This seamless transition from litigation to arbitration and back again (taken from ‘Conservatory & Provisional Measures in International Arbitration’) represents a utopian view of how the relationship between litigation and arbitration should operate. However, as the author, Lord Mustill, went on to note, the position is not so clear-cut in real life.
Trading organisations in a global economy have turned increasingly to arbitration instead of litigation to resolve disputes. The pros and cons of each process have been much debated. But any confidence in an assumption that an informed choice of arbitration as the agreed method of dispute resolution will oust any role of the courts is belied by recent case law.
Arbitration has attracted satellite litigation. Statistics show that arbitral disputes are demonstrating a growing tendency to sneak their way into the courtroom, attracting the attention of the House of Lords. There is a clear view emerging that steps should be taken to bolster
Is effect being given to the will of the contracting parties at the time they signed the contract? Are arbitrators being allowed to grab hold of the baton and run with it?
The role of the courts
Although one of the general principles of the Arbitration Act 1996 is to restrict intervention by the courts, the Act nevertheless goes on to provide for judicial intervention in certain circumstances.
The position under the Act is not unique. The United Nations Commission on International Trade Law (UNCITRAL) model law on international commercial arbitration adopts a similar approach. Although Article 5 seeks to exclude the involvement of the courts as far as possible, the model law does not exclude their participation in carrying out ‘certain functions of arbitration assistance and supervision’.
Once an arbitral tribunal has been constituted, most arbitrations are conducted without any reference to the court. There may be times where court intervention is necessary to ensure the proper conduct of the arbitration — for example — in preventing the disappearance of assets. Article 23 of the International Chamber of Commerce (ICC) rules empowers an arbitral tribunal to order interim measures, although this does not disentitle the parties from applying to a competent judicial authority for such measures.
The powers of a tribunal to order interim measures stems, as always, from the arbitration agreement itself, any arbitration rules incorporated into it and any applicable national law.
Practical difficulties arise in obtaining an injunction in an arbitration; examples include the fact that no such order can be made before a tribunal is duly appointed — a clear view that such an order could never be made ex parte (going against the thread of consensus woven throughout arbitration) — and the lack of sanctions for breach of such an order (no contempt of court equivalent).
The intervention question
Recent case law suggests that parties are calling upon the courts to intervene in the arbitral process, culminating in the 2007 Court of Appeal decision in Fiona Trust & Holding Corporation & Ors v Yuri Privalov & Ors. This brought a fresh approach to interpreting any jurisdiction or arbitration clause in an international commercial contract.
Of significant note is the judgment of Mr Justice Longmore: “The time has now come for a line of some sort to be drawn and a fresh start made… for cases arising in an international commercial context. Ordinary businessmen would be surprised at the nice distinctions drawn in the cases and the time taken up by argument in debating whether a particular case falls within one set of words or another very similar set of words.”
This principle was reflected in the House of Lords decision in West Tankers v Riunione Adriatica di Sicurta [2007]. Here, the question was whether a court of a European Union member state can properly make an order restraining a party from commencing or continuing proceedings in another member state on the grounds that such proceedings are in breach of an arbitration agreement. Although the House of Lords referred the question to the European Court of Justice, it made clear its preferred view that such an anti-suit injunction is acceptable where its purpose is to enforce an arbitration agreement.
No bad thing
The litigation of arbitration is unlikely to disappear; nor should it. Arbitration cannot exist in aspic. There will always be the need for the potential of court support and intervention when the machinery, agreed between the parties at a time when they were co-operating to achieve a commercial goal and a dispute was a far and distant prospect (if contemplated at all), has broken down.
There has been a recent trend of parties increasingly seeking court intervention. This leads to extra costs, time and uncertainty of outcome until an appeal process has been exhausted — precisely the problems which it can be said that arbitration, as a method of dispute resolution, should be addressing. n
Andrew Manning Cox is head of international arbitration at Wragge & Co.
