Section 44 of the Act provides that, unless otherwise agreed by the parties, the court has the same power to make orders for the purposes of and in relation to arbitral proceedings as it would in respect of legal proceedings in relation to a range of matters, including, notably, the taking of evidence of a witness (section 44(2)(a)), the preservation of evidence (section 44(2)(b)) and the granting of an interim injunction or the appointment of a receiver (section 44(2)(e)).
The Court of Appeal in this case held that the English courts have the power under section 44(2)(a) of the Act to order a non-party witness to give evidence in aid of arbitration proceedings, and furthermore that the English courts may exercise this power in aid of an arbitration that is seated outside of England and Wales.
The Court of Appeal’s judgments focused specifically on section 44(2)(a) of the Act. The extent to which the other powers available to the court under section 44 of the Act can be exercised against a non-party has yet to be fully decided. This decision could, however, also pave the way for other subsections of section 44 to be construed broadly in future.
The facts
This case concerned an application to the English courts for an order under section 44(2)(a) of the Act to take evidence, by way of deposition, from a non-party to New York-seated arbitration proceedings.
The underlying dispute, and the subject of the New York arbitral proceedings, concerned two settlement agreements between the appellants and the first and second respondents relating to the exploration and development of an oil field off the coast of Central Asia. The key issue in dispute was whether certain payments made by the first and second respondents to a Central Asian government were bribes that were not to be taken into consideration in determining amounts owed to the appellants. The third respondent, who was not a party to the arbitration and was resident in England, had acted as lead negotiator for the respondents with the foreign government. The third respondent was not prepared to go to New York to give evidence in the arbitration.
The tribunal granted permission to the appellants to make an application to the English courts to compel the third respondent’s testimony. The appellants subsequently applied to the court under section 44(2)(a) of the Act for an order for the third respondent’s evidence to be taken by deposition pursuant to the court’s powers under rule 34.8 of the English civil procedure rules (CPR 34.8).
First instance decision
At first instance, Foxton J refused the appellants’ application – against his own inclinations – on the basis that he should follow two recent decisions of the Commercial Court with respect to the extent of the court’s powers under section 44 of the Act. The two key decisions Foxton J considered were Cruz City Mauritius Holdings v. Unitech Limited2 and DTEK Trading SA v. Morozov,3 which concerned, respectively, an attempt to serve an application for a freezing injunction out of the jurisdiction against non-parties to an arbitration under section 44(2)(e) and an application for permission to serve out of the jurisdiction against a non-party under section 44(2)(b).
In Cruz City, Males J (as he was then and who subsequently also gave judgment in the Court of Appeal in this case) held, albeit obiter, that section 44 did not give the court the power to make orders against a non-party to the arbitration. In DTEK the court also arrived at the conclusion that its powers under section 44 could only be exercised against a party to the arbitration.
Foxton J did, however, make it clear that, had it not been for these prior authorities, he would have granted the application.
The Court of Appeal’s decision
The appellants appealed the first instance decision on the basis that the judge had erred in law in holding that the court does not have jurisdiction under section 44 of the Act to make an order against a non-party and, in particular, in holding that the reasoning in the judgments in the Cruz City and DTEK cases was applicable to an application to take evidence from a non-party to the arbitration under section 44(2)(a). The appellants also sought a finding that the court had the power under section 44(2)(a) to order the taking of evidence not only of a non-party witness who is located in the jurisdiction in aid of a domestic arbitration, but also (by virtue of section 2(3)(b) of the Act), in aid of support of a foreign-seated arbitration.
The Court of Appeal (Flaux LJ and Males LJ giving judgments) granted the appeal and held that section 44(2)(a) confers on the English court the power to make an order for the taking of evidence both (a) from a witness that is not a party to the arbitration or employed and/or controlled by such a party, and (b) in aid of a foreign-seated arbitration, as well as a domestic arbitration.
The Court of Appeal’s reasoning largely turned on the drafting of section 44(2)(a) and, in particular, the fact that section 44(2)(a) refers to the taking of evidence from “witnesses” rather than “parties”. The Court held that, in the majority of commercial arbitrations, potential witnesses are typically not parties to the arbitration. Furthermore, the drafting of the Act had not sought to distinguish between witnesses who were and were not employed by or under the control of parties to an arbitration. Consequently, there was no basis for limiting the meaning of “witnesses” to those witnesses who are also themselves parties or who were under the control of a party to the arbitration.
When reaching its judgment, the Court also noted that section 44(1) of the Act provides that, unless otherwise agreed, the court has the same power to make orders about the matters listed in section 44(2) in support of arbitral proceedings as it has for the purposes of legal proceedings. The definition of “legal proceedings”, set out in section 82(1) of the Act, includes civil proceedings in the High Court of England and Wales. In addition, section 2(3) of the Act confirms that the court’s powers under section 44 apply even if the seat of the arbitration is abroad. When taken together, the key question for the Court of Appeal was what power the court would have in relation to the taking of evidence from witnesses in High Court proceedings. Under CPR 34.8, the court has the power to order non-parties to give evidence by deposition. It therefore follows that the court has the power to do so in support of an arbitration, including a foreign-seated arbitration.
Ultimately, the Court of Appeal took a narrow approach to the question before it and ruled on the extent of the court’s powers under section 44(2)(a) only, rather than the court’s powers set out under section 44 more generally.
Conclusion
This decision provides welcome clarity on the court’s powers to order the taking of evidence from a witness in aid of arbitration proceedings under section 44(2)(a) of the Act. A decision that the court’s powers under section 44(2)(a) could only be exercised against witnesses who are themselves party to arbitrations or who are employed or controlled by parties to arbitrations would have seriously diminished the usefulness of this important power. The question of whether the court’s other powers under section 44 can be exercised against non-parties has, however, been left for another court to decide. In particular, the Court of Appeal declined to comment on whether the reasoning of the decisions in Cruz City and DTEK was correct with respect to the scope of the court’s powers under sections 44(2)(b) (the power to make orders for the preservation of evidence) and 44(2)(e) (the power to grant an interim injunction or to appoint a receiver).
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- [2020] EWCA Civ 409
- [2014] EWHC 3704 (Comm).
- [2017] EWHC 1704 (Comm).
Client Alert 2020-377
