A and B v C, D and E (Taking evidence for a foreign seated arbitration)

Hearing date: 12 March 2020

Approved Judgment

Introduction

The appellants appeal, with the permission of the judge, the Order of Foxton J dated 14 February 2020 dismissing the appellants' Arbitration Claim seeking an order under section 44(2)(a) of the Arbitration Act 1996 to take the evidence of the third respondent in England so that it can be adduced in an arbitration being conducted in New York between the appellants and the first and second respondents.

The third respondent is not a party to the arbitration and the appeal concerns what the judge described as “a long-standing controversy, on which there are conflicting statements by a number of judges” as to whether orders under section 44 can be made against non-parties to the arbitration.

Factual background

The dispute being arbitrated in New York arises in the context of two settlement agreements between the appellants and the first and second respondents respectively in relation to the exploration and development of an oil field off the coast of Central Asia. Under those agreements the appellants were entitled to a percentage of the net sale proceeds if the first and second respondents sold their respective interests in the field, which they did in 2002. A central issue in the arbitration is the nature of certain payments made by the first and second respondents to the Central Asian government described as “signature bonuses” and whether those amounts are deductible as costs in calculating the sums due to the appellants.

The appellants contend that the sums paid were bribes and so not properly deductible. They rely upon the fact that G, who negotiated the payment on behalf of the Central Asian government, was indicted almost 20 years ago by a US court for violations of the US Foreign Corrupt Practices Act. The third respondent, who is resident in England, was the lead negotiator for the respondents who negotiated directly with G.

The third respondent was not prepared to go to New York to give evidence and, on 13 November 2019, the tribunal granted the appellants permission to make an application to the English Court to compel his testimony. The appellants seek an Order permitting them to take his evidence by deposition under CPR 34.8.

The relevant statutory framework

The provisions of the Arbitration Act 1996 which are relevant to the present appeal are as follows:

“ 1. General principles.

The provisions of this Part are founded on the following principles, and shall be construed accordingly—

(a) the object of arbitration is to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense;

(b) the parties should be free to agree how their disputes are resolved, subject only to such safeguards as are necessary in the public interest;

(c) in matters governed by this Part the court should not intervene except as provided by this Part.

2. Scope of application of provisions.

(3) The powers conferred by the following sections apply even if the seat of the arbitration is outside England and Wales or Northern Ireland or no seat has been designated or determined—

(a) section 43 (securing the attendance of witnesses), and

(b) section 44 (court powers exercisable in support of arbitral proceedings);

but the court may refuse to exercise any such power if, in the opinion of the court, the fact that the seat of the arbitration is outside England and Wales or Northern Ireland, or that when designated or determined the seat is likely to be outside England and Wales or Northern Ireland, makes it inappropriate to do so.

4. Mandatory and non-mandatory provisions.

(1) The mandatory provisions of this Part are listed in Schedule 1 [these include section 43 but not section 44] and have effect notwithstanding any agreement to the contrary.

(2) The other provisions of this Part (the “non-mandatory provisions”) allow the parties to make their own arrangements by agreement but provide rules which apply in the absence of such agreement.

38. General powers exercisable by the tribunal.

(5) The tribunal may direct that a party or witness shall be examined on oath or affirmation, and may for that purpose administer any necessary oath or take any necessary affirmation.

43. Securing the attendance of witnesses.

(1) A party to arbitral proceedings may use the same court procedures as are available in relation to legal proceedings to secure the attendance before the tribunal of a witness in order to give oral testimony or to produce documents or other material evidence.

(2) This may only be done with the permission of the tribunal or the agreement of the other parties.

(3) The court procedures may only be used if—

(a) the witness is in the United Kingdom, and

(b) the arbitral proceedings are being conducted in England and Wales or, as the case may be, Northern Ireland.

(4) A person shall not be compelled by virtue of this section to produce any document or other material evidence which he could not be compelled to produce in legal proceedings.

44. Court powers exercisable in support of arbitral proceedings.

(1) Unless otherwise agreed by the parties, the court has for the purposes of and in relation to arbitral proceedings the same power of making orders about the matters listed below as it has for the purposes of and in relation to legal proceedings.

(2) Those matters are—

(a) the taking of the evidence of witnesses;

(b) the preservation of evidence;

(c) making orders relating to property which is the subject of the proceedings or as to which any question arises in the proceedings—

(i) for the inspection, photographing, preservation, custody or detention of the property, or

(ii) ordering that samples be taken from, or any observation be made of or experiment conducted upon, the property;

and for that purpose authorising any person to enter any premises in the possession or control of a party to the arbitration;

(d) the sale of any goods the subject of the proceedings;

(e) the granting of an interim injunction or the appointment of a receiver.

(3) If the case is one of urgency, the court may, on the application of a party or proposed party to the arbitral proceedings, make such orders as it thinks necessary for the purpose of preserving evidence or assets.

(4) If the case is not one of urgency, the court shall act only on the application of a party to the arbitral proceedings (upon notice to the other parties and to the tribunal) made with the permission of the tribunal or the agreement in writing of the other parties.

(5) In any case the court shall act only if or to the extent that the arbitral tribunal, and any arbitral or other institution or person vested by the parties with power in that regard, has no power or is unable for the time being to act effectively.

(6) If the court so orders, an order made by it under this section shall cease to have effect in whole or in part on the order of the tribunal or of any such arbitral or other institution or person having power to act in relation to the subject-matter of the order.

(7) The leave of the court is required for any appeal from a decision of the court under this section.

82. Minor definitions

(1) In this Part

“legal proceedings” means civil proceedings in England and Wales in the High Court or the county court or in Northern Ireland in the High Court or a county court;”

The judgment

The judge noted at [11] of his judgment that at first blush the language of section 44, particularly section 44(1), suggests that the Court has the same power to make orders against non-parties to an arbitration as it would have in legal proceedings to make orders against non-parties to the litigation. Furthermore, the reference in section 44(2)(a) to “the taking of evidence of witnesses” might suggest that it was principally concerned with securing evidence from witnesses who are not in the control of the arbitrating parties. However he considered that, on a review of the authorities, the position was more complex.

He considered first the decision of Moore-Bick J in Commerce and Industry Insurance v Certain Underwriters at Lloyd's [2002] 1 WLR 1323, the only authority specifically concerned with section 44(2)(a). There the arbitration tribunal sitting in New York issued a letter of request for the taking of evidence in this jurisdiction of two Lloyd's brokers. Moore-Bick J set aside an order obtained ex parte for the taking of their evidence under section 1 of the Evidence (Proceedings in Other Jurisdictions) Act 1975 on the basis that the arbitration tribunal was not a “tribunal” within the meaning of the Act. However, on the day of the hearing the applicant applied instead for an order under section 44(2)(a) of the Arbitration Act. Foxton J said that Moore-Bick J was clearly of the view he had jurisdiction to make an order direct against the witnesses, but the point that the subsection was limited to making orders against arbitrating parties does not seem to have been argued. In the event, Moore-Bick J decided not to make an order under section 44(2)(a) as a matter of discretion, so the precise form of order which would have been made was not apparent.

The approach of Foxton J was...