LLM228 – Arbitration Law, Practice and Procedrue Topic 4

Topic 4: Fundamentals of Arbitration Law

Part 2
Topic Preview

In this topic we continue our examination of the main provisions

of the Arbitraton Act 1996 (and the Arbitration (Scotland) Act
2010) and in doing so, we cover the following areas:

• The Arbitral tribunal, including

o Jurisdiction of the arbitral tribunal
o Removal of the tribunal
o General duties of the tribunal
• Procedural provisions
• Loss of right to object

The recent decision of Halliburton v Chubb is significant across

these issues – and you should refer to the separate materials
provided on that

Topic Content

Part 1. The Arbitral Tribunal

There are various provisions in both the 1996 and 2010 Acts that deal
with the establishment and composition of the arbitral tribunal. As a
general point, it is clear that the parties are, on the whole, free to agree
most of the procedures here.
s. 15 of the 1996 Act sets out the basic position:

s 15 The arbitral tribunal.

(1) The parties are free to agree on the number of arbitrators to

form the tribunal and whether there is to be a chairman or umpire.
(2) Unless otherwise agreed by the parties, an agreement that the
number of arbitrators shall be two or any other even number shall
be understood as requiring the appointment of an additional
arbitrator as chairman of the tribunal.
(3) If there is no agreement as to the number of arbitrators, the
tribunal shall consist of a sole arbitrator.

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Mention is made here of a ‘chairman’ and an ‘umpire’ and these terms

are explained.
The parties will normally agree on the basic composition of the tribunal,
either explicitly or via the operation of institutional rules (see later topic
on these). If the parties wish the tribunal to consist of an even number of
arbitrators, or an even number plus an umpire, it is important that, due
to the default provision under s. 15(2), this is explicitly done, since
otherwise a chairman will be appointed automatically. For practical
purposes, it would be unwise for there to be an even number of
arbitrators without a chairman or umpire, since this could lead to
deadlock.

It has been made clear that where s. 15(3) applies, the court has no
discretion to appoint more than one arbitrator (see below on court
appointments). One of the arguments made in the case of Villa
Denizcilik Sanayi Ve Ticaret AS v Longen SA (The Villa) [1998] 1
Lloyd’s Rep 195, heard before Mr Justice Mance in the Commercial
Court was that a one- man arbitral tribunal was inappropriate given the
complexity of the issues involved. This was rejected; the court had no
choice and had to appoint a single arbitrator under s. 15(3) - the use of
the word “shall” in s.15 (3) was instrumental here. This case also
demonstrates that the s.1 general principles will not operate to override
the clear wording of the Act elsewhere - they only act as guides to the
interpretation or application of the provisions of the Act. In addition, it
was argued in this case that it was common practice for there to be more
than one arbitrator in maritime arbitrations in London. However, the
court held that this was irrelevant - if s.15 (3) applied, then there was no
room to consider whether it should or not - its terms were compulsory.
The court here proceeded to make the appointment under s.18 (see
below) as requested.

Appointment procedure

Normally the parties will have agreed on this. It is not uncommon, for
example, for the parties to agree that an arbitrator will be chosen by
each of them with perhaps a third one agreed between them.
Alternatively, the appointment procedure might be incorporated from the
institutional rules that apply. It is important for parties to ensure that
there is a procedure in place and that it is what they want - this will cut
down on the possibility of a dispute about the identity or composition of
the tribunal, before the substantive dispute is even reached.

The Act, however, provides a default procedure for appointment in s16.

This section sets out what is to happen where the parties do not provide
for an appointment procedure, or where one is agreed, but it is not
comprehensive. The section deals with the following situations:

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(1) Where the tribunal is to consist of one arbitrator (either by

agreement or by the operation of s.15 - see above) – 28 days
for a joint appointment (s. 16(3));
(2) Where the tribunal is to consist of two arbitrators - 14 days for
each party to appoint one (s. 16(4));
(3) Where the tribunal is to consist of three arbitrators, the
procedure under (2) above to apply and those arbitrators to
choose a chairman forthwith (s. 16(5));
(4) Where the tribunal is to consist of two arbitrators and an
umpire, the procedure under (2) above to be followed and the
umpire to be appointed by the arbitrators at the latest before a
substantive hearing (s. 16(6));
(5) In any other case (including where there are more than two
parties), s. 18 applies (s. 16(7)).

The time limits for (1)-(4) are triggered upon a notice being served by
one party to the other, asking that party to appoint an arbitrator/agree to
the appointment of one.

Importance of the agreement of the parties

In all of the relevant provisions under this section, party autonomy is

stressed - the statutory provisions only apply in the absence of the
agreement of the parties. This will usually be clear, but in the case of
Federal Insurance Co. and another v Transamerica Occidental Life
Insurance Co. [1999] 2 Lloyd’s Law Rep 286 an issue arose as to
whether, in an application under s. 16, a time limit that had been agreed
between the parties could override the statutory time limit. Here, parties
had agreed the procedure for appointment of two arbitrators (one by
each) and a third as chairman. These were appointed, but the chairman
fell ill and resigned. There then arose a dispute over whether the time
limit of 14 days in s.16 applied (s.16 applied by virtue of the operation of
s. 27(3) - see below) or whether the agreed limit of 30 days applied. It
was held by Mr Justice Rix sitting in the Commercial Court that the latter
limit applied- s.16 did not require to apply in its entirety or not at all -
the court relied on s.16(2) (which makes clear that the provisions in s16
only apply to ‘the extent that there is no agreement’). So, in that case. It
was held that the 30-day limit in the clause applied, but that otherwise
the mechanism and procedure in s.16 applied to resolve the matter.

Failure of appointment procedure

Sometimes, the parties will be unable to agree on the appointment of the

arbitral tribunal, whether following their own agreed procedure or the one
set out in sections 15 and 16 of the Act. The Act again provides for this.

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One category of situation is singled out here. Where the parties have to
each choose an arbitrator, and one of the parties does so and the other
does not, then s17 provides that – following a process set out- the one
arbitrator already chosen to simply be appointed as sole arbitrator. This
applies whether the obligation for each to appoint is agreed between the
parties or applies due to the operation of s. 16 (situations (2), (3) or (4),
above). S17 provides that if there is no appointment, then the party who
has appointed “their” arbitrator can serve a notice of default on the other
party. That other party then has seven days to appoint, or else the
arbitration proceeds on the basis of a sole arbitrator (although s17(3)
does allow the defaulting party to ask the court to set this appointment
aside).
It should be noted that either failure or refusal to appoint will trigger this
section. The parties may agree to simply allow the arbitrator chosen by
one party to automatically, without further notice, be appointed as sole
arbitrator as soon as the deadline for appointment has expired without
such an appointment by his opponent being made - there is no need to
allow a further period, as is built into s. 17(1). This happened in
Minermet SpA Milan v Luckyfield Shipping Corporation SA [2004]
2 Lloyd’s Rep 348 and the court held that the procedure laid down by
the parties was not challengeable.

In any other case of failure of appointment, s. 18 applies. The starting

point here is that the parties can agree on the position but failing that,
either party can apply to the court. The court has a number of powers
under s18(3):
(a) to give directions as to the making of any necessary
appointments;
(b) to direct that the tribunal shall be constituted by such
appointments (or any one or more of them) as have been made;
(c) to revoke any appointments already made;
(d) to make any necessary appointments itself.

It is clear that the court under a section 18 application has wide powers.
Section 19 requires to be considered by the court (see below) so that any
agreed qualifications on the part of the arbitrator(s) are respected. In
practice, parties will suggest the names of arbitrators. The principles in
s.1 may play a role here in any individual case and might affect the
exercise of discretion by the court.

Although the discretion to appoint is wide, the court can refuse to

exercise its powers where to do so would breach the principles set out in
s.1. This argument was employed in the case of R. Durtnell & Sons Ltd.
v The Secretary of State for Trade and Industry [2001] 1 Lloyd’s
Law Rep. 275. This case arose out of a building dispute. The request
under s.18 was made after a period of five years following the completion

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of works had been made. It was argued that there had been inordinate
delay in making the request and that the request should be refused.
Judge Toulmin granted the request. In setting out the applicable
principles he said this:

“I have come to the following conclusions: (1) The Court has a

discretion under s. 18 of the 1996 Act whether or not to appoint an
arbitrator. (2) This discretion must be exercised judicially and
consistent with the principles set out in s. 1 of the 1996 Act and
the residual discretion of the Court. (3) Consistent with s. 1(a) of
the 1996 Act, the application should be refused if the Court
considers that: (a) It is impossible to obtain a fair resolution of the
dispute; (b) by an impartial tribunal; and (c) without unnecessary
delay or expense. (4) The Court should also, provided the
principles in (3) above are satisfied, and consistent with s. 1(b) of
the 1996 Act, implement the parties' agreement as to how their
disputes are to be resolved subject only to such safeguards as are
necessary in the public interest and set out in the 1996 Act. (5)
There remains a residual discretion in the Court to refuse to grant
a remedy to someone who has for so long neglected his right to
seek it. The exercise of this discretion will depend on the
circumstances of the particular case.”

Mr Justice Mance also confirmed that the court had to consider whether it
was appropriate to exercise its discretion under s.18 in the case Villa
Denizcilik Sanayi Ve Ticaret AS v Longen SA (The Villa) [1998] 1
Lloyd’s Rep 195.

Agreed qualifications

When the court is considering the exercise of its discretion under s.16 or
s.18, it must have regard to any agreed qualifications of the arbitrator(s).
This is provided by s. 19:

It is common for the parties in an arbitration agreement to stipulate that

any arbitrator appointed should possess certain relevant qualifications, to
enable him to conduct the reference; indeed, one of the advantages of
arbitration over, for example, litigation, is the involvement of someone
with specialist knowledge. Such a clause will often leave an appointing
authority to choose someone from their lists who possesses such
qualifications- for example, a surveyor from the list of the Royal
Institution of Chartered Surveyors.

In the case of Jivraj v Hashwani [2011] UKSC 40, the arbitration

agreement specified that each of the three arbitrators to be appointed to
disputes under a joint venture agreement were to be respected members
of the Ismaili community. However, when a dispute arose a retired High

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Court judge with commercial experience, rather than an Ismaili was

appointed by one of the parties. It was claimed that this was a breach of
the agreement. In response, however, it was argued that the provision in
the arbitration agreement was in breach of European law relating to
religious discrimination against employees.

After progressing through the English court system, the UK Supreme

court eventually ruled that an arbitrator was not an “employee” in the
sense required by the anti-discrimination law; but that the requirements
of the role meant that they had to be independent of the parties (see
discussion by Lord Clarke 2011 UKSC 40 at paras 38ff and especially
paras. 40 -43).

The court also decided that, if they had been required to do so, they
would have found that the requirement for an Ismaili could be objectively
justified in line with the requirements of the regulations (see Ibid. at
paras 55 – 70)

The Scottish position on the tribunal appointment procedure

The provisions in the 2010 Act are broadly similar to those in the 1996
Act and are to be found in rules 6 and 7 of the Scottish Arbitration Rules.
Rule 6 is a default rule, rule 7 (on the failure of the appointment
procedure) is mandatory.

There is one major difference from the 1996 provisions, however. Rule 7
dictates that where the appointment procedure (agreed or in terms of
rule 6) has failed, the appointment must be referred to an arbitral
appointments referee (AAR). This is a reference to a body experienced in
the appointment of arbitrators. Under s.24 of the 2010 Act, AARs are to
be specified by Ministers, but they are likely to comprise the main arbitral
bodies. Of course, if the parties cannot agree on an AAR, then the court
can make an appointment (rule 7(6)). The rationale for introducing the
concept of an AAR is to discourage the use of the court in the process (in
line with the founding principle in s.1(c) of the Act) and due to the
relative lack of experience of appointments by the courts.
Of course, in England, parties can refer a decision over a disputed
appointment to such a body anyway, but the 2010 Act obliges the parties
to consider such an appointment and only where a suggested
appointment is objected to will the court be able to become involved.

Chairman and Umpire

These two positions exist to deal with situations where there are a
number of arbitrators, and those arbitrators cannot agree on a matter.

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The roles are distinct and have special status in the 1996 Act; each is
regulated by their own provisions. In each case, this regulation applies
where the parties have not agreed the ambit of the respective roles:
where there is such agreement, then that governs the position.
On the position of chairman, again, party autonomy about their role is
preserved. A Chairman may be appointed, as we have seen, under s.
15(2). In addition, section 20 will apply where there is provision for a
chairman, but where there are no or at least incomplete powers for them.
In that case, where a decision is made either unanimously or by
majority-the chair will simply form part of the arbitral tribunal.

However, the role of the chairman as a special member of the tribunal

appears where there is neither unanimity nor a majority decision. Harris,
Planterose and Tecks explain how such a situation might arise, as
follows:

“This situation might arise where there is an even number of

arbitrators - perhaps four - or where in an odd-numbered tribunal,
there is an abstention. Even in a three-arbitrator tribunal it is
possible to envisage situations where there is no majority, when
the chairman’s view would prevail. For instance, one arbitrator
may hold that there is no liability; another may hold that there is
and that specific performance should be ordered; whilst the third
may agree on liability but wish to award damages. Or each may
disagree on the quantum of damages…”

In any such situation, the chairman has the ‘casting decision’ and can
break the deadlock (see s20(4)).

Turning to the umpire under s.21, their role is different. Although the
purpose of an umpire - to break a deadlock between the arbitrators- is
the same as with a chairman, the way in which they operate is different.
Essentially, they attend all hearings of the tribunal and listens to all
representations, evidence and arguments. The arbitrators will then
deliberate. The umpire will not take part in those deliberations. If there
occurs a deadlock, the umpire will replace the tribunal and take over the
decision-making role. There is provision for a party to apply to the court
in the event that the arbitrators do not participate in the notice provisions
for the appointment of the umpire.

Once again, the parties can agree a different procedure, and to the
extent to which one is agreed, it will replace this section; but the
remainder of the provisions of the section will apply in the event of
default in the agreed procedure; hence the phrase “If or to the extent
that there is no such agreement” in s. 21(2).

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In the event of there being no chairman or umpire, s. 22 applies and it

states that if the parties don’t agree a means of breaking deadlocks or
unanimity, then the decision-making is by majority. There is however a
possibility uncovered in the Act. This is where there is appointed an
arbitral tribunal with an even number of arbitrators and with no umpire
or chairman and no deadlock provision. In this scenario, s. 22(2) would
apply and if there was an equal split (i.e., no majority or unanimous
decision) the arbitral process would fail.
This is extremely unlikely, and the parties should be careful to build in
some kind of deadlock device.

The Scottish position

There is no specific provision for the appointment of a chairman in the

2010 Act, although this office is referred to in the (default) rule 30(2)(a)
which refers to the arbitrator who chairs the tribunal. In the absence of a
chair, this rule provides that the last nominated arbitrator or (where
there are only two arbitrators) by an umpire (formerly referred to as an
‘oversman’ in Scotland) appointed by the tribunal (whom failing by an
arbitral appointment referee).

Tribunal Secretaries

It has become a relatively common practice, especially in complex

arbitrations, to appoint a secretary whose primary task is to assist the
tribunal. It uncontroversial that secretaries may deal with administrative
matters, including everything related to the logistics of the process, and
provide secretarial services. Where their assistance concerns the
attendance at the hearings, drafting procedural documents or awards, it
becomes more contentious. Since a secretary is typically a junior lawyer,
one could argue that such functions could make the secretary a de-facto
additional arbitrator, which certainly would not be appropriate. Therefore,
one must approach the delegation of duties to a secretary with caution.

The proper role of a tribunal secretary in England was subject of a

discussion in P v Q and others [2017] EWHC 194 (Comm). Some
international guidelines could also be helpful in delineating the proper
role of a secretary, e.g. the Young ICCA Guide on Arbitral Secretaries.

Part 1(b) Removal of Arbitrator

It is possible for a party to apply to the court for the removal of an

arbitrator under s.24. This drastic power has recently been discussed by
the UK Supreme Court in the case of Halliburton Company v Chubb
Bermuda Insurance Ltd [2020] UKSC 48. This important case
serves to illuminate a number of relevant issues in this area. There is

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therefore a separate resource on this on Moodle. What follows is a briefer

summary of the key points and those not discussed in the decision.

S24 provides for four grounds on which an arbitrator can be removed:

(a) that circumstances exist that give rise to justifiable doubts as

to his impartiality;

(b) that he does not possess the qualifications required by the

arbitration agreement;

(c) that he is physically or mentally incapable of conducting the

proceedings or there are justifiable doubts as to his capacity to do
so;

(d) that he has refused or failed—

(i) properly to conduct the proceedings, or

(ii) to use all reasonable despatch in conducting the

proceedings or making an award, and that substantial
injustice has been or will be caused to the applicant.

In order to be successful in such an application, the aggrieved party will

have to:

(1) establish that one of the s.24(1) grounds of removal is made

out; and

(2) establish that substantial injustice has been or will be caused

as a result of the conduct giving rise to the establishment of the
ground(s) relied on (s.24 (1) last sentence).

The arbitrator is entitled to continue with proceedings while the

application is being heard; this will be rare given that if the application is
successful, the continued proceedings will have been a waste of time, and
this may even involve cost implications on the part of the arbitrator
under s.24(4). On the other hand, it has been noted by Harris, Planterose
and Tecks in The Arbitration Act 1996: A Commentary that this power
might discourage (or lead to the abandonment of) a ‘tactical challenge on
spurious grounds.’

If the arbitrator is removed, the court can make any order in connection
with the arbitrator’s fees and expenses as it sees fit, including possible
repayment of fees and expenses already paid – s. 24(4). So, an
arbitrator could be punished by use of this provision for his conduct,
particularly if it has led directly to the parties incurring fees to the
arbitrator while he was carrying out the conduct complained of. It should
be noted that this power can only be exercised by the court in cases
where a removal order is made.

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Given that the arbitrator’s conduct will be examined, in the interests of

fair play, the arbitrator has a specific right to be represented in the
removal proceedings - s. 24(5). This opportunity will be rarely taken up,
but it seems sensible to provide for it.

Any removal procedure in rules agreed between the parties must first be
exhausted before an application under this section is made- s.24 (2).

The procedure for a removal application is set out in the Civil Procedure
Rules 1998 Part 62.

The test of impartiality- s.24 (1) (a)

Much of the case law has centred around the ground contained in s.24
(1) (a), and around the meaning of ‘justifiable doubts as to...impartiality’.
This was a focus in Halliburton v Chubb, and the detail is covered in
the separate materials for that.

Meaning of ‘substantial injustice’

This phrase has the same meaning as the identical phrase in s.68, and
discussion of the case law below on that section is relevant here. In
Conder Structures v Kvaerner Construction Ltd. 1999 ADRLJ 365,
Mr Justice Dyson considered an argument that the arbitrator had made a
ruling without asking for full submissions and evidence, and that he
should be removed under s.24. The application was refused, and the
judge commented on the ‘substantial injustice’ test:

“I do not accept that an alleged loss of confidence in an arbitrator

caused by an irregularity in the proceedings is capable itself of
being substantial injustice. In my judgment, an applicant who
invokes a s.68 must show that the irregularity has caused or will
cause him to suffer substantial concrete or substantive prejudice.
It is not sufficient to show that the irregularity has demonstrated
incompetence on the part of the Arbitrator and has undermined the
confidence of the applicant in the ability of the Arbitrator. Loss of
confidence is neither a sufficient nor a necessary condition of
substantial injustice. It is simply not the test. It is possible for an
arbitrator to commit an irregularity which raises a question as to
his competence and yet which causes no injustice to either party,
still less any substantial injustice. Conversely it is possible for a
competent arbitrator to make a mistake which causes substantial
injustice, and which needs to be put right by the court but in
circumstances where, in the general sense, the applicant retains

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full confidence in the arbitrator. After all, Homer does sometimes

nod.”

Cases other than under s.24 (1) (a)

These are rare. A good example of a case under s. 24(1)(d), however, is

Wicketts v Brine Builders [2001] CILL 1805, where the arbitrator
made a series of ill-judged decisions and where the s.24 application was
granted. In Norbrook Laboratories Ltd. v Tank [2006] 2 Lloyd’s
Rep. 485, the arbitrator was removed under s.24 since he was judged to
have failed to have properly conducted the proceedings, causing
substantial injustice (s. 24(1)(d)(i)) since he contacted some of the
witnesses directly without informing all parties. It was also held that the
conduct of unilateral telephone conversations with one of the parties did
constitute a failure to properly conduct the proceedings but did not cause
substantial injustice, so did not justify removal.

The Scottish position

There are substantial differences between the approach in the 2010 Act
and that taken in the 1996 Act. The Outer House of the Court of Session
may remove an arbitrator on one of the following grounds:

- that he is not impartial and independent (emphasis added) (rule

12(a))
- that he has not treated the parties fairly (meaning at least to one
of the parties – rule 81) (Rule 12(b))
- that he does not meet the qualifications agreed by the parties in
advance (rule 12(c))
- that substantial injustice has been or will be caused to a party
since the arbitrator has failed to conduct the arbitration in
accordance with the rules as agreed by the parties or the other
Scottish Arbitration Rules (insofar as they apply) (rule 12(d)

The first point to note is that the “substantial injustice” test only applies
to the last ground of removal; no such injustice needs to be
demonstrated for the other grounds to apply. This means that, in theory,
it should be easier to seek the removal of an arbitrator in Scotland than
in England. However, in practice such a removal will be treated as a last
resort in both jurisdictions. In addition, it could be argued that since
fairness and impartiality are part of the founding principles of the 2010
Act (s.1(a)) it is hard to see why a barrier should be erected for parties
who feel these basic standards of behaviour have not been met. On the
other hand, the courts should not be permitted to intervene more often
than is absolutely necessary (note the unnecessary delay and expense

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and minimum intervention principles in s.1(b) and (c) of the 2010 Act)
and the drastic step of removal of an arbitrator should not, arguably,
take place except where a party has been significantly adversely affected
by an arbitrator’s actions (or failure to act).

The second point is that the arbitrator must be impartial and independent
– as indicated above, independence is regarded as being a part of
impartiality, so the test of impartiality covers both. However, one can see
circumstances where there may be evidence of a connection between an
arbitrator and one of the parties, but no suggestion that the arbitrator is
partial to that party; the mere fact of the connection (tainting his
independence) could then be used as an argument for his removal on the
basis that justice must be seen to be done.

The third point is that the justifiable doubts test which exists under the
1996 Act in relation to impartiality does not exist in the 2010 Act in
relation to impartiality or independence. This may prove to be difficult in
any future cases: on the face of it there will need to be proof that the
arbitrator is not impartial or independent. Although this seems like a
higher test, the Scottish courts might use the English justifiable doubts
standard to assist them.

Finally, rule 13 allows the Outer House to dismiss the tribunal as a whole
on the final ground outlined above, as it applies to the tribunal. This
provision, which has no equivalent in the 1996 Act, might assist in cases
similar to ASM Shipping Ltd. of India v TTMI Ltd of England [2005]
EWHC 2238 (Comm). In that case, there were two separate
applications for removal, one which would have been successful were it
not for the application of waiver (see below on this), leading to the
resignation of the arbitrator, the second, relating to his two colleagues,
which was unsuccessful since the bias on the part of the first arbitrator
did not ‘infect’ the others. This case would probably be decided similarly
in Scotland, but this rule allows one application covering the whole
tribunal.

Other methods of termination of the arbitrator’s mandate

There are a number of ways in which the arbitrator’s authority might

cease. These are dealt with in turn.

Revocation by the parties

The parties can agree to revoke an arbitrator’s authority under s. 23 but

the power is restricted.

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Unless the parties have agreed otherwise, the parties must jointly agree
a revocation under this section. The circumstances in which revocation
can occur can be agreed between the parties and in many institutional
rules there exist some provisions. Failing prior agreement on the
circumstances that may trigger revocation, it seems that any reason will
do - indeed no reason at all is necessary - the only stipulation is that the
parties agree. The equivalent provision in Scotland is rule 11 of the
Scottish Arbitration Rules, which is a default provision so can be
excluded. Where it applies, it has a broadly similar effect to its 1996 Act
equivalent (allowing removal by the parties jointly agreeing or by a third
party who is given power by the parties to remove), although it is much
more shortly stated.

Where the parties decide to remove an arbitrator, this will normally be

due to a loss of confidence in his/her ability to deal properly with the
reference. Such cases will be rare.

Resignation of the arbitrator

Institutional rules (if used) will almost always provide for the
circumstances in which an arbitrator can resign his office; where they do
not and where the parties do not otherwise agree on how this can
happen, again, the 1996 Act provides a default solution in section 25.

An arbitrator may wish to resign for one or more of a whole host of

reasons: he might become ill; he might feel unable to carry out his duties
set out in s.33 (for example due to an unsuitable procedure being
adopted by the parties under s.34; or, as another example, where he
feels that he no longer can satisfy the requirement of impartiality set out
in s.33(1)(a) and where neither party wishes him to be removed under
s.24); he might feel that he does not possess the qualifications or
experience necessary to properly handle the reference. The DAC in their
report (paragraph 115) identify another reason: an unfair burden on an
arbitrator where an arbitration drags on for longer than could have been
reasonably expected.
The default provisions in subsections (2)-(5) only apply where the
arbitrator has resigned in circumstances in which the court finds that it
was reasonable for him to have done so. These provisions will be used by
the arbitrator to enable him to escape any liability he might be exposed
to otherwise as a result of his resignation (such as liability for the loss
sustained by the parties as a result of having to re-run evidence before
the new tribunal) as well as to allow the arbitrator to claim some fees for
work already done. It should be noted that there is no right to resign in
particular circumstances here; the provision assumes that a resignation
has already taking place - the main purpose of the provision is really to
deal with the situation post-resignation. The arbitrator holds no blanket
immunity from litigation in respect of any resignation by him - s. 29(3) -
see later. This means that one or both of the parties might sue the

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arbitrator for breach of contract (unless he resigned in terms of the

contract) where he resigns - he has no automatic immunity protection
from such an action. However, he might seek relief from such an action
or possible action in terms of an order under s.25 (3) (a).
The Scottish provision on resignation is rule 15 of the Scottish Arbitration
Rules which, unlike the equivalent 1996 Act provision, sets out a right to
resign in certain circumstances. The 1996 Act assumes there is such a
right. An arbitrator may resign under this Scottish mandatory provision
where: the parties agree; the arbitrator is permitted to resign in terms of
his contract; the arbitrator’s appointment is challenged under rule 10 or
12; the parties remove or modify the right of the tribunal to obtain an
expert opinion under rule 34(1) (where it applies) after the arbitrator has
been appointed; or the Outer House of the Court of Session authorises
the resignation as reasonable upon an application from the arbitrator.

The downside to specifying the reasons for resignation is that where an

arbitrator wishes to resign in circumstances other than those specified in
rule 15, he will need to apply to the Outer House for authority to resign.
This will lead to added delay and expense (whoever may bear that
expense) and it might be easier simply to leave open the reasons for a
resignation – as the authors of the DAC Report observe (paragraph 111)
an arbitrator cannot physically be made to continue in his post, even if in
clear breach of his agreement with the parties; in these circumstances,
the enunciation of grounds on which an arbitrator may be permitted to
resign are arguably pointless. In addition, where an arbitrator is forced to
make an application to the Outer House and the judge takes the view
that his justification for resignation is unreasonable and refuses to allow
him to resign, what happens next? This raises the possibility of a specific
implement order, forcing the arbitrator to continue to arbitrate if he
refuses to do so in the face of the Outer House’s refusal to sanction his
resignation. While this scenario is extremely unlikely to arise, the
possibility arises due to the approach taken in rule 15.

Despite the general immunity of an arbitrator (see below) this immunity

does not restrict the court’s ability (under s.25 of the 1996 Act or rule 16
of the Scottish Arbitration Rules) to make a decision about the liability of
the parties to the arbitrator for unpaid fees or the liability of the
arbitrator to the parties for additional costs incurred as a result of the
arbitrator’s resignation. This consideration will vary from case to case,
but clearly the reason for the resignation will loom large. It is notable in
the Scottish provisions that the court in considering liability for fees/costs
is directed to specifically consider whether the resignation fell within/was
permitted under rule 15 (see rule 16(2)).

Death of arbitrator or appointing party

These situations are catered for under s. 26 of the 1996 Act:

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s 26 Death of arbitrator or person appointing him.

(1) The authority of an arbitrator is personal and ceases on his

death.
(2) Unless otherwise agreed by the parties, the death of the
person by whom an arbitrator was appointed does not revoke the
arbitrator's authority.

The operation of this section is straightforward. It need only be noted

that s. 26(1) is mandatory, while s. 26(2) is not. The equivalent Scottish
provisions are rules 79 and 80 of the Scottish Arbitration Rules.

Immunity of arbitrator

Unless he acts in bad faith, the arbitrator is not liable for anything done
or omitted in the carrying out of his duties (see s. 29):

The idea behind this immunity is that if it did not exist, arbitrators would
be exposed to being sued over their decisions. This would discourage
arbitrators from acting at all and would expose them to insurance
premiums to protect them from the financial risks of being sued - such
premiums would be an unacceptable burden on the office of arbitrator.

As to the meaning of ‘bad faith’, this is not yet clear, although the phrase
has been judicially defined elsewhere, for example by Mr Justice
Lightman in Melton Medes v Securities and Investments Board
[1995] Ch. 137; [1995] 3 All ER 880 (a case concerned with the
restricted disclosure of financial information) at 889j:

“The term "bad faith" has a variety of meanings in different

contexts. Thus in the field of administrative law, where the validity
of a decision or act is challenged on this ground, it is sufficient that
the power to decide or act has been exercised for purposes
otherwise than those for which the power was conferred or without
regard to the relevant, or only the relevant, considerations. There
is no necessary moral connotation. But in the context of the tort of
misfeasance in public office, or, as it is sometimes called,
deliberate abuse of power, the term has a far more restricted
meaning. A moral element is an essential ingredient. Lack of good
faith connotes either (a) malice in the sense of personal spite or a
desire to injure for improper reasons or (b) knowledge of absence
of power to make the decision in question: see Wade & Forsyth,
Administrative Law, 7th ed. (1994), p. 795, citing Bourgoin S.A. v.
Ministry of Agriculture, Fisheries and Food [1986] Q.B. 716.”

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It remains to be seen just how wide the scope of this concept will be in
the context of arbitration.

The broadly equivalent Scottish provision is to be found at rule 73 of the

Scottish Arbitration Rules.

Conflict of Interests and Confidentiality in Scottish Arbitrations

These are areas which are dealt with under the Arbitration (Scotland) Act
2010 but are not touched upon by the Arbitration Act 1996. That said, it
is likely that Halliburton v Chubb would be influential in any Scottish
court consideration of these issues.

Rule 8 of the Scottish Arbitration Rules requires arbitrators and those

who have been approached to act as arbitrators to disclose to the parties
without delay any circumstances known (or which have become known)
to the arbitrator which might reasonably be considered relevant when
considering whether the individual is impartial and independent. The
standard of “impartial and independent” is dealt with later. Here, it is
worth noting that this rule (which is mandatory) places on the
prospective arbitrator a duty of disclosure which persists throughout the
pre-appointment and post-appointment process right until the end of the
arbitration. There is a similar provision in the UNCITRAL Model Law on
International Commercial Arbitration 1985 (dealt with in a different topic)
(Article 12(1)). There are no specific consequences which must follow in
the event of a breach by the arbitrator of the duty in rule 8. One of the
parties may decide to seek his removal by the court under rule 12, and
any expenses incurred in having to re-start the arbitration before another
arbitrator (or in appointing a replacement where there is more than one)
might have to be paid by the removed arbitrator, but only where there is
bad faith present (see above and at rule 73).

The circumstances in question must be known to the arbitrator for the

duty to apply and secondly, they have to be circumstances that might
reasonably be considered to be relevant to the question of impartiality
and independence. There could arise a situation in which an arbitrator
decides not to disclose something since he takes the view that it could
not reasonably be considered relevant. However, this would be a
dangerous course to adopt since if the conflict is discovered by the party
who would not stand to benefit from the conflict discovers it, this may
lead to a removal application and there could be personal costs
implications for the arbitrator (only where bad faith present or where he
resigns – rules 73 and 16). At the very least, there will be a reputational
loss.

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Rule 26 contains a right of action in respect of the disclosure of

information relating to the arbitration, which certain exceptions. The
confidentiality of arbitration is one of its major attractions to commercial
entities who wish to keep their disputes (and sensitive commercial
information and documents which are lodged as part of the papers)
between them and their opponents. This led to the development of a
confidentiality obligation at common law (although one which has
attracted some litigation). There are many questions which arise out of
the confidentiality obligation in rule 26, which are examined in detail in
Davidson, F. The Arbitration (Scotland) Act 2010: the way forward or a
few missteps? 2011 JBL 43. The content of the English law on
confidentiality of arbitral proceedings (which would probably influence the
interpretation of rule 26 in Scotland) is summarised in: Dundas, H.R.,
Confidentiality in English Arbitration: The Final Word? 2008 Arbitration
458.

2. Jurisdiction of the Arbitral Tribunal

The primary source of the limits of the jurisdiction of the arbitral tribunal
are contained in the agreement between the parties. However, a much
more contentious and difficult issue is the question of which body, the
court or the tribunal, is allowed to determine the jurisdiction of the
arbitral tribunal. A related question is the issue of the conditions under
which such a determination is made. The 1996 Act makes provisions for
these.
The first point to consider in this respect is the separability of the
agreement. That is, the extent to which the section of any agreement
which deals with arbitration can be separated from the wider contract
between the parties. This is dealt within s. 7.
The other issue is that of the competence of the tribunal to rule on its
own competence. This idea of “competence-competence” will be
considered and, in terms of the 1996 Act is covered in ss30 – 32.
(Traditionally, the rule that arbitrators have jurisdiction to decide their
own jurisdiction was expressed by the German phrase "Kompetenz-
Kompetenz." Yet, the origin of the expression in German legal
terminology lends to it a substantially different meaning. If one were to
follow the traditional meaning of the expression in Germany,
"Kompetenz-Kompetenz" would imply that the arbitrators are empowered
to make a final ruling as to their jurisdiction, with no subsequent review
of the decision by any court. Understood in such a way, the concept is
rejected in Germany, just as it is elsewhere. It therefore seems
preferable to avoid the confusing German expression "Kompetenz-
Kompetenz," in favour of "competence-competence.”)

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Separability (severability) of the arbitration agreement

The best starting point in any examination of jurisdiction is the

separability of the arbitral agreement. For that, we require to go back to
s.7. This section provides that (unless the parties have agreed otherwise)
the arbitration agreement is treated as “distinct” from the wider
agreement of which it might be a part, if the underlying agreement
becomes held to be invalid, non-existent or ineffective. The arbitral
clause will survive such a challenge, even if the rest of the agreement
does not: its validity etc. is as a separate issue from the validity etc. of
the main contract terms.

This section is non-mandatory and so can be excluded by agreement.

The operation of s.7, as well as the ethos behind it, were commented
upon by Mr Justice Colman in the High Court case of Vee Networks Ltd.
v Econet Wireless International Ltd. [2005] 1 Lloyd’s Rep. 192 at
paragraphs 20-22 of his judgement:

“Section 7 of the 1996 Act reflects this concept of separability. Its

effect in substance is to confirm that arbitrators have jurisdiction
conclusively to determine issues on the voidness or voidability of
the matrix contract to the effect that they do not lose jurisdiction
by reason only that the matrix contract may be void or voidable.
However, s. 7 leaves intact the requirement that the arbitration
agreement should be valid and binding. If it is not valid and
binding for reasons other than the bare fact that the matrix
contract is not valid and binding, then s. 7 does not enable
arbitrators to exercise conclusive jurisdiction in respect of any
issue relating to the matrix contract…. If, in accordance with s. 7,
an arbitrator determines that the matrix contract is, for example,
void ab initio by reason of illegality and it is not in issue whether
the arbitration agreement is also illegal and void, the tribunal can
continue to exercise such jurisdiction under the arbitration
agreement as its scope permits. For example, if there were an
alternative claim in tort or for restitution which was within the
scope of the clause, the tribunal would continue to have
jurisdiction conclusively to determine that claim…. Accordingly, for
the purpose of determining an issue as to substantive jurisdiction
under s. 30(1) it is not sufficient to proceed from a conclusion that
the matrix contract is or is not void or invalid to the conclusion that
therefore the arbitration agreement is or is not valid. The relevant
issue can only be whether the latter agreement is, independently
of the validity or invalidity of the matrix contract, valid or invalid.”

It is clear, then, that even where the arbitrator conclusively decides that
the main contract (referred to by the judge in this case as the ‘matrix
contract’) is, for example, void, this should not lead to the conclusion

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automatically that the arbitration clause is void. If it is, however, then a

challenge can be made to the award under s.67, on the basis that the
arbitrator had no substantive jurisdiction. We will return to this case, and
such a challenge, later.

This principle applies even where it is claimed that the contract is void for
a major failure of consensus such as if it procured by bribery; as long as
the act of bribery (or other illegal act) does not directly affect the
arbitration clause. This was held to be the case by the House of Lords in
Fili Shipping Co. Ltd. and others v Premium Nafta Products Ltd.
and others [2007] UKHL 40, [2007] Bus. L.R. 1719 in which Lord
Hoffman explains the position at paragraphs 17 – 18 of the judgement:

“The arbitration agreement must be treated as a “distinct

agreement” and can be void or voidable only on grounds which
relate directly to the arbitration agreement. Of course there may
be cases in which the ground upon which the main agreement is
invalid is identical with the ground upon which the arbitration
agreement is invalid. For example, if the main agreement and the
arbitration agreement are contained in the same document and
one of the parties claims that he never agreed to anything in the
document and that his signature was forged, that will be an attack
on the validity of the arbitration agreement. But the ground of
attack is not that the main agreement was invalid. It is that the
signature to the arbitration agreement, as a “distinct agreement”,
was forged. Similarly, if a party alleges that someone who
purported to sign as agent on his behalf had no authority whatever
to conclude any agreement on his behalf, that is an attack on both
the main agreement and the arbitration agreement.”

There are wider implications to this idea too. Separability has also been
termed autonomy of an arbitration agreement in international
jurisprudence and this hints towards this separate and detached
existence. For example, separability entails that different laws may
govern the arbitration clause and the main contract. Indeed, there is
nothing that could stop the parties from providing, for example, that the
main contract is governed by the English law, but the arbitration clause is
governed by French law. If the parties also provided, within the
arbitration clause that the arbitral proceedings themselves were governed
by Scottish law, the complexity can be seen: three systems of law having
to coexist!

Competence-Competence
Competence to rule on its own jurisdiction-decision by the arbitral
tribunal
Section 30 provides a basic power on the part of the arbitral tribunal to
rule on its own “substantive” jurisdiction on questions such as the validity
of the underlying agreement (s30(1)(a); whether the tribunal is itself

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properly constituted (s30(1)(b) and whether the matter has been

properly put to arbitration (s30(1)(c)). There is however the power to
refer the matter to the courts (the process for which is discussed below).
The phrase ‘substantive jurisdiction’ in relation to an arbitral tribunal is
defined in s.82 (1) of the Act:

…substantive jurisdiction", in relation to an arbitral tribunal, refers

to the matters specified in section 30(1) (a) to (c), and references
to the tribunal exceeding its substantive jurisdiction shall be
construed accordingly…
It has been made clear that the basic rule underlying s.30 is to favour the
jurisdiction of the tribunal. This sentiment was expressed by Mr Justice
Thomas in the case Vale Do Rio Doce Navegacao v Shanghai Bao
Steel Ocean Shipping Co. Ltd. [2000] 2 Lloyd’s Rep. 1 in this way at
paragraphs 44-45:

“Section 30 of the Arbitration Act, 1996 provides that the tribunal

may rule on its own substantive jurisdiction. It is clear from the
report of the Departmental Advisory Committee on the Arbitration
Bill (DAC Report) that s. 30 was intended to state the doctrine of
"kompetenz-kompetenz". It was the intention that the basic rule
was to be that the tribunal would make the rulings on jurisdiction
in the first instance rather than recourse being had to the
Courts…Section 32 provides an exception to this basic rule; under
s. 32(1) the Court may determine questions as to the substantive
jurisdiction of the tribunal on the application of a party to arbitral
proceedings. A restriction on that right is imposed by s. 32(2).”

This idea was approved by Judge Seymour Q.C. in the case J.T. Mackley
& Co. v Gosport Marina Ltd. [2002] B.L.R. 367 at paragraph 23.

The question of whether the arbitral tribunal should be asked to rule on

its own jurisdiction or whether an application should be made to the court
for a determination of a preliminary point of jurisdiction (s.32- see below)
is a matter of tactics, to be measured in each case. There may well be a
danger of duplication in the event of the court review of the jurisdictional
determination (s.67 - see below) and this is especially so where there is a
duplication of evidence in those review proceedings. This is exactly what
happened in Azov Shipping Co. v Baltic Shipping Co. (No 3) [1999]
2 Lloyd’s Rep. 159. The procedural history as well as the duplication
point is made in the following passage at the beginning of the judgement
of Mr Justice Colman:

“One of the procedural problems which can arise from the attempt
to accommodate these two disparate concepts is well illustrated by
what has happened in the present case. The parties first argued
the issue of jurisdiction alone before Mr. Donald Davies, among the

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most experienced of all London maritime arbitrators. Azov, the

respondents in the arbitration, argued that there was no arbitration
agreement binding on them. The hearing lasted several days and
both sides called evidence. Mr. Davies decided that Azov was
bound by an arbitration agreement and that therefore he had
jurisdiction. His award is dated Jan. 30, 1998.Following his award
Azov issued proceedings by way of application under s. 67 by
which they applied for the award to be set aside. That involved the
relitigation of the whole issue, including the calling of factual
witnesses by Azov and of expert witnesses on Ukrainian and
Russian law by both parties. The hearing did not take place until
more than 12 months after the award and lasted for five days.
Although neither the parties nor the arbitrator have acted in any
way whatever inconsistently with the 1996 Act, it is, with
hindsight, regrettable that in a case involving as substantial an
evidential investigation as this neither party made application to
the Court at the outset under s. 32 of the Act for the preliminary
determination of the jurisdiction issue before the matter ever went
to the arbitrator. Had this been done, there would have been a
huge saving in time and costs.”

In the event of a determination by the arbitral tribunal that it has no

jurisdiction, clearly the tribunal should not issue an award on the merits.
This was confirmed by the Court of Appeal in LG Caltex Gas Co Ltd. v
National Petroleum Corporation [2001] 1 WLR 1892. There, the
point was made by Lord Phillips MR in the context of an interpretation of
s.31(4) and the corresponding s. 67(1) (on both, see below) and he said
this at paragraphs 79-80:

“Mr Harris [the arbitrator] has ruled that he has no substantive

jurisdiction. The appellants seek to challenge that ruling pursuant
to section 67(1)(a). In these circumstances section 73 has no
application. The appellants are not making any of the objections to
which that section applies. For these reasons, I differ from the
Judge's conclusion that section 73 is a bar to the relief that the
appellants seek. The issue of whether the respondents were party
to the two contracts was a central issue in the dispute as to
liability. The appellants were urging that Mr Harris had jurisdiction
to determine liability. Mr Harris, after a hearing that lasted three
weeks, has decided the central issue against them. Because that
issue was also the issue that determines jurisdiction, the
appellants are now able to reopen it. The judge considered this
result unjust. I am not persuaded that it is. Where an issue on
which jurisdiction turns is also an issue relevant to liability, each
party will be in a position, subject to making any necessary
reservations, to reopen that issue before the court if the
arbitrator's ruling on jurisdiction goes against them. In this
instance it is the appellants who have profited from this situation.”

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In terms of s. 30(2) it is made clear that the parties can set out
conditions for review of any decision by the arbitral tribunal on whether
or not it has jurisdiction. Where that is not provided, s. 67 will apply (see
below).

In the pre-1996 Act decision of Harbour Assurance Company (UK) v

Kansa General International Insurance [1993] Q.B. 701, it was
held that in general terms there is a presumption that parties to an
arbitration clause intend that all disputes be determined by a single
tribunal without a multiplicity of proceedings. This has been referred to
already (albeit in a different context) as the so-called ‘one stop
adjudication’ presumption. This presumption was applied to a decision
under s.30 in Nine Gladys Road Ltd. v Kersh [2004] EWHC 1080
where Mr Justice Lewison in the High Court said this at paragraph 26:

“Mr Pelham submits that this presumption applies only to the

nature of disputes between parties who are plainly parties to the
arbitration agreement and does not apply to the question whether
a person is a party to the arbitration agreement at all. However,
the policy underlying the presumption is, in my view, clear. It is to
prevent a multiplicity of disputes. It would, in my view, be an
eccentric intention to attribute to the parties an intention that a
dispute which involved a tenant, another lessee and a landlord
should be determined as between the tenant and the other lessee
by arbitration and as between the same tenant and the landlord by
the County Court, even though the same facts were underlying
both disputes.”
The question of whether this presumption will be applied in later cases is
an open one. However, it should be pointed out that, where appropriate
in such a question, the s. 1 general principles will apply to guide the
interpretation of s.30. The most important of these will be s.1 (a) on
avoiding unnecessary delay or expense and 1(c) on the ‘minimum
intervention’ principle.
It should be noted that s30 is non-mandatory and so can be contracted
out of by the parties. This means that the parties can, if they wish, agree
that the arbitral tribunal will have no power to determine its own
jurisdiction. Where such an agreement is reached, s.31 and s.67 will have
no application (even although they are said to be mandatory) since both
apply to determine the procedure of any objection (s.31) and review of
any decision of this kind by the tribunal (s.67). However, s.32 will still
apply, since it is mandatory, and is not dependent upon a power on the
part of the arbitral tribunal to rule on its own jurisdiction.
The Scottish provision is rule 19 of the Scottish Arbitration Rules. Again,
unlike in the 1996 Act, these provisions are mandatory, although apart
from the possible cost-saving justification it is not clear why this is so.
The English authorities on this very similarly worded provision will be
influential in Scotland.

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Competence to rule on its own jurisdiction - decision by the

arbitral tribunal- objection procedure

As noted above, the decision of the tribunal on its jurisdiction is not

necessarily final and parties have the right to object to it. The process for
this for the specific case of a question of jurisdiction is in s31. For other
cases, s73 is relevant and is discussed below. In both cases, the key is to
do so as quickly as possible.

Assuming that the arbitral tribunal does have the power to decide on its
own jurisdiction, there are three alternative time limits set out for the
raising of a jurisdictional objection:

(1) Where the cause of the objection is that the tribunal lacks
jurisdiction altogether and this objection exists at the outset of
proceedings, the objection must be taken no later than the time
the party takes the first step to contest the merits of any
matter related to the area of jurisdictional challenge (s.31(1));
(2) Where the ground of objection is that at any point during the
proceedings the arbitral tribunal is exceeding its jurisdiction,
the objection must be made as soon as possible after the
matter to be objected to is raised (s.31(2));
(3) Where the time for objection under (1) or (2) above is missed,
and the tribunal finds that the delay in raising the objection is
justified, a later objection may be entertained (s.30 (3)).

Assuming, then, that the objection is raised early enough, or is late but is
excused by the tribunal, the tribunal has a choice as to how to deal with
the objection. After hearing parties, the tribunal can issue a separate
award on jurisdiction or rule on the jurisdiction objection when ruling on
the merits (s. 31(4)). The parties can agree on which option the tribunal
must take and the tribunal is bound to abide by that agreement.
Otherwise, the discretion on which course to adopt lies with the tribunal.

Clearly, if the tribunal is likely to take the view that the objection is a
good one and that, if upheld, it will affect a substantial part, or all of the
proceedings, it would usually be prudent to issue a separate award. In
that event, the proceedings might be brought to an end (where the
objection covers all issues before the tribunal) or at least might cut down
on the issues to be argued (if any of the jurisdiction of the tribunal
survives the award). On the other hand, if the objection is to be repelled,
it will usually be uneconomic in terms of time to issue two awards when
the merits are going to be ruled on anyway; one award covering all
matters, including jurisdiction, would seem sensible.

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Where the parties do not agree, and the tribunal makes a decision on
which method to adopt, it has been held that such a decision alone is not
challengeable under s.67. This decision was taken by Justice Colman MR
in Aoot Kalmneft v Glencore International AG [2002] 1 Lloyd’s
Rep. 128. There, Mr Justice Colman, in setting out the limits of the
arbitrator’s discretion under s.31 (4), said this at paragraph 71:

“The function of s. 67 is not to challenge a decision as to what

course to take under s. 31(4) but to challenge the arbitrator's
ruling as to his jurisdiction or to challenge his award on the merits
on the ground that he did not have jurisdiction. Once an arbitrator
has decided under his powers under s. 31(4) to rule on his own
jurisdiction, the only function of s. 67 is to challenge the
arbitrator's conclusion either that he had jurisdiction or that he did
not. Above all the Court has no power to set aside a ruling that the
arbitrator has jurisdiction on the grounds that it would be better if
he reconsidered the matter in the light of more evidence that
might be available at a hearing on the merits.”

The wording of s.31 in various parts implies that a challenge can be a

partial one; in other words, a challenge that affects only one of or some
of the issues before the tribunal.

If the objector chooses to make an application to the court under s.32,

the parties can agree that the arbitral proceedings be stayed until the
outcome of that application, and if they do, the tribunal must again
honour that agreement. Otherwise, the tribunal has discretion on
whether to stay (s.31(3)). A stay might not be appropriate where, for
example, the objection to jurisdiction affects only one issue before the
tribunal. In such a case, depending on how intertwined (or not) the
issues are, and what impact that will make on the evidence to be led, it
might be prudent to simply continue the arbitral proceedings on those
issues that both parties agree are properly within the jurisdiction of the
tribunal. Again, the tribunal, in considering whether to follow this course,
will have to bear in mind the general principles set out in s.1.

There is a tension between the timings in s.31 and the wider act. For
example, s.73(1)(a) on loss of right to object is relevant. That latter
section applies to waiver of the right to object in general terms, but it
stipulates that an objection that the tribunal lacks substantive jurisdiction
should be taken “forthwith”. This is somewhat odd, since a different
standard is applied under s.31 in connection with a point that arises
during the arbitration, namely, “as soon as possible”. It is not clear which
should apply, but it seems that “as soon as possible” is quicker than
“forthwith”. The advantage of arguing that the objection is too late under
s.30 is that under s.73, there is a ‘get out’ for the late objector. Under
the last paragraph of s.73(1), the objector can argue that he did not
know and could not with reasonable diligence have discovered the

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grounds for the objection. Of course, having said this, there is an escape
clause in s.31- that the delay is justified. It will be for the party seeking
to repel the jurisdictional objection on the ground of lateness to consider
which attack to mount. At the end of the day, it might be argued that the
considerations under both sections will be similar. Indeed, in Hussman
(Europe) Ltd. v Al Ameen Development & Trade Co. [2000] 2
Lloyd’s Rep. 83 Mr Justice Thomas at paragraph 21-25 pointed to both
provisions (s.31 (2) and s.73(1)(a)) and then applied s.73; there was no
suggestion by him that the two were incompatible. This approach appears
to be taken by Mr Justice Langley in the case of Peterson Farms Inc. v
C&M Farming Ltd. [2004] 1 Lloyd’s Rep. 603 at paragraphs 19 and
20.

Also, staying with the issue of the timing of an objection, where a

tribunal “deals with” the objection in its award on the merits under
s.31(4)(b), but does not specifically deal with any delay argument, this
precludes the argument on delay in taking the objection being raised at
the court review stage, in an application procedure under s.67. This was
the view taken by Mr Justice Langley in the Peterson Farms case
(above) at paragraphs 21-42.

Scottish Position

The Scottish provisions are similar and are to be found at the mandatory
rule 20 of the Scottish Arbitration Rules. The test on timing is simpler –
before or as soon as reasonably practicable after the matter to which the
objection relates is first raised in the arbitration. This test (which, unlike
under the 1996 Act applies to all jurisdictional objections, whether to the
jurisdiction at all or to an allegation of an excess of jurisdiction) places
the onus on the objecting party to justify why the objection was not
made before the issue is first raised in the arbitration. This would cover a
situation where a party suspects that a lack of jurisdiction exists but fails
to act until the opportunity arises formally in the arbitration proceedings.
So, for example where a party should have been aware of a substantive
jurisdictional challenge after the arbitrator was appointed (but after the
dispute arises) he should raise the point then. Since the objection must
be made to the tribunal, the tribunal would have to be constituted first,
so an earlier objection (between the parties) does not trigger rule 20. The
benefit of this is that it encourages parties to address jurisdictional points
at the very earliest opportunity so that there is a chance to avoid the
delay and expense of continuing with the arbitration at all (or at least
with the merits part of the arbitration) if there is a fundamental
jurisdictional point. Of course, the parties may well not agree on the
matter of the jurisdiction of the arbitrator, but at least if it is raised in the
early stages, the tribunal can at a very early stage switch its focus from
an examination of the merits to an examination of its own jurisdiction.

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The Scottish provisions go onto provide, unlike in the 1996 Act, for what
is to happen if a jurisdictional objection is upheld – the tribunal must end
on that matter and any provisional or part awards on the matter must be
set aside (rule 20(3)). Rule 76(1)(d) on loss of right to object (dealt with
generally later) on a jurisdictional challenge applies in a similar fashion to
s. 73 of the 1996 Act.

Determination of jurisdiction by the Court

There are three circumstances in which the court might be asked to

determine the jurisdiction of an arbitral tribunal:

(1) Where an action is raised in the courts before any tribunal

proceedings have begun and where a party makes an
application under s.9 of the Act to stay the proceedings to allow
the case to go to arbitration; this, and the relationship between
s.30, have already been dealt with; or
(2) Where there is an application for a jurisdictional determination
made to the court during the currency of arbitral proceedings,
under s.32 of the Act; or
(3) Where there is an appeal lodged in court under s.67 against a
decision by the arbitral tribunal on its own jurisdiction.

Route 2 is for an issue which arises in the course of the arbitration. The
right to apply to the court under s.32 is severely limited. One reason for
that is to prevent parties prolonging the arbitration by raising matters in
court – at which point everything would be paused, or at least slowed,
while the court proceedings were resolved.
There are two possible scenarios:

(1) The parties agree in writing that an application should be made;

in such a case, one must be made, and the tribunal has no
discretion (s.32(2)(a)); or
(2) Where the parties do not agree, the tribunal must give its
permission and the court must be satisfied on all three of the
following:
a. The determination is likely to substantially save on costs;
b. That there was no delay in making the application; and
c. That there is good reason as to why the court should decide
the matter (s.32 (2) (b)).

The delay aspect in making an application is subject to no less than three

provisions: s.32(2)(b)(iii); s.40(2)(b) dealing with the general duties of

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the parties and the all-encompassing waiver provision, s.73(1) and more
particularly s.73(1)(a).

In the case of an application under scenario (2) above, the application

itself should state the grounds for the application- s.32 (3).

In a scenario (2) application, there are no restrictions on the reasons for

refusal of permission by the tribunal; of course, the principles in s.1,
including the principle of obtaining a fair resolution of the dispute, will
apply to the exercise of discretion here by the tribunal, as will the
corresponding duties on the tribunal in terms of s.33 (1) (a) and (b) (on
which, see below). Indeed, there seems no reason why a decision by the
arbitral tribunal to refuse permission might not form the basis of a
challenge to an award under s.68 (see later), although review application
might be lodged instead under s.67 in cases where the tribunal has made
a decision on jurisdiction itself. The restrictions to the right to challenge
contained within s.32 (see nest paragraph on these) relate only to the
question of the existence of the preconditions in s.32(2), not the arbitral
tribunal’s exercise of discretion in deciding whether to give permission.

There are two possible appeals that can take place arising out of a s.32
decision by the court:

(1) an appeal against that part of the decision of the court on

whether the conditions set out in s.32(2)(b) have been met;
leave is required for such an appeal (s.32(5)); or
(2) an appeal against the decision of the court on the application
itself; leave again is required, but this time the court can only
grant leave where the question involves a point of law of
general importance or there is some other special reason for
consideration of the matter by the Court of Appeal (s. 32(6),
last paragraph).

Where the seat of the arbitration is in England, it has been said that a
common law application to the court to determine a question of the
jurisdiction of an arbitral tribunal is incompetent; an application, if made,
must be made under s.32 of the Act. In the same case, namely, the
decision of Mr Justice Clarke in ABB Lummus Global Ltd. v Keppel
Fels Ltd. [1999] 2 Lloyd’s Rep. 24, it was also held that the court
required to be satisfied that the provisions of either s.32(2)(a) or (b) had
been met, otherwise an application could not be entertained.

However, on the common law application question, there is a more recent

decision that suggests that the court can entertain an application even
where it is accepted (or established) that the conditions of s.32 are not
met. This was the decision of Judge Richard Seymour in the case J.T.

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Mackley & Co. v Gosport Marina Ltd. [2002] B.L.R. 367. Reference
was made to the general principle of minimum interference in s.1(c) of
the Act, but it was held that the issues argued in that case were of
general importance to the question of whether there was a valid
reference, and that the declaratory application could be entertained;
indeed the judge went on to grant the application in this case. The judge
in this case found some support for the ability of the court to entertain an
application outwith the confines of Part 1 of the Act in the use of the word
“should” rather than “shall” in s.1(c), the full wording of which is as
follows:

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

This wording suggested, the court held, that the courts were not barred
from intervening in a non-Part 1 application, although they were
discouraged from doing so. This interpretation of s.1(c) was also
supported by Mr Justice Thomas in the case Vale do Rio Doce
Navegacao v Shanghai Bao Steel Ocean Shipping Co. Ltd. [2000] 2
Lloyd’s Rep. 1 at paragraph 52. It is unclear which case will be
followed, but the ABB Lummus case seems more persuasive in that it
follows the letter and spirit of the Act, while the Mackley decision, on
this point, does not.

Where an application is made to the court to determine the jurisdiction of

the arbitral tribunal before the appointment of that tribunal, it has been
held that the conditions set out in s.32 still apply. This was the decision
of Mr Justice Thomas in the case Vale do Rio Doce Navegacao v
Shanghai Bao Steel Ocean Shipping Co. Ltd. [2000] 2 Lloyd’s Rep.
1. An argument was made that s.32 does not apply until the arbitral
tribunal is appointed, but this argument was rejected.

On the procedure for making the application, this is dealt with in Part 62
of the Civil Procedure Rules 1998.
This section is mandatory, and it is not difficult to see why: the parties
under s.30 are permitted to deprive the arbitral tribunal of the right to
determine its own jurisdiction, or even to disapply s.30 and so deprive
the tribunal; in such cases, the court must have the power to determine
the jurisdiction of the tribunal and in such cases, s.32 is the only venue
open for such an argument.

Scottish position
The Scottish provisions, found in rules 22 and 23 of the Scottish
Arbitration Rules, are very similar to the 1996 Act provisions, except that
there is no appeal from a decision of the Outer House of the Court of

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Session on a jurisdictional challenge made to the court (rule 23(4)). This

at least restricts the stages through which a court-based challenge to a
tribunal’s jurisdiction must travel.

Challenging a substantive jurisdiction award

Where a party is not content with an award made by an arbitral tribunal

on substantive jurisdiction, he may apply to the court to challenge that
award under s.67. This provides for the ability to challenge an award of
the tribunal where it deals with a point of substantive jurisdiction or to
have the award declared of no effect for those reasons (grounds in s.67
(1)).

The court has three ways to dispose of this challenge. It can

(a) confirm the award,
(b) vary the award, or
(c) set aside the award in whole or in part.

We will return to other challenges to an award later, and to general

provisions in s.70 covering all challenges.
The purpose of s.67 is not to allow a court review application on the
option exercised by the tribunal under s.31(4)(a) (where the ruling on
the jurisdictional objection is contained in the award); the purpose is to
challenge the decision on its merits (see Justice Colman MR in Aoot
Kalmneft v Glencore International AG [2002] 1 Lloyd’s Rep. 128.)

The choice of remedies under this section, set out at subsection (1),
reflect the alternatives in s.31(4) on how the decision can be made by
the arbitrator. It is clear from the use of the words “in whole or in part” in
s.67(1)(b) that a decision to declare the arbitral tribunal’s decision on
substantive jurisdiction of no effect may only affect part of the award; for
example, where the argument on jurisdiction before the tribunal was only
in relation to part of the reference, where the parties have always
accepted that the tribunal has jurisdiction over remainder of the
reference.

S.67(1)(b) cannot apply unless the arbitral tribunal has made a decision
that it has jurisdiction, or at least that it has so for some part of the
reference; if it decides that it has no jurisdiction at all, it should issue an
award under s.31(4)(a), in which case any challenge to that decision will
be made under s.67(1)(a), not (b): LG Caltex Gas Co Ltd. v National
Petroleum Corporation [2001] 1 WLR 1892.

It has been held that where the s.67 challenge is to a decision by the
tribunal that it has no jurisdiction (a decision under s.31(4)(a)), despite

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the wording of s.67(1), the general loss of right to object provision (s.73)
does not apply - it only applies where the decision is under s.31(4)(b)
and the challenge to it one falling within s. 67(1)(b) or where there is a
decision under s.31(4)(a) to the effect that the tribunal has jurisdiction.
This was the view taken by the Court of Appeal in LG Caltex Gas Co
Ltd. v National Petroleum Corporation [2001] 1 WLR 1892. In
allowing the appeal against the decision of Mr Justice Aikens, Lord Phillips
MR, delivering the unanimous judgement of the court also observed (at
paragraph 80) that where the jurisdiction issue being challenged is also
the main substantive issue (here, the issue was whether the parties were
subject to the contracts in question), the appeal court can reopen both on
a s.67 challenge:

“The issue of whether the respondents were party to the two

contracts was a central issue in the dispute as to liability. The
appellants were urging that Mr Harris had jurisdiction to determine
liability. Mr Harris [the arbitrator], after a hearing that lasted three
weeks, has decided the central issue against them. Because that
issue was also the issue that determines jurisdiction, the
appellants are now able to reopen it. The judge considered this
result unjust. I am not persuaded that it is. Where an issue on
which jurisdiction turns is also an issue relevant to liability, each
party will be in a position, subject to making any necessary
reservations, to reopen that issue before the court if the
arbitrator's ruling on jurisdiction goes against them. In this
instance it is the appellants who have profited from this situation.”

In any application under s.67, there are certain procedural requirements

to overcome. These are as follows:

(1) The applicant must first have exhausted any arbitral process of
appeal or review that applies in the case (s.70(2)(a), applied by
s.67(1)); and
(2) The applicant must first have taken any available steps (if
applicable) under s.57 for the correction of an award or the
making of an additional award (see later on this) (s.70(2)(b)
applied by s.67(1)); and
(3) The application must be brought no later than 28 days after the
date of the award or the date when the result of any appeal or
review process is intimated (s.70(3) applied by s.67(1)); and
(4) In any case where the challenge is under s.67(1)(a) or (b),
there must be no loss of right by waiver under s.73 (unless the
decision by the tribunal is that it has no jurisdiction and the
challenge is under s.67(1)(a), in which case, as stated above,
s.73 will not apply).

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All applications are subject to stipulations (1)-(3), with (4) being of more
limited application.

The time limit of 28 days is an important one. A challenge on the

grounds of alleged breach of human rights based on the applicant’s
failure to consult English lawyers, when that applicant was a company
well versed in international contracts involving the possibility of arbitral
proceedings: Broda Agro Trade (Cyprus) Ltd v Alfred C Toepfer
International GmbH [2009] EWHC 3318.

All grounds of challenge must be included in the application, and any

additional grounds of challenge may well not be entertained if sought to
be introduced beyond that time limit: this was the view of Mr Justice
Colman in Westland Helicopters Ltd. v Sheikh Salah Al-Hejailan
[2004] 2 Lloyd’s Rep. 523 at paragraph 42 where he said:

“A similar approach should clearly apply to the statement of

grounds for an application to challenge the arbitrator's jurisdiction
under s. 67. If the applicant knew of a particular ground of
challenge when he issued his application but did not include it, he
should not be permitted to introduce that ground at a date which is
after the expiration of the period of 28 days from the award
specified in s. 70(3) of the Act.”

A similar but distinct point is that a jurisdictional argument that was not
raised before the arbitral tribunal cannot be raised for the first time in the
s.67 application, unless there is some reason for this. The position was
put this way by Mr Justice Colman in JSC Zestafoni v Ronly Holdings
Ltd. [2004] 2 Lloyd’s Rep. 335, paragraph 64:

“The principle of openness and fair dealing between the parties to

an arbitration demands not merely that if jurisdiction is to be
challenged under s. 67 the issue as to jurisdiction must normally
have been raised at least on some grounds before the arbitrator
but that each ground of challenge to his jurisdiction must
previously have been raised before the arbitrator if it is to be
raised under a s. 67 application challenging the award.”

This point was repeated by the same judge in Westland Helicopters

Ltd. v Sheikh Salah Al-Hejailan [2004] 2 Lloyd’s Rep. 523 at
paragraphs 40-41, and it was added that the only exception to this would
be if the ‘reasonable diligence’ saving in s.73(1) could apply then the
court might hear the argument.

Under s.67(2) the proceedings can be continued while a s.67 application

is being decided, and this might be sensible where the application only

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affects part of the reference, and where the evidence from the challenged
part is not too intertwined with that part remaining live before the
tribunal. Again, the principles in s.1 will play a pivotal role in the decision
of the tribunal here.

Leave to appeal any decision of the court on a s.67 application is required

- s. 67(4).

Section 67 is mandatory.

Scottish Position

The Scottish provision on such appeals is in rule 67 of the Scottish

Arbitration Rules, and this rule is mandatory. It is in similar terms to the
1996 Act provision. However, the rule does provide very restricted
grounds for appeal from the Outer House to the Inner House – an
important point of principle or practice or other compelling reason (rule
67(5)) - while there are no such restrictions on the granting of leave in
the 1996 Act provision. In addition, the Inner House is the final court of
appeal in Scotland on such a challenge; there is no such limit in the 1996
Act, meaning that a 1996 Act challenge can go as far as the Supreme
Court.

3. General Duties of the Tribunal

These are set out in s.33 of the Act. It describes the “General Duty” but
breaks that into two subdivisions which are potentially in tension. On the
one hand s33(1)(a) says that the tribunal should:
(a) act fairly and impartially as between the parties, giving each
party a reasonable opportunity of putting his case and dealing with
that of his opponent, and
On the other, s33(1)(b) says that the tribunal should
(b) adopt procedures suitable to the circumstances of the
particular case, avoiding unnecessary delay or expense, so as to
provide a fair means for the resolution of the matters falling to be
determined.
This duty runs through the tribunal’s “conducting the arbitral
proceedings” and also in its decision making and “in the exercise of all
other powers conferred on it.”

There is a tension between fairness – and allowing parties to have the

opportunity to put their case, and the need to avoid unnecessary delay,
in some cases at least.

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This section is, hardly surprisingly, mandatory and so cannot be

contracted out of. It will be seen that there is a degree of overlap
between some of the notions here and the principles embodied in s.1.
Also, this section is designed to secure the arbitral tribunal’s judicial
character.

The discharge of these duties emerges through the case law.

Scottish position

The Scottish equivalent is rule 24 of the Scottish Arbitration Rules, which

is worded more concisely, but carries the same broad import. There is
one major difference: rule 24 refers to the obligation on the tribunal to
“be impartial and independent” while the 1996 Act refers to impartiality
only. We will come back to this distinction later when dealing with
challenges to arbitral decisions.

4. Procedural Provisions

In this section, the provisions of the 1996 Act are dealt with. There are
broadly similar provisions in the Arbitration (Scotland) Act 2010.

Procedural and evidential rules

These are provided for in s. 34 of the 1996 Act. Under this provision the
tribunal has wide powers to “decide all procedural and evidential matters”
– but this is subject to the parties powers to agree these.
Section 34 gives some examples of what this might encompass. It is
worth using this as a checklist for parties to try and agree and allow them
to maintain some control on these basics, away from the arbitrator.
These grounds include:
(a) when and where any part of the proceedings is to be held;
(b) the language or languages to be used in the proceedings and
whether translations of any relevant documents are to be supplied;
(c) whether any and if so what form of written statements of claim
and defence are to be used, when these should be supplied and
the extent to which such statements can be later amended;
(d) whether any and if so which documents or classes of
documents should be disclosed between and produced by the
parties and at what stage;
(e) whether any and if so what questions should be put to and
answered by the respective parties and when and in what form this
should be done;

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(f) whether to apply strict rules of evidence (or any other rules) as
to the admissibility, relevance or weight of any material (oral,
written or other) sought to be tendered on any matters of fact or
opinion, and the time, manner and form in which such material
should be exchanged and presented;
(g) whether and to what extent the tribunal should itself take the
initiative in ascertaining the facts and the law
(h) whether and to what extent there should be oral or written
evidence or submissions.

This is non-mandatory, but is a useful stop-gap provision. Where the

parties do not agree at all on such matters, the arbitral tribunal has full
discretion. Where the parties agree on some of the matters but not all,
the tribunal will obtain the balance of the powers under s.34. Parties
should be wary of this provision, since, unless they provide for
procedures of their own, they are entirely in the hands of the arbitrator,
and an appeal on a procedural or evidential matter is unlikely to succeed.
Indeed, there have been few reported decisions of any importance on this
section.

The following points should be noted:

(1) The list of matters in s.34(2) is non-exhaustive, and others may

fall within the definition of ‘procedural and evidential’ matters;
(2) The general duties of the tribunal in s.33 (see above) will apply
to the tribunal when fixing any procedure not specified by the
parties;
(3) The tribunal has wide power (unless the parties agree
otherwise) to decide how long compliance with its directions
should take,
(4) The rules of evidence may be ignored by the tribunal-
s.34(2)(f); not all will be but this gives the tribunal the
opportunity to, for example, ignore the rules against hearsay
evidence, or the best evidence rules; alternatively, more strict
rules of evidence can be applied than in the public courts,
although the s.33 duties would have to be kept in mind here;
(5) The style of any hearing on evidence is left to the tribunal
unless the parties choose to agree on this - s.34(2)(g) and (e) -
this could lead to the legitimate adoption by the tribunal of an
inquisitorial approach, with questions and issues as well as the
general marshalling of witnesses coming from the tribunal, not
from the parties or their lawyers. The tribunal might even
decide not to hear oral evidence at all and might hold a
‘documents only’ arbitration or ask parties to have witness
affidavits lodged in lieu of oral evidence or it might decide to
exclude oral evidence on a certain point (either approach would
be in order under s.34(2)(h)). For a recent case where a rent

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review arbitrator refused to hold an oral hearing, and where a

challenge to this decision was rejected, see O’Donoghue v
Enterprise Inns Plc [2008] EHWC 2273 (Ch).
(6) There is a possibility of no pleadings being ordered; while this
would be unusual, its possibility is foreseen by the use of the
words “whether any” at the beginning of s.34 (2) (c).

Consolidation of Proceedings

This is provided for by s.35 of the 1996 Act and allows the parties (and
expressly not the tribunal) to agree to combine their proceedings with
others.
Consolidation under s.35 (1) (a) would involve combining different but
related claims to a single set of proceedings. Concurrent hearings under
s.35 (1) (b) would allow two (or more) arbitral proceedings to remain
separate but to share hearings. The section is non-mandatory.

There are no reported cases of any note on this provision.

Representation of Parties

This is covered in s.36 of the 1996 Act. A party can choose any
representative whether they are a lawyer or not. Again, this is non-
mandatory, and it ensures that the tribunal cannot prevent a party from
being represented. There are no cases of any note on this section, which
is relatively self-explanatory and uncontroversial.

Power to appoint experts, legal advisers or assessors

This power is to be found in s.37 of the 1996 Act. It gives the tribunal
wide powers to appoint experts or legal advisers to “report” to it and
attend proceedings. The fees of that are brought within the expenses of
the arbitration. The parties can agree otherwise – but there is no
unilateral power for them to challenge this step (unless that has itself
been pre-agreed). The control on this would of course be the general
duty on the tribunal, as set out above. Moreover, the parties are to be
given the “reasonable” opportunity to comment on what the tribunal is
provided by the expert (although that would be implied within the
general duty. By contrast, there is – for example – no power to comment
on the terms of reference made in the first place).

The most interesting power is the power to appoint an expert. This might
be because the parties have not called an expert on a particular point and
the tribunal wishes to hear expert evidence. It might even involve the

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appointment of an additional expert where two experts instructed, one

each by the parties, disagree.

The tribunal does not require to take representations from the parties on
whether to appoint an expert, advisor or assessor, although such a
course of action may be wise given the duties of the tribunal under s.33.
On the identity and remit of such a person, again, representations should
be taken from the parties.

Subsection (1) is non-mandatory and subsection (2) is mandatory. This

means that the parties could agree different terms for the appointment of
such person(s), but if they do, the costs incurred must still be classed as
expenses of the arbitrator (see later on expenses - the fees of such a
person would require to be reasonable, as with all other arbitrators’
expenses - s.28). Of course, if such a power is excluded, subsection (2)
has no effect. If nothing is said by the parties in their agreement or in the
institutional rules applied by them, these provisions will apply (subsection
(1) by default).

There are no notable cases on this section.

General powers of the tribunal

A number of miscellaneous powers are bestowed upon the tribunal under

s.38 of the 1996 Act:

This section is non-mandatory and can therefore be contracted out of.

Where it is not, the following powers are available under this section:

(1) power to order security for costs (s.38(3)). This means the
parties can seek to have the other party make provision to
ensure that the costs of the arbitration are recoverable.
(2) power to give directions on property which is the subject matter
of the proceedings and owned or possessed by one of the
parties - this would cover, for example, ordering a site visit or
inspection of the property by the tribunal and/or expert witness
(s38(4))
(3) to make use of oaths or affirmations in connection with oral
evidence (s38(5))
(4) to give directions to control or preserve evidence in the hands
of one of the parties. (s38(6))

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With the notable exception of the power to order security for costs (which
vests solely in the tribunal) the court has similar powers by virtue of
s.44, but s.44(5) is relevant; the court should only exercise those powers
where the tribunal has no power or is unable to act effectively for the
time being. The difference with the court is that the arbitrator has limited
powers in terms of third parties itself (its jurisdiction extending within the
confines of the contract through which it gets its “power”) (although
court intervention can be sought to compel that).

Power to order security for costs

Perhaps the most important power in s.38 is the power to order security
for costs. The tribunal will have to pay close attention to the s.33 duties
as well as the s.1 principles when considering such a move. However,
there are no general restrictions on the exercise of discretion of the
tribunal. There are two restricted exceptions to this wide discretion, set
out in s.38 (3): these are aimed at preventing a decision being made to
order security for costs purely on the basis of the foreign origin of the
party concerned. This does not mean that this cannot be a factor; only
that it should not be the sole reason.

It seems that the tribunal can of its own volition exercise this power, but
it would almost certainly be a breach of its duty to act fairly if it did so
without seeking representations from both parties, particularly the party
being considered as the possible subject of the order.

Some guidelines for the exercise of this discretion were set out by Mr
Justice Longmore in Azov Shipping Co. v Baltic Shipping Co. (No. 2)
[1999] 2 Lloyd’s Rep. 39. This was an application under s.67, and the
court was content to hear all of the evidence and arguments on
jurisdiction that had been placed before the arbitrator. The court decided
to award security for costs and said this:

“It seems to me to follow from this that cases will be rare in which
a Court or indeed an arbitrator would think it right to order security
for costs if an applicant for relief has sufficient assets to meet any
order for costs and if those assets are available for satisfaction of
any such order for costs. In this case it is therefore relevant for me
to enquire whether Azov have assets which are available for the
satisfaction of any judgment as to costs. If Azov does have such
assets, then I would not be inclined to make any order for
security; whereas, if it does not have such assets or if such assets
are not readily available to satisfy any Court order, I would be
inclined to make an order for security.”

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The judge went on to indicate that the question of whether the merits of
the case were relevant depended on the issue being determined by the
court:

“I pay no regard to the merits of the underlying dispute. That

might be relevant if I had to decide whether to award security in
respect of the costs of the arbitration as a whole, but that is not
my province. I am only deciding whether security for costs should
be awarded in respect of the jurisdiction dispute.”

The security order here was made under s.70(6) which allows the court
to make such an order in an appeal or application under sections 67-69,
subject to the same exclusion regarding basing a decision purely on the
foreign origin of the party concerned, and with a power of dismissal of
the appeal if not complied with.

There is a suggestion that the principles to be applied to a decision by the

tribunal under this section are the same as those to be applied by the
court: Wicketts v Brine Builders [2001] CILL 1805, per Judge Seymour
QC. This was a decision in the context of an arbitrator’s costs. However,
this is doubted by the authors Harris, Planterose and Tecks in The
Arbitration Act 1996: A Commentary who believe the discretion of the
arbitrator is unfettered, except for the application of the specific
exclusions in s. 38(3) and the application of sections 1 and 33. It would
seem that the view of the authors is preferable, particularly given the
absence of any express limitation on the tribunal’s discretion in the
section when such limitation could easily have been incorporated by the
framers.

In the event of a failure to provide security (following a peremptory order

- see later on these), the tribunal has the power to dismiss the claim -
s.41 (6).

It should be noted that the tribunal has the power to order security for
costs against a counterclaiming respondent. This is as a result of the
application of s.82(1) which defines claimant as including counterclaimant
unless the context requires otherwise.

Power to make provisional awards

Section 39 allows the parties to agree to give the arbitrator the power to
make provisional awards.

The following points should be made about this power:

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(1) it does not apply as a default power - the parties must agree,
or it will not apply (s.39 (1) and (4));
(2) although the section heading refers a provisional ‘award’ it has
been pointed out that it is in fact not an award at all but an
order - so the provisions as to awards (dealt with later) do not
apply;
(3) the order is not final on the issue which is the subject matter of
the order, unlike an interim order, and it may be adjusted in
the final award (s.39(3) and final sentence of s.39(4));
(4) the instances cited in s.39(2) are merely examples and are not
exhaustive;
(5) The tribunal will have to take care not to breach its s.33 duties
in considering such an award, and such an award is likely to be
only rarely justified (assuming it is competent) - there is only
one reported decision in which such an award was made, but it
not challenged in the Court of Appeal: BMBF (No12) Ltd. v
Harland & Wolff Shipbuilding & Heavy Industries Ltd.
[2001] 2 Lloyd’s Rep. 227.

Loss of right to object

There is a general provision of this nature, contained in s.73. As noted

above the terms vary compared with the provision on objection to the
arbitrator’s jurisdiction.
This section is mandatory.
The objections that are affected by the section are outlined in s.73 (1),
and these cover most of the objections a party to arbitral proceedings will
ever wish to make. These are (quoting directly):
(a) that the tribunal lacks substantive jurisdiction,
(b) that the proceedings have been improperly conducted,
(c) that there has been a failure to comply with the arbitration
agreement or with any provision of this Part, or
(d) that there has been any other irregularity affecting the tribunal
or the proceedings,
In some sections of the Act, specific attention is drawn to the operation of
s.73, but this is unnecessary; the section applies to all objections,
wherever they may arise under the Act.

There are three possible times by which an objection must be raised, all
set out in s.73 (1):

(1) within a time limit agreed between the parties;

(2) within a time limit set by the tribunal;

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(3) forthwith, once the party becomes aware of the ground of

objection;
(4) sometime later, but on the basis that he did not know or could
not with reasonable diligence have discovered the grounds of
objection

Unless the objection comes within any of these timescales, it may not be
raised at all - the party is barred from raising it.

The question of the meaning of ‘forthwith’ was considered in Wicketts v

Brine Builders [2001] CILL 1805 where it was said to mean ‘promptly’
or ‘without unnecessary delay’.

It is clear that the onus is on the party seeking to make the objection to
satisfy the court that he did not know or that he could not with
reasonable diligence have discovered the grounds for the objection. This
means that material must be presented to satisfy the court on this - a
bare assertion that this is the case will not do - see the judgement of Mr
Justice Colman in the case of JSC Zestafoni v Ronly Holdings Ltd.
[2004] 2 Lloyd’s Rep. 335. The judge suggested that usually a witness
statement would be expected in which the reason as to why the point had
not been raised earlier would be addressed - see paragraph 67. In that
case, the point was being raised for the first time eleven days after the
award.

In Rustal Trading Ltd. v Gill & Duffus [2000] 1 Lloyd’s Rep. 14

(dealt with earlier) a purported objection to the continued involvement of
one of the arbitrators was made in writing before an award was issued.
This letter was in the form of an invitation to the tribunal to consider
whether the connection referred to might make it difficult to judge the
case objectively. This was in a documents-only arbitration, so there was
no opportunity for an oral objection to be raised. The tribunal considered
the terms of the letter but did not respond nor were the terms of the
letter acted upon; the arbitrator concerned did not resign. An award was
later issued. Only after the award was a formal objection lodged. It was
argued that the letter represented a proper objection in terms of s.73.
The pertinent part of the letter is as follows:

“...as Mr. Lalljee's business reputation has been attacked, we have

been obliged to put these matters to him in his position as
consultant to Rustal. . .. He has pointed out that Mr. R. Shaw has
had business dealings with him in the past. In view of the
allegations made against Mr. Lalljee personally, which are of
course strongly denied, we are concerned that Mr. Shaw should
consider carefully whether his past dealings with Mr. Lalljee might
make it difficult for him to judge wholly objectively these most
serious and strongly disputed allegations made about the
management of Rustal...”

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However, this argument was rejected, and the court said this:

“Although that letter raised the matter of Mr. Shaw's previous

business dealings with Mr. Lalljee, it did so only in the most
general way. Most importantly, it did not contain anything which
could properly be interpreted as an objection to Mr. Shaw
continuing to act as a member of the tribunal. On the contrary, it
stated in terms that Rustal was not aware of any impediment to his
doing so.”

It was then argued that the ground of objection was not known to the
party concerned until after the award was issued, since they did not know
whether, in response to the letter, the arbitrator had acted on it and
resigned; there had been no response to the letter. However, the court
was not convinced by that argument either, and held that the delay
between the date for deliberation and the issue of the award was fatal to
the challenge, and that during that period, the proceedings were
continuing. It was held that the failure to resign was not the ground of
objection, and that the party could have found out at least one month
before the award was issued that the arbitrator had taken part in the
preparation of the award. The court explained the position in this way:

“The expression "continues to take part in the proceedings" is

broadly worded and the sub-section as a whole is designed to
ensure that a party who believes he has grounds for objecting to
the constitution of the tribunal or the conduct of the proceedings
raises that objection, if he wishes to do so, as soon as he is, or
ought reasonably to be, aware of it. He is not entitled to allow the
proceedings to continue without alerting the tribunal and the other
party to a flaw which in his view renders the whole arbitral process
invalid. That could often result in a considerable waste of time and
expense which is no doubt something which the legislation seeks
to avoid. There is, however, a more fundamental objection of
principle to a party's continuing to take part in proceedings while
at the same time keeping up his sleeve the right to challenge the
award if he is dissatisfied with the outcome. The unfairness
inherent in doing so is, of course, magnified if the defect is one
which could have been remedied if a proper objection had been
made at the time. Once arbitration proceedings have been
commenced there may well be many periods during which no
formal step is required of one or other party, but it would not be
right as a matter of ordinary usage to say that during such periods
either party is not taking part in the proceedings. I think the same
can be said of the period between the conclusion of the hearing
and the publication of the award. Nothing further may be required
of either of them at that stage, but that does not mean that they
have in any real sense ceased to take part in the proceedings. In
my judgment, unless a party makes it clear that he is withdrawing

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from the proceedings, he continues to take part in them until they

reach their conclusion, normally in the publication of a final award.
I can see no reason why a party who discovers grounds of
objection after the conclusion of the hearing and before the
publication of the award should not be required to voice it
promptly, even at that stage, if he wishes to pursue it later on by
challenge to the award. To require him to do so is consistent both
with the wording of s. 73(1) and the principles which underlie it.
For these reasons I am satisfied that Rustal did continue to take
part in the proceedings right up until the publication of the award
on Apr. 12, 1999…. Rustal continued to take part in the
proceedings between Feb. 16 and Apr. 12. It would have been a
simple matter to discover from the RSA whether Mr. Shaw
remained a member of the tribunal: indeed, the very fact that
there had been no notification of his replacement was a clear
indication that he did. Given the terms of the letter of Feb. 16, the
absence of any further communication from the RSA could hardly
have been interpreted as an indication to the contrary. I am far
from persuaded that if Rustal had acted with reasonable diligence
it could not have discovered at least a month before the award was
published both the circumstances which are said to cast doubts on
Mr. Shaw's impartiality and the fact that he was continuing to act
as a member of the tribunal.”

The Scottish position

This is broadly similar to that under the 1996 Act and can be found in the
mandatory rule 76 of the Scottish Arbitration Rules. The circumstances in
which a loss of a right to object might apply are wider than under the
1996 Act (see rule 76 (1)) and the benchmark for a timeous objection is
not one which is made “forthwith” as under the 1996 Act but is instead
one which is made “as soon as reasonably practicable” after the
circumstances giving rise to the objection first arose. Lack of
knowledge/reasonable diligence applies to save an otherwise late
objection in the same way as under the 1996 Act (rule 76(3)).

5. Miscellaneous Provisions

There are several other provisions in the Act that are worth briefly
mentioning. The Scottish equivalents are not covered here, for space
reasons.

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Choice of substantive law

The parties may choose the substantive law applicable to the dispute,
and this choice will be respected by the tribunal under s.46:

s 46 Rules applicable to substance of dispute.

(1) The arbitral tribunal shall decide the dispute--

(a) in accordance with the law chosen by the parties as applicable
to the substance of the dispute, or
(b) if the parties so agree, in accordance with such other
considerations as are agreed by them or determined by the
tribunal.
(2) For this purpose, the choice of the laws of a country shall be
understood to refer to the substantive laws of that country and not
its conflict of laws rules.
(3) If or to the extent that there is no such choice or agreement,
the tribunal shall apply the law determined by the conflict of laws
rules which it considers applicable.

This section is non-mandatory and allows the parties to defer to the

tribunal on this choice, failing which the tribunal can decide according to
‘choice of law’ rules. However, by far the easiest way to tackle the matter
is to agree a choice of law clause in the original contract, to avoid a
private international law dispute on this matter (see the PIL topic earlier
in the module).

Some recent interesting case law has emerged on whether the choice if
law under s.46 requires to be the law of a country, as opposed to a non-
country specific system of law. In Musawi v RE International (UK) Ltd
[2008] 1 Lloyd’s Rep 326 the court decided that Shia Sharia law could
not be applied since it is not country specific. This follows from a Court of
Appeal decision, under the Rome Convention, to the effect that Jewish
Law could not be applied as a choice of law: Halpern v Halpern [2008]
QB 195.

The law governing the arbitration agreement will dictate such matters as
the rules of its interpretations, validity and so on. In order to identify the
law governing the arbitration agreement, the courts will first look at the
express choice of the parties. Some institutional rules assist the parties in
this regard. For example, the LCIA Rules provide in Article 16(4):

“The law applicable to the Arbitration Agreement and the

arbitration shall be the law applicable at the seat of the arbitration,
unless and to the extent that the parties have agreed in writing on

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the application of other laws or rules of law and such agreement is

not prohibited by the law applicable at the arbitral seat.”

If no such express designation has been made and it becomes necessary

to determine the law applicable to the agreement to arbitrate, the two
most likely choices are the law of the main contract and the law of the
seat.

In Sulamérica Cia Nacional de Seguros SA and ors v Enesa

Engenharia SA and ors [2012] EWCA Civ 638, the English Court of
Appeal held that the law of the arbitration agreement was to be
determined by application of the three-stage enquiry.
(1) If the parties made an express choice of law to govern the arbitration
agreement, that choice would be effective, regardless of the law
applicable to the contract as a whole.
(2) Where the parties failed expressly to specify the law of the arbitration
agreement, it was necessary to consider whether the parties had made
an implied choice of law.
(3) Where it was not possible to establish the law of the arbitration
agreement by implication, it was necessary to consider what would be
the law with the ‘closest and most real connection’ with the arbitration
agreement.

The court always has to perform the above three-stage enquiry, and the
decision will depend every time on the facts of each individual case.

The Scottish provision is s.5 of the 2010 Act. Unlike in the 1996 Act,
these provisions are mandatory, although apart from the possible cost-
saving justification it is not clear why this is so. The English authorities on
this very similarly worded provision will be influential in Scotland.
Restraining the parallel proceedings abroad
Sometimes, the parties may hold different views as to whether or not a
dispute falls within the scope of the arbitration clause. Likewise, from the
tactical point of view, parties may disagree as to which forum they would
prefer in a given situation. Under such circumstances, to prevent
inconsistent judgments and awards, the jurisdiction of an arbitral tribunal
might require protection from the competent court.

If, in breach of the arbitration agreement providing for arbitration in

England, a party commences proceedings anywhere save in England
under the Arbitration Act 1996, such a breach is remediable by an anti-
suit injunction to protect the rights of the other party. This interim
injunction is an important tool that English courts deploy to assist
arbitration.

The English court has jurisdiction to restrain by injunction foreign

proceedings in breach of an arbitration agreement, save where those

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proceedings are brought in the courts of a State to which the Brussels I

Regulation or the Lugano Convention applies.

Power of court to extend arbitral time limits

There is a general power to this effect in s.79 which allows the court to
order an extension of time on “any matter” in the arbitration – and can
do so on the application of either party or the tribunal.
The provision is non mandatory but where it applies it is of almost
universal effect (exception is s.12). There is a requirement that any other
avenue of recourse has been taken and that substantial injustice would
be done if the limit is not extended (s.79 (3)) otherwise the discretion of
the court cannot be exercised. Usually there would be an expectation that
parties would agree the extension – in practice.

Timing of commencement of arbitral proceedings

There are three provisions on this - s.12, 13 and 14 of the Act. They are
self-explanatory and apply to the timing of commencement of arbitral
proceedings (s.14); the power of the court to extend time for bringing
arbitral proceedings (s. 12); and the application of the Limitation Acts to
arbitral proceedings (s.13).

Other parts of the Act

Parts II, III and IV of the Act, except as previously covered (the only
example of this is a brief mention of sections 100-104 on enforcement)
are not covered further since they do not deal with arbitration pursuant
to an arbitration agreement. So, subjects such as consumer arbitration
agreements and statutory arbitrations, while important, are not relevant
to the material covered in this module.

Additional Reading
The materials on Halliburton v Chubb posted on Moodle should be
considered as part of the essential reading of this handout – to the extent
that students gain a familiarity with the judgment and its role within
arbitration more generally. That should reflect a selection of the
resources available.

Further Reading

This handout covers a very significant amount of material: it is not

expected that every one of the sources below should be read in detail.

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They are however pertinent on the issues covered – and a selection are
worth considering to supplement, expand and explain the issues arising
further. Reading the full judgment in Halliburton v Chubb, for those who
get to this stage would be – at least – the first next step in terms of
“Further Reading”

Harris, Planterose and Tecks The Arbitration Act 1996, A Commentary,

chapters 3 – 8 (where covering relevant provisions discussed herein)

Redfern, A et al., Law and Practice of International Commercial

Arbitration, chapter 2 -4 and 6

Davidson F., Arbitration 2nd ed., chapters 7 and 10

Altaras, D., Review or rehearing: Electrosteel Castings Ltd v Scan Trans

Shipping & Chartering Sdn Bhd 2003 Arbitration 65.

Brawn, D., The court's powers to intervene in arbitration matters in

England and Wales, with particular reference to the court's inherent and
residual discretion 2010 Arbitration 214.

Dennys, N., Arbitration update: the limits of the courts' interference 2008
Const LJ 3.

Dundas, H., Arbitral rarities: recent arbitration cases in the English courts
with a Scottish postscript, 2015 Arbitration 332

Dundas, H.R., Separability and jurisdiction, court assistance to arbitration

and a costs horror story: three recent cases in the English courts 2005
Arbitration 265.

Jones, D., Competence-competence 2009 Arbitration 56.

Riches, J., Laker Airways Inc v FLS Aerospace Ltd [2000] 1 W.L.R. 113
(QBD (Comm)) 1999 Int ALR 175.

Schlaepfer, A.V., and Bartsch, P., A few reflections on the assessment of

evidence by international arbitrators 2010 IBLJ 211.
Seeger, K and Friel, S., Challenge under section 67 of the Arbitration Act
1996 2004 Int ALR N39.

Shine P., Establishing jurisdiction in commercial disputes: arbitral

autonomy and the principle of kompetenz-kompetenz 2008 JBL 202.

Trukhtanov, A., Separability of arbitration clause and jurisdiction 2008 Int

ALR N6.

Yang, E.T., What is "the first step in the proceedings to contest the
merits" under the Arbitration Act 1996? 2004 Arbitration 279.

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Topic Activities

This exercise is framed as a legal problem question to help you

develop your skills in identifying and testing the law.

You are acting as an advisor in an arbitration on a complex matter of

construction delay analysis. The parties had agreed to appoint an
experienced engineer with long project management experience – and a
number of previous arbitral appointments (which were disclosed and
accepted). Both parties have provided separate expert reports setting out
different analyses of the causes and lengths of delay which is posed by
each event in the dispute. The parties’ arbitration agreement provides
that the arbitrator’s decision is to be reached within 13 months of the
proceedings commencing. The proceedings are 4 months in.
One Monday morning you arrive at your office to find that the arbitrator
has emailed both parties overnight. It says as follows (the party names
are in the email subject heading, along with your and the other party’s
references):
“Dear Sir and Madam
I refer to the arbitration between your respective parties noted
above and my confirmation of receipt of submissions from both of
you two weeks ago. I have been reflecting upon them. I consider
that I would be assisted in my duties by the appointment of a
specialist delay advisor and I will do so over the course of this
morning. I will also need to seek your agreement to extent the
period for this arbitration by two months to allow for this to be
completed and for your comments on the report to be received.
While this may seem difficult, I believe it will ensure a more robust
award.
It seems to me that the other agreed upon steps may proceed as
agreed at our last hearing, but in the event that there would be a
benefit in those being revised to account for this development,
please do let me know.
Yours faithfully”
Question: Consider the advice you would give your client in this
case and then write it up in a note, with appropriate referencing,
as your topic activity. You should consider and identify the
relevant provisions from the 1996 Act and any relevant case law.
You should identify both the merits and problems with the course
of action proposed by the arbitrator
Word Limit: 400 words

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