A new decision signals the Court’s readiness to interpret section 44(2)(a) of the Arbitration Act 1996 broadly.
In A and B v C, D and E (Taking evidence for a foreign seated arbitration), the Court of Appeal unanimously allowed the taking of evidence from a witness by way of deposition in support of a foreign-seated arbitration, even though the witness was not a party to the arbitration agreement.
The Appellants and the First and Second Respondents were co-venturers in an oil field in Central Asia, and were parties to a New York seated arbitration (the New York Arbitration).
An issue arose in the New York Arbitration as to the nature of certain payments made by the First and Second Appellants and whether those amounts were properly deductible when quantifying sums due in respect of certain interests in the oil field. Although the evidential hearing in the New York Arbitration had concluded, the Appellants obtained permission from the tribunal to bring an application in the High Court under section 44(2)(a) of the Arbitration Act 1996 for an order for the compulsory taking of evidence from an individual in England who worked for their counterparties as the lead commercial negotiator of the production-sharing agreement (the Third Respondent).
The Third Respondent opposed the application at first instance on the basis that the Court had no jurisdiction under section 44 to make an order against someone other than a party to the arbitration agreement. Alternatively, even if there was such jurisdiction, no sufficient case had been made out for exercising it by the Appellants.
In doing so, the Third Respondent cited two previous decisions by the Commercial Court: Cruz City I Mauritius Holdings v Unitech Limited, which concerned an attempt to serve an application for a freezing injunction against non-parties to the arbitration agreement out of the jurisdiction, and DTEK Trading SA v Morozov, which concerned an application against a non-party under section 44(2)(b) and/or (c).
No submissions were made by counsel for the First and Second Respondents on the issue of whether the High Court had authority to make such an order, but the First and Second Respondents did support the submissions made by counsel for the Third Respondent that no proper case for the exercise of any power had been made out (essentially making the same submissions that the First and Second Respondents had made in the arbitration when opposing the Appellants’ application to the arbitral tribunal for permission to seek such an order).
First Instance Decision
In the High Court, Justice Foxton held that the Court did not have jurisdiction to make such an order against a non-party to an arbitration agreement, finding that the language and structure of section 44 did not support “differential treatment” of the various powers listed in that part of the Arbitration Act. The Judge therefore held that the reasoning in Cruz City and DTEK was persuasive and applicable in the present circumstances: both cases held that section 44 did not include the power to make an order against a non-party. In other words, despite the previous decisions relating to other powers under section 44(2), Justice Foxton held that the principle applied equally to other sub-sections.
That fact notwithstanding, the Judge acknowledged that, in the absence of prior decisions directly on point that he was bound to follow, there was considerable force in the argument that the jurisdiction under section 44 could be exercised against a non-party in an appropriate case. He noted that granting injunctions constituted one such example: a Court order could give a right to be heard to non-arbitrating parties, and that would necessarily involve a fundamental departure from the bilateral nature of consensual arbitration.
On appeal, the Appellants argued that irrespective of the scope of the other sub-sections under section 44, section 44(2)(a) gave the Court the same power in relation to the taking of evidence from a witness for an arbitration as the Court would have in civil litigation before English courts, which is available even to a foreign-seated arbitration by virtue of section 2(3)(b).
The Court of Appeal’s Decision
The Court of Appeal allowed the appeal, but without addressing whether other sub-sections of section 44 could similarly allow for non-party orders. The Court also left open the question of whether the two authorities relied upon at first instance were decided correctly.
The Court accepted the Appellants’ argument that the English Court has the same power in respect of “the taking of evidence of witness” under section 44(2)(a) as it has in civil proceedings before the High Court or a county court, on the basis of section 44(1) which provides that:
“unless otherwise agreed by the parties, the Court has for the purpose of and in relation to arbitral proceedings the same power of making orders about the matters listed below as it has for the purpose of and in relation to legal proceedings”.
This includes the power to order evidence to be given by deposition, which is available in civil proceedings under CPR 34.8.
The Court also clearly held that the power to order a deposition can be made in support of a foreign-seated arbitration (rather than only in support of a UK-seated arbitration). Section 44(1) is to be read in light of section 2(3), which provides that the Court’s powers exercisable in support of arbitral proceedings under section 44 also apply to foreign-seated arbitrations. Thus, the application of section 44(2)(a) cannot be construed to be limited to domestic arbitrations alone.
The pertinent question under section 44(2)(a) is what power would an English court have in relation to the taking of evidence of witness in a civil proceeding, as opposed to what power it would have for the purpose of foreign court proceedings. On this basis, the Court rejected the Third Respondent’s suggestion that in the same way the Court’s power to compel a witness based in England to give evidence in support of a foreign court proceedings is conditioned upon an incoming letter of request from a foreign court or tribunal in accordance with section 1 and 2 of the Evidence (Proceedings in Other Jurisdictions) Act 1975, the Court’s power in the case of a foreign-seated arbitration should similarly be constrained. Whilst recognising that its interpretation of section 44(2)(b) produced an anomaly whereby the Court can order a deposition in support of a foreign-seated arbitration but not foreign court proceedings in the absence of an incoming letter of request, the Court noted that the specific discretion under section 2(3) to consider the appropriateness of an order in the case of a foreign-seated arbitration, the requirement in section 44(4) that permission of the tribunal or agreement of the parties must first be obtained, and the Court’s general discretion in the exercise of its power provide sufficient safeguards against misuse of the power to order a deposition.
As regards the construction of the term “witness” in section 44(2)(a), the Court held that the term would cover all witnesses, including a non-party, given that a witness is rarely also a party. As the Appellants had pointed out, section 38(5) clearly distinguishes between a “party” and a “witness”. As such, there is no basis in equating “party” with “witness” for the purpose of section 44(2)(a).
The Court also rejected the following arguments put forward by the Third Respondent:
- The Third Respondent argued that certain phrases in section 44, such as the opening phrase “unless otherwise agreed by the parties” in section 44(1), undermined the Court’s alleged power to make non-party orders. However, the Court did not view those phrases as restrictions on the Court’s power to make orders, including an order against a non-party.
- Having acknowledged the limitation in section 44(7) on a non-party’s right of appeal, the Court found that such anomaly, which is more apparent than actual, does not justify a restrictive interpretation of section 44(2)(a) as argued.
- The Court rejected a narrow construction of the power to order a deposition due to its limited application, as the exercise of the power is a matter of judicial discretion and not jurisdiction.
- The Court pointed out that section 44(2)(a) would be left with little or no content in the context of foreign-seated arbitrations if non-party orders were not permitted.
The immediate practical outcome of this decision is that parties involved in a foreign-seated arbitration may now rely on section 44(2)(a) to compel a witness present in England to give evidence by way of deposition, if the tribunal is unable to secure that witness’ attendance. More importantly, the significance of this decision lies in the Court’s readiness to interpret section 44(2)(a) broadly.
Although it remains to be seen how the operation of section 44 as a whole will be interpreted going forward, and whether it would apply to non-parties in all circumstances, it does appear that a broad construction of section 44 can be applied to all sub-sections, which may result in a greater range of interim relief in support of both domestic and foreign-seated arbitrations.
  EWCA Civ 409.
 Cruz City I Mauritius Holdings v Unitech Limited  EWHC 3704 (Comm).
 DTEK Trading SA v Morozov  EWHC 1704 (Comm).
 Para 23 of the judgment.