Arbitration, Litigation & Commercial
An English Court has no Jurisdiction to Give Order for Taking of Evidence from Non-party in Support of Arbitration being Conducted Abroad — A Controversial Decision
06 March 2020
Summary
In A & Anor v C & Ors (Rev 1) [2020] EWHC 258 (Comm), the High Court of England and Wales (the “Court”) dealt with a novel issue, “without the benefit of prior authority”, of whether the Court has power under s.44(2)(a) of the Arbitration Act 1996 (the “Act”) to order for taking of the evidence of a non-party to the arbitration agreement residing in England so that it might be adduced in an arbitration being conducted abroad?
S.44 of the Act provides in the relevant part:
"Court powers exercisable in support of arbitral proceedings.
(1) Unless otherwise agreed by the parties, the court has for the purposes of and in relation to arbitral proceedings the same power of making orders about the matters listed below as it has for the purposes of and in relation to legal proceedings.
(2) Those matters are-
(a) the taking of the evidence of witnesses;
[....]”
Following the reasoning, albeit in different contexts, in the cases of Cruz City I Mauritius Holdings v Unitech Limited [2014] EWHC 3704 (Comm) and DTEK Trading SA v Morozov [2017] EWHC 1704 (Comm), Mr Justice Foxton held that the Court does not have the jurisdiction under s.44(2)(a) of the Act to make such an order against a non-party to the arbitration agreement.
The main reasons based on which Foxton J reached this conclusion include: (i) the private and confidential nature of arbitration; and (ii) unlikelihood that the UK Parliament intended to give English courts jurisdiction to make orders against non-parties in support of arbitrations being conducted anywhere in the world. Foxton J adopted the view of Males J as expressed in Cruz City case that “s.44 did not include any power to make an order against a non-party”.
The Claimants had been given permission by the arbitration tribunal abroad to bring this application for the compulsory taking of the non-party’s evidence in England. Would it have made any difference if a foreign court, instead of an arbitral tribunal, had made such a request? The Court left this question open and did not decide it.
Comments
It is a difficult decision which gives rise to many legal questions.
It is the trite law that the Parliament’s intention is to be ascertained primarily from the text of the statute in question. In Pinner v Everett [1969] 1 WLR 1266 at 1273, Lord Reid observed:
“In determining the meaning of any word or phrase in a statute the first question to ask always is what is the natural or ordinary meaning of that word or phrase in its context in the statute. It is only when that meaning leads to some result which cannot reasonably be supposed to have been the intention of the legislature that it is proper to look for some other possible meaning of the word or phrase.”
The Court’s powers exercisable in support of arbitral proceedings under s.44 of the Act have expressly been made subject to the agreement of the parties to the arbitration agreement. The default position is that the Court has such powers unless the parties intend to limit or exclude the Court’s powers under this section.
Therefore, it is for the parties, in many cases supported by their lawyers, to deliberate and agree at the time of making the arbitration agreement or possibly thereafter as to how to safeguard the confidentiality of their contractual matters and whether courts should have the power to order for taking of the evidence of the non-parties. S.44(2)(a) of the Act gives the power to the Court, in absence of the parties’ agreement to the contrary, to take the evidence of “witnesses” in relation to the arbitral proceedings. The Court in this case held that the word “witnesses” means “parties” to the arbitration agreement, not non-parties. One may argue that if it has been the intention of the Parliament, it could have said so expressly as it has done at other places in the Act. For example, under s.38(5) of the Act the tribunal, unless otherwise agreed by the parties,
“may direct that
The question is whether in s.38(5) of the Act the word “party” means only “witness” and by the word “witness” means only “party witness”? If it is, then one of these words will be rendered redundant; and if it is not, then these two words have different meanings and this leads to a conclusion that a witness does not have to be a party to the arbitration agreement. An arbitration tribunal has no power to make orders against third parties. It cannot order non-party witnesses to attend a hearing to give evidence, or to make a statement. The assistance of the Court, however, can be sought under s.43 of the Act in this regard. Under this section, if other conditions are met, the Court can order a “witness” to attend before the tribunal “in order to give oral testimony or to produce documents or other material evidence”. It is not disputed that under s.43 of the Act, the phrase “witness” includes a non-party witness. In order to benefit from this section, two conditions, inter alia, have to be met: “the witness is in the United Kingdom”, and “the arbitral proceedings are being conducted in England and Wales or, as the case may be, Northern Ireland”. It is perplexing if the Parliament is assumed to have intended the phrase “witness” in ss.38(5) and 43 of the Act to include also non-party witnesses but in the very next s.44 of the Act it restricted the same phrase to mean only the parties.
If the phrase “witnesses” in s.44(2)(a) of the Act is interpreted to include non-parties, the question is why it cannot reasonably be supposed to have been the intention of the Parliament necessitating displacing the plain meaning of the phrase? One may argue that it is exactly what appears to be the intention of the Parliament. What if a non-party is in possession of the crucial evidence relevant to the arbitration proceedings being conducted abroad without which the case is unlikely to be decided justly? It is quite possible that it is the intention of the Parliament to arm the Court with the power to require the non-party to give evidence subject always to the parties’ agreement to the contrary and the Court’s own discretion.
As stated above, one of the main reasons why the Court concluded that it has no power under s.44(2)(a) of the Act to order taking of the evidence of a non-party residing in England so that it might be adduced in an arbitration being conducted abroad is the private and confidential nature of arbitration. If it is the case then it gives rise to a very serious question: why is it permissible to disregard this factor and order a non-party to attend before a Tribunal if the arbitral proceedings are being conducted in England and Wales or Northern Ireland but not if the arbitral proceedings are being conducted abroad. If the purpose is to safeguard the confidentiality then it should be irrelevant where the arbitral proceedings are being conducted and whether the non-party witness is appearing before the Tribunal or Court. Foxton J does not provide any strong justification for making such a distinction.
The second important reason for the Court’s decision is the unlikelihood that the UK Parliament intended to give the English courts jurisdiction to make orders against non-parties in support of arbitrations being conducted abroad. But this exactly appears to be what the Parliament’s intention is: under s.2(3) of the Act, s.44 applies even if the seat of arbitration is outside of England and Wales or Northern Ireland. From the tenor of the judgment of Foxton J (although it was not the question before the Court), it appears as if such an order is sought against a party to the arbitration agreement residing in the UK in support of the arbitration being conducted abroad, the English Court will have jurisdiction to make the order under s.44(2)(a) of the Act. If it is the case then it will be very surprising if it is assumed that the UK Parliament intended to give the English court jurisdiction to make orders against parties in support of arbitrations being conducted anywhere in the world but not against non-parties.
At paragraph [28], Foxton J observed that:
“It might be said that, if s.44(2) orders cannot generally be made against non-parties, it would be surprising if coercive orders could nonetheless be made against non-party witnesses under s.44(2)(a), when s.43 already makes specific provision for securing the attendance of witnesses, but does so subject to two limitations which are not found in s.44.”
As stated above, under s.43 of the Act, for an English Court to make an order against a witness to appear before the arbitration tribunal to give oral testimony or to produce documents or other material evidence, two conditions have to be met: “the witness is in the United Kingdom”, and “the arbitral proceedings are being conducted in England and Wales or, as the case may be, Northern Ireland”. There appears to be justifications for such conditions quite different from those assumed by the Court, which may include the convenience of the witness as it would be harsh, for example, if an English Court orders a witness, especially a non-party witness, living in Nigeria to appear before the arbitration tribunal in Canada. Whereas under s.44(2)(a) of the Act, the witness, if ordered, has to appear before an English Court to give testimony which may be adduced in an arbitration being conducted abroad. If the witness does not reside in the UK, the Court can always refuse to exercise its discretion.
Is it against the object and purpose of the Act if s.44(2)(a) is interpreted to give the Court power to make orders against non-parties in support of arbitrations being conducted anywhere in the world? It may not be as the main object and purpose of the Act is to enable English courts to support arbitration. Forcing a non-party, unless otherwise agreed by the parties, to give crucial evidence in connection with the arbitration proceedings being conducted abroad is a support to arbitration. The power appears to be there. However, in an appropriate case, an English Court may refuse to exercise this power. If the Court orders a non-party under s.44(2)(a) of the Act, it has at its disposal many tools to restrict a non-party from further disclosure of private and confidential information.
It was famously said in Suarez-Valdez v. Shearson/American Express, Inc., 845 F.2d 950, 951 (11th Cir. May 23, 1988) that “[a]n agreement to arbitrate is an agreement to proceed under arbitration and not under court rules.” (footnote omitted); referred to in Stanton v. Paine Webber Jackson & Curtis, Inc., 685 F. Supp. 1241 (S.D. Fla. 1988). To remove any doubt, under s.44 of the Act, the Court’s powers have been stated to be the same as those exercisable in legal proceedings which means, under s.82(1), civil proceedings in the High Court or a County Court which in turn includes taking evidence from a non-party to the civil court proceedings.
It has rightly been suggested in Merkin and Flannery on the Arbitration Act 1996 that “a little appellate light on this issue would be most welcome”.