Disputes Quick Read: Commercial Court's arbitral power shift

QUICK READ

English Courts cannot compel a non-party to an arbitral agreement to give evidence in support of arbitration. That is the impact of the Commercial Court's decision in AB v CDE handed down earlier this month.

Until now, many practitioners will have understood the Court to have that power, one which arises out of the wording of s.44(2)(a) of the Arbitration Act 1996. However, the Court held that its powers under s.44 only extend to parties to the arbitration agreement, and it is only those parties (and not third parties) which it can compel to give evidence.

Some may say this is a surprising decision. The English courts have traditionally favoured the arbitral process and engaged so as to promote its efficiency. Where the arbitral tools are insufficient to dispense justice effectively the courts have powers to help the process along. If those courts are unable to compel third parties to the arbitration to give evidence, then that arguably leads to a less efficient process. While there are related powers under s.43, those are less extensive than the powers envisaged by s.44.

Then there is the question of what is meant by a party to an arbitration agreement, and where the line gets drawn. This is particularly so where corporate parties are concerned. Who – in the context of a corporate – is to be regarded as a party to the agreement for the purpose of giving witness evidence? Officers? Employees? Shareholders?

While the decision is well reasoned, there may be doubt as to whether it is the right outcome. This may be one which needs revisiting.

Note: In April 2020, the English Court of Appeal reversed this judgement, holding that the powers under s.44 of the Arbitration Act, at least in so far as they apply to the taking of witness evidence, do extend to third parties. Accordingly, the Court ordered that evidence be taken from the third party by way of deposition before an examiner. The Court was keen to emphasise that the decision was only in relation to the taking of evidence and did not extend more broadly to the interpretation of other aspects of s.44 and their applicability to third parties.