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Taking evidence for a foreign seated arbitration: as easy as A, B, C?20 May 2020

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A and B v C, D and E [2020] EWCA Civ 409

The English Court of Appeal has recently confirmed that section 44(2)(a) of the Arbitration Act 1996 (the “Act”) gives the power to make an order for the taking of evidence by way of deposition from a non-party witness in aid of a foreign arbitration. The decision provides some helpful clarity for parties to arbitrations and further underlines the reputation of the English courts as arbitration friendly.

"The decision provides some helpful clarity for parties to arbitrations and further underlines the reputation of the English courts as arbitration friendly."

Background

Section 44 of the Act sets out a list of matters about which the English court can make orders “for the purposes of and in relation to arbitral proceedings” in the same way that it can make orders in relation to English litigation. These matters include:

  • Taking evidence of witnesses (section 44(2)(a));
  • Preserving evidence (section 44(2)(b));
  • Making orders relating to property which is the subject of the proceedings or as to which any question arises in the proceedings (section 44(2)(c));
  • Selling goods that are the subject of the proceedings (section 44(2)(d)); and
  • Granting interim injunctions or appointing receivers (section 44(2)(e)).

However, the question of whether this power extends to making orders against non-parties to the arbitration has long been a question of some controversy.

In Cruz City 1 Mauritius Holdings v Unitech Ltd,¹ a case which concerned the court’s jurisdiction under section 44(2)(e) of the Act to grant “an interim injunction or the appointment of a receiver”, Males J (as he was then) considered in obiter comments that “the better view is that section 44 does not include any power to grant an injunction against a non-party”. Subsequently, in DTEK Trading SA v Morisov,² the English court considered whether it had jurisdiction under section 44(2)(b) of the Act to make an order for the preservation and inspection of a document in the possession of a third party in Ukraine. Sara Cockerill QC (as she then was) followed Males J’s analysis in Cruz City and concluded that the wording of section 44 did not indicate that it was intended to cover applications against third parties. Accordingly, she held that the English court did not have jurisdiction under section 44 of the Act to make an order against a non-party to the arbitration.

The facts

A & B v C, D & E concerned a dispute relating to the exploration and development of an oil field in Central Asia, and in particular over balances due under two settlement agreements. The dispute was being heard in an arbitration seated in New York. A central issue in the arbitration was whether certain payments were properly deducted from the sums due as “signature bonuses” (as the respondents contended) or were bribes and therefore to be left out of account (as the appellants submitted).

The third respondent (E) was an English resident who was not a party to the New York arbitration but had taken the lead in negotiations relating to the payments. He refused to give evidence in New York. The New York tribunal therefore gave the appellants permission to apply to the English court for an order under section 44(2)(a) of the Act compelling E’s testimony. However, in light of the decisions in Cruz City and DTEK the application was refused. The appellants appealed.

"If the court is to have the same power to make orders about the taking of a witness’s evidence for the purpose of arbitration as it would have for the purpose of High Court proceedings, that had to include the power to order a deposition."

The Court of Appeal’s decision

On an expedited appeal, the appellant’s primary case was that the appeal had to be determined on the narrow question of whether the particular power under section 44(2)(a) relating to the taking of evidence of witnesses was one which was exercisable against third parties. The Court of Appeal (whose panel included Males LJ) unanimously held that the English court did have jurisdiction under this provision. Consequently, an order was made for the examination of E by way of deposition before an examiner of the court.

In reaching its conclusion, the Court of Appeal explained that:

  • The wording of section 44(1), when read alongside other parts of the Act, made clear that provided the other limitations built into the section are satisfied, the English court has the same powers under section 44(2)(a) in relation to arbitrations, whatever their seat, as it has in relation to civil proceedings before the English courts;
  • The words “the taking of the evidence of witnesses” in section 44(2)(a) were apt to cover all witnesses, not simply those who were a party to the arbitration. Indeed, Males LJ commented that it will be relatively rare, at least in commercial arbitrations, for a witness to also be a party and that as the section draws no distinction between witnesses who are
  • under the “control” of a party and those who are not, it “… is clearly directed towards obtaining the evidence of individuals who are not parties to the arbitration”;
  • The English court’s power in relation to “the taking of the evidence of witnesses” in civil proceedings includes the power to order evidence to be given by deposition. Therefore, if the court is to have the same power to make orders about the taking of a witness’s evidence for the purpose of arbitration as it would have for the purpose of High Court proceedings, that had to include the power to order a deposition. While reaching this decision it was noted that the court cannot order a deposition in support of foreign court proceedings other than pursuant to an incoming letter of request and that this creates the somewhat anomalous situation whereby “… the court has in this regard a more extensive power to support a foreign-seated arbitration than it has to support foreign court proceedings”. However, the Court of Appeal found that this anomaly did not justify placing limitations on the statutory language which that language would not bear;
  • The other subsections of section 44 did not seem to point against the court having the power to make an order against third parties under section 44(2)(a), notwithstanding a limitation in section 44(7) on the rights of appeal of a non-party. Again, any such anomaly was not such to justify a restrictive interpretation of section 44(2)(a);
  • There was no reason to construe the power to order a deposition narrowly merely because the power is used in practice relatively rarely;
  • If section 44(2)(a) did not permit the court to order the taking of evidence by deposition, it had little or no content in the context of a foreign arbitration;
  • Although it was possible that the other section 44(2) powers did not apply to non-parties, this was not a sufficient basis on which to conclude that section 44(2)(a) did not apply to non-parties, Flaux LJ commenting that “any apparent inconsistency between the various heads of subsection (2) may be explained by the different language of those heads”; and
  • The decision that section 44(2)(a) applied to non-parties in support of a foreign arbitration was supported by the only first instance decision dealing directly with the question.³

"The decision delivers a partial resolution to the long-standing question of whether orders made by the English court “for the purposes of and in relation to arbitral proceedings” can be made against non-parties to the arbitration."

The Court of Appeal nevertheless declined to address the wider question of whether Cruz City and DTEK were correctly decided and therefore whether the other section 44(2) powers considered in those cases (being injunctive relief and the preservation/inspection of documents respectively) can also be exercised against a non-party.

Comment

The Court of Appeal’s decision delivers a partial resolution to the long-standing question of whether orders made by the English court “for the purposes of and in relation to arbitral proceedings” can be made against non-parties to the arbitration. In taking a narrow approach, and in examining the question from the perspective of the particular order sought, the Court of Appeal has made clear that, where appropriate to do so, the English court has jurisdiction to make an order compelling a non-party witness to foreign arbitral proceedings to give testimony. The decision is yet further demonstration of the arbitration-friendly approach of the English courts, whether in relation to domestic or foreign arbitrations.

However, in refusing to determine whether the reasoning in Cruz City and DTEK was correct, the position in relation to the other parts of section 44(2) remains unclear; Lord Justice Males himself indicating that “I would reserve my opinion on whether their reasoning on this point is correct” and that “there are, in my view, strong arguments either way and it may be that the position varies as between the various paragraphs of subsection (2)”.

Trainee Kaajal Shah also contributed to this article.

 

[1] [2014] EWHC 3704 (Comm)

[2] [2017] EWHC 1704 (Comm)

[3] Commerce & Industry Insurance Co of Canada v Certain Underwriters at Lloyd’s of London [2002] 1 WLR 1323

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