The defendant appointed an arbitrator and emailed a notice of the arbitration to an individual (Mr Cai), who was not an employee of the other party to the purported arbitration (the claimant in this action). However, Mr Cai had been handling the contract in question (and was the main contract point for the claimant) and there was a close relationship between his company and the claimant. After an award was handed down in favour of the defendant, the claimant applied to court pursuant to section 72 of the Arbitration Act 1996 for a declaration that the tribunal had not been properly constituted. Eder J held as follows:
- An application under section 72 does not have to be brought before an award is made. As confirmed by Walker J in London Steam Ship Owners v Kingdom of Spain (see Weekly Update 34/13), there is no need to confine section 72 in this way, because a party who does not participate in the arbitral proceedings is entitled to wait until an application to enforce the award. For that reason, there is no time limit equivalent to that specified for an application/appeal under sections 67-69 (ie 28 days) for an application under section 72.
- As was confirmed by Gross J in Lantic Sugar v Baffin (see Weekly Update 01/10), although section 76 of the Act, which deals with the service of notices, operates more flexibly than the CPR court regime for service, that does not obviate the need for the party itself (or its agent with actual/ostensible authority to accept service) to be served properly. A party should also actually be served, rather than merely become aware that there has been purported service.
- Eder J highlighted that service of a notice to commence arbitration is an important step which has significant legal consequences. Accordingly, even where an employee or agent has a wide general authority to act on behalf of his employer/principal, such authority does not (without more) generally include an authority to accept service of a notice of arbitration. On the facts, Mr Cai did not have any implied actual authority to accept such service. Nor did he have ostensible authority, no express representation having been made by the defendant that Mr Cai had authority to accept service.
- Nor had there been any "silent ratification" by the defendant, even though it had done nothing whatsoever to disown Mr Cai's unauthorised actions for 4 months. Eder J held that: "where an arbitral tribunal is not properly constituted, I do not consider that a party who has not participated in the arbitration proceedings can, in effect, be taken to ratify an award by mere silence and inaction". Nor had there been any "unequivocal act" amounting to positive ratification.
Accordingly, the judge confirmed that the tribunal had not been validly constituted.
COMMENT: This case offers a stark reminder of the importance of getting the procedural steps right when commencing arbitration. Here, the party which participated in arbitral proceedings and obtained an award in its favour, wasted time and money pursuing an arbitration which was in fact never validly commenced by failing to serve the notice of arbitration on the correct party.