January 18, 2017

Arbitration - Silver Dry Bulk v Homer Hulbert (High Court)

Application to court where respondent to arbitration had been dissolved

There can't be a valid arbitration when one of the parties has ceased to exist (see Baytur v Finagro [1992]). In this case, the respondent to an arbitration had been dissolved, but the claimant sought to argue that it nevertheless survived (at least in order to continue the arbitration). The claimant wished the arbitrator who it had appointed to decide this issue. However, in order to avoid pursuing an arbitration which might eventually turn out to have been an nullity from the start, the claimant sought an order under section 18 of the Arbitration Act 1996 ("the Act") from the court. It hoped that such an order would encourage the respondent's parent company (the real, albeit indirect, target of the arbitration) to participate in the determination by the arbitrator about whether the respondent still survived.

Section 18 provides that in the event of a failure of the procedure for the appointment of the tribunal, the court can make an order, if the parties fail to agree.

Males J held that an application under section 18 does not require the court to finally determine if the arbitral tribunal has jurisdiction (preferring the decision of Noble Denton to that of The Lapad [2004] on this point). The judge accepted that the claimant had a "good arguable case" (a relatively low threshold in this context) that the respondent continues to exist. However, the application under section 18 failed because there had been no failure of the appointment procedure here. The issue of whether one of the parties was still in existence was entirely separate. Even if he was wrong on that point, the judge said that he would have refused to exercise his discretion to make the order. Nor was there any other order which the court could usefully make.

The claimant had also separately sought orders for the production of documents against various third parties. The judge issued a witness summons for production of documents held by a company situated in England (pursuant to section 43 of the Act). The company has 14 days from the date of service of the summons to raise any objections. However, the judge's provisional view was that the company would be entitled to its reasonable costs of collecting and producing the documents but not the costs of obtaining legal advice.

Section 43 is only available if the witness is in the UK. Accordingly, the claimant also sought the issue of a Letter of Request directed to the Korean courts for the production of documents held by witnesses based there (pursuant to section 44 of the Act). The judge refused the order, on the basis that he was not prepared to conclude that the claimant had the better of the argument that the respondent continues in existence (and so could not represent to the foreign court that there probably is an arbitration in existence, for which the production of documents is requested).