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In A, B v C, D, E [2020] EWHC 258 (Comm) (“A v C”), the English High Court held that its powers in support of arbitral proceedings under section 44 of the Arbitration Act 1996 may not be exercised against third-parties to the arbitration agreement. This decision followed several authorities which considered the Court’s powers under section 44 where permission was required to serve third-parties out of the jurisdiction (Cruz City 1 Mauritius Holdings v Unitech Ltd [2014] EWHC 3704 (Comm), Dtek Trading SA v Morozov [2017] EWHC 94 (Comm) and Trans-Oil International SA v Savoy Trading KP [2020] EWHC 57 (Comm)). However, unlike the previous cases, A v C concerned a UK domiciled third-party.
The facts
A v C concerned an application under section 44(2)(a) of the Act to compel witness evidence by way of deposition to be used in a foreign-seated arbitration (as opposed to section 43, which requires that the arbitral proceedings are conducted in England and Wales). The claimant, first and second defendant were parties to the arbitration. However, the third defendant was an ex-employee of one of the defendants and therefore a third-party.
The third defendant argued that the Court had no jurisdiction under section 44 against third-parties and that, even if such jurisdiction existed: (i) this was not a case where the Court should exercise its discretion; and (ii) if the Court did exercise its discretion, it should not order a US-style deposition but instead that the third defendant’s evidence be given through a witness statement, to be followed by cross examination. The first and second defendants supported the latter arguments on discretion.
The decision
On the issue of the Court’s jurisdiction, Foxton J noted that at first blush, the language of section 44 lent support to the argument that it applies to third-parties. However, Foxton J went on to consider the conflicting authorities on the issue. In particular, the judge first discussed the long-standing case of Commerce and Industry Insurance Co of Canada v Certain Underwriters at Lloyd’s [2002] 1 WLR 1323, which had considered section 44(2)(a) in a similar fact pattern to A v C. Though Moore-Bick J (as he was then) held that the Court did have jurisdiction over a locally domiciled third-party, Foxton J noted that Commerce and Industry had not considered the third-party question and was focused on the exercise of the Court’s discretion. Foxton J then considered the cases of Cruz City and DTEK, which concerned attempts to serve out of the jurisdiction under CPR 62.5 (in those cases, the third-parties were foreign domiciled). Though Foxton J saw merit in the argument that section 44 should apply to third-parties (discussed in the 6th edition of Merkin and Flannery on the Arbitration Act), the decisions in Cruz City, DTEK and Trans-Oil were followed. As a result, the application was dismissed.
On the issue of discretion, Foxton J considered whether it would have been appropriate to make the order if he had found differently on jurisdiction. Foxton J held that, as there was no suggestion of particular inconvenience, the claimants had adequately explained why the evidence was of sufficient relevance to the arbitration. However, Foxton J made two caveats to this obiter commentary. First, it was noted that the claimants’ proposed topics for questioning were too broad. Second, it was noted the requested deposition procedure should not be ordered and instead the procedure should be consistent with an open offer which had made by third defendant. Specifically, the third defendant had requested an opportunity to review relevant documents from the arbitration, before providing a witness statement and being cross-examined by video-link in front of the tribunal.
Implications
The impact of this decision is that parties to arbitral proceedings will not be able to seek the English court’s assistance under section 44 in relation to third-parties, regardless of domicile. In relation to section 44(2)(a) specifically, it seems that the scope of this section of the Act is significantly narrowed, as many (if not most) applications to compel witness evidence are likely to involve third-parties.
Permission to appeal was, however, granted by the first instance judge thereby referring to the Court of Appeal the question of whether section 44 permits orders to be made against third-parties.
Click here for a copy of the judgment