January 27, 2017

Arbitration - DTEK Trading v Morozov (High Court)

High Court again confirms that permission to serve claim form out of the jurisdiction cannot be given where the respondent is not a party to the arbitration

In Cruz City v Unitech, Males J held (obiter) that section 44 of the Arbitration Act 1996 ("the Act") does not include any power to grant a remedy against a non-party to the arbitration agreement or arbitration (and so permission to serve the claim form out of the jurisdiction on a non-party could not be given). Males J noted that section 44 is one of the few sections of the Act which applies even if the seat is outside England and Wales, and he doubted that Parliament intended to give the English court jurisdiction to make orders against non-parties in support of arbitrations happening anywhere in the world.

Cruz City had concerned an application under CPR r62.5(1)(c), where the claimant is seeking a remedy other than an order under section 44 of the Act (in that case, the freezing of assets belonging to a third party). In this case, the claimant sought an order under section 44 (namely, the preservation of evidence) and therefore sought to rely on CPR r62.5(1)(b). It sought to argue that Cruz City had been wrongly decided. That argument was rejected.

The judge, Cockerill QC, held that section 44 does not permit an order to be made against a non-party: "While some of the provisions may be not unsuited to third party orders, there is nothing in the wording which indicates that the sections are designed with applications against third parties in mind. On the contrary however, when reading them together and not separately I concur with Males J's conclusion that the wording is more suggestive of applications confined to the arbitration parties than otherwise".

Nor did it matter that this conclusion effectively creates a lacuna, whereby a non-party might be able to take steps to thwart the arbitration agreement because there is no right to obtain injunctive relief against a non-party: "the fact that there would be a lacuna is not a reason to find a jurisdiction which is not justified on the wording of the relevant sections against the relevant background".