Tue, 13 February, 2018
(This blog was first published on the Practical Law Arbitration Blog on 5 February 2018. To view the original post. please click here.)
Section 31(1) provides:
“An objection that the arbitral tribunal lacks substantive jurisdiction at the outset of the proceedings must be raised by a party not later than the time he takes the first step in the proceedings to contest the merits of any matter in relation to which he challenges the tribunal’s jurisdiction”.
Section 73 provides:
“(1) If a party to arbitral proceedings takes part, or continues to take part, in the proceedings without making, either forthwith or within such time as is allowed by the arbitration agreement or the tribunal or by any provision of this Part, any objection –
(a) that the tribunal lacks substantive jurisdiction,
he may not raise that objection later…”
Provision is made in some arbitration rules as to when challenges to the tribunal’s substantive jurisdiction must be made. In the event of a conflict between the arbitration rules and the AA 1996, it falls to be considered how that conflict should be resolved and, therefore, when the party challenging jurisdiction must raise its objection for it to be in time.
This question was recently considered by Phillips J in A v B, in respect of an arbitration under the London Court of International Arbitration (LCIA) Rules 2014. The relevant facts were as follows:
The issues that therefore arose were whether A’s jurisdictional challenge was too late by reference to Article 23.3 of the LCIA Rules 2014 and, if it were, was the Article valid insofar as it required a challenge to be made within a shorter period of time than the AA 1996. The tribunal held that the challenge was too late as it should have been made no later than the date of A’s response but Phillips J held that the challenge had been in time.
Article 23.3 provides:
“An objection by a respondent that the Arbitral Tribunal does not have jurisdiction shall be raised as soon as possible but not later than the time for its Statement of Defence…”
B argued that A had lost the right to challenge jurisdiction because:
The judge held that service of the statement of defence was the first step in the proceedings to contest the merits in an LCIA arbitration such that Article 23.3 followed the structure and effect of sections 31(1) and (2) of the AA 1996.
The key question, therefore, was whether the wording “as soon as possible” present in Article 23.3 but absent in the AA 1996 ought to be read as introducing a stricter requirement than section 31(1) of the AA 1996, such that, if a challenge was not made “as soon as possible”, the respondent lost the right to object, even if the time for service of the statement of defence had not yet passed. The judge held that it did not have that effect because:
He therefore concluded that Article 23.3 had the same effect as section 31(1) of the AA 1996. It was thus unnecessary for him to consider whether, had the Article provided for a shorter time for making objections, it would have been valid given the mandatory nature of the provisions of the AA 1996. His obiter view was that it would not have been valid because section 73(1) had the effect that an objection could permissibly be brought within the longest of the various times set out therein. In other words, if “such time as is allowed by the arbitration agreement” was shorter than “any provision of this Part”, that is, section 31(1), the challenge would be in time if brought within the period established by the latter.
The following points emerge:
Firstly, a respondent to an arbitration on the LCIA Rules 2014 will not lose the right to object to the tribunal’s jurisdiction if it fails to raise its objection “as soon as possible” provided that:
Secondly, the precise circumstances in which the parties can legitimately agree to depart from the times for making a challenge set out in the AA 1996 remain uncertain. The judge’s obiter view was that they could do so only if the timings agreed by the parties were more generous to the party raising the complaint. However, it is not obvious from the language of section 73(1) that that is a correct interpretation, as it reads in words that are not present. Further, the fact the parties’ agreement gives more not less time to make the challenge does not change the nature of section 31(1) from a mandatory provision.
Thirdly, whether the parties can legitimately agree to extend the time for making a challenge beyond the taking of the first step in the proceedings to contest the merits remains potentially important, even in the context of LCIA arbitration. The judge was dismissive of the argument that A first contested the merits upon service of the response, denying liability on the basis that “it is not seriously arguable that the time for making an objection under section 31(1) expires on the service of that predominantly formal document rather than on the service of the Statement of Defence”. However, it has been left open in the context of the International Chamber of Commerce (ICC) Rules whether – depending upon its content – the service of an answer to a request can amount to the first step in the proceedings to contest the merits: see Republic of Sudan v Imagesat International NV. It is, therefore, theoretically possible that a party to an LCIA arbitration could, depending on the content of its response to a request for arbitration, take a first step in the proceedings to contest the merits.
Finally, the sensible course remains that, if at all possible, a respondent should raise its challenge at the earliest possible opportunity. This means that, whether the arbitration is on LCIA or (especially) ICC terms, the soundest approach is to raise it in the response or answer to request for arbitration respectively.
Paul is an experienced junior barrister practising across a wide range of commercial disputes. He appears regularly in the High Court (mainly the Commercial and Mercantile Courts) and in domestic and international arbitrations. Paul has also twice appeared in the Court of Appeal as sole counsel in addition to a number of other appearances alongside a leader.
Paul has particular expertise in shipping and maritime law in all its aspects, commodities, shipbuilding, energy and insurance disputes. He also has significant experience of procedural issues commonly arising in commercial litigation, including seeking and resisting injunctive relief (e.g. freezing, anti-suit and asset disclosure orders) and jurisdictional challenges (both in Court and arbitration).
He is recommended by Who's Who Legal: UK Bar, the Legal 500 and Chambers UK as a leading junior barrister. His significant experience of working for Chinese clients is reflected by his recommendation in the Legal 500 in its Asia Pacific rankings.