English Court of Appeal finds that the Arbitration Act s.44(2)(a) applies to third-parties

In A, B v C, D, E [2020] EWCA Civ 409 (“A v C”), the Court of Appeal (“CoA”) held that the Court’s powers in support of arbitral proceedings under section 44(2)(a) of the Arbitration Act 1996 (the “Act”) may be exercised against third-parties to the arbitration agreement. In doing so, the CoA (Flaux LJ, Newey LJ and Males LJ) overturned the High Court’s decision on the point.

The CoA’s decision was limited to the scope of section 44(2)(a) (the taking of witness evidence) and did not opine on section 44(2) as a whole. As a result, several other High Court decisions on the scope of the remaining limbs of section 44(2) are unaffected.

The facts 

The case 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. The claimant, first and second respondent were parties to the arbitration. However, the third respondent was an ex-employee of one of the respondents and therefore a third-party.

The High Court decision  

On the issue of the Court’s jurisdiction to compel the third respondent, Foxton J noted that at first blush, the language of section 44 lent support to the argument that it applies to third-parties. However, there were conflicting authorities. In particular, Moore-Bick J (as he was then) held in Commerce and Industry Insurance Co of Canada v Certain Underwriters at Lloyd’s [2002] 1 WLR 1323 that the Court did have jurisdiction over a locally domiciled third-party. However, Foxton J noted that Commerce and Industry Insurance was focused on whether the Court’s should exercise that power in the case and did not consider the third-party question. Foxton J then considered the cases of Cruz City 1 Mauritius Holdings v Unitech Ltd [2014] EWHC 3704 (Comm) and DTEK Trading SA v Morozov [2017] EWHC 94 (Comm), which concerned attempts to serve out of the jurisdiction under CPR 62.5 (in those cases, the third-parties were foreign domiciled) which found that section 44(2) did not extend to third-parties. Though Foxton J saw merit in the contrary argument, he followed those cases and the application was dismissed on that basis. 

On the issue of discretion, Foxton J also considered whether it would have been appropriate to make the order (if he 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 added two caveats. First, to narrow the claimants’ proposed topics for questioning (which were too broad). Second, to modify the procedure used (the third respondent had requested an opportunity to review relevant documents from the arbitration, before providing a witness statement and being cross-examined by video-link before the tribunal).

The Court of Appeal decision

On the issue of the Court’s jurisdiction under section 44(2), the CoA emphasised that its decision was made narrowly (on section 44(2)(a) only) and that it would not opine on the scope of the other heads of the subsection. Overruling the first instance decision, the CoA held that it did have the power to order evidence from a third-party under section 44(2)(a). The CoA gave the following eight reasons:  

  • First, section 44(1) read alongside sections 2(3) and 82(2) of the Act clearly provides that the Court has the same powers under 44(2)(a) in relation to arbitrations (regardless of seat) as it has with civil court proceedings. 
  • Second, the words “the taking of the evidence of witnesses” properly covers all witnesses and not just parties to the arbitration. 
  • Third, the Court’s powers under section 44(2)(a) mirror its powers in civil court proceedings (including the power to order a deposition under CPR 34.8). 
  • Fourth, the other subsections of section 44 did not point against the Court’s jurisdiction over third-parties under section 44(2)(a). 
  • Fifth, the fact that depositions are used rarely is not justification to construe the power narrowly. Instead, it is a broad power which is used in practice in limited circumstances. 
  • Sixth, if 44(2)(a) did not permit the Court to order a deposition, it would have little or no content in the context of a foreign arbitration.
  • Seventh, though the CoA’s narrow approach may result in inconsistency between the scope of the various heads of section 44(2), this may be explained by the language of those heads. 
  • Eighth, the CoA’s decision aligned with Commerce & Industry Insurance - the only other decision which considered the Court’s power under section 44(2)(a) to order the deposition of a third-party in aid of a foreign arbitration. 

On the issue of discretion, the CoA dismissed the submission that a more stringent test should have been applied in the first instance. Instead, the CoA held that Foxton J had applied the correct test when exercising his discretion (namely, the test described in Commerce & Industry Insurance).
As a result, the CoA ordered the third respondent to give evidence by way of deposition before an examiner (to be videotaped for the arbitral tribunal).

The CoA’s decision has clarified that section 44(2)(a) applies to non-parties to the arbitration. As a result, parties to foreign-seated arbitrations will be at liberty to seek orders to compel evidence from non-parties under section 44(2)(a).
However, as the CoA’s judgment was framed narrowly, the “long standing controversy” on orders against non-parties remains for the other heads of 44(2). In his concurring opinion, Males LJ noted there are strong arguments either way and reserved his opinion as to whether Cruz City and DTEK were correct on this point. As a consequence, it will not be surprising if parties attempt to test the scope of the other heads of section 44(2) against non-parties in the future. 
Click here for a copy of the judgment