ADR Adjudicative Options. Arbitration

Question 1

Interpretation

Answer 1

(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—
(i) whether there is a valid arbitration agreement;
(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—
(i) arbitration proceedings (whether started or not); or
(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.

Question 2

Starting the claim

Answer 2

(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 Practice Direction 62.

(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.

Question 3

Arbitration claim form

Answer 3

(1) An arbitration claim form must—

(a) include a concise statement of—
(i) the remedy claimed; and
(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—
(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
(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.

Question 4

Service out of the jurisdiction

Answer 4

(1) Subject to paragraph (2A), the court may give permission to serve an arbitration claim form out of the jurisdiction if—

(a) the claimant seeks to—
(i) challenge; or
(ii) appeal on a question of law arising out of,
an arbitration award made within the jurisdiction;

(b) the claim is for an order under section 44 of the 1996 Act; or

(c) the claimant—
(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
(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.

(2A) An arbitration claim form falling within (1)(a) to (c) above may be served out of the jurisdiction without permission if—
(a) the seat of the arbitration is or will be in England and Wales; and
(b) the respondent is party to the arbitration agreement in question.

(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.

Question 5

Stay of legal proceedings

Answer 5

(1) An application notice seeking a stay of legal proceedings under section 9 of the 1996 Act 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.

Question 6

A party to an arbitration agreement

Answer 6

It is “a party” to an arbitration agreement against whom “legal proceedings are brought … in respect of a matter which under the agreement is to be referred to arbitration” who may apply under s.9(1) for a stay of such legal proceedings. In this context, “a party” includes “any person claiming under or through a party to the agreement”.

Section 9 cannot apply if the parties to the court proceedings are not the parties (or persons claiming through or under a party) to the arbitration agreement, as it would be wholly inconsistent with the purpose and structure of the 1996 Act, and of s.9 in particular, if a stay could be obtained against a claimant who was not a party to the agreement.

the Court of Appeal overturned the decision of Blair that the second and third defendants were not entitled to a stay of the proceedings under the Arbitration Act 1996 s.9 by virtue of the arbitration clause in the partnership deed.
They were not parties to the deed, but it mentioned them by name, gave them the benefit of certain exclusions and indemnities, and incorporated the Contracts (Rights of Third Parties) Act 1999.

The Court of Appeal held that it was possible for the court to impose a stay in favour of a third party on the basis of an intention to rely on a contractual defence which was subject to a term providing for the submission of disputes to arbitration.

Difficulties can arise where the provisions in one agreement give jurisdiction to the court, and in another refer disputes to arbitration.

In such cases the allocation of jurisdiction is fundamentally one of construction.

Although an action against a company was stayed under the Arbitration Act 1996 s.9 where the same matter had been referred to arbitration, an action against the company’s parent on a guarantee which contained no arbitration agreement should not be stayed; the claimant bank was entitled to enforce the guarantee, if it could make good its claim, regardless of the claim against the principal debtor and the secondary nature of the claim against the guarantor.

Question 7

“… or after he has taken any step in those proceedings to answer the substantive claim”

Answer 7

Though the application cannot precede the taking of the appropriate step if any to acknowledge the legal proceedings, the application must be made before taking any step to answer the substantive claim.

So an application for security for costs was held to bar the defendant from obtaining a stay hereunder
so also the issue of an application for disclosure
so also attending case management conference or an application for directions issued by the claimant and agreeing to or obtaining an order thereon.
or without an order being made, but an undertaking given to furnish an account
After defence it is too late
Also after defendant has obtained time to plead and agreed to take short notice of trial

Opposition to an application for final judgment may constitute a step in the action; but no “step” is taken by a defendant opposing an application who not merely raises the matter of the arbitration clause in their affidavit (or witness statement), but also at the same time takes out an application to stay the claim

A defendant’s application for an extension of time to serve its defence does not necessarily amount to a “step in the proceedings” to answer the substantive claim under s.9(3), thereby barring it from making an application to stay the proceedings. it depends whether the taking of that step can be said to constitute an election.

he seeking of a second extension of time, in circumstances where the possibility of a stay to arbitration had previously been canvassed, was held to constitute a step in the proceedings, because the party in question had demonstrated an election to abandon its contractual right to a stay.

The defendant must act timeously. Thus if a defendant resists summary judgment proceedings by serving an affidavit or witness statement in opposition, but omits to issue an application to stay the claim until after a first hearing of the claimant’s application which is merely adjourned for a further and fuller hearing, they will be deemed to have taken a step in the claim.

A party who initiates an application for a stay pending an arbitration does not take a “step” in the proceedings within the meaning of s.9(3) of the 1996 Act if they, either simultaneously or subsequently, invoke or accept the court’s jurisdiction provided they do so only conditionally on their stay application failing

Question 8

Onus of showing that claim should proceed

Answer 8

It rests on the claimant to show that the dispute ought not to be referred to arbitration.

The section provides for two jurisdictional thresholds which are to be decided by the court before a stay could be granted: first, whether there is a concluded arbitration agreement; and secondly whether the issue in the proceedings is a matter which under the arbitration agreement is to be referred to arbitration. The question of whether an arbitration agreement had been effectively superseded in respect of a particular matter by a subsequent consensual contractual process formed part of the second jurisdictional question.

The standard of proof is the balance of probabilities:

Question 9

Arbitration

Answer 9

Arbitration involves an impartial arbitrator or tribunal considering both sides of a dispute and making a decision on the issues raised by the parties.
It can take a wide variety of forms and can arise in a wide variety of legal contexts.
It’s based on an agreement between the parties to refer the dispute or difference to arbitration.
That agreement may be made before or after the relevant dispute has arisen.
There may be a pre-existing arbitration agreement.

Question 10

Fundamental concepts in arbitration

Answer 10

Arbitrations governed by the Arbitration Act 1996 are subject to three general principles that are set out in s1
* the object of arbitration is to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense
* The parties should be free to agree how their disputes are resolved subject only to such safeguards as are necessary in the public interest
* The court should not intervene except as provided by the Arbitration Act 1996

Where the parties have agreed to refer their dispute to arbitration, that implies they want their dispute decided
* by a tribunal they have chosen
* In a neutral location and with neutral arbitrators
* In privacy
* Speedily an efficiently
* With light but efficient supervision by the courts

Question 11

Requirements

Answer 11

in order for there to be an effective reference to arbitration the following requirements must be met
* there must be a dispute or difference
* The dispute must be arbitrable. This means that there needs to be a private law dispute rather than a dispute relating to public law or legal status
* There must be an agreement to arbitrate
* For the Arbitration Act to apply the agreement to arbitrate must be in writing
* The nature of the dispute must come within the terms of the arbitration agreement
* The parties must have had legal capacity to enter into the arbitration agreement
* Any contractual condition precedent to arbitration must be complied with
* The parties must find an arbitral tribunal Willing to act and decide the dispute the dispute must come within the times of the particular reference to arbitration

Question 12

Contractual foundation of arbitration

Answer 12

almost any type of dispute can be referred to arbitration coma regardless of the legal classification of the underlying cause of action. Arbitration is most commonly used for resolving disputes arising out of a contract between the parties, frequently with the agreement to arbitrate it being found in a clause in the substantive contract.

Where such a dispute is referred to arbitration from a technical legal point of view there will be often for contracts
* the underlying substantive contract on which the dispute is based
* The agreement to arbitrate which is separate from the substantive contract
* The agreement between the parties and an arbitral institution referring the dispute to arbitration.
* Agreements appointing the arbitrators, made between the parties and or they arbitral institution and the individual arbitrators

Question 13

Mandate of the arbitral tribunal

Answer 13

An arbitral tribunal will not have jurisdiction unless the dispute comes within the terms of the particular reference 2 arbitration. This means for example that the arbitrators cannot make a decision against a person who is not a party to the arbitration agreement or on matters and not covered by the arbitration agreement or on matters not covered by the parties agreement with the arbitrators`

Question 14

Stay of legal proceedings

Answer 14

to prevent a party from breaching an agreement to arbitrate by bringing court proceedings section 9(1) Arbitration Act 1996 allows the other side to apply for state of those court proceedings. As they can be sought whether the legal proceedings said to breach the arbitration agreement are brought by way of claim or counterclaim as well as ordinary pot seven claims. I stay under section 9 imposes a hold on the legal proceedings and in practical terms usually has the consequence that the dispute will be referred for final determination by arbitration.

If the dispute raised in litigation is a matter which under the arbitration agreement is to be referred to arbitration the court shall grant stay (this is more mandatory rather than discretionary) Unless the court is satisfied that the arbitration agreement is null and void, inoperative or incapable of being performed.

Question 15

Commencement

Answer 15

Arbitrations are commenced by sending notice of arbitration then appointing the members of the arbitral tribunal. A notice of arbitration has to be in writing and must comply with the requirements for appointing the arbitral tribunal. These requirements can be met by air reasonably simple letter. In practise the letter tends to include additional details in order to comply with further requirements set out in any relevant institutional arbitral rules.

The parties are free to agree on the procedure for appointing the arbitrator or arbitrators including the procedure for appointing any chairman or umpire. Where the parties agreed to a three member tribunal, the usual position is that each party appoints one arbitrator coma and these two arbitrators then appoint a third member who act as the chairman.

Question 16

Procedure in arbitration

Answer 16

the complexity of the procedure adopted in arbitration will depend on what the parties have agreed, which will be influenced by the nature and importance of the dispute. The overall aim is the fair resolution of the dispute without unnecessary delay or expense

Question 17

Preliminary meeting

Answer 17

a preliminary meeting will often be convent shortly after the tribunal is appointed. Its main purpose is a forum for the tribunal to discuss jurisdictional matters and to make procedural directions for the preparation of the evidence needed for deciding the reference

Question 18

Directions on procedure and evidence

Answer 18

It is for the arbitration tribunal to decide all procedural and evidential matters that have been referred to it, subject to the right of the parties to agree with such matters between themselves. Procedural matters to consider may include:
* when and where to hold the proceedings
* The language is to be used and whether translators are required
* Whether written points of claim and defence will be used and therefore
* Whether documents should be disclosed and produced and at what stage
* Whether to apply their strict rules of evidence new line whether expert evidence is required, and the time, manner, and form in which such evidence should be exchanged and presented
* Whether the tribunal should take the initiative in ascertaining the facts and the law
* Whether and to what extent there should be oral or written evidence or submissions.

Question 19

Pretrial hearing conference

Answer 19

This will usually take place and number of weeks before the expected start of the hearing the main purpose is to review what has been done in preparation for the hearing to assess whether the parties are going to be ready for the hearing and to make directions

Question 20

Bundles

Answer 20

they will usually contain The documents dealing with the reference to the arbitration and the appointment of the tribunal. They will then usually have the statements of case, and any procedural orders and directions.
It may well be that separate bundles will be required for the evidence. These files should be divided into the contemporaneous documentation, the witness statement of the factual witnesses, and the expert evidence. A further file is likely to be needed to contain their written opening submissions or skeleton arguments and the authorities.

Question 21

No right to an oral hearing

Answer 21

the tribunal can decide whether and to what extent there should be oral or written evidence or submissions. And deciding whether to deal with the dispute on the documents or after an oral hearing the tribunal must bear in mind the need attacked fairly giving every party a reasonable opportunity of putting its case and dealing with that of the other side and the need to avoid unnecessary expense and delay

Question 22

Awards

Answer 22

there are four different types of awards and orders that are available to arbitrators
* procedural orders which provide procedural directions and measures designed to preserve evidenced or the subject matter of the dispute
* interim (also referred to as partial) Awards and awards on different issues which finally dispose of one or more of the substantive issues in the arbitration leaving the other issues to be decided later
* Final awards finally disposing of the arbitration
* costs awards which provide for the payment of the costs incurred in the arbitration between the parties

once an order or award is made it is binding on the parties

Question 23

enforcement of awards

Answer 23

a domestic arbitral award may be enforced by either bringing an ordinary civil claim on the award in the High Court or by using this summary procedure under section 66(1) Arbitration Act 1996. This section allows the court to grant permission to enforce an award of an arbitral tribunal in the same manner as a judgement or order of the court.

Cross-border enforcement of arbitral awards can usually be achieved through the new York convention in 1958 which applies to arbitral awards made in the territory overstate other than the state where the recognition and enforcement of such awards are sought.

Question 24

Appeals

Answer 24

there are only limited grounds for seeking judicial review of arbitral awards. Under section 68 it is possible to challenge an award on the ground of serious irregularity and unless the parties agreed to exclude the right under section 69 it is possible to appeal on a point of law. There are also restrictions on appeals within the court system in the limited cases where court applications can be made in arbitration claims.

Question 25

Expert or neutral determination

Answer 25

this is a process in which an expert or a neutral is appointed to make a determination on the issues referred to him or her by the appointing parties. It is most commonly employed in cases of a technical nature where the parties are likely to benefit from a determination by an appropriate expert such as an accountant, surveyor, or engineer. In appropriate cases the parties can agree that determination is carried out by an independent third party or even by a panel consisting of a number of neutral third parties and a lawyer.

The parties may contractually bind themselves in advance of any dispute arising to use expert determination to resolve a dispute about one or more specified issues or all issues arising out the contract between them.

The relationships between the parties and the experts the obligations of the expert and the circumstances in which the decision will be final and binding on the parties will be primarily governed by the tonnes of the contract by which the expert is appointed.
Where the parties use expert determination to resolve the dispute they usually agree that the determination is final and binding on them and typically this is recorded in the contract. Final means that the decision cannot be reviewed or appealed. Finding means that the parties must comply with the determination. That parties may also agree that their determination is only binding on them for a temporary or interim period.

Expert determination is not a subject to the supervision of the court. However the court may be involved if a dispute arises as to the jurisdiction of an expert or one or both parties wish to challenge their determination. A court order may also be necessary if there is a need to enforce the determination in the event of non compliance by one party.

In an expert determination the expert is acting as the decision maker not as a witness.

Question 26

Case is suitable for expert determination

Answer 26

expert determination is a very useful and cost effective way of determining disputes of a highly technical nature. relevant factors governing selection will include the extent to which the parties want a cost effective speedy conclusive determination of the matters in dispute within a relatively informal process with control over the selection of the appropriate expert.

Contractual nature of expert determination expert determination is most commonly used where the parties agreed to in advance in the underlying contract between them to use expert determination to resolve a specified or any dispute arising out of the contract. A separate contract will also come into existence between the parties and the expert when the matter is referred to the appointed expert for determination.

Question 27

Procedure

Answer 27

the procedure that is typically agreed will provide for each party to send to the expert:
* written submission setting out their case on each of the issues
* Copies of all relevant documents (the parties should cooperate to produce an agreed bundle of documents if possible)
* in some cases the parties may agree that the parties or their lawyers should make submissions at a meeting or hearing and although this is usually not required the attendance and cross examination of witnesses
* The parties may also agree that the expert can conduct his or her own lines of inquiry.

Question 28

Nature of the decision

Answer 28

the parties will usually agree that the decision will be binding on them and where this is so the court will uphold the decision unless there are grounds for setting it aside. The decision does not take the form of an award or an order unlike arbitration.

Question 29

Ignoring an expert determination clause
breach of contract

Answer 29

if one party refuses to comply with an expert determination clause in the contract the other party may be entitled to damages for breach of contract

applications to stay court proceedings pending expert determination
the court has discretion to stay court proceedings issued by a party who failed to use their contractually agreed machinery in the contract to determine their dispute
the burden will be on the party seeking to litigate the dispute to show grounds why the claim should not be stayed so that the parties can invoke the contractually agreed method of ADR.

The court may consider the following factors
* the extent to which the parties have complied with their requirements in any pre action protocol
* whether the dispute is suitable for determination by the ADR process the parties have contractually agreed to use
* the costs of that ADR process compared to the costs of litigation
* whether the dispute could be resolved more quickly by court proceedings than by requiring the parties to use the contractually agreed ADR machinery
* whether a stay would accord with the overriding objective
* whether an element of the claim was not subject to expert determination so that the proceedings relating to that part could not be stayed, and having parallel litigation an expert determination proceedings is likely to increase costs and time, and be contrary to the interests of justice

A stay merely holds proceedings for a few weeks until after the determination. If following the determination there is still a residual dispute the court proceedings can be reactivated.

Question 30

Grounds for challenging the decision

Answer 30

Contractual grounds for challenge may exist on one or more of the following grounds
* failing to provide reasons for the determination when the contract requires reasons to be given
* manifest error
* an error of law
* lack of procedural fairness
* The determination was not intended to be final and binding in relation to matters of construction.

Question 31

Procedure of making a challenge

Answer 31

a challenge to the decision in an expert determination we usually be made by issuing part eight proceedings. Part eight proceedings may also be issued in advance of an expert determination to decide any disputes about the interpretation of the expert determination clause, or to resolve disagreement about matters that should be referred to the expert pursuant to the clause. If the decision is set aside the court may in some circumstances make the determination itself if necessary after considering expert evidence adduced by the parties or it may direct and you expected to be instructed to determine the matter.

Question 32

Enforcing a decision

Answer 32

a decision reached by expert or neutral determination cannot be enforced in the same way as if it were a court decision. Failure by one side to honor the decision amounts to a breach of contract and proceedings can be issued in relation to the breach.