Summary Disposal
One of the biggest procedural differences between English court proceedings and English-seated arbitration is that a court may decide a claim or issue without a trial if it considers that a party has “no real prospect of success”. This is called ‘summary judgment’.
Summary judgment aims to save time and costs by allowing a court to dismiss meritless claims at a relatively early stage of proceedings.
Although summary judgment is a common feature of English litigation, it is rare in arbitration. This is because arbitrators are under a statutory duty to give each party a reasonable opportunity to put their case,2 and if they fail to do so, their award can be challenged before the courts in England and recognition and enforcement of the award can also be refused by foreign courts.3
This means that arbitrators are often extremely reluctant to summarily dispose of cases, notwithstanding the arbitrators’ statutory duty to adopt procedures that avoid unnecessary delay and expense.4 For similar reasons, summary processes are rarely used even if they are available under arbitral rules.5
This has important practical implications because even if a party has an entirely meritless case, it can still engage in a drawn-out arbitration to apply commercial pressure on an opponent, who may then be persuaded to seek settlement rather than spend time and money dealing with an arbitration.
To address this issue, the Law Commission proposes that the Arbitration Act 1996 should be amended to provide that, subject to the agreement of the parties, an arbitral tribunal may, on the application of a party, adopt a summary procedure to decide a claim or an issue. The precise detail of the summary procedure to be adopted would be a matter for the arbitral tribunal, having regard to the specific circumstances of the case, in consultation with the parties.
This proposal has, broadly speaking, been welcomed by most lawyers and arbitration users consulted by the Law Commission’s survey.
However, important practical considerations arise because of the proposed introduction of a power to summarily dismiss issues.
The test to be applied – “no real prospect of success”
A key issue is the required threshold for an application for summary judgment. The test proposed by the Law Commission is “no real prospect of success”, which follows the wording used in the English court rules.
This differs from other potential tests, such as “manifestly without merit”, which is found in several arbitral rules.6
The Law Commission reports that it recommends using the “no real prospect of success” because it has an understood meaning explained in English case law.
This use of the “no real prospect of success” test has advantages and disadvantages.
- On the one hand, the fact that there is a well-established test in case law for “no real prospect of success” means that the issue does not have to be extensively re-litigated to understand its scope, and lawyers can therefore provide clients with firmer advice as to how the concept will be interpreted by an arbitral tribunal.
- On the other hand, importing a test derived from the English court rules may add to the view held by some international users that English arbitration too closely mirrors the culture and practice of English litigation. That English approach can sometimes manifest itself in, for example, wide-ranging document production and a pleading style derived ultimately from the usages of the English courts. There is therefore a risk that the proposed change will be viewed as another example of English exceptionalism, the legal equivalent of warm beer or driving on the left-hand side of the road, and a departure from what the Law Commission set out to do (that is, provide a “state of the art” arbitral regime).
Either way, a cynic might argue that this will be better news for English-qualified arbitration lawyers than it will for their non-English qualified colleagues because it will potentially be easier for English-qualified lawyers to navigate principles derived from English court rules.
Will summary disposal be available in all cases?
It is important to note that English law does not view summary judgment as appropriate for all kinds of cases before the courts. It is likely that arbitral tribunals will follow a similar approach, given that the test proposed for summary disposal in arbitration relies heavily on case law discussing the test applied in the courts, though this remains to be seen after the reforms are implemented.
Summary judgment is rarely appropriate in circumstances where factual evidence is required to deal with an issue. This is because those cases by their very nature require a tribunal to hear evidence at trial. This includes, for example, situations where one side alleges that a term of a contract has been orally waived or varied or where the underlying dispute is whether an oral contract was formed.
Similarly, summary judgment is rare where a case turns on complex factual and technical issues, which often require expert evidence.
It therefore remains to be seen how the proposed changes to the Arbitration Act 1996 would apply in practice to, for example, delay or disruption cases in the construction or engineering industry, which often require considerable expert evidence, or cases dealing with alleged defects.
Summary judgment is also rare in professional negligence cases because of the requirement for expert evidence on the appropriate standards expected of the profession in question.7
Cases involving allegations of fraud also present challenges. The English courts are reluctant to make findings of dishonesty without allowing a defendant the opportunity to address the allegations. That is not to say that an English court will always reject summary judgment where there are allegations of fraud. But it does mean that a party must be careful when pitching its arguments about an opponent’s alleged misconduct because if summary judgment is strategically desirable, then alleging fraudulent conduct may backfire later if that would deprive the opposing party of the opportunity of rebutting the allegations. This is arguably less of an issue in terms of protection of reputation in confidential arbitration than in public litigation before the courts, but one can still foresee similar arguments being made before arbitral tribunals.
Other practical issues
The introduction of summary judgment also engages other important practical issues:
- Time bars. Arguments about the meaning and effect of contractual time bars will be front-loaded and take on additional importance. Time bars that are expressed in clear, unambiguous terms as acting to prevent otherwise meritorious claims are enforceable in English law and could therefore potentially form the basis of an application for summary disposal, depending on the particular circumstances of a matter. Such provisions are particularly common in, for example, certain standard form construction contracts requiring notice of claims to be given within specified periods. Expect to see an even bigger focus on issues around whether a party had de facto or ‘constructive’ notice of events based heavily on factual evidence to frustrate attempts to summarily dispose of issues without a full trial.
- Enforceability. The question remains whether, even with the inclusion of an express power of summary disposal, a foreign court would refuse enforcement on the basis that the losing party was afforded insufficient opportunity to put its case. It follows that if an arbitral claimant is worried about enforcing a summary award on this basis in a particular jurisdiction, then it may make sense for them to avoid applying for summary disposal.
- Guerilla tactics (that is, the exploitation of procedural rules to the detriment of addressing substantive issues). The Law Commission cautions that summary disposal should be used solely for the fair and efficient resolution of disputes rather than as an additional interim procedural step invoked disingenuously, for example, to delay a full trial of issues. However, the fact that the Law Commission feels moved to make this point is telling, and it is foreseeable that summary disposal applications will become a common feature of English-seated arbitration and will be deployed in a highly tactical fashion.
- Timing of applications: expert evidence and discovery. Expect to see arguments that summary judgment should only be available after discovery of documents and/or after expert evidence has been exchanged. Case law suggests that summary judgment will only be ordered in cases that revolve around expert evidence after the exchange of experts’ reports.8 Arbitral tribunals will not want to endorse “fishing expeditions” for documents but may also be reluctant to summarily dispose of certain issues prior to document production if that could potentially support due process arguments of the type discussed above.
- Choice of arbitral rules and drafting of arbitration clauses. The choice of specific institutional rules and the way they interplay with the amended Arbitration Act 1996 will be important. Some institutional rules already envisage summary disposal, whilst others do not, and the relationship between such rules (or the absence of them) and the amended Arbitration Act 1996 may give rise to arguments as to what the parties have already agreed with respect to summary disposal. If parties are against the idea of summary disposal, then it would make sense for that to be stated expressly in the arbitration agreement.
In summary, although many practitioners welcome the introduction of an express power to summarily dispose of issues in English-seated arbitration, this raises important practical and strategic considerations that arbitration users will have to have at the forefront of their minds when arbitrating in England.
Our next article in this series will address the proposed reforms to the Arbitration Act 1996 dealing with the law governing the arbitration agreement.
- Law Commission of England and Wales, Review of the Arbitration Act 1996: Final report and Bill, 5 September 2023.
- Arbitration Act 1996, section 33(1)(a).
- New York Convention, article V.1(b).
- Arbitration Act 1996, section 33(1)(b).
- SIAC Rules 2016, rule 29 (early dismissal); HKIAC Administered Arbitration Rules 2018, article 43 (early determination); LCIA Arbitration Rules 2020, article 22.1(viii) (early determination); SCC Arbitration Rules 2017, article 39 (summary procedure); ICSID Arbitration Rules 2022, rule 41 (objection for manifest lack of legal merit); ICC Note to Parties and Arbitral Tribunals on the Conduct of the Arbitration under the ICC Rules of Arbitration (2021), paragraph 110 (expeditious determination).
- For example: LCIA Arbitration Rules 2020, article 22.1(viii); ICSID Arbitration Rules 2022, rule 41; SIAC Rules 2016, rule 29; HKIAC Administered Arbitration Rules 2018, article 43.
- Sciortino v. Beaumont [2021] EWCA Civ 786.
- Hewes v West Hertfordshire Hospitals NHS Trust [2018] EWHC 2715 (QB).
In-depth 2023-210
