA v Nu-Life Upholstery Repairs Ltd [1985] 275 EG 1134, approved in
cases on section 68 of the 1996 Act, e.g. ABB AG v Hochtief Airport GmbH [2006] EWHC 388
(Comm); [2006] 2 Lloyds Rep 1.
138 DAC Supplementary Report on the Arbitration Act, paragraph 35.
139 See Chapter 19 on awards.

140 Paragraph 25(a).

141 Under section 57 the parties may agree to extend this time. Under the LMAA Terms the
tribunal also has power to extend the time limit. In an exceptional case where substantial injustice
could be established, an extension of time might be sought from court under section 79(3) of the
1996 Act.
142 The basic elements of fraud under English law are set out in Derry v Peek (1889) 14 App Cas
337.
143 Thyssen Canada Ltd v Mariana Maritime SA [2005] EWHC 219 (Comm); [2005] 1 Lloyds
Rep 640.
144 Elektrim SA v Vivendi Universal SA [2007] EWHC 11 (Comm); [2007] 1 Lloyds Rep 693.
145 Ibid.
146 Deutsche Schachtbau-und Tiefbohrgesellschaft mbH v Shell International Petroleum Co
Ltd [1990] 1 AC 295 applied in Profilati Italia SRL v Paine Webber Inc [2001] 1 Lloyds Rep
715; Cuflet Chartering v Carousel Shipping Co Ltd, The Marie H [2001] 1 Lloyds Rep 707. See
also IPCO (Nigeria) v Nigerian National Petroleum Corp [2005] EWHC 726; [2005] 2 Lloyds
Rep 326, paragraph 13 in the context of enforcement proceedings.
147 C-126/97 Eco Swiss China Time Ltd v Benetton International BV [1999] 2 All ER(Comm) 44.
However, the application of this case to powers of review under the 1996 Act is not easy to
predict, see Mustill & Boyd, 2001 Companion, pp. 81-82.
148 [1999] 2 All ER (Comm) 44.
149 Profilati Italia SRL v Paine Webber Inc [2001] 1 Lloyds Rep 715, approved in Elektrim
SA v Vivendi Universal SA [2007] EWHC 11 (Comm); [2007] 1 Lloyds Rep 693.
150 Cuflet Chartering v Carousel Shipping Co Ltd, The Marie H [2001] 1 Lloyds Rep
707, Elektrim SA v Vivendi Universal SA [2007] EWHC 11 (Comm); [2007] 1 Lloyds Rep 693.
151 Thyssen Canada Limited v Mariana Maritime SA, The Mariana [2005] EWHC 219 (Comm);
[2005] 1 Lloyds Rep 640, DDT Trucks of North America Ltd v DDT Holdings Ltd [2007] EWHC
1542; [2007] 2 Lloyds Rep 213.
152 [2001] 1 Lloyds Rep 715, see also Elektrim SA v Vivendi Universal SA [2007] EWHC 11
(Comm); [2007] 1 Lloyds Rep 693 and Brown & Sons Ltd v Crosby Homes (North West)
Limited [2008] EWHC 817 (TCC); [2008] BLR 366.
153 Cuflet Chartering v Carousel Shipping Co Ltd, The Marie H [2001] 1 Lloyds Rep 707.
154 Jugoimport-SPDR Holding Co Ltd v Westacre Investments Inc [1999] 2 Lloyds Rep 65 at
74; SOINCO Saci v Novokuznetsk Aluminium Plant [1998] 2 Lloyds Rep 337.
155 Soleimany v Soleimany [1998] 3 WLR 811 at 821.
156 Ibid.
157 Ibid., at 824.

158 Ibid.
159 R v V [2008] EWHC 1531 (Comm); [2009] 1 Lloyds Rep 97 applying Jugoimport-SPDR
Holding Co Ltd v Westacre Investments Inc [1999] 2 Lloyds Rep 65 (an enforcement case); see
also Omnium de Traitement et de Valorisation SA vHilmarton Ltd [1999] 2 Lloyds Rep 222.
160 R v V [2008] EWHC 1531 (Comm); [2009] 1 Lloyds Rep 97, Soleimany v Soleimany [1998]
3 WLR 811 at 824; Jugoimport-SPDR Holding Co Ltd v Westacre Investments Inc [1999] 2
Lloyds Rep 65 at 82.
161 Gannet Shipping Ltd v Eastrade Commodities Inc [2002] 1 Lloyds Rep
713, Gbangbola v Smith & Sheriff Ltd [1998] 3 All ER 730 (in relation to section 68(2)(f) but the
same principle would apply to 68(2)(h)).
162 Paragraph 250 of the DAC Report: see comments of Mustill & Boyd, 2001 Companion, p.
337 regarding uncertainty as to whether a formal defect will cause substantial injustice.
163 CNH Global NV v PGN Logistics Ltd [2009] EWHC B8 (Comm), paragraphs 49-52.
164 See, e.g., Mutual Shipping Corporation v Bayshore Shipping Co, The Montan [1985] 1
Lloyds Rep 189; Atlantic Lines & Navigation Co v Italmare SpA, The Apollon [1985] 1 Lloyds
Rep 597; Food Corporation v Marastro Cia Naviera SA, The Trade Fortitude [1985] 2 Lloyds
Rep 583; Danae Air Transport ASA v Air Canada [1999] 2 Lloyds Rep 547.
165 Gbangbola v Smith & Sheriff Ltd [1998] 3 All ER 730 (in relation to section 68(2)(f), but the
same principle would apply to 62(f)(i)).
166 CNH Global NV v PGN Logistics Ltd [2009] EWHC B8 (Comm).
167 Awards and rulings are dealt with interchangeably. The issue of what is an award is dealt with
in Chapter 19 on awards. In Ranko Group v Antarctic Maritime SA, The Robin [1998] LMLN 492,
Toulson J accepted that there was no significance in the different terminology of rulings and
awards in sections 30 and 67 of the 1996 Act.
168 See Chapter 19 for further discussion on the effect of an award.
169 [2002] 1 Lloyds Rep 128.
170 AOOT Kalmneft v Glencore International AG [2002] 1 Lloyds Rep 128.
171 See Chapter 11 for further discussion on what taking part in the proceedings means.
172 E.g. Law Debenture Trust Corporation plc v Elektrim Finance BV [2005] EWHC 1412 (Ch);
[2005] 2 Lloyds Rep 755.
173 See Chapter 8 on injunctions.
174 Paragraph 295 of the DAC Report.
175 Mustill & Boyd (2nd edn) p. 554.
176 Section 1(c) of the 1996 Act.

177 E.g. Vale do Rio doce Navegacao SA v Shanghai Bao Steel Ocean Shipping Co Ltd [2000] 2
Lloyds Rep 1 (approved in Law Debenture Trust Corporation plc v Elektrim Finance BV [2005]
EWHC 1412 (Ch); [2005] 2 Lloyds Rep 755 and ABB Lummus Global Ltd v Keppel Fels
Ltd [1999] 2 Lloyds Rep 24 (declarations as to validity of arbitration agreement refused).
178 Section 54(2) of the 1996 Act. It would appear to be open to the tribunal to decide under
section 54(1) on a date of the award which precluded any form of challenge (e.g., by pre-dating
it). It is difficult to see how the parties could challenge this under the Act, unless possibly on
grounds that the tribunal failed to act fairly between the parties in accordance with their duty
under section 33. In such circumstances the court might consider it appropriate to extend the time
limit.
179 Section 80(5) of the 1996 Act, CPR, Part 2, paragrah 2.8.
180 Section 55(2) of the 1996 Act.
181 Section 56(1) of the 1996 Act. See Chapter 20 on fees.
182 To disclose the award to only one of the parties would be inconsistent with section 55(2) of
the 1996 Act.
183 International Petroleum Refining & Supply SDAD Ltd v Elpis Finance SA, The Faith [1993] 2
Lloyds Rep 408 at 411.
184 Section 72 of the 1996 Act. The statutory time limit would also not apply to applications
pursuant to oral arbitration agreements or, very exceptionally, pursuant to the courts residual
inherent jurisdiction to set aside an award for want of jurisdiction.
185 See Mustill & Boyd (2nd edn) p. 569. Staughton LJ in Delta Civil Engineering v London
Docklands Development Corporations (1997) 81 BLR 19 also remarked on the potential
bootstraps effect of a decision being given legal effect in such circumstances.
186 RC Pillar & Sons v Edwards, 11 January 2001 (HHJ Anthony Thornton QC).
187 Blackdale Ltd v McLean Homes South East Ltd, 2 November 2001 (HHJ Humphrey Lloyd
QC).
188 2 November 2001, followed in Al Hadha Trading Company v Tradigrain SA [2002] 2 Lloyds
Rep 512.
189 Initially, the DAC contemplated section 79 as the source of the power to extend time, see
paragraph 294 of their report. They then recognised that this was not possible since the 28-day
time limit applies mandatorily whereas section 79 is subject to the parties agreement, see
paragraph 382. The power to extend was ultimately recognised in section 80(5), see paragraph 41
of the DAC Supplementary Report on the Arbitration Act.
190 Leibinger v Stryker Trauma GmbH [2006] EWHC 690 (Comm).
191 CPR, Part 62, rule 62.9(2); Practice Direction on Arbitrations, paragraph 11.1(2).
192 CPR, Part 62, rule 62.9(3).

193 CPR, Part 62, rule 62.9(3)(b).

194 Arbitration Practice Direction supplementing CPR Part 62, paragraph 10.2.
195 AOOT Kalmneft v Glencore International AG [2002] 1 Lloyds Rep 128.
196 Paragraph O9.2.
197 DDT Trucks of North America Ltd v DDT Holdings Ltd [2007] EWHC 1542; [2007] 2
Lloyds Rep 213, para 35.
198 These considerations are drawn from AOOT Kalmneft v Glencore International AG [2002] 1
Lloyds Rep 128, as applied by the Court of Appeal in Nagusina Naviera v Allied Maritime
Inc [2002] EWCA Civ 1147; [2003] 2 CLC 1, also applied in Thyssen Canada Limited v Mariana
Maritime SA,The Mariana [2005] EWHC 219 (Comm); [2005] 1 Lloyds Rep 640, Peoples
Insurance Company of China, Hebei Branch (2) China National Feeding Stuff Import/Export
Corporationv Vysanthi Shipping Co Ltd [2003] EWHC 1655 (Comm); [2003] 2 Lloyds Rep 617.
199 [2002] EWCA Civ 1147; [2003] 2 CLC 1, see also Brown & Sons Ltd v Crosby Homes
(North West) Limited [2008] EWCH 817 (TCC); [2008] BLR 366.
200 Profilati Italia SRL v Paine Webber Inc [2001] 1 Lloyds Rep 715 (application to extend time
not decided).
201 DDT Trucks of North America Ltd v DDT Holdings Ltd [2007] EWHC 1542; [2007] 2
Lloyds Rep 213, Dubai Islamic Bank PJSC v Paymentech Merchant Services Inc [2001] 1
Lloyds Rep 65.
202 Brown & Sons Ltd v Crosby Homes (North West) Limited [2008] EWCH 817 (TCC); [2008]
BLR 366.
203 Ibid., at paragraph 42.
204 Section 73(1)(c) would also cover some complaints under section 68, in particular section
68(2)(c).
205 Section 72 of the 1996 Act.
206 CPR Part 3.4.
207 Secretary of State for the Environment v Euston Centre [1994] 3 WLR 1081, applied
in Huyton SA v Jakil SpA [1999] 2 Lloyds Rep 83 (decided pre-CPR) and also Nagusina
Naviera v Allied Maritime Inc [2002] EWCA Civ 1147; [2003] 2 CLC 1 (decided under the CPR).
208 [1999] 2 Lloyds Rep 83.
209 Section 70(7) of the 1996 Act.
210 Sections 68(3) and 69(7) of the 1996 Act.
211 Section 1(a) of the 1996 Act.
212 [2008] EWHC 2904; [2009] 1 Lloyds Rep 273.

213 Al Hadha Trading Company v Tradigrain SA [2002] 2 Lloyds Rep 512 at paragraph
57, Hagop Ardahalian v Unifert International SA, The Elissar [1984] 2 Lloyds Rep.
214 Section 71(3) of the 1996 Act.
215 Aiden Shipping Co Ltd v Interbulk Ltd, The Vimeira (No 2) [1985] 2 Lloyds Rep
377; Glencore International AG v Beogradska Plovidba, The Avala [1996] 2 Lloyds Rep 311.
216 Glencore International AG v Beogradska Plovidba, The Avala [1996] 2 Lloyds Rep 311.
217 Huyton SA v Jakil SpA [1999] 2 Lloyds Rep 83 at 89 (decided under the 1950 Act but
comments on changes under the 1996 Act).
218 See Brooke & Curtis in [1994] 60 Arbitration 268 and Mustill & Boyd (2nd edn) p. 566, 2001
Companion, p. 231; Cf. IPCO (Nigeria) Ltd v Nigerian National Petroleum Corp (No 2) [2008]
EWCA Civ 1157; [2009] 1 Lloyds Rep 89.
219 Sections 68(3) and 69(7) of the 1996 Act.
220 Mustill & Boyd (2nd edn) p. 618.
221 Ibid., p. 565.
222 Henry Sotheran v Norwich Union Life Assurance Society [1992] ADRLJ 245; Pacol
Ltd v Joint Stock Co Rossakhar [2000] 1 Lloyds Rep 109; Ascot Commodities NV v Olam
International Ltd, The Agra [2002] 2 Lloyds Rep 277 (award set aside but order allowed for
rehearing before the original tribunal).
223 [2000] 1 Lloyds Rep 109.
224 [2008] EWHC 2904; [2009] 1 Lloyds Rep 273.
225 The court does not appear to have power to make a declaration that the award be of no effect.
226 Hussmann (Europe) Limited v Pharaon [2003] EWCA Civ 266; [2003] 1 All ER (Comm)
879. If the jurisdictional challenge involves a finding that the tribunal was not properly constituted
(e.g., through lack of qualification) then this may preclude the tribunal having continuing
jurisdiction. A concurrent application for removal or revocation of authority would be the safest
means to ensure that the tribunal would no longer be seized.
227 Section 67(1)(b) of the 1996 Act.
228 See section 72 of the 1996 Act and section 4 above on challenge for want of jurisdiction.
229 Sections 67(4), 68(4), 69(6) and 69(8) of the 1996 Act, Henry Boot Construction
Ltd v Malmaison Hotel (Manchester) Ltd [2000] 2 Lloyds Rep 625 and Athletic Union of
Constantinople v National Basketball Association [2002] EWCA Civ 830; [2002] 1 WLR 2863.
230 Henry Boot Construction Ltd v Malmaison Hotel (Manchester) Ltd [2000] 2 Lloyds Rep
625.
231 If there is an oral hearing the application should be made at that stage, otherwise as soon as
possible since an appellants notice must ordinarily be served not later than 21 days after the date

the order of the court below was sealed or perfected, CPR, Part 52.4. For a case where the matter
was referred to another judge see Reardon Smith Line Ltd v Sanko Steamship Co Ltd, The Sanko
Honour [1985] 1 Lloyds Rep 418.
232 Section 70(8).
233 Aden Refinery Co Ltd v Ugland Management Co Ltd [1986] 2 Lloyds Rep 336 at 344; North
Range Shipping Ltd v Seatrans Shipping Corporation [2002] EWCA Civ 405; [2002] 2 Lloyds
Rep 1.
234 North Range Shipping Ltd v Seatrans Shipping Corporation [2002] EWCA Civ 405; [2002] 2
Lloyds Rep 1, Astra Zeneca Insurance Co Ltd v CGU International Insurance plc [2006] EWCA
Civ 1340; [2007] 1 Lloyds Rep 142: these decisions would also apply to sections 67 and 68,
see ASM Shipping Ltd v TTMI Ltd [2006] EWCA Civ 1341; [2007] 1 Lloyds Rep 136.
235 In ASM Shipping Ltd v TTMI Ltd [2006] EWCA Civ 1341; [2007] 1 Lloyds Rep 136 the
Court of Appeal made clear that the residual jurisdiction would not arise merely if Convention
rights were invoked.
236 [2002] EWCA Civ 405; [2002] 2 Lloyds Rep 1.
237 As amplified in Antaios Compania Naviera SA v Salen Rederierna AB, The Antaios [1985]
AC 191.
238 Antaios Compania Naviera SA v Salen Rederierna AB, The Antaios [1985] 1 AC 191 at
205; CMA CGM SA v Beteiligungs-Kommanditgesellschaft MS, The Northern Pioneer [2002]
EWCA Civ 1878; [2003] 1 Lloyds Rep 212.
239 Section 69(8) of the 1996 Act. Permission is not available from the Court of Appeal since the
definition of court in section 105(1) includes only the High Court or a county court and the Court
of Appeal does not have jurisdiction to grant permission to appeal under section 69(8) of the 1996
Act; Henry Boot Construction Ltd v Malmaison Hotel (Manchester) Ltd [2000] 2 Lloyds Rep
625.
240 Pioneer Shipping Ltd v BTP Tioxide Ltd, The Nema [1982] AC 724 at 740.
241 Pedra Shipping v Petroship SA, The Times, 7 May 1985.
242 Maritime Transport Overseas GmbH v Unitramp, The Antaios [1981] 2 Lloyds Rep 284 at
300.
243 Inco Europe Ltd v First Choice Distribution [2000] 1 Lloyds Rep 467. If the first instance
judge grants permission to appeal the Access to Justice Act 1999 would probably allow the Court
of Appeal to impose an additional filter but it would give weight to the first instance judges
views; see the discussion in Henry Boot Construction Ltd v Malmaison Hotel (Manchester)
Ltd [2000] 2 Lloyds Rep 625 relating to appeals under section 69.
244 Pioneer Shipping Ltd v BTP Tioxide Ltd, The Nema [1982] AC 724 at 752.
245 See section 6 above on the court of first instances powers on an appeal at first instance from
the arbitration award.

246 Aden Refinery Co Ltd v Ugland Management Co Ltd [1986] 2 Lloyds Rep 336 at
341; Pioneer Shipping Ltd v BTP Tioxide Ltd, The Nema [1982] AC 724 at 752-753, CMA CGM
SA v Beteiligungs-Kommanditgesellschaft MS, The Northern Pioneer [2002] EWCA Civ 1878;
[2003] 1 Lloyds Rep 212.
247 CPR, Part 62, rule 62.3(1); Practice Direction 62, paragraph 2.1, Commercial Court Guide
O4.1.
248 Commercial Court Guide paragraph O8.10 (note that the judge may summarily dismiss the
serious irregularity application if he considers it has no real prospect of success, paragraph O8.8).
249 Alphapoint Shipping Ltd v Rotem Amfert Negev Ltd, The Agios Dimitros [2004] EWHC 2232
(Comm); [2005] 1 Lloyds Rep 23.
250 Icon Navigation Corporation v Sinochem International Petroleum (Bahamas) Co Ltd [2002]
EWHC 2812; LMLN [2003] 607 2(2) where submissions on the section 68 application were
relevant to the decision on the section 69 application.
251 CPR, Part 62.2(1)(d) and Practice Direction 62, paragraph 8.1.
252 Sections 67(1), 68(1) and 69(1) of the 1996 Act.
253 CPR, Part 62, rule 62.6(3).
254 Ibid., rule 62.6(2).
255 Practice Direction 62, paragraph 4.1.
256 Ibid., paragraph 6.1.
257 Section 70(6) of the 1996 Act, see CPR, Part 25 and Chapter 17 on security for costs.
258 Section 70(7) of the 1996 Act.
259 For the meaning of domiciled within the jurisdiction see the Judgments Regulation and the
Civil Jurisdiction and Judgments Order 2001 Schedule 1, paragraphs 9 to 12.
260 Article 1 of Council Regulation (EC) No 44/2001 and also the Brussels and Lugano
Conventions given effect by the Civil Jurisdiction and Judgments Act 1982.
261 CPR, Part 62, rule 62.5(1).
262 CPR, Part 6, rule 6.37(3) would probably apply to an arbitration claim form (see Practice
Direction 6B, paragraph 3.1(20)).
263 CPR, Part 62.5 and 62.16(2).
264 Mayer Newman & Co Ltd v A1Ferro Commodities Corporation SA, The John C
Helmsing [1990] 2 Lloyds Rep 290 and 293 and 296, see also CPR 6.37(1)(b).
265 CPR, Part 62, rule 62.5, Dept of Civil Aviation of the Kyrgyz Republic v Finrep GmbH [2006]
EWHC 1722 (Comm); [2006] 2 CLC 402.

266 CPR 6.37(1)(b). Although evidence of the merits is not expressly required under CPR Part
62.5, the court would be unlikely to grant permission if the application had no real prospect of
success. The court is unlikely to expect substantial evidence on the merits: in Dept of Civil
Aviation of the Kyrgyz Republic v Finrep GmbH [2006] EWHC 1722 (Comm); [2006] 2 CLC 402
Tomlinson J indicated that permission to serve out will be axiomatic, particularly in cases where
applications can be made as of right.
267 Dept of Civil Aviation of the Kyrgyz Republic v Finrep GmbH [2006] EWHC 1722 (Comm);
[2006] 2 CLC 402.
268 CPR, 62.4(2), see Nagusina Naviera v Allied Maritime Inc [2002] EWCA Civ 1147; [2003] 2
CLC 1.
269 Practice Direction 62, paragraph 3.2, CPR, Part 62.4(2), for the requirements of a certificate
of service; see CPR, Part 6, rule 6.29.
270 Practice Direction 62, paragraph 3.1 (The courts power to order alternative methods of
service would apply also to UK parties).
271 [2006] EWHC 1722 (Comm); [2006] 2 CLC 402.

Chapter 23

Enforcement of Awards
Enforcement of Awards

1. Introduction
2. Summary enforcement: section 66
3. Action on the award
4. Defences to enforcement
5. The order enforcing the award
6. Security for enforcement
7. Foreign awards

1. INTRODUCTION
An award made in a London maritime arbitration will usually take the form of an order to pay
damages or a sum of money, together with costs and interest, to the successful party. This chapter
summarises the available methods of enforcing that order should the unsuccessful party fail to
comply with it and will focus primarily upon enforcement of an award in England. As a matter of
English law an arbitration award, unlike a court judgment, does not of itself entitle the successful
party to levy execution against his opponents assets. To do so, the award must first be converted
to a judgment. There are two methods of effecting that conversion: first, pursuant to the summary
procedure contained in section 66 of the 1996 Act, and second (but much less commonly) at

common law by means of an action on the award. These options are discussed at sections 2 and
3 of this chapter.
The enforcement of awards abroad depends, ultimately, on the effect of local law. Where the
country in which enforcement is sought is party to the New York Convention on the Recognition
and Enforcement of Foreign Arbitration Awards, then the mechanism for enforcement will be
broadly similar to that for enforcement of foreign awards in England and Wales pursuant to Part
III of the 1996 Act (considered in outline in section 7 below). However, the precise method of
enforcement, and the scope of any defences to enforcement, will depend upon the construction
which local law has placed upon the Convention, and it will usually be necessary to obtain advice
from local lawyers as to the prospects of effecting enforcement.
Of course, a claimant in arbitration will usually be well advised to obtain security for its claims
before any award is granted. After the award has been granted, obtaining security becomes more
difficult, largely because the unsuccessful party may take steps to protect or remove its assets.
Security for claims is discussed generally in Chapter 18; the particular issues which arise in
relation to obtaining security post-award are discussed at section 6 below.

2. SUMMARY ENFORCEMENT: SECTION 66

The most common method of enforcing an award is by making an application to the court for
permission to enforce the award1 as a judgment under section 66 of the 1996 Act. Section 66
provides:

(1) An award made by the tribunal pursuant to an arbitration agreement may, by leave of the
court, be enforced in the same manner as a judgment or order of the court to the same effect.
(2) Where leave is so given, judgment may be entered in terms of the award.
(3) Leave to enforce an award shall not be given where, or to the extent that, the person
against whom it is sought to be enforced shows that the tribunal lacked substantive
jurisdiction to make the award.
The right to raise such an objection may have been lost (see section 73).
(4) Nothing in this section affects the recognition or enforcement of an award under any other
enactment or rule of law, in particular under Part II of the Arbitration Act 1950 (enforcement
of awards under Geneva Convention) or the provisions of Part III of this Act relating to the
recognition and enforcement of awards under the New York Convention or by an action on
the award.

Section 66 largely restates the law on enforcement as it existed prior to the 1996 Act.2

Scope of application
Section 66 is a mandatory provision which applies even if the seat of the arbitration is outside
England and Wales.3 Therefore, foreign arbitration awards can be enforced pursuant to section 66.
However, foreign arbitration awards may also attract the provisions of the Geneva Convention
(given effect by the Arbitration Act 1950, which remains in force for this purpose4) or the New
York Convention (which is given effect by Part III of the 1996 Act). In relation to such foreign
awards, section 66(4) provides that nothing in section 66 is to affect the recognition or
enforcement of awards pursuant to the Geneva or New York Conventions. It is not entirely clear

whether section 66(4) is intended to exclude the possibility of enforcing such awards pursuant to
the alternative regime set out in section 66. The better view is probably that a Convention award
may be enforced by either route.5 The provisions of English law giving effect to the New York
and Geneva Conventions are considered in outline in section 7 below.

The remedy under section 66

Section 66 reproduces, in almost identical terms, section 26 of the Arbitration Act 1950 and it is
likely that older cases considering section 26 will remain of relevance under section 66.
Enforcement under section 66 is sometimes referred to as summary enforcement:6 it is a quicker
procedure than the alternative action on the award. In particular (and as discussed at section 2
below), the application proceeds upon the basis of documentary evidence only, and no witnesses
are called to give evidence at the hearing of the application. Accordingly, the section 66 procedure
is quicker and cheaper than an action on the award and, for that reason, tends to be favoured by
parties seeking to enforce. Indeed, as the application is made without notice, it is normally
summary, and almost administrative in nature.
Sections 66(1) and (2) envisage two potential remedies: first, an order giving leave to enforce the
award as if it were a judgment (section 66(1)) and second a judgment in the terms of the award
(section 66(2)). Usually the first of these will be sufficient to enforce the award; however, there
are circumstances (e.g., where enforcement abroad is envisaged, or where the judgment debtor
may become insolvent) where it may be advisable to obtain a judgment.
The remedies under sections 66(1) and 66(2) are distinct. Section 66(1) permits an applicant to use
the courts mechanisms to enforce an award, whereas section 66(2) allows a party to obtain a
judgment in the terms of the award.
In ASM Shipping Ltd v TTMI Ltd of England 7 a shipowner (X) applied for an order debarring the
respondent charterer (Y) from resisting an application under section 24 of the Arbitration Act
1996 to remove the arbitrators in a reference pending between X and Y on grounds of contempt of
court in failing to comply with an order for enforcement of an award for freight in Xs favour. The
application was refused. First, the court considered that Y was not in breach of an order or
judgment of the court. The order giving permission to enforce the freight award was made under
section 66(1), and as such it was not a judgment against Y nor was it an order requiring Y to
comply with the order made by the arbitral tribunal. No contempt was established. In any event
the order requested would have been a disproportionate sanction. Had the order, however, been
made pursuant to section 66(2), there would have been a breach of order and thus (possibly) a
contempt of court.

Limits to the section 66 procedure

As enforcement under section 66 proceeds on a summary basis, it is unsuitable for cases where the
judgment debtor resists enforcement on grounds which raise factual issues requiring full
investigation. In such a case, the court will order the application to proceed to a full trial, with
disclosure of documents and witness evidence. Where, however, the defences raised by the
judgment debtor involve a pure point of law, it would be absurd for the court, having heard all
the arguments, to decline to adjudicate and insist upon a full trial, where the same arguments

would be duplicated at considerable extra expense.8 However, a distinction must be drawn

between pure points of law and those which are of mixed fact and law. In Kohn v Wagschal,9 Mr
Justice Morison held that the court could deal with a question of law affecting the award in
proceedings for summary enforcement of the award under section 66 of the 1996 Act if the point
did not involve issues of fact which could only be resolved by a trial.

Procedure for section 66 application

The procedure for an application under section 66 is set out in CPR Part 62, rules 62.17-62.21.
The application is made by issuing an arbitration claim form, which must be supported by an
affidavit or witness statement which exhibits the arbitration agreement and the award. The
statement or affidavit must also state the name and usual or last-known place of residence or
business (or, in the case of a company, the principal or registered address) of the party seeking to
enforce (called the judgment creditor) and the party ordered to pay (called the judgment
debtor) and state either that the award has not been complied with or the extent to which it has
not been complied with at the date of the application. If a judgment creditor seeks to enforce an
award of interest arising after the award (as often occurs in maritime arbitration awards), then a
certificate giving particulars of the interest awarded must also be filed.10 The arbitration claim
form and witness statement, together with the certificate of interest (if any) and two copies of a
draft enforcement order, are then lodged with the court11 to be considered by a judge. On
receiving the papers, the court will either make the order sought, or may decide that it wishes to
hear submissions from the judgment debtor,12 in which case it will direct that the application
notice and supporting statement should be served on the judgment debtor. It will also give
directions for the service by the judgment debtor of any evidence or argument upon which it seeks
to rely.
After the order is made, it must be served on the judgment debtor by delivering a copy personally
or by sending a copy to the judgment debtors usual or last known place of residence or business
or, in the case of a company, its registered or principal address. The judgment debtor may then,
within 14 days of service, apply to set aside the order. The order itself must state the judgment
debtors right of challenge. Grounds upon which enforcement may be resisted are considered in
section 4 below.
If the judgment debtor does not take steps to set the enforcement order aside and does not comply
with it, the judgment creditor can then proceed to invoke the methods of enforcement allowed by
English law (or, if the judgment is to be enforced against assets abroad, by local law), usually
involving execution against assets.
If the award to be enforced is an agreed award,13 then both the claim form and the order must state
that this is the case. This reflects the view of the DAC14 that it is desirable to place third parties
(including in particular liability insurers) on notice that the award was the result of a settlement.

3. ACTION ON THE AWARD

As indicated above, there may be cases in which the summary procedure under section 66 is
unsuitable for an enforcement of a particular award. There is an alternative remedy, at common

law, known as the action on the award. This remedy is preserved by section 81, which provides
for the survival of common law rights consistent with the 1996 Act.

Basis of the action

An arbitration agreement incorporates an implied promise by both parties to perform a valid
award. The effect of such an award is to supplant the original cause of action and replace it with
an implied obligation to honour the award:
In so far as it awards that one party shall pay, or do something for the benefit of the other, it gives
rise to an independent contractual obligation to perform the award.15
If the award is not honoured, then the judgment creditor can sue the judgment debtor for breach of
this implied obligation. If successful, such an action will result in a court judgment which can then
be enforced by way of execution against the judgment debtors assets. Although the remedy is
well established in English law, its precise nature and theoretical basis is not entirely free from
doubt. It is not clear from the authorities whether the cause of action is one in debt16 or for
damages or for liquidated damages.17 These distinctions are usually of no practical importance,
but may become significant where the judgment debtor asserts that it has counterclaims which it
can set off against the action on the award.18 Nor is it entirely clear whether it is necessary, when
asserting the cause of action, to plead and prove the arbitration agreement itself. The better view is
probably that it is necessary to plead and prove both the agreement and the award and, in addition,
the validity of the reference (i.e., that the arbitrator was duly appointed and that the dispute fell
within the terms of the agreement).19 However, an award which is valid on its face will
provideprima facie proof of the validity of the reference, and the burden will then shift to the
judgment debtor to prove otherwise.20
In addition to giving judgment for a sum of money, the court may in theory grant other
remedies,21 such as an injunction to prevent any threatened breach of the implied obligation to
honour the award,22 or a declaration of the validity or effect of an award.23 However, a simple
judgment for a sum of money will usually prove to be the quickest and simplest method of
enforcing the award.

Procedure
An action on the award is probably excluded from the scope of Part III of CPR Part 6224 and it is
therefore not necessary to use the prescribed arbitration claim forms. Instead, a claimant is entitled
to proceed by issuing an ordinary claim form in the Commercial Court pursuant to Parts 7 or 8 of
the CPR and the action will proceed as an ordinary commercial action. The steps in the action will
usually be: completion of statements of case, disclosure of documents, exchange of witness
statements and then trial. As is clear from the foregoing, the procedure is much lengthier and more
cumbersome than the summary section 66 procedure. If security for the claims has not already
been obtained, it may well be necessary for the judgment creditor to protect its position by
obtaining a freezing order before trial.

4. DEFENCES TO ENFORCEMENT

Whether enforcement proceedings are brought under section 66 or by an action on the award, the
judgment debtor may seek to resist enforcement. The grounds upon which enforcement of New
York Convention awards may be resisted are set out in section 103(2) of the Act, discussed in
outline below. In addition, the common law has developed principles governing the situations in
which the court may decline to recognise or enforce non-Convention awards: these are also
discussed below.

New York Convention Awards

Section 103(2) and (3) of the 1996 Act sets out an exhaustive list of grounds upon which the court
may decline to recognise or enforce a New York Convention award. Even if any of these grounds
are established, the court has a discretion entitling it to decide whether or not to enforce the award.
Many of the grounds set out in section 103 (e.g., refusal to enforce where the award is made
without jurisdiction or where enforcement would be contrary to public policy) correspond with the
principles of common law. In brief outline, the grounds set out in section 103(2) are as follows:
(a) that a party to the arbitration agreement was (under the law applicable to him) under some
incapacity
This would cover, for example, a situation where a company no longer existed and was therefore
incapable of conducting an arbitration, or where an individual party to the arbitration was unable
to attend due to illness (Kanoria vGuinness 25)
(b) that the arbitration agreement was not valid under the law to which the parties subjected it
or, failing any indication thereon, under the law of the country where the award was made
The effect of such a finding would be that the tribunal lacked jurisdiction to make the award. In
most cases, an arbitration agreement will be (expressly or impliedly) subjected to the law of the
seat of the arbitration.
(c) that he was not given proper notice of the appointment of the arbitrator or of the arbitration
proceedings or was otherwise unable to present his case
This overlaps to some extent with section 33 of the 1996 Act, which mandatorily requires the
tribunal to give the parties a reasonable opportunity to put their case. In the case of an English
arbitration, breach of this requirement of section 33 would entitle a respondent to apply have an
award set aside.26
In Minmetals Germany GmbH v Ferco Steel Ltd,27 the same tribunal was appointed, under the
auspices of the China International Economic and Trade Arbitration Commission, to determine
disputes arising under head sale and sub-sale contracts. In the sub-sale arbitration, the claimant
buyers obtained an award of damages. The tribunal then made a corresponding award in the head
sale contract arbitration, but without first asking the head seller to make submissions. The head
seller applied to the Chinese court, which remitted the award to the tribunal for further
consideration. The head seller erroneously believed that the tribunal could not rely, in the head
arbitration, upon the award made in the sub-sale arbitration, and so failed to make any
submissions. The tribunal made a second award granting damages against the head seller. The
head seller applied to the Chinese court, which rejected its application, holding that the head seller

had been given an opportunity to make submissions on the sub-sale award. In enforcement
proceedings in England, the head seller sought to rely upon section 103(2)(c). The court held that
the award would be enforced. Section 103(2)(c) envisaged an inability to present a case caused by
matters beyond a partys control.
Section 103(2)(c) has also been interpreted to cover situations where a party has not been
informed of the case he is required to meet. In Kanoria v Guinness,28 on review of the transcript of
submissions in arbitration, the Court of Appeal found that no case of mala fides had been
advanced in the written claim against Mr Guinness and it was only raised at the oral hearing.
Therefore, Mr Guinness was not given proper notice of an important part of the case against him
and the award would not be recognised or enforced. The Court did not need to go on to consider
whether Mr Guinness had also been under an incapacity due to illness in the arbitration.
Breach of natural justice by the panel may also result in a party being unable to present its case.
In Irvani v Irvani,29 the tribunal was found to have relied upon information not available to one
side in making their award, and had made findings which were flawed, unsatisfactory and
unreasoned.
(d) that the award deals with a difference not contemplated by or not falling within the terms of
the submission to arbitration or contains decisions on matters beyond the scope of the submission
to arbitration (but see subsection (4))
Again, this raises a defence based upon lack of jurisdiction. Subsection (4) permits the award to be
enforced to the extent that it contains decisions on matters submitted to arbitration which can be
separated from those on matters not so submitted. Accordingly, where parts of the award fall
within the tribunals jurisdiction and these can be severed, the court will enforce those parts.
Section 103(2)(d) is concerned with substantive jurisdiction, not with procedural
irregularities.30 Any defences based upon procedural complaints must be advanced under section
103(2)(c) or (f) or under the general public policy head (considered below).
(e) that the composition of the arbitral tribunal or the arbitral procedure was not in accordance
with the agreement of the parties or, failing such agreement, with the law of the country in which
the arbitration took place
Breaches in agreed procedure can be disregarded if trivial.31 Furthermore, if a respondent has
failed to object at the time to the breach, he may be held to have waived his right to object.32
(f) that the award has not yet become binding on the parties, or has been set aside or suspended
by a competent authority of the country in which, or under the law of which it was made
If the award is not yet final, then the court will decline to enforce it. If an appeal against the award
is pending, the English court may stay or adjourn the enforcement proceedings until the outcome
of the appeal is known.33 However, section 103(2)(f) is not triggered automatically by any
challenge to the award in a court of the country of origin.34 In addition to the grounds set out in
section 103(2), section 103(3) provides:
Recognition or enforcement of the award may also be refused if the award is in respect of a
matter which is not capable of settlement by arbitration, or if it would be contrary to public policy
to recognise or enforce the award.

It is recognised that some matters (for example, issues of criminality) are incapable of being
determined by arbitration. This exception is of little significance in maritime arbitration. The
public policy defence to enforcement is considered further below. However, it must be
remembered that the public policy referred to is English public policy, not the public policy of the
country where the award was made.35 Further, public policy should be approached with extreme
caution, and cannot be used as an open-ended escape route for refusing enforcement.36
State immunity
In Svenska Petroleum v Government of Lithuania,37 the Court of Appeal rejected state immunity
as a defence to enforcement of an arbitration award. It considered that an application under section
101(2) Arbitration Act 1996 for leave to enforce an award as a judgment fell within section 9(1) of
the State Immunity Act 1978 and removed state immunity. The unrestricted wording of section 9
meant that applications for leave to enforce arbitration awards did not attract sovereign immunity,
regardless of whether the award was foreign or domestic. Further, on the facts of the case, the
foreign state had agreed in writing to submit the dispute to arbitration, and therefore would not
have been entitled to section 9 protection in any event.

Non-Convention awards
The grounds upon which enforcement of a non-Convention award may be resisted are relatively
limited, though they have never been exhaustively stated. Early drafts of the Arbitration Bill
included a list of grounds upon which enforcement might be resisted, but this was omitted
following a House of Lords amendment.38 Instead, the 1996 Act leaves open, in section 81, the
possibility of resisting enforcement on the basis of any rule of law consistent with the Act,
including in particular public policy grounds. In practice, the main grounds upon which
enforcement is resisted are: lack of jurisdiction, defects in substance and/or form, limitation and
public policy. It is no defence to enforcement that the award in question is being appealed or
otherwise challenged, although this is one factor which the court is entitled to take into
consideration when exercising its discretion to enforce the award.
Jurisdiction
Section 66(3) provides that permission to enforce the award shall not be given where the
judgment debtor shows that it was made without jurisdiction. The burden of proving lack of
jurisdiction lies upon the judgment debtor and the court may decide that a full trial (involving
witnesses or even expert evidence) is required to determine it. However, if the judgment debtor
has taken part in the arbitration and has not previously raised any objection to the tribunals
jurisdiction, then the right to object will probably have been lost.39
Defects in form or substance
The court will refuse to enforce an award which has not decided all the issues between the parties
and is not, therefore, final. This may occur, for example, where no determination of a crucial issue
such as quantum has been made. However, in practice, it will usually be possible to remedy such
defects pursuant to sections 57 or 68 of the 1996 Act (which make provision for undetermined
claims or undecided issues to be referred or remitted to the tribunal40).
Limitation

Section 6 of the Limitation Act 1980 stipulates a six-year time limit on actions to enforce awards.
Regardless of whether proceedings are brought under section 66 or by action on the award, time
runs from the date of the breach of the implied obligation to comply with the award, which arises
when the award is made:
In Agromet Motoimport v Maulden Engineering Co (Beds) Ltd,41 judgment debtors argued that a
summary enforcement application (made pursuant to the old section 26) was time-barred because
it had been brought more than six years after the breach of contract upon which the original cause
of action was based. Otton J rejected that argument, stating that the action on the award was
distinct from and in no way entangled with the original contract or the breach occurring from
it.42 He held that time ran from the breach of the separate implied promise to honour the award.
In addition enforcement may be precluded by the court rule that an order of execution (called a
writ of execution) may not be granted without the courts permission where six years of more
have lapsed since the date of the underlying court order.43 However, there may be circumstances
where it is considered appropriate for the court to disapply this time limit.
In Good Challenger Navegante SA v Metalexportimport SA,44 the Court of Appeal allowed
enforcement of an award made in 1983 where the award creditor had obtained an order to enforce
the award in 1993 but had not applied for execution until 2001. The party seeking to enforce the
award was involved in protracted litigation in Romania, and did not seek to enforce the award
until three years after the conclusion of the Romanian proceedings. However, during this same
time frame, the opposing party had made two payments in respect of the award and had
acknowledged the debt by telex. The Court of Appeal considered that the enforcement action
accrued on the date on which the telex was sent, and therefore the proceedings to enforce the
award were made within the statutory limitation period. The circumstances of the case were
considered sufficiently unusual as to justify permission to allow execution outside the normal limit
under court rules.
Public policy
Section 81 of the 1996 Act expressly saves the courts power to refuse to recognise or enforce an
award on the ground that to do so would be contrary to English public policy. Most commonly,
public policy arguments arise where the underlying contract is said to be illegal (either by English
or foreign law) and where, therefore, enforcement of the award amounts to indirect enforcement
of an illegal contract, or where the award was obtained by fraud or in breach of the rules of natural
justice.
The English authorities on public policy are not entirely consistent in their approach, but some
broad principles may be stated.45 Normally the issue of illegality will fall within the tribunals
jurisdiction. This is because the illegality of the underlying contract does not necessarily
invalidate the ancillary arbitration agreement.46 If, in such a case, the tribunal determines that the
alleged illegality does not affect the main contract, then the court will, prima facie, enforce the
award. However, the judgment debtor is entitled to challenge enforcement of the award by arguing
that the overriding principle of public policy (e.g., the prevention of corruption or the need to
prevent the flouting of the law of foreign friendly states) outweighs the policy in favour of finality.
Ordinarily a court will be very reluctant to re-open a tribunals findings of fact or law on an

illegality issue. In deciding whether to mount a full enquiry into an issue of illegality at the
enforcement stage the judge has to decide whether to give full faith and credit to the arbitrators
award. Relevant considerations are whether the tribunal specifically considered the question of
illegality, whether there was incompetence on the part of the arbitrators and whether there is any
reason to suspect collusion or bad faith in obtaining the award. The seriousness of the allegation of
illegality will not normally be relevant in deciding whether the court should mount a full inquiry
into the award, but it would be relevant in the ultimate balancing of finality against competing
public policy considerations.47
In Soleimany v Soleimany,48 a dispute arising under a contract for the illegal export of carpets
from Iran was referred to the Beth Din to be determined in England49 but in accordance with
Jewish law. The award referred on its face to the illegality of the contract, but nevertheless
awarded a sum of money to the claimant. The Court of Appeal held that in those circumstances it
would be contrary to public policy for the award to be enforced. Soleimany v Soleimany was
distinguished by the Court of Appeal in Kohn v Wagschal,50 again a case concerning the
enforcement of a Beth Din decision. In Kohn, the Court of Appeal considered that the Beth Dins
award had in fact prevented any illegality which could have arisen from an alleged tax evasion.
Therefore, the court was not being called on to use its executive powers to order the doing of an
illegal act, and the award could be enforced.
Other cases have also distinguished Solemainy v Soleimany. In Westacre Investments
Inc v Jugoimport SPDR Holding Co Ltd,51 a consultancy contract relating to the sale of military
equipment and governed by Swiss law included an arbitration clause providing for ICC
arbitration. The claimant commenced arbitration, seeking payment of money due under the
agreement. One of the defences raised by the defendant was that the contractual arrangements
with the claimant were illegal and contrary to public policy because they involved procuring sales
by fraud, through bribery or by illicit personal influence. The tribunal found in favour of the
claimants, and the defendants appeal to the Swiss Federal Tribunal on grounds of public policy
was unsuccessful. In enforcement proceedings in the English court, the defendants argued that the
enforcement of the award would be contrary to public policy because it had been intended by the
parties that the underlying consultancy contract would involve bribery. These arguments were
rejected by Colman J who, relying heavily upon the fact that the issues of illegality and public
policy had already been ruled upon both by distinguished arbitrators and the Swiss Federal Court,
held that the policy in favour of finality outweighed the policy against enforcing illegal contracts.
His decision was upheld by the Court of Appeal, who held that although the contract would be
unenforceable in English law as being contrary to public policy, it did not fall into the category of
contracts whose enforcement was precluded by public policy irrespective of their proper law and
place of performance. The parties had chosen to determine their disputes in accordance with Swiss
law and arbitration and, in the absence of any evidence of breach of Swiss public policy, the
award would be enforced.52 Soleimany was distinguished by the Court of Appeal in Westacre on
the basis that, in that case, it was plain on the face of the award that performance was illegal in the
place of performance.
Soleimany was also distinguished in Omnium de Traitement et de Valorisation SA v Hilmarton
Ltd,53 in which disputes arising under a consultancy agreement were referred to ICC arbitration in

Switzerland to be determined in accordance with Swiss law. The tribunal held that, although the
performance of the consultancy agreement involved approaches to Algerian officials which were
knowingly in breach of Algerian law, that did not invalidate the contract as a matter of Swiss law,
because no element of corruption or bribery arose. Accordingly, the contract was enforceable and
an award was made in favour of the claimant. In enforcement proceedings in England, Timothy
Walker J held that it was not sufficient merely to show that the underlying agreement would be
illegal as a matter of English law: here, the parties had chosen Swiss law to govern the contract. In
the absence of any finding of corruption or illicit practice, the award would be enforced.
Suspension
It has been held that the English court has an inherent jurisdiction to suspend an English
arbitration award pending an application to challenge it, thereby preventing the award from being
enforced.
In Apis AS v Fantazia Kereskedelmi KFT,54 an English GAFTA arbitration award was challenged
by the respondents to the arbitration pursuant to section 68 of the 1996 Act. The respondents
alleged a breach by the GAFTA appeal board of its duties under section 33. In the meantime, the
claimants took steps to enforce the award in Slovakia. To avert such enforcement, and also to
avoid the posting of default by GAFTA, the respondents applied to the English court for an order
suspending the award. Despite the absence of any reference in the 1996 Act or in case law to the
existence of such power, the parties agreed that the court had inherent jurisdiction to make an
order suspending the award. Judge Raymond Jack accepted this as correct. His conclusion was
justified by reference to section 103(2)(f) of the 1996 Act, which sets out (as a ground for nonenforcement of a New York Convention award) the fact that the award has been suspended
by a competent authority of the country in which, or under the law of which, it was made. The
existence of an inherent power to suspend an award, and to require the provision of security as a
condition of suspension, was held by Judge Raymond Jack to be but a small step further. He
went on to hold that the inherent power should be exercised by reference to the guidelines laid
down by the Court of Appeal in Soleh Boneh International Ltd v Government of the Republic of
Uganda,55 a case concerned with enforcement in England of a foreign award pending a challenge
to that award in the foreign court. Relevant factors for the court to take into account included the
strength of the application to set the award aside, and the ease or difficulty of enforcement of the
award. In Apis, an order suspending the award was granted, but the respondents were required to
provide security as a condition of that suspension.
The concept of suspending an award pending challenge was further developed in Socadec
SA v Pan Afric Impex Co Ltd,56 which applied the principles arising from Apis. The applicant
company applied to set aside or suspend an order made by a judge on a without notice application
for two arbitration awards to be enforced as judgments. The company argued that the claim on
which the second award was based was time-barred pursuant to contract. Mackay J considered
that there were two questions to be answered: first, the strength of the argument that the award
was invalid and secondly, the difficulty in enforcing the award should enforcement be delayed. In
respect of the first point, Mackay J stated that the court had to give brief consideration to the
merits, and not conduct a mini-trial. In this instance, he could not find that the award was
manifestly invalid. On the second aspect he concluded that the enforcement of the second award

would be suspended for 28 days, and if within that time the defendant provided security, the
suspension would continue. If no security was provided, the suspension would lapse and the
award would become immediately enforceable.
The source and scope of the apparent inherent power to suspend an award remains unclear. It
may be doubted whether the existence of a wide-ranging power is consistent with section 1 of the
1996 Act, which is intended to prevent the court from intervening except as provided by this
Part. Nevertheless, this is not a point which has been taken in subsequent judicial consideration
of Apis.

5. THE ORDER ENFORCING THE AWARD

Partial enforcement
Where part of a sum awarded has been paid, the court may make an order in respect of the unpaid
portion, or may alternatively give judgment for the whole amount awarded subject to an
undertaking by the judgment creditor to accept the unpaid sum in satisfaction of the
judgment.57 The court may also make an order for enforcement of part of an award, but for that
part to be enforced, must be possible to enter judgment in terms of the award and accordingly
the award must be drafted so as to make it possible to identify the part of the award to be
enforced.58
If the judgment debtor is able to show that he has a cross-claim against the judgment creditor in
other pending proceedings, or that there is a debt owing by the judgment creditor, the court may
be persuaded to grant a stay of execution, or even to allow immediate enforcement of part of the
award only.
In ED & F Man v SATURS,59 the judgment creditors obtained a award in the amount of 52,438,
but admitted that they owed 23,756 to the judgment debtors. The court granted an application to
enforce the award pursuant to section 26 of the Arbitration Act 1950, the claimants undertaking to
accept 52,438 less 23,756 in satisfaction. Donaldson J commented that any attempt to enforce
the full award would come very close to being a contempt of Court and would certainly be
restrained instantly by an injunction if the respondents chose to apply for such relief.60

Costs
The order of the court will encompass any costs awarded by the arbitrator, including his fees. The
costs incurred in the court proceedings will be dealt with by a separate provision in the courts
order: in most cases, the successful judgment creditor will be entitled to recover its costs from the
judgment debtor.

Interest
Under section 49(4) of the 1996 Act, the tribunal has power to grant interest running after the
award upon any sum awarded. In arbitrations under LMAA terms, it is now standard practice for
such interest to be requested and awarded. If, however, the tribunal does not award interest
running after the award, then the court has no power to do so. However, once judgment has been
entered in terms of the award then interest may run on the judgment at the judgment rate.61

In Walker v Rowe,62 numerous disputes between marine underwriters and reinsurers were referred
to a single arbitration panel. The underwriters claims were dismissed, and the reinsurers were
awarded their costs; however, the award did not address the question of whether interest should
run, post-award, on the costs awarded. Enforcement proceedings were commenced pursuant to
section 66 of the 1996 Act, in which the reinsurers sought to recover interest on the sum awarded
up to the date enforcement was ordered. Aikens J held that the court had no power to grant such
interest. If a party wished to recover post-award interest, it was essential that he applied to the
tribunal for an award of such interest.

Foreign currency
The court may enforce an award made in a foreign currency.63 When applying to enforce a foreign
award made in a foreign currency, the applicant should not convert the award into sterling.

6. SECURITY FOR ENFORCEMENT

Usually, a claimant will take steps before the making of the award to secure its claimsmost
commonly by arresting vessels or other property, or by obtaining a freezing injunction. Security is
considered in more detail in Chapter 18. If no security has been sought prior to the making of the
award, then it is still possible to obtain a freezing injunction with a view to enforcing the award.
However, as a matter of English law it has been held that it is not possible to arrest a vessel in
support of enforcement proceedings:
In The Bumbesti,64 judgment creditors obtained two awards in Romanian arbitrations for damages
suffered as a result of early termination of charterparties. The judgment creditors arrested
the Bumbesti in Liverpool to enforce payment of one of the awards. Aikens J granted the judgment
debtors application to set aside the arrest. He held that a claim to enforce an award arose out of a
separate implied agreement to honour the arbitration award, and that such a cause of action was
not sufficiently directly in relation to the use or hire of a ship to found the jurisdiction to arrest.
The question of whether it was possible to effect an arrest based upon the original underlying
cause of action (namely, in this case the early redelivery of the vessels under the relevant
charterparty) was left open.65
Gater Assets Ltd v Nak Naftogaz Ukrainiy 66 clearly suggests that in the case of enforcement of a
domestic award under section 66 of the 1996 Act, an award debtor would not in principle be
entitled to security for the costs of resisting enforcement. The case decides that security for costs
will not be ordered against an award creditor who seeks enforcement of a foreign award under
section 101 of the 1996 Act since this would impose substantially more onerous conditions for
enforcement of a foreign award and thereby breach Article III of the New York Convention.

7. FOREIGN AWARDS
Most foreign awards are enforceable pursuant to international conventions on the enforcement of
awards (such as the New York Convention on the Recognition and Enforcement of Foreign
Arbitral Awards and the Convention on the Execution of Foreign Arbitral Awards signed in
Geneva in 1927, referred to as the New York and Geneva Conventions). The procedure for
enforcement of such awards is slightly different to that which applies under section 66 of the 1996

Act. A detailed discussion of the provisions of such conventions is beyond the scope of this book,
but an outline structure of the relevant provisions may be summarised as follows.
Recognition and enforcement of Geneva Convention awards is addressed in section 99 of the 1996
Act, which provides that Part II of the Arbitration Act 1950 continues to apply to foreign awards
falling within that Part but which are not also New York Convention awards. Accordingly, Part II
of the 1950 Act remains of relevance only for awards made in countries which are party to the
Geneva, but not to the New York, Convention.
Recognition and enforcement of New York Convention awards is dealt with in sections 100 to 104
of the 1996 Act. The procedure to be followed, including the necessary supporting evidence, is
addressed in sections 101-02. Section 103 sets out a list of grounds upon which recognition or
enforcement may be refused. The approach of the English courts to these defences to enforcement
has been considered at section 4 above.67
1 Part enforcement of an award is permissible under the 1996 Act provisions on enforcement and
the term award in these provisions should be construed to mean the award or part of it
Nigerian National Petroleum Corporation vIPCO (Nigeria) Ltd [2008] EWCA Civ 1157; [2009]
1 Lloyds Rep 89.
2 Section 26 of the Arbitration Act 1950.
3 Section 2(2) of the 1996 Act.
4 Section 99 of the 1996 Act.
5 See also section 104 of the 1996 Act.
6 The old section 26 procedure was described as in substance a summary form of the action on
the award: see per Hobhouse J in Coastal States Trading (UK) Ltd v Mebro
Mineraloelhandelsgesellschaft GmbH [1986] 1 Lloyds Rep 465 at 467.
7 ASM Shipping Ltd v TTMI Ltd of England [2007] EWHC 927 (Comm); [2007] 2 Lloyds Rep
155.
8 Curacao Trading Co BV v Harkisandas & Co [1992] 2 Lloyds Rep 186 at 192 per Hirst J;
approved and applied in Kohn v Wagschal [2006] EWHC 3356 (Comm).
9 Kohn v Wagschal [2006] EWHC 3356 (Comm); upheld by the Court of Appeal in [2007]
EWCA Civ 1022; [2007] 1 Lloyds Rep 100.
10 CPR, Part 62.19.
11 The application may be made without notice to the intended judgment debtor: CPR, Part
62.18(1).
12 CPR, Part 62.18(2).
13 For discussion of agreed awards, see Chapter 19.
14 Paragraph 378 of the DAC Report.

15 Hassneh Insurance Co of Israel v Mew [1993] 2 Lloyds Rep 243 at 247 (Colman J),
citing Bremer Oeltransport GmbH v Drewry [1933] KB 753. Hassneh was cited for this
proposition in Stargas SpA v Petredec Ltd, The Sargasso [1994] 1 Lloyds Rep 412 at 415.
16 Coastal States Trading (UK) Ltd v Mebro Mineraloelhandelsgesellschaft GmbH [1986] 1
Lloyds Rep 465 at 467 (Hobhouse J).
17 Birtley District Co-op v Windy Nook (No 2) [1960] 1 QB 1; Dalmia Dairy Industries
Ltd v National Bank of Pakistan [1978] 2 Lloyds Rep 223 at 273-4 (Kerr J, citing Bremer
Oeltransport GmbH v Drewry [1933] 1 KB 753).
18 See the discussion of Glencore Grain Ltd v Agros Trading Co [1999] 2 Lloyds Rep 410 in
[2000] LMCLQ 153.
19 Mustill & Boyd (2nd edn), pp. 417-418; Christopher Brown Ltd v Genossenschaft
Oesterreichischer Waldbesitzer [1954] 1 QB 8.
20 Kianta Osakeyhtio v Britain & Overseas Trading Co [1954] 1 Lloyds Rep 247 at 250-1.
21 Common law remedies are preserved in so far as not inconsistent with Part 1 of the 1996 Act:
section 81.
22 Birtley District Co-op v Windy Nook (No 2) [1960] 1 QB 1.
23 Ibid.; Selby v Whitbread [1917] 1 KB 736.
24 Paragraphs 2.1 and CPR Part 62, rule 62.17.
25 [2006] EWCA Civ 222; [2006] 2 All ER (Comm) 413; [2006] 1 Lloyds Rep 701; respondent
relied upon absence due to illness taken but the matter was decided on other grounds.
26 If it has caused substantial injustice: see section 68 of the 1996 Act.
27 [1999] 1 All ER (Comm) 315.
28 [2006] EWCA Civ 222; [2006] 2 All ER (Comm) 413; [2006] 1 Lloyds Rep 701.
29 [2001] 1 Lloyds Rep 412.
30 Minmetals Germany GmbH v Ferco Steel Ltd [1999] 1 All ER (Comm) 315.
31 China Agribusiness Development Corp v Balli Trading [1998] 2 Lloyds Rep 76.
32 As was held in the Minmetals case, above.
33 E.g., Soleh Boneh International v Govt of Uganda [1993] 2 Lloyds Rep 208; Minmetals
Germany GmbH v Ferco Steel Ltd [1999] 1 All ER (Comm) 315.
34 IPCO (Nigeria) Ltd v Nigerian National Petroleum Corp [2005] EWHC 726; [2005] 2 Lloyds
Rep 326.
35 Ibid.
36 Ibid.

37 [2006] EWCA Civ 1529; [2007] QB 886.

38 The House of Lords deleted the list because it was not exhaustive and parties might be led
astray by thinking that matters which are not mentioned are not covered: Hansard, House of
Lords, 18 March 1996, p. 1080. See also paragraph 32 of the DAC Supplementary Report,
39 See Chapter 6 and section 73 of the 1996 Act.
40 See Chapter 19 for further discussion.
41 [1985] 1 WLR 762.
42 At 772.
43 CPR Part 50, RSC Order 46 rule 2(1).
44 [2003] EWCA Civ 1668; [2004] 1 Lloyds Rep 67.
45 For a detailed discussion, see Mustill & Boyd, 2001 Companion, pp. 92-95.
46 See Chapter 6 on jurisdiction.
47 R v V [2008] EWHC 1531 (Comm); [2009] 1 Lloyds Rep 97.
48 [1999] QB 785.
49 Mustill & Boyd raise the question of whether the short answer to the issues raised in the case
was that there was illegality under the English lex fori: 2001 Companion, p. 93, fn 17.
50 [2007] EWCA Civ 1022; [2007] 1 Lloyds Rep 100.
51 [1999] QB 740.
52 Reasoning approved by Mustill & Boyd, 2001 Companion, pp. 94-95, stressing the importance
of trusting foreign arbitrators and courts of the foreign forum, even where the judge called upon to
enforce has grounds for concern.
53 [1999] 2 Lloyds Rep 222.
54 [2001] 1 All ER (Comm) 348.
55 [1993] 2 Lloyds Rep 208.
56 [2003] EWHC 2086.
57 ED & F Man v SATURS [1970] 2 Lloyds Rep 416.
58 Nigerian National Petroleum Corporation v IPCO (Nigeria) Ltd [2008] EWCA Civ 1157;
[2009] 1 Lloyds Rep 89.
59 [1970] 2 Lloyds Rep 416.
60 At 417.
61 Gater Assets Limited v Nak Naftogaz Ukrainy (No 3) [2008] EWHC 1108 (Comm); [2008] 2
Lloyds Rep 295 (involving a foreign award).

62 [2000] 1 Lloyds Rep 116, see also Pirtek (UK) Ltd v Deanswood Ltd [2005] EWHC 2301
(Comm); [2005] 2 Lloyds Rep 728.
63 Jugoslavenska Oceanska Plovidba v Castle Investment Co Inc [1974] QB 292.
64 [1999] 2 Lloyds Rep 481.
65 See pages 489-90. The argument is based upon dicta in The Rena K [1979] QB 377 to the
effect that a claim in rem to arrest a vessel does not merge with a judgment or award made in
personam, but survives, thereby enabling the judgment creditor to arrest the vessel so long as the
award or judgment remains unsatisfied.
66 [2007] EWCA Civ 988; [2007] 2 Lloyds Rep 588.
67 See also CPR Part 62, rules 62.17-62.21.

Chapter

APPENDIX A: Arbitration Act 1996

ARRANGEMENT OF SECTIONS

PART I. ARBITRATION PURSUANT TO AN ARBITRATION AGREEMENT

Introductory
Section
1. General principles.
2. Scope of application of provisions.
3. The seat of the arbitration.
4. Mandatory and non-mandatory provisions.
5. Agreements to be in writing.
The arbitration agreement
6. Definition of arbitration agreement.
7. Separability of arbitration agreement.
8. Whether agreement discharged by death of a party.
Stay of legal proceedings
9. Stay of legal proceedings.
10. Reference of interpleader issue to arbitration.
11. Retention of security where Admiralty proceedings stayed.
Commencement of arbitral proceedings

12. Power of court to extend time for beginning arbitral proceedings, &c.
13. Application of Limitation Acts.
14. Commencement of arbitral proceedings.
The arbitral tribunal
15. The arbitral tribunal.
16. Procedure for appointment of arbitrators.
17. Power in case of default to appoint sole arbitrator.
18. Failure of appointment procedure.
19. Court to have regard to agreed qualifications.
20. Chairman.
21. Umpire.
Section
22. Decision-making where no chairman or umpire.
23. Revocation of arbitrators authority.
24. Power of court to remove arbitrator.
25. Resignation of arbitrator.
26. Death of arbitrator or person appointing him.
27. Filling of vacancy, &c.
28. Joint and several liability of parties to arbitrators for fees and expenses.
29. Immunity of arbitrator.
Jurisdiction of the arbitral tribunal
30. Competence of tribunal to rule on its own jurisdiction.
31. Objection to substantive jurisdiction of tribunal.
32. Determination of preliminary point of jurisdiction.
The arbitral proceedings
33. General duty of the tribunal.
34. Procedural and evidential matters.
35. Consolidation of proceedings and concurrent hearings.
36. Legal or other representation.
37. Power to appoint experts, legal advisers or assessors.

38. General powers exercisable by the tribunal.

39. Power to make provisional awards.
40. General duty of parties.
41. Powers of tribunal in case of partys default.
Powers of court in relation to arbitral proceedings
42. Enforcement of peremptory orders of tribunal.
43. Securing the attendance of witnesses.
44. Court powers exercisable in support of arbitral proceedings.
45. Determination of preliminary point of law.
The award
46. Rules applicable to substance of dispute.
47. Awards on different issues, &c.
48. Remedies.
49. Interest.
50. Extension of time for making award.
51. Settlement.
52. Form of award.
53. Place where award treated as made.
54. Date of award.
55. Notification of award.
56. Power to withhold award in case of non-payment.
57. Correction of award or additional award.
58. Effect of award.
Costs of the arbitration
59. Costs of the arbitration.
60. Agreement to pay costs in any event.
Section
61. Award of costs.
62. Effect of agreement or award about costs.
63. The recoverable costs of the arbitration.

64. Recoverable fees and expenses of arbitrators.

65. Power to limit recoverable costs.
Powers of the court in relation to award
66. Enforcement of the award.
67. Challenging the award: substantive jurisdiction.
68. Challenging the award: serious irregularity.
69. Appeal on point of law.
70. Challenge or appeal: supplementary provisions.
71. Challenge or appeal: effect of order of court.
Miscellaneous
72. Saving for rights of person who takes no part in proceedings.
73. Loss of right to object.
74. Immunity of arbitral institutions, &c.
75. Charge to secure payment of solicitors costs.
Supplementary
76. Service of notices, &c.
77. Powers of court in relation to service of documents.
78. Reckoning periods of time.
79. Power of court to extend time limits relating to arbitral proceedings.
80. Notice and other requirements in connection with legal proceedings.
81. Saving for certain matters governed by common law.
82. Minor definitions.
83. Index of defined expressions: Part I.
84. Transitional provisions.

PART II. OTHER PROVISIONS RELATING TO ARBITRATION

Domestic arbitration agreements
85. Modification of Part I in relation to domestic arbitration agreement.
86. Staying of legal proceedings.
87. Effectiveness of agreement to exclude courts jurisdiction.
88. Power to repeal or amend sections 85 to 87.

Consumer arbitration agreements

89. Application of unfair terms regulations to consumer arbitration agreements.
90. Regulations apply where consumer is a legal person.
91. Arbitration agreement unfair where modest amount sought.
Small claims arbitration in the county court
92. Exclusion of Part I in relation to small claims arbitration in the county court.
Appointment of judges as arbitrators
Section
93. Appointment of judges as arbitrators.
Statutory arbitrations
94. Application to Part I to statutory arbitrations.
95. General adaptation of provisions in relation to statutory arbitrations.
96. Specific adaptations of provisions in relation to statutory arbitrations.
97. Provisions excluded from applying to statutory arbitrations.
98. Power to make further provision by regulations.

PART III. RECOGNITION AND ENFORCEMENT OF CERTAIN FOREIGN

AWARDS
Enforcement of Geneva Convention awards
99. Continuation of Part II of the Arbitration Act 1950.
Recognition and enforcement of New York Convention awards
100. New York Convention awards.
101. Recognition and enforcement of awards.
102. Evidence to be produced by party seeking recognition or enforcement.
103. Refusal of recognition or enforcement.
104. Saving for other bases of recognition or enforcement.

PART IV. GENERAL PROVISIONS

105. Meaning of the court: jurisdiction of High Court and county court.
106. Crown application.
107. Consequential amendments and repeals.
108. Extent.
109. Commencement.

110. Short title.

SCHEDULES:
Schedule 1Mandatory provisions of Part I.
Schedule 2Modifications of Part I in relation to judge-arbitrators.
Schedule 3Consequential amendments.
Schedule 4Repeals.

ARBITRATION ACT 1996

1996 CHAPTER 23
An Act to restate and improve the law relating to arbitration pursuant to an arbitration agreement;
to make other provision relating to arbitration and arbitration awards; and for connected purposes.
[17 June 1996].
BE IT ENACTED by the Queens most Excellent Majesty, by and with the advice and consent of
the Lords Spiritual and Temporal, and Commons, in this present Parliament assembled, and by the
authority of the same, as follows:

PART I. ARBITRATION PURSUANT TO AN ARBITRATION AGREEMENT

Introductory

General principles
1. The provisions of this Part are founded on the following principles, and shall be construed
accordingly

(a) the object of arbitration is to obtain the fair resolution of disputes by an impartial tribunal
without unnecessary delay or expense;
(b) the parties should be free to agree how their disputes are resolved, subject only to such
safeguards as are necessary in the public interest;
(c) in matters governed by this Part the court should not intervene except as provided by this
Part.

Scope of application of provisions

2.(1) The provisions of this Part apply where the seat of the arbitration is in England and Wales
or Northern Ireland.
(2) The following sections apply even if the seat of the arbitration is outside England and Wales or
Northern Ireland or no seat has been designated or determined

(a) sections 9 to 11 (stay of legal proceedings, &c.), and

(b) section 66 (enforcement of arbitral awards).

(3) The powers conferred by the following sections apply even if the seat of the arbitration is
outside England and Wales or Northern Ireland or no seat has been designated or determined

(a) section 43 (securing the attendance of witnesses), and

(b) section 44 (court powers exercisable in support of arbitral proceedings);

but the court may refuse to exercise any such power if, in the opinion of the court, the fact that the
seat of the arbitration is outside England and Wales or Northern Ireland, or that when designated
or determined the seat is likely to be outside England and Wales or Northern Ireland, makes it
inappropriate to do so.
(4) The court may exercise a power conferred by any provision of this Part not mentioned in
subsection (2) or (3) for the purpose of supporting the arbitral process where

(a) no seat of the arbitration has been designated or determined, and

(b) by reason of a connection with England and Wales or Northern Ireland the court is
satisifed that it is appropriate to do so.

(5) Section 7 (separability of arbitration agreement) and section 8 (death of a party) apply where
the law applicable to the arbitration agreement is the law of England and Wales or Northern
Ireland even if the seat of the arbitration is outside England and Wales or Northern Ireland or has
not been designated or determined.

The seat of the arbitration

3. In this Part the seat of the arbitration means the juridical seat of the arbitration designated

(a) by the parties to the arbitration agreement, or

(b) by any arbitral or other institution or person vested by the parties with powers in that
regard, or
(c) by the arbitral tribunal if so authorised by the parties,

or determined, in the absence of any such designation, having regard to the parties agreement and
all the relevant circumstances.

Mandatory and non-mandatory provisions

4.(1) The mandatory provisions of this Part are listed in Schedule 1 and have effect
notwithstanding any agreement to the contrary.
(2) The other provisions of this Part (the non-mandatory provisions) allow the parties to make
their own arrangements by agreement but provide rules which apply in the absence of such
agreement.
(3) The parties may make such arrangements by agreeing to the application of institutional rules or
providing any other means by which a matter may be decided.

(4) It is immaterial whether or not the law applicable to the parties agreement is the law of
England and Wales or, as the case may be, Northern Ireland.
(5) The choice of a law other than the law of England and Wales or Northern Ireland as the
applicable law in respect of a matter provided for by a non-mandatory provision of this Part is
equivalent to an agreement making provision about that matter.
For this purpose an applicable law determined in accordance with the parties agreement, or which
is objectively determined in the absence of any express or implied choice, shall be treated as
chosen by the parties.

Agreements to be in writing
5.(1) The provisions of this Part apply only where the arbitration agreement is in writing, and
any other agreement between the parties as to any matter is effective for the purposes of this Part
only if in writing.
The expressions agreement, agree and agreed shall be construed accordingly.
(2) There is an agreement in writing

(a) if the agreement is made in writing (whether or not it is signed by the parties).
(b) if the agreement is made by exchange of communications in writing, or
(c) if the agreement is evidenced in writing.

(3) Where parties agree otherwise than in writing by reference to terms which are in writing, they
make an agreement in writing.
(4) An agreement is evidenced in writing if an agreement made otherwise than in writing is
recorded by one of the parties, or by a third party, with the authority of the parties to the
agreement.
(5) An exchange of written submissions in arbitral or legal proceedings in which the existence of
an agreement otherwise than in writing is alleged by one party against another party and not
denied by the other party in his response constitutes as between those parties an agreement in
writing to the effect alleged.
(6) References in this Part to anything being written or in writing include its being recorded by
any means.
The arbitration agreement

Definition of arbitration agreement

6.(1) In this Part an arbitration agreement means an agreement to submit to arbitration present
or future disputes (whether they are contractual or not).
(2) The reference in an agreement to a written form of arbitration clause or to a document
containing an arbitration clause constitutes an arbitration agreement if the reference is such as to
make that clause part of the agreement.

Separability of arbitration agreement

7. Unless otherwise agreed by the parties, an arbitration agreement which forms or was intended
to form part of another agreement (whether or not in writing) shall not be regarded as invalid,
nonexistent or ineffective because that other agreement is invalid, or did not come into existence
or has become ineffective, and it shall for that purpose be treated as a distinct agreement.

Whether agreement discharged by death of a party

8.(1) Unless otherwise agreed by the parties, an arbitration agreement is not discharged by the
death of a party and may be enforced by or against the personal representatives of that party.
(2) Subsection (1) does not affect the operation of any enactment or rule of law by virtue of which
a substantive right or obligation is extinguished by death.
Stay of legal proceedings

Stay of legal proceedings

9.(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.
(2) An application may be made notwithstanding that the matter is to be referred to arbitration
only after the exhaustion of other dispute resolution procedures.
(3) An application may not be made by a person before taking the appropriate procedural step (if
any) to acknowledge the legal proceedings against him or after he has taken any step in those
proceedings to answer the substantive claim.
(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.
(5) If the court refuses to stay the legal proceedings, any provision that an award is a condition
precedent to the bringing of legal proceedings in respect of any matter is of no effect in relation to
those proceedings.

Reference of interpleader issue to arbitration

10.(1) Where in legal proceedings relief by way of interpleader is granted and any issue
between the claimants is one in respect of which there is an arbitration agreement between them,
the court granting the relief shall direct that the issue be determined in accordance with the
agreement unless the circumstances are such that proceedings brought by a claimant in respect of
the matter would not be stayed.
(2) Where subsection (1) applies but the court does not direct that the issue be determined in
accordance with the arbitration agreement, any provision that an award is a condition precedent to

the bringing of legal proceedings in respect of any matter shall not affect the determination of that
issue by the court.

Retention of security where Admiralty proceedings

stayed
11.(1) Where Admiralty proceedings are stayed on the ground that the dispute in question
should be submitted to arbitration, the court granting the stay may, if in those proceedings
property has been arrested or bail or other security has been given to prevent or obtain release
from arrest

(a) order that the property arrested be retained as security for the satisfaction of any award
given in the arbitration in respect of that dispute, or
(b) order that the stay of those proceedings be conditional on the provision of equivalent
security for the satisfaction of any such award.

(2) Subject to any provision made by rules of court and to any necessary modifications, the same
law and practice shall apply in relation to property retained in pursuance of an order as would
apply if it were held for the purposes of proceedings in the court making the order.
Commencement of arbitral proceedings

Power of court to extend time for beginning arbitral

proceedings, &c.
12.(1) Where an arbitration agreement to refer future disputes to arbitration provides that a
claim shall be barred, or the claimants right extinguished, unless the claimant takes within a time
fixed by the agreement some step

(a) to begin arbitral proceedings, or

(b) to begin other dispute resolution procedures which must be exhausted before arbitral
proceedings can be begun,

the court may by order extend the time for taking that step.
(2) Any party to the arbitration agreement may apply for such an order (upon notice to the other
parties), but only after a claim has arisen and after exhausting any available arbitral process for
obtaining an extension of time.
(3) The court shall make an order only if satisfied

(a) that the circumstances are such as were outside the reasonable contemplation of the parties
when they agreed the provision in question, and that it would be just to extend the time, or
(b) that the conduct of one party makes it unjust to hold the other party to the strict terms of
the provision in question.

(4) The court may extend the time for such period and on such terms as it thinks fit, and may do so
whether or not the time previously fixed (by agreement or by a previous order) has expired.

(5) An order under this section does not affect the operation of the Limitation Acts (see section
13).
(6) The leave of the court is required for any appeal from a decision of the court under this
section.

Application of Limitation Acts

13.(1) The Limitation Acts apply to arbitral proceedings as they apply to legal proceedings.
(2) The court may order that in computing the time prescribed by the Limitation Acts for the
commencement of proceedings (including arbitral proceedings) in respect of a dispute which was
the subject matter

(a) of an award which the court orders to be set aside or declares to be of no effect, or
(b) of the affected part of an award which the court orders to be set aside in part, or declares
to be in part of no effect,

the period between the commencement of the arbitration and the date of the order referred to in
paragraph (a) or (b) shall be excluded.
(3) In determining for the purposes of the Limitation Acts when a cause of action accrued, any
provision that an award is a condition precedent to the bringing of legal proceedings in respect of
a matter to which an arbitration agreement applies shall be disregarded.
(4) In this Part the Limitation Acts means

(a) in England and Wales, the Limitation Act 1980, the Foreign Limitation Periods Act 1984
and any other enactment (whenever passed) relating to the limitation of actions;
(b) in Northern Ireland, the Limitation (Northern Ireland) Order 1989, the Foreign Limitation
Periods (Northern Ireland) Order 1985 and any other enactment (whenever passed) relating to
the limitation of actions.

Commencement of arbitral proceedings

14.(1) The parties are free to agree when arbitral proceedings are to be regarded as commenced
for the purposes of this Part and for the purposes of the Limitation Acts.
(2) If there is no such agreement the following provisions apply.
(3) Where the arbitrator is named or designated in the arbitration agreement, arbitral proceedings
are commenced in respect of a matter when one party serves on the other party or parties a notice
in writing requiring him or them to submit that matter to the person so named or designated.
(4) Where the arbitrator or arbitrators are to be appointed by the parties, arbitral proceedings are
commenced in respect of a matter when one party serves on the other party or parties notice in
writing requiring him or them to appoint an arbitrator or to agree to the appointment of an
arbitrator in respect of that matter.

(5) Where the arbitrator or arbitrators are to be appointed by a person other than a party to the
proceedings, arbitral proceedings are commenced in respect of a matter when one party gives
notice in writing to that person requesting him to make the appointment in respect of that matter.
The arbitral tribunal

The arbitral tribunal

15.(1) The parties are free to agree on the number of arbitrators to form the tribunal and
whether there is to be a chairman or umpire.
(2) Unless otherwise agreed by the parties, an agreement that the number of arbitrators shall be
two or any other even number shall be understood as requiring the appointment of an additional
arbitrator as chairman of the tribunal.
(3) If there is no agreement as to the number of arbitrators, the tribunal shall consist of a sole
arbitrator.

Procedure for appointment of arbitrators

16.(1) The parties are free to agree on the procedure for appointing the arbitrator or arbitrators,
including the procedure for appointing any chairman or umpire.
(2) If or to the extent that there is no such agreement, the following provisions apply.
(3) If the tribunal is to consist of a sole arbitrator, the parties shall jointly appoint the arbitrator not
later than 28 days after service of a request in writing by either party to do so.
(4) If the tribunal is to consist of two arbitrators, each party shall appoint one arbitrator not later
than 14 days after service of a request in writing by either party to do so.
(5) If the tribunal is to consist of three arbitrators

(a) each party shall appoint one arbitrator not later than 14 days after service of a request in
writing by either party to do so, and
(b) the two so appointed shall forthwith appoint a third arbitrator as the chairman of the
tribunal.

(6) If the tribunal is to consist of two arbitrators and an umpire

(a) each party shall appoint one arbitrator not later than 14 days after service of a request in
writing by either party to do so, and
(b) the two so appointed may appoint an umpire at any time after they themselves are
appointed and shall do so before any substantive hearing or forthwith if they cannot agree on
a matter relating to the arbitration.

(7) In any other case (in particular, if there are more than two parties) section 18 applies as in the
case of a failure of the agreed appointment procedure.

Power in case of default to appoint sole arbitrator

17.(1) Unless the parties otherwise agree, where each of two parties to an arbitration agreement
is to appoint an arbitrator and one party (the party in default) refuses to do so, or fails to do so
within the time specified, the other party, having duly appointed his arbitrator, may give notice in
writing to the party in default that he proposes to appoint his arbitrator to act as sole arbitrator.
(2) If the party in default does not within 7 clear days of that notice being given

(a) make the required appointment, and

(b) notify the other party that he has done so,

the other party may appoint his arbitrator as sole arbitrator whose award shall be binding on both
parties as if he had been so appointed by agreement.
(3) Where a sole arbitrator has been appointed under subsection (2), the party in default may
(upon notice to the appointing party) apply to the court which may set aside the appointment.
(4) The leave of the court is required for any appeal from a decision of the court under this
section.

Failure of appointment procedure

18.(1) The parties are free to agree what is to happen in the event of a failure of the procedure
for the appointment of the arbitral tribunal.
There is no failure if an appointment is duly made under section 17 (power in case of default to
appoint sole arbitrator), unless that appointment is set aside.
(2) If or to the extent that there is no such agreement any party to the arbitration agreement may
(upon notice to the other parties) apply to the court to exercise its powers under this section.
(3) Those powers are

(a) to give directions as to the making of any necessary appointments;

(b) to direct that the tribunal shall be constituted by such appointments (or any one or more of
them) as have been made;
(c) to revoke any appointments already made;
(d) to make any necessary appointments itself.

(4) An appointment made by the court under this section has effect as if made with the agreement
of the parties.
(5) The leave of the court is required for any appeal from a decision of the court under this
section.

Court to have regard to agreed qualifications

19. In deciding whether to exercise, and in considering how to exercise, any of its powers under
section 16 (procedure for appointment of arbitrators) or section 18 (failure of appointment
procedure), the court shall have due regard to any agreement of the parties as to the qualifications
required of the arbitrators.

Chairman
20.(1) Where the parties have agreed that there is to be a chairman, they are free to agree what
the functions of the chairman are to be in relation to the making of decisions, orders and awards.
(2) If or to the extent that there is no such agreement, the following provisions apply.
(3) Decisions, orders and awards shall be made by all or a majority of the arbitrators (including
the chairman).
(4) The view of the chairman shall prevail in relation to a decision, order or award in respect of
which there is neither unanimity nor a majority under subsection (3).

Umpire
21.(1) Where the parties have agreed that there is to be an umpire, they are free to agree what
the functions of the umpire are to be, and in particular

(a) whether he is to attend the proceedings, and

(b) when he is to replace the other arbitrators as the tribunal with power to make decisions,
orders and awards.

(2) If or to the extent that there is no such agreement, the following provisions apply.
(3) The umpire shall attend the proceedings and be supplied with the same documents and other
materials as are supplied to the other arbitrators.
(4) Decisions, orders and awards shall be made by the other arbitrators unless and until they
cannot agree on a matter relating to the arbitration.
In that event they shall forthwith give notice in writing to the parties and the umpire, whereupon
the umpire shall replace them as the tribunal with power to make decisions, orders and awards as
if he were sole arbitrator.
(5) If the arbitrators cannot agree but fail to give notice of that fact, or if any of them fails to join
in the giving of notice, any party to the arbitral proceedings may (upon notice to the other parties
and to the tribunal) apply to the court which may order that the umpire shall replace the other
arbitrators as the tribunal with power to make decisions, orders and awards as if he were sole
arbitrator.
(6) The leave of the court is required for any appeal from a decision of the court under this
section.

Decision-making where no chairman or umpire

22.(1) Where the parties agree that there shall be two or more arbitrators with no chairman or
umpire, the parties are free to agree how the tribunal is to make decisions, orders and awards.
(2) If there is no such agreement, decisions, orders and awards shall be made by all or a majority
of the arbitrators.

Revocation of arbitrators authority

23.(1) The parties are free to agree in what circumstances the authority of an arbitrator may be
revoked.
(2) If or to the extent that there is no such agreement the following provisions apply.
(3) The authority of an arbitrator may not be revoked except

(a) by the parties acting jointly, or

(b) by an arbitral or other institution or person vested by the parties with powers in that
regard.

(4) Revocation of the authority of an arbitrator by the parties acting jointly must be agreed in
writing unless the parties also agree (whether or not in writing) to terminate the arbitration
agreement.
(5) Nothing in this section affects the power of the court

(a) to revoke an appointment under section 18 (powers exercisable in case of failure of

appointment procedure), or
(b) to remove an arbitrator on the grounds specified in section 24.

Power of court to remove arbitrator

24.(1) A party to arbitral proceedings may (upon notice to the other parties, to the arbitrator
concerned and to any other arbitrator) apply to the court to remove an arbitrator on any of the
following grounds

(a) that circumstances exist that give rise to justifiable doubts as to his impartiality;
(b) that he does not possess the qualifications required by the arbitration agreement;
(c) that he is physically or mentally incapable of conducting the proceedings or there are
justifiable doubts as to his capacity to do so;
(d) that he has refused or failed
o (i) properly to conduct the proceedings, or
o (ii) to use all reasonable despatch in conducting the proceedings or making an award, and
that substantial injustice has been or will be caused to the applicant.

(2) If there is an arbitral or other institution or person vested by the parties with power to remove
an arbitrator, the court shall not exercise its power of removal unless satisfied that the applicant
has first exhausted any available recourse to that institution or person.
(3) The arbitral tribunal may continue the arbitral proceedings and make an award while an
application to the court under this section is pending.
(4) Where the court removes an arbitrator, it may make such order as it thinks fit with respect to
his entitlement (if any) to fees or expenses, or the repayment of any fees or expenses already paid.

(5) The arbitrator concerned is entitled to appear and be heard by the court before it makes any
order under this section.
(6) The leave of the court is required for any appeal from a decision of the court under this
section.

Resignation of arbitrator
25.(1) The parties are free to agree with an arbitrator as to the consequences of his resignation
as regards

(a) his entitlement (if any) to fees or expenses, and

(b) any liability thereby incurred by him.

(2) If or to the extent that there is no such agreement the following provisions apply.
(3) An arbitrator who resigns his appointment may (upon notice to the parties) apply to the
court

(a) to grant him relief from any liability thereby incurred by him, and
(b) to make such order as it thinks fit with respect to his entitlement (if any) to fees or
expenses or the repayment of any fees or expenses already paid.

(4) If the court is satisfied that in all the circumstances it was reasonable for the arbitrator to
resign, it may grant such relief as is mentioned in subsection (3)(a) on such terms as it thinks fit.
(5) The leave of the court is required for any appeal from a decision of the court under this
section.

Death of arbitrator or person appointing him

26.(1) The authority of an arbitrator is personal and ceases on his death.
(2) Unless otherwise agreed by the parties, the death of the person by whom an arbitrator was
appointed does not revoke the arbitrators authority.

Filling of vacancy, &c.

27.(1) Where an arbitrator ceases to hold office, the parties are free to agree

(a) whether and if so how the vacancy is to be filled,

(b) whether and if so to what extent the previous proceedings should stand, and
(c) what effect (if any) his ceasing to hold office has on any appointment made by him (alone
or jointly).

(2) If or to the extent that there is no such agreement, the following provisions apply.
(3) The provisions of sections 16 (procedure for appointment of arbitrators) and 18 (failure of
appointment procedure) apply in relation to the filling of the vacancy as in relation to an original
appointment.

(4) The tribunal (when reconstituted) shall determine whether and if so to what extent the previous
proceedings should stand.
This does not affect any right of a party to challenge those proceedings on any ground which had
arisen before the arbitrator ceased to hold office.
(5) His ceasing to hold office does not affect any appointment by him (alone or jointly) of another
arbitrator, in particular any appointment of a chairman or umpire.

Joint and several liability of parties to arbitrators for

fees and expenses
28.(1) The parties are jointly and severally liable to pay to the arbitrators such reasonable fees
and expenses (if any) as are appropriate in the circumstances.
(2) Any party may apply to the court (upon notice to the other parties and to the arbitrators) which
may order that the amount of the arbitrators fees and expenses shall be considered and adjusted
by such means and upon such terms as it may direct.
(3) If the application is made after any amount has been paid to the arbitrators by way of fees or
expenses, the court may order the repayment of such amount (if any) as is shown to be excessive,
but shall not do so unless it is shown that it is reasonable in the circumstances to order repayment.
(4) The above provisions have effect subject to any order of the court under section 24(4) or
25(3)(b) (order as to entitlement to fees or expenses in case of removal or resignation of
arbitrator).
(5) Nothing in this section affects any liability of a party to any other party to pay all or any of the
costs of the arbitration (see sections 59 to 65) or any contractual right of an arbitrator to payment
of his fees and expenses.
(6) In this section references to arbitrators include an arbitrator who has ceased to act and an
umpire who has not replaced the other arbitrators.

Immunity of arbitrator
29.(1) An arbitrator is not liable for anything done or omitted in the discharge or purported
discharge of his functions as arbitrator unless the act or omission is shown to have been in bad
faith.
(2) Subsection (1) applies to an employee or agent of an arbitrator as it applies to the arbitrator
himself.
(3) This section does not affect any liability incurred by an arbitrator by reason of his resigning
(but see section 25).
Jurisdiction of the arbitral tribunal

Competence of tribunal to rule on its own jurisdiction

30.(1) Unless otherwise agreed by the parties, the arbitral tribunal may rule on its own
substantive jurisdiction, that is, as to

(a) whether there is a valid arbitration agreement,

(b) whether the tribunal is properly constituted, and
(c) what matters have been submitted to arbitration in accordance with the arbitration
agreement.

(2) Any such ruling may be challenged by any available arbitral process of appeal or review or in
accordance with the provisions of this Part.

Objection to substantive jurisdiction of tribunal

31.(1) An objection that the arbitral tribunal lacks substantive jurisdiction at the outset of the
proceedings must be raised by a party not later than the time he takes the first step in the
proceedings to contest the merits of any matter in relation to which he challenges the tribunals
jurisdiction.
A party is not precluded from raising such an objection by the fact that he has appointed or
participated in the appointment of an arbitrator.
(2) Any objection during the course of the arbitral proceedings that the arbitral tribunal is
exceeding its substantive jurisdiction must be made as soon as possible after the matter alleged to
be beyond its jurisdiction is raised.
(3) The arbitral tribunal may admit an objection later than the time specified in subsection (1) or
(2) if it considers the delay justified.
(4) Where an objection is duly taken to the tribunals substantive jurisdiction and the tribunal has
power to rule on its own jurisdiction, it may

(a) rule on the matter in an award as to jurisdiction, or

(b) deal with the objection in its award on the merits.

If the parties agree which of these courses the tribunal should take, the tribunal shall proceed
accordingly.
(5) The tribunal may in any case, and shall if the parties so agree, stay proceedings whilst an
application is made to the court under section 32 (determination of preliminary point of
jurisdiction).

Determination of preliminary point of jurisdiction

32.(1) The court may, on the application of a party to arbitral proceedings (upon notice to the
other parties), determine any question as to the substantive jurisdiction of the tribunal.
A party may lose the right to object (see section 73).
(2) An application under this section shall not be considered unless

(a) it is made with the agreement in writing of all the other parties to the proceedings, or
(b) it is made with the permission of the tribunal and the court is satisfied
o (i) that the determination of the question is likely to produce substantial savings in costs,
o (ii) that the application was made without delay, and
o (iii) that there is good reason why the matter should be decided by the court.

(3) An application under this section, unless made with the agreement of all the other parties to the
proceedings, shall state the grounds on which it is said that the matter should be decided by the
court.
(4) Unless otherwise agreed by the parties, the arbitral tribunal may continue the arbitral
proceedings and make an award while an application to the court under this section is pending.
(5) Unless the court gives leave, no appeal lies from a decision of the court whether the conditions
specified in subsection (2) are met.
(6) The decision of the court on the question of jurisdiction shall be treated as a judgment of the
court for the purposes of an appeal.
But no appeal lies without the leave of the court which shall not be given unless the court
considers that the question involves a point of law which is one of general importance or is one
which for some other special reason should be considered by the Court of Appeal.
The arbitral proceedings

General duty of the tribunal

33.(1) The tribunal shall

(a) act fairly and impartially as between the parties, giving each party a reasonable
opportunity of putting his case and dealing with that of his opponent, and
(b) adopt procedures suitable to the circumstances of the particular case, avoiding
unnecessary delay or expense, so as to provide a fair means for the resolution of the matters
falling to be determined.

(2) The tribunal shall comply with that general duty in conducting the arbitral proceedings, in its
decisions on matters of procedure and evidence and in the exercise of all other powers conferred
on it.

Procedural and evidential matters

34.(1) It shall be for the tribunal to decide all procedural and evidential matters, subject to the
right of the parties to agree any matter.
(2) Procedural and evidential matters include

(a) when and where any part of the proceedings is to be held;

(b) the language or languages to be used in the proceedings and whether translations of any
relevant documents are to be supplied;

(c) whether any and if so what form of written statements of claim and defence are to be used,
when these should be supplied and the extent to which such statements can be later amended;
(d) whether any and if so which documents or classes of documents should be disclosed
between and produced by the parties and at what stage;
(e) whether any and if so what questions should be put to and answered by the respective
parties and when and in what form this should be done;
(f) whether to apply strict rules of evidence (or any other rules) as to the admissibility,
relevance or weight of any material (oral, written or other) sought to be tendered on any
matters of fact or opinion, and the time, manner and form in which such material should be
exchanged and presented;
(g) whether and to what extent the tribunal should itself take the initiative in ascertaining the
facts and the law;
(h) whether and to what extent there should be oral or written evidence or submissions.

(3) The tribunal may fix the time within which any directions give by it are to be complied with,
and may if it thinks fit extend the time so fixed (whether or not it has expired).

Consolidation of proceedings and concurrent hearings

35.(1) The parties are free to agree

(a) that the arbitral proceedings shall be consolidated with other arbitral proceedings, or
(b) that concurrent hearings shall be held, on such terms as may be agreed.

(2) Unless the parties agree to confer such power on the tribunal, the tribunal has no power to
order consolidation of proceedings or concurrent hearings.

Legal or other representation

36. Unless otherwise agreed by the parties, a party to arbitral proceedings may be represented in
the proceedings by a lawyer or other person chosen by him.

Power to appoint experts, legal advisers or assessors

37.(1) Unless otherwise agreed by the parties

(a) the tribunal may

o (i) appoint experts or legal advisers to report to it and the parties, or
o (ii) appoint assessors to assist it on technical matters,
and may allow any such expert, legal adviser or assessor to attend the proceedings; and

(b) the parties shall be given a reasonable opportunity to comment on any information,
opinion or advice offered by any such person.

(2) The fees and expenses of an expert, legal adviser or assessor appointed by the tribunal for
which the arbitrators are liable are expenses of the arbitrators for the purposes of this Part.

General powers exercisable by the tribunal

38.(1) The parties are free to agree on the powers exercisable by the arbitral tribunal for the
purposes of and in relation to the proceedings.
(2) Unless otherwise agreed by the parties the tribunal has the following powers.
(3) The tribunal may order a claimant to provide security for the costs of the arbitration.
This power shall not be exercised on the ground that the claimant is

(a) an individual ordinarily resident outside the United Kingdom, or

(b) a corporation or association incorporated or formed under the law of a country outside the
United Kingdom, or whose central management and control is exercised outside the United
Kingdom.

(4) The tribunal may give directions in relation to any property which is the subject of the
proceedings or as to which any question arises in the proceedings, and which is owned by or is in
the possession of a party to the proceedings

(a) for the inspection, photographing, preservation, custody or detention of the property by the
tribunal, an expert or a party, or
(b) ordering that samples be taken from, or any observation be made of or experiment
conducted upon, the property.

(5) The tribunal may direct that a party or witness shall be examined on oath or affirmation, and
may for that purpose administer any necessary oath or take any necessary affirmation.
(6) The tribunal may give directions to a party for the preservation for the purposes of the
proceedings of any evidence in his custody or control.

Power to make provisional awards

39.(1) The parties are free to agree that the tribunal shall have power to order on a provisional
basis any relief which it would have power to grant in a final award.
(2) This includes, for instance, making

(a) a provisional order for the payment of money or the disposition of property as between the
parties, or
(b) an order to make an interim payment on account of the costs of the arbitration.

(3) Any such order shall be subject to the tribunals final adjudication; and the tribunals final
award, on the merits or as to costs, shall take account of any such order.
(4) Unless the parties agree to confer such power on the tribunal, the tribunal has no such power.
This does not affect its powers under section 47 (awards on different issues, &c.).

General duty of parties

40.(1) The parties shall do all things necessary for the proper and expeditious conduct of the
arbitral proceedings.
(2) This includes

(a) complying without delay with any determination of the tribunal as to procedural or
evidential matters, or with any order or directions of the tribunal, and
(b) where appropriate, taking without delay any necessary steps to obtain a decision of the
court on a preliminary question of jurisdiction or law (see sections 32 and 45).

Powers of tribunal in case of partys default

41.(1) The parties are free to agree on the powers of the tribunal in case of a partys failure to
do something necessary for the proper and expeditious conduct of the arbitration.
(2) Unless otherwise agreed by the parties, the following provisions apply.
(3) If the tribunal is satisfied that there has been inordinate and inexcusable delay on the part of
the claimant in pursuing his claim and that the delay

(a) gives rise, or is likely to give rise, to a substantial risk that it is not possible to have a fair
resolution of the issues in that claim, or
(b) has caused, or is likely to cause, serious prejudice to the respondent, the tribunal may
make an award dismissing the claim.

(4) If without showing sufficient cause a party

(a) fails to attend or be represented at an oral hearing of which due notice was given, or
(b) where matters are to be dealt with in writing, fails after due notice to submit written
evidence or make written submissions,

the tribunal may continue the proceedings in the absence of that party or, as the case may be,
without any written evidence or submissions on his behalf, and may make an award on the basis
of the evidence before it.
(5) If without showing sufficient cause a party fails to comply with any order or directions of the
tribunal, the tribunal may make a peremptory order to the same effect, prescribing such time for
compliance with it as the tribunal considers appropriate.
(6) If a claimant fails to comply with a peremptory order of the tribunal to provide security for
costs, the tribunal may make an award dismissing his claim.
(7) If a party fails to comply with any other kind of peremptory order, then, without prejudice to
section 42 (enforcement by court of tribunals peremptory orders), the tribunal may do any of the
following

(a) direct that the party in default shall not be entitled to rely upon any allegation or material
which was the subject matter of the order;
(b) draw such adverse inferences from the act of non-compliance as the circumstances justify;

(c) proceed to an award on the basis of such materials as have been properly provided to it;
(d) make such order as it thinks fit as to the payment of costs of the arbitration incurred in
consequence of the non-compliance.

Powers of court in relation to arbitral proceedings

Enforcement of peremptory orders of tribunal

42.(1) Unless otherwise agreed by the parties, the court may make an order requiring a party to
comply with a peremptory order made by the tribunal.
(2) An application for an order under this section may be made

(a) by the tribunal (upon notice to the parties),

(b) by a party to the arbitral proceedings with the permission of the tribunal (and upon notice
to the other parties), or
(c) where the parties have agreed that the powers of the court under this section shall be
available.

(3) The court shall not act unless it is satisfied that the applicant has exhausted any available
arbitral process in respect of failure to comply with the tribunals order.
(4) No order shall be made under this section unless the court is satisfied that the person to whom
the tribunals order was directed has failed to comply with it within the time prescribed in the
order or, if no time was prescribed, within a reasonable time.
(5) The leave of the court is required for any appeal from a decision of the court under this
section.

Securing the attendance of witnesses

43.(1) A party to arbitral proceedings may use the same court procedures as are available in
relation to legal proceedings to secure the attendance before the tribunal of a witness in order to
give oral testimony or to produce documents or other material evidence.
(2) This may only be done with the permission of the tribunal or the agreement of the other
parties.
(3) The court procedures may only be used if

(a) the witness is in the United Kingdom, and

(b) the arbitral proceedings are being conducted in England and Wales or, as the case may be,
Northern Ireland.

(4) A person shall not be compelled by virtue of this section to produce any document or other
material evidence which he could not be compelled to produce in legal proceedings.

Court powers exercisable in support of arbitral

proceedings

44.(1) Unless otherwise agreed by the parties, 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.
(2) Those matters are

(a) the taking of the evidence of witnesses;

(b) the preservation of evidence;
(c) making orders relating to property which is the subject of the proceedings or as to which
any question arises in the proceedings
o (i) for the inspection, photographing, preservation, custody or detention of the property,
or
o (ii) ordering that samples be taken from, or any observation be made of or experiment
conducted upon, the property;
and for that purpose authorising any person to enter any premises in the possession or control
of a party to the arbitration;

(d) the sale of any goods the subject of the proceedings;

(e) the granting of an interim injunction or the appointment of a receiver.

(3) If the case is one of urgency, the court may, on the application of a party or proposed party to
the arbitral proceedings, make such orders as it thinks necessary for the purpose of preserving
evidence or assets.
(4) If the case is not one of urgency, the court shall act only on the application of a party to the
arbitral proceedings (upon notice to the other parties and to the tribunal) made with the permission
of the tribunal or the agreement in writing of the other parties.
(5) In any case the court shall act only if or to the extent that the arbitral tribunal, and any arbitral
or other institution or person vested by the parties with power in that regard, has no power or is
unable for the time being to act effectively.
(6) If the court so orders, an order made by it under this section shall cease to have effect in whole
or in part on the order of the tribunal or of any such arbitral or other institution or person having
power to act in relation to the subject-matter of the order.
(7) The leave of the court is required for any appeal from a decision of the court under this
section.

Determination of preliminary point of law

45.(1) Unless otherwise agreed by the parties, the court may on the application of a party to
arbitral proceedings (upon notice to the other parties) determine any question of law arising in the
course of the proceedings which the court is satisfied substantially affects the rights of one or
more of the parties.
An agreement to dispense with reasons for the tribunals award shall be considered an agreement
to exclude the courts jurisdiction under this section.

(2) An application under this section shall not be considered unless

(a) it is made with the agreement of all the other parties to the proceedings, or
(b) it is made with the permission of the tribunal and the court is satisfied
o (i) that the determination of the question is likely to produce substantial savings in costs,
and
o (ii) that the application was made without delay.

(3) The application shall identify the question of law to be determined and, unless made with the
agreement of all the other parties to the proceedings, shall state the grounds on which it is said that
the question should be decided by the court.
(4) Unless otherwise agreed by the parties, the arbitral tribunal may continue the arbitral
proceedings and make an award while an application to the court under this section is pending.
(5) Unless the court gives leave, no appeal lies from a decision of the court whether the conditions
specified in subsection (2) are met.
(6) The decision of the court on the question of law shall be treated as a judgment of the court for
the purposes of an appeal.
But no appeal lies without the leave of the court which shall not be given unless the court
considers that the question is one of general importance, or is one which for some other special
reason should be considered by the Court of Appeal.
The award

Rules applicable to substance of dispute

46.(1) The arbitral tribunal shall decide the dispute

(a) in accordance with the law chosen by the parties as applicable to the substance of the
dispute, or
(b) if the parties so agree, in accordance with such other considerations as are agreed by them
or determined by the tribunal.

(2) For this purpose the choice of the laws of a country shall be understood to refer to the
substantive laws of that country and not its conflict of laws rules.
(3) If or to the extent that there is no such choice or agreement, the tribunal shall apply the law
determined by the conflict of laws rules which it considers applicable.

Awards on different issues, &c.

47.(1) Unless otherwise agreed by the parties, the tribunal may make more than one award at
different times on different aspects of the matters to be determined.
(2) The tribunal may, in particular, make an award relating

(a) to an issue affecting the whole claim, or

(b) to a part only of the claims or cross-claims submitted to it for decision.

(3) If the tribunal does so, it shall specify in its award the issue, or the claim or part of a claim,
which is the subject matter of the award.

Remedies
48.(1) The parties are free to agree on the powers exercisable by the arbitral tribunal as regards
remedies.
(2) Unless otherwise agreed by the parties, the tribunal has the following powers.
(3) The tribunal may make a declaration as to any matter to be determined in the proceedings.
(4) The tribunal may order the payment of a sum of money, in any currency.
(5) The tribunal has the same powers as the court

(a) to order a party to do or refrain from doing anything;

(b) to order specific performance of a contract (other than a contract relating to land);
(c) to order the rectification, setting aside or cancellation of a deed or other document.

Interest
49.(1) The parties are free to agree on the powers of the tribunal as regards the award of
interest.
(2) Unless otherwise agreed by the parties the following provisions apply.
(3) The tribunal may award simple or compound interest from such dates, at such rates and with
such rests as it considers meets the justice of the case

(a) on the whole or part of any amount awarded by the tribunal, in respect of any period up to
the date of the award;
(b) on the whole or part of any amount claimed in the arbitration and outstanding at the
commencement of the arbitral proceedings but paid before the award was made, in respect of
any period up to the date of payment.

(4) The tribunal may award simple or compound interest from the date of the award (or any later
date) until payment, at such rates and with such rests as it considers meets the justice of the case,
on the outstanding amount of any award (including any award of interest under subsection (3) and
any award as to costs).
(5) References in this section to an amount awarded by the tribunal include an amount payable in
consequence of a declaratory award by the tribunal.
(6) The above provisions do not affect any other power of the tribunal to award interest.

Extension of time for making award

50.(1) Where the time for making an award is limited by or in pursuance of the arbitration
agreement, then, unless otherwise agreed by the parties, the court may in accordance with the
following provisions by order extend that time.
(2) An application for an order under this section may be made

(a) by the tribunal (upon notice to the parties), or

(b) by any party to the proceedings (upon notice to the tribunal and the other parties), but only
after exhausting any available arbitral process for obtaining an extension of time.

(3) The court shall only make an order if satisfied that a substantial injustice would otherwise be
done.
(4) The court may extend the time for such period and on such terms as it thinks fit, and may do so
whether or not the time previously fixed (by or under the agreement or by a previous order) has
expired.
(5) The leave of the court is required for any appeal from a decision of the court under this
section.

Settlement
51.(1) If during arbitral proceedings the parties settle the dispute, the following provisions apply
unless otherwise agreed by the parties.
(2) The tribunal shall terminate the substantive proceedings and, if so requested by the parties and
not objected to by the tribunal, shall record the settlement in the form of an agreed award.
(3) An agreed award shall state that it is an award of the tribunal and shall have the same status
and effect as any other award on the merits of the case.
(4) The following provisions of this Part relating to awards (sections 52 to 58) apply to an agreed
award.
(5) Unless the parties have also settled the matter of the payment of the costs of the arbitration, the
provisions of this Part relating to costs (sections 59 to 65) continue to apply.

Form of award
52.(1) The parties are free to agree on the form of an award.
(2) If or to the extent that there is no such agreement, the following provisions apply.
(3) The award shall be in writing signed by all the arbitrators or all those assenting to the award.
(4) The award shall contain the reasons for the award unless it is an agreed award or the parties
have agreed to dispense with reasons.
(5) The award shall state the seat of the arbitration and the date when the award is made.

Place where award treated as made

53. Unless otherwise agreed by the parties, where the seat of the arbitration is in England and
Wales or Northern Ireland, any award in the proceedings shall be treated as made there, regardless
of where it was signed, despatched or delivered to any of the parties.

Date of award
54.(1) Unless otherwise agreed by the parties, the tribunal may decide what is to be taken to be
the date on which the award was made.
(2) In the absence of any such decision, the date of the award shall be taken to be the date on
which it is signed by the arbitrator or, where more than one arbitrator signs the award, by the last
of them.

Notification of award
55.(1) The parties are free to agree on the requirements as to notification of the award to the
parties.
(2) If there is no such agreement, the award shall be notified to the parties by service on them of
copies of the award, which shall be done without delay after the award is made.
(3) Nothing in this section affects section 56 (power to withhold award in case of non-pay-ment).

Power to withhold award in case of non-payment

56.(1) The tribunal may refuse to deliver an award to the parties except upon full payment of
the fees and expenses of the arbitrators.
(2) If the tribunal refuses on that ground to deliver an award, a party to the arbitral proceedings
may (upon notice to the other parties and the tribunal) apply to the court, which may order that

(a) the tribunal shall deliver the award on the payment into court by the applicant of the fees
and expenses demanded, or such lesser amount as the court may specify,
(b) the amount of the fees and expenses properly payable shall be determined by such means
and upon such terms as the court may direct, and
(c) out of the money paid into court there shall be paid out such fees and expenses as may be
found to be properly payable and the balance of the money (if any) shall be paid out to the
applicant.

(3) For this purpose the amount of fees and expenses properly payable is the amount the applicant
is liable to pay under section 28 or any agreement relating to the payment of the arbitrators.
(4) No application to the court may be made where there is any available arbitral process for
appeal or review of the amount of the fees or expenses demanded.
(5) References in this section to arbitrators include an arbitrator who has ceased to act and an
umpire who has not replaced the other arbitrators.
(6) The above provisions of this section also apply in relation to any arbitral or other institution or
person vested by the parties with powers in relation to the delivery of the tribunals award.

As they so apply, the references to the fees and expenses of the arbitrators shall be construed as
including the fees and expenses of that institution or person.
(7) The leave of the court is required for any appeal from a decision of the court under this
section.
(8) Nothing in this section shall be construed as excluding an application under section 28 where
payment has been made to the arbitrators in order to obtain the award.

Correction of award or additional award

57.(1) The parties are free to agree on the powers of the tribunal to correct an award or make an
additional award.
(2) If or to the extent there is no such agreement, the following provisions apply.
(3) The tribunal may on its own initiative or on the application of a party

(a) correct an award so as to remove any clerical mistake or error arising from an accidental
slip or omission or clarify or remove any ambiguity in the award, or
(b) make an additional award in respect of any claim (including a claim for interest or costs)
which was presented to the tribunal but not dealt with in the award.

These powers shall not be exercised without first affording the other parties a reasonable
opportunity to make representations to the tribunal.
(4) Any application for the exercise of those powers must be made within 28 days of the date of
the award or such longer period as the parties may agree.
(5) Any correction of an award shall be made within 28 days of the date the application was
received by the tribunal or, where the correction is made by the tribunal on its own initiative,
within 28 days of the date of the award or, in either case, such longer period as the parties may
agree.
(6) Any additional award shall be made within 56 days of the date of the original award or such
longer period as the parties may agree.
(7) Any correction of an award shall form part of the award.

Effect of award
58.(1) Unless otherwise agreed by the parties, an award made by the tribunal pursuant to an
arbitration agreement is final and binding both on the parties and on any persons claiming through
or under them.
(2) This does not affect the right of a person to challenge the award by any available arbitral
process of appeal or review or in accordance with the provisions of this Part.
Costs of the arbitration

Costs of the arbitration

59.(1) References in this Part to the costs of the arbitration are to

(a) the arbitrators fees and expenses,

(b) the fees and expenses of any arbitral institution concerned, and
(c) the legal or other costs of the parties.

(2) Any such reference includes the costs of or incidental to any proceedings to determine the
amount of the recoverable costs of the arbitration (see section 63).

Agreement to pay costs in any event

60. An agreement which has the effect that a party is to pay the whole or part of the costs of the
arbitration in any event is only valid if made after the dispute in question has arisen.

Award of costs
61.(1) The tribunal may make an award allocating the costs of the arbitration as between the
parties, subject to any agreement of the parties.
(2) Unless the parties otherwise agree, the tribunal shall award costs on the general principle that
costs should follow the event except where it appears to the tribunal that in the circumstances this
is not appropriate in relation to the whole or part of the costs.

Effect of agreement or award about costs

62. Unless the parties otherwise agree, any obligation under an agreement between them as to how
the costs of the arbitration are to be borne, or under an award allocating the costs of the
arbitration, extends only to such costs as are recoverable.

The recoverable costs of the arbitration

63.(1) The parties are free to agree what costs of the arbitration are recoverable.
(2) If or to the extent there is no such agreement, the following provisions apply.
(3) The tribunal may determine by award the recoverable costs of the arbitration on such basis as
it thinks fit.
If it does so, it shall specify

(a) the basis on which it has acted, and

(b) the items of recoverable costs and the amount referable to each.

(4) If the tribunal does not determine the recoverable costs of the arbitration, any party to the
arbitral proceedings may apply to the court (upon notice to the other parties) which may

(a) determine the recoverable costs of the arbitration on such basis as it thinks fit, or
(b) order that they shall be determined by such means and upon such terms as it may specify.

(5) Unless the tribunal or the court determines otherwise

(a) the recoverable costs of the arbitration shall be determined on the basis that there shall be
allowed a reasonable amount in respect of all costs reasonably incurred, and
(b) any doubt as to whether costs were reasonably incurred or were reasonable in amount
shall be resolved in favour of the paying party.

(6) The above provisions have effect subject to section 64 (recoverable fees and expenses of
arbitrators).
(7) Nothing in this section affects any right of the arbitrators, any expert, legal adviser or assessor
appointed by the tribunal, or any arbitral institution, to payment of their fees and expenses.

Recoverable fees and expenses of arbitrators

64.(1) Unless otherwise agreed by the parties, the recoverable costs of the arbitration shall
include in respect of the fees and expenses of the arbitrators only such reasonable fees and
expenses as are appropriate in the circumstances.
(2) If there is any question as to what reasonable fees and expenses are appropriate in the
circumstances, and the matter is not already before the court on an application under section 63(4),
the court may on the application of any party (upon notice to the other parties)

(a) determine the matter, or

(b) order that it be determined by such means and upon such terms as the court may specify.

(3) Subsection (1) has effect subject to any order of the court under section 24(4) or 25(3)(b)
(order as to entitlement to fees or expenses in case of removal or resignation of arbitrator).
(4) Nothing in this section affects any right of the arbitrator to payment of his fees and expenses.

Power to limit recoverable costs

65.(1) Unless otherwise agreed by the parties, the tribunal may direct that the recoverable costs
of the arbitration, or of any part of the arbitral proceedings, shall be limited to a specified amount.
(2) Any direction may be made or varied at any stage, but this must be done sufficiently in
advance of the incurring of costs to which it relates, or the taking of any steps in the proceedings
which may be affected by it, for the limit to be taken into account.
Powers of the court in relation to award

Enforcement of the award

66.(1) An award made by the tribunal pursuant to an arbitration agreement may, by leave of the
court, be enforced in the same manner as a judgment or order of the court to the same effect.
(2) Where leave is so given, judgment may be entered in terms of the award.
(3) Leave to enforce an award shall not be given where, or to the extent that, the person against
whom it is sought to be enforced shows that the tribunal lacked substantive jurisdiction to make
the award.

The right to raise such an objection may have been lost (see section 73).
(4) Nothing in this section affects the recognition or enforcement of an award under any other
enactment or rule of law, in particular under Part II of the Arbitration Act 1950 (enforcement of
awards under Geneva Convention) or the provisions of Part III of this Act relating to the
recognition and enforcement of awards under the New York Convention or by an action on the
award.

Challenging the award: substantive jurisdiction

67.(1) A party to arbitral proceedings may (upon notice to the other parties and to the tribunal)
apply to the court

(a) challenging any award of the arbitral tribunal as to its substantive jurisdiction; or
(b) for an order declaring an award made by the tribunal on the merits to be of no effect, in
whole or in part, because the tribunal did not have substantive jurisdiction.

A party may lose the right to object (see section 73) and the right to apply is subject to the
restrictions in section 70(2) and (3).
(2) The arbitral tribunal may continue the arbitral proceedings and make a further award while an
application to the court under this section is pending in relation to an award as to jurisdiction.
(3) On an application under this section challenging an award of the arbitral tribunal as to its
substantive jurisdiction, the court may by order

(a) confirm the award,

(b) vary the award, or
(c) set aside the award in whole or in part.

(4) The leave of the court is required for any appeal from a decision of the court under this
section.

Challenging the award: serious irregularity

68.(1) A party to arbitral proceedings may (upon notice to the other parties and to the tribunal)
apply to the court challenging an award in the proceedings on the ground of serious irregularity
affecting the tribunal, the proceedings or the award.
A party may lose the right to object (see section 73) and the right to apply is subject to the
restrictions in section 70(2) and (3).
(2) Serious irregularity means an irregularity of one or more of the following kinds which the
court considers has caused or will cause substantial injustice to the applicant

(a) failure by the tribunal to comply with section 33 (general duty of tribunal);
(b) the tribunal exceeding its powers (otherwise than by exceeding its substantive jurisdiction:
see section 67);

(c) failure by the tribunal to conduct the proceedings in accordance with the procedure agreed
by the parties;
(d) failure by the tribunal to deal with all the issues that were put to it;
(e) any arbitral or other institution or person vested by the parties with powers in relation to
the proceedings or the award exceeding its powers.
(f) uncertainty or ambiguity as to the effect of the award;
(g) the award being obtained by fraud or the award or the way in which it was procured being
contrary to public policy;
(h) failure to comply with the requirements as to the form of the award; or
(i) any irregularity in the conduct of the proceedings or in the award which is admitted by the
tribunal or by any arbitral or other institution or person vested by the parties with powers in
relation to the proceedings or the award.

(3) If there is shown to be serious irregularity affecting the tribunal, the proceedings or the award,
the court may

(a) remit the award to the tribunal, in whole or in part, for reconsideration,
(b) set the award aside in whole or in part, or
(c) declare the award to be of no effect, in whole or in part.

The court shall not exercise its power to set aside or to declare an award to be of no effect, in
whole or in part, unless it is satisfied that it would be inappropriate to remit the matters in question
to the tribunal for reconsideration.
(4) The leave of the court is required for any appeal from a decision of the court under this
section.

Appeal on point of law

69.(1) Unless otherwise agreed by the parties, a party to arbitral proceedings may (upon notice
to the other parties and to the tribunal) appeal to the court on a question of law arising out of an
award made in the proceedings.
An agreement to dispense with reasons for the tribunals award shall be considered an agreement
to exclude the courts jurisdiction under this section.
(2) An appeal shall not be brought under this section except

(a) with the agreement of all the other parties to the proceedings, or
(b) with the leave of the court.

The right to appeal is also subject to the restrictions in section 70(2) and (3).
(3) Leave to appeal shall be given only if the court is satisfied

(a) that the determination of the question will substantially affect the rights of one or more of
the parties,
(b) that the question is one which the tribunal was asked to determine,

(c) that, on the basis of the findings of fact in the award

o (i) the decision of the tribunal on the question is obviously wrong, or
o (ii) the question is one of general public importance and the decision of the tribunal is at
least open to serious doubt, and
(d) that, despite the agreement of the parties to resolve the matter by arbitration, it is just and
proper in all the circumstances for the court to determine the question.

(4) An application for leave to appeal under this section shall identify the question of law to be
determined and state the grounds on which it is alleged that leave to appeal should be granted.
(5) The court shall determine an application for leave to appeal under this section without a
hearing unless it appears to the court that a hearing is required.
(6) The leave of the court is required for any appeal from a decision of the court under this section
to grant or refuse leave to appeal.
(7) On an appeal under this section the court may by order

(a) confirm the award,

(b) vary the award,
(c) remit the award to the tribunal, in whole or in part, for reconsideration in the light of the
courts determination, or
(d) set aside the award in whole or in part.

The court shall not exercise its power to set aside an award, in whole or in part, unless it is
satisfied that it would be inappropriate to remit the matters in question to the tribunal for
reconsideration.
(8) The decision of the court on an appeal under this section shall be treated as a judgment of the
court for the purposes of a further appeal.
But no such appeal lies without the leave of the court which shall not be given unless the court
considers that the question is one of general importance or is one which for some other special
reason should be considered by the Court of Appeal.

Challenge or appeal: supplementary provisions

70.(1) The following provisions apply to an application or appeal under section 67, 68 or 69.
(2) An application or appeal may not be brought if the applicant or appellant has not first
exhausted

(a) any available arbitral process of appeal or review, and

(b) any available recourse under section 57 (correction of award or additional award).

(3) Any application or appeal must be brought within 28 days of the date of the award or, if there
has been any arbitral process of appeal or review, of the date when the applicant or appellant was
notified of the result of that process.

(4) If on an application or appeal it appears to the court that the award

(a) does not contain the tribunals reasons, or

(b) does not set out the tribunals reasons in sufficient detail to enable the court properly to
consider the application or appeal,

the court may order the tribunal to state the reasons for its award in sufficient detail for that
purpose.
(5) Where the court makes an order under subsection (4), it may make such further order as it
thinks fit with respect to any additional costs of the arbitration resulting from its order.
(6) The court may order the applicant or appellant to provide security for the costs of the
application or appeal, and may direct that the application or appeal be dismissed if the order is not
complied with.
The power to order security for costs shall not be exercised on the ground that the applicant or
appellant is

(a) an individual ordinarily resident outside the United Kingdom, or

(b) a corporation or association incorporated or formed under the law of a country outside the
United Kingdom, or whose central management and control is exercised outside the United
Kingdom.

(7) The Court may order that any money payable under the award shall be brought into court or
otherwise secured pending the determination of the application or appeal, and may direct that the
application or appeal be dismissed if the order is not complied with.
(8) The court may grant leave to appeal subject to conditions to the same or similar effect as an
order under subsection (6) or (7).
This does not affect the general discretion of the court to grant leave subject to conditions.

Challenge or appeal: effect of order of court

71.(1) The following provisions have effect where the court makes an order under section 67,
68 or 69 with respect to an award.
(2) Where the award is varied, the variation has effect as part of the tribunals award.
(3) Where the award is remitted to the tribunal, in whole or in part, for reconsideration, the
tribunal shall make a fresh award in respect of the matters remitted within three months of the date
of the order for remission or such longer or shorter period as the court may direct.
(4) Where the award is set aside or declared to be of no effect, in whole or in part, the court may
also order that any provision that an award is a condition precedent to the bringing of legal
proceedings in respect of a matter to which the arbitration agreement applies, is of no effect as
regards the subject matter of the award or, as the case may be, the relevant part of the award.
Miscellaneous

Saving for rights of person who takes no part in

proceedings
72.(1) A person alleged to be a party to arbitral proceedings but who takes no part in the
proceedings may question

(a) whether there is a valid arbitration agreement,

(b) whether the tribunal is properly constituted, or
(c) what matters have been submitted to arbitration in accordance with the arbitration
agreement,

by proceedings in the court for a declaration or injunction or other appropriate relief.

(2) He also has the same right as a party to the arbitral proceedings to challenge an award

(a) by an application under section 67 on the ground of lack of substantive jurisdiction in

relation to him, or
(b) by an application under section 68 on the ground of serious irregularity (within the
meaning of that section) affecting him;

and section 70(2) (duty to exhaust arbitral procedures) does not apply in his case.

Loss of right to object

73.(1) If a party to arbitral proceedings takes part, or continues to take part, in the proceedings
without making, either forthwith or within such time as is allowed by the arbitration agreement or
the tribunal or by any provision of this Part, any objection

(a) that the tribunal lacks substantive jurisdiction,

(b) that the proceedings have been improperly conducted,
(c) that there has been a failure to comply with the arbitration agreement or with any
provision of this Part, or
(d) that there has been any other irregularity affecting the tribunal or the proceedings, he may
not raise that objection later, before the tribunal or the court, unless he shows that, at the time
he took part or continued to take part in the proceedings, he did not know and could not with
reasonable diligence have discovered the grounds for the objection.

(2) Where the arbitral tribunal rules that it has substantive jurisdiction and a party to arbitral
proceedings who could have questioned that ruling

(a) by any available arbitral process of appeal or review, or

(b) by challenging the award, does not do so, or does not do so within the time allowed by the
arbitration agreement or any provision of this Part, he may not object later to the tribunals
substantive jurisdiction on any ground which was the subject of that ruling.

Immunity of arbitral institutions, &c.

74.(1) An arbitral or other institution or person designated or requested by the parties to appoint
or nominate an arbitrator is not liable for anything done or omitted in the discharge or purported
discharge of that function unless the act or omission is shown to have been in bad faith.
(2) An arbitral or other institution or person by whom an arbitrator is appointed or nominated is
not liable, by reason of having appointed or nominated him, for anything done or omitted by the
arbitrator (or his employees or agents) in the discharge or purported discharge of his functions as
arbitrator.
(3) The above provisions apply to an employee or agent of an arbitral or other institution or person
as they apply to the institution or person himself.

Charge to secure payment of solicitors costs

75. The powers of the court to make declarations and orders under section 73 of the Solicitors Act
1974 or Article 71H of the Solicitors (Northern Ireland) Order 1976 (power to charge property
recovered in the proceedings with the payment of solicitors costs) may be exercised in relation to
arbitral proceedings as if those proceedings were proceedings in the court.
Supplementary

Service of notices, &c.

76.(1) The parties are free to agree on the manner of service of any notice or other document
required or authorised to be given or served in pursuance of the arbitration agreement or for the
purposes of the arbitral proceedings.
(2) If or to the extent that there is no such agreement the following provisions apply.
(3) A notice or other document may be served on a person by any effective means.
(4) If a notice or other document is addressed, pre-paid and delivered by post

(a) to the addressees last known principal residence or, if he is or has been carrying on a
trade, profession or business, his last known principal business address, or
(b) where the addressee is a body corporate, to the bodys registered or principal office, it
shall be treated as effectively served.

(5) This section does not apply to the service of documents for the purposes of legal proceedings,
for which provision is made by rules of court.
(6) References in this Part to a notice or other document include any form of communication in
writing and references to giving or serving a notice or other document shall be construed
accordingly.

Powers of court in relation to service of documents

77.(1) This section applies where service of a document on a person in the manner agreed by
the parties, or in accordance with provisions of section 76 having effect in default of agreement, is
not reasonably practicable.

(2) Unless otherwise agreed by the parties, the court may make such order as it thinks fit

(a) for service in such manner as the court may direct, or

(b) dispensing with service of the document.

(3) Any party to the arbitration agreement may apply for an order, but only after exhausting any
available arbitral process for resolving the matter.
(4) The leave of the court is required for any appeal from a decision of the court under this
section.

Reckoning periods of time

78.(1) The parties are free to agree on the method of reckoning periods of time for the purposes
of any provision agreed by them or any provision of this Part having effect in default of such
agreement.
(2) If or to the extent there is no such agreement, periods of time shall be reckoned in accordance
with the following provisions.
(3) Where the act is required to be done within a specified period after or from a special date, the
period begins immediately after that date.
(4) Where the act is required to be done a specified number of clear days after a specified date, at
least that number of days must intervene between the day on which the act is done and that date.
(5) Where the period is a period of seven days or less which would include a Saturday, Sunday or
a public holiday in the place where anything which has to be done within the period falls to be
done, that day shall be excluded.
In relation to England and Wales or Northern Ireland, a public holiday means Christmas Day,
Good Friday or a day which under the Banking and Financial Dealings Act 1971 is a bank
holiday.

Power of court to extend time limits relating to arbitral

proceedings
79.(1) Unless the parties otherwise agree, the court may by order extend any time limit agreed
by them in relation to any matter relating to the arbitral proceedings or specified in any provision
of this Part having effect in default of such agreement.
This section does not apply to a time limit to which section 12 applies (power to court to extend
time for beginning arbitral proceedings, &c.).
(2) An application for an order may be made

(a) by any party to the arbitral proceedings (upon notice to the other parties and to the
tribunal), or
(b) by the arbitral tribunal (upon notice to the parties).

(3) The court shall not exercise its power to extend a time limit unless it is satisfied

(a) that any available recourse to the tribunal, or to any arbitral or other institution or person
vested by the parties with power in that regard, has first been exhausted, and
(b) that a substantial injustice would otherwise be done.

(4) The courts power under this section may be exercised whether or not the time has already
expired.
(5) An order under this section may be made on such terms as the court thinks fit.
(6) The leave of the court is required for any appeal from a decision of the court under this
section.

Notice and other requirements in connection with legal

proceedings
80.(1) References in this Part to an application, appeal or other step in relation to legal
proceedings being taken upon notice to the other parties to the arbitral proceedings, or to the
tribunal, are to such notice of the originating process as is required by rules of court and do not
impose any separate requirement.
(2) Rules of court shall be made

(a) requiring such notice to be given as indicated by any provision of this Part, and
(b) as to the manner, form and content of any such notice.

(3) Subject to any provision made by rules of court, a requirement to give notice to the tribunal of
legal proceedings shall be construed

(a) if there is more than one arbitrator, as a requirement to give notice to each of them, and
(b) if the tribunal is not fully constituted, as a requirement to give notice to any arbitrator who
has been appointed.

(4) References in this Part to making an application or appeal to the court within a specified period
are to the issue within that period of the appropriate originating process in accordance with rules
of court.
(5) Where any provision of this part requires an application or appeal to be made to the court
within a specified time, the rules of court relating to the reckoning of periods, the extending or
abridging of periods, and the consequences of not taking a step within the period prescribed by the
rules, apply in relation to that requirement.
(6) Provision may be made by rules of court amending the provisions of this Part

(a) with respect to the time within which any application to the court must be made,

(b) so as to keep any provision made by this Part in relation to arbitral proceedings in step
with the corresponding provision of rules of court applying in relation to proceedings in the
court, or
(c) so as to keep any provision made by this Part in relation to legal proceedings in step with
the corresponding provision of rules of court applying generally in relation to proceedings in
the court.

(7) Nothing in this section affects the generality of the power to make rules of court.

Saving for certain matters governed by common law

81.(1) Nothing in this Part shall be construed as excluding the operation of any rule of law
consistent with the provisions of this Part, in particular, to any rule of law as to

(a) matters which are not capable of settlement by arbitration;

(b) the effect of an oral arbitration agreement; or
(c) the refusal of recognition or enforcement of an arbitral award on grounds of public policy.

(2) Nothing in this Act shall be construed as reviving any jurisdiction of the court to set aside or
remit an award on the ground of errors of fact or law on the face of the award.

Minor definitions
82.(1) In this Part
arbitrator, unless the context otherwise requires, includes an umpire;
available arbitral process, in relation to any matter, includes any process of appeal to or review
by an arbitral or other institution or person vested by the parties with powers in relation to that
matter;
claimant, unless the context otherwise requires, includes a counterclaimant, and related
expressions shall be construed accordingly;
dispute includes any difference;
enactment includes an enactment contained in Northern Ireland legislation;
legal proceedings means civil proceedings in the High Court or a county court;
peremptory order means an order made under section 41(5) or made in exercise of any
corresponding power conferred by the parties;
premises includes land, buildings, moveable structures, vehicles, vessels, aircraft and
hovercraft;
question of law means

(a) for a court in England and Wales, a question of the law of England and Wales, and
(b) for a court in Northern Ireland, a question of the law of Northern Ireland;

substantive jurisdiction, in relation to an arbitral tribunal, refers to the matters specified in

section 30(1)(a) to (c), and references to the tribunal exceeding its substantive jurisdiction shall be
construed accordingly.
(2) References in this Part to a party to an arbitration agreement include any person claiming
under or through a party to the agreement.

Index of defined expressions: Part I

83. In this Part the expressions listed below are defined or otherwise explained by the provisions
indicated

agreement, agree and agreed

section 5(1)

agreement in writing

section 5(2) to (5)

arbitration agreement

sections 6 and 5(1)

arbitrator

section 82(1)

available arbitral process

section 82(1)

claimant

section 82(1)

commencement (in relation to

arbitral proceedings)

section 14

costs of the arbitration

section 59

the court

section 105

dispute

section 82(1)

enactment

section 82(1)

legal proceedings

section 82(1)

Limitation Acts

section 13(4)

notice (or other document)

section 76(6)

party
in relation to an arbitration
agreement

section 82(2)

where section 106(2) or (3)

applies

section 106(4)

peremptory order

section 82(1) (and see

section 41(5))

premises

section 82(1)

question of law

section 82(1)

recoverable costs

sections 63 and 64

seat of the arbitration

section 3

serve and service (of notice or other

document)

section 76(6)

substantive jurisdiction (in relation

to an arbitral tribunal)

section 82(1) (and see

section 30(1)(a) to (c))

upon notice (to the parties or the

tribunal)

section 80

written and in writing

section 5(6)

Transitional provisions

84.(1) The provisions of this Part do not apply to arbitral proceedings commenced before the
date on which this Part comes into force.
(2) They apply to arbitral proceedings commenced on or after that date under an arbitration
agreement whenever made.
(3) The above provisions have effect subject to any transitional provision made by an order under
section 109(2) (power to include transitional provisions in commencement order).

PART II. OTHER PROVISIONS RELATING TO ARBITRATION

Domestic arbitration agreements

Modification of Part I in relation to domestic arbitration

agreement
85.(1) In the case of a domestic arbitration agreement the provisions of Part I are modified in
accordance with the following sections.
(2) For this purpose a domestic arbitration agreement means an arbitration agreement to which
none of the parties is

(a) an individual who is a national of, or habitually resident in, a state other than the United
Kingdom, or
(b) a body corporate which is incorporated in, or whose central control and management is
exercised in, a state other than the United Kingdom,

and under which the seat of the arbitration (if the seat has been designated or determined) is in the
United Kingdom.
(3) In subsection (2) arbitration agreement and seat of the arbitration have the same meaning
as in Part I (see sections 3, 5(1) and 6).

Staying of legal proceedings

86.(1) In section 9 (stay of legal proceedings), subsection (4) (stay unless the arbitration
agreement is null and void, inoperative, or incapable of being performed) does not apply to a
domestic arbitration agreement.
(2) On an application under that section in relation to a domestic arbitration agreement the court
shall grant a stay unless satisfied

(a) that the arbitration agreement is null and void, inoperative, or incapable of being
performed, or
(b) that there are other sufficient grounds for not requiring the parties to abide by the
arbitration agreement.

(3) The court may treat as a sufficient ground under subsection (2)(b) the fact that the applicant is
or was at any material time not ready and willing to do all things necessary for the proper conduct

of the arbitration or of any other dispute resolution procedures required to be exhausted before
resorting to arbitration.
(4) For the purposes of this section the question whether an arbitration agreement is a domestic
arbitration agreement shall be determined by reference to the facts at the time the legal
proceedings are commenced.

Effectiveness of agreement to exclude courts jurisdiction

87.(1) In the case of a domestic arbitration agreement any agreement to exclude the jurisdiction
of the court under

(a) section 45 (determination of preliminary point of law), or

(b) section 69 (challenging the award: appeal on point of law),

is not effective unless entered into after the commencement of the arbitral proceedings in which
the question arises or the award is made.
(2) For this purpose the commencement of the arbitral proceedings has the same meaning as in
Part I (see section 14).
(3) For the purposes of this section the question whether an arbitration agreement is a domestic
arbitration agreement shall be determined by reference to the facts at the time the agreement is
entered into.

Power to repeal or amends ss. 85 to 87

88.(1) The Secretary of State may by order repeal or amend the provisions of sections 85 to 87.
(2) An order under this section may contain such supplementary, incidental and transitional
provisions as appear to the Secretary of State to be appropriate.
(3) An order under this section shall be made by statutory instrument and no such order shall be
made unless a draft of it has been laid before and approved by a resolution of each House of
Parliament.
Consumer arbitration agreements

Application of unfair terms regulations to consumer

arbitration agreements
89.(1) The following sections extend the application of the Unfair Terms in Consumer
Contracts Regulations 1994 in relation to a term which constitutes an arbitration agreement.
For this purpose arbitration agreement means an agreement to submit to arbitration present or
future disputes or differences (whether or not contractual).
(2) In those sections the Regulations means those regulations and includes any regulations
amending or replacing those regulations.
(3) Those sections apply whatever the law applicable to the arbitration agreement.

Regulations apply where consumer is a legal person

90. The Regulations apply where the consumer is a legal person as they apply where the consumer
is a natural person.

Arbitration agreement unfair where modest amount

sought
91.(1) A term which constitutes an arbitration agreement is unfair for the purposes of the
Regulations so far as it relates to a claim for a pecuniary remedy which does not exceed the
amount specified by order for the purposes of this section.
(2) Orders under this section may make different provision for different cases and for different
purposes.
(3) The power to make orders under this section is exercisable

(a) for England and Wales, by the Secretary of State with the concurrence of the Lord
Chancellor,
(b) for Scotland, by the Secretary of State with the concurrence of the Lord Advocate, and
(c) for Northern Ireland, by the Department of Economic Development for Northern Ireland
with the concurrence of the Lord Chancellor.

(4) Any such order for England and Wales or Scotland shall be made by statutory instrument
which shall be subject to annulment in pursuance of a resolution of either House of Parliament.
(5) Any such order for Northern Ireland shall be a statutory rule for the purposes of the Statutory
Rules (Northern Ireland) Order 1979 and shall be subject to negative resolution, within the
meaning of section 41(6) of the Interpretation Act (Northern Ireland) 1954.
Small claims arbitration in the county court

Exclusion of Part I in relation to small claims arbitration

in the county court
92. Nothing in Part I of this Act applies to arbitration under section 64 of the County Courts Act
1984.
Appointment of judges as arbitrators

Appointment of judges as arbitrators

93.(1) A judge of the Commercial Court or an official referee may, if in all the circumstances he
thinks fit, accept appointment as a sole arbitrator or as umpire by or by virtue of an arbitration
agreement.
(2) A judge of the Commercial Court shall not do so unless the Lord Chief Justice has informed
him that, having regard to the state of business in the High Court and the Crown Court, he can be
made available.

(3) An official referee shall not do so unless the Lord Chief Justice has informed him that, having
regard to the state of official referees business, he can be made available.
(4) The fees payable for the services of a judge of the Commercial Court or official referee as
arbitrator or umpire shall be taken in the High Court.
(5) In this section
arbitration agreement has the same meaning as in Part I; and
official referee means a person nominated under section 68(1)(a) of the Supreme Court Act
1981 to deal with official referees business.
(6) The provisions of Part I of this Act apply to arbitration before a person appointed under this
section with the modifications specified in Schedule 2.
Statutory arbitrations

Application of Part I to statutory arbitrations

94.(1) The provisions of Part I apply to every arbitration under an enactment (a statutory
arbitration), whether the enactment was passed or made before or after the commencement of this
Act, subject to the adaptations and exclusions specified in sections 95 to 98.
(2) The provisions of Part I do not apply to a statutory arbitration if or to the extent that their
application

(a) is inconsistent with the provisions of the enactment concerned, with any rules or
procedure authorised or recognised by it, or
(b) is excluded by any other enactment.

(3) In this section and the following provisions of this Part enactment

(a) in England and Wales, includes an enactment contained in subordinate legislation within
the meaning of the Interpretation Act 1978;
(b) in Northern Ireland, means a statutory provision within the meaning of section 1(f) of the
Interpretation Act (Northern Ireland) 1954.

General adaptation of provisions in relation to statutory

arbitrations
95.(1) The provisions of Part I apply to a statutory arbitration

(a) as if the arbitration were pursuant to an arbitration agreement and as if the enactment were
that agreement, and
(b) as if the persons by and against whom a claim subject to arbitration in pursuance of the
enactment may be or has been made were parties to that agreement.

(2) Every statutory arbitration shall be taken to have its seat in England and Wales or, as the case
may be, in Northern Ireland.

Specific adaptations of provisions in relation to statutory

arbitrations
96.(1) The following provisions of Part I apply to a statutory arbitration with the following
adaptations.
(2) In section 30(1) (competence of tribunal to rule on its own jurisdiction), the reference in
paragraph (a) to whether there is a valid arbitration agreement shall be construed as a reference to
whether the enactment applies to the dispute or difference in question.
(3) Section 35 (consolidation of proceedings and concurrent hearings) applies only so as to
authorise the consolidation of proceedings, or concurrent hearings in proceedings, under the same
enactment.
(4) Section 46 (rules applicable to substance of dispute) applies with the omission of subsection
(1)(b) (determination in accordance with considerations agreed by parties).

Provisions excluded from applying to statutory

arbitrations
97. The following provisions of Part I do not apply in relation to a statutory arbitration

(a) section 8 (whether agreement discharged by death of a party);

(b) section 12 (power of court to extend agreed time limits);
(c) sections 9(5), 10(2) and 71(4) (restrictions on effect of provision that award condition
precedent to right to bring legal proceedings).

Power to make further provision by regulations

98.(1) The Secretary of State may make provision by regulations for adapting or excluding any
provision of Part I in relation to statutory arbitrations in general or statutory arbitrations of any
particular description.
(2) The power is exercisable whether the enactment concerned is passed or made before or after
the commencement of this Act.
(3) Regulations under this section shall be made by statutory instrument which shall be subject to
annulment in pursuance of a resolution of either House of Parliament.

PART III. RECOGNITION AND ENFORCEMENT OF CERTAIN FOREIGN

AWARDS
Enforcement of Geneva Convention awards

Continuation of Part II of the Arbitration Act 1950

99. Part II of the Arbitration Act 1950 (enforcement of certain foreign awards) continues to apply
in relation to foreign awards within the meaning of that Part which are not also New York
Convention awards.
Recognition and enforcement of New York Convention awards

New York Convention awards

100.(1) In this Part a New York Convention award means an award made, in pursuance of an
arbitration agreement, in the territory of a state (other than the United Kingdom) which is a party
to the New York Convention.
(2) For the purposes of subsection (1) and of the provisions of this Part relating to such awards

(a) arbitration agreement means an arbitration agreement in writing, and

(b) an award shall be treated as made at the seat of the arbitration, regardless of where it was
signed, despatched or delivered to any of the parties.

In this subsection agreement in writing and seat of the arbitration have the same meaning as
in Part I.
(3) If Her Majesty by Order in Council declares that a state specified in the Order is a party to the
New York Convention, or is a party in respect of any territory so specified, the Order shall, while
in force, be conclusive evidence of that fact.
(4) In this section the New York Convention means the Convention on the Recognition and
Enforcement of Foreign Arbitral Awards adopted by the United Nations Conference on
International Commercial Arbitration on 10th June 1958.

Recognition and enforcement of awards

101.(1) A New York Convention award shall be recognised as binding on the persons as
between whom it was made, and may accordingly be relied on by those persons by way of
defence, set-off or otherwise in any legal proceedings in England and Wales or Northern Ireland.
(2) A New York Convention award may, by leave of the High Court or a county court, be
enforced in the same manner as a judgment or order of that court to the same effect.
As to the meaning of the court see section 105.
(3) Where leave is so given, judgment may be entered in terms of the award.

Evidence to be produced by party seeking recognition or

enforcement
102.(1) A party seeking the recognition or enforcement of a New York Convention award must
produce

(a) the duly authenticated original award or a duly certified copy of it, and
(b) the original arbitration agreement or a duly certified copy of it.

(2) If the award or agreement is in a foreign language, the party must also produce a translation of
it certified by an official or sworn translator or by a diplomatic or consular agent.

Refusal of recognition or enforcement

103.(1) Recognition or enforcement of a New York Convention award shall not be refused
except in the following cases.
(2) Recognition or enforcement of the award may be refused if the person against whom it is
invoked proves

(a) that a party to the arbitration agreement was (under the law applicable to him) under some
incapacity;
(b) that the arbitration agreement was not valid under the law to which the parties subjected it
or, failing any indication thereon, under the law of the country where the award was made;
(c) that he was not given proper notice of the appointment of the arbitrator or of the
arbitration proceedings or was otherwise unable to present his case;
(d) that the award deals with a difference not contemplated by or not falling within the terms
of the submission to arbitration or contains decisions on matters beyond the scope of the
submission to arbitration (but see subsection (4));
(e) that the composition of the arbitral tribunal or the arbitral procedure was not in accordance
with the agreement of the parties or, failing such agreement, with the law of the country in
which the arbitration took place;
(f) that the award has not yet become binding on the parties, or has been set aside or
suspended by a competent authority of the country in which, or under the law of which, it was
made.

(3) Recognition or enforcement of the award may also be refused if the award is in respect of a
matter which is not capable of settlement by arbitration, or if it would be contrary to public policy
to recognise or enforce the award.
(4) An award which contains decisions on matters not submitted to arbitration may be recognised
or enforced to the extent that it contains decisions on matters submitted to arbitration which can be
separated from those on matters not so submitted.
(5) Where an application for the setting aside or suspension of the award has been made to such a
competent authority as is mentioned in subsection (2)(f), the court before which the award is
sought to be relied upon may, if it considers it proper, adjourn the decision on the recognition or
enforcement of the award.
It may also on the application of the party claiming recognition or enforcement of the award order
the other party to give suitable security.

Saving for other bases of recognition or enforcement

104. Nothing in the preceding provisions of this Part affects any right to rely upon or enforce a
New York Convention award at common law or under section 66.

PART IV. GENERAL PROVISIONS

Meaning of the court: jurisdiction of High Court and

county court
105.(1) In this Act the court means the High Court or a county court, subject to the following
provisions.
(2) The Lord Chancellor may by order make provision

(a) allocating proceedings under this Act to the High Court or to county courts; or
(b) specifying proceedings under this Act which may be commenced or taken only in the
High Court or in a county court.

(3) The Lord Chancellor may by order make provision requiring proceedings of any specified
description under this Act in relation to which a county court has jurisdiction to be commenced or
taken in one or more specified county courts.
Any jurisdiction so exercisable by a specified county court is exercisable throughout England and
Wales or, as the case may be, Northern Ireland.
(4) An order under this section

(a) may differentiate between categories of proceedings by reference to such criteria as the
Lord Chancellor sees fit to specify, and
(b) may make such incidental or transitional provision as the Lord Chancellor considers
necessary or expedient.

(5) An order under this section for England and Wales shall be made by statutory instrument
which shall be subject to annulment in pursuance of a resolution of either House of Parliament.
(6) An order under this section for Northern Ireland shall be a statutory rule for the purposes of the
Statutory Rules (Northern Ireland) Order 1979 which shall be subject to annulment in pursuance
of a resolution of either House of Parliament in like manner as a statutory instrument and section 5
of the Statutory Instruments Act 1946 shall apply accordingly.

Crown application
106.(1) Part I of this Act applies to any arbitration agreement to which Her Majesty, either in
right of the Crown or of the Duchy of Lancaster or otherwise, or the Duke of Cornwall, is a party.
(2) Where Her Majesty is party to an arbitration agreement otherwise than in right of the Crown,
Her Majesty shall be represented for the purposes of any arbitral proceedings

(a) where the agreement was entered into by Her Majesty in right of the Duchy of Lancaster,
by the Chancellor of the Duchy or such person as he may appoint, and
(b) in any other case, by such person as Her Majesty may appoint in writing under the Royal
Sign Manual.

(3) Where the Duke of Cornwall is party to an arbitration agreement, he shall be represented for
the purposes of any arbitral proceedings by such person as he may appoint.
(4) References in Part I to a party or the parties to the arbitration agreement or to arbitral
proceedings shall be construed, where subsection (2) or (3) applies, as references to the person
representing Her Majesty or the Duke of Cornwall.

Consequential amendments and repeals

107.(1) The enactments specified in Schedule 3 are amended in accordance with that Schedule,
the amendments being consequential on the provisions of this Act.
(2) The enactments specified in Schedule 4 are repealed to the extent specified.

Extent
108.(1) The provisions of this Act extend to England and Wales and, except as mentioned
below, to Northern Ireland.
(2) The following provisions of Part II do not extend to Northern Ireland
section 92 (exclusion of Part I in relation to small claims arbitration in the county court), and
section 93 and Schedule 2 (appointment of judges as arbitrators).
(3) Sections 89, 90 and 91 (consumer arbitration agreements) extend to Scotland and the
provisions of Schedules 3 and 4 (consequential amendments and repeals) extend to Scotland so far
as they relate to enactments which so extend, subject as follows.
(4) The repeal of the Arbitration Act 1975 extends only to England and Wales and Northern
Ireland.

Commencement
109.(1) The provisions of this Act come into force on such day as the Secretary of State may
appoint by order made by statutory instrument, and different days may be appointed for different
purposes.
(2) An order under subsection (1) may contain such transitional provisions as appear to the
Secretary of State to be appropriate.

Short title
110. This Act may be cited as the Arbitration Act 1996.
SCHEDULES

Section 4(1). SCHEDULE 1. MANDATORY PROVISIONS OF PART I

sections 9 to 11 (stay of legal proceedings);
section 12 (power of court to extend agreed time limits);
section 13 (application of Limitation Acts);

section 24 (power of court to remove arbitrator);

section 26(1) (effect of death of arbitrator);
section 28 (liability of parties for fees and expenses of arbitrators);
section 29 (immunity of arbitrator);
section 31 (objection to substantive jurisdiction of tribunal);
section 32 (determination of preliminary point of jurisdiction);
section 33 (general duty of tribunal);
section 37(2) (items to be treated as expenses of arbitrators);
section 40 (general duty of parties);
section 43 (securing the attendance of witnesses);
section 56 (power to withhold award in case of non-payment);
section 60 (effectiveness of agreement for payment of costs in any event);
section 66 (enforcement of award);
sections 67 and 68 (challenging the award: substantive jurisdiction and serious irregularity), and
sections 70 and 71 (supplementary provisions; effect of order of court) so far as relating to those
sections;
section 72 (saving for rights of person who takes no part in proceedings);
section 73 (loss of right to object);
section 74 (immunity of arbitral institutions, &c.);
section 75 (charge to secure payment of solicitors costs).

Section 93(6). SCHEDULE 2. MODIFICATIONS OF PART I IN RELATION

TO JUDGE-ARBITRATORS
Introductory
1. In this Schedule judge-arbitrator means a judge of the Commercial Court or official referee
appointed as arbitrator or umpire under section 93.
General
2.(1) Subject to the following provisions of this Schedule, references in Part I to the court shall
be construed in relation to a judge-arbitrator, or in relation to the appointment of a judgearbitrator, as references to the Court of Appeal.
(2) The references in sections 32(6), 45(6) and 69(8) to the Court of Appeal shall in such a case be
construed as references to the House of Lords.
Arbitrators fees

3.(1) The power of the court in section 28(2) to order consideration and adjustment of the
liability of a party for the fees of an arbitrator may be exercised by a judge-arbitrator.
(2) Any such exercise of the power is subject to the powers of the Court of Appeal under sections
24(4) and 25(3)(b) (directions as to entitlement to fees or expenses in case of removal or
resignation).
Exercise of court powers in support of arbitration
4.(1) Where the arbitral tribunal consists of or includes a judge-arbitrator the powers of the
court under sections 42 to 44 (enforcement of peremptory orders, summoning witnesses, and other
court powers) are exercisable by the High Court and also by the judge-arbitrator himself.
(2) Anything done by a judge-arbitrator in the exercise of those powers shall be regarded as done
by him in his capacity as judge of the High Court and have effect as if done by that court.
Nothing in this sub-paragraph prejudices any power vested in him as arbitrator or umpire.
Extension of time for making award
5.(1) The power conferred by section 50 (extension of time for making award) is exercisable by
the judge-arbitrator himself.
(2) Any appeal from a decision of a judge-arbitrator under that section lies to the Court of Appeal
with the leave of that court.
Withholding award in case of non-payment
6.(1) The provisions of paragraph 7 apply in place of the provisions of section 56 (power to
withhold award in the case of non-payment) in relation to the withholding of an award for
nonpayment of the fees and expenses of a judge-arbitrator.
(2) This does not affect the application of section 56 in relation to the delivery of such an award
by an arbitral or other institution or person vested by the parties with powers in relation to the
delivery of the award.
7.(1) A judge-arbitrator may refuse to deliver an award except upon payment of the fees and
expenses mentioned in section 56(1).
(2) The judge-arbitrator may, on an application by a party to the arbitral proceedings, order that if
he pays into the High Court the fees and expenses demanded, or such lesser amount as the judgearbitrator may specify

(a) the award shall be delivered.

(b) the amount of the fees and expenses properly payable shall be determined by such means
and upon such terms as he may direct, and
(c) out of the money paid into court there shall be paid out such fees and expenses as may be
found to be properly payable and the balance of the money (if any) shall be paid out to the
applicant.

(3) For this purpose the amount of fees and expenses properly payable is the amount the applicant
is liable to pay under section 28 or any agreement relating to the payment of the arbitrator.
(4) No application to the judge-arbitrator under this paragraph may be made where there is any
available arbitral process for appeal or review of the amount of the fees or expenses demanded.
(5) Any appeal from a decision of a judge-arbitrator under this paragraph lies to the Court of
Appeal with the leave of that court.
(6) Where a party to arbitral proceedings appeals under sub-paragraph (5), an arbitrator is entitled
to appear and be heard.
Correction of award or additional award
8. Subsections (4) to (6) of section 57 (correction of award or additional award: time limit for
application or exercise of power) do not apply to a judge-arbitrator.
Costs
9. Where the arbitral tribunal consists of or includes a judge-arbitrator the powers of the court
under section 63(4) (determination of recoverable costs) shall be exercised by the High Court.
10.(1) The power of the court under section 64 to determine an arbitrators reasonable fees and
expenses may be exercised by a judge-arbitrator.
(2) Any such exercise of the power is subject to the powers of the Court of Appeal under sections
24(4) and 25(3)(b) (directions as to entitlement to fees or expenses in case of removal or
resignation).
Enforcement of award
11. The leave of the court required by section 66 (enforcement of award) may in the case of an
award of a judge-arbitrator be given by the judge-arbitrator himself.
Solicitors costs
12. The powers of the court to make declarations and orders under the provisions applied by
section 75 (power to charge property recovered in arbitral proceedings with the payment of
solicitors costs) may be exercised by the judge-arbitrator.
Powers of court in relation to service of documents
13.(1) The power of the court under section 77(2) (powers of court in relation to service of
documents) is exercisable by the judge-arbitrator.
(2) Any appeal from a decision of a judge-arbitrator under that section lies to the Court of Appeal
with the leave of that court.
Powers of court to extend time limits relating to arbitral proceedings
14.(1) The power conferred by section 79 (power of court to extend time limits relating to
arbitral proceedings) is exercisable by the judge-arbitrator himself.

(2) Any appeal from a decision of a judge-arbitrator under that section lies to the Court of Appeal
with the leave of that court.

Section 107(1). SCHEDULE 3. CONSEQUENTIAL AMENDMENTS

Merchant Shipping Act 1894 (c.60)
1. In section 496 of the Merchant Shipping Act 1894 (provisions as to deposits by owners of
goods), after subsection (4) insert
(5) In subsection (3) the expression legal proceedings includes arbitral proceedings and as
respects England and Wales and Northern Ireland the provisions of section 14 of the Arbitration
Act 1996 apply to determine when such proceedings are commenced..
Stannaries Court (Abolition) Act 1896 (c.45)
2. In section 4(1) of the Stannaries Court (Abolition) Act 1896 (references of certain disputes to
arbitration), for the words from tried before to any such reference substitute referred to
arbitration before himself or before an arbitrator agreed on by the parties or an officer of the
court.
Tithe Act 1936 (c.43)
3. In section 39(1) of the Tithe Act 1936 (proceedings of Tithe Redemption Commission)

(a) for the Arbitration Acts 1889 to 1934 substitute Part I of the Arbitration Act 1996;
(b) for paragraph (e) substitute

(e) the making of an application to the court to determine a preliminary point of law and the
bringing of an appeal to the court on a point of law;;

(c) for the said Acts substitute Part I of the Arbitration Act 1996.

Education Act 1944 (c.31)

4. In section 75(2) of the Education Act 1944 (proceedings of Independent School Tribunals) for
the Arbitration Acts 1889 to 1934 substitute Part I of the Arbitration Act 1996.
Commonwealth Telegraphs Act 1949 (c.39)
5. In section 8(2) of the Commonwealth Telegraphs Act 1949 (proceedings of referees under the
Act) for the Arbitration Acts 1889 to 1934, or the Arbitration Act (Northern Ireland) 1937,
substitute Part I of the Arbitration Act 1996.
Lands Tribunal Act 1949 (c.42)
6. In section 3 of the Lands Tribunal Act 1949 (proceedings before the Lands Tribunal)

(a) in subsection (6)(c) (procedural rules: power to apply Arbitration Acts), and
(b) in subsection (8) (exclusion of Arbitration Acts except as applied by rules), for the
Arbitration Acts 1889 to 1934 substitute Part I of the Arbitration Act 1996.

Wireless Telegraphy Act 1949 (c.54)

7. In the Wireless Telegraphy Act 1949, Schedule 2 (procedure of appeals tribunal), in paragraph
3(1)

(a) for the words the Arbitration Acts 1889 to 1934 substitute Part I of the Arbitration Act
1996;
(b) after the word Wales insert or Northern Ireland; and
(c) for the said Acts substitute Part I of that Act.

Patents Act 1949 (c.87)

8. In section 67 of the Patents Act 1949 (proceedings as to infringement of pre-1978 patents
referred to comptroller), for The Arbitration Acts 1889 to 1934 substitute Part I of the
Arbitration Act 1996.
National Health Service (Amendment) Act 1949 (c.93)
9. In section 7(8) of the National Health Service (Amendment) Act 1949 (arbitration in relation to
hardship arising from the National Health Service Act 1946 or the Act), for the Arbitration Acts
1889 to 1934 substitute Part I of the Arbitration Act 1996 and for the said Acts substitute
Part I of that Act.
Arbitration Act 1950 (c.27)
10. In section 36(1) of the Arbitration Act 1950 (effect of foreign awards enforceable under Part II
of that Act) for section 26 of this Act substitute section 66 of the Arbitration Act 1996.
Interpretation Act (Northern Ireland) 1954 (c.33 (N.I.))
11. In section 46(2) of the Interpretation Act (Northern Ireland) 1954 (miscellaneous definitions),
for the definition of arbitrator substitute
arbitrator has the same meaning as in Part I of the Arbitration Act 1996;.
Agricultural Marketing Act 1958 (c.47)
12. In section 12(1) of the Agricultural Marketing Act 1958 (application of provisions of
Arbitration Act 1950)

(a) for the words from the beginning to shall apply substitute Sections 45 and 69 of the
Arbitration Act 1996 (which relate to the determination by the court of questions of law) and
section 66 of that Act (enforcement of awards) apply; and
(b) for an arbitration substitute arbitral proceedings.

Carriage by Air Act 1961 (c.27)

13.(1) The Carriage by Air Act 1961 is amended as follows.
(2) In section 5(3) (time for bringing proceedings)

(a) for an arbitration in the first place where it occurs substitute arbitral proceedings; and

(b) for the words from and subsections (3) and (4) to the end substitute and the provisions
of section 14 of the Arbitration Act 1996 apply to determine when such proceedings are
commenced..

(3) In section 11(c) (application of section 5 to Scotland)

(a) for subsections (3) and (4) substitute the provisions of section 14 of the Arbitration Act
1996; and
(b) for an arbitration substitute arbitral proceedings.

Factories Act 1961 (c.34)

14. In the Factories Act 1961, for section 171 (application of Arbitration Act 1950), substitute

Application of the Arbitration Act 1996

171. Part I of the Arbitration Act 1996 does not apply to proceedings under this Act except in so
far as it may be applied by regulations made under this Act..
Clergy Pensions Measure 1961 (No. 3)
15. In the Clergy Pensions Measure 1961, section 38(4) (determination of questions), for the
words The Arbitration Act 1950 substitute Part I of the Arbitration Act 1996.
Transport Act 1962 (c.46)
16.(1) The Transport Act 1962 is amended as follows.
(2) In section 74(6)(f) (proceedings before referees in pension disputes), for the words the
Arbitration Act 1950 substitute Part I of the Arbitration Act 1996.
(3) In section 81(7) (proceedings before referees in compensation disputes), for the words the
Arbitration Act 1950 substitute Part I of the Arbitration Act 1996.
(4) In Schedule 7, Part IV (pensions), in paragraph 17(5) for the words the Arbitration Act 1950
substitute Part I of the Arbitration Act 1996.
Corn Rents Act 1963 (c.14)
17. In the Corn Rents Act 1963, section 1(5) (schemes for apportioning corn rents, &c.), for the
words the Arbitration Act 1950 substitute Part I of the Arbitration Act 1996.
Plant Varieties and Seeds Act 1964 (c.14)
18. In section 10(6) of the Plant Varieties and Seeds Act 1964 (meaning of arbitration
agreement), for the meaning given by section 32 of the Arbitration Act 1950 substitute the
same meaning as in Part I of the Arbitration Act 1996.
Lands Tribunal and Compensation Act (Northern Ireland) 1964 (c.29 (N.I.))
19. In section 9 of the Lands Tribunal and Compensation Act (Northern Ireland) 1964
(proceedings of Lands Tribunal), in subsection (3) (where Tribunal acts as arbitrator) for the
Arbitration Act (Northern Ireland) 1937 substitute Part I of the Arbitration Act 1996.

Industrial and Provident Societies Act 1965 (c.12)

20.(1) Section 60 of the Industrial and Provident Societies Act 1965 is amended as follows.
(2) In subsection (8) (procedure for hearing disputes between society and member, &c.)

(a) in paragraph (a) for the Arbitration Act 1950 substitute Part I of the Arbitration Act
1996; and
(b) in paragraph (b) omit by virtue of section 12 of the said Act of 1950.

(3) For subsection (9) substitute

(9) The court or registrar to whom any dispute is referred under subsections (2) to (7) may at the
request of either party state a case on any question of law arising in the dispute for the opinion of
the High Court or, as the case may be, the Court of Session..
Carriage of Goods by Road Act 1965 (c.37)
21. In section 7(2) of the Carriage of Goods by Road Act 1965 (arbitrations: time at which
deemed to commence), for paragraphs (a) and (b) substitute
(a) as respects England and Wales and Northern Ireland, the provisions of section 14(3) to (5) of
the Arbitration Act 1996 (which determine the time at which an arbitration is commenced)
apply;.
Factories Act (Northern Ireland) 1965 (c.20 (N.I.))
22. In section 171 of the Factories Act (Northern Ireland) 1965 (application of Arbitration Act),
for The Arbitration Act (Northern Ireland) 1937 substitute Part I of the Arbitration Act 1996.
Commonwealth Secretariat Act 1966 (c.10)
23. In section 1(3) of the Commonwealth Secretariat Act 1966 (contracts with Commonwealth
Secretariat to be deemed to contain provision for arbitration), for the Arbitration Act 1950 and
the Arbitration Act (Northern Ireland) 1937 substitute Part I of the Arbitration Act 1996.
Arbitration (International Investment Disputes) Act 1966 (c.41)
24. In the Arbitration (International Investment Disputes) Act 1966, for section 3 (application of
Arbitration Act 1950 and other enactments) substitute

Application of provisions of Arbitration Act 1996

3.(1) The Lord Chancellor may by order direct that any of the provisions contained in sections
36 and 38 to 44 of the Arbitration Act 1996 (provisions concerning the conduct of arbitral
proceedings, &c.) shall apply to such proceedings pursuant to the Convention as are specified in
the order with or without any modifications or exceptions specified in the order.
(2) Subject to subsection (1), the Arbitration Act 1996 shall not apply to proceedings pursuant to
the Convention, but this subsection shall not be taken as affecting section 9 of that Act (stay of
legal proceedings in respect of matter subject to arbitration).
(3) An order made under this section

(a) may be varied or revoked by a subsequent order so made, and

(b) shall be contained in a statutory instrument..

Poultry Improvement Act (Northern Ireland) 1968 (c.12 (N.I.))

25. In paragraph 10(4) of the Schedule to the Poultry Improvement Act (Northern Ireland) 1968
(reference of disputes), for The Arbitration Act (Northern Ireland) 1937 substitute Part I of the
Arbitration Act 1996.
Industrial and Provident Societies Act (Northern Ireland) 1969 (c.24 (N.I.))
26.(1) Section 69 of the Industrial and Provident Societies Act (Northern Ireland) 1969
(decision of disputes) is amended as follows.
(2) In subsection (7) (decision of disputes)

(a) in the opening words, omit the words from and without prejudice to 1937;
(b) at the beginning of paragraph (a) insert without prejudice to any powers exercisable by
virtue of Part I of the Arbitration Act 1996,; and
(c) in paragraph (b) omit the registrar or and registrar or and for the words from as might
have been granted by the High Court to the end substitute as might be granted by the
registrar.

(3) For subsection (8) substitute

(8) The court or registrar to whom any dispute is referred under subsections (2) to (6) may at the
request of either party state a case on any question of law arising in the dispute for the opinion of
the High Court..
Health and Personal Social Services (Northern Ireland) Order 1972 (N.I.14)
27. In Article 105(6) of the Health and Personal Social Services (Northern Ireland) Order 1972
(arbitrations under the Order), for the Arbitration Act (Northern Ireland) 1937 substitute Part I
of the Arbitration Act 1996.
Consumer Credit Act 1974 (c.39)
28.(1) Section 146 of the Consumer Credit Act 1974 is amended as follows.
(2) In subsection (2) (solicitor engaged in contentious business), for section 86(1) of the
Solicitors Act 1957 substitute section 87(1) of the Solicitors Act 1974.
(3) In subsection (4) (solicitor in Northern Ireland engaged in contentious business), for the words
from business done to Administration of Estates (Northern Ireland) Order 1979 substitute
contentious business (as defined in Article 3(2) of the Solicitors (Northern Ireland) Order 1976..
Friendly Societies Act 1974 (c.46)
29.(1) The Friendly Societies Act 1974 is amended as follows.
(2) For section 78(1) (statement of case) substitute

(1) Any arbitrator, arbiter or umpire to whom a dispute falling within section 76 above is referred
under the rules of a registered society or branch may at the request of either party state a case on
any question of law arising in the dispute for the opinion of the High Court or, as the case may be,
the Court of Session..
(3) In section 83(3) (procedure on objections to amalgamations &c. of friendly societies), for the
Arbitration Act 1950 or, in Northern Ireland, the Arbitration Act (Northern Ireland) 1937
substitute Part I of the Arbitration Act 1996.
Industry Act 1975 (c.68)
30. In Schedule 3 to the Industry Act (arbitration of disputes relating to vesting and compensation
orders), in paragraph 14 (application of certain provisions of Arbitration Acts)

(a) for the Arbitration Act 1950 or, in Northern Ireland, the Arbitration Act (Northern
Ireland) 1937 substitute Part I of the Arbitration Act 1996, and
(b) for that Act substitute that Part.

Industrial Relations (Northern Ireland) Order 1976 (N.I.16)

31. In Article 59(9) of the Industrial Relations (Northern Ireland) Order 1976 (proceedings of
industrial tribunal), for The Arbitration Act (Northern Ireland) 1937 substitute Part I of the
Arbitration Act 1996.
Aircraft and Shipbuilding Industries Act 1977 (c.3)
32. In Schedule 7 to the Aircraft and Shipbuilding Industries Act 1977 (procedure of Arbitration
Tribunal), in paragraph 2

(a) for the Arbitration Act 1950 or, in Northern Ireland, the Arbitration Act (Northern
Ireland) 1937 substitute Part I of the Arbitration Act 1996, and
(b) for that Act substitute that Part.

Patents Act 1977 (c.37)

33. In section 130 of the Patents Act 1977 (interpretation), in subsection (8) (exclusion of
Arbitration Act) for The Arbitration Act 1950 substitute Part I of the Arbitration Act 1996.
Judicature (Northern Ireland) Act 1978 (c.23)
34.(1) The Judicature (Northern Ireland) Act 1978 is amended as follows.
(2) In section 35(2) (restrictions on appeals to the Court of Appeal), after paragraph (f)insert
(fa) except as provided by Part I of the Arbitration Act 1996, from any decision of the High
Court under that Part;.
(3) In section 55(2) (rules of court) after paragraph (c) insert
(cc) providing for any prescribed part of the jurisdiction of the High Court in relation to the trial
of any action involving matters of account to be exercised in the prescribed manner by a person
agreed by the parties and for the remuneration of any such person;.

Health and Safety at Work (Northern Ireland) Order 1978 (N.I.9)

35. In Schedule 4 to the Health and Safety at Work (Northern Ireland) Order 1978 (licensing
provisions), in paragraph 3, for The Arbitration Act (Northern Ireland) 1937 substitute Part I of
the Arbitration Act 1996.
County Courts (Northern Ireland) Order 1980 (N.I.3)
36.(1) The County Courts (Northern Ireland) Order 1980 is amended as follows.
(2) In Article 30 (civil jurisdiction exercisable by district judge)

(a) for paragraph (2) substitute

(2) Any order, decision or determination made by a district judge under this Article (other than
one made in dealing with a claim by way of arbitration under paragraph (3)) shall be embodied in
a decree which for all purposes (including the right of appeal under Part VI) shall have the like
effect as a decree pronounced by a county court judge.;

(b) for paragraphs (4) and (5) substitute

(4) Where in any action to which paragraph (1) applies the claim is dealt with by way of
arbitration under paragraph (3)

(a) any award made by the district judge in dealing with the claim shall be embodied in a
decree which for all purposes (except the right of appeal under Part VI) shall have the like
effect as a decree pronounced by a county court judge;
(b) the district judge may, and shall if so required by the High Court, state for the
determination of the High Court any question of law arising out of an award so made;
(c) except as provided by sub-paragraph (b), any award so made shall be final; and
(d) except as otherwise provided by county court rules, no costs shall be awarded in
connection with the action.

(5) Subject to paragraph (4), county court rules may

(a) apply any of the provisions of Part I of the Arbitration Act 1996 to arbitrations under
paragraph (3) with such modifications as may be prescribed;
(b) prescribe the rules of evidence to be followed on any arbitration under paragraph (3) and,
in particular, make provision with respect to the manner of taking and questioning evidence.

(5A) Except as provided by virtue of paragraph (5)(a), Part I of the Arbitration Act 1996 shall not
apply to an arbitration under paragraph (3)..
(3) After Article 61 insert
Appeals from decisions under Part I of Arbitration Act 1996
61A.(1) Article 61 does not apply to a decision of a county court judge made in the exercise of
the jurisdiction conferred by Part I of the Arbitration Act 1996.

(2) Any party dissatisfied with a decision of the county court made in the exercise of the
jurisdiction conferred by any of the following provisions of Part I of the Arbitration Act 1996,
namely

(a) section 32 (question as to substantive jurisdiction of arbitral tribunal);

(b) section 45 (question of law arising in course of arbitral proceedings);
(c) section 67 (challenging award of arbitral tribunal: substantive jurisdiction);
(d) section 68 (challenging award of arbitral tribunal: serious irregularity);
(e) section 69 (appeal on point of law),

may, subject to the provisions of that Part, appeal from that decision to the Court of Appeal.
(3) Any party dissatisfied with any decision of a county court made in the exercise of the
jurisdiction conferred by any other provision of Part I of the Arbitration Act 1996 may, subject to
the provisions of that Part, appeal from that decision to the High Court.
(4) The decision of the Court of Appeal on an appeal under paragraph (2) shall be final..
Supreme Court Act 1981 (c.54)
37.(1) The Supreme Court Act 1981 is amended as follows.
(2) In section 18(1) (restrictions on appeals to the Court of Appeal), for paragraph (g) substitute
(g) except as provided by Part I of the Arbitration Act 1996, from any decision of the High Court
under that Part;.
(3) In section 151 (interpretation, &c.), in the definition of arbitration agreement, for the
Arbitration Act 1950 by virtue of section 32 of that Act; substitute Part I of the Arbitration Act
1996;.
Merchant Shipping (Liner Conferences) Act 1982 (c.37)
38. In section 7(5) of the Merchant Shipping (Liner Conferences) Act 1982 (stay of legal
proceedings), for the words from section 4(1) to the end substitute section 9 of the Arbitration
Act 1996 (which also provides for the staying of legal proceedings)..
Agricultural Marketing (Northern Ireland) Order 1982 (N.I.12)
39. In Article 14 of the Agricultural Marketing (Northern Ireland) Order 1982 (application of
provisions of Arbitration Act (Northern Ireland) 1937)

(a) for the words from the beginning to shall apply substitute Section 45 and 69 of the
Arbitration Act 1996 (which relate to the determination by the court of questions of law) and
section 66 of that Act (enforcement of awards) apply; and
(b) for an arbitration substitute arbitral proceedings.

Mental Health Act 1983 (c.20)

40. In section 78 of the Mental Health Act 1983 (procedure of Mental Health Review Tribunals),
in subsection (9) for The Arbitration Act 1950 substitute Part I of the Arbitration Act 1996.
Registered Homes Act 1984 (c.23)
41. In section 43 of the Registered Homes Act 1984 (procedure of Registered Homes Tribunals),
in subsection (3) for The Arbitration Act 1950 substitute Part I of the Arbitration Act 1996.
Housing Act 1985 (c.68)
42. In section 47(3) of the Housing Act 1985 (agreement as to determination of matters relating to
service charges) for section 32 of the Arbitration Act 1950 substitute Part I of the Arbitration
Act 1996.
Landlord and Tenant Act 1985 (c.70)
43. In section 19(3) of the Landlord and Tenant Act 1985 (agreement as to determination of
matters relating to service charges), for section 32 of the Arbitration Act 1950 substitute Part I
of the Arbitration Act 1996.
Credit Unions (Northern Ireland) Order 1985 (N.I.12)
44.(1) Article 72 of the Credit Unions (Northern Ireland) Order 1985 (decision of disputes) is
amended as follows.
(2) In paragraph (7)

(a) in the opening words, omit the words from and without prejudice to 1937;
(b) at the beginning of sub-paragraph (a) insert without prejudice to any powers exercisable
by virtue of Part I of the Arbitration Act 1996,; and
(c) in sub-paragraph (b) omit the registrar or and registrar or and for the words from as
might have been granted by the High Court to the end substitute as might be granted by the
registrar.

(3) For paragraph (8) substitute

(8) The court or registrar to whom any dispute is referred under paragraphs (2) to (6) may at the
request of either party state a case on any question of law arising in the dispute for the opinion of
the High Court..
Agricultural Holdings Act 1986 (c.5)
45. In section 84(1) of the Agricultural Holdings Act 1986 (provisions relating to arbitration), for
the Arbitration Act 1950 substitute Part I of the Arbitration Act 1996.
Insolvency Act 1986 (c.45)
46. In the Insolvency Act 1986, after section 349 insert

Arbitration agreements to which bankrupt is party

349A.(1) This section applies where a bankrupt had become party to a contract containing an
arbitration agreement before the commencement of his bankruptcy.

(2) If the trustee in bankruptcy adopts the contract, the arbitration agreement is enforceable by or
against the trustee in relation to matters arising from or connected with the contract.
(3) If the trustee in bankruptcy does not adopt the contract and a matter to which the arbitration
agreement applies requires to be determined in connection with or for the purposes of the
bankruptcy proceedings

(a) the trustee with the consent of the creditors committee, or

(b) any other party to the agreement,

may apply to the court which may, if it thinks fit in all the circumstances of the case, order that the
matter be referred to arbitration in accordance with the arbitration agreement.
(4) In this section
arbitration agreement has the same meaning as in Part I of the Arbitration Act 1996; and
the court means the court which has jurisdiction in the bankruptcy proceedings..
Building Societies Act 1986 (c.53)
47. In Part II of Schedule 14 to the Building Societies Act 1986 (settlement of disputes:
arbitration), in paragraph 5(6) for the Arbitration Act 1950 and the Arbitration Act 1979 or, in
Northern Ireland, the Arbitration Act (Northern Ireland) 1937 substitute Part I of the Arbitration
Act 1996.
Mental Health (Northern Ireland) Order 1986 (N.I.4)
48. In Article 83 of the Mental Health (Northern Ireland) Order 1986 (procedure of Mental Health
Review Tribunal), in paragraph (8) for The Arbitration Act (Northern Ireland) 1937 substitute
Part I of the Arbitration Act 1996.
Multilateral Investment Guarantee Agency Act 1988 (c.8)
49. For section 6 of the Multilateral Investment Guarantee Agency Act 1988 (application of
Arbitration Act) substitute

Application of Arbitration Act

6.(1) The Lord Chancellor may by order made by statutory instrument direct that any of the
provisions of sections 36 and 38 to 44 of the Arbitration Act 1996 (provisions in relation to the
conduct of the arbitral proceedings, &c.) apply, with such modifications or exceptions as are
specified in the order, to such arbitration proceedings pursuant to Annex II to the Convention as
are specified in the order.
(2) Except as provided by an order under subsection (1) above, no provision of Part I of the
Arbitration Act 1996 other than section 9 (stay of legal proceedings) applies to any such
proceedings..
Copyright, Designs and Patents Act 1988 (c.48)

50. In section 150 of the Copyright, Designs and Patents Act 1988 (Lord Chancellors power to
make rules for Copyright Tribunal), for subsection (2) substitute
(2) The rules may apply in relation to the Tribunal, as respects proceedings in England and Wales
or Northern Ireland, any of the provisions of Part I of the Arbitration Act 1996..
Fair Employment (Northern Ireland) Act 1989 (c.32)
51. In the Fair Employment (Northern Ireland) Act 1989, section 5(7) (procedure of Fair
Employment Tribunal), for The Arbitration Act (Northern Ireland) 1937 substitute Part I of the
Arbitration Act 1996.
Limitation (Northern Ireland) Order 1989 (N.I.11)
52. In Article 2(2) of the Limitation (Northern Ireland) Order 1989 (interpretation), in the
definition of arbitration agreement, for the Arbitration Act (Northern Ireland) 1937 substitute
Part I of the Arbitration Act 1996.
Insolvency (Northern Ireland) Order 1989 (N.I.19)
53. In the Insolvency (Northern Ireland) Order 1989, after Article 320 insert
Arbitration agreements to which bankrupt is party
320A.(1) This Article applies where a bankrupt had become party to a contract containing an
arbitration agreement before the commencement of his bankruptcy.
(2) If the trustee in bankruptcy adopts the contract, the arbitration agreement is enforceable by or
against the trustee in relation to matters arising from or connected with the contract.
(3) If the trustee in bankruptcy does not adopt the contract and a matter to which the arbitration
agreement applies requires to be determined in connection with or for the purposes of the
bankruptcy proceedings

(a) the trustee with the consent of the creditors committee, or

(b) any other party to the agreement,

may apply to the court which may, if it thinks fit in all the circumstances of the case, order that the
matter be referred to arbitration in accordance with the arbitration agreement.
(4) In this Article
arbitration agreement has the same meaning as in Part I of the Arbitration Act 1996; and
the court means the court which has jurisdiction in the bankruptcy proceedings..
Social Security Administration Act 1992 (c.5)
54. In section 59 of the Social Security Administration Act 1992 (procedure for inquiries, &c.), in
subsection (7), for The Arbitration Act 1950 substitute Part I of the Arbitration Act 1996.
Social Security Administration (Northern Ireland) Act 1992 (c.8)

55. In section 57 of the Social Security Administration (Northern Ireland) Act 1992 (procedure for
inquiries, &c.), in subsection (6) for the Arbitration Act (Northern Ireland) 1937 substitute Part
I of the Arbitration Act 1996.
Trade Union and Labour Relations (Consolidation) Act 1992 (c.52)
56. In sections 212(5) and 263(6) of the Trade Union and Labour Relations (Consolidation) Act
1992 (application of Arbitration Act) for the Arbitration Act 1950 substitute Part I of the
Arbitration Act 1996.
Industrial Relations (Northern Ireland) Order 1992 (N.I.5)
57. In Articles 84(9) and 92(5) of the Industrial Relations (Northern Ireland) Order 1992
(application of Arbitration Act) for The Arbitration Act (Northern Ireland) 1937 substitute Part
I of the Arbitration Act 1996.
Registered Homes (Northern Ireland) Order 1992 (N.I.20)
58. In Article 33(3) of the Registered Homes (Northern Ireland) Order 1992 (procedure of
Registered Homes Tribunal) for The Arbitration Act (Northern Ireland) 1937 substitute Part I
of the Arbitration Act 1996.
Education Act 1993 (c.35)
59. In section 180(4) of the Education Act 1993 (procedure of Special Educational Needs
Tribunal), for The Arbitration Act 1950 substitute Part I of the Arbitration Act 1996.
Roads (Northern Ireland) Order 1993 (N.I.15)
60.(1) The Roads (Northern Ireland) Order 1993 is amended as follows.
(2) In Article 131 (application of Arbitration Act) for the Arbitration Act (Northern Ireland)
1937 substitute Part I of the Arbitration Act 1996.
(3) In Schedule 4 (disputes), in paragraph 3(2) for the Arbitration Act (Northern Ireland) 1937
substitute Part I of the Arbitration Act 1996.
Merchant Shipping Act 1995 (c.21)
61.In Part II of Schedule 6 to the Merchant Shipping Act 1995 (provisions having effect in
connection with Convention Relating to the Carriage of Passengers and Their Luggage by Sea),
for paragraph 7 substitute
7. Article 16 shall apply to arbitral proceedings as it applies to an action; and, as respects
England and Wales and Northern Ireland, the provisions of section 14 of the Arbitration Act 1996
apply to determine for the purposes of that Article when an arbitration is commenced..
Industrial Tribunals Act 1996 (c.17)
62. In section 6(2) of the Industrial Tribunals Act 1996 (procedure of industrial tribunals), for the
Arbitration Act 1950 substitute Part I of the Arbitration Act 1996.

Section 106(2). SCHEDULE 4. REPEALS

Chapter

Short title

Extent of repeal

1892 c. Military Lands Act 1892. In section 21(b), the words

43.
under the Arbitration Act
1889
1922 c.
51.

Allotments Act 1922.

In section 21(3), the words

under the Arbitration Act
1889.

1937 c. 8
(N.I.).

Arbitration Act
(Northern Ireland)
1937.

The whole Act.

1949 c.
54.

Wireless Telegraphy Act

1949.

In Schedule 2, paragraph
3(3).

1949 c.
97.

National Parks and

Access to the
Countryside Act 1949.

In section 18(4), the words

from Without prejudice
to England or Wales.

1950 c.
27.

Arbitration Act 1950.

Part I.

Section 42(3).
1958 c.
47.

Agricultural Marketing
Act 1958.

Section 53(8).

1962 c.
46.

Transport Act 1962.

In Schedule 11, Part II,

paragraph 7.

1964 c.
14.

Plant Varieties and

Seeds Act 1964.

In section 10(4) the words

from or in section 9 to
three arbitrators).
Section 39(3)(b)(i).

Chapter

Short title

Extent of repeal

1964 c.
29 (N.I.).

Lands Tribunal and

Compensation Act
(Northern Ireland)
1964.

In section 9(3) the words

from so, however, that to
the end.

1965 c. Industrial and Provident In section 60(8)(b), the

12.
Societies Act 1965.
words by virtue of section
12 of the said Act of 1950.
1965 c.
37.

Carriage of Goods by
Road Act 1965.

Section 7(2)(b).

1965 c.
13 (N.I.).

New Towns Act

(Northern Ireland)
1965.

In section 27(2), the words

from under and in
accordance with to the
end.

1969 c. Industrial and Provident

24 (N.I.). Societies Act (Northern
Ireland) 1969.

1970 c. Administration of Justice

31.
Act 1970

In section 69(7)
(a) in the opening
words, the words from
and without prejudice
to 1937;
(b) in paragraph (b),
the words the registrar
or and registrar or.

Section 4.
Schedule 3.

1973 c.
41.

Fair Trading Act 1973.

Section 33(2)(d).

1973 N.I.
1.

Drainage (Northern
Ireland) Order 1973.

In Article 15(4), the words

from under and in
accordance to the end.
Article 40(4).

Chapter

Short title

Extent of repeal
In Schedule 7, in paragraph
9(2), the words from
under and in accordance
to the end.

1974
c. 47.

Solicitors Act 1974.

In section 87(1), in the

definition of contentious
business, the words appointed
under the Arbitration Act 1950.

1975
c. 3.

Arbitration Act 1975.

The whole Act.

1975
Petroleum and
c. 74. Submarine Pipe-Lines
Act 1975.

In Part II of Schedule 2

(a) in model clause 40(2),

the words in accordance
with the Arbitration Act
1950;
(b) in model clause 40(2B),
the words in accordance
with the Arbitration Act
(Northern Ireland) 1937.

In Part II of Schedule 3, in model

clause 38(2), the words in
accordance with the Arbitration
Act 1950.
1976
N.I.
12.

Solicitors (Northern
Ireland) Order 1976.

In Article 3(2), in the entry

contentious business, the
words appointed under the
Arbitration Act (Northern
Ireland) 1937.
Article 71H(3).

1977
c. 37.

Patents Act 1977.

In section 52(4) the words

section 21 of the Arbitration
Act 1950 or, as the case may be,
section 22 of the Arbitration Act
(Northern Ireland) 1937
(statement of cases by
arbitrators); but.
Section 131(e).

1977
c. 38.

Administration of
Justice Act 1977.

Section 17(2).

1978
c. 23.

Judicature (Northern
Ireland) Act 1978.

In section 35(2), paragraph

(g)(v).
In Schedule 5, the amendment to
the Arbitration Act 1950.

1979
c. 42.

Arbitration Act 1979.

The whole Act.

1980
c. 58.

Limitation Act 1980.

Section 34.

1980
N.I. 3.

County Courts
(Northern Ireland)
Order 1980.

Article 31(3).

1981
c. 54.

Supreme Court Act

1981.

Section 148.

1982
c. 27.

Civil Jurisdiction and

Judgments Act 1982.

Section 25(3)(c) and (5).

In section 26
(a) in subsection (1), the
words to arbitration or;
(b) in subsection (1)(a)(i),
the words arbitration or;
(c) in subsection (2), the
words arbitration or.

1982
c. 53.

Administration of
Justice Act 1982.

Section 15(6).
In Schedule 1, Part IV.

1984 Merchant Shipping Act

c. 5.
1984.

Section 4(8).

1984
c. 12.

Telecommunications
Act 1984.

Schedule 2, paragraph 13(8).

1984
c. 16.

Foreign Limitation
Periods Act 1984.

Section 5.

5.
1984
c. 28.

County Courts Act

1984.

In Schedule 2, paragraph 70.

1985
c. 61.

Administration of
Justice Act 1985.

Section 58.
In Schedule 9, paragraph 15.

1985
c. 68.

Housing Act 1985.

In Schedule 18, in paragraph

6(2) the words from and the
Arbitration Act 1950 to the
end.

1985
N.I.
12.

Credit Unions (Northern

Ireland) Order 1985.

In Article 72(7)

(a) in the opening words,

the words from and
without prejudice to
1937;
(b) in sub-paragraph (b),
the words the registrar
or and registrar or.

1986
c. 61.

Insolvency Act 1986.

In Schedule 14, the entry

relating to the Arbitration Act
1950.

1988
c. 8.

Multilateral Investment
Guarantee Agency Act
1988.

Section 8(3).

1988
c. 21.

Consumer Arbitration
Agreements Act 1988.

The whole Act.

1989
N.I.
11.

Limitation (Northern
Ireland) Order 1989.

Article 72.

In Schedule 3, paragraph 1.
1989
N.I.
19.

Insolvency (Northern
Ireland) Order 1989.

In Part II of Schedule 9,
paragraph 66.

1990 Courts and Legal Services Sections 99 and 101 to 103.

c. 41.
Act 1990.
1991
N.I. 7.

Food Safety (Northern

Ireland) Order 1991.

In Articles 8(8) and 11(10),

the words from and the
provisions to the end.

1992
c. 40.

Friendly Societies Act

1992.

In Schedule 16, paragraph

30(1).

1995
c. 8.

Agricultural Tenancies
Act 1995.

Section 28(4).

1995
c. 21.

Merchant Shipping Act

1995.

Section 96(10).
Section 264(9).

1995 Private International Law

c. 42.
(Miscellaneous
Provisions) Act 1995.

Section 3.

EXPLANATORY MEMORANDUM ACCOMPANYING THE 1996 BILL

This Bill restates existing legislation on arbitration, as set out in the Arbitration Acts of 1950,
1975 and 1979, whilst at the same time codifying principles established by recent case law. It also
introduces certain changes in the law which are designed to improve arbitration as a fair, speedy
and cost-effective way of resolving disputes. It reflects as far as possible the format and provisions
of the UNCITRAL Model Law on International Commercial Arbitration.
The objective of the Bill is to provide for the fair, speedy and cost-effective resolution of disputes
by an impartial tribunal. Apart from a limited number of clauses which are not subject to contrary
agreement, the Bill gives maximum scope for the parties to an arbitration to decide for themselves
how the arbitration should be handled. The provisions of the Bill come into play to support the
arbitration only when the parties have not decided what should happen.
The Bill also reflects the view that the decision of the parties to choose a private tribunal rather
than the courts to resolve their dispute must be respected. The Bill strengthens the powers of
arbitrators and the role of the court is limited to those occasions when it is obvious that either the
arbitral process needs assistance or that there has been or is likely to be a clear denial of justice.
Similarly, if the parties have vested an arbitral institution with powers to act in certain situations
any available process of appeal must be exhausted before the courts can be approached.

PART I. ARBITRATION PURSUANT TO AN ARBITRATION AGREEMENT

Clauses 1 to 4 are new. Clause 1 sets out the general principles on which the Bill is founded, as
indicated above. Clause 2 defines the scope of application of Part I whilst Clause 3 explains the
concept of the seat of the arbitration.Clause 4 has as its purpose to distinguish between those
provisions of Part I which are mandatory in the sense that they may not be displaced by contrary
agreement, and those which parties can choose whether or not to apply. The mandatory provisions
are set out in Schedule 1.
Clause 5 requires agreements to be in writing and provides a widely drawn definition of writing.
Agreements in writing include agreements evidenced in writing as well as oral agreements which
refer to terms which are in writing. Writing includes anything recorded by any means.
Clause 6, which corresponds to the Model Law, defines arbitration agreement in essentially the
same terms as section 32 of the 1950 Act. The clause also provides that agreements which
incorporate by reference the terms of a written form of agreement constitute valid arbitration
agreements.
Clause 7 corresponds to Article 16(1) of the Model Law and codifies the law on the separability of
the arbitration clause from the main contract.
Clause 8, which deals with whether an arbitration agreement is discharged by the death of a party,
reproduces the provisions of the 1950 Act with the change that subsection (1) is non-mandatory.

Clause 9, which corresponds to Article 8 of the Model Law and reproduces section 4(1) of the
1950 Act and section 1 of the 1975 Act with changes, provides for the circumstances in which an
application to the court to stay legal proceedings in favour of enforcement of the arbitration
agreement may be brought and how the court should treat such applications.
Clause 10 reproduces section 5 of the 1950 Act and provides for the reference of an interpleader
issue to arbitration.
Clause 11 reproduces section 26 of the Civil Jurisdiction and Judgments Act 1982. It authorises
the court, when it stays Admiralty proceedings in order to enforce an arbitration agreement, to
order that security given to obtain release from arrest be retained pending the award.
Clause 12 reproduces with amendments section 27 of the 1950 Act which confers powers on the
court, in certain circumstances, to extend a time limit imposed by an arbitration agreement for the
commencement of an arbitration. The court must now be satisfied before granting an extension
that circumstances have arisen which were outside the reasonable contemplation of the parties
when they agreed the time limit and that it would be just to extend the time or that the conduct of
one party makes it unjust to hold the other to the strict terms of their bargain.
Clause 13 re-enacts with minor modifications (but not so as to change the law) subsections (1), (5)
and (7)(b) of section 34 of the Limitation Act 1980.
Clause 14 corresponds to Article 21 of the Model Law and determines when arbitral proceedings
are deemed to be commenced.
Clause 15, which corresponds to Article 10 of the Model Law, provides for the composition of the
arbitral tribunal and lays down default provisions in the event that the parties do not agree their
own arrangements. The arrangements fill in certain gaps in the 1950 Act.
Clauses 16, 17 and 18 provide default arrangements, in the absence of party agreement for
appointing the tribunal and the procedure to be followed in the event of their failure. These clauses
simplify and clarify the current law.
Clause 19 requires the court to have regard to any agreement of the parties as to the qualifications
required of the arbitrators when considering whether, and if so how, to exercise its powers
under Clauses 16 and 18.
Clauses 20 and 21 provide for the role of chairmen and umpires respectively. Current legislation
does not provide for the office of chairman. Clause 22 sets out arrangements for decision making
where there is no chairman or umpire.
Clauses 23 and 24 deal with the circumstances in which the authority of an arbitrator may be
revoked and an arbitrator may be removed by the court.
Clause 25 provides for the consequences of the resignation of an arbitrator.
Clause 26 provides that the authority of an arbitrator ceases on his death but that the death of a
party does not revoke the authority of any arbitrator appointed by him.
Clause 27 corresponds to Article 15 of the Model Law and provides simple rules for the filling of
vacancies in the tribunal and the standing of previous proceedings.

Clause 28 provides for the remuneration of the arbitrators and sets out the obligations of the
parties in this regard.
Clause 29 is new and confers immunity on members of a tribunal, their employees and agents.
Clauses 30 and 31, which flow from Article 16 of the Model Law, state the existing law that an
arbitral tribunal may rule on a question concerning its own jurisdiction, and provide for the timing
of an objection and how the tribunal may respond.
Clause 32 is based on Article 16(3) of the Model Law and is concerned with applications to the
court to consider a preliminary point of jurisdiction under Clause 31.
Clause 33 corresponds to Article 18 of the Model Law and sets out the duties of the tribunal in the
conduct of the proceedings.
Clause 34 corresponds to Articles 19, 20, 22 to 24 and 26 of the Model Law. It deals with the
conduct of the proceedings. The existing statutory provision is in section 12(1) to (3) of the 1950
Act.
Clause 35 is designed to make clear that the parties are able to agree to consolidate arbitral
proceedings or to hold concurrent hearings.
Clause 36 permits a party to arbitral proceedings to be represented by a lawyer or other person
chosen by him.
Clause 37 gives the power to the tribunal to appoint experts, legal advisors or assessors to assist it.
Clause 38 corresponds to Article 17 of the Model Law and is concerned with the interlocutory
powers exercisable by the tribunal.
Clause 39 empowers the parties to authorise the tribunal to make provisional awards. The tribunal
cannot act without the agreement of the parties.
Clause 40 imposes on the parties a general duty to do all things necessary for the proper conduct
of the arbitral proceedings.
Clause 41 corresponds to Article 35 of the Model Law and confers powers on the tribunal to deal
with a party who refuses to co-operate.
Clause 42 provides for the enforcement of peremptory orders made under Clause 41 which have
not been complied with.
Clause 43 makes available to parties to arbitral proceedings the same processes as are available to
parties to litigation to compel the attendance of witnesses. It corresponds to Article 27 of the
Model Law.
Clause 44 corresponds to Articles 9 and 31 of the Model Law and confers the same powers on the
court in aid of an arbitration as it has for the purposes of court proceedings. The court may only
exercise these powers if the tribunal or arbitral institution has no power to act or is unable
temporarily to act effectively.

Clause 45 confers a power on the court to determine a preliminary point of law arising in the
arbitral proceedings. The clause is based on section 2 of the 1979 Act but does not reproduce it
exactly. The court can consider only those questions of law which substantially affect the rights of
one or more of the parties.
Clause 46 corresponds to Article 28 of the Model Law and determines the rules to be applied in
deciding the substance of the dispute.
Clause 47 allows the tribunal to make more than one award on different aspects of the case.
Clause 48 enables the parties to agree the powers exercisable by the tribunal in relation to
remedies. The clause provides a list of powers to order remedies if the parties do not otherwise
agree.
Clause 49 introduces a new power to enable the tribunal, in default of agreement between the
parties, to award compound interest as well as simple interest on amounts successfully claimed
and to award such interest on amounts awarded at rates other than the judgment debt rate.
Clause 50 supersedes section 13(2) of the 1950 Act and provides for the court to extend any time
limits for making the award set out in the arbitration agreement if satisfied that not to do so would
result in substantial injustice.
Clause 51 corresponds to Article 30 of the Model Law and enables an agreed settlement of the
dispute to be given the status of an arbitral award.
Clause 52 sets out a provision not included in current arbitration statute law to require the tribunal
to give reasons for its award. The parties can opt out of the requirement.
Clauses 53, 54 and 55 cover various detailed aspects of the award, including where and when it is
made and requirements for notifying the parties.
Clause 56 supersedes with amendments section 19 of the 1950 Act and confers on a tribunal a lien
on its award to secure payment of its fees and for taxation of the fees demanded.
Clause 57 corresponds to Article 33 of the Model Law. It enlarges upon section 17 of the 1950
Act by conferring power on the tribunal to correct slips, clerical mistakes and errors in an award
and to clear up any ambiguities and section 18(4) of the 1950 Act which authorises a tribunal to
make an additional award in respect of any matter agreed to be referred to the tribunal but not
covered by the award.
Clause 58 provides that the award is final and binding on the parties and on any persons claiming
through or under them.
Clauses 59 to 65 deal with the costs of the arbitration. A new power is given in Clause 65 to the
tribunal to limit the recoverable costs of the arbitration.
Clause 66 empowers the courts to enforce an award in the same manner as a judgment, as per
section 26(1) of the 1950 Act.
Clauses 67 to 69 provide for the circumstances in which applications may be made to the court to
challenge the award and how the court should respond to such applications. Various changes are

made to the current law. Clause 70restricts applications which may be made under Clauses 67 to
69. Clause 71 concerns the consequences which flow from the decisions of the court.
Clause 72 allows a person who has taken no part in the arbitral proceedings to challenge the
jurisdiction of the tribunal at any time if he finds that he is alleged to be a party to the proceedings.
Clause 73, which corresponds to Article 4 of the Model Law, sets out the circumstances in which
parties forfeit their right to object to any irregularity regarding the tribunal or the proceedings.
Clause 74 introduces limited immunity for arbitral institutions. Immunity is extended to the
function of the appointment or nomination of arbitrators unless it can be shown that bad faith was
involved. Arbitral institutions are also not liable for the actions of the arbitrators they appoint.
Clause 75 concerns the powers of the court in relation to the payment of certain solicitors costs.
Clause 76 allows parties to decide on the manner of service of any notice or other document. It
provides a method of service in the event that the parties have not so agreed.
Clause 77 gives the court power, where service as agreed or under Clause 76 is not reasonably
practicable, to order substituted service or to dispense with service but only if any available
arbitral process for resolving the matter is first exhausted.
Clause 78 makes provision for reckoning periods of time prescribed by the Bill.
Clause 79 empowers the court to extend any time limit fixed by Part I. Recourse to the tribunal or
arbitral institutions (if they have been vested by the parties with the power) must first be made
before the court can be approached. The court must be satisfied that not to extend the limits would
result in a substantial injustice.
Clause 80 sets out the requirements as to notice in respect of legal proceedings.
Clause 81 provides that certain matters shall continue to be governed by the common law and not
by Part I.
Clauses 82 and 83 define and signpost certain expressions used in Part I.
Clause 84 provides that Part I applies to all arbitral proceedings commenced on or after the
coming into force of the Bill, under an arbitration agreement whenever made.

PART II. OTHER PROVISIONS RELATING TO ARBITRATION

Clauses 85 to 87 make special provision, as reflected in section 1 of the 1975 Act and section 3 of
the 1979 Act, for domestic arbitrations in respect of the stay of legal proceedings and agreements
to exclude the jurisdiction of the courts on points of law. Clause 88 empowers the Secretary of
State to repeal or restrict these special provisions by affirmative statutory instrument.
Clauses 89 to 91 make provision about consumer arbitration agreements.
Clause 92 excludes the provisions of Part I in relation to small claims arbitration in the county
court.
Clause 93 and Schedule 2 provide for the appointment of judges as arbitrators.

Clauses 94 to 98 adapt the provisions of Part I to statutory arbitrations and include a power to
make further changes by statutory instrument.

PART III. RECOGNITION AND ENFORCEMENT OF CERTAIN FOREIGN

AWARDS
Clauses 99 to 104 restate the current law on the enforcement of Geneva Convention awards and
the recognition and enforcement of New York Convention awards.

PART IV. GENERAL PROVISIONS

Clauses 105 to 109 cover certain general provisions including the binding of the Crown and
arrangements for commencement. Clause 106 and Schedules 3 and 4 deal with consequential
amendments and repeals.
Effect of the Bill on public sector manpower
The Bill will have no effect on public sector manpower.
Business compliance cost assessment
There are no expected compliance costs for business.

Chapter

APPENDIX B: THE LMAA Terms (2006)

Preliminary
1. These Terms may be refered to as the LMAA Terms (2006).
2. In these Terms, unless the context otherwise requires,

(i) the Association means the London Maritime Arbitrators Association; Member of the
Association includes full, retired and supporting members; President means the President
for the time being of the Association or, where he cannot act, such other member of the
Committee of the Association as he may designate;
(ii) tribunal includes a sole arbitrator, a tribunal of two or more arbitrators, and an umpire;
(iii) original arbitrator means an arbitrator appointed (whether initially or by substitution)
by or at the request of a party as its nominee and any arbitrator duly appointed so to act
following failure of a party to make its own nomination.

3. The purpose of arbitration according to these Terms is to obtain the fair resolution of maritime
and other disputes by an impartial tribunal without unnecessary delay or expense. The arbitrators
at all times are under a duty to act fairly and impartially between the parties and an original
arbitrator is in no sense to be considered as the representative of his appointor.

Application

4. These Terms apply to arbitral proceedings commenced on or after 1st January 2006. Section 14
of the Arbitration Act 1996 (the Act) shall apply for the purpose of determining on what date
arbitral proceedings are to be regarded as having commenced.
5. These Terms shall apply to an arbitration agreement whenever the parties have agreed that they
shall apply and the parties shall in particular be taken to have so agreed:

(a) whenever the dispute is referred to a sole arbitrator who is a full Member of the
Association and whenever both the original arbitrators appointed by the parties are full
Members of the Association, unless both parties have agreed or shall agree otherwise;
(b) whenever a sole arbitrator or both the original arbitrators have been appointed on the basis
that these Terms apply to their appointment.

Whenever a sole arbitrator or both the original arbitrators have been appointed on the basis
referred to at (b), such appointments or the conduct of the parties in taking part in the arbitration
thereafter shall constitute an agreement between the parties that the arbitration agreement
governing their dispute has been made or varied so as to incorporate these Terms and shall further
constitute authority to their respective arbitrators so to confirm in writing on their behalf.
6. In the absence of any agreement to the contrary the parties to all arbitral proceedings to which
these Terms apply agree:

(a) that the law applicable to their arbitration agreement is English law; and
(b) that the seat of the arbitration is in England.

7.

(a) Subject to paragraph (b), the arbitral proceedings and the rights and obligations of the
parties in connection therewith shall be in all respects governed by the Act save to the extent
that the provisions of the Act are varied, modified or supplemented by these Terms.
(b) Where the seat of the arbitration is outside England and Wales the provisions of these
Terms shall nevertheless apply to the arbitral proceedings, save to the extent that any
mandatory provisions of the law applicable to the arbitration agreement otherwise provide.

The arbitral tribunal

8. If the tribunal is to consist of three arbitrators:

(a) each party shall appoint one arbitrator not later than 14 days after service of a request in
writing by either party to do so;
(b) the two so appointed may at any time thereafter appoint a third arbitrator so long as they
do so before any substantive hearing or forthwith if they cannot agree on any matter relating
to the arbitration, and if the two said arbitrators do not appoint a third within 10 working days
of one calling upon the other to do so, the President shall, on the application of either
arbitrator or of a party, appoint the third arbitrator;
(c) the third arbitrator shall be the chairman unless the parties shall agree otherwise;

(d) before the third arbitrator has been appointed or if the position has become vacant, the two
original arbitrators, if agreed on any matter, shall have the power to make decisions, orders
and awards in relation thereto;
(e) after the appointment of the third arbitrator decisions, orders or awards shall be made by
all or a majority of the arbitrators;
(f) the view of the chairman shall prevail in relation to a decision, order or award in respect of
which there is neither unanimity nor a majority under paragraph (e).

9. If the tribunal is to consist of two arbitrators and an umpire:

(a) each party shall appoint one arbitrator not later than 14 days after service of a request in
writing by either party to do so;
(b) the two so appointed may appoint an umpire at any time after they themselves are
appointed and shall do so before any substantive hearing or forthwith if they cannot agree on
any matter relating to the arbitration, and if the two said arbitrators do not appoint an umpire
within 10 working days of one calling upon the other to do so, the President shall, on the
application of either arbitrator or of a party, appoint the umpire;
(c) the umpire shall attend any substantive hearing and shall following his appointment be
supplied with the same documents and other materials as are supplied to the other arbitrators;
(d) the umpire may take part in the hearing and deliberate with the original arbitrators;
(e) decisions, orders and awards shall be made by the original arbitrators unless and until they
cannot agree on a matter relating to the arbitration. In that event they shall forthwith give
notice in writing to the parties and the umpire, whereupon the umpire shall replace them as
the tribunal with power to make decisions, orders and awards as if he were the sole arbitrator.

Jurisdiction
10. Notwithstanding the terms of any appointment of an arbitrator, unless the parties otherwise
agree the jurisdiction of the tribunal shall extend to determining all disputes arising under or in
connection with the transaction the subject of the reference, and each party shall have the right
before the tribunal makes its award (or its last award, if more than one is made in a reference) to
refer to the tribunal for determination any further dispute(s) arising subsequently to the
commencement of the arbitral proceedings.

Tribunals fees
11. Provisions regulating fees payable to the tribunal and other related matters are set out in the
First Schedule. Save as therein or herein otherwise provided, payment of the tribunals fees and
expenses is the joint and several responsibility of the parties. An arbitrator or umpire shall be
entitled to resign from a reference in the circumstances set out in paragraph (C) of the First
Schedule.

Arbitration procedure

12. (a) It shall be for the tribunal to decide all procedural and evidential matters subject to the
right of the parties to agree any matter. However, the normal procedure to be adopted is as set
out in the Second Schedule.

(b) In the absence of agreement it shall be for the tribunal to decide whether and to what
extent there should be oral or written evidence or submissions in the arbitration. The parties
should however attempt to agree at an early stage whether the arbitration is to be on
documents alone (i.e. without a hearing) or whether there is to be an oral hearing.

Interlocutory proceedings

13. (a) In all cases the procedure set out in paragraphs 1 to 4 of the Second Schedule should
be adopted.
(b) Applications for directions should not be necessary but, if required, they should be made
in accordance with the Second Schedule.
(c) Arbitrations on documents alone
Following completion of the steps covered by paragraphs 1 to 4 of the Second Schedule, if it
has been or is then determined by the tribunal or agreed by the parties that the case is to be
dealt with on documents alone, the tribunal will then give notice to the parties of its intention
to proceed to its award and will so proceed unless either party within seven days requests, and
is thereafter granted, leave to serve further submissions and/or documents.
(d) Oral hearings
If it is determined or agreed that there shall be an oral hearing, then following the fixing of the
hearing date a booking fee will be payable in accordance with the provisions of the First
Schedule.

Powers of the tribunal

14. In addition to the powers set out in the Act, the tribunal shall have the following specific
powers to be exercised in a suitable case so as to avoid unnecessary delay or expense, and so as to
provide a fair means for the resolution of the matters falling to be determined:

(a) The tribunal may limit the number of expert witnesses to be called by any party or may
direct either that no expert be called on any issue(s) or that no expert evidence shall be called
save with the leave of the tribunal.
(b) Where two or more arbitrations appear to raise common issues of fact or law, the tribunals
may direct that the two or more arbitrations shall be conducted with and heard concurrently.
Where such an order is made, the tribunals may give such directions as the interests of
fairness, economy and expedition require including:
o (i) that the documents disclosed by the parties in one arbitration shall be made available
to the parties to the other arbitration upon such conditions as the tribunals may determine;
o (ii) that the evidence given in one arbitration shall be received and admitted in the other
arbitration, subject to all parties being given a reasonable opportunity to comment upon it
and subject to such other conditions as the tribunals may determine.
(c) If a party fails to comply with a peremptory order of the tribunal to provide security for
costs, then without prejudice to the power granted by section 41(6) of the Act, the tribunal
shall have power to stay that partys claim or such part of it as the tribunal thinks fit in its sole
discretion.

Preliminary meetings

15. (a) The tribunal may decide at any stage that the circumstances of the arbitration require
that there should be a preliminary meeting to enable the parties and the tribunal to review the
progress of the case; to reach agreement so far as possible upon further preparation for, and
the conduct of the hearing; and, where agreement is not reached, to enable the tribunal to give
such directions as it thinks fit.
(b) A preliminary meeting should be held in complex cases including most cases involving a
hearing of more than five days duration. Exceptionally more than one preliminary meeting
may be required.
(c) All preliminary meetings (whether required by the tribunal or held on the application of
the parties) should be preceded by a discussion between the parties representatives who
should attempt to identify matters for discussion with the tribunal, attempt to reach agreement
so far as possible on the directions to be given, and prepare for submission to the tribunal an
agenda of matters for approval or determination by it.
(d) Before the preliminary meeting takes place the parties should provide the tribunal with a
bundle of appropriate documents, together with information sheets setting out the steps taken
and to be taken in the arbitration, a list of any proposed directions whether agreed or not and
an agenda of matters for discussion at the hearing. The information sheets should include
estimates of readiness for the hearing and the likely duration of the hearing.
(e) There is set out in the Third Schedule a guidance document indicating topics which may
be appropriate for consideration before and at the preliminary hearing.

Settlement
16. It is the duty of the parties (a) to notify the tribunal immediately if the arbitration is settled or
otherwise terminated (b) to make provision in any settlement for payment of the fees and expenses
of the tribunal and (c) to inform the tribunal of the parties agreement as to the manner in which
payment will be made of any outstanding fees and expenses of the tribunal, e.g. for interlocutory
work not covered by any booking fee paid. The same duty arises if the settlement takes place after
an interim award has been made. Upon being notified of the settlement or termination of any
matter the tribunal may dispose of the documents relating to it.
17. Any booking fee paid will be dealt with in accordance with the provisions of paragraph
(D)(1)(d) of the First Schedule. Any other fees and expenses of the tribunal shall be settled
promptly and at latest within 28 days of presentation of the relevant account(s). Notwithstanding
the terms of any settlement between them the parties shall remain jointly and severally responsible
for all such fees and expenses of the tribunal until they have been paid in full.

Adjournment
18. If a case is for any reason adjourned part-heard, the tribunal will be entitled to an interim
payment, payable in equal shares or otherwise as the tribunal may direct, in respect of fees and
expenses already incurred, appropriate credit being given for the booking fee.

Availability of arbitrators

19. (a) In cases where it is known at the outset that an early hearing is essential, the parties
should consult and ensure the availability of the arbitrator(s) to be appointed by them.

(b) If, in cases when the tribunal has already been constituted, the fixture of an acceptable
hearing date is precluded by the commitments of the original appointee(s), the provisions of
the Fourth Schedule shall apply.

The award
20. The time required for preparation of an award must vary with the circumstances of the case.
The award should normally be available within not more than six weeks from the close of the
proceedings. In many cases, and in particular where the matter is one of urgency, the interval
should be substantially shorter.
21. The members of a tribunal need not meet together for the purpose of signing their award or of
effecting any corrections thereto.

22. (a) An award will contain the reasons for it unless the parties agree otherwise.
(b) The parties may agree to dispense with reasons in which case notice shall be given to the
tribunal before the award is made. [Note: the effect of such agreement is to exclude the
courts jurisdiction under Section 69 of the Act to determine an appeal on a question of law
arising out of the award; see Section 69(1).]
(c) Where in accordance with paragraph (b) the parties have agreed to dispense with reasons
the tribunal will issue an award without reasons together with a document which does not
form part of the award but which gives, on a confidential basis, an outline of the reasons for
the tribunals decision (hereafter called privileged reasons).
(d) Unless the court shall otherwise determine, the document containing privileged reasons
(referred to in paragraph (c)) may not be relied upon or referred to by either party in any
proceedings relating to the award.

23. As soon as possible after an award has been made it shall be notified to the parties by the
tribunal serving on them a notice in writing which shall inform the parties of the amount of the
fees and expenses of the tribunal and which shall indicate that the award is available for sending to
or collection by the parties upon full payment of such amount. At the stage of notification neither
the award nor any copy thereof need be served on the parties and the tribunal shall be entitled
thereafter to refuse to deliver the award or any copy thereof to the parties except upon full
payment of its fees and expenses.
24. If any award has not been paid for and collected within one month of the date of publication,
the tribunal may give written notice to either party requiring payment of the costs of the award,
whereupon such party shall be obliged to pay for and collect the award within fourteen days.

25. (a) In addition to the powers set out in Section 57 of the Act, the tribunal shall have the
following powers to correct an award or to make an additional award:
o (i) The tribunal may on its own initiative or on the application of a party correct any
accidental mistake, omission or error of calculation in its award.
o (ii) The tribunal may on the application of a party give an interpretation of a specific
point or part of the award.

(b) An application for the exercise of the powers set out above and in Section 57 of the Act
must be made within 28 days of the award unless the tribunal shall think fit to extend the
time.
(c) The powers set out above shall not be exercised without first affording the other parties a
reasonable opportunity to make representations to the tribunal.
(d) Any correction or interpretation of an award may be effected in writing on the original
award or in a separate memorandum which shall become part of the award. It shall be effected
within 90 days of the date of the original award unless all parties shall agree a longer period.

26. If the tribunal considers that an arbitration decision merits publication and gives notice to the
parties of its intention to release the award for publication, then unless either or both parties
inform the tribunal of its or their objection to publication within 21 days of the notice, the award
may be publicised under such arrangements as the Association may effect from time to time. The
publication will be so drafted as to preserve anonymity as regards the identity of the parties, of
their legal or other representatives, and of the tribunal.

Service of documents
27. Where a party is represented by a lawyer or other agent in connection with any arbitral
proceedings, all notices or other documents required to be given or served for the purposes of the
arbitral proceedings together with all decisions, orders and awards made or issued by the tribunal
shall be treated as effectively served if served on that lawyer or agent.

General
28. Three months after the publication of a final award the tribunal may notify the parties of its
intention to dispose of the documents and to close the file, and it will act accordingly unless
otherwise requested within 21 days of such notice being given.
29. In relation to any matters not expressly provided for herein the tribunal shall act in accordance
with the tenor of these Terms.

THE FIRST SCHEDULE

TRIBUNALS FEES
(A) Appointment fee
An appointment fee is payable on appointment by the appointing party or by the party at whose
request the appointment is made. The appointment fee shall be a standard fee fixed by the
Committee of the Association from time to time1. Unless otherwise agreed, the appointment fee of
an umpire or third arbitrator shall in the first instance be paid by the claimant, and the appointment
fee of an agreed sole arbitrator shall be paid by each party in equal shares.
(B) Interim fees
An arbitrator may in his discretion require payment of his fees to date (which expression shall for
these purposes include any expenses) at appropriate intervals (which shall be not less than three
months). Any such demand for payment shall be addressed to the arbitrators appointing party and
shall be copied to any other member of the tribunal and other parties. A third arbitrator or umpire

shall require payment from the parties in equal shares. Any such demand for payment is without
prejudice (a) to ultimate liability for the fees in question and (b) to the parties joint and several
liability therefor.
(C) Right to resign for non-payment
If any amount due under (A) or (B) above remains unpaid for more than 28 days after payment
has been demanded, the arbitrator in his sole discretion may give written notice to his appointor
and to the other parties and arbitrators that he will resign his appointment if such amount still
remains unpaid 14 days after such notification. Without prejudice to ultimate liability for the fees
in question, any other party may prevent such resignation by paying the amount demanded within
the said 14 days. Upon any resignation under this paragraph the arbitrator will be entitled to
immediate payment of his fees to date, and shall be under no liability to any party for any
consequences of his resignation.
(D) Booking fees
(1) (a) For a hearing of up to ten days duration there shall be payable to the tribunal a booking fee
of such sum per arbitrator as the Committee of the Association may from time to time decide*, for
each day reserved. The booking fee will be invoiced to the party asking for the hearing date to be
fixed or to the parties in equal shares if both parties ask for the hearing date to be fixed as the case
may be and shall become due and shall be paid within 14 days of confirmation of the reservation
or six months in advance of the first day reserved (the start date), whichever date be the later. If
the fee is not paid in full by the due date the tribunal will be entitled to cancel the reservation
forthwith without prejudice to its entitlement to be paid the fee in question or the appropriate
proportion thereof in accordance with sub-paragraph (d) below. In the event of a cancellation
under this provision either party may secure reinstatement of the reservation by payment within
seven days of any balance outstanding.
(b) For hearings over ten days duration the booking fee in sub-paragraph (1)(a) above shall for
each day reserved be increased by 30% in the case of a hearing of up to 15 days and 60% in the
case of a hearing of up to 20 days and may, at the discretion of the tribunal, be subscribed in
nonreturnable instalment payments. For hearings in excess of 20 days the booking fee shall be at
the rate for a hearing of 20 days plus such additional sum as may be agreed with the parties in the
light of the length of the proposed hearing.
(c) The booking fee for any third arbitrator or umpire shall be due and payable as above, save that
the booking fee due to any third arbitrator or umpire appointed less than six months before the
start date shall be due forthwith upon his appointment and payable within 14 days thereof.
(d) Where, (i) at the request of one or both of the parties, or (ii) by reason of settlement of any
dispute, or (iii) by reason of cancellation pursuant to sub-paragraph (a) above or (iv) by reason of
the indisposition or death of any arbitrator or umpire a hearing is adjourned or a hearing date
vacated prior to or on or after the start date, then, unless non-returnable instalment or other
payments have been agreed, the booking fee will be retained by (or, if unpaid, shall be payable to)
the tribunal (i) in full if the date is adjourned or vacated less than three months before the start
date or on or after that date, (ii) as to 50 per cent if the date is adjourned or vacated three months

or more before the start date. Any interlocutory fees and expenses incurred will also be payable or,
as the case may be, deductible from the refund under (ii).
(e) Where, at the request of one or both of the parties, or by reason of the indisposition or death of
any arbitrator or umpire a hearing is adjourned or a hearing date is vacated and a new hearing date
is fixed, a further booking fee will be payable in accordance with sub-paragraphs (a) and (b)
above.
(2) An arbitrator or umpire who, following receipt of his booking fee or any part thereof, is for
any reason replaced is, upon settlement of his fees for any interlocutory work, responsible for the
transfer of his booking fee to the person appointed to act in his place. In the event of death the
personal representative shall have corresponding responsibility.
(E) Security for costs of awards
(1) Without prejudice to the rights provided for in paragraphs (A), (B) and (D) above, a tribunal is
entitled to reasonable security for its estimated costs (including its fees and expenses) up to the
making of an award. In calculating such amount credit will be given for any booking fees paid.
Such security is to be provided no later than 21 days before the start of any oral hearing intended
to lead to an award or, in the case of a documents-only arbitration, no later than immediately
before the tribunal starts reading and drafting with a view to producing an award.
(2) If a tribunal exercises the right to request security under sub-paragraph (1) above, it shall
advise the parties of its total estimated costs (a) in the case of an oral hearing, usually when such
hearing is fixed and in any event no later than 28 days before the security must be in place, and (b)
in the case of a documents-only arbitration 28 days before the tribunal intends to start reading
and/or drafting with a view to producing an award.
(3) Requests for security hereunder shall be addressed to the party requesting any oral hearing,
and to the claimant in the case of a documents-only arbitration. If such party fails to provide such
security within the time set any other party will be given seven days notice in which to provide it,
failing which the tribunal may vacate any hearing dates or, in the case of a documents-only
arbitration, refrain from reading and/or drafting.
(4) In any case where time does not allow for the periods in sub-paragraphs (1)-(3) above, the
tribunal shall be entitled at its discretion to set such shorter periods as are reasonable in the
circumstances.
(5) The form of such security shall be in the tribunals discretion. Normally an undertaking from
an appropriate firm of lawyers or a P&I or Defence Association will be acceptable. However, a
tribunal may require a cash deposit or bank guarantee. Any undertaking or guarantee must
undertake to pay the sum covered no later than five weeks after publication of the relevant award
and shall not be conditional upon the award being released unless the costs thereof are wholly
covered by the relevant security.
(6) No estimate given hereunder shall prejudice the tribunals entitlement to its reasonable fees
and expenses.

(7) Any security provided or payment made in accordance with these provisions shall be without
prejudice to ultimate liability as between the parties for the fees and expenses in question, and to
the parties joint and several liability to the tribunal until all outstanding fees and expenses have
been paid in full.
(F) Accounting for payments made on account
Where the case proceeds to an award, or is settled subsequent to the start of the hearing,
appropriate credit will be given for any amounts paid under paragraphs (B), (D) or (E) above in
calculating the amount to be paid in order to collect the award, or as the case may be, the amount
payable to the tribunal upon settlement of the case.

ACCOMMODATION
(1) If accommodation and/or catering is arranged by the tribunal, the cost will normally be
recovered as part of the cost of the award, but where a case is adjourned part-heard or in other
special circumstances, the tribunal reserves the right to direct that the cost shall be provisionally
paid by the parties in equal shares (or as the tribunal may direct) promptly upon issue of the
relevant account. Prior to booking accommodation and/or catering the tribunal may, if it thinks fit,
request that it be provided with security sufficient to cover its prospective liabilities in respect
thereof.
(2) If accommodation is reserved and paid for by the parties and it is desired that the cost incurred
be the subject of directions in the award, the information necessary for that purpose must be
furnished promptly to the tribunal.

THE SECOND SCHEDULE

ARBITRATION PROCEDURE
1. The normal procedure (which shall apply unless the parties agree otherwise) requires service of
claim submissions. If, exceptionally, formal pleadings are thought appropriate (e.g. in more
complicated references) special permission must be obtained from the tribunal. Whether claim
submissions or points of claim are served, they must set out the position of the claimants in
respect of the issues that have arisen between the parties as clearly, concisely and
comprehensively as possible, and must always be accompanied by all supporting documentation
relevant to the issues between the parties.
2. Except in unusual cases (e.g. applications for interim final awards for sums which are said to be
indisputably due and owing) defence submissions or, if the tribunal has permitted formal
pleadings, points of defence (and counterclaim, if any) with all documentation relevant to the
issues between the parties (other than that disclosed by the claimants) are to be served 28 days
after receipt of the claim submissions or points of claim. An allegation that all relevant
documentation has not been disclosed with the claim submissions or points of claim will not
normally be a reason for allowing additional time for service of defence submissions or points of
defence. However a failure to disclose all relevant documentation at an appropriate stage may be
penalised in costs.

3. Submissions in reply or, if the tribunal has permitted formal pleadings, points of reply are to be
served 14 days after service of submissions or points of defence unless there is also a defence to a
counterclaim, in which case the submissions or pleadings are to be served within 28 days from
receipt of the submissions or points of defence and counterclaim. Any reply to the defence to
counterclaim must be served within 14 days thereafter.
4. A party serving supporting documentation must check with the tribunal whether it wishes to
receive copies of all or some of the documentation at that stage. The aim should be for a tribunal
to see enough documentation to be able to identify the issues in the case but not to be burdened
with, for instance, copy invoices at the commencement of a reference.
5. All submissions and pleadings must be set out in numbered paragraphs.
6. Bare denials in response to an allegation will not be acceptable. If an allegation is denied,
reasons must be given and if appropriate a positive contrary case put forward.
7. Applications for security for costs will not be considered until after service of defence
submissions (or points of defence, if formal pleadings have been permitted). Any application must
be accompanied by a justification for it and a breakdown of the costs which it is reasonably
anticipated will be incurred up to the stage of the reference for which security is sought. In the
light of paragraph (E) of the First Schedule it will not be appropriate for security for costs to
include any provision for the fees of a tribunal.
8. Unless the parties agree that the reference is ready to proceed to an award on the exclusive basis
of the written submissions that have already been served, both parties must complete the
Questionnaire set out at the end of this Schedule within 14 days of the service of the final
submissions or pleadings as set out in paragraph 3 above. Every such Questionnaire must contain
the declaration set out at the end of the Questionnaire below, which shall be signed by a properly
authorized officer of the party on whose behalf it is served. Completed Questionnaires must be
served on the tribunal and the other party or parties. Unless the parties agree, the tribunal will then
establish the future procedural course of the reference, either on the basis of the Questionnaires
and any other applications made to it in writing or, if appropriate, after a preliminary meeting.
9. Subject to any specific agreement between the parties or ruling from the tribunal, both parties
are entitled at any stage to ask each other for any documentation that they consider to be relevant
which has not previously been disclosed. Parties will not generally be required to provide broader
disclosure than is required by the courts. Generally a party will only be required to disclose the
documents on which it relies or which adversely affect its own case, as well as documents which
either support or affect the other partys case.
10. If a party wishes to obtain disclosure of certain documents prior to service of submissions or a
pleading, it must seek the agreement of the other party, failing which it should make an
appropriate written application to the tribunal, explaining the rival positions of the parties in
question.
11. In appropriate cases the tribunal may order the service of a statement of truth signed by an
officer or by the legal representative of a party confirming the accuracy of any submissions or of
any declarations that a reasonable search for relevant documentation has been carried out.

12. Subject to contrary agreement of the parties or an appropriate ruling by the tribunal, the parties
will be required to exchange statements of evidence of fact (whether to be adduced in evidence
under the Civil Evidence Acts or to stand as evidence in chief) as well as expert evidence covering
areas agreed by the parties or ordered by the tribunal within a time scale agreed by the parties or
ordered by the tribunal. Statements of evidence of fact or expert evidence that have not been
exchanged in accordance with these provisions will not be admissible at a hearing without leave of
the tribunal which will only be granted in exceptional circumstances.
13. Any application to a tribunal for directions as to procedural or evidential matters should, save
in exceptional circumstances, be made only after the other party has been afforded an opportunity
to agree, within three working days, the terms of the directions proposed. Any application that has
not previously been discussed with the representatives of such other party and that does not fully
record the rival positions of the parties will normally simply be rejected by a tribunal. If a party
has been requested by another party to discuss and agree any application, but has failed to respond
within three working days (or such other time as may be allowed by the tribunal), the tribunal will
not elicit the comments of that party or make orders conditional on objections not being received.
14. Communications regarding procedural matters should be made expeditiously.
15. Tribunals will not acknowledge receipt of correspondence despite any request to that effect
unless there is particular reason to do so.
16. Only in the most exceptional circumstances can it be appropriate for a party to question the
terms of any procedural order made or seek a review of it by the tribunal.
17. If a tribunal considers that unnecessary costs have been incurred at any stage of a reference, it
may of its own volition or on the application of a party make rulings as to the liability for the
relevant discrete costs. Unnecessary costs may be incurred by, e.g., inappropriate applications
having been made or not agreed, excessive photocopying or unnecessary communications being
generated by the same message being sent by fax and/or e-mail, and mail and/or courier. Tribunals
may order such costs to be assessed and paid immediately.

QUESTIONNAIRE
(Information to be provided as required in paragraph 8 of the Second Schedule to the LMAA
Terms)
As many as possible of the procedural issues should be agreed by the parties. If agreement has
been possible, then please make that clear in the answers to the Questionnaire.
1. A brief note of the nature of the claim (e.g. unsafe port or balance of accounts dispute).
2. Approximate quantum of the claim.
3. Approximate quantum of any counterclaim.
4. The principal outstanding issues requiring determination raised by the claim and any
counterclaim.
5. Are any amendments to the claim, defence or counterclaim required?

6. Are any of the issues in the reference suitable for determination as a preliminary issue?
7. Are there any areas of disclosure that remain to be dealt with?
8. Would a preliminary meeting be useful, and if so at what stage?
9. What statement evidence is it intended to adduce and by when; and (if there is to be a
hearing)what oral evidence will be adduced?
10. What expert evidence is it intended to adduce by way of reports and/or oral testimony and by
when will experts reports be exchanged? Generally a meeting of experts will be useful. Unless the
parties agree or the tribunal rules that such a meeting would not be appropriate, when should the
meeting take place?
11. Suggested timetable for preparation for the close of submissions if the case is to go ahead on
documents alone or for a hearing if that is appropriate.
12. Estimated length of the hearing, if any.
13. Which witnesses of fact and experts is it anticipated will be called at the hearing, if there is to
be one?
14. Is it appropriate for a hearing date to be fixed now? (Save in exceptional circumstances, a
hearing date will not be fixed until the preparation of the case is sufficiently advanced to enable
the duration of the hearing to be properly estimated; this will normally be after disclosure of
documents has been substantially completed.)
15. Estimated costs of each party
(i) up to completion of this Questionnaire; and
(ii) through to the end of the reference.
16. Does either party consider that it is entitled to security for costs and, if so, in what amount?
17. Have the parties considered whether mediation might be worthwhile?
Declaration (to be signed by a properly authorised officer of the party completing the
questionnaire: see para. 8 above):
On behalf of the [claimants/respondents] I, the undersigned [name] being [state position in
organization] and being fully authorised to make this declaration, confirm that I have read and
understood, and agree to, the answers given above.
Signed ........................... Dated ..........................

THE THIRD SCHEDULE

PRELIMINARY MEETINGS
This Schedule sets out, in check-list form, the topics which may be appropriate for consideration
when a preliminary meeting is to be held in accordance with paragraph 15 of the Terms.

The circumstances in which a preliminary meeting may be held vary very considerably. In some
cases (including the more complex arbitrations and most cases involving a hearing of more than
five days) a preliminary meeting is necessary and will be held on the initiative of the tribunal or at
the request of the parties, after much of the preparatory work has been done, to review the
progress of the case and to enable directions to be made or agreed for further preparation for, and
the conduct of, the hearing. In other cases a dispute may have arisen as to some procedural matter
(e.g. a failure to serve submissions or a pleading or to give adequate disclosure of documents) and
a party may seek to persuade the tribunal to give appropriate directions (including, in a proper
case, a peremptory order under Section 41(5) of the Act) so as to resolve the matter.
Whatever the occasion for a preliminary meeting with the arbitrators, two general principles
apply; first, that an application to the arbitrators for a particular order should normally be made
only after the other party has been afforded a reasonable opportunity to agree the terms of the
directions proposed (see paragraph 13 of the Second Schedule); second, that, wherever possible, a
preliminary meeting should be preceded by a discussion between the parties representatives as to
the future conduct of the case along the lines indicated in paragraph 15 of the Terms.
The check-list sets out some of the most important matters for consideration. However, many of
the points mentioned will not arise unless the parties have agreed or the tribunal has ordered some
procedure other than that contemplated by the Second Schedule. Such points, which are marked *,
are included to cover cases of this kind.
The check-list cannot attempt to be comprehensive. Inevitably, certain matters must be left to the
discretion of the tribunal and the parties advisers. The opportunity is taken to list the procedural
matters which may need to be considered in a logical order from the commencement of the
arbitration. It should however be possible in cases where, for whatever reason, the Second
Schedule is not followed, for the directions relating to at least the earlier stages of the arbitration
to be agreed with the other party, or failing agreement to be dealt with on a written application to
the arbitrators and without the need for a preliminary meeting (see paragraph 8 of the Second
Schedule).
1. Can the arbitration be decided on documents only?
The parties and their advisers should consider at the outset whether the case is suitable to be
decided without an oral hearing (see paragraph 13(c) of the Terms).
2. Submissions and pleadings*

(i) A time-table should be ordered or agreed for the service of submissions or pleadings.
(ii) Once an initial exchange has taken place, it should be considered whether a reply is
necessary and whether requests for further details (including particulars) of the other partys
case are necessary and if made whether all such requests have been properly dealt with.
(iii) As the case proceeds and further documents become available, the submissions or
pleadings should be reviewed to see:
o (a) whether amendments are required;
o (b) whether all issues are still alive.

3. Disclosure of documents*

(i) A time-table should be ordered or agreed either for the disclosure of all relevant documents
or for the initial disclosure of such specified categories of documents as may be ordered or
agreed.
(ii) Applications for further disclosure should initially be made to the opposing party, and if
not complied with, by application to the tribunal.
(iii) Disputes as to outstanding disclosure should not normally require a specific meeting with
the arbitrators and applications can often best be reserved until a preliminary meeting is to
take place in any event.
(iv) Consideration should always be given to whether it can be ordered or agreed that the
ambit of disclosure be limited so as to avoid unnecessary delay and expense.

4. Factual evidence

(i) Can some facts/figures be agreed or admitted?

(ii) A time-table should be ordered or agreed for the exchange of statements (or affidavits) of
witnesses of fact.
(iii) It should be ordered or agreed:
o (a) whether the statements or affidavits are to be admitted without calling the maker to
give oral evidence at the hearing or
o (b) whether the statements are to stand as the evidence in chief of the witnesses subject to
their attending to give oral evidence; and
o (c) whether the evidence of any witness is to be taken in advance or by means of a live
telephone or video link or by use of a video recording.
(iv) In any case where it may be desired to seek the assistance of a Court (whether within or
outside the United Kingdom) to secure the attendance of witnesses at the hearing, to obtain
documentary or other evidence, to record oral testimony for presentation to the tribunal or to
exercise other powers in support of the arbitral proceedings, the party intending to invoke the
assistance of the Court should first where practicable seek the agreement of the other parties
to the making of the application to the Court or, if agreement cannot be reached, should apply
to the tribunal for permission to make the application (see Sections 43 and 44 of the Act) and
for directions as to when and how it is to be made.

5. Expert evidence

(i) It should be ordered or agreed whether or not the case requires expert evidence to be
adduced and, if so, the subjects on which expert evidence is necessary and the number and
disciplines of the experts.
(ii) If it is ordered or agreed that the case is one requiring expert evidence the order or
agreement should provide
o (a) whether each party is to adduce expert evidence; and/or
o (b) whether the tribunal should appoint experts or assessors to assist it on technical
matters (see Section 37 of the Act);
(iii) Where expert evidence is to be adduced by the parties a time-table should be ordered or
agreed for the following:
o (a) the exchange of experts reports;
o (b) any without prejudice meeting of experts held to agree or narrow the issues;

(c) the drawing up of a memorandum by the experts setting out what has been agreed and
what remains in issue;
o (d) the service of supplementary experts reports;
(iv) It should be ordered or agreed whether the tribunal will deal with the technical issues on
the basis of the experts reports, without the need for the authors to give oral evidence.

6. Preliminary issues/interim awards

Both the tribunal and the parties should consider at any preliminary meeting:

(i) what are the important matters in issue between the parties;
(ii) how are those issues best decided;
(iii) whether time and expense will be saved if one or more issues (e.g. interpretation of
contract) are decided as preliminary issues;
(iv) whether liability and damages should be decided at one hearing or separately.

7. Questions to the parties

It may be considered whether one of the parties (or the tribunal) should put questions to a party
and in what form this should be done.
8. Procedure at the hearing
It may be considered whether one of the parties (or the tribunal) should put questions to a party
and in what form this should be done.
Directions may be given as to:

(i) what if any rules of evidence will apply and generally as to the manner and form in which
the evidence is to be presented at the hearing;
(ii) the length of time available for witnesses to give their evidence or for parties or their
representatives to present their arguments;
(iii) whether arguments are to be in written or oral form or a combination of the two.

9. Investigations by the tribunal

Would any investigations by the tribunal assist in ascertaining the facts?
10. Inspection
Would the tribunal be assisted by attending trials or experiments, or inspecting any object
featuring in the dispute?
11. Documents

(i) If possible provide agreed chronology and dramatis personae;

(ii) arrangements of documents (e.g. different bundles for different topics, or as appropriate)
and dates by which bundles to be produced;
(iii) unnecessary inclusion of documents to be avoided;
(iv) when documents are voluminous, consider copying only key bundles and providing a
core bundle.

12. Advance reading

(i) Provision of pleadings and other suitable material (e.g. experts reports) to the tribunal as
far in advance of the hearing as possible.
(ii) Should time be set aside during the hearing, after appropriate opening, for private reading
of any documents by tribunal (to reduce time otherwise involved in reading documents out)?

13. Multi-party disputes

(i) Concurrent or consecutive hearings (see paragraph 14(b) of the Terms);

(ii) procedure generally.

14. Representation
Level of representation at the hearing to be appropriate to the case.
15. Hearing dates
(The fixing of dates will, in the majority of cases, be most usefully considered after discovery has
been substantially completed. An application for a date to be fixed should not, however, be made
until the parties are able to make a realistic estimate of how long the hearing is likely to last, and
when the parties will be ready.)

(i) Estimated duration of hearing.

(ii) When can parties realistically be expected to be ready?
(iii) Any problems re availability of witnesses? (If so, can these be mitigated by taking
evidence in advance, using proofs/affidavits at the hearing, by means of a live telephone or
video link, or by use of a video recording?)
(iv) Availability of tribunal (see paragraph 19 of the Terms and the Fourth Schedule).
(v) Accommodation required and numbers attending.
(vi) Any special facilities (e.g. transcripts, interpreters, etc.)
(vii) Arrangements for accommodation, etc.: who to book/pay for?

16. Costs
Estimates should be given of the parties respective costs up to the date of the meeting, and
through to the end of the hearing.

THE FOURTH SCHEDULE

RECONSTITUTION OF THE TRIBUNAL

The following provisions are directed to avoiding delay which the parties or either of them
consider unacceptable, but if both parties prefer to retain a tribunal as already constituted they
remain free so to agree.
1. The governing factor will be the ability of the tribunal to fix a hearing date within a reasonable
time of the expected readiness date as notified by the parties on application for a date or, if they
are not agreed as to the expected readiness date, within a reasonable time of whichever forecast
date the tribunal considers more realistic.

2. For hearings of up to 10 days estimated duration, what constitutes a reasonable time will
(unless the parties apply for a date further ahead) be determined by reference to the estimated
length of hearing as follows:

Estimated duration

Reasonable time

(i) Up to 2 days

3 months

(ii) 3-5 days

6 months

(iii) 6-10 days

10 months

Relevant time-scale is used below to mean whichever of the foregoing periods is applicable and,
in cases of more than 10 days duration, such corresponding time-scale as the tribunal may
consider appropriate.
3. A sole arbitrator who is unable to offer a date within the relevant time-scale will offer to retire
and, if so requested by the parties or either of them, will retire upon being satisfied that an
appropriate substitute appointment has been effected by the parties; in event of their disagreement,
either party may request the President to make the necessary substitute appointment.
4. In all other cases, unless all members of the tribunal are able to offer a matching date within the
relevant time-scale:

(A) the tribunal will have regard to any agreed preference of the parties, but if there is no
agreed preference the tribunal will fix:
o (i) the earliest hearing date that can be given by any member(s) able to offer a guaranteed
date within the relevant time-scale;
o (ii) if a guaranteed date within the relevant time-scale cannot be offered by any member
of the tribunal, the earliest date thereafter which can be guaranteed by any member(s) of
the tribunal; on the basis, in either case, that any member then unable (by reason of a
prior commitment) to guarantee the date so fixed will (unless that prior commitment has
meanwhile cleared) retire by notice given six clear weeks prior to the start date.
(B) Upon notification of any such retirement an appropriate substitution will be effected as
follows:
o (i) If an original arbitrator retires the substitute shall be promptly appointed by his
appointer; or failing such appointment at least 21 days prior to the start date the substitute
will then be appointed by the umpire or third arbitrator or, if an umpire or third arbitrator
has not yet been appointed, the substitute will be appointed by the President;
o (ii) If an umpire or third arbitrator retires the substitute will be appointed by the original
arbitrators.

5. For the purpose of Paragraph (4):

(A) appropriate substitution means appointment of a substitute able to match the hearing
date established in accordance with sub-paragraph (A);
(B) start date means the first date reserved for the hearing;
(C) An umpire or third arbitrator will retain power to make any necessary substitution under
sub-paragraph (B)(i) notwithstanding that he may himself have given notice of retirement
under sub-paragraph (A) and an original arbitrator will retain the like power under
subparagraph (B)(ii).

6. An arbitrator or umpire who retires as mentioned above shall:

(i) be entitled to immediate payment of his fees and expenses incurred up to the date of his
retirement; and
(ii) incur no liability to any party by reason thereof.

THE LMAA TERMS (2006)

COMMENTARY
The new revision of the LMAA Terms, the LMAA Terms (2006), applies to all references
commenced on or after 1st January, 2006. It is designed to meet needs which have become
apparent since the Terms were last amended in 2002.
***
The most important change is to paragraph 22. Whereas since 1996, the Terms provided (contrary
to the default provisions of the Arbitration Act 1996) that reasoned awards would only be made
when requested, nowin line with trends in other fields and actual practice in LMAA
arbitrationsa reasoned award will be made unless the parties agree otherwise.
The other important change is to paragraph 8 of the Second Schedule, which now requires each
Questionnaire to be signed by a properly authorized officer of the party on whose behalf the
Questionnaire is completed. In other areas of arbitral activity preliminary meetings are commonly
held, at which the presence of representatives of the parties themselves, as distinct from their
advisers, is often found be useful. Whilst the LMAA does not consider that such a course is
desirable in London maritime arbitrations, it is felt that having parties themselves sign off
Questionnaires will go some way to achieving a similar effect.
Paragraphs 8(b) and 9(b) have been amended so as to allow the President to appoint a third
arbitrator or umpire if the first two arbitrators cannot agree, thus avoiding the need for an
expensive application to the Court.
Further, the definition of President in paragraph 1 has been enlarged to allow the actual
President to designate a substitute where he cannot act, e.g. because of absence or sickness, or a
conflict of interest.
Paragraph 10 has been amended to overcome arguments advanced in one case which, if right,
would have prohibited a tribunal from accepting jurisdiction in respect of new claims.

Apart from these changes, two erroneous references have been corrected; one in paragraph 8 of
the Second Schedule and the other in paragraph 1 of the checklist in the Third Schedule.

ARBITRATION CLAUSE
Parties may wish to consider the use of an arbitration clause which expressly provides for the
proceedings to be subject to the LMAA Terms.
A suggested form of clause, the BIMCO/LMAA Arbitration Clause, is set out below. It provides
for the constitution of a tribunal if the parties do not agree upon a sole arbitrator. The clause can
be readily modified if the preference should be for a tribunal composed of two arbitrators, with
power to appoint an umpire if they disagree.
Agreement upon a sole arbitrator has obvious economic attractions, particularly in the case of
arbitrations on documents alone, or where the amount at stake is modest. Parties are of course free
to appoint who they like, but is normally in their interests to appoint persons who are resident in
the UK and thus readily available to participate in a London arbitration.

BIMCO/LMAA Arbitration Clause

After consultation with the LMAA, BIMCO have adopted and are recommending the following
amended arbitration clause, which the LMAA recommends for future use in place of the present
LMAA Clause.

(a) This Contract shall be governed by and construed in accordance with English law and
any dispute arising out of or in connection with this Contract shall be referred to arbitration in
London in accordance with the Arbitration Act 1996 or any statutory modification or reenactment thereof save to the extent necessary to give effect to the provisions of this Clause.
The arbitration shall be conducted in accordance with the London Maritime Arbitrators
Association (LMAA) Terms current at the time when the arbitration proceedings are
commenced.
The reference shall be to three arbitrators. A party wishing to refer a dispute to arbitration
shall appoint its arbitrator and send notice of such appointment in writing to the other party
requiring the other party to appoint its own arbitrator within 14 calendar days of that notice
and stating that it will appoint its arbitrator as sole arbitrator unless the other party appoints its
own arbitrator and give notice that it has done so within the 14 days specified. If the other
party does not appoint its own arbitrator and give notice that it has done so within the 14 days
specified, the party referring a dispute to arbitration may, without the requirement of any
further prior notice to the other party, appoint its arbitrator as sole arbitrator and shall advise
the other party accordingly. The award of a sole arbitrator shall be binding on both parties as
if he had been appointed by agreement.
Nothing herein shall prevent the parties agreeing in writing to vary these provisions to
provide for the appointment of a sole arbitrator.
In cases where neither the claim nor any counterclaim exceeds the sum of US$50,000 (or
such other sum as the parties may agree) the arbitration shall be conducted in accordance with
the LMAA Small Claims Procedure current at the time when the arbitration proceedings are
commenced.

(b) Notwithstanding (a) above, the parties may agree at any time to refer to mediation any
difference and/or dispute arising out of or in connection with this Contract.
In the case of a dispute in respect of which arbitration has been commenced under (a), above,
the following shall apply:
o (i) Either party may at any time and from time to time elect to refer the dispute or part of
the dispute to mediation by service on the other party of a written notice (the Mediation
Notice) calling on the other party to agree to mediation.
o (ii) The other party shall thereupon within 14 calendar days of receipt of the Mediation
Notice confirm that they agree to mediation, in which case the parties shall thereafter
agree a mediator within a further 14 calendar days, failing which on the application of
either party a mediator will be appointed promptly by the Arbitration Tribunal (the
Tribunal) or such person as the Tribunal may designate for that purpose. The mediation
shall be conducted in such place and in accordance with such procedure and on such
terms as the parties may agree or, in the event of disagreement, as may be set by the
mediator.
o (iii) If the other party does not agree to mediate, that fact may be brought to the attention
of the Tribunal and may be taken into account by the Tribunal when allocating the costs
of the arbitration as between the parties.
o (iv) The mediation shall not affect the right of either party to seek such relief or take such
steps as it considers necessary to protect its interest.
o (v) Either party may advise the Tribunal that they have agreed to mediation. The
arbitration procedure shall continue during the conduct of the mediation but the Tribunal
may take the mediation timetable into account when setting the timetable for steps in the
arbitration.
o (vi) Unless otherwise agreed or specified in the mediation terms, each party shall bear its
own costs incurred in the mediation and the parties shall share equally the mediators
costs and expenses.
o (vii) The mediation process shall be without prejudice and confidential and no
information or documents disclosed during it shall be revealed to the Tribunal except to
the extent that they are disclosable under the law and procedure governing the
arbitration.

(Note: the parties should be aware that the mediation process may not necessarily interrupt time
limits)

FALCA Rules
The BIMCO/LMAA Arbitration Clause set out above includes a provision incorporating the Small
Claims Procedure for appropriate cases. The LMAA has also co-operated in the promotion of
FALCA (Fast and Low Cost Arbitration), a procedure suitable for cases more substantial than
those for which the Small Claims Procedure is designed, but in which the parties do not want a
full-scale arbitration.
If parties wish to apply the Small Claims Procedure and FALCA to appropriate cases, they may
prefer to adopt the FALCA clause, to be found on page 39 of the LMAA Handbook 2006 and on
the LMAA website at www.lmaa.org.ukunder page 1 of the Commentary on LMAA FALCA Rules.

Reproduced with the kind permission of The London Maritime Arbitrators Association.
1 * The current fees as fixed by the LMAA Committee will be found on the LMAA website
at www.lmaa.org.uk .

Chapter

APPENDIX C: The LMAA Small Claims Procedure

1. Introduction
These provisions shall be known as the LMAA Small Claims Procedure 2006 effective 1st
January 2006. They shall apply to any dispute which parties have agreed should be referred to
arbitration under this Procedure. If any such agreement refers to a monetary limit for disputes that
may be so referred, such limit shall be deemed to exclude interest and costs unless the parties
agree otherwise.

2. Appointment of arbitrator
(a) If a dispute has arisen and the parties have agreed that it should be referred to arbitration under
the Small Claims Procedure, then, unless a sole arbitrator has already been agreed on, either party
may give notice to the other requiring him to join in appointing a sole arbitrator. If within fourteen
days the parties have agreed on a sole arbitrator and the intended arbitrator has agreed to act, the
Claimant shall within a further fourteen days send to the Respondent (with copies to the arbitrator)
a letter of claim accompanied by copies of all relevant documents including experts reports and
shall also send to the arbitrator a remittance in his favour for the Small Claims fee as defined in
para 3(b).
(b) If the parties have not within fourteen days agreed on a sole arbitrator, either party may apply
in writing to the Honorary Secretary, London Maritime Arbitrators Association for the
appointment of a sole arbitrator by the President. Such application shall be copied to the other
party and shall be accompanied by a copy of the letter of claim together with copies of all said
relevant documents and a remittance for the said Small Claims fee plus 100, plus VAT where
applicable in favour of the LMAA. Where appropriate a party applying to the President should
provide a concise explanation of the issues which are likely to arise and an indication as to
whether any particular expertise on the part of the arbitrator is required. The President, having
considered the nature of the dispute, shall appoint an appropriate arbitrator and shall give notice to
the parties. The LMAA shall send to the arbitrator the letter of claim and the documents together
with the said Small Claims fee, and shall retain the balance in respect of administrative expenses.

3. The arbitrators fee

(a) The Small Claims fee includes the appointment fee, interlocutories, a hearing not exceeding
one day (if requried by the arbitrator pursuant to para 5(g)), the writing of the Award and the
assessment of costs (if any). It does not include expenses, such as the hire of an arbitration room,
which shall in the first instance be paid by the Claimant on demand. However if there is any

challenge to jurisdiction which, or which it is suggested falls to the arbitrator to resolve, the
arbitrator shall be entitled to charge on a reasonably appropriate basis for such work, his
additional fees being payable in the first instance by the Claimant before he makes any award,
ultimate liability for such additional fees being for the arbitrator to resolve.
(b) The Small Claims fee shall be such standard fee as shall be fixed from time to time by the
Committee of the LMAA*: VAT shall be payable where applicable. For all purposes, including
time limts, payment of the Small Claims fee within 14 days of agreement being reached upon a
sole arbitrator under paragraph 2(a) shall be a condition precedent to the valid commencement of
proceedings under the Small Claims Procedure.
(c) In the event of the Respondent putting forward a counterclaim which exceeds the amount of
the claim an additional fixed fee in such amount (plus VAT where applicable), as shall be fixed
from time to time by the Committee of the LMAA*, is payable by the Respondent. Payment of
such fee within fourteen days of service of defence and counterclaim submissions shall, for all
purposes including time limits, be a condition precedent to the Respondents entitlement to bring
any such counterclaim within the proceedings in question.
(d) If the case is settled amicably before an award has been written, the arbitrator may retain out of
the Small Claims fee a sum sufficient to compensate him for services thus far rendered and any
balance shall be repaid.

4. Right of appeal excluded

The right of appeal to the Courts is excluded under this procedure. By adopting the Small Claims
Procedure the parties shall be deemed to have agreed to waive all rights of appeal. For the
avoidance of doubt, this provision does not apply to any ruling by an arbitrator on his own
jurisdiction.

5. Procedure
(a) A letter of defence and details of counterclaim (if any) accompanied in each case by copies of
all relevant documents including any experts reports shall be delivered by the Respondent to the
Claimant within twenty-eight days from receipt of the letter of claim or from the date of the
appointment of the arbitrator, whichever shall be the later.
(b) A letter of reply and defence to counterclaim (if any) shall be delivered by the Claimant to the
Respondent within a further twenty-one days. Where an additional fee is payable under paragraph
3(c) hereof in respect of the counterclaim, the twenty-one days shall run only from receipt by the
arbitrator of the additional fee. The arbitrator shall be entitled to refuse to admit evidence
submitted at the stage of reply and defence to counterclaim (if any) if it should properly have been
served with the letter of claim.
(c) The Respondent shall, if he so wishes, deliver to the Claimant a letter of reply to defence to
any counterclaim within a further fourteen days.
(d) Any extension to the above time limits (including that for the service of a letter of claim set out
in paragraph 2(a) above) must be applied for before expiry of the existing time limit. If a party

fails to serve its pleading within the time limit set, the arbitrator, on the application of the other
party or of his own motion, will notify the defaulting party that unless the outstanding
communication is received within a fixed period (maximum 14 days) he will proceed to the award
on the basis of the submissions and documents before him to the exclusion of all others. (In the
case of failure to serve a letter of claim the arbitrator shall make an award dismissing the claim.)
The time allowed by the arbitrators notice, added to any extension of time previously agreed
between the parties in respect of the same pleading, shall not in total exceed 28 days. Any
pleading submitted by the defaulting party subsequent to expiry of the time limit set by the
arbitrators notice shall not be admissible.
(e) Following the service of the letter of reply, or, where there is a counterclaim, following service
of the letter of reply to defence to counterclaim, the arbitrator may declare to the parties that
pleadings have closed. No further pleadings shall be considered by the arbitrator following such a
declaration.
(f) Copies of all the above letters and documents shall be sent to the arbitrator and to the other
party, or if the other party is acting through a solicitor or representative, to that solicitor or
representative.
(g) There shall be no hearing unless, in exceptional circumstances, the arbitrator requires this. (h)
In the case of an oral hearing the arbitrator shall have power to allocate the time available (which
shall be limited to one working day) between the parties in such manner that each party has an
equal opportunity in which to present his case.
(i) All communications or notifications under this procedure may be by letter, telex, telefax or email.

6. Disclosure of documents
(a) There shall be no disclosure, but, if in the opinion of the arbitrator a party has failed to produce
any relevant document(s), he may order the production of such document(s) and may indicate to
the party to whom the order is directed that, if without adequate explanation that party fails to
produce the document(s), he may proceed on the assumption that the contents of such document(s)
do not favour that partys case.
(b) The expression relevant documents includes all documents relevant to the dispute, whether
or not favourable to the party holding them. It includes witness statements, experts reports and
the like on which a party intends to rely, but does not include documents which are not legally
disclosable.

7. The award
The arbitrator will make every effort to publish the award within one month, in a documents-only
case, from the date when he has received all relevant documents and submissions, or, where there
is an oral hearing, from the close of the hearing.

8. Costs

The arbitrator shall assess and award costs on a commercial basis having regard to the nature of
the reference. Unless the parties otherwise agree, the amount which one party may be ordered to
pay to the other in respect of legal costs (including disbursements) shall be assessed at a sum in
the arbitrators absolute discretion up to such maximum figure as shall be fixed and published
from time to time by the Committee of the LMAA*. Where there is a counterclaim in respect of
which an additional fixed fee is payable to the arbitrator pursuant to paragraph (c) hereof, this
amount (after striking any necessary balance between costs orders where there is more than one)
shall not exceed such other maximum figure as shall be fixed and published from time to time by
the Committee of the LMAA1. No breakdowns of such costs are to be provided unless the parties
agree otherwise or the arbitrator so requires, in which event they must be provided within 7 days
of the service of the last pleading as in paragraph 5(e) above or the arbitrators direction,
whichever is later. The successful party will normally be awarded the Small Claims fee (including
the fee of 100.00 payable to the LMAA in cases where the President is requested to appoint an
arbitrator) in addition to any legal costs which he has incurred (subject to the limits mentioned
above), provided always that any award of costs shall be in the sole discretion of the arbitrator.

9. General
The arbitrator may in any case which, in his discretion, he considers exceptional depart from or
vary the above provisions as he considers appropriate, save that he shall not be entitled to vary the
maximum figure which can be awarded under the Small Claims Procedure in respect of legal costs
unless the parties agree otherwise.
In any case where it is determined or agreed, because of the nature and/or weight of a case, that
the Small Claims Procedure is inappropriate and shall not be applicable, it shall cease to apply in
its entirety.

COMMENTARY ON THE LMAA SMALL CLAIMS PROCEDURE 2006

(Note: Attention is particularly drawn to the passages in bold type below. These indicate
substantial changes to the Commentary made at the time of the 2006 Revision of the Procedure.)

1. Introduction
The Small Claims Procedure has been introduced to provide a simplified, quick and inexpensive
procedure for the resolution of small claims. It is supplementary to the Documents Only procedure
contained in the Third Schedule to the LMAA Terms 2006.
It is suggested that it should be used where neither the claim nor any counterclaim exceeds the
sum of $50,000 (excluding interest and costs). It is not suitable for use where there are complex
issues or where there is likely to be examination of witnesses. On the other hand, the Procedure
may be suitable for handling larger claims where there is a single issue at stake.
There has been a regrettable tendency to apply the Procedure regardless of the complexity of the
issues involved in a particular dispute (and occasionally, regardless of the amounts involved). This
is likely to lead to dissatisfaction with and criticism of the Procedure since the constraints on the
arbitrator and the parties imposed by the limited financial remuneration for their services (which is
an essential part of the Procedure) may mean that a particular dispute is not dealt with as the

parties envisage. Parties proposing to use the Procedure are therefore encouraged to consider at
the outset as to whether it is appropriate to vary the terms of the Procedure (for example, by
mutually agreeing to increase the maximum amount of recoverable costs). The position of the
arbitrator is dealt with further in the context of discretion at paragraph 9 below.
Attention is drawn to the following features:

2. Reference to a sole arbitrator

This will provide a saving both in time and expense. It is expected and hoped that in most cases
the parties will be able to agree on the sole arbitrator. Where they cannot agree, application may
be made to the LMAA and the President will then make the appointment. There will be a charge
of 100 to cover the administrative expenses. The attention of the parties is drawn to the fact that
payment of the fixed fee in full (including the additional element when the appointment is made
by the President) is a condition precedent to the commencement of proceedings. In requesting the
President to make an appointment under the Procedure, the appointing party should provide as full
an explanation as is practicable of the issues which he expects to arise. He should also draw the
attention of the President to the fact that particular expertise on the part of the arbitrator may be
desirable (for example, engineering expertise in the case of a performance dispute). Parties should
also be aware that it is the practice of the President not to consider for appointment in a particular
case any arbitrator whose name he knows has been put forward byeither party. The objective of
this practice is to avoid any perception on the part of the other party that a party has secured an
advantage by having the President appoint as arbitrator one of the individuals whom he has
proposed. A party asking the President to make an appointment should therefore disclose the
names of the arbitrators proposed by either party.
Claimants must also note that by virtue of paragraph 3(b), payment of the Small Claims fee
is a condition precedent to the commencement of arbitration, including for the purposes of
any time bar. Similarly under sub-paragraph (c), a counterclaim may not be brought until
any relevant fee has been paid by the respondent. (Further, by paragraph 5(b), the
claimants time for responding to a counterclaim does not run until any fee relevant to the
counterclaim has been paid.)

3. Arbitrator to receive a fixed fee

So that the parties know where they stand at an early stage it is provided that the arbitrator will
receive a fixed fee. In the case of a counterclaim which exceeds the amount of the claim there is
an additional fixed fee. This additional fee is charged because a counterclaim that exceeds the
claim will normally involve different issues. No additional charge is made in respect of
counterclaims which do not in total exceed the amount of the claim. Members of the LMAA have
agreed to deal with disputes under the LMAA Small Claims Procedure as a service to the industry,
though it will be appreciated that, having regard to current rates of remuneration, it may in many
cases involve some financial sacrifice. Any expenses must be paid in addition.
The amounts of these fees are determined from time to time by the LMAA Committee and
will be found in the LMAA Newsletter and on the website at www.lmaa.org.uk

Challenges to jurisdiction can involve a great deal of work additional to that required to
resolve the merits of a dispute. Accordingly it seems appropriate that such work should be
paid for on aquantum meruit basis before the arbitrator resolves the challenge, and that such
fees should be bornein the first instance onlyby the claimant.

4. Exclusion of appeal
Under the Arbitration Act 1996 there is no restriction on the parties to exclude the right of appeal.
An agreement to arbitrate under the LMAA Small Claims Procedure will automatically be treated
as an agreement to exclude the right of appeal. In view of this, while a Reasoned Award will be
given, it will be expected that reasons will be relatively brief. This exclusion does not, by virtue
of the Arbitration Act 1996, apply to challenges to jurisdiction.

5. Informal procedure
There will be no formal pleadings and no disclosure as such. Each party will be informed of the
case against him by a simple exchange of letters accompanied by copies of all relevant documents,
including witness statements. A strict but reasonable timetable is imposed and, if a party fails to
comply with a final time limit set by the arbitrator, the arbitrator will proceed to his award on the
basis of the documents already received. There is substituted for disclosure (a procedure
frequently used to gain time) an obligation on the parties to disclose all relevant documents with
their letters of claim or defence. Should a party fail in this obligation, the arbitrator is given power
to order production of any missing documents and to give warning to that party that, if he fails to
produce them without adequate explanation, the arbitrator may proceed on the basis that those
documents do not favour that partys case. Claimants should note that any attempt to secure a
tactical advantage by withholding production of evidence which should properly accompany the
claim submissions until the stage of a reply may be met with a refusal on the part of the arbitrator
to admit such further evidence.

6. Legal representation
The use of lawyers is not excluded, though it is thought that in many cases they will not be
necessary. But it should be borne in mind that advice from a lawyer can often indicate to a party
the strength or weakness of his case and can assist in reaching an amicable settlement; also, if
settlement cannot be reached, the case may be presented by a lawyer in a more orderly and
concise manner.

7. The award
The arbitrator will normally make his Award within one month from the date on which he has
received all the papers.

8. The costs
The power of an arbitrator to award costs has been retained as an important feature of London
arbitration. It operates to deter spurious claims or defences and may assist in promoting an
amicable settlement. The arbitrator is given power to tax or assess legal costs, but on a

commercial basis. The amount recoverable will be assessed at a sum in the arbitrators discretion
not to exceed such sum as may be fixed by the Committee of the LMAA. Where there is a
counterclaim that attracts an additional fee for the arbitrator under paragraph 3(c), again
this fee is fixed by the Committee from time to time. Although the arbitrator has a discretion to
vary or depart from the provisions of the Procedure in exceptional cases (see paragraph 9 below),
this discretion does not extend to varying the amount of legal costs recoverable under this
Procedure. It is regarded as being of fundamental importance so far as the Procedure is concerned
that a party agreeing to arbitrate disputes according to the Procedure can be certain at the outset of
his maximum liability in terms of costs.
Unless otherwise agreed or requested by the arbitrator, parties are not required to present
schedules of the costs claimed: the amount is to be left to the arbitrators discretion.

9. Discretion
It is expected that in the great majority of cases the strict timetable and provisions of the
Procedure will be observed and enforced, but in exceptional cases there is discretion for the
arbitrator to vary or depart from them. The success of the Procedure in promoting cost-effective
arbitration in London has led to a regrettable number of cases in which disputes have been
referred to arbitration according to the Procedure which are not appropriate for determination in
accordance with the spirit, if not the letter, of that Procedure. Such situations can arise simply as
the result of the fact that parties to a contract agreed in that contract to apply the Procedure to all
disputes involving less than a certain sum of money, regardless of the nature of such disputes. In
such cases the parties should be aware that the arbitrator may at the outset or at any time thereafter
inform them that in his opinion the dispute referred to him cannot be dealt with satisfactorily
according to the Procedure. He will then be entitled to invite the parties either to agree to an
appropriate variation of the Procedure or, alternatively, to agree to his continuing to act on the
basis of the LMAA Terms in force for the time being. In the event of a refusal by the parties so to
agree the arbitrator shall be entitled to resign from the reference whilst retaining out of the Small
Claims fee a sum sufficient to remunerate him for services thus far rendered. An amendment to
paragraph 9 makes it clear that where the Small Claims Procedure is deemed inappropriate,
it shall cease to apply in all respects.
Reproduced with the kind permission of The London Maritime Arbitrators Association.
1 *The current sums, as fixed by the LMAA Committee, may be found on the LMAA website
at www.lmaa.org.uk.

Chapter

APPENDIX D: The LMAA Intermediate Claims Procedure 2009

APPENDIX D: The LMAA Intermediate Claims Procedure 2009

(as developed in conjunction with The Baltic Exchange)

Introduction
1. These provisions shall be known as the LMAA Intermediate Claims Procedure 2009 (and
hereinafter called this Procedure). They shall apply to any dispute which parties have agreed
should be referred to arbitration under this Procedure. Any agreed monetary limit for disputes that
may be so referred shall be deemed to exclude interest and costs unless the parties agree
otherwise. In the absence of such agreed monetary limit, this Procedure shall apply where either:

(a) the total amount of the Claimants claims or the total amount of any counterclaims exceed
any applicable agreed upper limit under the LMAA Small Claims Procedure; or
(b) US$100,000

but where neither the total amount of the claimants claims nor the total amount of any
counterclaims exceed US$400,000, or such other sum as the parties may agree, (exclusive of
interest and costs). Should either party at any time advance claims or counterclaims which in total
exceed that amount, the tribunal shall decide, in its absolute discretion, whether it is appropriate to
continue the reference under this Procedure or to apply the LMAA Terms current at the date of
commencement of the arbitration proceedings.

Appointment of the tribunal

2. The parties are free to agree on the composition of the tribunal but, in the absence of agreement,
the tribunal is to consist of three arbitrators as set out in paragraph 3 below.
3. If the tribunal is to consist of three arbitrators:

(a) each party shall appoint one arbitrator not later than 14 days after service of a request in
writing by either party to do so;
(b) the two so appointed may at any time thereafter appoint a third arbitrator so long as they
do so before any substantive hearing or forthwith if they cannot agree on any matter relating
to the arbitration, and if the two said arbitrators do not appoint a third within 10 working days
of one calling upon the other to do so, the President shall, on the application of either
arbitrator or of a party, appoint the third arbitrator;
(c) the third arbitrator shall be the chairman unless the parties shall agree otherwise;
(d) before the third arbitrator has been appointed or if the position has become vacant, the two
original arbitrators, if agreed on any matter, shall have the power to make decisions, orders
and awards in relation thereto;
(e) after the appointment of the third arbitrator decisions, orders or awards shall be made by
all or a majority of the arbitrators;
(f) the view of the chairman shall prevail in relation to a decision, order or award in respect of
which there is neither unanimity nor a majority under paragraph (e).

4. If the tribunal is to consist of two arbitrators and an umpire:

(a) each party shall appoint one arbitrator not later than 14 days after service of a request in
writing by either party to do so;
(b) the two so appointed may appoint an umpire at any time after they themselves are
appointed and shall do so before any substantive hearing or forthwith if they cannot agree on
any matter relating to the arbitration, and if the two said arbitrators do not appoint an umpire
within 10 working days of one calling upon the other to do so, the President shall, on the
written application of either arbitrator or of a party, appoint the umpire;
(c) the umpire shall attend any substantive hearing and shall following his appointment be
supplied with the same documents and other materials as are supplied to the other arbitrators;
(d) the umpire may take part in the hearing and deliberate with the original arbitrators;
(e) decisions, orders and awards shall be made by the original arbitrators unless and until they
cannot agree on a matter relating to the arbitration. In that event they shall forthwith give
notice in writing to the parties and the umpire, whereupon the umpire shall replace them as
the tribunal with power to make decisions, orders and awards as if he were the sole arbitrator.

5. If the tribunal is to consist of a sole arbitrator and if within 14 days of one party calling for
arbitration the parties have not agreed upon a sole arbitrator:

(a) either party may apply in writing for the appointment of a sole arbitrator by the President;
(b) such application shall be copied to the other party and shall be accompanied by a
remittance in favour of the LMAA for its fee for making the appointment (the LMAA fee);
(c) a party applying to the President shall provide a concise explanation of the issues which
are likely to arise and an indication as to whether any particular expertise on the part of the
arbitrator is required;
(d) the President (or if he is unable to act, a member of the LMAA Committee nominated by
him) having considered the nature of the dispute, shall appoint a sole arbitrator and give
notice of such appointment to the parties.

Opening submissions
6.

(a) The submissions referred to hereunder shall comprise the opening submissions and shall
be copied to the tribunal as and when served.
(b) Claim submissions accompanied by all relevant documents (as defined in paragraph 7(b))
shall be served by the claimant within 14 days of the appointment of the second member of
the tribunal or the appointment of a sole arbitrator, as appropriate;
(c) Defence submissions, together with any counterclaim, accompanied in each case by copies
of all relevant documents shall be served by the respondent on the claimant within 28 days
from receipt of the claim submissions.
(d) Reply submissions, together with any defence to counterclaim, shall be served by the
claimant on the respondent within a further 21 days.
(e) The respondent shall, if it so wishes, serve on the claimant reply to defence to
counterclaim submissions within a further 21 days.
(f) Following service of the reply submissions, or, where there is a counterclaim, following
service of the reply to defence to counterclaim submissions, or following expiry of the time

for service of the same, the opening submissions shall be deemed completed and no further
opening submissions may be served by either party, except with the prior permission of the
tribunal.

Disclosure of documents
7.

(a) There will be no formal stage of disclosure, each party being obliged to produce all
relevant documents with its opening submissions. Following service of claim submissions,
the parties shall include in their opening submissions any specific request for disclosure of
any relevant documents. If such documents are not disclosed by the other party within 14
days of completion of the opening submissions the tribunal may draw adverse inferences in
its award, should it consider that other party to be in default of its disclosure obligations.
(b) The expression relevant documents includes all documents relevant to the dispute,
whether or not favourable to the party having power, possession or control of them, but does
not include documents which are privileged and not therefore legally disclosable.

Statements of witnesses of fact

8. Any party wishing to adduce in evidence statements of witnesses of fact (witness statements)
must give notice of such intention within 14 days after completion of opening submissions (see:
paragraph 6 above). Any such witness statements are to be served/exchanged within 28 days after
the completion of opening submissions. Neither party may serve any supplementary witness
statement unless the express permission of the tribunal has first been obtained and any terms
imposed by the tribunal complied with. Any request for such permission must be made by the
party wishing to adduce such evidence within fourteen days of service/exchange of witness
statements, failing which no supplementary witness statement shall be adduced in evidence by that
party.

Expert evidence
9.

(a) Unless served with opening submissions, no expert evidence may be adduced by either
party unless the express permission of the tribunal has first been obtained. Any request for
such permission must be made within fourteen days after completion of opening submissions
or exchange of witness statements (whichever is the later) and must indicate the precise
nature of the issues to which the expert evidence is directed and identify the precise field of
expertise of the expert witness(es), who will, if permitted, give such evidence.
(b) Any expert evidence is to be served/exchanged within twenty-one days after the date on
which the tribunal gives permission for such evidence to be adduced.
(c) Neither party may serve any supplementary expert evidence unless the express permission
of the tribunal has first been obtained and any terms imposed by the tribunal complied with.
Any request for such permission must be made by the party wishing to adduce such evidence
within fourteen days of service/exchange of experts reports, failing which no supplementary
witness statement shall be adduced in evidence by that party.

Oral hearing
10.

(a) There is no automatic right to an oral hearing and only exceptionally will one be held.
(b) Either party may apply to the tribunal for an oral hearing within, but no later than, 21 days
after (i) completion of opening submissions, or (ii) 14 days after (aa) service/exchange of
witness statements or (bb) the determination of the tribunal of any application to adduce
expert evidence or (cc) the time permitted for service/exchange of expert evidence, whichever
is the later.
(c) If an oral hearing is permitted:
o (i) each party shall serve a skeleton argument, together with a statement of agreed facts,
in advance of the hearing;
o (ii) except with the permission of the tribunal (sought and obtained no less than 14 days
prior to the commencement of the hearing), the oral hearing shall be limited to a
maximum of five hours;
o (iii) each party shall be allocated a maximum of two hours in which to present its case
either in the form of evidence or argument or both, as that party may see fit, and the
remaining hour shall be allocated by the tribunal in such a way as it considers fair and
appropriate in the circumstances of the particular case. Time for cross-examination of the
other partys witnesses is included in each partys two-hour allocation.
o (iv) following the conclusion of the oral hearing, each party shall have the right (but not
the obligation) to serve one set only of closing submissions. Such submissions shall be
served sequentially with the respondent first serving its submissions within seven days of
the end of the oral hearing and the claimant serving its closing submissions within seven
days thereafter.

Closing submissions if no oral hearing

11. If an oral hearing is not permitted (see paragraph 10 above) and there has been no further
disclosure beyond that accompanying the opening submissions, and no witness or expert evidence
has been adduced in accordance with the preceding paragraphs, neither party shall be entitled to
serve any further submissions beyond those provided for in paragraph 6, above. In a case where
there is no oral hearing but there has been disclosure and/or witness and /or expert evidence, each
party shall be entitled to serve one set of closing submissions. Any such closing submissions shall
be served sequentially with the respondent first serving its closing submissions within 14 days
after the last of the said steps in the procedural timetable for the reference has been performed (see
paragraphs 7, 8 and 9 hereof) and the claimant serving its closing submissions within 7 days
thereafter. The closing submissions must not adduce new evidence.

Extension of time
12. Any extension of the time limits set forth in this Procedure shall be applied for before expiry
of the existing time limit. If a party fails to comply with the relevant step in the proceedings within
the time limit set for the performance thereof, the tribunal, on the application of the other party or
of its own motion, shall notify the defaulting party that unless it complies within a fixed period

(maximum 21 days) it will proceed to its award on the basis of the submissions and documents
before it to the exclusion of all others. (In the case of a failure to serve claim submissions, the
tribunal has the power to make and shall make an award dismissing the claim unless the tribunal is
satisfied that it would not be just to require service of claim submissions at that time, in which
event the tribunal will extend time as it deems appropriate). Any submissions, documents, witness
statements, or expert evidence submitted by the defaulting party subsequent to expiry of the time
limit set by the tribunals notice shall not be admissible.

The award
13.

(a) The tribunal will make every effort to publish its award within six weeks of service of the
last submissions served by the parties.
(b) In addition to the powers set out in section 57 of the Arbitration Act 1996 (the Act), the
tribunal shall have the following powers to correct an award or to make an additional award:
o (i) The tribunal may on its own initiative or on the application of a party correct any
accidental mistake or omission or error of calculation in its award;
o (ii) The tribunal may on the application of a party give an interpretation of a specific
point or part of the award;
(c) An application for the exercise of the powers set out above and in section 57 of the Act
must be made within 28 days of the award unless the tribunal shall think fit to extend time;
(d) Such powers shall not be exercised without the tribunal first affording the other party (or,
where it is acting on its own initiative, the parties) a reasonable opportunity to make
representations to the tribunal;
(e) Any correction or interpretation of an award may be effected in writing on the original
award or in a separate memorandum or supplementary award which shall become part of the
award. It shall be effected within 56 days of the date of the original award unless all parties
shall agree a longer period.

Right of appeal
14. The parties are deemed to have agreed that there will be a right of appeal to the Courts but
only where the tribunal certifies in its award that the dispute between the parties involves a
question of law of general interest or importance to the trade or industry in question. Any right of
appeal is otherwise excluded. For the avoidance of doubt this provision does not apply to any
ruling by a tribunal in relation to its own jurisdiction.

Parties costs
15.

(a) Costs will be awarded on a summary and commercial basis and in such manner and
amount as the tribunal shall in its absolute discretion consider fair, reasonable and
proportional to the matters in dispute.
(b) The parties recoverable costs are be capped so that neither party shall be entitled to
recover more than a sum equivalent to 30% of the claimants monetary claim as advanced

plus, should there be a counterclaim and should the tribunal consider it to be distinct from the
claimants claim, a sum equivalent to 30% of such monetary counterclaim as advanced. These
percentages shall be increased from 30% to 50% if there is an oral hearing, and in that event
expenses such as hiring a venue for the hearing and/or associated catering costs shall be
recoverable in addition to, and shall not be included in, the said 50%. These percentages are
maximum figures and the tribunal may at any time, and in its absolute discretion, cap the
parties future costs so that the total cap amounts to some lesser percentage than is here stated.
(c) If declaratory or other non-monetary relief is sought the tribunal will, following
completion of opening submissions and in its sole discretion, decide what overall cap on
future costs to apply.
(d) To enable the tribunal to assess costs, each party will provide a breakdown of those costs
as soon as the tribunal is in a position to proceed to its award.

Security for costs

16. Applications for security for costs will not be considered until after service of defence
submissions. Any application must be accompanied by a justification for it and a breakdown of
the costs which it is reasonably anticipated will be incurred up to the stage of the reference for
which security is sought. In no circumstances will security for costs be granted in a sum above the
amount at which the parties respective costs have been capped.

Tribunals costs
17.

(a) Every arbitrator appointed under this Procedure shall be entitled to charge an appointment
fee.
(b) Save in exceptional circumstances, the tribunals costs (for payment of which the parties
are jointly and severally liable) shall not exceed a sum equivalent to one-third of the total at
which a partys costs are capped under paragraph 15 above, excluding the appointment fee, in
respect of a sole arbitrator or two-thirds thereof in respect of a two or three-man tribunal.
(c) The tribunals said costs do not include expenses such as hiring a venue for the hearing
and/or associated catering costs which shall, in the first instance, be paid by the party
requesting an oral hearing on demand.
(d) Should there be a challenge to the jurisdiction of the tribunal which, or which it is
suggested, falls to the tribunal to resolve, the tribunal shall be entitled to charge a reasonable
fee for such work, its additional fee being payable in the first instance by the claimant before
the tribunal makes any award, ultimate liability for such additional fee being for the tribunal
to determine.
(e) An arbitrator may in his discretion require payment of his outstanding fees, and any
expenses incurred, at appropriate intervals. Any such demand for payment shall be addressed
to the arbitrators appointing party and shall be copied to any other member of the tribunal
and other parties. A sole arbitrator, third arbitrator or umpire shall require payment from the
parties in equal shares. Any such demand for payment is without prejudice to (i) ultimate
liability for the fees in question and (ii) the parties joint and several liability therefor. The
cost of any award shall be paid upon collection of it.

(f) If any amount due under (a) or (e) above remains unpaid for more than 14 days after
payment has been demanded, the arbitrator may give written notice to the appointor and to the
other parties and arbitrators that he will resign his appointment if such amount still remains
unpaid 7 days after such notification. Without prejudice to ultimate liability for the fees in
question, any other party may prevent such resignation by paying the amount demanded
within the said 7 days. Upon any resignation under this paragraph the resigning arbitrator will
be entitled to immediate payment of his fees to date, and shall be under no liability to any
party for any consequences of his resignation.

Concurrency
18. Where two or more arbitrations conducted under this Procedure appear to raise common issues
of fact or law, the tribunals may direct that those arbitrations shall be conducted and any hearing
take place concurrently. Where such an order is made, the tribunals may give such directions as
the interests of fairness, economy and expedition require including: (a) that the documents
disclosed by the parties in one arbitration shall be made available to the parties to the other
arbitration upon such conditions as the tribunals may determine; (b) that the evidence given in one
arbitration shall be received and admitted in the other arbitration, subject to all parties being given
a reasonable opportunity to comment upon it and subject to such other conditions as the tribunals
may determine.

General
19.

(a) The tribunal may in any case which, in its discretion, it considers exceptional depart from
or vary the above provisions as it considers appropriate, save that it shall not be entitled to
vary the maximum figure which can be awarded to the parties in respect of their legal costs,
unless the parties agree otherwise.
(b) The appointment fee and the LMAA fee shall be such amounts as the Committee of the
LMAA shall from time to time decide.
(c) All references to costs herein are exclusive of VAT and VAT is to be added thereto where
applicable.
(d) In calculating costs for the purposes of paragraphs 15, 16 and 17 hereof, where claimed in
a currency other than US Dollars, the tribunal will adopt the mid buying and selling exchange
rate between the two currencies prevailing on the date of commencement of the arbitration
proceedings.
(e) For all purposes, including time limits, arbitration proceedings shall be deemed to be
commenced under this Procedure upon one of the parties appointing an arbitrator or upon one
of the parties calling upon the other party to agree on the appointment of a sole arbitrator.
(f) In the absence of any agreement to the contrary, the parties to all arbitral proceedings to
which this Procedure applies agree: (i) that the law applicable to their arbitration agreement is
English law; and (ii) that the seat of the arbitration is in London, England.

COMMENTARY ON THE LMAA INTERMEDIATE CLAIMS PROCEDURE

(2009)

Introduction
1. The LMAA Intermediate Claims Procedure has been introduced to fulfil an apparent need for a
procedure to deal with medium-sized claims, i.e. those deserving of a fuller procedure than
provided by the Small Claims Procedure while not, on grounds of proportionality, justifying the
full procedure offered by the LMAA Terms.
In addition, the intention behind this procedure is that it should largely provide its own momentum
and should also ensure that the extent of costs liability will be largely predictable at the outset.
It is suggested that it should be used for claims which exceed the top monetary limit of any
relevant Small Claims Procedure but are less than US$400,000. However, it will only apply if
specifically agreed by the parties to be incorporated into their contract and, when they do agree
that it should apply, they may of course set the applicable lower and upper limits. The
BIMCO/LMAA Arbitration Clause may be used to incorporate the LMAA Small Claims
Procedure, the LMAA ICP, and the LMAA Terms and the parties can adapt the financial limits set
out in that clause.

Appointment of Tribunal
2. Paragraphs 15 deal with the question of appointment of the tribunal in the variety of
circumstances which can arise and are self-explanatory. There is provision for application to the
President of the LMAA where the parties have agreed to the appointment of a sole arbitrator but
cannot agree his or her identity.

Opening Submissions
3. The form and procedural timetable for these submissions follow a well established format. In
some cases the exchange of these submissions will be sufficient to enable the tribunal to proceed
to its award once they had been completed.

Disclosure of Documents
4. This procedure dispenses with any formal disclosure stage in the procedural timetable, given
that the opening submissions must be accompanied by all relevant documents as defined in
paragraph 7(b). However, any specific requests are to be included in the parties opening
submissions and adverse inferences may be drawn by the tribunal in the event of non-disclosure.

Statements of Witnesses of Fact

5. If a party wishes to adduce in evidence statements of witnesses of fact it must give notice of
such intention after completion of the opening submissions and it should be noted that there is no
automatic right to serve supplementary witness statements.

Expert Evidence
6. Should a party wish to serve expert evidence, that party must obtain the express prior
permission of the tribunal and, again, there is a time limit for applying for this as well as for

serving/exchanging it. Again, there is no automatic right to serve supplementary expert evidence
and there is a time limit for applying for permission to do so.

Oral Hearing
7. An oral hearing will tend to be the exception rather than the rule and it should be noted that,
again, there is a time limit for applying for this. It will normally be limited to a maximum of 5
hours and is primarily intended to allow for cross-examination of witnesses, so as to assist the
tribunal should there be significant conflicts as to relevant facts. There is provision for closing
written submissions thereafter.

Closing Submissions if no Oral Hearing

8. These provisions are to allow for sequential service of closing submissions where, following
completion of opening submissions, there has been further disclosure and/or witness evidence and/
or expert evidence.

Extension of Time
9. In order to achieve the purpose of an inherent momentum to the proceedings, strict rules as to
the extensions of time are incorporated.

The Award
10. The intention is to produce an award within 6 weeks of service of the last submissions
(whether the last of the opening submissions or the closing submissions). There is also additional
power given to the tribunal to correct an existing award or make an additional award.

Right of Appeal
11. Rather than exclude any right of appeal, as under the Small Claims Procedure, or leave the
matter on the basis of the Act, this provision constitutes an advance agreement by the parties to
allow the tribunal to decide whether or not there should be an appeal on the question of law by
way of certification contained in its award. This is a novel provision and is intended to achieve
two purposes, namely to avoid a dichotomy of views between the tribunal and the Courts as to
whether the award contains a question of law of general public importance and, secondly, to avoid
the costs of applying for leave and establishing before the Court for a second time that which
would have already been demonstrated to the tribunal.

Parties Costs
12. These provisions have put an upper limit or cap on the parties costs, calculated by reference
to the monetary value of the parties claims and allow for, in effect, summary assessment of the
same. As a consequence, the parties should be able to predict, in advance, their maximum liability
(should they be unsuccessful) for the other parties costs. They should also avoid incurring what
can frequently amount to substantial costs in the assessment of costs.

Security for Costs

13. The terms allow for security for costs to be ordered in the usual way.

Tribunals Costs
14. These costs are capped by reference to the cap on the parties costs save in respect of a
challenge to the jurisdiction of the tribunal, where the tribunal is entitled to charge a reasonable
fee.

Concurrency
15. The terms allow for two or more arbitrations to be conducted and heard concurrently on a
similar basis to that permitted by the LMAA Terms.

General
16. This part of the terms includes provisions allowing the tribunal to depart from or vary the
terms in exceptional circumstances; however, this does not allow variation of the cap on the
parties costs. Further, since the claims made by the parties will frequently be in US Dollars while
their costs will usually be incurred in Pounds Sterling, the terms allow for the cap to be set by
taking the exchange rate at the commencement of the arbitration. The other miscellaneous
provisions are self-explanatory.
Reproduced with the kind permission of The London Maritime Arbitrators Association.-

Chapter

APPENDIX E: The LMAA/Baltic Exchange Mediation Terms

(2009)

Article 1 Preliminary
1.1 These terms may be referred to as the LMAA/Baltic Exchange Mediation Terms (2009).
1.2 In these Terms unless the context otherwise requires:

(a) Association means the London Maritime Arbitrators Association;

(b) Chairman means the Chairman of the Baltics Member and Membership Services
Committee (c) President means the President for the time being of the Association;
(c) Mediation means and includes mediation, conciliation and any form of dispute
resolution other than litigation and arbitration;
(d) Mediator means and includes one or more persons appointed or nominated for the
purpose of mediation who shall be a member of the LMAA/Baltic Exchange Mediation Panel.

Article 2 Application and purpose of the terms

2.1 These Terms apply to mediation of disputes arising out of or relating to a contractual or other
legal relationship, whether commercial or maritime, where the parties seeking an amicable
settlement of their disputes have agreed that the Terms shall apply.

2.2 The parties may agree to exclude or vary any of these Terms at anytime.

Article 3 Number of mediators

Unless the parties otherwise agree there shall be one Mediator who shall be appointed within 14
days from the commencement of the mediation procedure as mentioned in Article 4 below.

Article 4 Commencement of the mediation procedure

4.1 The party initiating mediation shall send to the other party or parties a written invitation to
mediate under these Terms, briefly setting out the matters in dispute.
4.2 The mediation procedure shall be deemed to have commenced when the other party or parties
accept in writing the invitation to mediation.
4.3 If the other party, or if one of the other parties, rejects the invitation to mediation, or if the
other party or parties fail to respond to the invitation within 14 days or any other period that may
be stated in the invitation, there will be no mediation procedure for the time being. Provided that,
if there are more than two parties and one accepts but the other or others do not, then mediation in
accordance with these Terms between the party making the invitation and the party accepting shall
take place if they so agree.

Article 5 Appointment of mediator

5.1 If the parties to a dispute agree to mediate but are unable to agree on the appointment of a
Mediator and one, or more, of the parties is not a member of the Baltic Exchange they may make
an application in writing to the President, or such other person nominated for this purpose by the
President, accompanied by payment of an administration fee of such sum as shall be fixed from
time to time by the committee of the Association, plus VAT where applicable, for the appointment
of a Mediator. If both, or all, parties are members of the Baltic Exchange they may make an
application in writing to the Chairman for the appointment of a Mediator.
5.2 Any application for the appointment of a Mediator shall be accompanied by a brief summary
of the matters in dispute. A copy of the application and summary shall be sent to the other parties
to the mediation. The President, or such other person nominated for this purpose by the President,
or the Chairman, may call for such further information as he may require. He shall then appoint
the Mediator and shall notify the parties of his or her name and address.
5.3 Where the parties have agreed that each party should appoint a Mediator and one or more of
the parties has failed to make the appointment, the party or parties who have made the
appointment may apply in writing to the President, or such other person nominated for this
purpose by the President, accompanied by payment of an administrative fee of such sum as shall
be fixed from time to time by the committee of the Association, plus VAT where applicable, for
the appointment of a Mediator on behalf of the defaulting party or parties. If both, or all, parties
are members of the Baltic Exchange they may make an application in writing to the Chairman for
the appointment of a Mediator on behalf of the defaulting party or parties. In case any application
is made under the terms of this paragraph the procedure indicated in the preceding paragraph shall
be followed.

5.4 None of the President, the Association, the Chairman and the Baltic Exchange or any agent or
employee of any of them, shall be liable for (i) anything done or omitted to be done in the
designation or appointment, or purported designation or appointment, of any Mediator unless the
act or omission is shown to have been in bad faith or (ii) anything done or omitted to be done by
any Mediator appointed by them in the discharge or purported discharge of his or her function as
Mediator.

Article 6 Exchange of information

6.1 Each party will send to the Mediator within 14 days of his appointment, or such other period
as may be agreed, copies of a concise Summary of its case in the dispute and all documents to
which the Summary refers and any other documents to which it may wish to refer in the
Mediation. A copy of the Summary and documents will be sent simultaneously to any other party
to the Mediation.
6.2 In addition, each party may send to the Mediator and/or bring to the Mediation further
documentation which it wishes to disclose in confidence to the Mediator but not the other party or
parties, clearly stating that such documentation is confidential to the Mediator.
6.3 The parties shall endeavour to agree a joint summary and set of documents or, if this is not
possible, the maximum number of pages for each Summary and set of documents to accompany
each Summary.

Article 7 Duties and powers of the mediator

7.1 The Mediator shall assist the parties in an independent and impartial manner in their attempt to
reach an amicable settlement of their dispute. He shall be guided by the principle of objectivity,
fairness and justice, giving consideration to, among other things, the rights and obligations of the
parties, the usages of the trade in question and the circumstances surrounding the dispute
including any previous business practices between the parties or some of them.
7.2 The Mediator shall conduct the mediation in such manner as he considers appropriate, taking
into account the circumstances of the case, the amount in dispute and any wishes the parties may
express, including any request that the Mediator hear oral statements, together with the need for a
speedy settlement of the dispute.
7.3 The Mediator may at any time make proposals for the settlement of disputes. Such proposal
may be oral or in writing and need not be accompanied by any reasons therefore.
7.4 The Mediator may invite the parties to meet with him or may communicate with them orally
or in writing. He may meet or communicate with the parties together or any of them separately.
Where the Mediator receives factual information concerning the dispute from a party, he may
disclose the substance of that information to the other party or parties so that that other party or
those other parties may have the opportunity to present any explanation which it or they may
consider appropriate. However, when a party gives information to the Mediator subject to the
specific condition that it be kept confidential the Mediator shall not disclose that information to
any other party.

7.5 The Mediator may, with the consent of the parties, call any witness he thinks may be able to
assist in the mediation.

Article 8 Co-operation of parties with mediator

The parties will in good faith co-operate with the Mediator and in particular will endeavour to
comply with requests by him to submit written materials, provide evidence and attend meetings.

Article 9 Settlement agreement

9.1 Where it appears to the Mediator that there are elements of a settlement which would be
acceptable to the parties, he may formulate the terms of a possible settlement and submit them to
the parties for their observations. He may reformulate the terms in the light of such observations.
9.2 If the parties reach agreement on the settlement of the dispute they shall draw up and sign a
written agreement. The Mediator may draw up, or assist the parties in drawing up, the settlement
agreement.
9.3 The parties, by signing the settlement agreement, put an end to the dispute and are bound by
the agreement.
9.4 The Mediator may, if so requested by the parties, draw up the settlement agreement in the
form of an arbitration award or, where the matter has been referred to arbitration before the
commencement of the mediation, the parties may agree that the settlement agreement be drawn up
in the form of an arbitration award by the arbitration tribunal already appointed.

Article 10 Confidentiality
The Mediator and the parties must keep confidential all matters relating to the mediation
proceedings. Confidentiality extends also to the settlement agreement (or any arbitration award
made) except where its disclosure is necessary for the purposes of implementation and
enforcement.

Article 11 Termination of mediation procedure

11.1 The mediation procedure is terminated:

(a) By the signing of the settlement agreement by the parties or by the signing of an
arbitration award, on the date of such agreement or award;
(b) By a written declaration of the parties to the effect that further efforts in mediation are no
longer justified, on the date of the declaration;
(c) By a written declaration by a party to the other party or parties to the effect that the
mediation procedure is terminated, on the date of the declaration;
(d) By a written declaration of the Mediator to the effect that further efforts at mediation are
no longer justified, on the date of the declaration.

Article 12 Resort of arbitration or judicial proceedings

Where the disputes referred to mediation are the subject of any arbitration or judicial proceedings
either party may advise the arbitration tribunal or Court that they have agreed to mediation. The
arbitration or judicial proceedings shall however continue during the conduct of the mediation
subject to any right the arbitration tribunal or Court may exercise to take the mediation timetable
into account when setting any timetable in those proceedings. The mediation procedure may not
interrupt time limits and either party may initiate arbitration or judicial proceedings at any time
where in his opinion such proceedings are necessary for preserving his rights.

Article 13 Costs
13.A The mediators costs
13.A.1 An appointment fee shall be payable to the Mediator by each party to the mediation
procedure. The appointment fee shall be 250 per party or such other sum as the Committee of the
Association may from time to time decide.
13.A.2 Upon termination of the mediation procedure the Mediator shall fix the costs of the
mediation and shall give written notice thereof to the parties who shall, unless otherwise ordered
by the Mediator, be liable to pay the same in equal proportions. Such costs shall include the
Mediators fees, which, unless agreed beforehand, shall be reasonable in amount, having regard to
the time involved, the amount in dispute and the complexity of the case, any out of pocket
expenses and the expenses of anywitnesses called by the Mediator with the consent of the parties.
13.A.3 If any party fails to pay the Mediators costs or its proportion thereof within 30 days from
the termination of the mediation procedure, the other party or parties shall be jointly and severally
liable to indemnify the Mediator in respect of such failure.
13.A.4 The Mediator may, on his appointment or at any time or times thereafter, order the parties
to pay to him a deposit on account of his costs.

13.B The Parties Costs

13.B.1 Normally each party shall bear its own costs.
13.B.2 However, if the Mediator should be of the opinion that any party has not genuinely tried to
co-operate in the mediation or has been obstructive so that the mediation procedure has been
thwarted or has been made more expensive, he may order that that party shall pay all or part of the
costs of any other party; and, if such costs cannot be amicably agreed, the Mediator may assess
and decide the amount to be paid and a certificate signed by the Mediator shall be conclusive and
binding on the parties.

Article 14 Role of the mediator in other proceedings

The parties and the Mediator undertake that the Mediator shall not act as arbitrator, witness,
lawyer, adviser or representative of any party in arbitration or judicial proceedings in respect of
the dispute that is the subject of the mediation procedure.

Article 15 Admissibility of evidence in other proceedings

15.1 Unless all parties to the mediation procedure otherwise agree, the parties undertake not to
reveal, introduce or rely on the following as evidence in any arbitration or judicial proceedings,
whether or not those proceedings relate to the dispute that is the subject of the mediation
procedure:

(a) Views expressed or proposals made by any party with a view to possible settlement of the
dispute;
(b) Admissions made by the party in the course of the mediation procedure;
(c) Proposals made by the Mediator;
(d) The fact that a party has indicated its willingness to accept a proposal to settle made by the
Mediator.

15.2 The parties further undertake, unless all other parties otherwise agree, not to refer to or rely
on any documents which might have been disclosed during the mediation procedure, whether
voluntarily or at the request of the Mediator or other party but which would otherwise have been
privileged and to return all such documents and copies thereof to the party disclosing them.

Article 16 Liability of the mediator

The Mediator shall not be liable for anything done or omitted in the discharge or purported
discharge of his or her functions as Mediator unless the act or omission is shown to have been in
bad faith.

COMMENTARY ON THE LMAA/BALTIC EXCHANGE MEDIATION

TERMS (2009)

Introduction
1. The LMAA/Baltic Exchange Mediation Terms have been introduced in co-operation with the
Baltic Exchange to provide a flexible mediation service where parties in a contractual or other
legal relationship seek an amicable settlement of their disputes. Mediation may take place whether
or not the parties are already involved in arbitration or judicial proceedings and may involve two
or more parties. Where, for example, a dispute involves several parties who may not all have a
direct relationship with each other, mediation enables all of those parties to be involved in a single
procedure to resolve the dispute. Mediation also offers the possibility of resolving disputes on
commercial terms that may not necessarily be limited to a monetary payment by one party to the
other, for example, by an agreement to conclude new, or extend existing, business between the
parties.
The possibility of resolving disputes by mediation is recognised in the BIMCO/LMAA Arbitration
Clause but no specific mediation clause is required to refer a dispute to mediation under the
LMAA/Baltic Exchange Mediation Terms.

Commencing the Mediation Procedure

2. No particular formality is involved in commencing a mediation. A party simply writes to the
other party or parties setting out the matters in dispute and inviting them to mediate under the
LMAA/ Baltic Exchange Terms. The mediation is deemed to commence when the other party or

parties accept in writing the invitation to mediate. If there are more than two parties and one
accepts but the other or others do not the mediation may continue between the two parties who
agree to mediation if they so agree.

The Appointment of a Mediator

3. The panel of qualified mediators for the LMAA/Baltic Exchange Mediation Terms is drawn
from a wide range of different backgrounds, including full members of the LMAA, lawyers and
senior broker members of the Baltic Exchange.
Unless the parties agree otherwise, there will usually be one mediator who is to be appointed
within 14 days from the commencement of the mediation. The parties may agree on the
appointment of a mediator from the panel. If, however, they are unable to agree, the parties may
apply to the President of the LMAA, or a person nominated by the President for the purpose, to
make the appointment. Where both or all of the parties are members of the Baltic Exchange the
application should be made to the Chairman of the Baltic Exchange Member and Membership
Services Committee to make the appointment. Any application should be accompanied by a brief
summary of the matters in dispute, a copy of which should also be sent to the other parties to the
mediation. Any application to the President of the LMAA should be accompanied by payment of
an administration fee as fixed from time to time by the committee of the LMAA.

Exchange of Information
4. Within 14 days of the appointment of the mediator each party must send to the mediator and the
other party or parties a concise summary of its case and any documents referred to in the summary
or which the party wishes to refer to in the mediation. The parties are encouraged to try to agree a
joint summary and set of documents or, at least, a limit on the number of pages for each summary
and set of documents.

The Mediation Procedure

5. The mediator may conduct the mediation in the manner that he, or she, considers appropriate,
taking into account the circumstances, the amount in dispute and any express wishes of the parties.
A new feature of these terms is the power given to the mediator to conduct the mediation in
writing only or by phone and fax or e-mail. This provision has been included with the smaller
cases in mind where it may be less cost effective for decision makers of the parties to travel to the
mediation. Mediation hearings may take place in London or anywhere convenient to the parties
(although the agreement of the mediator to this should ideally be sought at the time of
appointment).
The mediator will only disclose information received from a party to the dispute during the course
of the mediation with that partys agreement.
Although unlikely to occur in most cases, the mediator may call any witness who it is felt will be
able to assist in the mediation.

Settlement

6. Where there appear to be the elements of a settlement acceptable to the parties, the mediator
may, if he or she considers it appropriate, formulate the terms of a settlement agreement for their
consideration and re-formulate it in light of their observations. If the parties reach an agreement
they should then draw up and sign a settlement agreement to bring the dispute to an end. The
settlement may, if the parties so wish, take the form of an arbitration award.

Confidentiality
7. The mediator and the parties must keep confidential all matters relating to the mediation
proceedings.

Relationship with Arbitration and Judicial Proceedings

8. Where the disputes referred to arbitration are already the subject of arbitration or judicial
proceedings either party may advise the arbitration tribunal or court that they have agreed to
mediation. The arbitration or judicial proceedings will however continue in the meantime. The
mediation procedure does not however interrupt time limits and either party may initiate
proceedings during the course of the mediation to prevent their rights from becoming time barred.

Costs
9. An appointment fee of, presently, 250 is payable to the mediator by each party to the
mediation procedure. At the end of the mediation the mediator will fix the cost of the mediation.
In most cases the cost will be shared equally between the parties. Liability for these costs is
however joint and several.
Each party will normally bear their own costs of the mediation, although provision is made to
enable the mediator to make an award of costs against a party that he or she considers has not tried
genuinely to co-operate in the mediation or has been obstructive.

Admissibility of Evidence in Other Proceedings

10. As the mediation procedure takes place on a without prejudice basis, unless all parties to the
mediation otherwise agree, the parties undertake not to reveal or rely on any evidence disclosed in
the mediation that might otherwise be privileged or on any views expressed or proposals made by
any party with a view to settlement or to any admissions made by any party or views expressed by
the mediator.
Reproduced with the kind permission of The London Maritime Arbitrators Association.

Chapter

APPENDIX F: The UNCITRAL Model Law

APPENDIX F: The UNCITRAL Model Law

(As adopted by the United Nations Commission on International Trade Law on 21 June 1985)

CHAPTER I. GENERAL PROVISIONS

Article 1. Scope of application1

(1) This Law applies to international commercial2 arbitration, subject to any agreement in force
between this State and any other State or States.
(2) The provisions of this Law, except articles 8, 9, 17 H, 17 I, 17 J, 35 and 36, apply only if the
place of arbitration is in the territory of this State.
(3) An arbitration is international if:

(a) the parties to an arbitration agreement have, at the time of the conclusion of that
agreement, their places of business in different States; or
(b) one of the following places is situated outside the State in which the parties have their
places of business:
o (i) the place of arbitration if determined in, or pursuant to, the arbitration agreement;
o (ii) any place where a substantial part of the obligations of the commercial relationship is
to be performed or the place with which the subject-matter of the dispute is most closely
connected; or
(c) the parties have expressly agreed that the subject-matter of the arbitration agreement
relates to more than one country.

(4) For the purposes of paragraph (3) of this article:

(a) if a party has more than one place of business, the place of business is that which has the
closest relationship to the arbitration agreement;
(b) if a party does not have a place of business, reference is to be made to his habitual
residence.

(5) This Law shall not affect any other law of this State by virtue of which certain disputes may
not be submitted to arbitration or may be submitted to arbitration only according to provisions
other than those of this Law.

Article 2. Definitions and rules of interpretation

For the purposes of this Law:

(a) arbitration means any arbitration whether or not administered by a permanent arbitral
institution;
(b) arbitral tribunal means a sole arbitrator or a panel of arbitrators;
(c) court means a body or organ of the judicial system of a State;
(d) where a provision of this Law, except article 28, leaves the parties free to determine a
certain issue, such freedom includes the right of the parties to authorize a third party,
including an institution, to make that determination;

(e) where a provision of this Law refers to the fact that the parties have agreed or that they
may agree or in any other way refers to an agreement of the parties, such agreement includes
any arbitration rules referred to in that agreement;
(f) where a provision of this Law, other than in articles 25(a) and 32(2)(a), refers to a claim, it
also applies to a counter-claim, and where it refers to a defence, it also applies to a defence to
such counter-claim.

Article 2 A. International origin and general principles

(As adopted by the Commission at its thirty-ninth session, in 2006)
(1) In the interpretation of this Law, regard is to be had to its international origin and to the need
to promote uniformity in its application and the observance of good faith.
(2) Questions concerning matters governed by this Law which are not expressly settled in it are to
be settled in conformity with the general principles on which this Law is based.

Article 3. Receipt of written communications

(1) Unless otherwise agreed by the parties:

(a) any written communication is deemed to have been received if it is delivered to the
addressee personally or if it is delivered at his place of business, habitual residence or mailing
address; if none of these can be found after making a reasonable inquiry, a written
communication is deemed to have been received if it is sent to the addressees last-known
place of business, habitual residence or mailing address by registered letter or any other
means which provides a record of the attempt to deliver it;
(b) the communication is deemed to have been received on the day it is so delivered.

(2) The provisions of this article do not apply to communications in court proceedings.

Article 4. Waiver of right to object

A party who knows that any provision of this Law from which the parties may derogate or any
requirement under the arbitration agreement has not been complied with and yet proceeds with the
arbitration without stating his objection to such non-compliance without undue delay or, if a timelimit is provided therefor, within such period of time, shall be deemed to have waived his right to
object.

Article 5. Extent of court intervention

In matters governed by this Law, no court shall intervene except where so provided in this Law.

Article 6. Court or other authority for certain functions

of arbitration assistance and supervision
The functions referred to in articles 11(3), 11(4), 13(3), 14, 16(3) and 34(2) shall be performed by
[Each State enacting this model law specifies the court, courts or, where referred to therein,
other authority competent to perform these functions.]

CHAPTER II. ARBITRATION AGREEMENT

Option I

Article 7. Definition and form of arbitration agreement

(As adopted by the Commission at its thirty-ninth session, in 2006)
(1) Arbitration agreement is an agreement by the parties to submit to arbitration all or certain
disputes which have arisen or which may arise between them in respect of a defined legal
relationship, whether contractual or not. An arbitration agreement may be in the form of an
arbitration clause in a contract or in the form of a separate agreement.
(2) The arbitration agreement shall be in writing.
(3) An arbitration agreement is in writing if its content is recorded in any form, whether or not the
arbitration agreement or contract has been concluded orally, by conduct, or by other means.
(4) The requirement that an arbitration agreement be in writing is met by an electronic
communication if the information contained therein is accessible so as to be useable for
subsequent reference; electronic communication means any communication that the parties
make by means of data messages; data message means information generated, sent, received or
stored by electronic, magnetic, optical or similar means, including, but not limited to, electronic
data interchange (EDI), electronic mail, telegram, telex or telecopy.
(5) Furthermore, an arbitration agreement is in writing if it is contained in an exchange of
statements of claim and defence in which the existence of an agreement is alleged by one party
and not denied by the other.
(6) The reference in a contract to any document containing an arbitration clause constitutes an
arbitration agreement in writing, provided that the reference is such as to make that clause part of
the contract.
Option II

Article 7. Definition of arbitration agreement

(As adopted by the Commission at its thirty-ninth session, in 2006)
Arbitration agreement is an agreement by the parties to submit to arbitration all or certain
disputes which have arisen or which may arise between them in respect of a defined legal
relationship, whether contractual or not.

Article 8. Arbitration agreement and substantive claim

before court
(1) A court before which an action is brought in a matter which is the subject of an arbitration
agreement shall, if a party so requests not later than when submitting his first statement on the
substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null
and void, inoperative or incapable of being performed.

(2) Where an action referred to in paragraph (1) of this article has been brought, arbitral
proceedings may nevertheless be commenced or continued, and an award may be made, while the
issue is pending before the court.

Article 9. Arbitration agreement and interim measures by

court
It is not incompatible with an arbitration agreement for a party to request, before or during arbitral
proceedings, from a court an interim measure of protection and for a court to grant such measure.

CHAPTER III. COMPOSITION OF ARBITRAL TRIBUNAL

Article 10. Number of arbitrators

(1) The parties are free to determine the number of arbitrators.
(2) Failing such determination, the number of arbitrators shall be three.

Article 11. Appointment of arbitrators

(1) No person shall be precluded by reason of his nationality from acting as an arbitrator, unless
otherwise agreed by the parties.
(2) The parties are free to agree on a procedure of appointing the arbitrator or arbitrators, subject
to the provisions of paragraphs (4) and (5) of this article.
(3) Failing such agreement,

(a) in an arbitration with three arbitrators, each party shall appoint one arbitrator, and the two
arbitrators thus appointed shall appoint the third arbitrator, if a party fails to appoint the
arbitrator within thirty days of receipt of a request to do so from the other party, or if the two
arbitrators fail to agree on the third arbitrator within thirty days of their appointment, the
appointment shall be made, upon request of a party, by the court or other authority specified
in article 6;
(b) in an arbitration with a sole arbitrator, if the parties are unable to agree on the arbitrator,
he shall be appointed, upon request of a party, by the court or other authority specified in
article 6.

(4) Where, under an appointment procedure agreed upon by the parties,

(a) a party fails to act as required under such procedure, or

(b) the parties, or two arbitrators, are unable to reach an agreement expected of them under
such procedure, or
(c) a third party, including an institution, fails to perform any function entrusted to it under
such procedure,

any party may request the court or other authority specified in article 6 to take the necessary
measure, unless the agreement on the appointment procedure provides other means for securing
the appointment.

(5) A decision on a matter entrusted by paragraph (3) or (4) of this article to the court or other
authority specified in article 6 shall be subject to no appeal. The court or other authority, in
appointing an arbitrator, shall have due regard to any qualifications required of the arbitrator by
the agreement of the parties and to such considerations as are likely to secure the appointment of
an independent and impartial arbitrator and, in the case of a sole or third arbitrator, shall take into
account as well the advisability of appointing an arbitrator of a nationality other than those of the
parties.

Article 12. Grounds for challenge

(1) When a person is approached in connection with his possible appointment as an arbitrator, he
shall disclose any circumstances likely to give rise to justifiable doubts as to his impartiality or
independence. An arbitrator, from the time of his appointment and throughout the arbitral
proceedings, shall without delay disclose any such circumstances to the parties unless they have
already been informed of them by him.
(2) An arbitrator may be challenged only if circumstances exist that give rise to justifiable doubts
as to his impartiality or independence, or if he does not possess qualifications agreed to by the
parties. A party may challenge an arbitrator appointed by him, or in whose appointment he has
participated, only for reasons of which he becomes aware after the appointment has been made.

Article 13. Challenge procedure

(1) The parties are free to agree on a procedure for challenging an arbitrator, subject to the
provisions of paragraph (3) of this article.
(2) Failing such agreement, a party who intends to challenge an arbitrator shall, within fifteen days
after becoming aware of the constitution of the arbitral tribunal or after becoming aware of any
circumstance referred to in article 12(2), send a written statement of the reasons for the challenge
to the arbitral tribunal. Unless the challenged arbitrator withdraws from his office or the other
party agrees to the challenge, the arbitral tribunal shall decide on the challenge.
(3) If a challenge under any procedure agreed upon by the parties or under the procedure of
paragraph (2) of this article is not successful, the challenging party may request, within thirty days
after having received notice of the decision rejecting the challenge, the court or other authority
specified in article 6 to decide on the challenge, which decision shall be subject to no appeal;
while such a request is pending, the arbitral tribunal, including the challenged arbitrator, may
continue the arbitral proceedings and make an award.

Article 14. Failure or impossibility to act

(1) If an arbitrator becomes de jure or de facto unable to perform his functions or for other reasons
fails to act without undue delay, his mandate terminates if he withdraws from his office or if the
parties agree on the termination. Otherwise, if a controversy remains concerning any of these
grounds, any party may request the court or other authority specified in article 6 to decide on the
termination of the mandate, which decision shall be subject to no appeal.

(2) If, under this article or article 13(2), an arbitrator withdraws from his office or a party agrees to
the termination of the mandate of an arbitrator, this does not imply acceptance of the validity of
any ground referred to in this article or article 12(2).

Article 15. Appointment of substitute arbitrator

Where the mandate of an arbitrator terminates under article 13 or 14 or because of his withdrawal
from office for any other reason or because of the revocation of his mandate by agreement of the
parties or in any other case of termination of his mandate, a substitute arbitrator shall be appointed
according to the rules that were applicable to the appointment of the arbitrator being replaced.

CHAPTER IV. JURISDICTION OF ARBITRAL TRIBUNAL

Article 16. Competence of arbitral tribunal to rule on its

jurisdiction
(1) The arbitral tribunal may rule on its own jurisdiction, including any objections with respect to
the existence or validity of the arbitration agreement. For that purpose, an arbitration clause which
forms part of a contract shall be treated as an agreement independent of the other terms of the
contract. A decision by the arbitral tribunal that the contract is null and void shall not entail ipso
jure the invalidity of the arbitration clause.
(2) A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the
submission of the statement of defence. A party is not precluded from raising such a plea by the
fact that he has appointed, or participated in the appointment of, an arbitrator. A plea that the
arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged
to be beyond the scope of its authority is raised during the arbitral proceedings. The arbitral
tribunal may, in either case, admit a later plea if it considers the delay justified.
(3) The arbitral tribunal may rule on a plea referred to in paragraph (2) of this article either as a
preliminary question or in an award on the merits. If the arbitral tribunal rules as a preliminary
question that it has jurisdiction, any party may request, within thirty days after having received
notice of that ruling, the court specified in article 6 to decide the matter, which decision shall be
subject to no appeal; while such a request is pending, the arbitral tribunal may continue the arbitral
proceedings and make an award.

CHAPTER IV A. INTERIM MEASURES AND PRELIMINARY ORDERS

(As adopted by the Commission at its thirty-ninth session, in 2006)
Section 1. Interim measures

Article 17. Power of arbitral tribunal to order interim

measures
(1) Unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party, grant
interim measures.

(2) An interim measure is any temporary measure, whether in the form of an award or in another
form, by which, at any time prior to the issuance of the award by which the dispute is finally
decided, the arbitral tribunal orders a party to:

(a) Maintain or restore the status quo pending determination of the dispute;
(b) Take action that would prevent, or refrain from taking action that is likely to cause,
current or imminent harm or prejudice to the arbitral process itself;
(c) Provide a means of preserving assets out of which a subsequent award may be satisfied; or
(d) Preserve evidence that may be relevant and material to the resolution of the dispute.

Article 17A. Conditions for granting interim measures

(1) The party requesting an interim measure under article 17(2)(a), (b) and (c) shall satisfy the
arbitral tribunal that:

(a) Harm not adequately reparable by an award of damages is likely to result if the measure is
not ordered, and such harm substantially outweighs the harm that is likely to result to the
party against whom the measure is directed if the measure is granted; and
(b) There is a reasonable possibility that the requesting party will succeed on the merits of the
claim. The determination on this possibility shall not affect the discretion of the arbitral
tribunal in making any subsequent determination.

(2) With regard to a request for an interim measure under article 17(2)(d), the requirements in
paragraphs (1)(a) and (b) of this article shall apply only to the extent the arbitral tribunal considers
appropriate.
Section 2. Preliminary orders

Article 17B. Applications for preliminary orders and

conditions for granting preliminary orders
(1) Unless otherwise agreed by the parties, a party may, without notice to any other party, make a
request for an interim measure together with an application for a preliminary order directing a
party not to frustrate the purpose of the interim measure requested.
(2) The arbitral tribunal may grant a preliminary order provided it considers that prior disclosure
of the request for the interim measure to the party against whom it is directed risks frustrating the
purpose of the measure.
(3) The conditions defined under article 17A apply to any preliminary order, provided that the
harm to be assessed under article 17A(1)(a), is the harm likely to result from the order being
granted or not.

Article 17C. Specific regime for preliminary orders

(1) Immediately after the arbitral tribunal has made a determination in respect of an application for
a preliminary order, the arbitral tribunal shall give notice to all parties of the request for the
interim measure, the application for the preliminary order, the preliminary order, if any, and all

other communications, including by indicating the content of any oral communication, between
any party and the arbitral tribunal in relation thereto.
(2) At the same time, the arbitral tribunal shall give an opportunity to any party against whom a
preliminary order is directed to present its case at the earliest practicable time.
(3) The arbitral tribunal shall decide promptly on any objection to the preliminary order. (4) A
preliminary order shall expire after twenty days from the date on which it was issued by the
arbitral tribunal. However, the arbitral tribunal may issue an interim measure adopting or
modifying the preliminary order, after the party against whom the preliminary order is directed
has been given notice and an opportunity to present its case.
(5) A preliminary order shall be binding on the parties but shall not be subject to enforcement by a
court. Such a preliminary order does not constitute an award.
Section 3. Provisions applicable to interim measures and preliminary orders

Article 17D. Modification, suspension, termination

The arbitral tribunal may modify, suspend or terminate an interim measure or a preliminary order
it has granted, upon application of any party or, in exceptional circumstances and upon prior
notice to the parties, on the arbitral tribunals own initiative.

Article 17E. Provision of security

(1) The arbitral tribunal may require the party requesting an interim measure to provide
appropriate security in connection with the measure.
(2) The arbitral tribunal shall require the party applying for a preliminary order to provide security
in connection with the order unless the arbitral tribunal considers it inappropriate or unnecessary
to do so.

Article 17F. Disclosure

(1) The arbitral tribunal may require any party promptly to disclose any material change in the
circumstances on the basis of which the measure was requested or granted.
(2) The party applying for a preliminary order shall disclose to the arbitral tribunal all
circumstances that are likely to be relevant to the arbitral tribunals determination whether to grant
or maintain the order, and such obligation shall continue until the party against whom the order
has been requested has had an opportunity to present its case. Thereafter, paragraph (1) of this
article shall apply.

Article 17G. Costs and damages

The party requesting an interim measure or applying for a preliminary order shall be liable for any
costs and damages caused by the measure or the order to any party if the arbitral tribunal later
determines that, in the circumstances, the measure or the order should not have been granted. The
arbitral tribunal may award such costs and damages at any point during the proceedings.
Section 4. Recognition and enforcement of interim measures

Article 17H. Recognition and enforcement

(1) An interim measure issued by an arbitral tribunal shall be recognized as binding and, unless
otherwise provided by the arbitral tribunal, enforced upon application to the competent court,
irrespective of the country in which it was issued, subject to the provisions of article 17 I.
(2) The party who is seeking or has obtained recognition or enforcement of an interim measure
shall promptly inform the court of any termination, suspension or modification of that interim
measure.
(3) The court of the State where recognition or enforcement is sought may, if it considers it
proper, order the requesting party to provide appropriate security if the arbitral tribunal has not
already made a determination with respect to security or where such a decision is necessary to
protect the rights of third parties.

Article 17I. Grounds for refusing recognition or

enforcement3
(1) Recognition or enforcement of an interim measure may be refused only:

(a) At the request of the party against whom it is invoked if the court is satisfied that:
o (i) Such refusal is warranted on the grounds set forth in article 36(1)(a)(i), (ii), (iii) or
(iv); or
o (ii) The arbitral tribunals decision with respect to the provision of security in connection
with the interim measure issued by the arbitral tribunal has not been complied with; or
o (iii) The interim measure has been terminated or suspended by the arbitral tribunal or,
where so empowered, by the court of the State in which the arbitration takes place or
under the law of which that interim measure was granted; or
(b) If the court finds that:
o (i) The interim measure is incompatible with the powers conferred upon the court unless
the court decides to reformulate the interim measure to the extent necessary to adapt it to
its own powers and procedures for the purposes of enforcing that interim measure and
without modifying its substance; or
o (ii) Any of the grounds set forth in article 36(1)(b)(i) or (ii), apply to the recognition and
enforcement of the interim measure.

(2) Any determination made by the court on any ground in paragraph (1) of this article shall be
effective only for the purposes of the application to recognize and enforce the interim measure.
The court where recognition or enforcement is sought shall not, in making that determination,
undertake a review of the substance of the interim measure.
Section 5. Court-ordered interim measures

Article 17J. Court-ordered interim measures

A court shall have the same power of issuing an interim measure in relation to arbitration
proceedings, irrespective of whether their place is in territory of this State, as it has in relation to

proceedings in courts. The court shall exercise such power in accordance with its own procedures
in consideration of the specific features of international arbitration.

CHAPTER V. CONDUCT OF ARBITRAL PROCEEDINGS

Article 18. Equal treatment of parties

The parties shall be treated with equality and each party shall be given a full opportunity of
presenting his case.

Article 19. Determination of rules of procedure

(1) Subject to the provisions of this Law, the parties are free to agree on the procedure to be
followed by the arbitral tribunal in conducting the proceedings.
(2) Failing such agreement, the arbitral tribunal may, subject to the provisions of this Law,
conduct the arbitration in such manner as it considers appropriate. The power conferred upon the
arbitral tribunal includes the power to determine the admissibility, relevance, materiality and
weight of any evidence.

Article 20. Place of arbitration

(1) The parties are free to agree on the place of arbitration. Failing such agreement, the place of
arbitration shall be determined by the arbitral tribunal having regard to the circumstances of the
case, including the convenience of the parties.
(2) Notwithstanding the provisions of paragraph (1) of this article, the arbitral tribunal may, unless
otherwise agreed by the parties, meet at any place it considers appropriate for consultation among
its members, for hearing witnesses, experts or the parties, or for inspection of goods, other
property or documents.

Article 21. Commencement of arbitral proceedings

Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute
commence on the date on which a request for that dispute to be referred to arbitration is received
by the respondent.

Article 22. Language

(1) The parties are free to agree on the language or languages to be used in the arbitral
proceedings. Failing such agreement, the arbitral tribunal shall determine the language or
languages to be used in the proceedings. This agreement or determination, unless otherwise
specified therein, shall apply to the written statement by a party, any hearing and any award,
decision or other communication by the arbitral tribunal.
(2) The arbitral tribunal may order that any documentary evidence shall be accompanied by a
translation into the language or languages agreed upon by the parties or determined by the arbitral
tribunal.

Article 23. Statements of claim and defence

(1) Within the period of time agreed by the parties or determined by the arbitral tribunal, the
claimant shall state the facts supporting his claim, the points at issue and the relief or remedy
sought, and the respondent shall state his defence in respect of these particulars, unless the parties
have otherwise agreed as to the required elements of such statements. The parties may submit with
their statements all documents they consider to be relevant or may add a reference to the
documents or other evidence they will submit.
(2) Unless otherwise agreed by the parties, either party may amend or supplement his claim or
defence during the course of the arbitral proceedings, unless the arbitral tribunal considers it
inappropriate to allow such amendment having regard to the delay in making it.

Article 24. Hearings and written proceedings

(1) Subject to any contrary agreement by the parties, the arbitral tribunal shall decide whether to
hold oral hearings for the presentation of evidence or for oral argument, or whether the
proceedings shall be conducted on the basis of documents and other materials. However, unless
the parties have agreed that no hearings shall be held, the arbitral tribunal shall hold such hearings
at an appropriate stage of the proceedings, if so requested by a party.
(2) The parties shall be given sufficient advance notice of any hearing and of any meeting of the
arbitral tribunal for the purposes of inspection of goods, other property or documents.
(3) All statements, documents or other information supplied to the arbitral tribunal by one party
shall be communicated to the other party. Also any expert or evidentiary document on which the
arbitral tribunal may rely in making its decision shall be communicated to the parties.

Article 25. Default of a party

Unless otherwise agreed by the parties, if, without showing sufficient cause,

(a) the claimant fails to communicate his statement of claim in accordance with article 23(1),
the arbitral tribunal shall terminate the proceedings;
(b) the respondent fails to communicate his statement of defence in accordance with article
23(1), the arbitral tribunal shall continue the proceedings without treating such failure in itself
as an admission of the claimants allegations;
(c) any party fails to appear at a hearing or to produce documentary evidence, the arbitral
tribunal may continue the proceedings and make the award on the evidence before it.

Article 26. Expert appointed by arbitral tribunal

(1) Unless otherwise agreed by the parties, the arbitral tribunal

(a) may appoint one or more experts to report to it on specific issues to be determined by the
arbitral tribunal;
(b) may require a party to give the expert any relevant information or to produce, or to
provide access to, any relevant documents, goods or other property for his inspection.

(2) Unless otherwise agreed by the parties, if a party so requests or if the arbitral tribunal
considers it necessary, the expert shall, after delivery of his written or oral report, participate in a
hearing where the parties have the opportunity to put questions to him and to present expert
witnesses in order to testify on the points at issue.

Article 27. Court assistance in taking evidence

The arbitral tribunal or a party with the approval of the arbitral tribunal may request from a
competent court of this State assistance in taking evidence. The court may execute the request
within its competence and according to its rules on taking evidence.

CHAPTER VI. MAKING OF AWARD AND TERMINATION OF

PROCEEDINGS

Article 28. Rules applicable to substance of dispute

(1) The arbitral tribunal shall decide the dispute in accordance with such rules of law as are chosen
by the parties as applicable to the substance of the dispute. Any designation of the law or legal
system of a given State shall be construed, unless otherwise expressed, as directly referring to the
substantive law of that State and not to its conflict of laws rules.
(2) Failing any designation by the parties, the arbitral tribunal shall apply the law determined by
the conflict of laws rules which it considers applicable.
(3) The arbitral tribunal shall decide ex aequo et bono or as amiable compositeur only if the
parties have expressly authorized it to do so.
(4) In all cases, the arbitral tribunal shall decide in accordance with the terms of the contract and
shall take into account the usages of the trade applicable to the transaction.

Article 29. Decision making by panel or arbitrators

In arbitral proceedings with more than one arbitrator, any decision of the arbitral tribunal shall be
made, unless otherwise agreed by the parties, by a majority of all its members. However,
questions of procedure may be decided by a presiding arbitrator, if so authorized by the parties or
all members of the arbitral tribunal.

Article 30. Settlement

(1) If, during arbitral proceedings, the parties settle the dispute, the arbitral tribunal shall terminate
the proceedings and, if requested by the parties and not objected to by the arbitral tribunal, record
the settlement in the form of an arbitral award on agreed terms.
(2) An award on agreed terms shall be made in accordance with the provisions of article 31 and
shall state that it is an award. Such an award has the same status and effect as any other award on
the merits of the case.

Article 31. Form and contents of award

(1) The award shall be made in writing and shall be signed by the arbitrator or arbitrators. In
arbitral proceedings with more than one arbitrator, the signatures of the majority of all members of
the arbitral tribunal shall suffice, provided that the reason for any omitted signature is stated.
(2) The award shall state the reasons upon which it is based, unless the parties have agreed that no
reasons are to be given or the award is an award on agreed terms under article 30.
(3) The award shall state its date and the place of arbitration as determined in accordance with
article 20(1). The award shall be deemed to have been made at that place.
(4) After the award is made, a copy signed by the arbitrators in accordance with paragraph (1) of
this article shall be delivered to each party.

Article 32. Termination of proceedings

(1) The arbitral proceedings are terminated by the final award or by an order of the arbitral
tribunal in accordance with paragraph (2) of this article.
(2) The arbitral tribunal shall issue an order for the termination of the arbitral proceedings when:

(a) the claimant withdraws his claim, unless the respondent objects thereto and the arbitral
tribunal recognizes a legitimate interest on his part in obtaining a final settlement of the
dispute;
(b) the parties agree on the termination of the proceedings;
(c) the arbitral tribunal finds that the continuation of the proceedings has for any other reason
become unnecessary or impossible.

(3) The mandate of the arbitral tribunal terminates with the termination of the arbitral proceedings,
subject to the provisions of article 33 and 34(4).

Article 33. Correction and interpretation of award;

additional award
(1) Within thirty days of receipt of the award, unless another period of time has been agreed upon
by the parties:

(a) a party, with notice to the other party, may request the arbitral tribunal to correct in the
award any errors in computation, any clerical or typographical errors or any errors of similar
nature;
(b) if so agreed by the parties, a party, with notice to the other party, may request the arbitral
tribunal to give an interpretation of a specific point or part of the award.

If the arbitral tribunal considers the request to be justified, it shall make the correction or give the
interpretation within thirty days of receipt of the request. The interpretation shall form part of the
award.
(2) The arbitral tribunal may correct any error of the type referred to in paragraph (1)(a) of this
article on its own initiative within thirty days of the date of the award.

(3) Unless otherwise agreed by the parties, a party, with notice to the other party, may request,
within thirty days of receipt of the award, the arbitral tribunal to make an additional award as to
claims presented in the arbitral proceedings but omitted from the award. If the arbitral tribunal
considers the request to be justified, it shall make the additional award within sixty days.
(4) The arbitral tribunal may extend, if necessary, the period of time within which it shall make a
correction, interpretation or an additional award under paragraph (1) or (3) of this article.
(5) The provisions of article 31 shall apply to a correction or interpretation of the award or to an
additional award.

CHAPTER VII. RECOURSE AGAINST AWARD

Article 34. Application for setting aside as exclusive

recourse against arbitral award
(1) Recourse to a court against an arbitral award may be made only by an application for setting
aside in accordance with paragraphs (2) and (3) of this article.
(2) An arbitral award may be set aside by the court specified in article 6 only if:

(a) the party making the application furnishes proof that:

o (i) a party to the arbitration agreement referred to in article 7 was under some incapacity;
or the said agreement is not valid under the law to which the parties have subjected it or,
failing any indication thereon, under the law of this State; or
o (ii) the party making the application was not given proper notice of the appointment of an
arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
o (iii) the award deals with a dispute not contemplated by or not falling within the terms of
the submission to arbitration, or contains decisions on matters beyond the scope of the
submission to arbitration, provided that, if the decisions on matters submitted to
arbitration can be separated from those not so submitted, only that part of the award
which contains decisions on matters not submitted to arbitration may be set aside; or
o (iv) the composition of the arbitral tribunal or the arbitral procedure was not in
accordance with the agreement of the parties, unless such agreement was in conflict with
a provision of this Law from which the parties cannot derogate, or, failing such
agreement, was not in accordance with this Law; or
(b) the court finds that:
o (i) the subject-matter of the dispute is not capable of settlement by arbitration under the
law of this State; or
o (ii) the award is in conflict with the public policy of this State.

(3) An application for setting aside may not be made after three months have elapsed from the
date on which the party making that application had received the award or, if a request had been
made under article 33, from the date on which that request had been disposed of by the arbitral
tribunal.
(4) The court, when asked to set aside an award, may, where appropriate and so requested by a
party, suspend the setting aside proceedings for a period of time determined by it in order to give

the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action
as in the arbitral tribunals opinion will eliminate the grounds for setting aside.

CHAPTER VIII. RECOGNITION AND ENFORCEMENT OF AWARDS

Article 35. Recognition and enforcement

(1) An arbitral award, irrespective of the country in which it was made, shall be recognized as
binding and, upon application in writing to the competent court, shall be enforced subject to the
provisions of this article of article 36.
(2) The party relying on an award or applying for its enforcement shall supply the duly
authenticated original award or a duly certified copy thereof, and the original arbitration
agreement referred to in article 7 or a duly certified copy thereof. If the award or agreement is not
made in an official language of this State, the party shall supply a duly certified translation thereof
into such language.4
(Article 35(2) has been amended by the Commission at its thirty-ninth session, in 2006.)

Article 36. Grounds for refusing recognition or

enforcement
(1) Recognition or enforcement of an arbitral award, irrespective of the country in which it was
made, may be refused only:

(a) at the request of the party against whom it is invoked, if that party furnishes to the
competent court where recognition or enforcement is sought proof that:
o (i) a party to the arbitration agreement referred to in article 7 was under some incapacity;
or the said agreement is not valid under the law to which the parties have subjected it or,
failing any indication thereon, under the law of the country where the award was made;
or
o (ii) the party against whom the award is invoked was not given proper notice of the
appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to
present his case; or
o (iii) the award deals with a dispute not contemplated by or not falling within the terms of
the submission to arbitration, or it contains decisions on matters beyond the scope of the
submission to arbitration, provided that, if the decisions on matters submitted to
arbitration can be separated from those not so submitted, that part of the award which
contains decisions on matters submitted to arbitration may be recognized and enforced;
or
o (iv) the composition of the arbitral tribunal or the arbitral procedure was not in
accordance with the agreement of the parties or, failing such agreement, was not in
accordance with the law of the country where the arbitration took place; or
o (v) the award has not yet become binding on the parties or has been set aside or
suspended by a court of the country in which, or under the law of which, that award was
made; or
(b) if the court finds that:

o
o

(i) the subject-matter of the dispute is not capable of settlement by arbitration under the
law of this State; or
(ii) the recognition or enforcement of the award would be contrary to the public policy of
this State.

(2) If an application for setting aside or suspension of an award has been made to a court referred
to in paragraph (1)(a)(v) of this article, the court where recognition or enforcement is sought may,
if it considers it proper, adjourn its decision and may also, on the application of the party claiming
recognition or enforcement of the award, order the other party to provide appropriate security.
1 * Article headings are for reference purposes only and are not to be used for purposes of
interpretation.
2 The term commercial should be given a wide interpretation so as to cover matters arising
from all relationships of a commercial nature, whether contractual or not. Relationships of a
commercial nature include, but are not limited to, the following transactions: any trade transaction
for the supply or exchange of goods or services; distribution agreement; commercial
representation or agency; factoring; leasing; construction of works; consulting; engineering;
licensing; investment; financing; banking; insurance; exploitation agreement or concession; joint
venture and other forms of industrial or business co-operation; carriage of goods or passengers by
air, sea, rail or road.
3 The conditions set forth in article 17 I are intended to limit the number of circumstances in
which the court may refuse to enforce an interim measure. It would not be contrary to the level of
harmonization sought to be achieved by these model provisions if a State were to adopt fewer
circumstances in which enforcement may be refused.
4 The condition set forth in this paragraph are intended to set maximum standards. It would,
thus, not be contrary to the harmonization to be achieved by the model law if a State retained even
less onerous conditions.

Chapter

APPENDIX G: CPR Part 62 on Arbitration Claims

CONTENTS OF THIS PART
Scope of this Part and interpretation

Rule 62.1

I CLAIMS UNDER THE 1996 ACT

Interpretation

Rule 62.2

Starting the claim

Rule 62.3

Arbitration claim form

Rule 62.4

Service out of the jurisdiction

Rule 62.5

Notice

Rule 62.6

Case management

Rule 62.7

Stay of legal proceedings

Rule 62.8

Variation of time

Rule 62.9

Hearings

Rule 62.10

II OTHER ARBITRATION CLAIMS

Scope of this Section

Rule
62.11

Applications to Judge

Rule
62.12

Starting the claim

Rule
62.13

Claims in District Registries

Rule
62.14

Time limits and other special provisions about

arbitration claims

Rule
62.15

Service out of the jurisdiction

Rule
62.16

III ENFORCEMENT
Scope of this Section

Rule
62.17

Enforcement of awards

Rule
62.18

Interest on awards

Rule
62.19

Registration in High Court of foreign awards

Rule
62.20

Registration of awards under the Arbitration

(International Investment Disputes) Act 1966

Rule
62.21

Scope of this Part and interpretation

62.1 (1) This Part contains rules about arbitration claims. (2) In this Part

(a) the 1950 Act means the Arbitration Act 19501;

(b) the 1975 Act means the Arbitration Act 19752;
(c) the 1979 Act means the Arbitration Act 19793;
(d) the 1996 Act means the Arbitration Act 19964;
(e) references to
o (i) the 1996 Act; or
o (ii) any particular section of that Act include references to that Act or to the particular
section of that Act as applied with modifications by the ACAS Arbitration Scheme
(England and Wales) Order 20015; and
(f) arbitration claim form means a claim form in the form set out in the practice direction.

(3) Part 58 (Commercial Court) applies to arbitration claims in the Commercial Court, Part 59
(Mercantile Court) applies to arbitration claims in the Mercantile Court and Part 60 (Technology
and Construction Court claims) applies to arbitration claims in the Technology and Construction
Court, except where this Part provides otherwise.

I CLAIMS UNDER THE 1996 ACT

Interpretation
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

o (i) whether there is a valid arbitration agreement;
o (ii) whether an arbitration tribunal is properly constituted; or 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
o (i) arbitration proceedings (whether started or not); or
o (ii) an arbitration agreement.

(2) This Section of this Part does not apply to an arbitration claim to which Sections II or III of
this Part apply.

Starting the claim

62.3 (1) Except where paragraph (2) applies an arbitration claim must be started by the issue of an
arbitration claim form in accordance with the Part 8 procedure.
(2) An application under section 9 of the 1996 Act to stay legal proceedings must be made by
application notice to the court dealing with those proceedings.
(3) The courts in which an arbitration claim may be started are set out in the practice direction.
(4) Rule 30.5 applies with the modification that a judge of the Technology and Construction Court
may transfer the claim to any other court or specialist list.

Arbitration claim form

62.4 (1) An arbitration claim form must

(a) include a concise statement of

o (i) the remedy claimed; and
o (ii) any questions on which the claimant seeks the decision of the court;
(b) give details of any arbitration award challenged by the claimant, identifying which part or
parts of the award are challenged and specifying the grounds for the challenge;
(c) show that any statutory requirements have been met;
(d) specify under which section of the 1996 Act the claim is made;
(e) identify against which (if any) defendants a costs order is sought; and
(f) specify either
o (i) the persons on whom the arbitration claim form is to be served, stating their role in the
arbitration and whether they are defendants; or
o (ii) that the claim is made without notice under section 44(3) of the 1996 Act and the
grounds relied on.

(2) Unless the court orders otherwise an arbitration claim form must be served on the defendant
within 1 month from the date of issue and rules 7.5 and 7.6 are modified accordingly.
(3) Where the claimant applies for an order under section 12 of the 1996 Act (extension of time
for beginning arbitral proceedings or other dispute resolution procedures), he may include in his
arbitration claim form an alternative application for a declaration that such an order is not needed.

Service out of the jurisdiction

62.5 (1) The court may give permission to serve an arbitration claim form out of the jurisdiction
if

(a) the claimant seeks to

o (i) challenge; or
o (ii) appeal on a question of law arising out of,
an arbitration award made within the jurisdiction;

(The place where an award is treated as made is determined by section 53 of the 1996 Act.)

(b) the claim is for an order under section 44 of the 1996 Act; or
(c) the claimant
o (i) seeks some other remedy or requires a question to be decided by the court affecting an
arbitration (whether started or not), an arbitration agreement or an arbitration award; and
o (ii) the seat of the arbitration is or will be within the jurisdiction or the conditions in
section 2(4) of the 1996 Act are satisfied.

(2) An application for permission under paragraph (1) must be supported by written evidence

(a) stating the grounds on which the application is made; and

(b) showing in what place or country the person to be served is, or probably may be found.

(3) Rules 6.40 to 6.46 apply to the service of an arbitration claim form under paragraph (1). (4) An
order giving permission to serve an arbitration claim form out of the jurisdiction must specify the
period within which the defendant may file an acknowledgment of service.

Notice
62.6 (1) Where an arbitration claim is made under section 24, 28 or 56 of the 1996 Act, each
arbitrator must be a defendant.
(2) Where notice must be given to an arbitrator or any other person it may be given by sending
him a copy of

(a) the arbitration claim form; and

(b) any written evidence in support.

(3) Where the 1996 Act requires an application to the court to be made on notice to any other
party to the arbitration, that notice must be given by making that party a defendant.

Case management
62.7 (1) Part 26 and any other rule that requires a party to file an allocation questionnaire does not
apply.
(2) Arbitration claims are allocated to the multi-track. (3) Part 29 does not apply.

(4) The automatic directions set out in the practice direction apply unless the court orders
otherwise.

Stay of legal proceedings

62.8 (1) An application notice seeking a stay of legal proceedings under section 9 of the 1996
Act6 must be served on all parties to those proceedings who have given an address for service.
(2) A copy of an application notice under paragraph (1) must be served on any other party to the
legal proceedings (whether or not he is within the jurisdiction) who has not given an address for
service, at

(a) his last known address; or

(b) a place where it is likely to come to his attention.

(3) Where a question arises as to whether

(a) an arbitration agreement has been concluded; or

(b) the dispute which is the subject-matter of the proceedings falls within the terms of such an
agreement,

the court may decide that question or give directions to enable it to be decided and may order the
proceedings to be stayed pending its decision.

Variation of time
62.9 (1) The court may vary the period of 28 days fixed by section 70(3) of the 1996 Act for

(a) challenging the award under section 67 or 68 of the Act; and

(b) appealing against an award under section 69 of the Act.

(2) An application for an order under paragraph (1) may be made without notice being served on
any other party before the period of 28 days expires.
(3) After the period of 28 days has expired

(a) an application for an order extending time under paragraph (1) must
o (i) be made in the arbitration claim form; and
o (ii) state the grounds on which the application is made;
(b) any defendant may file written evidence opposing the extension of time within 7 days
after service of the arbitration claim form; and
(c) if the court extends the period of 28 days, each defendants time for acknowledging
service and serving evidence shall start to run as if the arbitration claim form had been served
on the date when the courts order is served on that defendant.

Hearings
62.10 (1) The court may order that an arbitration claim be heard either in public or in private.

(2) Rule 39.2 does not apply.

(3) Subject to any order made under paragraph (1)

(a) the determination of

o (i) a preliminary point of law under section 45 of the 1996 Act; or
o (ii) an appeal under section 69 of the 1996 Act on a question of law arising out of an
award, will be heard in public; and
(b) all other arbitration claims will be heard in private.

(4) Paragraph (3)(a) does not apply to

(a) the preliminary question of whether the court is satisfied of the matters set out in section
45(2)(b); or
(b) an application for permission to appeal under section 69(2)(b).

II OTHER ARBITRATION CLAIMS

Scope of this Section

62.11 (1) This Section of this Part contains rules about arbitration claims to which the old law
applies.
(2) In this Section

(a) the old law means the enactments specified in Schedules 3 and 4 of the 1996 Act as they
were in force before their amendment or repeal by that Act; and
(b) arbitration claim means any application to the court under the old law and includes an
appeal (or application for permission to appeal) to the High Court under section 1(2) of the
1979 Act.7

(3) This Section does not apply to

(a) a claim to which Section III of this Part applies; or

(b) a claim on the award.

Applications to Judge
62.12 A claim

(a) seeking permission to appeal under section 1(2) of the 1979 Act;
(b) under section 1(5) of that Act (including any claim seeking permission); or
(c) under section 5 of that Act,

must be made in the High Court and will be heard by a judge of the Commercial Court unless any
such judge directs otherwise.

Starting the claim

62.13 (1) Except where paragraph (2) applies an arbitration claim must be started by the issue of
an arbitration claim form in accordance with the Part 8 procedure.
(2) Where an arbitration claim is to be made in existing proceedings

(a) it must be made by way of application notice; and

(b) any reference in this Section of this Part to an arbitration claim form includes a reference
to an application notice.

(3) The arbitration claim form in an arbitration claim under section 1(5) of the 1979 Act
(including any claim seeking permission) must be served on

(a) the arbitrator or umpire; and

(b) any other party to the reference.

Claims in District Registries

62.14 If

(a) a claim is to be made under section 12(4) of the 1950 Act8 for an order for the issue of a
witness summons to compel the attendance of the witness before an arbitrator or umpire; and
(b) the attendance of the witness is required within the district of a District Registry,

the claim may be started in that Registry.

Time limits and other special provisions about

arbitration claims
62.15 (1) An arbitration claim to

(a) remit an award under section 22 of the 1950 Act9;

(b) set aside an award under section 23(2) of that Act10 or otherwise; or
(c) direct an arbitrator or umpire to state the reasons for an award under section 1(5) of the
1979 Act,

must be made, and the arbitration claim form served, within 21 days after the award has been
made and published to the parties.
(2) An arbitration claim to determine any question of law arising in the course of a reference under
section 2(1) of the Arbitration Act 1979 must be made, and the arbitration claim form served,
within 14 days after

(a) the arbitrator or umpire gave his consent in writing to the claim being made; or
(b) the other parties so consented.

(3) An appeal under section 1(2) of the 1979 Act must be filed, and the arbitration claim form
served, within 21 days after the award has been made and published to the parties.

(4) Where reasons material to an appeal under section 1(2) of the 1979 Act are given on a date
subsequent to the publication of the award, the period of 21 days referred to in paragraph (3) will
run from the date on which reasons are given.
(5) In every arbitration claim to which this rule applies

(a) the arbitration claim form must state the grounds of the claim or appeal;
(b) where the claim or appeal is based on written evidence, a copy of that evidence must be
served with the arbitration claim form; and
(c) where the claim or appeal is made with the consent of the arbitrator, the umpire or the
other parties, a copy of every written consent must be served with the arbitration claim form.

(6) In an appeal under section 1(2) of the 1979 Act

(a) a statement of the grounds for the appeal specifying the relevant parts of the award and
reasons; and
(b) where permission is required, any written evidence in support of the contention that the
question of law concerns
o (i) a term of a contract; or
o (ii) an event, which is not a one-off term or event,

must be filed and served with the arbitration claim form.

(7) Any written evidence in reply to written evidence under paragraph (6)(b) must be filed and
served on the claimant not less than 2 days before the hearing.
(8) A party to a claim seeking permission to appeal under section 1(2) of the 1979 Act who wishes
to contend that the award should be upheld for reasons not expressed or fully expressed in the
award and reasons must file and serve on the claimant, a notice specifying the grounds of his
contention not less than 2 days before the hearing.

Service out of the jurisdiction

62.16 (1) Subject to paragraph (2)

(a) any arbitration claim form in an arbitration claim under the 1950 Act or the 1979 Act; or
(b) any order made in such a claim,

may be served out of the jurisdiction with the permission of the court if the arbitration to which
the claim relates

(i) is governed by the law of England and Wales; or

(ii) has been, is being, or will be, held within the jurisdiction.

(2) An arbitration claim form seeking permission to enforce an award may be served out of the
jurisdiction with the permission of the court whether or not the arbitration is governed by the law
of England and Wales.

(3) An application for permission to serve an arbitration claim form out of the jurisdiction must be
supported by written evidence

(a) stating the grounds on which the application is made; and

(b) showing in what place or country the person to be served is, or probably may be found.

Rules 6.40 to 6.46 apply to the service of an arbitration claim form under paragraph (1).
(4) Omitted
(5) An order giving permission to serve an arbitration claim form out of the jurisdiction must
specify the period within which the defendant may file an acknowledgment of service.

III ENFORCEMENT

Scope of this Section

62.17 This Section of this Part applies to all arbitration enforcement proceedings other than by a
claim on the award.

Enforcement of awards
62.18 (1) An application for permission under

(a) section 66 of the 1996 Act11;

(b) section 101 of the 1996 Act;
(c) section 26 of the 1950 Act12; or
(d) section 3(1)(a) of the 1975 Act,13

to enforce an award in the same manner as a judgment or order may be made without notice in an
arbitration claim form.
(2) The court may specify parties to the arbitration on whom the arbitration claim form must be
served.
(3) The parties on whom the arbitration claim form is served must acknowledge service and the
enforcement proceedings will continue as if they were an arbitration claim under Section I of this
Part.
(4) With the permission of the court the arbitration claim form may be served out of the
jurisdiction irrespective of where the award is, or is treated as, made.
(5) Where the applicant applies to enforce an agreed award within the meaning of section 51(2) of
the 1996 Act

(a) the arbitration claim form must state that the award is an agreed award; and
(b) any order made by the court must also contain such a statement.

(6) An application for permission must be supported by written evidence

(a) exhibiting
o (i) where the application is made under section 66 of the 1996 Act or under section 26 of
the 1950 Act, the arbitration agreement and the original award (or copies);
o (ii) where the application is under section 101 of the 1996 Act, the documents required to
be produced by section 102 of that Act; or
o (iii) where the application is under section 3(1)(a) of the 1975 Act, the documents
required to be produced by section 4 of that Act;
(b) stating the name and the usual or last known place of residence or business of the claimant
and of the person against whom it is sought to enforce the award; and (c) stating either
o (i) that the award has not been complied with; or
o (ii) the extent to which it has not been complied with at the date of the application.

(7) An order giving permission must

(a) be drawn up by the claimant; and

(b) be served on the defendant by
o (i) delivering a copy to him personally; or
o (ii) sending a copy to him at his usual or last known place of residence or business.

(8) An order giving permission may be served out of the jurisdiction

(a) without permission; and

(b) in accordance with rules 6.40 to 6.46 as if the order were an arbitration claim form.

(9) Within 14 days after service of the order or, if the order is to be served out of the jurisdiction,
within such other period as the court may set

(a) the defendant may apply to set aside the order; and
(b) the award must not be enforced until after
o (i) the end of that period; or
o (ii) any application made by the defendant within that period has been finally disposed
of.

(10) The order must contain a statement of

(a) the right to make an application to set the order aside; and
(b) the restrictions on enforcement under rule 62.18(9)(b).

(11) Where a body corporate is a party any reference in this rule to place of residence or business
shall have effect as if the reference were to the registered or principal address of the body
corporate.

Interest on awards
62.19 (1) Where an applicant seeks to enforce an award of interest the whole or any part of which
relates to a period after the date of the award, he must file a statement giving the following
particulars

(a) whether simple or compound interest was awarded;

(b) the date from which interest was awarded;
(c) where rests were provided for, specifying them;
(d) the rate of interest awarded; and
(e) a calculation showing
o (i) the total amount claimed up to the date of the statement; and
o (ii) any sum which will become due on a daily basis.

(2) A statement under paragraph (1) must be filed whenever the amount of interest has to be
quantified for the purpose of

(a) obtaining a judgment or order under section 66 of the 1996 Act (enforcement of the
award); or
(b) enforcing such a judgment or order.

Registration in High Court of foreign awards

62.20 (1) Where

(a) an award is made in proceedings on an arbitration in any part of a British overseas

territory or other territory to which Part I of the Foreign Judgments (Reciprocal Enforcement)
Act 193314 (the 1933 Act) extends;
(b) Part II of the Administration of Justice Act 192015 extended to that part immediately
before Part I of the 1933 Act was extended to that part; and
(c) an award has, under the law in force in the place where it was made, become enforceable
in the same manner as a judgment given by a court in that place,

rules 74.1 to 74.7 and 74.9 apply in relation to the award as they apply in relation to a judgment
given by the court subject to the modifications in paragraph (2).
(2) The modifications referred to in paragraph (1) are as follows

(a) for references to the State of origin are substituted references to the place where the award
was made; and
(b) the written evidence required by rule 74.4 must state (in addition to the matters required
by that rule) that to the best of the information or belief of the maker of the statement the
award has, under the law in force in the place where it was made, become enforceable in the
same manner as a judgment given by a court in that place.

Registration of awards under the Arbitration

(International Investment Disputes) Act 1966
62.21 (1) In this rule

(a) the 1966 Act means the Arbitration (International Investment Disputes) Act 196616;
(b) award means an award under the Convention;

(c) the Convention means the Convention on the settlement of investment disputes between
States and nationals of other States which was opened for signature in Washington on 18th
March 196517;
(d) judgment creditor means the person seeking recognition or enforcement of an award;
and
(e) judgment debtor means the other party to the award.

(2) Subject to the provisions of this rule, the following provisions of Part 74 apply with such
modifications as may be necessary in relation to an award as they apply in relation to a judgment
to which Part I of the Foreign Judgments (Reciprocal Enforcement) Act 193318 applies

(a) rule 74.1;

(b) rule 74.3;
(c) rule 74.4(1), (2)(a) to (d), and (4);
(d) rule 74.6 (except paragraph (3)(c) to (e)); and
(e) rule 74.9(2).

(3) An application to have an award registered in the High Court under section 1 of the 1966
Act19 must be made in accordance with the Part 8 procedure.
(4) The written evidence required by rule 74.4 in support of an application for registration must

(a) exhibit the award certified under the Convention instead of the judgment (or a copy of it);
and
(b) in addition to stating the matters referred to in rule 74.4(2)(a) to (d) state whether
o (i) at the date of the application the enforcement of the award has been stayed
(provisionally or otherwise) under the Convention; and
o (ii) any, and if so what, application has been made under the Convention, which, if
granted, might result in a stay of the enforcement of the award.

(5) Where, on granting permission to register an award or an application made by the judgment
debtor after an award has been registered, the court considers

(a) that the enforcement of the award has been stayed (whether provisionally or otherwise)
under the Convention; or
(b) that an application has been made under the Convention which, if granted, might result in
a stay of the enforcement of the award, the court may stay the enforcement of the award for
such time as it considers appropriate.

1 1950 c. 27.
2 1975 c. 3; repealed by the Arbitration Act 1996 (c. 23), section 107(2) and Schedule 4 but
continues to apply to claims commenced before 31st January 1997 by virtue of the Arbitration Act
1996 (Commencement No. 1) Order 1996 (S.I. 1996/3146), article 4 and Schedule 2.

3 1979 c. 42; repealed by the Arbitration Act 1996 (c. 23), section 107(2) and Schedule 4 but
continues to apply to claims commenced before 31st January 1997 by virtue of the Arbitration Act
1996 (Commencement No. 1) Order 1996 (S.I. 1996/3146), article 4 and Schedule 2.
4 1996 c. 23.
5 S.I. 2001/1185.
6 1996 c. 23.
7 1979 c. 42; repealed by the Arbitration Act 1996 (c. 23), section 107(2) and Schedule 4 but
continues to apply to claims commenced before 31st January 1997 by virtue of the Arbitration Act
1996 (Commencement No. 1) Order 1996 (S.I. 1996/3146), article 4 and Schedule 2.
8 1950 c. 27; section 12(4) was repealed by the Arbitration Act 1996 (c. 23), section 107(2) and
Schedule 4 but continues to apply to claims commenced before 31st January 1997 by virtue of the
Arbitration Act 1996 (Commencement No. 1) Order 1996 (S.I. 1996/3146), article 4 and Schedule
2.
9 1950 c. 27; section 22 was repealed by the Arbitration Act 1996 (c. 23), section 107(2) and
Schedule 4 but continues to apply to claims commenced before 31st January 1997 by virtue of the
Arbitration Act 1996 (Commencement No. 1) Order 1996 (S.I. 1996/3146), article 4 and Schedule
2.
10 1950 c. 27; section 23(2) was repealed by the Arbitration Act 1996 (c. 23), section 107(2) and
Schedule 4 but continues to apply to claims commenced before 31st January 1997 by virtue of the
Arbitration Act 1996 (Commencement No. 1) Order 1996 (S.I. 1996/3146), article 4 and Schedule
2.
11 1996 c. 23.
12 1950 c. 27; section 26 was repealed by the Arbitration Act 1996 (c. 23), section 107(2) and
Schedule 4 but continues to apply to claims commenced before 31st January 1997 by virtue of the
Arbitration Act 1996 (Commencement No. 1) Order 1996 (S.I. 1996/3146), article 4 and Schedule
2.
13 1975 c. 3; repealed by the Arbitration Act 1996 (c. 23), section 107(2) and Schedule 4 but
continues to apply to claims commenced before 31st January 1997 by virtue of the Arbitration Act
1996 (Commencement No. 1) Order 1996 (S.I. 1996/3146), article 4 and Schedule 2.
14 1933 c. 13 (23 & 24 Geo. 5).
15 1920 c. 81 (10 & 11 Geo. 5); section 10 of Part II was substituted by the Civil Jurisdiction and
Judgments Act 1982 (c. 27), section 35(2) and section 14 of Part II was amended by the Civil
Jurisdiction and Judgments Act 1982 (c. 27), section 35(3).
16 1966 c. 41.
17 The text of the Convention is set out in the Schedule to the Arbitration (International
Investment Disputes) Act 1966 (c. 41).

18 23 & 24 Geo 5 c.13.19. 1966 c. 41; section 1 was amended by the Administration of Justice
Act 1977 (c. 38), sections 4 and 32(4) and Schedule 5, Part I and by the Supreme Court Act 1981
(c. 54), section 152(1) and Schedule 5.

Chapter

APPENDIX H: Practice DirectionArbitration

APPENDIX H: Practice DirectionArbitration
This Practice Direction Supplements Part 62

CONTENTS OF THIS PRACTICE DIRECTION

SECTION I
62.3Starting the claim

Para.
2.1

62.4Arbitration claim form

Para.
3.1

Acknowledgment of service or making representations

by arbitrator or ACAS

Para.
4.1

Supply of documents from court records

Para.
5.1

62.7Case management

Para.
6.1

Securing the attendance of witnesses

Para.
7.1

Interim remedies

Para.
8.1

Applications under sections 32 and 45 of the 1996 Act

Para.
9.1

Decisions without a hearing

Para.
10.1

62.9Variation of time

Para.
11.1

Applications for permission to appeal

Para.
12.1

SECTION II
62.13Starting the claim

Para. 14.1

SECTION III
62.21Registration of awards under the Arbitration
(International Investment Disputes) Act 1966

Para.
16.1

SECTION I
1.1 This Section of this Practice Direction applies to arbitration claims to which Section I of Part
62 applies.
1.2 In this Section the 1996 Act means the Arbitration Act 1966.
1.3 Where a rule provides for a document to be sent, it may be sent

(1) by first class post;

(2) through a document exchange; or
(3) by fax, electronic mail or other means of electronic communication.

62.3Starting the claim

2.1 An arbitration claim under the 1996 Act (other than under section 9) must be started in
accordance with the High Court and County Courts (Allocation of Arbitration Proceedings) Order
1996 by the issue of an arbitration claim form.
2.2 An arbitration claim form must be substantially in the form set out in Appendix A to this
practice direction.
2.3 Subject to paragraph 2.1, an arbitration claim form

(1) may be issued at the courts set out in column 1 of the table below and will be entered in
the list set out against that court in column 2;

(2) relating to a landlord and tenant or partnership dispute must be issued in the Chancery
Division of the High Court.

Court

List

Admiralty and Commercial Registry at the Royal Courts of

Justice, London

Commercial
list

Technology and Construction Court Registry, St. Dunstans

House, London

TCC list

District Registry of the High Court (where mercantile court

established)

Mercantile
list

District Registry of the High Court (where arbitration claim

form marked Technology and Construction Court in top
right hand corner)

TCC list

2.3A An arbitration claim form must, in the case of an appeal, or application for permission to
appeal, from a judge-arbitrator, be issued in the Civil Division of the Court of Appeal. The judge
hearing the application may adjourn the matter for oral argument before two judges of that court.

62.4Arbitration claim form

Service
3.1 The court may exercise its powers under rule 6.15 to permit service of an arbitration claim
form at the address of a partys solicitor or representative acting for him in the arbitration.
3.2 Where the arbitration claim form is served by the claimant he must file a certificate of service
within 7 days of service of the arbitration claim form.
(Rule 6.17 specifies what a certificate of service must show.)

Acknowledgment of service or making representations by

arbitrator or ACAS
4.1 Where

(1) an arbitrator; or
(2) ACAS (in a claim under the 1996 Act as applied with modifications by the ACAS
Arbitration Scheme (England and Wales) Order 2001)

is sent a copy of an arbitration claim form (including an arbitration claim form sent under rule
62.6(2)), that arbitrator or ACAS (as the case may be) may

(a) apply to be made a defendant; or

(b) make representations to the court under paragraph 4.3.

4.2 An application under paragraph 4.1(2)(a) to be made a defendant

(1) must be served on the claimant; but

(2) need not be served on any other party.

4.3 An arbitrator or ACAS may make representations by filing written evidence or in writing to
the court.

Supply of documents from court records

5.1 An arbitration claim form may only be inspected with the permission of the court.

62.7Case management
6.1 The following directions apply unless the court orders otherwise.
6.2 A defendant who wishes to rely on evidence before the court must file and serve his written
evidence

(1) within 21 days after the date by which he was required to acknowledge service; or,
(2) where a defendant is not required to file an acknowledgment of service, within 21 days
after service of the arbitration claim form.

6.3 A claimant who wishes to rely on evidence in reply to written evidence filed under paragraph
6.2 must file and serve his written evidence within 7 days after service of the defendants
evidence.
6.4 Agreed indexed and paginated bundles of all the evidence and other documents to be used at
the hearing must be prepared by the claimant.
6.5 Not later than 5 days before the hearing date estimates for the length of the hearing must be
filed together with a complete set of the documents to be used.
6.6 Not later than 2 days before the hearing date the claimant must file and serve

(1) a chronology of the relevant events cross-referenced to the bundle of documents;

(2) (where necessary) a list of the persons involved; and
(3) a skeleton argument which lists succinctly
o (a) the issues which arise for decision;
o (b) the grounds of relief (or opposing relief) to be relied upon;
o (c) the submissions of fact to be made with the references to the evidence; and
o (d) the submissions of law with references to the relevant authorities.

6.7 Not later than the day before the hearing date the defendant must file and serve a skeleton
argument which lists succinctly

(1) the issue which arise for decision;

(2) the grounds of relief (or opposing relief) to be relied upon;
(3) the submissions of fact to be made with the references to the evidence; and
(4) the submissions of law with references to the relevant authorities.

Securing the attendance of witnesses

7.1 A party to arbitral proceedings being conducted in England or Wales who wishes to rely on
section 43 of the 1996 Act to secure the attendance of a witness must apply for a witness
summons in accordance with Part 34.
7.2 If the attendance of the witness is required within the district of a district registry, the
application may be made at that registry.
7.3 A witness summons will not be issued until the applicant files written evidence showing that
the application is made with

(1) the permission of the tribunal; or

(2) the agreement of the other parties.

Interim remedies
8.1 An application for an interim remedy under section 44 of the 1996 Act must be made in an
arbitration claim form.

Applications under sections 32 and 45 of the 1996 Act

9.1 This paragraph applies to arbitration claims for the determination of

(1) a question as to the substantive jurisdiction of the arbitral tribunal under section 32 of the
1996 Act; and
(2) a preliminary point of law under section 45 of the 1996 Act.

9.2 Where an arbitration claim is made without the agreement in writing of all the other parties to
the arbitral proceedings but with the permission of the arbitral tribunal, the written evidence or
witness statements filed by the parties must set out any evidence relied on by the parties in support
of their contention that the court should, or should not, consider the claim.
9.3 As soon as practicable after the written evidence is filed, the court will decide whether or not it
should consider the claim and, unless the court otherwise directs, will so decide without a hearing.

Decisions without a hearing

10.1 Having regard to the overriding objective the court may decide particular issues without a
hearing. For example, as set out in paragraph 9.3, the question whether the court is satisfied as to
the matters set out in section 32(2)(b) or section 45(2)(b) of the 1996 Act.
10.2 The court will generally decide whether to extend the time limit under section 70(3) of the
1996 Act without a hearing. Where the court makes an order extending the time limit, the
defendant must file his written evidence within 21 days from service of the order.

62.9Variation of time
11.1 An application for an order under rule 62.9(1)

(1) before the period of 28 days has expired, must be made in a Part 23 application notice;
and
(2) after the period of 28 days has expired, must be set out in a separately identified part in the
arbitration claim form.

Applications for permission to appeal

12.1 Where a party seeks permission to appeal to the court on a question of law arising out of an
arbitration award, the arbitration claim form must

(1) identify the question of law; and

(2) state the grounds

on which the party alleges that permission should be given.

12.2 The written evidence in support of the application must set out any evidence relied on by the
party for the purpose of satisfying the court

(1) of the matters referred to in section 69(3) of the 1996 Act; and
(2) that permission should be given.

12.3 The written evidence filed by the respondent to the application must

(1) state the grounds on which the respondent opposes the grant of permission;
(2) set out any evidence relied on by him relating to the matters mentioned in section 69(3) of
the 1996 Act; and
(3) specify whether the respondent wishes to contend that the award should be upheld for
reasons not expressed (or not fully expressed) in the award and, if so, state those reasons.

12.4 The court will normally determine applications for permission to appeal without an oral
hearing.
12.5 Where the court refuses an application for permission to appeal without an oral hearing, it
must provide brief reasons.

12.6 Where the court considers that an oral hearing is required, it may give such further directions
as are necessary.

SECTION II
13.1 This Section of this Practice Direction applies to arbitration claims to which Section II of Part
62 applies.

62.13Starting the claim

14.1 An arbitration claim must be started in the Commercial Court and, where required to be
heard by a judge, be heard by a judge of that court unless he otherwise directs.

SECTION III
15.1 This Section of this Practice Direction applies to enforcement proceedings to which Section
III of Part 62 applies.

62.21Registration of awards under the Arbitration

(International Investment Disputes) Act 1966
16.1 Awards ordered to be registered under the 1966 Act and particulars will be entered in the
Register kept for that purpose at the Admiralty and Commercial Registry.

Forms
See Forms Section

Chapter

APPENDIX I: The Admiralty & Commercial Courts Guide

APPENDIX I: The Admiralty & Commercial Courts Guide
8th Edition: 2009

CONTENTS

Section O Arbitration
1 Arbitration claims
Claims under the Arbitration Act 1996
2 Starting an arbitration claim
3 The arbitration claim form
4 Service of the arbitration claim form
5 Acknowledgment of service

6 Standard directions
7 Interim remedies
8 Challenging the award
9 Time limits
Claims under the Arbitration Acts 19501979
10 Starting an arbitration claim
11 The arbitration claim form
12 Service of the arbitration claim form
13 Acknowledgment of service
14 Standard directions
15 Interim remedies
16 Challenging the award
17 Time limits
Provisions applicable to all arbitrations
18 Enforcement of awards
19 Matters of general application
20 Appointment of a Commercial Judge as arbitrator
O. Arbitration

O1 Arbitration claims
O1.1

(a) Applications to the court under the Arbitration Acts 19501996 and other applications
relating to arbitrations are known as arbitration claims.
(b) The procedure applicable to arbitration claims is to be found in Part 62 and its associated
practice direction. Separate provision is made
o (i) by Section I for claims relating to arbitrations to which the Arbitration Act 1996
applies;
o (ii) by Section II for claims relating to arbitrations to which the Arbitration Acts 1950
1979 (the old law) apply; and
o (iii) by Section III for enforcement proceedings.
(c) For a full definition of the expression arbitration claim see rule 62.2(1) (claims under
the 1996 Act) and rule 62.11(2) (claims under the old law).
(d) Part 58 applies to arbitration claims in the Commercial Court insofar as no specific
provision is made by Part 62: rule 62.1(3).

Claims under the Arbitration Act 1996

O2 Starting an arbitration claim
O2.1 Subject to section O2.3 an arbitration claim must be started by the issue of an arbitration
claim form in accordance with the Part 8 procedure: rule 62.3(1).
O2.2 The claim form must be substantially in the form set out in Appendix A to practice direction
62: PD62 2.2.
O2.3 An application to stay proceedings under section 9 of the Arbitration Act 1996 must be made
by application notice in the proceedings: rule 62.3(2).
O2.4 Where a question arises as to whether an arbitration agreement is null and void, inoperative
or incapable of being performed the court may deal with it in the same way as provided by rule
62.8(3) which applies where a question arises as to whether an arbitration agreement has been
concluded or the dispute which is the subject matter of the proceedings falls within the terms of
such an agreement.

O3 The arbitration claim form

O3.1 The arbitration claim form must contain, among other things, a concise statement of the
remedy claimed and, if an award is challenged, the grounds for that challenge: rule 62.4(1).
O3.2 Reference in the arbitration claim form to a witness statement or affidavit filed in support of
the claim is not sufficient to comply with the requirements of rule 62.4(1).

O4 Service of the arbitration claim form

O4.1 An arbitration claim form issued in the Admiralty & Commercial Registry must be served
by the claimant.
O4.2

(a) The rules governing service of the claim form are set out in Part 6 of the Civil Procedure
Rules.
(b) Unless the court orders otherwise an arbitration claim form must be served on the
defendant within 1 month from the date of issue: rule 62.4(2).

O4.3

(a) An arbitration claim form may be served out of the jurisdiction with the permission of the
court: rule 62.5(1).
(b) Rules 6.406.46 apply to the service of an arbitration claim form out of the jurisdiction:
rule 62.5(3).

O4.4 The court may exercise its powers under rules 6.15 and/or 6.37(5)(b) to permit service of an
arbitration claim form on a party at the address of the solicitor or other representative acting for
him in the arbitration: PD62 3.1.

O4.5 The claimant must file a certificate of service within 7 days of serving the arbitration claim
form: PD62 3.2.

O5 Acknowledgment of service
O5.1

(a) A defendant must file an acknowledgment of service of the arbitration claim form in every
case: rule 58.6(1).
(b) An adapted version of practice form N210 (acknowledgment of service of a Part 8 claim
form) has been approved for use in the Commercial Court.

O5.2 The time for filing an acknowledgment of service is calculated from the service of the
arbitration claim form.

O6 Standard directions
O6.1 The directions set out in PD62 6.26.7 apply unless the court orders otherwise.
O6.2 The claimant should apply for a hearing date as soon as possible after issuing an arbitration
claim form or (in the case of an appeal) obtaining permission to appeal.
O6.3 A defendant who wishes to rely on evidence in opposition to the claim must file and serve
his evidence within 21 days after the date by which he was required to acknowledge
service: PD62 6.2.
O6.4 A claimant who wishes to rely on evidence in response to evidence served by the defendant
must file and serve his evidence within 7 days after the service of the defendants evidence: PD62
6.3.
O6.5 An application for directions in a pending arbitration claim should be made by application
notice under Part 23. Where an arbitration application involves recognition and/or enforcement of
an agreement to arbitrate and that application is challenged on the grounds that the parties to the
application were not bound by an agreement to arbitrate, it will usually be necessary for the court
to resolve that issue in order to determine the application. For this purpose it may be necessary for
there to be disclosure of documents and/or factual and/or expert evidence. In that event, it is the
responsibility of those advising the applicant to liaise with the other party and to arrange with the
Listing Office for a case management conference to be listed as early as possible to enable the
court to give directions as to the steps to be taken before the hearing of the application.

O7 Interim remedies
O7.1 An application for an interim remedy under section 44 of the Arbitration Act 1996 must be
made in an arbitration claim form: PD62 8.1.

O8 Challenging the award

Challenge by way of appeal

O8.1 A party wishing to appeal against the award of an arbitrator or umpire must set out in the
arbitration claim form (i) the question of law on which the appeal is based; and (ii) a succinct
statement of the grounds of appeal, identifying the relevant part(s) of the award and reasons.
O8.2 If the appeal is brought with the agreement of the other parties to the proceedings, a copy of
their agreement in writing must be filed with the arbitration claim form.
O8.3 A party seeking permission to appeal must

(i) state in his arbitration claim form the grounds on which he contends that permission to
appeal should be given PD62 12.1; and
(ii) file and serve with the arbitration claim form any written evidence on which he wishes to
rely for the purposes of satisfying the court of the matters referred to in section 69(3) of the
1996 Act: PD62 12.2.

O8.4

(a) If the defendant wishes to oppose the claimants application for permission to appeal he
must file a witness statement setting out (i) the grounds on which he opposes the grant of
permission; and (ii) any evidence on which he relies in relation to the matters mentioned in
section 69(3) of the 1996 Act: PD62 12.3(1) & (2).
(b) If the defendant wishes to contend that that the award should be upheld for reasons other
than those expressed in the award, he must set out those reasons in his witness
statement: PD62 12.3(3).

O8.5 The court will normally determine applications for permission to appeal without an oral
hearing. If the court considers that an oral hearing is required, it will give further directions as
appropriate.

Challenging an award for serious irregularity

O8.6

(a) An arbitration claim challenging an award on the ground of serious irregularity under
section 68 of the 1996 Act is appropriate only in cases where there are grounds for thinking
o (i) that an irregularity has occurred which
o (ii) has caused or will cause substantial injustice to the party making the challenge.
(b) An application challenging an award on the ground of serious irregularity should therefore
not be regarded as an alternative to, or a means of supporting, an application for permission to
appeal.

O8.7 The challenge to the award must be supported by evidence of the circumstances on which
the claimant relies as giving rise to the irregularity complained of and the nature of the injustice
which has been or will be caused to him.
O8.8 If the nature of the challenge itself or the evidence filed in support of it leads the court to
consider that the claim has no real prospect of success, the court may exercise its powers under

rule 3.3(4) to dismiss the application summarily. In such cases the applicant will have the right to
apply to the court to set aside the order and to seek directions for the hearing of the application.

Multiple claims
O8.9 If the arbitration claim form includes both a challenge to an award by way of appeal and a
challenge on the ground of serious irregularity, the applications should be set out in separate
sections of the arbitration claim form and the grounds on which they are made separately
identified.
O8.10 In such cases the papers will be placed before a judge to consider how the applications may
most appropriately be disposed of. It is sometimes more appropriate to dispose of the application
to set aside or remit the award before considering the application for permission to appeal.

O9 Time limits
O9.1 An application to challenge an award under sections 67 or 68 of the 1996 Act or to appeal
under section 69 of the Act must be brought within 28 days of the date of the award: see section
70(3).
O9.2 The court has power to vary the period of 28 days fixed by section 70(3) of the 1996
Act: rule 62.9(1). However, it is important that any challenge to an award be pursued without
delay and the court will require cogent reasons for extending time.
O9.3 An application to extend time made before the expiry of the period of 28 days must be made
in a Part 23 application notice, but the application notice need not be served on any other
party: rule 62.9(2) and PD62 11.1(1).
O9.4 An application to extend time made after the expiry of the period of 28 days must be made
in the arbitration claim form in which the applicant is seeking substantive relief: rule 62.9(3)(a).
O9.5 An application to vary the period of 28 days will normally be determined without a hearing
and prior to the consideration of the substantive application: PD62 10.2.

Claims under the Arbitration Acts 19501979

O10 Starting an arbitration claim
O10.1 Subject to section O10.2 an arbitration claim must be started by the issue of an arbitration
claim form in accordance with the Part 8 procedure: rule 62.13(1).
O10.2 The claim form must be substantially in the form set out in Appendix A to PD62 2.2.
O10.3 An application to stay proceedings on the grounds of an arbitration agreement must be
made by application notice in the proceedings: rule 62.13(2).

O11 The arbitration claim form

O11.1 An arbitration claim form must state the grounds of the claim or appeal: rule 62.15(5)(a).

O11.2 Reference in the arbitration claim form to the witness statement or affidavit filed in support
of the claim is not sufficient to comply with the requirements of rule 62.15(5)(a).

O12 Service of the arbitration claim form

O12.1 An arbitration claim form issued in the Admiralty & Commercial Registry must be served
by the claimant.
O12.2 The rules governing service of the claim form are set out in Part 6 of the Civil Procedure
Rules.
O12.3

(a) An arbitration claim form may be served out of the jurisdiction with the permission of the
court: rule 62.16(1).
(b) Rules 6.406.46 apply to the service of an arbitration claim form out of the jurisdiction:
rule 62.16(4).

O12.4 Although not expressly covered by PD62, the court may in an appropriate case exercise its
powers under rule 6.15 and/or 6.37(5) to permit service of an arbitration claim form on a party at
the address of the solicitor or other representative acting for him in the arbitration.
O12.5 The claimant must file a certificate of service within 7 days of serving the claim form.

Acknowledgment of service
O13.1

(a) A defendant must file an acknowledgment of service in every case: rule 58.6(1).
(b) An adapted version of practice form N210 (acknowledgment of service of a Part 8 claim
form) has been approved for use in the Commercial Court.

O13.2 The time for filing an acknowledgment of service is calculated from the service of the
arbitration claim form.

O14 Standard directions

O14.1 Where the claim or appeal is based on written evidence, a copy of that evidence must be
served with the arbitration claim form: rule 62.15(5)(b).
O14.2 Where the claim or appeal is made with the consent of the arbitrator or umpire or other
parties, a copy of every written consent must be served with the arbitration claim form: rule
62.15(5)(c).
O14.3 An application for directions in a pending arbitration claim should be made by application
notice under Part 23.

O15 Interim remedies

O15.1 An application for an interim remedy under section 12(6) of the 1950 Act must be made in
accordance with Part 25.
O15.2 The application must be made by arbitration claim form.
O15.3 A claim under section 12(4) of the 1950 Act for an order for the issue of a witness
summons to compel the attendance of a witness before an arbitrator or umpire where the
attendance of the witness is required within the district of a District Registry may be started in that
Registry: rule 62.14.

O16 Challenging the award

Challenge by way of appeal
O16.1 A party wishing to appeal against the award of an arbitrator or umpire must file and serve
with the arbitration claim form a statement of the grounds for the appeal, specifying the relevant
part(s) of the award and reasons: rule 62.15(6).
O16.2 A party seeking permission to appeal must also file and serve with the arbitration claim
form any written evidence in support of the contention that the question of law concerns a term of
the contract or an event which is not one off: rule 62.15(6).
O16.3 Any written evidence in reply must be filed and served not less than 2 days before the
hearing of the application for permission to appeal: rule 62.15(7).
O16.4 A party who wishes to contend that the award should be upheld for reasons other than those
set out in the award and reasons must file and serve on the claimant a notice specifying the
grounds of his contention not less than 2 days before the hearing of the application for permission
to appeal: rule 62.15(8).
O16.5 Applications for permission to appeal will be heard orally, but will not normally be listed
for longer than half an hour. Skeleton arguments should be lodged.

Claims to set aside or remit the award

O16.6 A claim to set aside or remit an award on the grounds of misconduct should not be regarded
as an alternative to, or a means of supporting, an application for permission to appeal.
O16.7 The directions set out in PD62 6.26.7 should be followed unless the court orders
otherwise.

Multiple claims
O16.8 If the arbitration claim form includes both an appeal and an application to set aside or remit
the award, the applications should be set out in separate sections of the arbitration claim form and
the grounds on which they are made separately identified.
O16.9 The court may direct that one application be heard before the other or may direct that they
be heard together, as may be appropriate. It is usually more appropriate to dispose of the

application to set aside or remit the award before considering the application for permission to
appeal.

O17 Time limits

O17.1

(a) Time limits governing claims under the 1950 and 1979 Acts are set out in rule 62.15.
(b) Different time limits apply to different claims. It is important to consult rule 62.15 to
ensure that applications are made within the time prescribed.
(c) The court has power under rule 3.1(2) to vary the time limits prescribed by rule 62.15, but
will require cogent reasons for doing so.

Provisions applicable to all arbitrations

Enforcement of awards
O18.1 All applications for permission to enforce awards are governed by Section III of Part
62: rule 62.17.
O18.2 An application for permission to enforce an award in the same manner as a judgment may
be made without notice, but the court may direct that the arbitration claim form be served, in
which case the application will continue as an arbitration claim in accordance with the procedure
set out in Section I: rule 62.18(1)(3).
O18.3 An application for permission to enforce an award in the same manner as a judgment must
be supported written evidence in accordance with rule 62.18(6).
O18.4

(a) Two copies of the draft order must accompany the application.
(b) If the claimant wishes to enter judgment, the form of the judgment must correspond to the
terms of the award.
(c) The defendant has the right to apply to the court to set aside an order made without notice
giving permission to enforce the award and the order itself must state in terms
o (i) that the defendant may apply to set it aside within 14 days after service of the order or,
if the order is to be served out of the jurisdiction, within such other period as the court
may set; and
o (ii) that it may not be enforced until after the end of that period or any application by the
defendant to set it aside has been finally disposed of: rule 62.18(9) & (10).

Matters of general application

O19 Transfer of arbitration claims
O19.1 An arbitration claim which raises no significant point of arbitration law or practice will
normally be transferred

(i) if a rent-review arbitration, to the Chancery Division;

(ii) if a construction or engineering arbitration, to the Technology and Construction Court;
(iii) if an employment arbitration, to the Central London County Court Mercantile List.

O19.2 Salvage arbitrations will normally be transferred to the Admiralty Court.

O20 Appointment of a Commercial Judge as sole

arbitrator or umpire
O20.1 Section 93 of the Arbitration Act 1996 provides for the appointment of a Commercial
Judge as sole arbitrator or umpire. The Act limits the circumstances in which a Judge may accept
such an appointment.
O20.2 Enquiries should be directed to the Judge in charge of the Commercial List or the Clerk to
the Commercial Court.

Chapter

APPENDIX J: Departmental Advisory Committee on Arbitration

Law Report on the Arbitration Bill
APPENDIX J: Departmental Advisory Committee on Arbitration Law Report on
the Arbitration Bill
1

February 1996
Chairman: The Rt Hon Lord Justice Saville QC
Members of the Committee: Professor J M Hunter (Deputy Chairman); Miss C R Allen
(Secretary); Mr P Bovey; Mr A W S Bunch; Mrs S C Boyd QC; Dr K G Chrystie; Lord Dervaird;
Mr J B Garrett; Professor R M Goode CBE, QC, FBA; Mr B Harris; Mrs J Howe; Mrs P KirbyJohnson; Mr R A MacCrindle QC; Mr A L Marriott; Mr K S Rokison QC; Mr D Sarre; Mr J H M
Sims; Professor D R Thomas; Professor J Uff QC; Mr V V Veeder QC
The DAC has been greatly assisted by the invaluable work done by Mr T T Landau of counsel.

CONTENTS
Chapter 1Introduction
Chapter 2Part I of the Bill
General
Introductory Provisions (Clauses 1-5)
The Arbitration Agreement (Clauses 6-8)
Stay of Legal Proceedings (Clauses 9-11)

Commencement of Arbitral Proceedings (Clauses 12-14)

The Arbitral Tribunal (Clauses 15-29)
Jurisdiction of the Arbitral Tribunal (Clauses 30-32)
The Arbitral Proceedings (Clauses 33-41)
Powers of Court in Relation to Arbitral Proceedings (Clauses 42-45)
The Award (Clauses 46-58)
Costs of the Arbitration (Clauses 59-65)
Powers of the Court in Relation to Award (Clauses 66-71)
Miscellaneous Provisions (Clauses 72-75)
Supplementary Provisions (Clauses 76-84)
Chapter 3Part II of the Bill
Domestic Arbitration Agreements (Clauses 85-88)
Consumer Arbitration Agreements (Clauses 89-93)
Small Claims Arbitrations in the County Court (Clause 94)
Appointment of Judges as Arbitrators (Clause 95)
Statutory Arbitrations and Supplementary (Clauses 96-101)
Chapter 4Part III of the Bill
Chapter 5Part IV of the Bill
Chapter 6Supplementary Recommendations
Chapter 7Conclusions

CHAPTER 1INTRODUCTION
1. In its Report of June 1989, the Departmental Advisory Committee on Arbitration Law (the
DAC), under the chairmanship of Lord Justice Mustill (now Lord Mustill) recommended against
England, Wales and Northern Ireland adopting the UNCITRAL Model Law on International
Commercial Arbitration. Instead, the DAC recommended that there should be a new and improved
Arbitration Act for England, Wales and Northern Ireland, with the following features (Paragraph
108):

(1) It should comprise a statement in statutory form of the more important principles of the
English law of arbitration, statutory and (to the extent practicable) common law.
(2) It should be limited to those principles whose existence and effect are uncontroversial.
(3) It should be set out in a logical order, and expressed in language which is sufficiently clear
and free from technicalities to be readily comprehensible to the layman.

(4) It should in general apply to domestic and international arbitrations alike, although there
may have to be exceptions to take account of treaty obligations.
(5) It should not be limited to the subject-matter of the Model Law.
(6) It should embody such of our proposals for legislation as have by then been enacted: see
paragraph 100 [of the 1989 Report].
(7) Consideration should be given to ensuring that any such new statute should, so far as
possible, have the same structure and language as the Model Law, so as to enhance its
accessibility to those who are familiar with the Model Law.

2. In an Interim Report in April 1995, the DAC stated as follows:

The original interpretation of [paragraph 108 of the 1989 Report] led to the draft Bill which was
circulated in February 1994. Although undoubtedly a highly skilful piece of work it now appears
that this draft Bill did not carry into effect what most users in fact wanted. In the light of the
responses, the view of the DAC is that a new Bill should still be grounded on the objectives set
out in [paragraph 108 of the 1989 Report], but that, reinterpreted, what is called for is much more
along the lines of a restatement of the law, in clear and user-friendly language, following as far
as possible, the structure and spirit of the Model Law, rather than simply a classic exercise in
consolidation.
3. The DACs proposals in the Interim Report led to a new draft Bill which was circulated for
public consultation in July 1995. This draft was very much the product of a fresh start. Indeed, it
will be noted that whereas the February 1994 draft had the following long-title:
To consolidate, with amendments, the Arbitration Act 1950, the Arbitration Act 1975, the
Arbitration Act 1979 and related enactments
this was altered for the July 1995 draft, and now begins:
An Act to restate and improve the law relating to arbitration pursuant to an arbitration
agreement
4. The DAC remained of the view, for the reasons given in the Mustill Report, that the solution
was not the wholesale adoption of the Model Law. However, at every stage in preparing a new
draft Bill, very close regard was paid to the Model Law, and it will be seen that both the structure
and the content of the July draft Bill, and the final draft, owe much to this model.
5. The task of the Committee has been made far easier by the extraordinary quantity and qualityof
responses we received both to the draft Bill published in February 1994 and to the draft Bill which
was published in July 1995. A large number of people put substantial time and effort into
responding to both drafts and putting forward suggestions, and we are very grateful to all of them.
Indeed, both these consultation exercises have proved invaluable: the former showed that a new
approach was required, while the latter showed that our April 1995 proposals seemed to be on the
right track. Both sets of responses also contained carefully considered suggestions, many of which
have been incorporated in the Bill. It should be emphasised that those suggestions which have not
been adopted were only put on one side after lengthy consideration.
6. Among those who responded were a large number of institutions who offer arbitration services
(such as the ICC) or who provide rules and administration for arbitrations concerning their

members (such as the commodity associations). Both domestically and internationally institutions
such as these play a very significant role in the field of arbitration. It seemed to us that the Bill
should specifically recognise this, and that it should safeguard their spheres of operation.
Consequently, there are many references to such institutions in the Bill, and, indeed, Clause 74
gives them what we believe to be a necessary degree of immunity from suit.
7. Given the extremely favourable response, the July 1995 draft was taken forward, with certain
modifications, to form the basis of the final draft, which is explained in this Report.
8. As well as containing a guide to the provisions of the final draft, this Report also contains
supplementary recommendations (in Chapter 6) on certain matters that have come to light since
publication of the final draft, and since its second reading in the House of Lords.

CHAPTER 2PART I OF THE BILL

9. The title to this Part is Arbitration Pursuant to an Arbitration Agreement. It is in this Part that
we have attempted to restate within a logical structure the basic principles of our law of
arbitration, as it relates to arbitration under an agreement to adopt this form of dispute resolution.
The Bill does not purport to provide an exhaustive code on the subject of arbitration. It would
simply not be practicable to attempt to codify the huge body of case law that has built up over the
centuries, and there would be a risk of fossilising the common law (which has the great advantage
of being able to adapt to changing circumstances) had we attempted to do so. Rather, we have
sought to include what we consider to be the more important common law principles, whilst
preserving all others, in so far as they are consistent with the provisions of the Bill (see Clause
81).
10. A small number of key areas, however, have not been included, precisely because they are
unsettled, and because they are better left to the common law to evolve. One such example
concerns privacy and confidentiality in arbitrations, which deserves special mention here.
11. Privacy and confidentiality have long been assumed as general principles in English
commercial arbitration, subject to important exceptions. It is only recently that the English courts
have been required to examine both the legal basis for such principles and the breadth of certain of
these exceptions, without seriously questioning the existence of the general principles themselves
(see e.g. The Eastern Saga [1988] 2 Lloyds Rep. 373, 379 (Leggatt LJ); DollingBaker v. Merrett [1990] 1 WLR 1205, 1213 (Parker LJ); Hassneh v. Mew [1993] 2 Lloyds Rep.
243 (Colman J); Hyundai Engineering v. Active (unreported, 9 March 1994, Phillips J); Ins
Company v. Lloyds Syndicate [1995] 2 Lloyds Rep. 272 (Colman J); London & Leeds Estates
Limited v. Parisbas Limited (No. 2) (1995) E.G. 134 (Mance J)).
12. In practice, there is also no doubt whatever that users of commercial arbitration in England
place much importance on privacy and confidentiality as essential features of English arbitrations
(e.g. see survey of users amongst the Fortune 500 US corporations conducted for the LCIA by
the London Business School in 1992). Indeed, as Sir Patrick Neill QC stated in his 1995
Bernstein Lecture, it would be difficult to conceive of any greater threat to the success of
English arbitration than the removal of the general principles of confidentiality and privacy.

13. Last years decision of the High Court of Australia in Esso/BHP v. Plowman (see [1995] 11
Arb. Int. 234) reinforced many peoples interest in seeking to codify the relevant English legal
principles in the draft Arbitration Bill. The implied term as the contractual basis for such
principles was not in doubt under English law, and the English Courts were upholding these
principles in strong and unequivocal terms. However, the Australian decision was to the effect
that, as a matter of Australian law, this contractual approach was unsustainable as regards
confidentiality. This has troubled users of commercial arbitration far outside Australia. The first
response has been for arbitral institutions to amend their arbitration rules to provide expressly for
confidentiality and privacy. The new WIPO Rules have sought to achieve this and we understand
that both the ICC and the LCIA are currently amending their respective rules to similar effect.
14. In England, the second response was to consider placing these general principles on a firm
statutory basis in the Arbitration Bill. This task was initially undertaken by the DAC mid-1995,
and perhaps surprisingly, it soon proved controversial and difficult.
15. Whilst none could reasonably dispute the desirability of placing these general principles
beyond all doubt on a firm statutory basis, applicable to all English arbitrations within the scope of
the Bill (irrespective of the substantive law applicable to the arbitration agreement), grave
difficulties arose over the myriad exceptions to these principles which are necessarily required for
such a statutory provisions. There is of course no statutory guidance to confidentiality in the
UNICTRAL Model Law whatever; and indeed, in a different context, Lord Mustill has recently
warned against an attempt to give in the abstract an accurate exposition of confidentiality at large
(see In re D (Adoption Reports: Confidentiality) [1995] 3 WLR 483, 496DL: To give an accurate
exposition of confidentiality at large would require a much more wide-ranging survey of the law
and practice than has been necessary for a decision on the narrow issue raised by the appeal, and
cannot in my opinion safely be attempted in the abstract.)
16. For English arbitration, the exceptions to confidentiality are manifestly legion and unsettled in
part; and equally, there are important exceptions to privacy (e.g. in The Lena Goldfields
Case (1930), the arbitration tribunal in London opened the hearing to the press (but not the public)
in order to defend the proceedings against malicious charges made by one of the parties, the
USSR). As to the former, the award may become public in legal proceedings under the Arbitration
Acts 1950-1979 or abroad under the 1958 New York Convention; the conduct of the arbitration
may also become public if subjected to judicial scrutiny within or without England; and most
importantly, several non-parties have legitimate interests in being informed as to the content of a
pending arbitration, even short of an award: e.g. parent company, insurer, P&I Club, guarantor,
partner, beneficiary, licensor and licensee, debenture-holder, creditors committee etc., and of
course even the arbitral institution itself (such as the ICC Court members approving the draft
award). Whilst non-parties to the arbitration agreement and proceedings, none of these are
officious strangers to the arbitration. Further, any provisions as to privacy and confidentiality
would have to deal with the duty of a company to make disclosure of, e.g., arbitration proceedings
and actual or potential awards which have an effect on the companys financial position. The
further Australian decision in Commonwealth of Australia v. Cockatoo Dockyard Pty Ltd (1995)
36 NSWLR 662 suggests that the public interest may also demand transparency as an exception to
confidentiality: Can it be seriously suggested that [the] parties private agreement can, endorsed

by a procedural direction of an arbitrator, exclude from the public domain matters of legitimate
concern per Kirby J. This decision raises fresh complications, particularly for statutory
corporations. We are of the view that it would be extremely harmful to English arbitration if any
statutory statement of general principles in this area impeded the commercial good-sense of
current practices in English arbitration.
17. Given these exceptions and qualifications, the formulation of any statutory principles would be
likely to create new impediments to the practice of English arbitration and, in particular, to add to
English litigation on the issue. Far from solving a difficulty, the DAC was firmly of the view that
it would create new ones. Indeed, even if acceptable statutory guidelines could be formulated,
there would remain the difficulty of fixing and enforcing sanctions for non-compliance. The
position is not wholly satisfactory. However, none doubt at English law the existence of the
general principles of confidentiality and privacy (though there is not unanimity as to their
desirability). Where desirable, institutional rules can stipulate for these general principles, even
where the arbitration agreement is not governed by English law. As to English law itself, whilst
the breadth and existence of certain exceptions remains disputed, these can be resolved by the
English courts on a pragmatic case-by-case basis. In due course, if the whole matter were ever to
become judicially resolved, it would remain possible to add a statutory provision by way of
amendment to the Bill. For these reasons, the DAC is of the view that no attempt should be made
to codify English law on the privacy and confidentiality of English arbitration in the Bill. We
would, however, draw attention to our supplementary recommendations on this topic in Chapter 6
below.

Clause 1. General principles

18. The DAC was persuaded by the significant number of submissions which called for an
introductory clause setting out basic principles. This Clause sets out three general principles. The
first of these reflects what we believe to be the object of arbitration. We have not sought to define
arbitration, since this poses difficulties that we discussed in our April 1995 Interim Report, and in
the end we were not persuaded that an attempted definition would serve any useful purpose. We
do, however, see value in setting out the object of arbitration. Fairness, impartiality and the
avoidance of unnecessary delay or expense are all aspects of justice, i.e. all requirements of a
dispute resolution system based on obtaining a binding decision from a third party on the matters
at issue. To our minds it is useful to stipulate that all the provisions of the Bill must be read with
this object of arbitration in mind.
19. The second principle is that of party autonomy. This reflects the basis of the Model Law and
indeed much of our own present law. An arbitration under an arbitration agreement is a
consensual process. The parties have agreed to resolve their disputes by their own chosen means.
Unless the public interest otherwise dictates, this has two main consequences. Firstly, the parties
should be held to their agreement and secondly, it should in the first instance be for the parties to
decide how their arbitration should be conducted. In some cases, of course, the public interest will
make inroads on complete party autonomy, in much of the same way as there are limitations on
freedom of contract. Some matters are simply not susceptible of this form of dispute resolution
(e.g. certain cases concerning status or many family matters) while other considerations (such as
consumer protection) may require the imposition of different rights and obligations. Again, as

appears from the mandatory provisions of the Bill, there are some rules that cannot be overridden
by parties who have agreed to use arbitration. In general the mandatory provisions are there in
order to support and assist the arbitral process and the stated object of arbitration.
20. So far as the third principle is concerned this reflects Article 5 of the Model Law. This Article
provides as follows:
In matters governed by this Law, no court shall intervene except where so provided in this Law.
21. As was pointed out in the Mustill Report (pp. 50-52) there would be difficulties in importing
this Article as it stands. However, there is no doubt that our law has been subject to international
criticism that the Courts intervene more than they should in the arbitral process, thereby tending to
frustrate the choice the parties have made to use arbitration rather than litigation as the means for
resolving their disputes.
22. Nowadays the Courts are much less inclined to intervene in the arbitral process than used tobe
the case. The limitation on the right of appeal to the Courts from awards brought into effect by the
Arbitration Act 1979, and changing attitudes generally, have meant that the Courts nowadays
generally only intervene in order to support rather than displace the arbitral process. We are very
much in favour of this modern approach and it seems to us that it should be enshrined as a
principle in the Bill.

Clause 2. Scope of application of provisions

23. International arbitrations can give rise to complex problems in the conflict of laws. A possible
solution to some of these problems would have been to provide that all arbitrations conducted in
England and Wales or in Northern Ireland should be subject to the provisions of the Bill,
regardless of the parties express or implied choice of some other system of law. We have not
adopted this solution, which appears to us contrary to the basic principle that the parties should be
free to agree how their disputes should be resolved. There appear to us to be no reasons of public
policy to prevent the parties conducting an arbitration here under an agreement governed by
foreign law or in accordance with a foreign procedural law. Clause 4(5) also follows the same
basic principle. Of course, cases may well arise where considerations of our own concepts of
public policy would lead to the refusal of the Court here to enforce an arbitration award. This,
however, is covered by Clause 66(3).
24. The rules of the conflict of laws as they apply to arbitration are complex, and to some extent
still in a state of development by the courts. It therefore seems to us inappropriate to attempt to
codify the relevant principles, beyond the simple statements set out in clause 2(1). Thus, as clause
2(2) provides, matters referable to the arbitration agreement are governed by the law of England
and Wales or of Northern Ireland, as the case may be, where that it the law applicable to the
arbitration agreement, and matters of procedure are governed by that law where the seat of the
arbitration is in England and Wales or in Northern Ireland: seat is defined in Clause 3. Beyond
that we have not attempted to state the relevant rules of the conflict of laws, nor to embark on the
issues of characterisation by which they are invoked.
25. Subsection (3) concerns the powers of the court to support the arbitration by staying
proceedings brought in breach of an agreement to arbitrate, by compelling the attendance of

witnesses, by granting those forms of interim relief which are set out in Clause 44, and by
enforcing the award at common law by summary procedure. Such powers should obviously be
available regardless of whether the seat of the arbitration is in England and Wales or in Northern
Ireland, and regardless of what law is applicable to the arbitration agreement or the arbitral
proceedings. Since we have used the expression whatever the law applicable , it follows that
Clause 2(3) is in no way restricted by Clause 2(1). It will be noted that in extending the power of
the court to grant interim relief in support of arbitrations to arbitrations having a foreign seat we
have given effect to our recommendation that section 25 of the Civil Jurisdiction and Judgments
Act 1982 should be extended to arbitration proceedings. It should be appreciated that Rules of
Court will have to be amended to give proper effect to the extension of the Courts jurisdiction in
Clause 2(3) (i.e. so as to allow service out of the jurisdiction in cases where it is necessary).
Subsection (4) enables the court to refuse to exercise its power in such cases, where the fact that
the arbitration has a foreign seat makes it inappropriate to exercise that power.

Clause 3. The seat of the arbitration

26. The definition of seat of the arbitration is required by Clause 2, and as part of the definition
of domestic arbitration in Clause 85. The concept of the seat as the juridical seat of the
arbitration is known to English law but may be unfamiliar to some users of arbitration. Usually it
will be the place where the arbitration is actually conducted: but this is not necessarily so,
particularly if different parts of the proceedings are held in different countries.
27. In accordance with the principle of party autonomy, Clause 3 provides that the seat may be
designated by the parties themselves or in some other manner authorised by them. Failing that it
must be determined objectively having regard to the parties agreement and all other relevant
circumstances. English law does not at present recognise the concept of an arbitration which has
no seat, and we do not recommend that it should do so. The powers of the court where the seat is
in England and Wales or in Northern Ireland are limited to those necessary to carry into effect the
principles enshrined in Clause 1. Where the seat is elsewhere, the courts powers are further
limited by Clause 2(4). The process of consultation identified no need for an arbitration which was
delocalised to a greater extent than this.

Clause 4. Mandatory and non-mandatory provisions

28. This provision is designed to make clear that the Bill has certain provisions that cannot be
overridden by the parties; and for ease of reference these are listed in Schedule 1 to the Bill. The
Clause also makes clear that the other provisions of this Part can be changed or substituted by the
parties, and exist as fall-back rules that will apply if the parties do not make any such change or
substitution, or do not provide for the particular matter in question. In this way, in the absence of
any other contrary agreement, gaps in an arbitration agreement will be filled.
29. Subsection (5). Although we believe that the choice of a foreign law would anyway have the
effect set out in this provision, it seemed for the sake of clarity to be useful to state this expressly,
so as to remind all concerned that a choice of a foreign law does amount to an agreement of the
parties to which due regard should be paid.

30. It should be made clear that the phrase mandatory is not used in either of the two senses that
it is used, for example, in Articles 3 and 7 of the Rome Convention (see Goode, Commercial Law,
2nd Ed, at p. 1118); the mandatory provisions of Part I of the Bill are only mandatory in so far as
the provisions of Part I apply (i.e. by virtue of Clause 2). The mandatory provisions would have
no application if Part I does not apply.

Clause 5. Agreements to be in writing

(a) Arbitration agreements
31. Article 7 of the Model Law requires the arbitration agreement to be in writing. We have not
followed the precise wording of this Article, for the reasons given in the Mustill Report (p. 52),
though we have incorporated much of that Article in the Bill.
32. The requirement for the arbitration agreement to be in writing is the position at present under
Section 32 of the Arbitration Act 1950 and Section 7 of the Arbitration Act 1975. If an arbitration
agreement is not in writing then it is not completely ineffective, since the common law recognises
such agreements and is saved by Clause 81(2)(a).
33. We remain of the view expressed in the Consultative Paper issued with the draft Clauses
published in July 1995, that there should be a requirement of writing. An arbitration agreement
has the important effect of contracting out of the right to go to the court, i.e. it deprives the parties
of that basic right. To our minds an agreement of such importance should be in some written form.
Furthermore the need for such form should help to reduce disputes as to whether or not an
arbitration agreement was made and as to its terms.
34. We have, however, provided a very wide meaning to the words in writing. Indeed this
meaning is wider than that found in the Model Law, but in our view, is consonant with Article II.2
of the English text of the New York Convention. The non-exhaustive definition in the English text
(shall include) may differ in this respect from the French and Spanish texts, but the English text
is equally authentic under Article XVI of the New York Convention itself, and also accords with
the Russian authentic text (); see also the 1989 Report of the Swiss Institute of
Comparative Law on Jurisdictional Problems in International Commercial Arbitration (by Adam
Samuel), at pp. 81-85. It seems to us that English Law as it stands more than justifies this wide
meaning; see, for example, Zambia Steel v. James Clark [1986] 2 Lloyds Rep. 225. In view of
rapidly evolving methods of recording we have made clear that writing includes recording by
any means.
(b) Other agreements
35. These we have also made subject to a writing requirement. Had we not done so, we could
envisage disputes over whether, for example, something the parties had agreed to during the
conduct of the arbitration amounted to a variation of the arbitration agreement and required
writing, or could be characterised as something else. By introducing some formality with respect
to all agreements, the possibility of subsequent disputes (e.g. at the enforcement stage) is greatly
diminished. Indeed it seemed to us that with the extremely broad definition we have given to
writing, the advantages of requiring some record of what was agreed with regard to any aspect of

an arbitration outweighed the disadvantages of requiring a specific form for an effective

agreement.
(c) Further points
36. Subsection 5(3). This is designed to cover, amongst other things, extremely common situations
such as salvage operations, where parties make an oral agreement which incorporates by reference
the terms of a written form of agreement (e.g. Lloyds Open Form), which contains an arbitration
clause. Whilst greatly extending the definition of writing, the DAC is of the view that given the
frequency and importance of such activity, it was essential that it be provided for in the Bill. The
reference could be to a written agreement containing an arbitration clause, or to a set of written
arbitration rules, or to an individual written arbitration agreement. This provision would also cover
agreement by conduct. For example, party A may agree to buy from party B a quantity of goods
on certain terms and conditions (which include an arbitration clause) which are set out in writing
and sent to party B, with a request that he sign and return the order form. If, which is by no means
uncommon, party B fails to sign the order form, or send any document in response to the order,
but manufactures and delivers the goods in accordance with the contract to party A, who pays for
them in accordance with the contract, this could constitutean agreement otherwise than in writing
by reference to terms which are in writing , and could therefore include an effective arbitration
agreement. The provision therefore seeks to meet the criticisms that have been made of Article
7(2) of the Model Law in this regard (see, e.g., the Sixth Goff Lecture, delivered by Neil Kaplan
QC in Hong Kong in November 1995, (1996) 12 Arb.Int. 35). A written agreement made by
reference to separate written terms would, of course, be caught by Clause 5(2).
37. Subsection 5(4). There has been some concern that a writing requirement with respect to every
agreement might unduly constrain the parties freedom and flexibility with respect to, for
example, minor matters of procedure during a hearing. This subsection seeks to avoid this. An
agreement will be evidenced in writing if recorded by, amongst others, a third party with the
authority of the parties to the agreement. Given that this third party could of course be the tribunal,
the parties are free during a hearing to make whatever arrangements or changes to the agreed
procedure they wish, as long as these are recorded by the tribunal. The DAC is of the view that
this presents no serious hindrance to the parties flexibility, and has the merit of reducing the risk
of disputes later on as to what exactly was agreed. Clearly, this subsection also has a wider effect,
allowing for the recording of an oral agreement at any stage.
38. Subsection 5(5). This provisions is based on Article 7(2) of the Model Law, but with certain
important changes. The DAC has been careful to emphasise that for there to be an effective
arbitration agreement for the purposes of this Part, it is not enough for one party to allege in a
written submission that there is an arbitration agreement, in circumstances where the other party
simply fails to respond at all. If this were enough, an unfair obligation would be placed on any
party (including a stranger to the proceedings in question) to take the active step of serving a
written submission in order to deny this allegation. Therefore, in order to satisfy this subsection,
there must be a failure to deny an allegation by a party who has submitted a response submission.
39. It has been suggested that the term written submissions is too narrow, and that this should be
replaced by documents. The DAC does not agree with this, given that this would include the
most informal of letters. It may well be unjust, for example, for one party to be able to point to one

sentence in one letter in a long exchange with another party, in which there is an allegation that
there exists an arbitration clause, and where this has not been denied.
40. Reference should also be made to subsection 23(4). Whilst any agreement as to an arbitration
must be in writing, the DAC is of the view that it is impracticable to impose a writing requirement
on an agreement to terminate an arbitration. Parties may well simply walk away from proceedings,
or allow the proceedings to lapse, and it could be extremely unfair if one party were allowed to
rely upon an absence of writing at some future stage. Where a claimant allows an arbitration to
lapse, Clause 41(3) may be utilised.

THE ARBITRATION AGREEMENT

Clause 6. Definition of arbitration agreement

41. The first subsection reflects Article 7(1) of the Model Law and provides a more informative
definition than that in Section 32 of the 1950 Act. We have used the word disputes but this is
defined in Clause 82 as including differences since there is some authority for the proposition
that the latter term is wider than the former; see Sykes v. Fine FareLtd [1967] 1 Lloyds Rep. 53.
42. The second subsection reflects Article 7(2) of the Model Law. In English law there is at
present some conflicting authority on the question as to what is required for the effective
incorporation of an arbitration clause by reference. Some of those responding to the July 1995
draft Clauses made critical comments of the views of Sir John Megaw in Aughton v. M F Kent
Services [1991] 57 BLR 1 (a construction contract case) and suggested that we should take the
opportunity of making clear that the law was as stated in the charter party cases and as
summarised by Ralph Gibson LJ in Aughton. (Similar disquiet has been expressed about decisions
following Aughton, such as Ben Barrett v. Henry Boot Management Ltd [1995] Constr.Ind.Law
Letter 1026.) It seemed to us, however, that although we are of the view that the approach of
Ralph Gibson LJ should prevail in all cases, this was really a matter for the Court to decide. The
wording we have used certainly leaves room for the adoption of the charter party rules in all cases,
since it refers to references to a document containing an arbitration clause as well as a reference to
the arbitration clause itself. Thus the wording is not confined to cases where there is specific
reference to the arbitration clause, which Sir John Megaw (but not Ralph Gibson LJ) considered
was a requirement for effective incorporation by reference.

Clause 7. Separability of arbitration agreement

43. This Clause sets out the principle of separability which is already part of English law
(see Harbour Assurance v. Kansa [1993] QB 701), which is also to be found in Article 16(1) of
the Model Law, and which is regarded internationally as highly desirable. However, it seems to us
that the doctrine of separability is quite distinct from the questions of the degree to which the
tribunal is entitled to rule on its own jurisdiction, so that, unlike the Model Law, we have dealt
with the latter elsewhere in the Bill (Clause 30).
44. In the draft Clauses published in July 1995 we inserted a provision to make clear that the
doctrine of separability did not affect the question whether an assignment of rights under the
substantive agreement carried with it the right or obligation to submit to arbitration in accordance

with the arbitration agreement. This is now omitted as being unnecessary, since we have redrafted subsection (1) in order to follow the relevant part of Article 16 of the Model Law more
closely, and to make clear that the doctrine of separability is confined to the effect of invalidity etc
of the main contract on the arbitration agreement, rather than being, as it was in the July 1995
draft, a freestanding principle. Similarly, in being so restricted, this Clause is not intended to have
any impact on the incorporation of an arbitration clause from one document or contract into
another (which is addressed in Clause 6(2)).
45. A number of those responding to our drafts expressed the wish for the Bill to lay down rules
relating to assignment, e.g. that the assignment of rights under the substantive agreement should
be subject to any right or obligation to submit to arbitration in accordance with the arbitration
agreement unless either of these agreements provided otherwise. Indeed we included such a
provision in the illustrative draft published in April 1995. However, on further consideration, we
concluded that it would not be appropriate to seek to lay down any such rules.
46. There were two principal reasons for reaching this view.

(i) In the first place, under English law the assignability of a contractual right is governed by
the proper law of that right, while the effectiveness of the assignment is governed by the
proper law of the assignment. However, where the law governing the substantive agreement
(or the arbitration agreement) is not English law, different rules may well apply and there is
an added problem in that those rules (under the foreign law in question) may be categorised as
either substantive or procedural in nature. The Bill would therefore have to address such
problems whilst simultaneously not interfering with substantive rights and obligations. We
were not persuaded that it would be either practicable or of any real use to attempt to devise
general rules which would deal satisfactorily with this matter.
(ii) In the second place, English law distinguishes between legal and equitable assignments,
so that any rules we devised would have to take this into account. In our view, an attempt to
devise rules relating to assignments where no foreign law elements are involved is more the
subject of reform of the law of assignment generally than of a Bill relating exclusively to
arbitration.

47. Finally, it should be noted that the substantive agreement of which the arbitration agreement
forms part need not itself be in writing for the Bill to apply, provided of course that the arbitration
agreement itself is in writing. This should be clarified as we suggest in our supplementary
recommendations in Chapter 6 below.

Clause 8. Whether agreement discharged by death of a

party
48. This Clause sets out the present statutory position. The common law was that an arbitration
agreement was discharged by the death of a party. That rule was altered by the Arbitration Act
1934 as re-enacted by Section 2 of the Arbitration Act 1950. We have avoided using the technical
expression right of action which is to be found in Section 2(3) of the 1950 Act and which could
perhaps give rise to problems for the reasons given in the consultative paper published with the

draft Clauses in July 1995. In line with party autonomy, we have provided that the parties can
agree that death shall have the effect of discharging the arbitration agreement.
49. This Clause deals only with the arbitration agreement. The effect of the death of a party on the
appointment of an arbitrator (also to be found in Section 2 of the 1950 Act) is now dealt with in
that part of the Bill concerned with the arbitral tribunal (see Clause 26(2)).

Clause 9. Stay of legal proceedings

50. We have proposed a number of changes to the present statutory position (section 4(1) of the
1950 Act and section 1 of the 1975 Act), having in mind Article 8 of the Model Law, our treaty
obligations, and other considerations.
51. We have made it clear that a stay can be sought of a counterclaim as well as a claim. The
existing legislation could be said not to cover counterclaims, since it required the party seeking a
stay first to enter an appearance, which a defendant to counterclaim could not do. Indeed,
appearance is no longer the appropriate expression in the High Court in any event, and never
was the appropriate expression in the county court. We have also made clear that an application
can be made to stay part of legal proceedings, where other parts are not subject to an agreement to
arbitrate.
52. Further, the Clause provides that an application is only to be made by a party against whom
legal proceedings are brought (as opposed to any other party).
53. We have provided that an application may be made for a stay even where the matter cannot be
referred to arbitration immediately, because the parties have agreed first to use other dispute
resolution procedures. This reflects dicta of Lord Mustill in Channel Tunnel v. Balfour
Beatty [1993] AC 334.
54. In this Clause we have made a stay mandatory unless the Court is satisfied that the arbitration
agreement is null and void, inoperative, or incapable of being performed. This is the language of
the Model Law and of course of the New York Convention on the Recognition and Enforcement
of Foreign Arbitral Awards, presently to be found in the Arbitration Act 1975.
55. The Arbitration Act 1975 contained a further ground for refusing a stay, namely where the
Court was satisfied that there was not in fact any dispute between the parties with regard to the
matter agreed to be referred. These words do not appear in the New York Convention and in our
view are confusing and unnecessary, for the reasons given in Hayter v. Nelson [(No. 2)] [1990] 2
Lloyds Rep. 265.
56. In Part II of the Bill these provisions are altered in cases of domestic arbitration agreements
as there defined.
57. We have included a provision (subsection (5)) that where the Court refuses to stay the legal
proceedings, any term making an award a condition precedent to the bringing of legal proceedings
(known as a Scott v. Avery clause) will cease to have effect. This avoids a situation where the
arbitration clause is unworkable, yet no legal proceedings can be successfully brought. Whilst one
respondent suggested that this may go too far, it appears to be a matter of basic justice that a
situation in which a party can neither arbitrate nor litigate must be avoided.

Clause 10. Reference of interpleader issue to arbitration

58. This Clause is based on Section 5 of the 1950 Act. We have however taken the opportunity of
making a stay mandatory so as to comply with the New York Convention, as well as trying to
express the provision in simpler, clearer terms. The Clause is required because interpleader
arises where one party claiming no right himself in the subject matter, is facing conflicting claims
from other parties and does not know to which of them he should account. English law allows
such a party to bring those in contention before the Court which may order the latter to fight out
the question between themselves. If they have agreed to arbitrate the matter then Clause 9 would
not itself operate, since the party seeking interpleader relief would not be making a claim which he
had agreed to arbitrate.
59. We have not defined interpleader, although some suggested that we should, given that this is
a legal term of art, which goes far beyond arbitration contexts.

Clause 11. Retention of security where Admiralty

proceedings stayed
60. This Clause is not intended to do more than re-enact the present statutory position as foundin
section 26 of the Civil Jurisdiction and Judgments Act 1982.
61. Clauses 9 to 11 are, of course, mandatory.

Clause 12. Power of court to extend time for beginning

arbitral proceedings, etc.
62. We have proposed a number of changes to the existing law.
63. The major change concerns the test that the Court must apply before extending the time.
64. The power of the Court to extend a contractual time limit which would otherwise bar the claim
first appeared in our law in section 16(6) of the Arbitration Act 1934, which was re-enacted in
section 27 of the Arbitration Act 1950.
65. From paragraph 33 of the Report of the MacKinnon Committee presented to Parliament in
March 1927 it can be seen that the reason for suggesting that the Court should have power to
extend the time was that the vast majority of submissions to arbitrations are contained in printed
forms of contract, which cannot be carefully examined in the transaction of business and alteration
of which it would be difficult for most people to secure. The Committee concluded that it might
be sound policy to create a power to modify unconscionable provisions as regards common forms
of submission in printed forms. It is also clear from paragraph 34 of the Report that the Committee
had in mind cases where the time limit was very short, i.e. measured in days. The Committee
suggested that the test should be whether the time limit created an unreasonable hardship.
66. As can be seen from the Notes on Clauses to the 1934 Act, it was later felt that since the
justification for giving the power was presumably either ignorance of the existence of the
provision in the contract, or the acceptance of the provision through undue pressure by the other

party, which could be the case whether or not the contract was in a common form, the power
should not be limited to such forms.
67. Section 27 of the 1950 Act, with its test of undue hardship, seems to many to have been
interpreted by the Courts in a way hardly envisaged by those who suggested the power in the first
place. Indeed that interpretation seems to have changed over the years: see the discussion in
Mustill and Boyd, Commercial Arbitration, 2nd Ed., pp. 201-215. Some responses indicated
dissatisfaction with the way the Courts were using Clause 27 to interfere with the bargain that the
parties had made. The present legal position would seem to owe much to a time, now some 20
years ago, when the Courts were flirting with the idea that they enjoyed some general power of
supervisory jurisdiction over arbitrations.
68. The justification for time limits is that they enable commercial concerns (and indeed others) to
draw a line beneath transactions at a much earlier stage than ordinary limitation provisions would
allow. It should be mentioned, however, that other responses suggested that the position presently
reached by the Courts should be maintained.
69. The present Committee re-examined section 27 in the light of the underlying philosophy of the
Bill, namely that of party autonomy. This underlying philosophy seems to have been generally
welcomed in this country and abroad and of course it fits with the general international
understanding of arbitration. Party autonomy means, among other things, that any power given to
the Court to override the bargain that the parties have made must be fully justified. The idea that
the Court has some general supervisory jurisdiction over arbitrations has been abandoned.
70. It seemed to us in todays climate that there were three cases where the power could be
justified in the context of agreed time limits to bring a claim. These are, firstly, where the
circumstances are such as were outside the reasonable contemplation of the parties when they
agreed the provision in question and that it would be fair to extend the time, secondly, where the
conduct of one party made it unjust to hold the other to the time limit, and thirdly, where the
respective bargaining position of the parties was such that it would again be unfair to hold one of
them to the time limit.
71. The third of these cases seems to us to reflect the thinking of the MacKinnon Committee,
while the other two have developed through the Courts interpretation of section 27. However this
third category is really an aspect of what nowadays would be called consumer protection. This
part of the Bill is not concerned with consumer protection, for which provision is made elsewhere
and in respect of which there is a growing body of European law.
72. In these circumstances it seemed to us to be appropriate to set out in this part of the Bill the
first and second of the cases we have described. Apart from anything else, this will give the Courts
the opportunity to reconsider how to proceed in the light of the philosophy underlying the Bill as a
whole, namely that of party autonomy. As the MacKinnon Committee itself intimated, great care
must be taken before interfering with the bargain that the parties have made.
73. It was suggested to the DAC that the principal matter to be taken into account by the court
should be the length of the contractual period in question. The DAC is of the view that this is only
one of several relevant matters, another factor being, for example, the contemplation of the

parties. For this reason, the DAC concluded that a simple test of substantial injustice, without
more, would not suffice.
74. There are some other changes.

(i) Firstly, Clause 12(1)(b) contains a reference to other dispute resolution procedures. We
understand that there is an increasing use of provisions which call for mediation and other
alternative dispute resolution procedures to precede recourse to arbitration, so that we thought
it proper to add this to the other step covered by the Clause, namely to begin arbitral
proceedings. We do not intend to widen the scope of the Clause beyond this, so that unless
the step in question is one of the two kinds described, the Clause will not operate. Thus this
represents only a small but we think logical extension to the present law.
(ii) Secondly, it is made a pre-condition that the party concerned first exhausts any available
arbitral process for obtaining an extension of time. In the view of the Committee it would be a
rare case indeed where the Court extended the time in circumstances where there was such a
process which had not resulted in an extension, for it would in the ordinary case be difficult if
not impossible to persuade the Court that it would be just to extend the time or unjust not to
do so, where by an arbitral process to which ex hypothesi the applying party had agreed, the
opposite conclusion had been reached.
(iii) Thirdly, we have made any appeal from a decision of the Court under this Clause subject
to the leave of that Court. It seems to us that there should be this limitation, and that in the
absence of some important question of principle, leave should not generally be granted. We
take the same view in respect of the other cases in the Bill where we propose that an appeal
requires the leave of the Court.
(iv) Fourthly, whereas the existing statutory provision refers to terms of an agreement that
provide that claims shall be barred, this has been extended to read barred, or the claimants
right extinguished.

75. For obvious reasons, this Clause is mandatory.

Clauses 13 and 14. Application of Limitation Acts and

commencement of arbitral proceedings
76. The first of these provisions is designed to restate the present law. The reference to the Foreign
Limitation Periods Act 1984 avoids (subject to the provisions of that Act) the imposition of an
English limitation period where an applicable foreign law imposes a different period. The second
provision reflects to a degree Article 21 of the Model Law, but sets out the various cases,
including one not presently covered by the law. It will be noted that we have used the word
matter rather than the word disputes. This is to reflect the fact that a dispute is not the same as
a claim; cf. Mustill and Boyd, op. cit. at p. 29 and Commission for the New
Towns v. Crudens (1995) CILL 1035. The neutral word matter will cover both, so that an
arbitration clause which refers to claims will be covered as well as one which refers to disputes.
77. Clause 13 is a mandatory provision.

THE ARBITRAL TRIBUNAL

Clause 15. The arbitral tribunal

78. Article 10(1) of the Model Law provides that the parties are free to determine the number of
arbitrators. We have included a like provision.
79. Article 10(2) of the Model Law stipulates that failing such determination, the number of
arbitrators shall be three. This we have not adopted, preferring the existing English rule that in the
absence of agreement the default number shall be one. The employment of three arbitrators is
likely to be three times the cost of employing one, and it seems right that this extra burden should
be available if the parties so choose, but not imposed on them. The provision for a sole arbitrator
also accords but with common practice in this country, and the balance of responses the DAC
received. The Model Law default does not, of course, cater for the situation where there are more
than two parties to the arbitration.

Clause 16. Procedure for the appointment of arbitrators

80. Again we have had the Model Law (Article 11) very much in mind in drafting these
provisions, though we have attempted to cater for more cases and also for the fact that under our
law, there can be either an umpire or a chairman. We should note that this has caused some
confusion abroad, particularly in the United States, where what we would describe as a
chairman is called an umpire. In Clauses 20 and 21 we set out the differences between these
two which (in the absence of agreement between the parties) is the present position under English
law.
81. The time limits we have imposed for appointments we consider to be fair and reasonable.
They can be extended by the Court under Clause 79, but the power of the Court in this regard is
limited as set out in that Clause. In the ordinary case we would not expect the Court to allow a
departure from the Clause 16 time limits.
82. It might be noted that periods of 28 days, rather than 30 days (as in the Model Law) have been
used throughout the Bill, in order to reduce the likelihood of a deadline expiring on a weekend.

Clause 17. Power in case of default to appoint sole

arbitrator
83. This Clause is intended to replace the present rules concerning the appointment of a sole
arbitrator where the other party is in default (section 7(b) of the 1950 Act). It only applies to a two
party case. We have stipulated that the party in default must not only appoint his arbitrator within
the specified period but also inform the other party that he has done so. This in our view is a
significant improvement on the present law, where the defaulting party was under no obligation to
say that he had made an appointment. This was calculated to cause unnecessary delay, confusion
and expense.
84. Some of those responding objected to this Clause. The DAC, however, remains of the view
that this provision is an example of the Court supporting the arbitral process, and reducing the
opportunities available for a recalcitrant party. The DAC is advised that section 7(b) of the 1950

Act is used a great deal, and that its very existence constitutes a deterrent to those contemplating
dilatory tactics. The alternative would be to simply provide for recourse to Court. This would be
overly burdensome in most cases, and is available, in any event, under the provisions of the Bill.
85. It has been suggested that the Bill should set out grounds upon which the Court shouldexercise
its discretion in Clause 17(3). The DAC is of the view, however, that this is best left for the Courts
to develop, given the specific circumstances of each case, and in the light of the overall
philosophy of the Bill.
86. One respondent queried the use of the word refuses in Clause 17(1). The advantage of this is
that if a party does actually refuse to appoint an arbitrator, rather than simply failing to do so, the
non-defaulting party need not wait for the expiration of the relevant time period within which the
defaulting party may make such an appointment, but could use the mechanism in Clause 17
straight away.

Clause 18. Failure of appointment procedure

87. Again we have had the Model Law in mind when drafting this provision. The starting point is
any agreement the parties may have made to deal with a failure of the appointment procedure. In
the absence of any such agreement, the Court is given the power to make appointments. This is a
classic case of the Court supporting and helping to carry through the arbitration process.
88. It will be noted that we have given the Court power to revoke any appointments already made.
This is to cover the case where unless the Court took this step it might be suggested thereafter that
the parties had not been fairly treated, since one had his own choice arbitrator while the other had
an arbitrator imposed on him by the Court in circumstances that were no fault of his own. This
situation in fact arose in France in the Dutco case, where an award was invalidated for this reason.
89. The Model Law stipulates that there shall be no appeal from a decision of the Court. We have
not gone as far as this, since there may well be questions of important general principle which
would benefit from authoritative appellate guidance.

Clause 19. Court to have regard to agreed qualifications

90. This comes from Article 11(5) of the Model Law, which itself seeks to preserve as much of
the parties agreement as possible.

Clauses 20 and 21. Chairman and umpire

91. The parties are, of course, free to make what arrangements they like about the functions and
powers of Chairmen or Umpires. We have set out what we believe to be the position under
English law in the absence of any such agreement. As we understand the current position, in the
absence of an agreement between the parties, an umpire can neither take part nor attend an
arbitration until the arbitrators have disagreed.
92. A cause of delay and expense often exists under our umpire system where the umpire does not
attend the proceedings and it is only at an advanced stage (when the arbitrators disagree) that he
takes over, for much that has gone on may have to be repeated before him. Equally, the time and
expense of an umpire may be wasted if he attends but the arbitrators are able to agree on

everything. We have decided that it would be preferable to stipulate that (in the absence of
agreement between the parties) the umpire should attend the proceedings (as opposed to taking
part in the proceedings) and be supplied with the same documents and materials as the other
arbitrators. We hope, however, that common sense will prevail and that the parties will make
specific agreement over this question, tailored to the circumstances of the particular case.
93. Subsection 21(4) caused some concern amongst a few respondents, but this subsection simply
reflects what is understood to be the current position.
94. We should record that we considered whether the peculiarly English concept of an umpire
should be swept away in favour of the more generally used chaired tribunal. As we have pointed
out above, in the United States what we would describe as a chairman is called an umpire. In the
end we decided not to recommend this, and to continue to provide default provisions for those
who wanted to continue to use this form of arbitral tribunal.

Clause 22. Decision-making where no chairman or

umpire
95. We decided to include this situation for the sake of completeness, though the default provision
can only work if there is unanimity or a majority. If there is neither, then it would appear that the
arbitration agreement cannot operate, unless the parties can agree, or have agreed, what is to
happen.

Clause 23. Revocation of arbitrators authority

96. Statutory provisions making it impossible unilaterally to revoke the authority of an arbitrator
have existed since 1833. The present Clause is designed to reflect the current position, save that
we have imposed a writing requirement and thought it helpful to make express reference to
arbitral institutions, etc. These of course only have such powers as the parties have agreed they
shall have, so that strictly this provision is not necessary, but we consider that an express reference
makes for clarity.
97. Some of those responding suggested that the parties right to agree to revoke an arbitral
appointment should be limited (e.g. that Court approval should be required in every case). The
DAC has not adopted these suggestions since any tribunal is properly regarded as the parties
tribunal and to do so would derogate from the principle of party autonomy.
98. It will be seen that various terms are used in the Bill with respect to the termination of an
arbitral appointment, such as removal and revocation of authority. Different terms have been
adopted simply as a matter of correct English usage. The difference in terms is not intended to be
of any legal significance.
99. Subsection 23(4). Whilst any agreement as to an arbitration must be in writing, as defined
earlier, the DAC is of the view that it is impracticable to impose a writing requirement on an
agreement to terminate an arbitration. Parties may well simply walk away from proceedings, or
allow the proceedings to lapse, and it could be extremely unfair if one party were allowed to rely
upon an absence of writing at some future stage. Where a Claimant allows an arbitration to lapse,
Clause 41(3) may be utilised.

Clause 24. Power of court to remove arbitrator

100. We have set out the cases where the Court can remove an arbitrator.
101. The Model Law (Article 12) specifies justifiable doubts as to the independence (as well as
impartiality) of an arbitrator as grounds for his removal. We have considered this carefully, but
despite efforts to do so, no-one has persuaded us that, in consensual arbitrations, this is either
required or desirable. It seems to us that lack of independence, unless it gives rise to justifiable
doubts about the impartiality of the arbitrator, is of no significance. The latter is, of course, the
first of our grounds for removal. If lack of independence were to be included, then this could only
be justified if it covered cases where the lack of independence did not give rise to justifiable
doubts about impartiality, for otherwise there would be no point including lack of independence as
a separate ground.
102. We can see no good reason for including non-partiality lack of independence as a ground
for removal and good reasons for not doing so. We do not follow what is meant to be covered by a
lack of independence which does not lead to the appearance of partiality. Furthermore, the
inclusion of independence would give rise to endless arguments, as it has, for example, in Sweden
and the United State, where almost any connection (however remote) has been put forward to
challenge the independence of an arbitrator. For example, it is often the case that one member of
a barristers Chambers appears as counsel before an arbitrator who comes from the same
Chambers. Is that to be regarded, without more, as a lack of independence justifying the removal
of the arbitrator? We are quite certain that this would not be the case in English law. Indeed the
Chairman has so decided in a case in Chambers in the Commercial Court. We would also draw
attention to the article Barristers Independence and Disclosure by Kendall in (1992) 8 Arb. Int.
287. We would further note in passing that even the oath taken by those appointed to the
International Court of Justice; and indeed to our own High Court, refers only to impartiality.
103. Further, there may well be situations in which parties desire their arbitrators to have
familiarity with a specific field, rather than being entirely independent.
104. We should emphasise that we intend to lose nothing of significance by omitting reference to
independence. Lack of this quality may well give rise to justifiable doubts about impartiality,
which is covered, but if it does not then we cannot at present see anything of significance that we
have omitted by not using this term.
105. We have included, as grounds for removal, the refusal or failure of an arbitrator properly to
conduct the proceedings, as well as failing to use all reasonable despatch in conducting the
proceedings or making an award, where the result has caused or will cause substantial injustice to
the applicant. We trust that the Courts will not allow the first of these matters to be abused by
those intent on disrupting the arbitral process. To this end we have included a provision allowing
the tribunal to continue while an application is made. There is also Clause 73 which effectively
requires a party to put up or shut up if a challenge is to be made.
106. We have every confidence that the Courts will carry through the intent of this part of the Bill,
which is that it should only be available where the conduct of the arbitrator is such as to go so
beyond anything that could reasonably be defended that substantial injustice has resulted or will

result. The provision is not intended to allow the Court to substitute its own view as to how the
arbitral proceedings should be conducted. Thus the choice by an arbitrator of a particular
procedure, unless it breaches the duty laid on arbitrators by Clause 33, should on no view justify
the removal of an arbitrator, even if the Court would not itself have adopted that procedure. In
short, this ground only exists to cover what we hope will be the very rare case where an arbitrator
so conducts the proceedings that it can fairly be said that instead of carrying through the object of
arbitration as stated in the Bill, he is in effect frustrating that object. Only if the Court confines
itself in this way can this power of removal be justified as a measure supporting rather than
subverting the arbitral process.
107. We have also made the exhaustion of any arbitral process for challenging an arbitrator a
precondition to the right to apply to the Court. Again it will be a very rare case indeed where the
Court will remove an arbitrator notwithstanding that that process has reached a different
conclusion.
108. If an arbitrator is removed by the Court, we have given the Court power to make orders in
respect of his remuneration. We would expect this power to be exercised where the behaviour of
the arbitrator is inexcusable to the extent that this should be marked by depriving him of all or
some of his fees and expenses. This subsection is also the subject of a supplementary
recommendation in Chapter 6 below.
109. As a matter of justice, we have stipulated that an arbitrator is entitled to be heard on any
application for his removal.
110. This is a mandatory provision. It seems to us that an agreement to contract out of the cases
we specify would really be tantamount to an agreement to a dispute resolution procedure that is
contrary to the basic principles set out in Clause 1.

Clause 25. Resignation of arbitrator

111. In theory it could be said that an arbitrator cannot unilaterally resign if this conflicts with the
express or implied terms of his engagement. However, as a matter of practical politics an
arbitrator who refuses to go on cannot be made to do so, though of course he may incur a liability
for breach of his agreement to act.
112. In this Clause we have given an arbitrator who resigns the right to go to the Court to seek
relief from any liability incurred through resigning and to make orders relating to his remuneration
and expenses, unless the consequences of resignation have been agreed with the parties (e.g. by
virtue of having adopted institutional rules).
113. We have chosen the words of subsection (1) with care so that the agreement referred to is
confined to an agreement as to the consequences of resignation. A simple agreement not to resign
(or only to resign in certain circumstances) with no agreement as to what will happen if this
promise is broken is not within the subsection. This has to be so since otherwise (by virtue of
subsection (2)), subsections (3) and (4) would never or hardly ever operate, for the arbitrator will
not be under any liability or at risk as to his fees or expenses unless he is in breach by resigning.

114. In the July draft we suggested a provision which would have entitled the Court to grant relief
in all circumstances including those where the arbitrator had made an agreement as to the
consequences of his resignation. However, as the result of a response that we received we have
concluded that where the parties have agreed with an arbitrator on the consequences it would be
wrong to give the Court a power to adjust the position.
115. The reason we propose this is that circumstances may well arise in which it would be just to
grant such relief to a resigning arbitrator. For example, the arbitrator may (reasonably) not be
prepared to adopt a procedure agreed by the parties (i.e. under Clause 34) during the course of an
arbitration, taking the view that his duty under Clause 33 conflicts with their suggestions (the
relationship between the duty of arbitrators in Clause 33 and the freedom of the parties in Clause
34, is discussed in more detail below). Again, an arbitration may drag on for far longer than could
reasonably have been expected when the appointment was accepted, resulting in an unfair burden
on the arbitrator. In circumstances where the Court was persuaded that it was reasonable for the
arbitrator to resign, it seems only right that the Court should be able to grant appropriate relief.

Clause 26. Death of arbitrator or person appointing him

116. This Clause complements Clause 8 and is included for the same reason. Clause 26(1) is
mandatoryit is difficult to see how parties could agree otherwise.

Clause 27. Filling of vacancy, etc.

117. This Clause reflects Article 15 of the Model Law, but also deals with certain other important
ancillary matters. It should be noted that we do not propose to re-enact the power given to the
Court under section 25 of the Arbitration Act 1950 to fill a vacancy created by its removal of an
arbitrator. It seems to us that (in the absence of agreement between the parties) it is preferable for
the original appointment procedure to be used, for otherwise (as in the Dutco case mentioned
above) it might be argued that the parties were not being treated equally.
118. We have given the tribunal the right (when reconstituted) to determine to what extent the
previous proceedings should stand, though we have also made clear that this does not affect any
right a party may have to challenge what has happened.
119. Further, we have provided in Clause 27(5) that the fact of an arbitrator ceasing to hold office
will not affect any appointment made by him (whether alone or jointly) of another arbitrator,
unless the parties have otherwise agreed pursuant to Clause 27(1)(c).

Clause 28. Joint and several liability of parties to

arbitrators for fees and expenses
120. Arbitration proceedings necessarily involve the incurring of expenditure. The arbitrators have
to be paid, and the parties incur expense in presenting their cases to the tribunal. The issue of costs
involves at least three quite discrete elements:

(i) As a matter of general contract law, arbitrators, experts, institutions and any other payees
whatsoever are entitled to be paid what has been agreed with them by any of the parties.

Therefore, for example, if a party appoints an arbitrator for an agreed fee, as a matter of
general contract law (rather than anything in this Bill), that arbitrator is entitled to that fee.
(ii) It is generally accepted that all parties are jointly and severally liable for the fees of an
arbitrator. This is an issue as to the entitlement of arbitrators, and as such is quite distinct
from the third element.
(iii) As in court litigation, when one party is successful, that party should normally recover at
least a proportion of his costs. This issue, being where the burden of costs should lie, is an
issue as between the parties.

121. The Bill contains provisions as to costs and fees in two separate parts: the joint and several
liability owed by the parties to the arbitrators (the second element) is addressed in this clause,
whilst the third element (i.e. the responsibility for costs as between the parties) is addressed in
Clauses 59-65. The first element, being a matter of general contract law, is not specifically
addressed by either set of provisions, but is preserved in both. It is extremely important to
distinguish between these provisions.
122. Clause 28 is concerned with the rights of the arbitrators in respect of fees and expenses. As
subsection (5) makes clear, and as explained above, this provision is not concerned with which of
the parties should (as between themselves) bear these costs as the result of the arbitration, which is
dealt with later in the Bill, nor with any contractual right an arbitrator may have in respect of fees
and expenses.
123. As we understand the present law, the parties are jointly and severally liable to the arbitrator
for his fees and expenses. The present position seems to be that if these are agreed by one party,
the other party becomes liable, even if he played no part in making that agreement; and
circumstances may arise in which that party is unable to obtain a reduction of the amount by
taxation. It seems to us that whilst arbitrators should be protected by this joint and several liability
of the parties, a potentially unfair result must be avoided: a party who never agreed to the
appointment by another party of an exceptionally expensive arbitrator should not be held jointly
and severally liable for that arbitrators exceptional fees. To this end, we have stipulated, in
Clause 28(1), that a partys joint and several liability to an arbitrator only extends to reasonable
fees. Of course, if a party has agreed an exceptional fee with an arbitrator, that party may still be
pursued by that arbitrator, under general contract law, which is preserved in Clause 28(5).
124. We have proposed a mechanism to allow a party to go to the Court if any question arises as
to the reasonableness of the arbitrators charges. The Court is empowered to adjust fees and
expenses even after they have been paid, since circumstances may well arise in which a question
about the level of fees and expenses only arises after payment has been made. For example, a
large advance payment may be made at a time when it is considered that the arbitration will take a
long time, but this does not turn out to be the case. However, the Court must be satisfied that it is
reasonable in the circumstances to order repayment. Thus an applicant who delays in making an
application is likely to receive short shrift from the Court, nor is the Court likely to order
repayment where the arbitrator has in good faith acted in such a way that it would be unjust to
order repayment. It seems to us that it is necessary to set out expressly in the Bill that the power of
the Court extends to dealing with fees and expenses yet to be paid.

125. These provisions are extended by subsection (6) to include an arbitrator who has ceased to
act and an umpire who has not replaced the other arbitrators. An arbitrator may cease to act
through the operation of Clauses 23 to 26, or if an umpire takes over following a disagreement.
126. The liability in Clause 28(1) is to the parties. It seems to us to follow that a person who has
not participated at all, and in respect of whom it is determined that the arbitral tribunal has no
jurisdiction, would not be a party for the purposes of this clause (Cf. Clause 72). More difficult
questions may well arise in respect of persons who have participated, for there the doctrine of
Kompetenz-Kompetenz (Clauses 30 and 31) may have to be weighed against the proposition that
a party can hardly be under any liability in respect of the fees and expenses of the tribunal which
he has successfully established should not have been acting at all on the merits of the dispute.
127. It is to be noted that arbitrators fees and expenses include, by virtue of Clause 37(2), the fees
and expenses of tribunal appointed experts, etc.
128. It seems that the present joint and several liability of the parties to an arbitrator for his fees
may rest on some implied contract said to exist between them. Be this as it may, such an implied
contract (in so far as it related to fees and expenses) would not survive by virtue of Clause 81 of
this Bill, because this only saves rules of law which are consistent with Part I. Any implied
contract imposing a liability for more than reasonable fees and expenses would clearly be
inconsistent with Clause 28(1). Furthermore, since Clause 28(1) gives a statutory right there
remains no good reason for any implied contractual right. As stated above, any specific contract
would, however, of course be preserved by Clause 28(5).
129. Contrary to some suggestions made to us, it seems to us that rights of contribution between
the parties in relation to their statutory liability under Clause 28(1) can best be left to the ordinary
rules which relate to joint and several liability generally.
130. Clause 28 is made mandatory, since otherwise the parties could by agreement between
themselves deprive the arbitrators of what seems to us to be a very necessary protection.

Clause 29. Immunity of arbitrators

131. Although the general view seems to be that arbitrators have some immunity under the present
law, this is not entirely free from doubt. We were firmly of the view that arbitrators should have a
degree of immunity, and most (though not all) the responses we received expressed the same
view.
132. The reasons for providing immunity are the same as those that apply to Judges in our Courts.
Arbitration and litigation share this in common, that both provide a means of dispute resolution
which depends upon a binding decision by an impartial third party. It is generally considered that
an immunity is necessary to enable that third party properly to perform an impartial decision
making function. Furthermore, we feel strongly that unless a degree of immunity is afforded, the
finality of the arbitral process could well be undermined. The prospect of a losing party attempting
to re-arbitrate the issues on the basis that a competent arbitrator would have decided them in
favour of that party is one that we would view with dismay. The Bill provides in our view
adequate safeguards to deal with cases where the arbitral process has gone wrong.

133. This is a mandatory provision. Given the need and reason for immunity, it seems to us to
follow that as a matter of public policy, this should be so.
134. The immunity does not, of course, extend to cases where it is shown that the arbitrator has
acted in bad faith. Our law is well acquainted with this expression and although we considered
other terms, we concluded that there were unlikely to be any difficulties in practice in using this
test: see, for example, Melton Medes Ltd v. Securities and Investment Board [1995] 3 All ER 880.
135. Subsection 29(3). There was a concern that if a provision such as this was not included,
Clause 25, when read together with Clause 29, could be said to preclude a claim against an
arbitrator for resigning in breach of contract and similarly a defence (based on resignation) to a
claim by an arbitrator for his fees, unless bad faith is proved.
136. Since the publication of the final draft of the Bill we have concluded that the Court should be
given power to remove or modify the immunity as it sees fit when it removes an arbitrator. We
consider this further in Chapter 6 below.

Clause 30. Competence of tribunal to rule on its own

jurisdiction
137. This Clause states what is called the doctrine of Kompetenz-Kompetenz. This is an
internationally recognised doctrine, which is also recognised by our own law (e.g. Christopher
Brown v. Genossenschaft Osterreichischer Waldbesitzer [1954] 1 QB 8), though this has not
always been the case.
138. The great advantage of this doctrine is that it avoids delays and difficulties when a question is
raised as to the jurisdiction of the tribunal. Clearly the tribunal cannot be the final arbiter of a
question of jurisdiction, for this would provide a classic case of pulling oneself up by ones own
bootstraps, but to deprive a tribunal of a power (subject to Court review) to rule on jurisdiction
would mean that a recalcitrant party could delay valid arbitration proceedings indefinitely by
making spurious challenges to its jurisdiction.
139. The Clause and the following Clause are based on Article 16 of the Model Law, but unlike
that model we have not made this provision mandatory so that the parties, if they wish, can agree
that the tribunal shall not have this power. We have also spelt out what we mean by substantive
jurisdiction.

Clause 31. Objection to substantive jurisdiction of

tribunal
140. In this Clause we set out how a challenge to the jurisdiction can be made, and the
circumstances in which it must be made (following Article 16 of the Model Law). This reflects
much of the Model Law but we have, for example, refrained from using expressions like
submission of the statement of defence since this might give the impression, which we are
anxious to dispel, that every arbitration requires some formal pleading or the like.
141. The Clause, in effect, sets out three ways in which the matter may proceed.

(i) The first is that the tribunal may make an award on the question of jurisdiction. If it does
so then that award may be challenged by a party under Clause 67.
(ii) The second way is for the tribunal to deal with the question of jurisdiction in its award on
the merits. Again on the jurisdiction aspect the award may be challenged under Clause 67.

We have provided these two methods because, depending on the circumstances, the one or the
other may be the better course to take, bearing in mind the duty (in Clause 33) to adopt procedures
suitable to the circumstances of the particular case, avoiding unnecessary delay or expense.

(iii) The third way of proceeding is for an application to be made to the Court before any
award (pursuant to Clause 32). Again this third course is designed to achieve the same
objective (albeit in limited circumstances). For example, cases arise where a party starts an
arbitration but the other party, without taking part, raises an objection to the jurisdiction of the
tribunal. In such circumstances, it might very well be cheaper and quicker for the party
wishing to arbitrate to go directly to the Court to seek a favourable ruling on jurisdiction
rather than seeking an award from the tribunal. Such an approach would be very much the
exception, and, to this end, Clause 32 is narrowly drawn. In this connection it must be
remembered that a party who chooses not to take any part in an arbitration cannot in justice be
required to take any positive steps to challenge the jurisdiction, for to do otherwise would be
to assume against that party (before the point has been decided) that the tribunal has
jurisdiction. We return to this topic when considering Clause 72.

142. Article 16(3) of the Model Law provides that the arbitral tribunal may rule on a plea as to
jurisdiction either as a preliminary question or in an award on the merits. The DAC is of the view
that it is unnecessary to introduce a new concept of a preliminary ruling, which is somehow
different from an award. Clause 31(4) therefore only refers to awards. This has the advantage that
awards on jurisdiction will have the benefit of those provisions on awards generally (e.g. costs,
lien, reasons, additional awards, etc), and, if appropriate, may be enforced in the same way as any
other award.
143. A challenge to jurisdiction may well involve questions of fact as well as questions of law.
Since the arbitral tribunal cannot rule finally on its own jurisdiction, it follows that both its
findings of fact and its holdings of law may be challenged. The regime for challenging such
awards is set out in Clause 67.
144. Clause 31(1) replaces the requirement set out in Article 16(2) of the Model Law (that a
challenge to the overall jurisdiction of the tribunal must be raised no later than the submission of a
statement of defence) with a requirement that such an objection be raised no later than the time a
party takes the first step in the proceedings to contest the merits of any matter in relation to which
he challenges the tribunals jurisdiction. This allows for alternative procedures where there is no
statement of defence as such.
145. Clause 31 is a mandatory provision. Under Clause 30, of course, the parties can agree that the
tribunal shall not have power to rule on its own jurisdiction, but while this means (as subsection
(4) points out) that the tribunal cannot then make an award on jurisdiction, the compulsory nature

of Clause 31 means that the objection must be raised as there stipulated. It seems to us that this is
highly desirable by way of support for the object of arbitration as set out in Clause 1.
146. It has been suggested to the DAC that there should be a mechanism whereby an objecting
party, or even a non-objecting party, could require the tribunal forthwith to make an award as to
jurisdiction, rather than merely incorporating a ruling in an award on the merits. The DAC
disagrees with this. Unless the parties agree otherwise, the choice as to which course to take will
be left with the tribunal, who will decide what is to be done consistent with their duty under
Clause 33 (see below). Indeed, in some cases it may be simply impracticable to rule on
jurisdiction, before determining merits. If, however, the parties agree which course is to be taken,
and if, of course, their agreement is effective (i.e. it does not require the tribunal to breach its
mandatory duty under Clause 33) then the provision under discussion requires the tribunal to take
the course chosen by the parties.

Clause 32. Determination of preliminary point of

jurisdiction
147. In this Clause we have set out the procedure for the third of the possible ways of dealing with
a challenge to the jurisdiction. As stated above, this Clause provides for exceptional cases only: it
is not intended to detract from the basic rule as set out in Clause 30. Hence the restrictions in
Clause 32(2), and the procedure in Clause 32(3). It will be noted that we have required either the
agreement of the parties, or that the Court is satisfied that this is, in effect, the proper course to
take. It is anticipated that the Courts will take care to prevent this exceptional provision from
becoming the normal route for challenging jurisdiction. Since this Clause concerns a power
exercisable by the Court in relation to the jurisdiction of the tribunal, it is in our view important
enough to be made mandatory.
148. Under this Clause the tribunal may continue the arbitral proceedings and make an award
whilst the application to the Court is pending. Thus a recalcitrant party will not be able to mount
spurious challenges as a means of delaying the arbitral process. Under subsection (5) of the
preceding Clause the tribunal can, of course (and must if the parties agree) stay the arbitral
proceedings whilst an application is made. Which course the tribunal takes (where it has power to
choose) will of course depend once again on what it sees its Clause 33 duty to be.
149. The right of appeal from Court rulings is limited in the way set out in the Clause.

THE ARBITRAL PROCEEDINGS

Clause 33. General duty of the tribunal

150. This is one of the central proposals in our Bill (grounded on Article 18 of the Model Law). It
is a mandatory provision, since, as is explained below, we fail to see how a proceeding which
departed from the stipulated duties could properly be described as an arbitration. We endeavour to
set out, in the simplest, clearest terms we have been able to devise, how the tribunal should
approach and deal with its task, which is to do full justice to the parties. In the following Clauses
we set out in detail the powers available to the tribunal for this purpose.

151. It has been suggested that the generality of Clause 33 may be problematic: that it may be an
invitation to recalcitrant parties to launch challenges, or that vagueness will give rise to
arguments. The advantage of arbitration is that it offers a dispute resolution system which can be
tailored to the particular dispute to an extent which litigation finds it difficult to do. Thus
depending on the nature of the dispute, there will be numerous ways in which the arbitration can
be conducted. It is quite impossible to list all the possible variants and to set out what may or may
not be done. Indeed any attempt to do so would defeat one of the main purposes of the Bill, which
is to encourage arbitral tribunals not slavishly to follow court or other set procedures. It follows
that the only limits can be those set out in the present clause. It is to be hoped that the Courts will
take a dim view of those who try to attack awards because of suggested breaches of this clause
which have no real substance. At the same time, it can hardly be suggested that awards should not
be open to attack when the tribunal has not acted in accordance with the principles stated.
152. It has further been suggested that this part of the Bill will cause the demise of the amateur
arbitrator. If by this is meant the demise of people who purport to act as arbitrators but who are
either unable or unwilling (or both) to conduct the proceedings in accordance with what most
would regard as self-evident rules of justice, then we indeed hope that this will be one of the
results. But since these rules of justice are generally accepted in our democratic society, and are
not merely theoretical considerations that concern lawyers alone, we can see no reason why the
Bill should discourage anyone who is ready willing and able to apply them. Indeed we consider
that the Bill will encourage and support all such people.
153. Sometimes the parties to an arbitration employ lawyers who seek, in effect, to bully a
nonlegal arbitrator into taking a course of action which is against his better instincts, by seeking to
blind him with legal science to get their way. Again, in some circles it is thought that somehow
the procedures in an arbitration should be modelled on Court procedures, and that to adopt other
methods would be misconduct (an expression that the Bill does not use) on the part of the
arbitrator. This part of the Bill is designed to prevent such bullying and to explode the theory that
an arbitration has always to follow Court procedures. If an arbitrator is satisfied that the way he
wants to proceed fulfils his duty under this Clause and that the powers he wants to exercise are
available to him under the following Clauses, then he should have the courage of his own
convictions and proceed accordingly, unless the parties are agreed that he should adopt some other
course.
The relationship between Clauses 1(b), 33 and 34(1)
154. It has been suggested to us there could be a conflict between:

(i) the mandatory duty cast on arbitrators by Clause 33 and

(ii) the principle of party autonomy in Clause 1(b) and the proviso in Clause 34(1). As we
explain below, the DAC does not consider that there is any inconsistency between these two
principles.

155. Under the principle of party autonomy, the parties are free to agree upon anything to do with
the arbitration, subject only to such safeguards as are necessary in the public interest (Clause
1(b)). The mandatory provisions set out those matters which have effect notwithstanding any

agreement to the contrary: see Clause 4. It seems to us that the public interest dictates that Clause
33 must be mandatory, i.e. that the parties cannot effectively agree to dispense with the duty laid
on arbitrators under Clause 33. In other words, they cannot effectively agree that the arbitrators
can act unfairly, or that the arbitrators can be partial, or that the arbitrators can decide that the
parties (or one of them) should not have a reasonable opportunity of putting his case or answering
that of his opponent, or indeed that the arbitrators can adopt procedures that are unsuitable for the
particular circumstances of the case or are unnecessarily slow or expensive, so that the means for
resolving the matters to be determined is unfair. It is, of course, extremely unlikely in the nature of
things that the parties would wish deliberately to make such bizarre agreements, but were this to
happen, then it seems to us that such agreements should be ineffective for the purposes of this Bill,
i.e. not binding on the parties or the tribunal.
156. However, a situation could well arise in practice in cases where the parties are agreed on a
method of proceeding which they consider complies with the first of the general principles set out
in Clause 1 (and which therefore the tribunal could adopt consistently with its duty under Clause
33) but the tribunal takes a different view, or where they are agreed in their opposition to a method
of proceeding which the tribunal considers should be adopted in order to perform its Clause 33
duty.
157. In our view it is neither desirable nor practicable to stipulate that the tribunal can override the
agreement of the parties. It is not desirable, because the type of arbitration we are discussing is a
consensual process which depends on the agreements of the parties who are surely entitled (if they
can agree) to have the final say on how they wish their dispute to be resolved. It is not practicable,
since there is no way in which the parties can be forced to adopt a method of proceeding if they
are agreed that this is not the way they wish to proceed. The latter is the case even if it could be
established that their agreement was ineffective since it undermined or prevented performance of
the duty made mandatory by Clause 33.
158. A party would be unable to enforce an ineffective agreement against the other parties, nor
would such an agreement bind the tribunal, but the problem under discussion only exists while the
parties are in fact at one, whether or not their agreement is legally effective.
159. In circumstances such as these, the tribunal (assuming it has failed to persuade the parties to
take a different course) has the choice of adopting the course of preferred by the parties or of
resigning. Indeed, resignation would be the only course if the parties were in agreement in
rejecting the method preferred by the tribunal, and no other way of proceeding was agreed by
them or considered suitable by the tribunal.
160. We have stipulated elsewhere in the Bill that the immunity we propose for arbitrators does
not extend to any liability they may be under for resigning (Clause 29) though under Clause 25
they may seek relief in respect of such liability from the Court. The reason for the limitation on
immunity is that cases may arise where the resignation of the arbitrator is wholly indefensible and
has caused great delay and loss. In our view Clause 25 would suffice to protect arbitrators who
resigned because they reasonably believed that the agreement of the parties prevented them from
properly performing their Clause 33 duty. Furthermore, arbitrators could always stipulate for a
right to resign in such circumstances as a term of their appointment.

161. If, on the other hand, the tribunal adopted a method of proceeding agreed by the parties, it
seems to us that none of the parties could afterwards validly complain that the tribunal had failed
in its Clause 33 duty, since the tribunal would only have done what the parties had asked it to do.
Again, the fact that as between the parties such an agreement may have been ineffective as
undermining or preventing performance of the Clause 33 duties seems to us to be wholly
irrelevant. It could of course be said that the tribunal had breached its Clause 33 duty, but this
would have no practical consequences since the parties themselves would have brought about this
state of affairs, and would therefore be unable to seek any relief in respect of it.
162. Some people have expressed concern that there is a danger that lawyers will agree between
themselves a method of proceeding which the tribunal consider to be unnecessarily long or
expensive. However, if a tribunal considered, for example, that lawyers were trying either
deliberately to churn the case for their own private advantage or were simply but misguidedly
seeking to adopt unnecessary procedures etc, the obvious solution would be to ask them to
confirm that their respective clients had been made aware of the views of the tribunal but were
nevertheless in agreement that the course proposed by their lawyers should be adopted. At the end
of the day, however, the fact remains that the only sanction the arbitrators have is to resign.
163. In summary, therefore, we consider that the duty of the arbitrators under Clause 33 and the
right of the parties to agree how the arbitration should be conducted do fit together. Under Clause
33 the tribunal have the specified duties. Under Clause 34 therefore, the tribunal must decide all
procedural and evidential matters, subject to the right of the parties to agree any matter. If the
parties reach an agreement on how to proceed which clashes with the duty of the tribunal or which
the tribunal reasonably considers does so, then the arbitrators can either resign and have the
protection of Clause 25, or can adopt what the parties want and will not afterwards be liable to the
parties for doing so.
Further points
164. In this Clause we have provided that the tribunal shall give each party a reasonable
opportunity of putting his case and dealing with that of his opponent. Article 18 of the Model
Law uses the expression full opportunity.
165. We prefer the word reasonable because it removes any suggestion that a party is entitled to
take as long as he likes, however objectively unreasonable this may be. We are sure that this was
not intended by those who framed the Model Law, for it would entail that a party is entitled to an
unreasonable time, which justice can hardly require. Indeed the contrary is the case, for an
unreasonable time would ex hypothesi mean unnecessary delay and expense, things which produce
injustice and which accordingly would offend the first principle of Clause 1, as well as Clauses 33
and 40.

Clause 34. Procedural and evidential matters

166. We trust that the matters we have listed in this Clause (which are partly drawn from Articles
19, 20, 22, 23 and 24 of the Model Law) are largely self-evident. We have produced a nonexhaustive check-list because we think it will be helpful both to arbitrating parties and to their
arbitrators. We cannot emphasise too strongly that one of the strengths of the arbitral process is

that it is able much more easily than any Court system to adapt its procedures to suit the particular
case. Hence we have spelt this out as a duty under the preceding Clause. The list of powers helps
the tribunal (and indeed the parties) to choose how best to proceed, untrammelled by technical or
formalistic rules.
167. Some of those responding suggested that we should include a special code to deal with the
arbitration of small claims. We have not adopted this suggestion for the very reason we have just
stated. Any such code would have to have detailed rules, arbitrary monetary or other limits and
other complicated provisions. In our view, proper adherence to the duties in Clause 33 will
achieve the same result. A small claim will simply not need all the expensive procedural and other
paraphernalia which might be required for the resolution of some huge and complicated
international dispute.
168. Furthermore, we consider that associations and institutions concerned with specific areas of
trade etc. can play a very significant part in formulating rules and procedures for arbitrating
disputes concerning their members. Such bodies have the detailed knowledge and experience
required to enable them properly to address this task, in relation both to small claims and
otherwise. We feel strongly that it would be wrong for a Bill of the present kind to seek to lay
down a rigid structure for any kind of case; and that different methods must be developed to suit
different circumstances, by arbitral tribunals as well as those who have the necessary practical
knowledge of those circumstances. Finally, of course, the Bill in no way impinges upon small
claims procedures developed for use through the court system.
169. Subsection (a). Whilst Article 20(1) of the Model Law states that, in the absence of the
agreement of the parties, the place of arbitration shall be determined by the arbitral tribunal
having regard to the circumstances of the case, including the convenience of the parties,
subsection 34(2)(a) does not state that the tribunal should have the convenience of the parties in
mind, given that this is a consideration that is really subsumed under the general duty of the
Tribunal in Clause 33, and, further, because the DAC was of the view that like considerations
apply to the other parts of Clause 34, such as subsection (b), even though the Model Law does not
appear to reflect this. Unlike the Model Law, subsection (a) also refers to when, as well as
where.
170. Subsection (f) makes it clear that arbitrators are not necessarily bound by the technical rules
of evidence. In his 1993 Freshfields Lecture ((1994) 10 Arb. Int. 1), Lord Steyn questioned why
the technical rules of evidence should apply to arbitration, even if (as he doubted) there was
authority for this. This provision clarifies the position. It is to be noted that Clause 34(2)(f) helps
to put an end to any arguments that it is a question of law whether there is material to support a
finding of fact.
171. Subsection (g). Some anxiety was expressed at the power to act inquisitorially, to be found in
subsection (g), on grounds that arbitrators are unused to such powers and might, albeit in good
faith, abuse them.
172. We do not share this view. Once again it seems to us that provided the tribunal in exercising
its powers follows its simple duty as set out in Clause 33 (and subsection (2) of this Clause tells
the tribunal that this is what they must do) then in suitable cases an inquisitorial approach to all or

some of the matters involved may well be the best way of proceeding. Clause 33, however,
remains a control, such that, for example, if an arbitrator takes the initiative in procuring evidence,
he must give all parties a reasonable opportunity of commenting on it.
173. A number of arbitrators who responded to our July 1995 draft suggested that the tribunal
should be entitled to have the last word, i.e. should be given the power to override the agreement
of the parties to follow a different course. The interrelationship of the tribunals duties and party
autonomy has already been discussed above. As is clear from that discussion, we disagree with
this view for the following reasons:

(i) To give the tribunal such a power would be contrary to Article 19 of the Model Law. It
would also be contrary to the present position under English law.
(ii) To allow the tribunal to override the agreement of the parties would to our minds
constitute an indefensible inroad into the principle of party autonomy, upon which the Bill is
based.
(iii) It is difficult to see how such a power could be backed by any effective sanction. If the
parties agree not to adopt the course ordered by the tribunal, there is nothing the tribunal can
do except resign.
(iv) It seems to us that the problem is more apparent than real. In most cases the parties rely
on the tribunal to decide how to conduct the case and do not sit down and agree between
themselves how it is to be done. In order to reflect what actually happens in practice we have
accordingly reversed the way many of the other Clauses begin and stated that it is for the
tribunal to decide all procedural and evidential matters, subject to the right of the parties to
agree any matter. In our view, however, since arbitration is the parties own chosen method of
dispute resolution, we cannot see why they should be deprived of the right to decide what
form the arbitration should take.

174. As we have made clear above, it is of course open to those who frame rules for arbitration
which the parties incorporate into their agreement, to stipulate that the tribunal is to have the last
word, and likewise arbitrators can stipulate this as a term of their agreement to act, though once
again there would be no means, apart from persuasion or the threat of resignation, of enforcing
such a stipulation if the parties later jointly took a different view.
175. It has been suggested that there could be a conflict between the proviso in Clause 34(1) and
Clause 40. This is said to arise, for example, where the parties have agreed a procedural or
evidential matter which they are entitled to do under Clause 34(1), but the tribunal are intent on
taking a different course. Does the parties agreement override their duty under Clause 40? The
DAC considers that no such conflict exists:

(i) The parties are free to agree on all procedural and evidential matters, pursuant to Clause
34(1).
(ii) However, any such agreement will only be effective, if it is consistent with Clause 33,
being a mandatory provision.
(iii) Any such agreement made pursuant to Clause 34(1), and consistent with Clause 33, will
define the scope of Clause 40i.e. the parties will have agreed on how the arbitration is to be
conducted, or, in the words of Clause 40, what is to constitute the proper and expeditious

conduct of the arbitral proceedings. The determinations of the tribunal should follow that
agreement (which would not be the case if such an agreement was inconsistent with Clause
33) and ex hypothesi the parties should be obliged to comply.
(iv) If there are matters on which the parties have not agreed, then the tribunal will fill the gap
under Clause 34(1) and Clause 40(1) will again operate without conflict.

176. It has also been suggested that the Bill should include a provision that the arbitrator should
encourage the parties to use other forms of ADR when this was considered appropriate. This
suggestion has not been adopted, since the Bill is concerned with arbitration where the parties
have chosen this rather than any other form of dispute resolution.

Clause 35. Consolidation of proceedings and concurrent

hearings
177. This Clause makes clear that the parties may agree to consolidate their arbitration with other
arbitral proceedings or to hold concurrent hearings.
178. During the consultation exercises, the DAC received submissions calling for a provision that
would empower either a tribunal or the Court (or indeed both) to order consolidation or concurrent
hearings. These were considered extremely carefully by the committee.
179. The problem arises in cases where a number of parties are involved. For example, in a
construction project a main contractor may make a number of sub-contracts each of which
contains an arbitration clause. A dispute arises in which a claim is made against one subcontractor who seeks to blame another. In Court, of course, there is power to order consolidation
or concurrent hearings, as well as procedures for allowing additional parties to be joined. In
arbitrations, however, this power does not exist. The reason it does not exist is that this form of
dispute resolution depends on the agreement of the contracting parties that their disputes will be
arbitrated by a private tribunal, not litigated in the public courts. It follows that unless the parties
otherwise agree, only their own disputes arising out of their own agreement can be referred to that
agreed tribunal.
180. In our view it would amount to a negation of the principle of party autonomy to give the
tribunal or the Court power to order consolidation or concurrent hearings. Indeed it would to our
minds go far towards frustrating the agreement of the parties to have their own tribunal for their
own disputes. Further difficulties could well arise, such as the disclosure of documents from one
arbitration to another. Accordingly we would be opposed to giving the tribunal or the Court this
power. However, if the parties agree to invest the tribunal with such a power, then we would have
no objection.
181. Having said this, the DAC appreciates the common sense behind the suggestion. We are
persuaded, however, that the problem is best solved by obtaining the agreement of the parties.
Thus those who are in charge of drafting standard forms of contract, or who offer terms for
arbitration services which the parties can incorporate into their agreements, (especially those
institutions and associations which are concerned with situations in which there are likely to be
numerous contracts and sub-contracts) could include suitable clauses permitting the tribunal to
consolidate or order concurrent hearings in appropriate cases. For example, the London Maritime

Arbitrators Association Rules have within them a provision along these lines. In order to
encourage this, we have made clear in this Clause that with the agreement of the parties, there is
nothing wrong with adopting such procedure.
182. It will be noted that whereas Clause 39 uses the expression [t]he parties are free to agree that
the tribunal shall have power to order , Clause 35 simple states that [t]he parties are free to
agree . This difference is easily explained. In both cases the parties are free to endow the
tribunal with the power in question. This is implicit in Clause 35(1) by virtue of Clause 35(2).
Under Clause 35(1), the parties may agree between themselves to consolidate two arbitrations, or
to have concurrent hearings, before a tribunal has been appointed. This could, of course, have a
bearing on how the tribunal is to be appointed in such a situation. Indeed the parties may agree on
institutional rules that provide for this. However, an equivalent arrangement is difficult to imagine
in the context of Clause 39. Overall, the difference in wording is not intended to impede the
parties freedom to agree what they like, when they like, in either case.

Clause 36. Legal or other representation

183. It seems to us that this reflects a basic right, though of course the parties are free to dispense
with it if they wish.
184. In the draft produced in July we used the phrase a lawyer or other person of his choice. We
have changed this, because we felt that it might give the impression that a party could stubbornly
insist on a particular lawyer or other person, in circumstances where that individual could not
attend for a long time, thus giving a recalcitrant party a good means of delaying the arbitral
process. This should not happen. A lawyer or other person chosen by him does not give this
impression: if a partys first choice is not available, his second choice will still be a lawyer or
other person chosen by him. The right to be represented exists but must not be abused.
Furthermore the right must be read with the first principle of Clause 1, as well as Clauses 33 and
40. If this is done then we trust that attempts to abuse the right will fail.
185. It has been suggested to the DAC that there should be some provision requiring a party to
give advance notice to all other parties if he intends to be represented at a hearing. Whilst in some
ways an attractive proposal, this would be difficult to stipulate as a statutory provision, given that
it may be impossible in some circumstances, or simply unnecessary in others. Further, different
sanctions may be appropriate depending on the particular case. It is clearly desirable that, as a
general rule, such notice be given. If it is not, one sanction may be for the tribunal to adjourn a
hearing at the defaulting partys cost. In the end, however, this must be a matter for the tribunals
discretion in each particular case.
186. It has been suggested that this Clause provides an opportunity of extending by statute the
privilege enjoyed by legal advisers to non-legal advisers or representatives. We have not adopted
this suggestion. It seems to us that it would be necessary to define with great precision which
nonlegal advisers or representatives are to be included (e.g. what relationship they must have to
the arbitration and its conduct), and the precise classes of privilege which should be extended to
them. Further, any such provision would necessarily have an impact on the position beyond
arbitration. In short, it seems to us that this question cannot be confined to arbitrations and raises
matters of general principle far beyond those of our remit.

Clause 37. Power to appoint experts, legal advisers or

assessors
187. This to our minds would be a useful power in certain cases. We trust that the provisions we
suggest are self-evident. Of course, the power can only be exercised if in the circumstances of the
particular case its exercise falls within the scope of the duty of the tribunal set out in Clause 33.
188. Subsection (2) is made mandatory, to avoid the risk of the parties agreeing otherwise and
thus disabling the tribunal from recovering from the parties expenses properly incurred.

Clause 38. General powers exercisable by the tribunal

189. These provisions represent a significant re-drawing of the relationship between arbitration
and the Court. Wherever a power could properly be exercised by a tribunal rather than the Court,
provision has been made for this, thereby reducing the need to incur the expense and
inconvenience of making applications to Court during arbitral proceedings.
190. The first of the powers in this Clause is one which enables the tribunal to order security for
costs. The power presently given to the Court to order security for costs in arbitrations is removed
in its entirety.
191. This is a major change from the present position where only the Court can order security for
costs. The theory which lay behind the present law is that it is the duty of an arbitral tribunal to
decide the substantive merits of the dispute referred to it and that it would not be performing this
duty if it stayed or struck out the proceedings pending the provision of security: see for
example, Re Unione Stearinerie Lanza and Weiner [1917] 2 KB 558.
192. We do not subscribe to this theory, which Parliament has already abandoned in the context of
striking out a claim for want of prosecution. In our view, when the parties agree to arbitrate, they
are agreeing that their dispute will be resolved by this means. To our minds (in the absence of
express stipulations to the contrary) this does not mean that the dispute is necessarily to be
decided on its substantive merits. It is in truth an agreement that it will be resolved by the
application of the agreed arbitral process. If one party then fails to comply with that process, then
it seems to us that it is entirely within what the parties have agreed that the tribunal can resolve the
dispute on this ground.
193. Apart from this, the proposition that the Court should involve itself in such matters as
deciding whether a claimant in an arbitration should provide security for costs has received
universal condemnation in the context of international arbitrations. It is no exaggeration to say that
the recent decision of the House of Lords in Coppee-Lavalin SA/NV v. Ken-Ren Chemicals and
Fertilizers [1994] 2 WLR 631 was greeted with dismay by those in the international arbitration
community who have at heart the desire to promote our country as a world centre for arbitration.
We share those concerns.
194. It has been suggested to the DAC that the court should retain a power to order security for
costs that may be incurred up to the appointment of the tribunal. We have not been persuaded,
however, that this is really necessary.

195. It has been pointed out that in some cases an application for security before an arbitral
tribunal might involve disclosing to that tribunal the fact that an offer of settlement had been or
was about to be made. Under the court system, such disclosure can be made to a court other than
that which will try the merits of the case.
196. We are not disturbed by this. It seems to us that a tribunal, properly performing its duty under
Clause 33, could and should not be influenced by such matters, if the case proceeds to a hearing
on the merits, nor do we accept that the disclosure of such information could somehow disqualify
the tribunal from acting.
197. Clause 38(3) has been the subject of significant criticism since the Bill was introduced. In the
light of this, we have concluded that it must be redrawn. Chapter 6, to which reference should be
made, contains a full discussion of the problems with this provision as currently drafted, and our
recommendations for its amendment.
198. Whilst the sanction in court for a failure to provide security for costs is normally a stay of the
action, this is inappropriate in arbitration: if an arbitrator stayed proceedings, the arbitration would
come to a halt without there necessarily being an award which could be challenged (e.g. if a party
seeks to continue the proceedings). We have therefore included a specific sanction with respect to
a failure to provide security for costs, which is to be found in Clause 41(6). This provision also
follows the practice of the English Commercial Court, which changed from the old practice of
ordering a stay of proceedings if security was not provided. The disadvantage of the latter course
was that it left the proceedings dormant but alive, so that years later they could be revived by the
provision of security.
199. Clause 38 provides the tribunal with other powers in relation to the arbitration proceedings.
We trust that these are self-explanatory.

Clause 39. Power to make provisional awards

200. In the July 1995 draft Clauses, this power did not require the agreement of the parties. As the
result of responses, we have concluded on further consideration that this is necessary.
201. In The Kostas Melas [1981] 1 Lloyds Rep. 18 at 26, Goff J, as he then was, made clear that
it was no part of an arbitrators function to make temporary or provisional financial arrangements
between the parties. Furthermore, as can be demonstrated by the abundance of court cases dealing
with this subject (in the context of applications for summary judgment, interim
payments, Mareva injunctions and the like) enormous care has to be taken to avoid turning what
can be a useful judicial tool into an instrument of injustice. We should add that we received
responses from a number of practicing arbitrators to the effect that they would be unhappy with
such powers, and saw no need for them. We should note in passing that the July 1995 draft would
arguably (and inadvertently) have allowed arbitrators to order ex parte Mareva or even Anton
Piller relief. These draconian powers are best left to be applied by the Courts, and the provisions
of the Bill with respect to such powers have been adjusted accordingly.
202. There is a sharp distinction to be drawn between making provisional or temporary
arrangements, which are subject to reversal when the underlying merits are finally decided by the
tribunal; and dealing severally with different issues or questions at different times and in different

awards, which we cover in Clauses 47. It is for this reason that in this provision we draw attention
to that Clause.
203. These considerations have led us firmly to conclude that it would only be desirable to give
arbitral tribunals power to make such provisional orders where the parties have so agreed. Such
agreements, of course, will have to be drafted with some care for the reasons we have stated.
Subject to the safeguards of the parties agreement and the arbitrators duties (Clause 33), we
envisage that this enlargement of the traditional jurisdiction of arbitrators could serve a very
useful purpose, for example in trades and industries where cash flow is of particular importance.

Clause 40. General duty of the parties

204. This is a mandatory provision, since it would seem that an ability to contract out of it would
be a negation of the arbitral process.
205. We were asked what the sanction would be for non-compliance. The answer lies in other
Clauses of the Bill. These not only give the tribunal powers in relation to recalcitrant parties (e.g.
Clause 41), but stipulate time limits for taking certain steps (e.g. applications to the Court, etc.)
and (in Clause 73) making clear that undue delay will result in the loss of rights.

Clause 41. Powers of tribunal in case of partys default

206. The first part of this Clause sets out the present law (section 13A of the 1950 Act, which was
inserted by section 102 of the Courts and Legal Services Act 1990) giving the arbitral tribunal
power to strike out for want of prosecution.
207. The second part makes clear that in the circumstances stipulated, a tribunal may proceed ex
parte, though we have forborne from using this expression (or indeed any other legal Latin words
or phrases) in the Bill. The Clause has its roots in Article 25 of the Model Law.
208. It is a basic rule of justice that a court or tribunal should give all parties an opportunity to put
their case and answer that of their opponents. That is why this appears in Clause 33 of the Bill.
Equally, however, and for reasons already mentioned, that opportunity should, again for reasons
of justice, be limited to a reasonable one. If for no good reason such an opportunity is not taken by
a party then to our minds it is only fair to the other party that the tribunal should be able to
proceed as we have set out in this Clause.
209. The last part of this Clause sets out a system of peremptory orders. It will be noted that a
peremptory order must be to the same effect as the preceding order which was disobeyed
(subsection (5)). It could be quite unfair for an arbitrator to be able to make any type of
peremptory order, on any matter, regardless of its connection with the default in question.
210. For the reasons mentioned earlier, subsection (6) provides that where a party fails to comply
with a peremptory order to provide security for costs, the tribunal may make an award dismissing
the claim, thereby following the practice of the English Commercial Court, and avoiding the
danger that the proceedings are halted indefinitely, without there being anything to challenge
before the Court.

211. So far as failure to comply with other peremptory orders is concerned, we have provided a
range of remedies. They do not include a power simply to make an award against the defaulting
party. The reason for this is that (unlike a failure to comply with a peremptory order to provide
security) it seems to us that this is too draconian a remedy, and that the alternatives we have
provided very much better fit the justice of the matter.

POWERS OF COURT IN RELATION T O ARBITRAL PROCEEDINGS

Clause 42. Enforcement of peremptory orders of tribunal

212. Although in Clause 41 we have provided the tribunal with powers in relation to peremptory
orders, it seemed to us that the Court should have power to order compliance with such orders,
though (unless both parties have agreed) these can only be invoked with the permission of the
tribunal. In our view there may well be circumstances where in the interests of justice, the fact the
the Court has sanctions which in the nature of things cannot be given to arbitrators (e.g. committal
to prison for contempt) will assist the proper functioning of the arbitral process. This Clause is a
good example of the support the Court can give to that process. Subsection (3) requires that any
other available recourse within the arbitral process be first exhausted.

Clause 43. Securing the attendance of witnesses

213. This Clause (which corresponds to Article 27 of the Model Law, and is derived from section
12(4) and (5) of the 1950 Act) is also designed to provide Court support for the arbitral process. It
will be noted, in particular, that the agreement of the parties or the permission of the tribunal is
required. The reason for this is to make sure that this procedure is not used to override any
procedural method adopted by the tribunal, or agreed by the parties, for the arbitration. Thus, for
example, if the tribunal has decided that there shall be no oral evidence, then (unless all parties
agree otherwise) this procedure cannot be used to get round that decision.

Clause 44. Court powers exercisable in support of

arbitral proceedings
214. This provision corresponds in part to Article 9 of the Model Law. As part of the redefinition
of the relationship between arbitration and the Court, which was mentioned above, the powers we
have given the Court are intended to be used when the tribunal cannot act or act effectively, as
subsection (5) makes clear. It is under this Clause that the Court has power to
order Mareva or Anton Piller relief (i.e. urgent protective measures to preserve assets or evidence)
so as to help the arbitral process to operate effectively. Equally, there may be instances where a
party seeks an order that will have an effect on a third party, which only the Court could grant. For
the same reason the Court is given the other powers listed.
215. In order to prevent any suggestion that the Court might be used to interfere with or usurp the
arbitral process, or indeed any attempt to do so, we have stipulated that except in cases of urgency
with regard to the preservation of assets or evidence, the Court can only act with the agreement of
the parties or the permission of the tribunal. We have excepted cases of urgency, since these often
arise before the tribunal has been properly constituted or when in the nature of things it cannot act
quickly or effectively enough.

216. Furthermore, under subsection (6) the Court, after making an order, can in effect hand over to
the tribunal the task of deciding whether or not that order should cease to have effect. This is a
novel provision, but follows from the philosophy behind these provisions: if a given power could
possibly be exercised by a tribunal, then it should be, and parties should not be allowed to make
unilateral applications to the Court. If, however, a given power could be exercised by the tribunal,
but not as effectively, in circumstances where, for example, speed is necessary, then the Court
should be able to step in.

Clause 45. Determination of preliminary point of law

217. This Clause preserves what used to be the old Consultative Case procedure, though its
availability is limited as we have set out, in order not to interfere with the arbitral process. The
Clause is based on section 2 of the 1979 Act, with certain important changes.
218. It seems to us that with the limitations we have provided, this procedure can have its uses.
For example, an important point of law may arise which is of great general interest and potentially
the subject of a large number of arbitrations. This not infrequently happens when some major
event occurs, as, for example, the closure of the Suez Canal or the United States embargo on the
export of soya beans. It may well be considered by those concerned that in such special
circumstances it would be cheaper and better for all to obtain a definitive answer from the Court at
an early stage.
219. However, under subsection (1), unless the parties agree, the Court must now be satisfied that
determination of the given question of law will substantially affect the rights of one or more of the
parties. This last point is a departure from the 1979 Act, section 1 of which makes this
precondition in relation to an appeal in respect of questions of law arising out of the award, but
section 2 of which does not impose it in relation to the determination of a preliminary point of
law.
220. Further, unless the parties agree, the Court will now have to be satisfied of the matters set out
in subsection (2) before considering an application, so that the procedure can only be used (even
with the permission of the tribunal) in cases where its adoption will produce a substantial saving
in costs to the parties or one of them. The condition in section 2(2) of the 1979 Act, which
requires that the question of law be one in respect of which leave to appeal would be likely to be
given under section 1(3)(b) of that Act, is not repeated.
221. It has been suggested to the DAC that the right to refer to the Court under this Clause be
removed from all non-domestic arbitrations, unless the parties otherwise agree. For the reasons
given above as to the value of this provision, and for the reasons given below with respect to
preserving the right of appeal in Clause 69, we were not persuaded by this.

THE AWARD

Clause 46. Rules applicable to substance of dispute

222. This Clause reflects much, though not all, of Article 28 of the Model Law. We have not, for
example, directed the tribunal to take into account the usages of the trade applicable to the
transaction. If the applicable law allows this to be done, then the provision is not necessary;

while if it does not, then it could be said that such a direction overrides that law, which to our
minds would be incorrect.
223. Subsection (1)(b) recognises that the parties may agree that their dispute is not to be decided
in accordance with a recognised system of law but under what in this country are often called
equity clauses, or arbitration ex aequo et bono, or amiable composition, i.e. general
considerations of justice and fairness, etc. It will be noted that we have avoided using this
description in the Bill just as we have avoided using the Latin and French expressions found in the
Model Law. There appears to be no good reason to prevent parties from agreeing to equity
clauses. However, it is to be noted that in agreeing that a dispute shall be resolved in this way, the
parties are in effect excluding any right to appeal to the Court (there being no question of law to
appeal).
224. Subsection (2) does, in effect, adopt the rule found in Article 28 of the Model Law, thereby
avoiding the problems of renvoi.
225. Subsection (3) caters for the situation where there is no choice or agreement. This again is the
language of the Model Law. In such circumstances the tribunal must decide what conflicts of law
rules are applicable, and use those rules in order to determine the applicable law. It cannot simply
make up rules for this purpose. It has been suggested to the DAC that more guidance be given as
to the choice of a proper law, but it appears to us that flexibility is desirable, that it is not our remit
to lay down principles in this highly complex area, and that to do so would necessitate a departure
from the Model Law wording.

Clause 47. Awards on different issues, etc.

226. We regard this as a very important provision. Some disputes are very complex, raising a large
number of complicated issues which, if they are all addressed and dealt with at one hearing, would
necessarily take a very long time and be very expensive. Disputes concerning large scale
construction contracts are a good example, though there are many other cases.
227. In recent years both the Commercial Court and the Official Referees Court in England
(which deal with large cases) have adopted a different approach. The Judge plays much more of a
managerial role, suggesting and indeed directing ways in which time and money can be saved.
One of the ways is to select issues for early determination, not necessarily on the basis that they
will be legally determinative of the entire litigation, but where they may well be commercially
determinative, in the sense that a decision is likely to help the parties to resolve their other
differences themselves without the need to spend time and money on using lawyers to fight them
out. This has a further advantage. Cases fought to the bitter end often result in a permanent loss of
goodwill between the warring factions, thus impeding or preventing future profitable relationships
between them. The result is often in truth a loss to all the parties, whether or not they were the
winners in the litigation.
228. In Court therefore, the old idea that a party is entitled to a full trial of everything at once has
now largely disappeared: see, for example, the decision of the House of Lords
in Ashmore v. Corporation of Lloyds [1992] 2 Lloyds Rep 1. Furthermore, this method of

approach is reflected in the views expressed by Lord Woolf in his current consideration of how to
improve our system of civil justice. The same reasoning, of course, applies to arbitrations.
229. As we have said earlier, arbitration enjoys an advantage over litigation, since the arbitral
tribunal is appointed to deal with the particular dispute that has arisen, and is thus in a better
position to tailor the procedure to suit the particular circumstances of that dispute. Furthermore, an
arbitral tribunal is often able, for the same reason, to move much quicker than the Court.
230. For these reasons, we have tried to make clear in this Clause that the tribunal is empowered
to proceed in this way. This is an aspect of the duty cast upon the tribunal to adopt procedures
suitable to the circumstances of the particular case, which is set out in Clause 33(1)(a). We would
encourage arbitrators to adopt this approach in any case where it appears that time and money will
be saved by doing so, and where such an approach would not be at the expense of any of the other
requirements of justice.
231. In this connection we would draw attention to the decision of Goff J (now Lord Goff) in The
Kostas Melas, op. cit. As we observed when considering Clause 39, the function of arbitrators is
not to make temporary financial adjustments between the parties pending the resolution of the
dispute, unless this is what they have agreed the arbitrators can do. As this case shows, there is a
clear distinction between such arrangements and the right to make a permanent binding decision
after considering the arguments, even though the later resolution of other issues (if this becomes
necessary) may overall produce a different result.
232. We should emphasise that in this Clause we are not intending to give arbitral tribunals greater
or different powers from those they presently have, but to emphasise how their powers should, in
suitable cases, be exercised.
233. It might also be noted that we have been careful to avoid use of the term interim award,
which has become a confusing term, and in its most common use, arguably a misnomer.

Clause 48. Remedies

234. We trust that the matters addressed in this Clause are self-evident. We have excluded specific
performance of land contracts, so as not to change the law in this regard, but clarified the power of
arbitrators to award injunctive relief. Given that the parties are free to agree on the remedies that a
tribunal may order, there is nothing to restrict such remedies to those available at Court.

Clause 49. Interest

235. The responses we received demonstrated to us that there was a general desire to give arbitral
tribunals a general power to award compound interest.
236. There is no doubt that the absence of such a power adds to the delays (and thus the expense)
of arbitrations and causes injustice, for it is often in a partys interest to delay the proceedings and
the honouring of an award, since the interest eventually payable is less than can be made by
holding on to funds which should be paid over to the other party, who of course is losing out by a
like amount.

237. Some of those responding were fearful that arbitrators would abuse this power, and may, for
example, award compound interest on a punitive rather than compensatory basis. We do not share
those fears. To our minds any competent arbitrator seeking to fulfil the duties laid on him by the
Bill will have no more difficulty in making decisions about compound interest than he will in
deciding in any other context what fairness and justice require. Anyone who has such difficulties
demonstrates, in our view, that he is really not fit to act as an arbitrator. In such a case, the award
and the arbitrator will be susceptible of challenge.
238. Clauses 84 and 111 allow for transitional measures. In the context of this Clause, we
understand that these may prove necessary in relation to the enforcement of awards through the
country courts, who we are told are not presently equipped to calculate compound interest payable
from the date of the award.

Clause 50. Extension of time for making award

239. This Clause re-enacts the existing law, though with two qualifications:

(i) arbitral procedures for obtaining an extension must be exhausted before recourse to the
Court; and
(ii) the Court must be satisfied that substantial injustice would be done if the time were not
extended. It seems to us that these qualifications are needed so as to ensure that the Courts
power is supportive rather than disruptive of the arbitral process. For the same reason, it
seems to us that it would be a rare case indeed where the Court extended the time
notwithstanding that this had not been done through an available arbitral process.

Clause 51. Settlement

240. This Clause reflects Article 30 of the Model Law. It enables an agreed settlement of the
dispute to be given the status of an arbitral award, which could then be enforced as such.
241. Concern has been expressed that this provision (taken from Article 30 of the Model Law)
might be used by the parties either to obtain an award in respect of matters which are simply not
arbitrable (e.g. matters which under our law cannot be settled by agreement between the parties),
or to mislead third parties (e.g. the tax authorities). It was suggested that any agreed award should
have to state on its face that it is such.
242. Dealing first with deception, in our view there is no material difference between Clause 51
and our present law: cf. p. 59 of the Mustill Report. As that Report observes, Article 30 and our
present law recognise the right of the tribunal to refuse to make an award on agreed terms if it
contains an objectionable feature, e.g. is structured to mislead third parties. Clause 51 preserves
that right. Thus unless the tribunal is itself prepared to be a party to an attempted deception, we
consider the risk that misleading awards will be made to be very small. If the tribunal is prepared
to conspire with the parties, then nothing we could put in Clause 51 is likely to deter it.
Furthermore, the whole of Clause 51 is based upon the assumption that there is a dispute between
the parties which has been referred to arbitration and then settled. Nothing in the Clause would
assist parties to mislead others where there was no genuine dispute or genuine reference or
genuine settlement. The Clause would simply not apply to such a situation.

243. So far as arbitrability is concerned, this is a question that goes beyond agreed awards. We
discuss this question when considering Clause 66 (see also the supplementary recommendations in
Chapter 6 below).
244. We are not persuaded that we should require that any agreed award should state that it is
such. Both under this Clause and Clause 52 the parties are free to agree on the form the award
should take. In our view this is not only the position under the Model Law but also the position
under our present law. A requirement that an agreed award should state that it is such would have
to be made a mandatory provision to be effective. We are not aware of any problems arising under
our present law and are reluctant to impose this formal requirement. Moreover, it would of course
be open to the tribunal to record the agreement in the award if they thought it was appropriate to
do so. However, at the enforcement stage we agree that the Court should be informed if the award
is an agreed award, if this is not apparent from the award itself. We return to this point when
considering Clause 66 below (see also Chapter 6).

Clause 52. Form of award

245. This Clause follows closely Article 31 of the Model Law. There are, however, two matters
worthy of particular note.
246. In the first place, as in the Model Law, we have required the tribunal to give reasons, unless
the award is an agreed award or the parties have agreed that reasons need not be given.
247. To our minds, it is a basic rule of justice that those charged with making a binding decision
affecting the rights and obligations of others should (unless those others agree) explain the reasons
for making that decision. This was also the view of the majority of those who commented on this.
248. It was suggested that having to give reasons would be likely to add to the cost of arbitrations
and encourage applications for leave to appeal to the Court.
249. We do not agree. The need for reasons is that which we have explained above and has
nothing to do with the question whether or not a Court should hear an appeal from an award.
Further, we have introduced stricter conditions for the bringing of appeals in any event. As to cost,
it is always open to the parties to agree to dispense with reasons if they wish to do so, though in
the case of domestic arbitrations this can only be done after the dispute has arisen: see Clauses
69(1) and 87.
250. The second noteworthy point is that we have used the word seat instead of the Model Law
phrase place of arbitration. We consider that the Model Law uses this phrase to mean the seat
(there being no obvious legal reason to stipulate the geographical place where the award was
made), and since we have used this word earlier in the Bill (see Clauses 2 and 3) it would in our
view only cause confusion not to use it here. Of course the seat is only of importance in
international arbitrations or where the question arises as to the enforcement of an award abroad.
Therefore, in a purely domestic arbitration, if an arbitrator were to fail to state the seat, or to
state this incorrectly, it is extremely unlikely that the award could be challenged under Clause
68(2)(h), given that such a failure would be unlikely to result in substantial injustice.

251. Subsection (3) provides that the award shall be in writing and signed by all the arbitrators or,
alternatively, by all those assenting to the award. An earlier draft of this subsection had only
stipulated that all arbitrators assenting to an award sign it. It was pointed out to the DAC,
however, that (for whatever reason) some dissenting arbitrators may not wish to be identified as
such, and that the provision should therefore be amended to provide for this.
252. It has been suggested to the DAC that there should be a provision allowing for somebody to
sign on behalf of an arbitrator. This could invoke complicated principles of agency, and, overall, is
better left to be resolved in each particular case.

Clause 53. Place where award is treated as made

253. This Clause is designed to avoid disputes over where an award is made and (in cases where
Part I of the Bill applies to the arbitration in question) it reverses the decision (although not the
result) of the House of Lords in Hiscox v.Outhwaite [1992] 1 AC 562.

Clause 54. Date of award

254. We trust this provision is self-explanatory.

Clause 55. Notification of award

255. This provision we also trust is self-explanatory. The obligations on the tribunal to notify the
parties by service on them of copies of the award is important, given that certain time limits in the
Bill for, e.g. challenging the award, run from the date of the award (which, under Clause 54, in the
absence of any other agreement, is the date upon which it is signed). Time periods, of course, can
be extended: see Clause 79. We have required the award to be notified to the parties so as to
prevent one party from obtaining the award and sitting on it without informing the other party
until the expiry of time limits for appeal etc, which we are aware has happened in practice.
256. Clause 55(3) provides that nothing in this section affects the power to withhold an award in
the case of non-payment. However, it should be noted that the duty to notify all parties would of
course revive once the tribunals lien has been satisfied.

Clause 56. Power to withhold award in case of nonpayment

257. These provisions enable a party to seek the assistance of the Court if he considers that the
arbitrators are asking too much for the release of their award, though it is important to note from
subsection (4) that there is already arbitral machinery for an appeal or review of the fees or
expenses demanded.
258. Subsection (8) makes clear that this Clause does not affect the right to challenge fees and
expenses under Clause 28, i.e. that paying them to get the award does not lose this right. The
reason for this provision is that it may be important for a party to obtain the award quickly, rather
than going to the Court for an order about fees and expenses before getting the award.
259. Unlike section 19 of the 1950 Act, this provision gives the Court a discretion to specify that a
lesser amount than that claimed by the arbitration be paid into Court, in order to have the award

released. If this were not so, an arbitrator could demand an extortionate amount, in effect
preventing a party from taking advantage of the mechanism provided for here.
260. For obvious reasons, this provision is mandatory.

Clause 57. Correction of award or additional award

261. This Clause reflects Article 33 of the Model Law. In our view this is a useful provision, since
it enables the arbitral process to correct itself, rather than requiring applications to the Court. In
order to avoid delay, we have stipulated time limits for seeking corrections, etc.

Clause 58. Effect of award

262. This provision in effect simply restates the existing law.
263. It has been suggested that what is described as the other side of subsection (1) should be spelt
out in the Bill, i.e. that whatever the parties may or may not agree, the award is of no substantive
or evidential effect against any one who is neither a party nor claiming through or under a party.
264. Such a provision would, of course, have to be mandatory. It would have to confine itself to
cases exclusively concerned with the laws of this country, for otherwise it could impinge on other
applicable laws which have a different rule. Even where the situation was wholly domestic, it
would also have to deal with all those cases (agreed or otherwise) in one way or another. In our
view it would be very difficult to construct an acceptable provision and we are not persuaded that
it is needed.

COSTS OF THE ARBITRATION

Clause 59. Costs of the arbitration
Clause 60. Agreement to pay costs in any event
Clause 61. Award of costs
Clause 62. Effect of agreement or award about costs
Clause 63. The recoverable costs of the arbitration
Clause 64. Recoverable fees and expenses of arbitrators
Clause 65. Power to limit recoverable costs
265. In these Clauses we have attempted to provide a code dealing with how the costs of an
arbitration should be attributed between the parties. The question of the right of the arbitrators to
fees and expenses is dealt with earlier in that part of the Bill concerned with the arbitral tribunal:
see Clause 28.
266. Clause 59 defines costs.
267. Clause 60 is a mandatory provision preventing effective agreements to pay the whole or part
of the costs in any event unless made after the dispute has arisen. The Clause is based on section
18(3) of the Arbitration Act 1950. The Committee are of the view that public policy continues to
dictate that such a provision should remain.

268. Clause 62 empowers the arbitrators to make an award in relation to costs. Subsection (2) sets
out the general principle to be applied, which is the same principle that is applicable in Court.
269. It has been suggested that arbitral tribunals should not be fettered in this way, but to our
minds it is helpful to state the principle, especially for those who may not be lawyers and who
otherwise might not know how to proceed. Furthermore, it seems to us that there is no reason why
the general principle should not apply to arbitrations: it certainly does under the present law. The
parties are, of course, free to agree on other principles, subject to Clause 60.
270. Clauses 63 and 64 are we hope more or less self-explanatory. Clearly there has to be a special
regime for the fees and expense of the arbitrators, for otherwise they would be left with the power
to decide for themselves whether or not they had overcharged!
271. Clause 64(4) presents any contractual right an arbitrator may have to payment of his fees and
expenses. If a party has agreed these, then it would in our view be wrong to allow the Court to
adjust the amount, i.e. to rewrite that agreement.
272. Clause 65 contains a new proposal. It gives the tribunal power to limit in advance the amount
of recoverable costs. We consider that such a power, properly used, could prove to be extremely
valuable as an aid to reducing unnecessary expenditure. It also represents a facet of the duty of the
tribunal as set out in Clause 33. The Clause enables the tribunal to put a ceiling on the costs, so
that while a party can continue to spend as much as it likes on an arbitration it will not be able to
recover more than the ceiling limit from the other party. This will have the added virtue of
discouraging those who wish to use their financial muscle to intimidate their opponents into
giving up through fear that by going on they might be subject to a costs order which they could
not sustain.

POWERS OF THE COURT IN RELATION T O AWARD

Clause 66. Enforcement of the award

273. This reflects Article 35 of the Model Law. Enforcement through the Court provides the
classic case of using the Court to support the arbitral process. Subsection (3)(a) is intended to state
the present law: see Mustill & Boyd,Commercial Arbitration, 2nd Ed., at p. 546. Subsection (3)(b)
is intended to cover cases where public policy would not recognise the validity of an award, for
example awards purporting to decide matters which our law does not accept can be resolved by
this means. For obvious reasons, this provision is mandatory.
274. Reference should be made to Chapter 6, where certain supplementary recommendations are
made with respect to this Clause.

Clause 67. Challenging the award: substantive

jurisdiction
275. Jurisdiction has already been considered in the context of that part of the Bill dealing with the
jurisdiction of the arbitral tribunal: see Clauses 30 to 32.
276. Clause 31 allows the tribunal (where it has power to rule on its own jurisdiction) to make a
jurisdiction award, either on its own, or as part of its award on the merits. Clause 67 provides

the mechanisms for challenging the jurisdiction rulings in such awards, and is a mandatory
provision. It also provides a mechanism for challenges to the jurisdiction by someone who has
taken no part in the arbitral proceedings. We deal with such persons below, when considering
Clause 72.
277. To avoid the possibility of challenges to the jurisdiction causing unnecessary delay, the rights
given by this Clause are subject to qualifications, which explains the reference in subsection (1) to
three other sections. In addition, subsection (2) means that a challenge to jurisdiction does not stop
the tribunal from proceeding with other aspects of the arbitration while the application is pending.

Clause 68. Challenging the award: serious irregularity

278. We have drawn a distinction in the Bill between challenges in respect of substantive
jurisdiction (i.e. those matters listed in Clause 30) and challenges in respect of what we have
called serious irregularity. We appreciate that cases may arise in which it might be difficult to
decide into which category a particular set of circumstances should be placed, but since the time
limits etc for both Clause 67 and Clause 68 are the same, this should cause no procedural
difficulties. We are firmly of the view, however, that it is useful to have two categories.
279. The reason for this is that where jurisdiction is concerned, there can be no question of
applying a test of substantial injustice or the like. An award of a tribunal purporting to decide
the rights or obligations of a person who has not given that tribunal jurisdiction so to act simply
cannot stand, though of course, if the party concerned has taken part in the arbitration, there is
nothing wrong in requiring him to act without delay in challenging the award.
280. Irregularities stand on a different footing. Here we consider that it is appropriate, indeed
essential, that these have to pass the test of causing substantial injustice before the Court can
act. The Court does not have a general supervisory jurisdiction over arbitrations. We have listed
the specific cases where a challenge can be made under this Clause. The test of substantial
injustice is intended to be a applied by way of support for the arbitral process, not by way of
interference with that process. Thus it is only in those cases where it can be said that what has
happened is so far removed from what could reasonably be expected of the arbitral process that
we would expect the Court to take action. The test is not what would have happened had the
matter been litigated. To apply such a test would be to ignore the fact that the parties have agreed
to arbitrate, not litigate. Having chosen arbitration, the parties cannot validly complain of
substantial injustice unless what has happened simply cannot on any view be defended as an
acceptable consequence of that choice. In short, Clause 68 is really designed as a long stop, only
available in extreme cases where the tribunal has gone so wrong in its conduct of the arbitration
that justice calls out for it to be corrected.
281. By way of example, there have been cases under our present law where the Court has
remitted awards to an arbitral tribunal because the lawyers acting for one party failed (or decided
not to) put a particular point to the tribunal: see, for example, Indian Oil Corporation v. Coastal
(Bermuda) Ltd [1990] 2 Lloyds Rep. 407; King v. Thomas McKenna [1991] 2 QB
480; Breakbulk Marine v. Dateline, 19 March 1992, unreported (jurisdiction recognised but not
exercised).

282. The responses we received were critical of such decisions, on the grounds that they really did
amount to an interference in the arbitral process agreed by the parties. We agree. The Clause we
propose is designed not to permit such interference, by setting out a closed list of irregularities
(which it will not be open to the Court to extend), and instead reflecting the internationally
accepted view that the Court should be able to correct serious failure to comply with the due
process of arbitral proceedings: cf. Article 34 of the Model Law.
283. This Clause is, of course, mandatory.

Clause 69. Appeal on point of law

284. We received a number of responses calling for the abolition of any right of appeal on the
substantive issues in the arbitration. These were based on the proposition that by agreeing to
arbitrate their dispute, the parties were agreeing to abide by the decision of their chosen tribunal,
not by the decision of the Court, so that whether or not a Court would reach the same conclusion
was simply irrelevant. To substitute the decision of the Court on the substantive issues would be
wholly to subvert the agreement the parties had made.
285. This proposition is accepted in many countries. We have considered it carefully, but we are
not persuaded that we should recommend that the right of appeal should be abolished. It seems to
us, that with the safeguards we propose, a limited right of appeal is consistent with the fact that the
parties have chosen to arbitrate rather than litigate. For example, many arbitration agreements
contain an express choice of the law to govern the rights and obligations arising out of the bargain
made subject to that agreement. It can be said with force that in such circumstances, the parties
have agreed that that law will be properly applied by the arbitral tribunal, with the consequence
that if the tribunal fail to do this, it is not reaching the result contemplated by the arbitration
agreement.
286. In these circumstances what we propose is a right to apply to the Court to decide a point of
law arising out of an award. This right is limited, however, in several ways.

(i) The point of law must substantially affect the rights of one or more of the parties. This
limitation exists, of course, in our present law.
(ii) The point of law must be one that was raised before the tribunal. The responses showed
that in some cases applications for leave to appeal have been made and granted on the basis
that an examination of the reasons for the award shows an error on a point of law that was not
raised or debated in the arbitration. This method of proceeding has echoes of the old and long
discarded common law rules relating to error of law on the face of award, and is in our view a
retrograde step. In our view the right to appeal should be limited as we suggest.
(iii) There have been attempts, both before and after the enactment of the Arbitration Act
1979, to dress up questions of fact as questions of law and by that means to seek an appeal on
the tribunals decision on the facts. Generally these attempts have been resisted by the Courts,
but to make the position clear, we propose to state expressly that consideration by the Court
of the suggested question of law is made on the basis of the findings of fact in the award.
(iv) We have attempted to express in this Clause the limits put on the right to appeal by the
House of Lords in Pioneer Shipping Ltd v. BTP Tioxide Ltd (The Nema) [1982] AC 724.

287. With respect to the last point, we think it is very important to do this. Many of those abroad
who do not have ready access to our case law were unaware that the Arbitration Act 1979 had
been construed by the House of Lords in a way that very much limited the right of appeal, and
which was not evident from the words of the Act itself.
288. The test we propose is whether, in the ordinary case, the Court is satisfied that the decision of
the tribunal is obviously wrong. The right of appeal is only available for such cases, for the
reasons discussed above. Where the matter is one of general public importance, the test is less
onerous, but the decision must still be open to serious doubt.
289. We propose a further test, namely whether, despite the agreement of the parties to resolve the
matter by arbitration, it is just and proper in all the circumstances for the Court to determine the
question.
290. We have been asked why we suggest this addition. The reason is that we think it desirable
that this factor should be specifically addressed by the Court when it is considering an application.
It seems to us to be the basis on which the House of Lords acted as it did in The Nema, op. cit. The
Court should be satisfied that justice dictates that there should be an appeal; and in considering
what justice requires, the fact that the parties have agreed to arbitrate rather than litigate is an
important and powerful factor.
291. It will be noted that we have included a provision that the Court should determine an
application without a hearing unless it appears to the Court that a hearing is required. This again
reflects what was said in The Nema op. cit.about the tendency for applications for leave being
turned into long and expensive court hearings. In our view, the tests for leave (i.e. obviously
wrong or open to serious doubt) are such that in most cases the Court will be able to decide
whether to allow or reject the application on written material alone.
292. Finally, a question has been raised as to whether an agreement in advance of the proceedings
(i.e. contained in an arbitration clause more in the underlying contract) would satisfy
Clause69(2)(a). The Clause is intended to encompass such agreements, and in our view it plainly
does so since the word agreement is not qualified. However, such an agreement will not
automatically allow an appeal unless it complies with the other conditions set out in Clauses 69
and 70.

Clause 70. Challenge or appeal: supplementary

provisions
Clause 71. Challenge or appeal: effect of order of the
court
293. These provisions contain time-limits and other matters in relation to challenges to the award
and applications and appeals. Some of these provisions are mandatory.
294. The time limit in Clause 70(3) runs from the date of the award, or, where applicable, the date
when a party was notified of the result of any arbitral process of appeal or review. It has been
suggested that difficulties might arise if an award is held back by the arbitrators, pending payment

by the parties (i.e. under Clause 56). It is possible that the time limit in Clause 70(3) will have
expired by the time an award is released. However, the DAC is of the view that the date of the
award is the only incontrovertible date from which the time period should run. Any other starting
point would result in great uncertainty (e.g. as to the exact point at which an award is released
or delivered). Further, any difficulties arising from specific circumstances can be easily
remedied by way of an extension of time under Clause 79.

MISCELLANEOUS

Clause 72. Saving for rights of persons who takes no part

in proceedings
295. To our minds this is a vital provision. A person who disputes that an arbitral tribunal has
jurisdiction cannot be required to take part in the arbitration proceedings or to take positive steps
to defend his position, for any such requirement would beg the question whether or not his
objection has any substance and thus be likely to lead to gross injustice. Such a person must be
entitled, if he wishes, simply to ignore the arbitral process, though of course (if his objection is not
well-founded) he runs the risk of an enforceable award being made against him. Those who do
decide to take part in the arbitral proceedings in order to challenge the jurisdiction are, of course,
in a different category, for then, having made that choice, such people can fairly and properly be
required to abide by the time limits etc that we have proposed.
296. This is a mandatory provision.

Clause 73. Loss of right to object

297. Recalcitrant parties or those who have had an award made against them often seek to delay
proceedings or to avoid honouring the award by raising points on jurisdiction etc which they have
been saving up for this purpose or which they could and should have discovered and raised at an
earlier stage. Article 4 of the Model Law contains some provisions designed to combat this sort of
behaviour (which does the efficiency of arbitration as a form of dispute resolution no good) and
we have attempted to address the same point in this Clause. In particular, unlike the Model Law,
we have required a party to arbitration proceedings who has taken part or continued to take part
without raising the objection in due time, to show that at that stage he neither knew nor could with
reasonable diligence have discovered the grounds for his objection (the latter being an important
modification to the Model Law, without which one would have to demonstrate actual knowledge,
which may be virtually impossible to do). It seems to us that this is preferable to requiring the
innocent party to prove the opposite, which for obvious reasons it might be difficult or impossible
to do.
298. For the reasons explained when considering Clause 72, the provision under discussion
cannot, of course, be applied to a party who has chosen to play no part at all in the arbitral
proceedings.

Clause 74. Immunity of arbitral institutions, etc.

299. In this mandatory provision we have provided institutions and individuals who appoint
arbitrators with a degree of immunity.
300. The reason for this proposal is that without such an immunity, there is in our view a real risk
that attempts will be made to hold institutions or individuals responsible for the consequences of
their exercise of the power they may be given to appoint or nominate arbitrators, or for what their
appointed or nominate arbitrators then do or fail to do. This would provide a means of reopening
matters that were referred to arbitration, something that might be encouraged if arbitrators were
given immunity (as we have also proposed in Clause 29) but nothing was said about such
institutions or individuals.
301. There is an additional point of great importance. Many organisations that provide arbitration
services, including Trade Associations as well as bodies whose sole function it is to provide
arbitration services, do not in the nature of things have deep pockets. Indeed much of the work is
done by volunteers simply in order to promote and help this form of dispute resolution. Such
organisations could find it difficult if not impossible to finance the cost of defending legal
proceedings or even the cost of insurance against such cost. In our view the benefits which these
organisations (and indeed individuals) have on arbitration generally fully justify giving them a
measure of protection so that their good work can continue.

Clause 75. Charge to secure payment of solicitors costs

302. This is a technical provision designed to maintain the present position.

SUPPLEMENTARY

Clause 76. Service of notices, etc.

303. The subject matter of this Clause was touched on the MacKinnon Report which led to the
Arbitration Act 1934. In this Clause we have attempted to do three things.

(i) We have stipulated that the parties can agree on how service of notices and other
documents can be done.
(ii) We have made clear that in the absence of agreement, service by any effective means will
suffice.
(iii) We have provided in subsection (4) an option which can best be described as a fail-safe
method, which a party may employ if he wishes, for example if he is not sure that other
methods will be effective. We should emphasise that this fail safe method is not a compulsory
or preferred method for service, but merely a means which, if employed, will be treated as
effective.

305. These provisions do not apply in respect of service in Court proceedings, for the obvious
reason that such service must comply with the rules of the Court concerned.

Clause 77. Powers of court in relation to service of

documents

306. In this Clause we have given the Court powers to support the arbitral process so that it is not
delayed or frustrated through difficulties over service. In the nature of human affairs, it is sadly
the case that potential respondents to arbitration proceedings quite often go to considerable lengths
to avoid service and thus to achieve this state of affairs, by making normal methods difficult or
even impossible to use effectively. This Clause should, in appropriate cases, help to deal with such
cases.

Clause 78. Reckoning periods of time

307. In our view it would be of great assistance to set out a code to deal with the reckoning of
time, thus avoiding the need to refer to other sources. Hence this provision.

Clause 79. Power of court to extend time limits relating

to arbitral proceedings
308. Here we propose that the Court should have a general right to extend time limits, except time
limits for starting an arbitration, which is dealt with specifically in Clause 12. We propose that the
wording of the Clause be clarified as set out in Chapter 6 below.
309. This power is limited in the ways set out in this Clause. In particular, no extension will be
granted unless a substantial injustice would otherwise be done and any arbitral process for
obtaining an extension must first be exhausted. As we have said in other contexts, it would be a
rare case indeed where we would expect the Court to grant an extension where such has not been
obtained through that process. With these limitations we take the view that this provision can
properly be described as supporting the arbitral process.

Clause 80. Notice and other requirements in connection

with legal proceedings
310. Legal proceedings must of course be subject to the rules of the Court concerned. We have
made clear, therefore, that where the Bill provides for notice of legal proceedings to be given to
others, this is a reference to such rules as the Court concerned may make; and is not a separate
requirement over and above those rules.

Clause 81. Saving for certain matters governed by

common law
311. As we have stated earlier, and as was stated in the Mustill Report, it would be neither
practicable nor desirable to attempt to codify the whole of our arbitration law. Hence subsections
(1) and (2) of this Clause.
312. It was suggested to us that a provision preserving the common law would enable arguments
to be raised and accepted which were contrary to the spirit and intent of the Bill. We do not think
that this will happen, in view of the opening words of the Clause and indeed the statements of
principle in Clause 1. Equally, it seems to us to be necessary to make clear that the common law
(so far as it is consistent with the Bill) will continue to make its great contribution to our

arbitration law, a contribution that has done much to create and preserve the world wide
popularity of arbitration in our country.
313. Subsection (3) is technically necessary to make clear that the repeal of the existing statutes
does not have the effect of reviving the common law rules relating to errors on the face of the
award.

Clause 82. Minor definitions

Clause 83. Index of defined expressions: Part I
314. The first of these Clauses provides the definition of words and phrases which are often
repeated in the body of the Bill, so that repetition of the meaning is avoided, as well as providing a
ready means of discovering the meaning of certain important words and phrases. The second of
these Clauses is also designed to help the reader by identifying the place where other important
words and phrases are defined or explained.

Clause 84. Transitional provisions

315. This Clause sets out the general proposition, namely that the Bill will apply to arbitral
proceedings commenced after the legislation comes into force, whenever the arbitration agreement
is made. There are respectable precedents for this, since the Arbitration Acts 1889, and 1934
contained a like provision. The 1950 Act, of course, was not a precedent, since this was a
consolidating measure. We consider this to be a useful provision, since some arbitration
agreements have a very long life indeed (for example, rent review arbitration agreements under
leases) and it would be most unsatisfactory if the existing law and the proposed legislation were to
run in parallel (if that is the right expression) indefinitely into the future.
316. Reference should also be made to Clause 111.

CHAPTER 3PART II OF THE BILL OTHER PROVISIONS RELATING TO

ARBITRATION

DOMESTIC ARBITRATION AGREEMENTS

Clause 85. Modification of Part I in relation to domestic

arbitration agreements
Clause 86. Staying of legal proceedings
Clause 87. Effectiveness of agreement to exclude courts
jurisdiction
Clause 88. Power to repeal or amend ss. 85 to 87
317. Under our present law, a distinction is drawn between domestic and other arbitrations for two
main purposes.

318. In the first place, the rules for obtaining a stay of legal proceedings differ. The reason for this
is that under international Conventions, a stay in favour of an arbitration is mandatory except in
certain specified circumstances. The current Convention is the New York Convention and the
rules under that Convention we have now set out in Clause 9. With an exception that we have
already discussed above, Clause 9 simply re-enacts the Arbitration Act 1975 so far as it concerns
this matter.
319. Section 1 of the Arbitration Act 1975 does not apply to domestic arbitrations as there
defined. These continue to be governed by section 4(1) of the Arbitration Act 1950, which makes
the grant of a stay discretionary.
320. It is our view that consideration should be given to abolishing this distinction and applying
the New York Convention rules to all cases. It seems to us that these rules fit much more happily
with the concept of party autonomy than our domestic rules, which were framed at a time when
attitudes to arbitrations were very different and the Courts were anxious to avoid what they
described as usurpation of their process.
321. For example, there are cases justifying the refusal of a stay in cases where the Court
considers that the party seeking to arbitrate has no defence to the claim and is merely seeking to
delay the day of judgment. This has been explained on the basis that since there is no defence to
the claim, there is no dispute that can be arbitrated. The difficulty with this argument is that it
logically follows that only disputable matters can be arbitrated, or, in other words, that the
arbitrators have no jurisdiction to deal with cases where there is no real defence. This in turn
means that a claimant cannot refer a claim to arbitration where there is no real defence, since ex
hypothesi the arbitrators would have no jurisdiction. In short, this argument leads to consequences
that in our view have only to be stated to be rejected. As to delaying tactics, it has been our
intention throughout the Bill to provide the means whereby an agreement to arbitrate can produce
(in suitable cases) a very quick answer indeed. Indeed, if in truth there is no defence to a claim,
then it should not take more than a very short time for an arbitral tribunal to deal with the matter
and produce an award.
322. For these reasons, which are those discussed in Nelson v. Hayter [1990] 2 Lloyds Rep. 265,
we consider that this ground for preserving the distinction between domestic and other arbitrations
so far as stays are concerned is highly unconvincing.
323. The domestic rules have also have also been used to refuse stays where the disputes are likely
to involve other parties, who could not be brought into the arbitration, since the agreement to
arbitrate only binds those who were party to it. Here the justification for refusing to stay legal
proceedings is that it would be much better for all the concerned parties to be brought into one
proceeding, so that the whole matter can be sorted out between them all.
324. This reasoning of course is in one sense supported by common sense and justice, for in
certain cases it would be better and fairer for all the disputes between all the parties involved to be
dealt with by one tribunal, thereby avoiding delay and the possibility of inconsistent findings by
different tribunals. However, as we observed in the context of considering whether there should be
a power (without the agreement of the parties) to order consolidation or concurrent hearings in
arbitrations (Clause 35), to refuse a stay because other parties are involved involves tearing up the

arbitration agreement that the applicant for a stay has made. In other words, with the benefit of
hindsight, the Court adjusts the rights and obligations of contracting parties.
325. We fully accept that for reasons of consumer protection, this on occasion can and should be
done, but we are not persuaded that it should be a general rule in the context of stays of domestic
arbitrations, for it sits uneasily with the principle of party autonomy and amounts to interference
with rather than support for the arbitral process.
326. We should also note that the distinction drawn between domestic and other arbitrations
produces odd results. An arbitration agreement between two English people is a domestic
arbitration agreement, while an agreement between an English person and someone of a different
nationality is not, even if that person has spent all his time in England. Furthermore, we are aware
that it could be said that the distinction discriminates against European Community nationals who
are not English, and is thus contrary to European law.
327. Notwithstanding the foregoing, we do not propose in this Bill to abolish the distinction. Some
defend it and we have not had an opportunity to make all the soundings we would like on this
subject. What we have done is to put the domestic arbitration rules in a separate part of the Bill,
and provided in Clause 88 for a power of repeal through the mechanism of a positive joint
resolution of each House of Parliament.
328. What we have felt able to do is to redraft the domestic rules on stays and to make two
changes. Firstly we have removed the discretion and instead set out words which are wide enough
to encompass the circumstances which the cases have developed as grounds for refusing a stay.
Secondly and more importantly, we have reversed the existing burden of proof (and incidentally
got rid of a double or perhaps treble negative in the previous legislation). It seemed to us that it
was for the party seeking to litigate something which he had previously agreed to arbitrate to
persuade the Court that he should be allowed to go back on his agreement.
329. The second purpose served by making a distinction between domestic and other arbitrations
is to prevent the parties in a domestic case from effectively agreeing to exclude the jurisdiction of
the Court to deal with preliminary points of law or with an appeal from an award on a point of
law, until after the commencement of the arbitral proceedings. This necessarily means that until
the arbitration starts such parties cannot make an effective agreement to dispense with reasons, for
that is treated as an agreement to exclude the jurisdiction of the Courtsee, now, Clause 69(1).
330. Again we are not persuaded of the value or the validity of this, but we have preserved the
existing law for the same reason as we have preserved position on stays. Our own view is that this
distinction should disappear.
331. It should be noted that we have not preserved the special categories dealt with in Section 4
of the Arbitration Act 1979. These were intended as a temporary measure, and the weight of the
responses received persuaded us that they should now go.

CONSUMER ARBITRATION AGREEMENTS

Clauses 89 to 93

332. In these Clauses we have consolidated the provisions of the Consumer Arbitration
Agreements Act 1988. We have suggested this in order to bring within the Bill all the current
major enactments on arbitration, so as to provide as complete a code as possible.
333. We did not regard it as part of our remit to redraft this legislation, so we have not sought
responses on it. However, we are aware that problems have arisen in construing this Act. For
example, it has been suggested that what now appears as Clause 89 makes it far from clear
whether a building contract made by a consumer falls outside the Act if the consumer has sought a
number of quotes for the work.
334. We are also aware of a more fundamental problem. This country has recently implemented
Council Directive 93/13 through the Unfair Terms in Consumer Contracts Regulations 1994 (S.I.
1994/3159). These Regulations came into force on 1 July 1995. Thus at the moment a situation
exists where there are two parallel regimes for protecting consumer interests in the context of
arbitration agreements.
335. To our minds this is an unsatisfactory state of affairs, likely to cause confusion and
difficulties. Although we have not attempted to trespass into the field of consumer protection, it
does seem to us that it would be unfortunate if the opportunity were not taken to clarify the
position. On the face of it the solution would seem to be to maintain the suggested repeal of the
1988 Act and to omit Clauses 89 to 92 of the Bill. If this were to be done, then we would welcome
at least a cross-reference in the Bill to the Regulations, so that anyone reading the Bill will be
made aware of them. As we understand it, the Regulations would not affect our international
obligations regarding arbitrations (for example, the New York Convention) though doubtless
those charged with the question of consumer protection will consider this aspect of the matter.
336. We would, however, emphasise that the arbitration community is extremely anxious that the
Bill should not be delayed. The fact is that this country has been very slow to modernise its
arbitration law and this has done us no good in our endeavour to retain our pre-eminence in the
field of international arbitration, a service which brings this country very substantial amounts
indeed by way of invisible earnings.
337. It is for these reasons that we have included in Clause 88 a power to amend or repeal Clauses
89 to 93. If the situation cannot be clarified or settled without delaying the progress of the Bill,
then this mechanism could allow the Bill to go forward with the Consumer Arbitration
Agreements Act in it, and the matter dealt with later.

SMALL CLAIMS ARBITRATIONS IN THE COUNTY COURT

Clause 94. Exclusion of Part I in relation to small claims

in the county court
338. There is an entirely separate regime for the arbitration of small claims in the County Court.
The Bill is not intended to affect this.
339. As we observed earlier in the Report, we considered the suggestion that we should
incorporate in the Bill another system for the arbitration of small claims, but for the reasons given,
we have not adopted this suggestion and do not recommend it.

APPOINTMENT OF JUDGES AS ARBITRAT ORS

Clause 95. Appointment of judges as arbitrators

340. In this Clause we have set out the existing provisions for the appointment of Commercial
Judges and Official Referees as arbitrators.
341. We are firmly of the view that provision should be made for any Judge to be appointed as an
arbitrator, rather than limiting the power to the two kinds of Judge presently included. It was not,
however, possible to obtain agreement to this proposal from the concerned departments in time to
put it in the Bill.
342. We appreciate that in view of the court commitments of Judges generally, it is not possible to
allow Judges to act as arbitrators whenever they are asked and are willing to do so. Hence the
present requirement now set out in subsections (2) and (3). We would suggest that the same or a
similar provision is used for all other Judges.
343. We are told that the problem is particularly acute in the field of patents and the like, where
the parties are anxious to arbitrate but where the only acceptable arbitrators are Judges.

STATUTORY ARBITRATIONS

Clauses 96 to 101
344. These provisions adapt Part I to statutory arbitrations. This exercise is not within our remit
and we have played no part in it.

CHAPTER 4PART III OF THE BILL

Clauses 102 to 107

345. The purpose of Part III is to re-enact the substance of the provisions relating to the
recognition and enforcement of foreign arbitral awards contained in Part II of the Arbitration Act
1950 and the Arbitration Act 1975, which gave effect to the UKs treaty obligations under the
Geneva and New York Conventions respectively.
346. The Geneva Convention only remains in force as between state parties to that Convention
which have not subsequently become parties to the New York Convention. So far as the UK is
concerned, it is believed that only a few states (e.g. Malta) remain in that category. Accordingly,
in the interest of brevity, Clause 102 states simply that Part II of the Arbitration Act 1950
continues to apply to Geneva Convention awards which are not also New York Convention
awards rather than restating or refraining the non-user-friendly language of Part II of that Act.
347. The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards
adopted by the UN Conference on International Arbitration on 10 June 1958 is not only the
cornerstone of international dispute resolution; it is an essential ingredient more generally of
world trade. If it did not exist, or even if it were not to have been widely adopted by the worlds
trading nations, contracting parties from different legal cultures might be reduced to resolving
their disputes in the courts of a country which would be alien to either one or both of them
(because of doubts as to the enforceability across national boundaries of arbitration awards made

in a neutral country). Clauses 102 to 107 to the Bill restate the current implementing legislation
(contained in the 1975 Act) in concise and simple language.
348. As we have indicated earlier in Chapter 2, we take the view that the definition of in writing
is consistent with Article II.2 of the New York Convention. For clarity therefore, we consider that
the Bill can be improved by including an express cross reference to this definition in Clause
103(2). This would have the added advantage of ensuring that the enforcement of foreign awards
under Clause 66 and enforcement under the New York Convention are in this respect in line with
each other.
349. One intriguing question was highlighted by the decision of the House of Lords
in Hiscox v. Outhwaite [1992] 1 AC 562. This concerns the case of an arbitration with its seat in
country A and an award that states expressly that it was made in country B. Country A might be
a New York Convention country, and B notor vice versa. (Article I.1 of the Convention
provides that it shall apply to awards made in the territory of a State other than the State in
which recognition and enforcement of such awards are sought (emphasis added).)
350. Distinguished authors (writing before the decision in Hiscox) are split on the question. Dr A.
J. van den Berg in the first edition of his authoritative book on the Convention (at pp. 294/295)
states: The award must be deemed to be made in the country which is indicated in the award as
[the] place where the award was made. (emphasis added) [sic].
351. But the late Dr F. A. Mann QC (in [1985] Arb. Int. 107/108) wrote, after recalling that little
learning then existed on the question of where an award is made, It is submitted that an award is
made at the place at which the arbitration is held, i.e. the arbitral seat admittedly the view
suggested here attributes a somewhat strained meaning to the word made. But for the reasons
given the natural meaning of the word leads to such strange consequences that a less literal
interpretation would seem to be justified.
352. In Hiscox the question arose as to whether, where the seat of arbitration was in England
and for all practical purposes it was a domestic English arbitration, the award became a
foreign award for the purposes of the Convention merely because it stated expressly on its face
that it was signed in Paris? According to the House of Lords, applying a literal interpretation of
Article I.1 of the Convention, the answer was Yes.
353. So far as arbitrations held in England, Wales or Northern Ireland are concerned, the strange
consequences of this result have been removed by Clause 53 of the Bill (see above).
354. The DAC is of the view that this question should be resolved by incorporating into Part III of
the proposed new legislation an equivalent provision to that contained in Clause 53to the effect
that an award shall be treated as made at the seat of the arbitration, regardless of where it was
signed, despatched or delivered to any of the parties. It seems to us that this is consonant with the
UKs treaty obligations under the New York Convention.

CHAPTER 5PART IV OF THE BILL

355. We have drawn attention to Clause 111 under Clause 84. The other Clauses in this Part we
trust are self-evident, and were not within the remit of the DAC, although we do welcome the
inclusion of Northern Ireland.

CHAPTER 6SUPPLEMENTARY RECOMMENDATIONS

356. The foregoing discussion is based on the text of the Bill as it was introduced in December
1995. Since that date we have had the advantage of considering the speeches made in the House of
Lords on the Second Reading and some comments and suggestions from others, as well as looking
once again at the text of the Bill in the course of preparing this Report. In consequence, we make
the following recommendations.

Clause 2. Scope of application

357. A number of foreign readers have expressed the view that Clause 2(2)(a) does not
sufficiently make clear that the applicable law referred to is the law applicable to the arbitration
agreement rather than the law applicable to the substantive agreement (which would have far
reaching and wholly unintended consequences). For the sake of clarity, we would suggest an
amendment along the following lines:
where the applicable law to that agreement is the law of England and Wales or Northern
Ireland; and

Clause 7. Separability of arbitration agreement

358. In view of the definition of agreement in Clause 5, we suggest that the words (whether or
not in writing) be inserted after the words another agreement in Clause 7, since otherwise it
could be said that this Clause is only effective in relation to such other agreements as are in
writing. This is not the intention.

Clause 14(5). Commencement of arbitral proceedings

359. It has been suggested that the words gives notice should be replaced by serves, in
conformity with Clauses 14(3) and 14(4). This is a matter for Parliamentary Counsel to consider.

Clause 16(6)(b) and Clause 21(4)

360. The word any follows a negative and so could be read as meaning all. This is not the
intention. We therefore suggest that the words one or more matters follow the word any in
these provisions.

Clause 24(4). Power of court to remove arbitrator

361. We have explained in Chapter 1 above the reasoning behind Clause 29(3). Upon further
reflection, it appears to us that Clause 24(4) needs to be altered for the same reason. As currently
drafted, if an arbitrator resigns and is sued for his fees, he is not protected from such a breach of
contract action by the immunity in Clause 29. Rather, he can apply to the Court for protection
under Clause 25(3), and the Court may see fit to grant this, if appropriate. However, if an
arbitrator does not resign, but is removed by the Court under Clause 24, it would appear that he
will have the benefit of the immunity in Clause 29, come what may. In such circumstances, the
parties could not sue him for breach of contract, unless they could demonstrate bad faith. This is
anomalous. The DAC therefore recommends that Clause 24(4) be amended to provide that as well
as making such order as it thinks fit with respect to an arbitrators entitlement to fees, where the

Court removes an arbitrator, it also be given a discretion to make such order as it thinks fit with
respect to an arbitrators immunity under Clause 29. Such wide words would enable the Court, for
example, to remove the immunity but impose a ceiling on the amount of any liability.
362. Arbitrators may also be removed by agreement of the parties. However, the DAC does not
consider that a similar provision be made with respect to this, given that it would be contrary to
the whole basis of Clause 29 for parties to be able to agree on the removal of an arbitrators
immunity.

Clause 25(2). Resignation of arbitrator

363. There is a rogue in writing in this subsection, which should be deleted by virtue of Clause
5(1).

Clause 38(3). Security for costs

364. In the draft Clauses published in July 1995, the power to order security for costs was
expressed in very general terms. This elicited a number of responses which expressed concern that
there were no principles or guidelines for the exercise of this power. It is certainly the case that the
power to order security for costs, unless exercised with great care, can all too easily work injustice
rather than justice.
365. The rules and principles applied by the Courts with respect to security for costs have been
carefully worked out over many years, and are contained in a large amount of case law that has
developed alongside Order 23 of the Rules of the Supreme Court. Given the concerns referred to
above, the DAC considered whether to set out these rules and principles in the Bill. In the end we
decided that this would be simply impracticable: a codification of all the relevant case law would
be extremely difficult, would result in very lengthy and complicated provisions, and may well
have an unintended impact on how this area is approached by the Courts.
366. Clause 38(3) of the current draft of the Bill reflects what we initially concluded was the only
solution to this difficulty: it provides that arbitrators are to have power to order a party to provide
security for costs wherever the court would have power and that this power is to be
exercised: on the same principles as the court. In the light of many comments received since the
Bill was introduced (including a significant number of criticisms of this subsection from foreign
arbitration specialists and institutions), we have had to reconsider this area, and, after much
careful thought, we have concluded that Clause 38(3) requires amendment for the following
reasons:

(i) As drafted, this subsection is very far from being user-friendly. Without referring to the
Rules of Supreme Court, and the case law referred to in the relevant part of the White Book, it
would be impossible for any domestic or foreign user to determine what the nature and scope
of the power conferred here is. Lay arbitrators may have difficulty locating or even, perhaps,
understanding the relevant law (any error of law, of course, being a potential ground for
appeal). In the case of a foreign arbitration that has its seat in this country for the sole reason
that this is a neutral forum, it would be extremely undesirable for parties to have to instruct
English lawyers in order to make sense of this provision. This alone could constitute a

powerful disincentive to selecting this country as an arbitral seat. Indeed, throughout the Bill,
we have been very careful to avoid any such express cross-references to other legal sources.
(ii) One of the grounds on which an order for security for costs may be made in Court is that
the plaintiff is ordinarily resident out of the jurisdiction: see Order 23, Rule 1(1)(a) of the
Rules of the Supreme Court. On further consideration of the matter, we have concluded that it
would be very damaging to this countrys position as the leading centre for international
arbitrations to make this ground available to arbitral tribunals. It would reasonably appear to
those abroad who are minded to arbitrate their claims here that foreigners were being singled
out for special and undeserved treatment. (Of course if the parties agree to invest their
tribunal with power to order security for costs on this ground, they are free to do so.)
(iii) On reflection, the concerns expressed above as to the potential scope of the power
conferred by Clause 38(3) and the possibilities of injustice may be overstated. The other
provisions of the Bill confer very far-reaching powers on arbitrators, and it has been made
clear throughout that this is tempered, for example, by the mandatory duty in Clause 33. The
same would be true of the power to order security for costs: in exercising the power, the
tribunal would have to comply with Clause 33, and any serious irregularity could form the
basis of a challenge. In agreeing to arbitration, parties in effect agree that their disputes could
be decided differently from a Court, although in accordance with principles of justice. The
fact that arbitrators may decide an issue as to security for costs differently from a judge
appears to be no more than an aspect of this. It is true that if this power is improperly
exercised, a claim could, for example, be stifled without justification. It is equally true,
however, that the Bill contains mechanisms for parties to challenge any such injustice or
improper conduct, and sufficient warnings to arbitrators as to their mandatory duties.

367. We remain of the view that the power to order security for costs is an important one, and
should be given to arbitrators, and also that some basic restrictions should be set out in this
Clause, in the light of the points made above. To this end, we recommend that Clause 38(3) be
deleted, and replaced with a new provision along the following lines:
(3) The tribunal may order a claimant to provide security for the costs of the arbitration. Such
power shall not be exercised on the grounds only that such party is

(a) an individual ordinarily resident in a state other than the United Kingdom,
(b) a body corporate which was incorporated in or has its central management and control
exercised in a state other than the United Kingdom.

368. Such a provision would allow arbitrators a flexibility in exercising this power, within the
confines of their strict duty in Clause 33. The risk of an order on the sole ground that a party is
from abroad, would be removed. Similarly, there would be no need for an arbitrator, whether
domestic or foreign, to discern the English or Northern Irish law in this area, or, indeed, to instruct
local lawyers in this respect. An arbitrator may well exercise this power differently from a Court
(as with many other powers conferred by the Bill), but any misuse could be corrected under the
other provisions of the Bill.
369. It is of course the case that orders for security are not to be made automatically, but only
when the justice of the case so requires. We appreciate that cases are likely to arise when deciding

what is just may be very difficult. For example, a claimant may contend that he might be
prevented from continuing if he has to put up security, whilst at the same time a respondent is
contending that unless security is provided, he is likely to be ruined. However, to our minds, this
is merely an example of the balancing of factors in order to achieve the most just result possible
which is part of the essential function of arbitrators.
370. The power to award security for costs under the proposed provision could be exercised
against counter-claimants as well as claimants. This we have covered in the definition Clause (see
Clause 82(1)).

Clause 66. Enforcement of award

371. In the present Bill, we have provided that leave by a Court to enforce an award may not be
given if the award was so defective in form or substance that it is incapable of enforcement, if its
enforcement would be contrary to public policy or if the tribunal lacked substantive jurisdiction.
372. These are what are described as passive defences to the enforcement of an award. The
positive steps that may be taken are those we have set out in Clause 67 to 69, together with the
rights preserved in Clause 72 for someone who has taken no part in the arbitral proceedings.
373. In our view the way we have drafted Clause 66 sufficed to cover all the cases where
enforcement should be refused. However, since the Bill was published it has been suggested to us
that it would be advisable to spell out in more detail two particular cases, namely those where the
arbitral tribunal has purported to decide matters which are simply not capable of resolution by
arbitration, whatever the parties might have agreed (e.g. custody of a child) and those where the
tribunal has made an award which (if enforced) would improperly affect the rights and obligations
of those who were not parties to the arbitration agreement.
374. On the present wording, even if it could be said that either or both these cases fell outside the
three categories where leave to enforce shall not be given, it does not follow that the Clause
somehow sanctions enforcement in those cases. The reason for this is that the Clause does not
require the Court to order enforcement, but only gives it a discretion to do so. That discretion is
only fettered in a negative way, i.e. by setting out certain cases where enforcement shall not be
ordered. To our minds there is nothing to prevent a Court from refusing to enforce an award in
other appropriate cases. Unlike, for example, Clause 68, there is no closed list of cases where
leave to enforce an award may be refused. However, on reflection we consider that it would be
preferable to set out the two cases as further instances where the discretion of the Court is
negatively fettered, and we would suggest that a further category is added to subsection (3) along
the following lines:
it purports to decide matters which are not capable of resolution by arbitration or grants relief
which (if enforced as a judgment or order of the court) would improperly affect the rights of
persons other than the parties to the arbitration agreement.
375. Such a provision would best appear before the catch all case of public policy. It will be noted
that this wording takes advantage of the definition of parties to an arbitration agreement to be
found in Clause 82(2). Furthermore, to put the matter beyond any doubt, we would suggest that it
is made clear that subsection (3) is not a closed list, by inserting suitable words.

376. It is vital to include some such word as improperly since there is no doubt that there are
many cases where third party rights and obligations are perfectly properly affected, such as
guarantors or insurers who have agreed to pay the amount of an award to which they are not a
party. Furthermore, it must always be borne in mind that the parties rights and obligations may
well be governed by a law other than our own, under which, for example, matters are arbitrable
which would not be the case under our own law. In such cases it would not automatically follow
that the Court would refuse to enforce the award, unless of course public policy dictated that
course.
377. Apart from the enforcement procedure set out in this clause, under our law it is possible to
bring an action on an award, in much the same way as an action is brought on an agreement. This
method is expressly saved in Clause 81(2)(b). There is also an oblique reference to this in Clause
66(5) in the reference to rule of law. On reflection, it seems to us that it would make for greater
clarity to add the words or by an action on the award at the end of this subsection.
378. There is one further point. It seems to us that there is much to be said for a suggestion that the
Court must be informed on an application for enforcement if the award is an agreed award (see
Clause 51) if this is not apparent from the award itself, and that any enforcement order or
judgment of the Court should also state that it is made in respect of an agreed award, thus putting
everyone concerned on notice of that fact and avoiding the risk that third parties might be misled
into believing that the award was one made at arms length. We suggest that these requirements be
added to Clause 66.

Clause 69. Appeal on point of law

379. It has been pointed out that Clause 69(8) sets out the two pre-conditions to an appeal to the
Court of Appeal as alternatives, whereas they should be cumulative (as with the similar
preconditions in section 1(7) of the 1979 Act). We recommend that the Clause be amended
accordingly.

Clause 70. Challenge or appeal: supplementary

provisions
380. We note that the power to order security or bring the money payable under the award into
court only extends at present to applications under Clauses 67 or 68. This should be extended so
that the Court can impose these requirements as a condition of granting leave to appeal under
Clause 69. This is a tool of great value, since it helps to avoid the risk that while the appeal is
pending, the ability of the losing party to honour the award may (by design or otherwise) be
diminished.

Clause 74. Immunity of arbitral institutions, etc.

381. On reflection we consider that the wording of Clause 74(2) should be tightened so as to make
clear that the institution or person concerned is not liable without more for anything done or
omitted to be done by the arbitrator. Thus we suggest that the words by reason only of should be
substituted for the word for in this subsection.

Clause 79. Powers of court to extend time limits relating

to arbitral proceedings
382. It has been pointed out to us that Clause 79(1) as presently drafted could be said to be
inapplicable to, for example, Clause 70(3) where the time stipulated is not one having effect in
default of agreement between the parties. We agree with this comment and suggest that Clause
79(1) be amended along the following lines:
the court may by order extend any time limit agreed by them in relation to any matter relating
to the arbitral proceedings or applicable by virtue of any provision of this Part.

Clause 81. Saving for certain matters governed by

common law
383. We suggest that two additions should be made to the specific cases mentioned in sub-section
(2).
384. The first of these relates to confidentiality. For reasons we have explained, we have not
included specific provisions dealing with this matter. However, it seems to us that it would be
valuable to highlight the fact that our law does deal with it. Thus we suggest a further category
which could perhaps be in the following words:
confidentiality and privacy in relation to arbitrations.
385. The second addition we propose relates to arbitrability, which we have discussed in the
context of Clause 66. Again there is a lot of important law on this topic. We suggest a further
category which could perhaps be in the following words:
whether a matter is capable of resolution by arbitration.
386. The title to this Clause is Saving for certain matters governed by common law. We would
prefer the expression other rules of law to the words common law as this would include
legislation and be clearer to non-lawyers and those from abroad.

Clause 82. Minor definitions

387. The definition of question of law started life as part of the Clause dealing with appeals to
the Court; now Clause 69. The objective was to make clear that there was no question of an appeal
in respect of a matter of foreign law. Our law treats questions of foreign law as questions of fact.
Furthermore, we can see no good reason for allowing an appeal on foreign law, since ex
hypothesi the Court cannot give a definitive or authoritative ruling on such matters. The Courts
have refused to grant leave to appeal on questions of foreign law, but attempts are still made and it
would be desirable to put the matter beyond doubt.
388. The definition was moved to this Clause. It had, of course, to accommodate the fact that the
Bill is expressed to apply to Northern Ireland as well as England and Wales. However the present
definition, while it does this, also seems to indicate that where the seat of the arbitration is in
neither of these places, the meaning of question of law is not confined to questions of
(respectively) English law or the law of Northern Ireland. We would suggest that the definition be

amended, so that question of law means a question of law of England and Wales where the
application for leave to appeal is made to a Court in England and Wales, and a question of the law
of Northern Ireland, where an application for leave to appeal is made to a Court in Northern
Ireland.

Clause 85. Domestic arbitration agreements

389. It has been pointed out to us that the way domestic arbitration agreements is defined
(which is taken from the existing legislation) means that agreements made by sovereign states
which incorporate an arbitration clause fall into this category. We are sure that this was not the
intention, so that if the distinction between domestic and non-domestic arbitrations is to remain,
the opportunity should be taken to correct this anomaly.

Clause 93. Appointment of judges as arbitrators

390. For the reasons set out in our discussion of this Clause in Chapter 1, we recommend that this
provision be extended to judges generally.

Clauses 94-100. Statutory arbitrations

391. Although the application of Part I to statutory arbitrations is not part of our remit, we note
that during the Second Reading Lord Lester suggested that it might be a requirement of European
law in cases of compulsory arbitration that the arbitrators should be independent as well as
impartial. We can offer no view on this point, but if it is felt appropriate to include any such
requirement in the context of statutory arbitrations, great care should be taken to make clear that
this requirement has no application to private or other consensual arbitrations, so as to avoid any
risk of this concept being imported into other cases. This, for the reasons already given, would in
our view be most damaging. We understand that Lord Lester shares our view that a requirement of
independence for private or other consensual arbitrations is neither necessary nor desirable.

Clause 103. New York Convention awards

392. For the reasons set out in our discussion in Chapter 3, this Clause should be amended so as to
cross-refer to the definition of writing to be found in Part I of the Bill, and should also incorporate
the recommendation that an award should be treated as made at the seat of the arbitration,
regardless of where it was signed, despatched or delivered to any of the parties.

Clause 107. Saving for other bases of recognition or

enforcement
393. It has been pointed out that, as drafted, this Clause may not save enforcement under Part II of
the 1950 Act. This is a matter for Parliamentary Counsel to consider.

CHAPTER 7CONCLUSIONS
394. The Arbitration Bill and this Report are the result of a long and wide-ranging process of
consultation with interested parties, probably the most comprehensive for any Bill of this kind.
Our recommendations are based on the many responses that we have received as well as our own

researches and discussions. In a number of cases, of course, we have had to make decisions on
matters where more than one point of view has been expressed. What we should emphasise,
however, is that all were agreed that it is high time we had new legislation, to the extent that many
people have stated to us that for this reason they were not disposed to delay progress by
stubbornly insisting on their point of view on particular points; and have demonstrated that this is
the case by being ready and willing to reach compromise solutions. We are convinced (as all are)
that further delay will do grave and probably irretrievable damage to the cause of arbitration in
this country, thus damaging our valuable international reputation as well as the promotion here of
this form of dispute resolution.
395. We have attempted to produce a draft which can be read, understood and applied by
everyone, not just lawyers learned in this branch of our law. Thus our aim has been to make the
text user-friendly and the rules it contains clear and readily comprehensible, so that arbitration is
available to all who wish to use it. This has not been an easy task, since in the nature of things this
form of dispute resolution raises highly complex and sophisticated matters. We have attempted it,
however, in the hope that our efforts will not only encourage and promote arbitration, but also
help to achieve what we believe to be the true object of this form of dispute resolution, namely (in
the words of Clause 1 of the Bill itself) to obtain the fair resolution of disputes by an impartial
tribunal without unnecessary delay or expense.
1 * Published with the kind permission of the Department of Trade and Industry.

Chapter

APPENDIX K: Departmental Advisory Committee on Arbitration

Law Supplementary Report on The Arbitration Act 1996*
APPENDIX K: Departmental Advisory Committee on Arbitration Law
Supplementary Report on The Arbitration Act 1996*
1

(January 1997: Chairman: The Rt Hon Lord Justice Saville)

SUPPLEMENT TO THE DAC REPORT ON THE ARBITRATION BILL, OF

FEBRUARY 1996
CONTENTS
Chapter 1Introduction
Chapter 2Part I of the Act
Chapter 3Part II of the Act
Chapter 4Part III of the Act
Chapter 5Part IV of the Act
Appendix AThe new RSC Order 73 and Allocation Order

Appendix BTransitional Provisions

CHAPTER 1INTRODUCTION
1. In our Report of February 1996 we discussed the provisions of the Arbitration Bill as
introduced in the House of Lords in December 1995. In Chapter 6 of that Report we set out some
recommendations for changes to some of the provisions of the Bill, having considered the
speeches made in the House of Lords on the Second Reading and some comments and suggestions
from others; and having also carried out our own re-examination of the Bill. This Report discusses
the changes that were made to the Bill during its passage through Parliament and thus the
differences between that Bill and the Arbitration Act 1996, which received the Royal Assent on 17
June 1996. All these changes were recommended by the Committee, though some differ from or
are in addition to the suggestions originally made in Chapter 6. Not all the changes suggested in
Chapter 6 were adopted, but again this met with the approval of the Committee, after yet further
reflection and consideration of comments and suggestions made to us.
2. Certain decisions were also taken by the DAC after the Act received the Royal Assent, with
respect to the commencement of its provisions. These are also discussed with respect to the
particular sections affected, and in the context of the transitional provisions.
3. This Supplementary Report is to be read in conjunction with our Report of February 1996. The
numbering of sections corresponds to the Act in its final form. As several sections were added to
the Bill during its passage through Parliament, some of the references are slightly different from
those in Chapter 6 of our February 1996 Report.
4. The new Order 73 of the Rules of the Supreme Court, together with the new Allocation Order
(which stipulates the Courts to which arbitration applications may be made) have been included in
Appendix A to this Report, together with a short commentary. The new Order 73 has been
completely recast in order to reflect the changes brought about by the Act and to simplify the
procedure for Court applications concerning arbitration. Although drafted in consultation with
some members of the DAC, the new rules were not within the latters remit, and are therefore
included here simply for ease of reference.
5. By the Arbitration Act (Commencement No. 1) Order 1996 (S.I. 1996 No. 3146), the Act (with
the qualifications set out in that Order) comes into force on 31st January 1997. This Order also
contains transitional provisions. The Order is reproduced in Appendix B, together with a short
commentary.

CHAPTER 2PART I OF THE ACT

Section 2. Scope of application

6. Clause 2 of the Bill as introduced in the House of Lords in December 1995, read as follows:
2.(1) The provisions of this Part apply where the law of England and Wales or Northern
Ireland is applicable, or the powers of the court are exercisable, in accordance with the rules of the
conflict of laws.
(2) They apply, in particular

(a) to matters relating to or governed by the arbitration agreement, where the applicable law is
the law of England and Wales or Northern Ireland; and
(b) to matters governed by the law applicable to the arbitral proceedings, where the seat of the
arbitration is in England and Wales or Northern Ireland.

(3) The following provisions apply whatever the law applicable to the arbitration agreement or the
arbitral proceedings:

(a) sections 9 to 11 (stay of legal proceedings);

(b) section 43 (securing the attendance of witnesses) and section 44 (court powers exercisable
in support of arbitral proceedings); and
(c) section 66 (enforcement of arbitral awards).

(4) The court may refuse to exercise any power conferred by this Part if, in the opinion of the
court, the fact that the seat of the arbitration is outside England and Wales or Northern Ireland, or
that when designated or determined the seat is likely to be outside England and Wales or Northern
Ireland, makes it inappropriate to exercise that power.
7. This provision was explained at paragraphs 23 to 25 of our Report of February 1996. The
intention was to set out a clear statement identifying the scope of application of the Act, without
attempting to codify any rules of the conflict of laws. The basic elements of this clause, as
originally drafted, may be summarised as follows:

(i) Clause 2(1) simply provided that the Act applies wherever English law is found to be
applicable to an arbitration, or where the powers of the English Court are exercisable in
relation to an arbitration. Whether or not English law is applicable, and whether or not the
powers of the English Court are exercisable, are both matters to be determined by reference to
appropriate rules of the conflict of laws, which are to be found elsewhere.
(ii) Clause 2(2), as originally drafted, further refined this basic principle by recognising that
different elements in an arbitration may well be governed by different laws. The law
governing the merits of the dispute (e.g. a choice of law clause in a contract) may not
necessarily govern the arbitration clause itself, as the latter constitutes a separate agreement.
Similarly, the law governing the procedure of the arbitration may well be a different law from
that governing the merits of the dispute. Consequently, if the arbitration agreement was
governed by English law, those provisions in the Act which concern arbitration agreements
would apply (clause 2(2)(a)). Similarly, if the seat of the arbitration was in England and
Wales or Northern Ireland, those parts of the Act which concern the arbitral procedure (as
distinct from matters of substance) would apply (clause 2(2)(b)). This further refinement was
necessary in order to avoid the danger that all the provisions of Part I of the Act would be
imported if English law is found to govern one particular aspect of an arbitration. For
example, an arbitration may have a French seat, with French law governing the procedure, but
English law governing the arbitration agreement. In such a situation, only those provisions of
the Act which concern arbitration agreements should apply. It would be quite wrong to apply
provisions of the Act which concern arbitral procedure, as this would be governed by French
law. Indeed, if this were not the case, a choice of English law to govern an arbitration
agreement would entitle a party to invoke the jurisdiction of the English Court wherever the

seat of the arbitration might be, thereby endowing the English Court with an unacceptable
extra-territorial jurisdiction.
(iii) The remaining parts of the original clause 2 made specific provision for the New York
Convention (clause 2(3)(a) and (b)stays of legal proceedings and the enforcement of
awards) and enacted, section 25 of the Civil Jurisdiction and Judgments Act 1982 (clause
2(3)(b)powers in support of foreign arbitrations).

8. In Chapter 6 of our February 1996 Report, at paragraph 357, we recommended that the original
clause 2(2)(a) be slightly amended in order to make clear that the applicable law referred to there
was the law applicable to the arbitration agreement, rather than the law applicable to the
substantive agreement.
9. Following the introduction of the Bill into Parliament, we had the benefit of further detailed
discussions with a number of leading arbitration experts from abroad, and took the opportunity of
reconsidering this provision. It is fair to say that whilst there was unanimous support for the
inclusion of such a provision identifying the scope of the Act, there was considerable disquiet as
to the clause as drafted. It was felt that the provision was sound in principle, but unworkable in
practice, for the following reasons:

(i) The clause was complicated and extremely difficult to understand. To this end, it appeared
to defeat its own object.
(ii) In order to apply clause 2(2), it was necessary to be able to identify all those provisions of
the Act which concerned the arbitration agreement, as distinct from all those that concerned
the arbitral procedure. As explained above, if for example English law governed the
arbitration agreement, but not the arbitral procedure, by virtue of clause 2(2) only those
provisions in the Act which concerned the arbitration agreement (as opposed to the arbitral
procedure) would apply. The provisions of the Act had therefore to be individually
characterised and separated in this way.
However, the original clause made no attempt to characterise each provision of the Act,
precisely because this had proved an extremely difficult and complex exercise. Many
provisions concern both arbitration agreements and arbitral procedure, and there appeared to
be a divergence of view with respect to many others.
(iii) There was a feeling amongst certain foreign experts that the original clause gave the
wrong impression, in that it appeared to endow the English Court with inappropriate
extraterritorial powers, when this was clearly not intended.

10. In the light of these difficulties, the DAC decided to recast the whole provision in a different
form that would be far easier to understand and that would be entirely workable in practice. The
policy behind the section, however, was not materially altered. The final section 2 provides a clear
and simple scheme, which was welcomed by all those who had originally expressed concerns.
11. Section 2(1) states the basic rule: Part I of the Act applies to arbitrations which have their seat
in England and Wales or Northern Ireland. The concept of a seat was referred to in our February
1996 Report, and is defined in section 3 of the Act. The seat of an arbitration refers to its legal
place, as opposed to its geographical location. It is, of course, perfectly possible to conduct an
arbitration with an English seat at any convenient location, whether in England or abroad.

12. If the seat of an arbitration is in England and Wales or Northern Ireland, the arbitration will be
governed by this Act. If, however, a foreign law has been chosen to govern any particular aspect
of the arbitration, such as the arbitral procedure or the arbitration agreement, or is otherwise
applicable to any such aspect, this is catered for by section 4(5). Therefore, reference may be
made to this Act in the first instance, and then back to another law with respect to a specific issue.
Whilst a process of characterisation may still have to be done, the combination of section 2 and
section 4(5) avoids the dangers that:

a choice of English law with respect to one part of an arbitration will import other parts of the
Act that concern other aspects of the arbitration;
a choice of England as the seat of the arbitration will necessarily entail the imposition of
every provision of the Act.

13. Sections 2(2) to (5) set out a series of deviations from the basic rule in section 2(1).
14. Section 2(2) caters for the New York Convention. Under the terms of this Convention, the
English Courts are obliged to recognise and enforce arbitration agreements and foreign arbitral
awards. Sections 9 to 11 (stays of legal proceedings etc) and section 66 (enforcement) could not,
therefore, be restricted to arbitrations with a seat in England and Wales or Northern Ireland. These
particular sections therefore apply even if the seat of an arbitration is abroad. Equally, these
sections will apply if no seat has been designated or determined.
15. Section 2(3) extends the power of the Court to grant interim relief in support of arbitrations
with a foreign seat, thereby giving effect to section 25 of the Civil Jurisdiction and Judgments Act
1982, as was intended by the original clause 2(3)(b). The power of the Court to exercise these
powers is restricted in the last part of this section to appropriate cases. There may well be
situations in which it would be quite wrong for an English Court to make an interim order in
support of a foreign arbitration, where this would result in a possible conflict with another
jurisdiction.
16. Section 2(4) deals with those cases where a seat has still to be designated or determined, but
where recourse to the Court is necessary in the meantime. For example, an arbitration agreement
may provide that the tribunal, once constituted, will designate the seat of the arbitration. The
agreement may also provide that any arbitration must be commenced within a specified time
period. If that time period is exceeded, could a party make an application to the English Court
pursuant to section 12 of the Act for an Order extending time for the commencement of
proceedings (e.g. in order that a seat may be designated)? See e.g. International Tank & Pipe
S.A.K. v. Kuwait Aviation Fuelling Co. K.S.C. [1975] QB 224 (C.A.). Clearly this would not be
possible under section 2(1), as long as the arbitration was without an English or Northern Irish
seat. It was our view, however, that the English Court should be able to exercise supportive
powers if there is a sufficient connection with England and Wales or Northern Ireland such that
this is appropriate (i.e. the requirement in section 2(4)(b)), and if there will be no clash with a
foreign jurisdiction. For example, there will be cases where it is extremely likely that once a seat
is designated, that seat will be England and Wales or Northern Ireland.

17. Section 2(4) therefore gives the English Court powers where that Court is satisfied, as a matter
of English law, that the arbitration in question does not have a seat elsewhere. As long as there is
no seat elsewhere, there could be no possible conflict with any other jurisdiction.
18. Both sections 2(3) and 2(4) are based on a very clear policy: the English Court should have
effective powers to support an actual or anticipated arbitration that does not fall within section
2(1). However, such powers should not be used where any other foreign Court is already, or is
likely to be, seized of the matter, or where the exercise of such powers would produce a clash with
any other more appropriate forum.
19. Section 2(5) provides that section 7 (separability) and section 8 (death of a party) apply
whenever the law applicable to an arbitration agreement is English law, even if the seat of the
arbitration is abroad. Without this provision, reference would have to be made to the old English
common law with respect to separability and the effect of death in every arbitration where the
arbitration agreement is governed by English law, but the seat is not in England and Wales or
Northern Ireland, such as to be within Section 2(1). This would be an absurd result.

Section 7. Separability of arbitration agreement

20. As we said in Chapter 6, we suggested that the words (whether or not in writing) be inserted
after the words another agreement in view of the definition of agreement in what is now
section 5, in order to preclude any argument that section 7 only applies where the other agreement
is in writing. This amendment was duly made.

Section 14(5). Commencement of arbitral proceedings

21. Parliamentary Counsel considered that it was not necessary to make the amendment suggested
in paragraph 359 of Chapter 6 and we accepted his advice.

Section 16(6)(b) and section 21(4)

22. The Bill used the word any after a negative which could thus be read as meaning all. This
was not intended. We suggested a form of wording in paragraph 360 of Chapter 6 but were
persuaded that a neater solution was to replace any with a, and this was done.

Section 24(4). Power of Court to remove arbitrator

23. In paragraph 361 of Chapter 6, we drew attention to the fact that the immunity of an arbitrator,
under what is now section 29, did not extend to protect an arbitrator from the consequences of
resigning, though some protection is available under what is now section 25(3). This we
contrasted with what is now section 24, since an arbitrator removed by the Court still enjoyed the
section 29 immunity. We thought that this was anomalous and that the Court should be given a
discretionary power to make such order as it thought fit with regard to the immunity of an
arbitrator it removed.
24. This suggestion was not adopted. After further consideration we concluded that the anomaly
was more apparent than real and that the suggestion would undermine the reasons for providing
arbitrators with the immunity expressed in section 29. As will be seen from paragraph 362 of

Chapter 6, we were against adopting the same suggestion when the parties agreed to remove an
arbitrator under what is now section 23. What it seemed to us would be likely to happen if our
original suggestion were adopted is that the parties, instead of privately agreeing to remove an
arbitrator, would instead apply to the Court in the hope that the immunity would be wholly or
partially removed. This seemed to us to be undesirable.
25. It should be remembered, of course, that while an arbitrator retains his immunity if removed
by the Court, what is now section 24(4) does give the Court the power to make orders about his
fees and expenses, including those already paid.

Section 25(2). Resignation of arbitrator

26. At paragraph 363 of Chapter 6 we noted that the words in writing appeared, though by
virtue of section 5(1) this was unnecessary. These words were duly removed by amendment.

Section 32, section 45 and section 69

27. The Bill used the words unless the court certifies. These were changed by amendment to
which shall not be given unless the court considers. This amendment was made to make clear
that where an appeal is desired from a decision of the Court, leave must be obtained from that
Court itself, and will always be required. Leave may not be obtained from the Court of Appeal. As
originally drafted, the incorrect impression was given that leave of the Court may not be necessary
where that Court certified the issue as being one of general importance or one which for some
other special reason should be considered by the Court of Appeal.

Section 38(3). Security for costs

28. The power for arbitrators to order security for costs was included in the Bill for the reasons set
out at paragraphs 189 to 199 of our February 1996 Report. In the Bill as introduced, we included a
provision that the arbitral tribunal should apply the same principles as the Court in exercising this
power. This was an attempt to meet the concerns of those who considered that since under the
existing law arbitrators had no power to order security (unless the parties had expressly agreed to
confer such a power), there was a need to set out some principles to guide arbitrators. However, as
we explained at paragraphs 364 to 370 of Chapter 6, we concluded in the end that this was not a
good idea and that it would be better to amend this part of the Bill, by deleting the references to
Court principles and by making clear that the fact that a claimant or counter-claimant came from
abroad was not a ground for ordering security. Our suggestions were adopted. We proposed a
specific amendment, but Parliamentary Counsel improved upon it, in particular by not using the
word only since this might enable it to be argued that the fact that the claimant or counterclaimant came from abroad could be taken into account so long as there were other supporting
factors as well. This, of course, was not our intention.
29. It should also be noted that the Bill as introduced used the word party in relation to orders
for security for costs. This did not matter so long as there was a reference to Court principles, but
once this was deleted, it was necessary to change this to claimant, since it was not our intention
to give arbitral tribunals the power to order respondents to provide security. Section 82 defines
claimant as including counter-claimant.

Section 46(1)(b). Equity clauses

30. Whilst the provisions of Part I of the Act apply to arbitrations commenced after the Act comes
into force, regardless of when the arbitration agreement was made (by virtue of section 84), strong
representations were made to the DAC that section 46(1)(b) should be commenced differentlyin
such a way as to preserve the existing law on the validity of equity clauses with respect to
arbitration agreements that already exist and were made before the Act comes into force. Many
existing contracts contain standard clauses which read as if they are equity clauses, but which
have been interpreted differently by the Courts. This is the case, for example, with so-called
honourable engagement clauses in reinsurance treaties. It was thought that if section 46(1)(b)
were to apply to existing arbitration agreements, this would entail a retrospective substantive
change in the meaning and effect of existing contracts, different from that which the contracting
parties would have contemplated at the time of contracting. The DAC agreed with this view, and
decided that section 46(1)(b) should not apply to arbitration agreements that were made before the
Act comes into force. Existing case law on the interpretation and effect of equity clauses will
therefore continue to apply to such agreements. Transitional provisions have been put in place
accordingly (see Appendix B).

Section 57. Correction of award or additional award

31. A minor drafting change was made to section 57(3)(b).

Section 66. Enforcement of award

32. In paragraphs 371 to 378 of Chapter 6 we made various suggestions for changes to the
provision as it then appeared in the Bill. We were concerned that we had not covered enough of
the cases where leave to enforce an award could be refused. We also suggested that it should be
made clear that the list was not a closed list. However, on further reflection we concluded that it
would be preferable, instead of having a list which would have to be expressed as not closed, to
have no list at all; instead relying on the fact (as noted at paragraphs 373 and 374) that the opening
words of the provision do not require the Court to order enforcement, but only give it a discretion
to do so. Thus what was subsection (3) of the Bill was deleted by amendment. However, it will be
noted that in what is now section 81 it is made clear (by an amendment to the Bill as introduced)
that any rule of law relating in particular to matters which are not capable of settlement by
arbitration or to the refusal of recognition or enforcement of an arbitral award on the grounds of
public policy continues to operate.
33. The suggestion that there should be an express reference to an action on the award was
adopted and this reference is now to be found in section 66(4) of the Act. This in turn meant that
the reference to an action on an award in what is now section 81 was unnecessary and this latter
reference was accordingly removed by amendment.
34. In paragraph 378 of Chapter 6 we suggested that where the application was to enforce an
agreed award, the Court should be notified of that fact, which should also be recorded in any order
for enforcement. Upon reflection, however, it seemed to us that such requirements would be better
placed in the relevant Rules of Court, and this, we are informed, will be done.

Section 68. Challenging the award: serious irregularity

35. In the Bill, one of the grounds for challenging an award was expressed as uncertainty or
ambiguity of the award. It was pointed out to us that this wording might encourage attempts to
challenge an award under this provision on the grounds that the reasoning of the decision was
uncertain or ambiguous. This was certainly not our intention. What we wanted to cover were cases
where the result of the award was uncertain or ambiguous. Where the quality of the award was in
question, there would only be recourse under the limited right to appeal under section 69. To make
matters clear, this part of the section was amended and now reads uncertainty or ambiguity as to
the effect of the award.

Section 70. Challenge or appeal: supplementary

provisions
36. In paragraph 380 of Chapter 6 we suggested that the power to order security or that the amount
of the award be brought into Court should be extended so as to apply to applications and appeals
under what is now section 69, as well as what are now sections 67 and 68. This suggestion was
adopted and the appropriate amendments made to Section 70.
37. Subsection 70(6) (security for costs) was further amended in order to bring this provision into
line with the amended section 38(3), which has been referred to above.

Section 74. Immunity of arbitral tribunals etc

38. In paragraph 381 of Chapter 6 we suggested tightening the wording of subsection 2. This
suggestion was adopted by inserting into this subsection after the word liable the words by
reason of having appointed or nominated him. Without this amendment it could have been
suggested that an immunity existed even where, for example, an institution conspired with an
arbitrator to act partially.

Section 76. Service of notices etc

39. Some minor textual amendments were made to the Bill as introduced, in order to tie this
provision with others concerning the giving of notices.

Section 77. Powers of court in relation to service of

documents
40. What was subsection (5) of Clause 77 in the Bill as introduced was deleted on amendment as
being unnecessary. The point was already covered by section 76(6).

Section 79. Power of court to extend time limits relating

to arbitral proceedings
41. In paragraph 382 of Chapter 6 we noted that this provision did not cover cases where the time
stipulated was not one having effect in default of agreement between the parties e.g. what is now
section 70(3). We suggested an amendment to what is now section 79(1). This suggestion was not

adopted, but the point was covered by adding the words the extending or abridging of periods to
what is now section 80(5).

Section 80
42. The word appeal was added by amendment to this provision, so it would cover appeals as
well as applications.
43. A minor change was also made to subsection (5) (insertion of the words the extending or
abridging of periods) in order to tie this provision in with relevant Rules of Court.

Section 81. Saving for certain matters governed by

common law
44. In paragraphs 383 to 386 of Chapter 6 we made a number of suggestions. First we suggested a
reference to privacy and confidentiality. This suggestion was not adopted, since we finally
concluded (especially as the law on this topic is in a stage of development) that it would be better
to have no express reference at all, and to rely instead as necessary on the general opening words
of this section. The second suggestion (namely an express reference to whether a matter is capable
of resolution by arbitration) was adopted and the words matters which are not capable of
settlement by arbitration added by amendment. We also suggested changing the words common
law in the title, but were persuaded that this was not really necessary.

Sections 82 to 83. Minor definitions

45. In paragraphs 387 and 388 of Chapter 6 we raised a point of drafting on the definition of
question of law. This was dealt with by deleting the words where the seat of the arbitration is
and inserting in their place the words for a court.
46. Further minor amendments were made to sections 82 and 83 in the light of the new section
105 that was added (meaning of court).

CHAPTER 3PART II OF THE ACT

Sections 85-87. Domestic arbitration agreements

47. In paragraphs 317 to 331 of our February 1996 Report, we set out the reasons why the rules
governing domestic arbitration agreements had been grouped together in sections 85 to 87 of Part
II of the Act, and our provisional view as to whether or not the distinction in English law between
international and domestic arbitration should be maintained. In July 1996, the Department of
Trade and Industry published a consultation document on the commencement of the Act in which,
amongst other matters, views were sought on this issue. The majority of respondents were in
favour of the abolition of this distinction, and the application of the international regime
throughout (i.e. a mandatory stay of legal proceedings in all cases, and the ability to exclude the
right to appeal on a point of law at any stage in all cases).
48. At about the same time as this consultation document was published, the Court of Appeal
upheld the decision of Waller J in Philip Alexander Securities and Futures Limited v. Bamberger
and others (unreported: 8 May 1996 (Commercial Court); 12 July 1996 (Court of Appeal)), in

which it was held (in the context of the Consumer Arbitration Agreements Act 1988) that the
distinction between international and domestic arbitration is incompatible with European
Community law because it amounts to a restriction on the freedom to provide services contrary to
Article 59 of the Treaty of Rome and/or unlawful discrimination contrary to Article 6.
49. In the light of the responses to the consultation document, the decision of the Court of Appeal,
and the factors we had originally set out in our February 1996 Report, the DAC has since decided
that, as matters currently stand, there is no option but to abolish this distinction. Indeed, on one
view, in the light of the Philip Alexander case, the distinction has already been removed from
current English law. However, it is to be noted that (at the time of going to press) an application
for leave to appeal the Philip Alexander case is pending before the House of Lords, and there
remains the possibility that the question will be referred to the European Court.
50. In these circumstances, sections 85 to 87 have not been brought into force by the
Commencement Order. The present intention is to repeal these sections by an Order made
pursuant to section 88 of the Act, although this may now depend upon the outcome of the Philip
Alexander case.

Section 85
51. In paragraph 389 of Chapter 6 we noted an anomaly in the definition of domestic arbitration
agreement and suggested that the opportunity should be taken to correct it. However, in view of
the position with respect to the future of the distinction between domestic and non-domestic
arbitration agreements, this suggestion was not adopted.
52. Various other minor textual amendments were also made to this section, which now are of no
consequence.

Section 88
53. A minor textual amendment was made to this section, in order to reflect the amendments made
to the consumer provisions of the Act (the new sections 89 to 91).

Sections 89 to 91. Consumer arbitration agreements

54. Clauses 89 to 93 of the Bill as introduced into Parliament reproduced the Consumer
Arbitration Agreements Act 1988. These provisions were removed by amendment, and replaced
by what is now sections 89 to 91, which refer to the Unfair Terms in Consumer Contracts
Regulations 1994 (implementing EC Council Directive 93/13 EEC). The consumer provisions of
the Act were beyond the remit of the DAC, and are therefore not commented upon here. For an
explanation of these amendments, reference should be made to Hansard at HL Vol. 571 No. 72,
cols. 152-155 (2 April 1996).

Section 93. Appointment of judges as arbitrators

55. Our suggestion in paragraph 390 of Chapter 6 was not adopted.

Sections 94-98. Statutory arbitrations

56. The issue that we noted at paragraph 391 of Chapter 6 concerning the requirement of
independence in statutory (compulsory) arbitration was debated in the House of Lords (see
Hansard HL Vol. 569 No. 51, col. CWH 26-28 (28 February 1996)), but did not result in an
amendment to the Bill.
57. The words or difference were inserted in section 96(2) by way of tidying up.

CHAPTER 4PART III OF THE ACT

Section 100(2). New York Convention awards

58. In paragraph 392 of Chapter 6, we recommended that this provision be amended so as to
cross-refer to the definition of writing to be found in Part I of the Act, and also to incorporate our
recommendation that an award be treated as made at the seat of the arbitration, regardless of
where it was signed, despatched or delivered to any of the parties. This recommendation was
adopted.

Section 101
59. A minor textual amendment was made to section 101(2), in order to refer to the new section
105, that was added.

Section 102. Evidence to be produced

60. The wording of this provision was amended in order to bring it back into line with the wording
of the New York Convention itself.

Section 104. Saving for other bases of recognition or

enforcement
61. The concern recorded at paragraph 393 of Chapter 6 did not lead to any amendment.

CHAPTER 5PART IV OF THE ACT

Section 105. Meaning of the court: jurisdiction of

High Court and county court
62. This is a new section. It was added in order to confer order-making powers on the Lord
Chancellor to allocate matters as between different Courts, thereby providing for more flexibility
than was provided for by existing rules. Reference should be made to the Allocation Order set out
at Appendix B.

APPENDIX ATHE NEW RSC ORDER 73 AND ALLOCATION ORDER

Appendix A to the DAC Supplementary Report is not set out since it set out RSC Order 73 which
has been superseded by the new court rules.

APPENDIX BTRANSITIONAL PROVISIONS

70. As we said in paragraph 315 of our February 1996 Report, we decided to use the precedent of
previous arbitration statutes so that the new Act applies to arbitrations commenced after it came

into force, whenever the arbitration agreement was made. The transitional provisions reflect this,
but of course also have to deal with arbitration agreements and arbitrations which are to remain
governed by the pre-existing law.
71. Section 84(1) of the Act is a limiting provision, in that it stipulates that the Act does not apply
to arbitrations commenced before the date on which Part I comes into force, and this is of course
reflected in paragraph 2(a) of Schedule 2 to the Commencement No. 1 Order.
72. Section 84(2) is an enlarging provision, since it applies the Act to arbitrations commenced
after Part I comes into force, even if the agreement is made at an earlier time.
73. The remaining transitional provisions in paragraph 2 of Schedule 2 to the Commencement No.
1 Order, deal with arbitration applications to the Court. Paragraph 2(b) is designed to ensure that
the pre-existing law applies to all applications to Court made before Part I comes into force, and
that this will remain the case even if an arbitration is commenced after Part I comes into force.
Paragraph 2(c) is designed to ensure that applications relating to arbitral proceedings commenced
before Part I comes into force are themselves governed by the pre-existing law so as to avoid one
law applying to the arbitration proceedings and another to arbitration applications to the Court.
74. Paragraph 4 of Schedule 2 deals with the question of Equity Clauses in arbitration
agreements, which we deal with in Paragraph 30 of this Report.

THE ARBITRATION ACT 1996 (COMMENCEMENT NO. 1) ORDER 1996

(1996 No. 3146)
Made 16th December 1996
The Secretary of State, in exercise of the powers conferred on him by section 109 of the
Arbitration Act 1996(a), hereby makes the following Order:
1. This Order may be cited as the Arbitration Act 1996 (Commencement No. 1) Order 1996.
2. The provisions of the Arbitration Act 1996 (the Act) listed in Schedule 1 to this Order shall
come into force on the day after this Order is made.
3. The rest of the Act, except sections 85 to 87, shall come into force on 31st January 1997.
4. The transitional provisions in Schedule 2 to this Order shall have effect.
John M. Taylor
Parliamentary Under-Secretary of State for Corporate and Consumer Affairs, Department of Trade
and Industry
16th December 1996

SCHEDULE 1 (Article 2)
Section 91 so far as it relates to the power to make orders under the section. Section 105.
Section 107(1) and paragraph 36 of Schedule 3, so far as relating to the provision that may be
made by county court rules.

Section 107(2) and the reference in Schedule 4 to the County Courts (Northern Ireland) Order
1980 so far as relating to the above matter.
Section 108 to 110.

SCHEDULE 2 (Article 4)
1. In this Schedule:

(a) the appointed day means the date specified in Article 3 of this Order;
(b) arbitration application means any application relating to arbitration made by or in legal
proceedings, whether or not arbitral proceedings have commenced;
(c) the old law means the enactments specified in section 107 as they stood before their
amendment or repeal by the Act.

2. The old law shall continue to apply to:

(a) arbitral proceedings commenced before the appointed day;

(b) arbitration applications commenced or made before the appointed day;
(c) arbitration applications commenced or made on or after the appointed day relating to
arbitral proceedings commenced before the appointed day

and the provisions of the Act which would otherwise be applicable shall not apply.
3. The provisions of this Act brought into force by this Order shall apply to any other arbitration
application.
4. In the application of paragraph (b) of subsection (1) of section 46 (provision for dispute to be
decided in accordance with provisions other than law) to an arbitration agreement made before the
appointed day, the agreement shall have effect in accordance with the rules of law (including any
conflict of laws rules) as they stood immediately before the appointed day.

EXPLANATORY NOTE
(This note is not part of the Order)
With one exception, this Order brings into force the provisions of the Arbitration Act 1996. Those
provisions necessary to enable the substantive provisions to be brought into force are commenced
immediately. The substantive provisions come into force on 31st January 1997. Commencement is
subject to transitional provisions designed to ensure continuity of legal proceedings and to
preserve the current law on what are known as honourable engagement clauses in relation to
existing agreements.
Sections 85 to 87, which make special provision in relation to domestic arbitration agreements, are
not commenced.
1 * Published with the kind permission of the Department of Trade and Industry.

Chapter

APPENDIX L(i): LMAA Standard Procedure

APPENDIX L(i): LMAA Standard Procedure

Chapter

APPENDIX L(ii): LMAA ICP Procedure

APPENDIX L(ii): LMAA ICP Procedure

Chapter

APPENDIX L(iii): LMAA Small Claims Procedure

APPENDIX L(iii): LMAA Small Claims Procedure

Chapter

APPENDIX L(iv): Arbitration Claims

APPENDIX L(iv): Arbitration Claims

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