A reducing or expanding jurisdiction?
(This blog was first published on the Practical Law Arbitration Blog on 26 March 2018. To view the original post. please click here.)
The English courts have traditionally followed the principle of non-intervention in arbitral proceedings. This non-interventionist stance was given statutory force under section 1(c) of the English Arbitration Act 1996 (AA 1996), which provides that “the court should not intervene except as provided by [the Arbitration Act 1996]”.
However the AA 1996 provides for such intervention under sections 42 (enforcing of peremptory orders of the arbitral tribunal), section 43 (securing the attendance of witnesses), section 44 (interim remedies) and section 45 (determination of a preliminary point of law by the court).
Court intervention is generally subject to the precondition that the parties have not agreed to dispense with such court powers of intervention, either in their arbitration agreement or subsequently. It is also dependent on the relief sought being shown to be “urgent” in the case of interim remedies.
Section 44 is the most common route under which court intervention is sought. It generally takes the form of an application made as a matter of urgency for either a freezing injunction (section 44(2)(e)), an order for the inspection, photographing, preservation, custody or detention of the property (section 44(2)(c)) (sometimes known as a “Vasso Order”) or for the preservation of evidence (section 44(2)(b)).
Additionally, in the context of carriage of goods, an order for the sale of property, “the subject of the proceedings”, may also be sought under section 44(2)(d). This latter application is generally sought where goods are deteriorating or are liable to deterioriate, or where their continued presence is likely to incur storage and other costs, or where such goods have been abandoned or discharge has not been effected.
A section 44 application is made under CPR 62 and by way of an arbitration claim form (Form N8). It can provide a party to an arbitration agreement with a speedy and powerful weapon with which to preserve the status quo, pending the appointment of an arbitral tribunal or once it has been constituted.
Two very recent cases demonstrate that:
- The English courts will be willing to accede to an application for interim relief under section 44 where such relief is required urgently and where such relief is sought solely against a party to the arbitration agreement, albeit it will have an effect on others: Dainford Navigation Inc v PDVSA Petroleo SA “Moscow Stars” (order for sale of goods subject to a lien granted).
- The English courts will not ordinarily grant relief under section 44 against third parties and in particular not against those who are based abroad: DTEK Trading SA v Mr Sergey Morozov and another “MV MBA Rosaria” (order for the preservation of evidence against a third party out of the jurisdiction refused).
The Moscow Stars
In Moscow Stars, Males J ordered the sale of a cargo of crude oil belonging to charterers, which was being carried on board the owners’ vessel. The owners had already exercised a contractual charterparty lien over that cargo and had commenced arbitration proceedings in respect of unpaid sums due under the charterparty.
Males J held that, even if the arbitration was not directly “about” the cargo or its ownership, the arbitral award would determine what was to happen to that cargo, depending on whether or not the owner’s claims succeeded in arbitration. Section 44 did not give the English courts “power to make a free-standing order for sale as a form of independent relief”. The power was limited to a case where the goods were “the subject of the proceedings”. A paradigm case is where the ownership of goods is in dispute. However, the wording, “the subject of the proceedings”, was wider and required only a “sufficient nexus between the cargo and the arbitral proceedings”. Males J did not answer the question of whether the position would have been different if the cargo on board the vessel was owned by a third party, not a party to the arbitration.
MV MBA Rosaria
In MV MBA Rosaria some further indications were given by the English courts on the issue of whether a section 44 application might be advanced against a third party based outside the jurisdiction.
The case involved an application, under section 44(2)(b), to preserve evidence in the hands of a non-party based outside England and Wales.
Sara Cockerill QC held that section 44 of the AA 1996 did not permit the court to make orders against a non-party, and that CPR 62.5(1)(b) did not allow service out against third parties (following the reasoning of Males J in Cruz City 1 Mauritius Holdings v Unitech Ltd).
The decision in Moscow Stars is a welcome widening of the jurisdiction of the English courts to assist in arbitrations. However, the decision in MV MBA Rosaria is more problematic. This is because it may produce a lacuna whereby a non-party might take steps to seek to thwart the arbitration agreement, with seemingly no right to obtain injunctive relief against that non-party pursuant to section 44. However, the English court held that such a lacuna was not a good reason for extending the supervisory jurisdiction of the English courts over arbitrations to affect third parties, in particular those abroad.
As a consequence, an arbitral party may be forced to go abroad and seek what relief it can against the third party using the legal avenues available there. This cannot be in the interests of the parties to the English arbitration, or to a proper and organised supervisory function being exercised by the English court over arbitral proceedings.