Court of Appeal Assists Foreign Arbitration by Compelling Non-Party Witness to Give Evidence

A recent Court of Appeal case has clarified the circumstances in which the English Courts have the power to assist arbitrations in other jurisdictions in obtaining evidence from a non-party witness.

Background

A dispute being arbitrated in New York pursuant to New York law concerned two settlement agreements made between the appellants and respectively each of the first and second respondents. The agreements related to the exploration and development of an oil field off the coast of central Asia. Pursuant to those agreements, the appellants were entitled to a percentage of the net proceeds of sale if the first and second respondents sold their respective interests in the oil field. They duly did so in 2002.

The arbitration focused on payments made by the first and second respondents to the government of the central Asian state in calculating what was due to the appellants. The first and second respondents claimed that those payments were deductible as costs. The appellants alleged that they were bribes. The third respondent was the lead negotiator on the part of the first and second respondents and he was based in England. He declined to travel to New York to give evidence in the arbitration, although it was made clear he was prepared to give evidence by video-link. The New York Arbitral Tribunal gave permission to the appellants to apply to the English Courts to compel the third respondent to give evidence.

At First Instance

The appellants made an application to the English Court for an order pursuant to rule 34.8 of the English civil procedure rules (the CPR) that the third respondent give evidence by deposition in support of the New York Arbitral proceedings. The relevant section of the Arbitration Act 1996, section 44(2)(a), provides that:

“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.
Those matters are—
the taking of the evidence of witnesses”;

The judge, however, declined to make the order sought by the appellants. He held that Section 44(2)(a) Arbitration Act 1996 did not extend to the taking of evidence from witnesses who were not actually parties to the arbitration, which the third respondent had not been.

Before the Court of Appeal

Various arguments were made by the appellants before the Court of Appeal. One was that on the statutory language alone, section 44(2)(a) Arbitration Act 1996 gave the Court power to make orders against a non-party. Further, one of the powers given to the Court in civil litigation was the power to order a deposition to be taken before an examiner pursuant to CPR 34.8. The appellants also submitted that section 2(iii)(b) of the Arbitration Act 1996 confirms that section 44 applies even if the seat of the arbitration is outside England and Wales. That meant the Court had jurisdiction to make such an order in aid of a New York arbitration.

The third respondent argued that the Court’s power under section 44 only applied to the parties to the arbitration. A third party in the position of the third respondent was not in a position to address the Tribunal because he had no standing. Further, it was argued that section 44(2)(a) of the Arbitration Act 1996 did not give the Court power to order examination by deposition because the power under CPR 34.8 was a narrow power with a limited role under the CPR. It would be surprising if this narrow power could be used to aid a foreign arbitration, thereby effectively placing such an arbitration in a significantly better position as regards the taking of evidence in England than a foreign court.

The Court of Appeal's Decision

The Court of Appeal, in allowing the appeal, explained that it preferred to decide the case on the narrow approach that section 44(2)(a) does give the Court power to make an order for the taking of evidence by way of deposition from a non-party witness in aid of a foreign arbitration. It found that the English Court had the same power in relation to arbitrations as in relation to civil proceedings.

The Court made it clear that the "taking of the evidence of witnesses" covers all witnesses and not just those who are a party to the arbitration. The statute itself distinguishes between "a witness" and "a party" where it is necessary to do so. The English Court also has power to order evidence to be given by deposition under CPR 34.8.

Takeaway

There can often be a disconnect between the powers of a Tribunal in arbitration and the Court in litigation. Here, the Court of Appeal stepped in to demonstrate that it had the statutory power and procedural machinery to act in synergy with a New York Arbitration Tribunal.