An issue which has recently received attention from the courts in the UK, and which is highly relevant to businesses engaged in arbitrations seated outside the UK, is whether a UK-based third-party witness can be compelled to give evidence in a foreign-seated arbitration.
This issue was determined in the recent ruling of the Court of Appeal in A and B v C, D & E  EWCA Civ 409, where the court considered the scope of section 44(2)(a) of the Arbitration Act 1996 “the Act”). The ruling is also of interest as the case concerns the long-standing legal controversy about this type of witness order and previous conflicting court judgments.
Section 44(2)(a) of the Act gives courts the power to make various orders in relation to the gathering of witness evidence in arbitration proceedings, (unless the parties have previously agreed otherwise).
Under section 2(3) of the Act, section 44 may, at the court’s discretion, apply to arbitrations which are seated outside England and Wales.
Details of the case
The case of A and B v C, D & E  EWCA Civ 409 concerned payments due to the A from C and D in relation to the exploration and development of an oil field off the coast of Central Asia.
Signature bonuses paid to a Central Asian government were deducted from the payment figures. These bonuses had been negotiated by an intermediary on behalf of the government and E, a representative for A and B.
E had been charged with breach of the US Foreign Corrupt Practice Act 1977, and there was an argument as to whether the bonuses were actually bribes and could therefore not be deducted from the payments owed to A
Arbitration proceedings were started in New York, and E, who was living in England, refused to attend the arbitration to give evidence. This resulted in the arbitration tribunal allowing A to make an application to the High Court in England to compel E to testify. A argued that section 44(2)(a) of the Act should apply to third parties such as E because the wording of the section refers to evidence taken from ‘witnesses’ which would surely encompass non-parties as well as the parties themselves.
In the first hearing in the High Court, the court ruled in favour of E, which argued that pursuant to the previous decisions in Cruz City I Mauritius Holdings v Unitech Limited  EWHC 3704 and DTEK Trading SA v Morozov  EWHC 1704 along with the language of section 44 itself, meant that section 44 did not apply to third parties.
The decision of the High Court was appealed, and the Court of Appeal allowed the deposition of E. The Court of Appeal decided that the language of section 44 did not limit the application of it to the actual parties to the arbitration, and that ‘witnesses’ was broader in scope, thereby covering third parties, and, further, the language of section 44(2)(a) did not justify the limitation of its application only to UK domestic arbitrations.
Impact of decision
The decision in A and B v C, D & E will be of great assistance to those businesses who find themselves being a party in a foreign-seated arbitration and needing to rely on the testimony of a reluctant UK-based witness. The knowledge that the testimony of a third-party witness could be compelled, if necessary, may also now encourage parties to enter into arbitration, where they might previously have been somewhat reluctant to do so. In addition, businesses may now be more confident about entering into transactions and commercial agreements which provide for foreign-seated arbitration (as opposed to court proceedings) as the chosen dispute resolution process.
There could also be broader implications; in that the decision in the case shows that the courts may interpret subsection 2(a) of section 44 more widely than previously thought. Whether this will extend into the other sections of the Act remains to be seen, but the decisions reached in the cases of Cruz and DTEK were not without criticism, and a wider interpretation of all of the sub-sections of this section of the Act could lead to wider assistance in arbitrations, both foreign and domestic.
How Clarion can help
Clarion’s Commercial Dispute Resolution Team has extensive experience in arbitration and other dispute resolution proceedings and can assist with any queries you may have regarding disputes which are subject to either UK domestic or international arbitration, whether you are drafting contracts at the beginning of a commercial relationship, or you need advice on a potential dispute.
If you have any questions regarding the subject matter of this article, or dispute resolution in general, please do not hesitate to contact David Williams, Partner on 0113 227 3602 or at firstname.lastname@example.org.
Disclaimer: Anything posted on this blog is for general information only and is not intended to provide legal advice on any general or specific matter. Please refer to our terms and conditions for further information. Please contact the author of the blog if you would like to discuss the issues raised.