In the recent case of ARI v WXJ [2022] EWHC 1543 (Comm), the English High Court looked at the question of when an arbitrator is considered validly appointed for the purposes of an arbitration clause in a charterparty. This is a point which will be of great interest to parties and counsel involved in the commencement of arbitration with the seat in England.
For parties commencing arbitration with a three-member tribunal, subject to any specific applicable rules laid out in the arbitration agreement, the first procedural step is often for the claimant to appoint an arbitrator and give notice of the appointment to the other side. They, in turn would then normally have a period of time to appoint their own arbitrator. If the respondent does not appoint an arbitrator within that time however, section 17 of the English Arbitration Act 1996 provides a mechanism for the claimant to have its choice appointed as the sole arbitrator. While this default mechanism may be disapplied in the case of institutional arbitration (where the institution may instead make an appointment in place of the defaulting party), it remains an important mechanism in the context of ad hoc arbitration.
In the recent case of ARI v WXJ [2022] EWHC 1543 (Comm), the English High Court looked at the question of when an arbitrator is considered validly appointed for the purposes of an arbitration clause in a charterparty. This is a point which will be of great interest to parties and counsel involved in the commencement of arbitration with the seat in England.
Background
The claimant commenced a London Maritime Arbitration Association (LMAA) arbitration concerning a dispute under a charterparty. The arbitration clause within the charterparty provided that the respondent/defendant was to appoint and give notice of appointment of its arbitrator within 14 days of notice of the claimant’s notice of appointment of its arbitrator, failing which the claimant could appoint its appointed arbitrator as sole arbitrator. On 22 December 2021, the claimant sent notice of appointment of its arbitrator (‘GGG’) stating that the respondent had 14 days to appoint its arbitrator failing which the claimant would appoint GGG as the sole arbitrator. On 3 January 2022 (within 12 days), the respondent emailed an arbitrator (‘JJJ’) with the subject as “Possible appointment URGENT” stating:
“We write to enquire about your availability and willingness to be appointed as an arbitrator in an LMAA arbitration in London …
Unfortunately we have a relatively tight deadline (5 January 2022) for the appointment so we would be very grateful to receive your response as soon as possible.
… We hope that the above provides sufficient information for you to assess your interest in the matter, together with any possible conflicts …”
JJJ responded to this email stating that, “subject to conflicts”, they were “available for this assignment”. The next day, on 4 January 2022, the respondent wrote again to JJJ:
“… subject to your final confirmation that you are conflict-free, we are planning to write to counsel for [the Claimant] tomorrow (Wednesday 5 January) providing your contact details … Once your appointment is confirmed we hope to reach out to discuss the appointment of the presiding arbitrator. We very much look forward to your confirmation (hopefully today) that you are conflict free to act in this matter and we look forward to working with you.”
JJJ responded “Good evening and it appears that I can act here without any firm conflicts” and asked that JJJ’s associate was copied into any correspondence with the claimant.
The respondent replied “Thank you for your confirmation. We will … confirm your appointment and the way forward in due course after tomorrow”. On 5 January 2022, the respondent gave notice to the claimant of its appointment of JJJ.
Correspondence followed between the respondent and JJJ in relation to agreeing the terms of JJJ’s appointment and renumeration. Following those discussions, and having failed to reach agreement, on 1 February 2022 JJJ said they would not be able to participate in the arbitration.
The question the Court was asked to look at on a summary judgment basis was whether JJJ had been validly appointed by 5 January 2022 (and if so, did that mean the respondent was now permitted to replace its arbitrator), or whether the respondent had failed to do so (in which case GGG would be the sole arbitrator).
The two tests
The Judge (Foxton J) considered the way to approach the issue of whether there has been an ‘appointment’ of an arbitrator was “pragmatically, rather than doctrinally” [15]. Quoting previous case law, he stated that “a broad and non-technical approach should be adopted because notices are given by international traders and businessmen” [13] and that it did “not necessarily entail … that the issue of whether an arbitrator has been appointed for the purposes of commencing an arbitration under an arbitration agreement such as this one is to be determined by a contractual analysis of the dealings between” them [15].
Although the issue of what needs to be achieved to constitute a valid ‘appointment’ may be an issue of construction of the arbitration agreement, Foxton J held that the issue of appointment did not turn on whether a contract had been concluded between the appointing party and the arbitrator (as the claimant argued), but rather under a two-pronged test whether there had been:
- “clear and unconditional communication of acceptance of the appointment by the arbitrator which is then notified to the other party”; or
- “communication of an unconditional willingness by the arbitrator to accept the appointment, which the appointing party then acts upon by communicating the appointment to the appointee and the other party” [22].
The Court also considered that, unless the arbitrator makes acceptance or confirmation of appointment conditional on agreement as to terms of a retainer, then appointment cannot be discounted on this basis: “the fact that there had been no discussion of the financial or other terms on which JJJ would act did not preclude JJJ’s appointment as arbitrator. Indeed, it is relatively common for arbitrators to accept appointments without any express agreement as to fees, in particular in LMAA arbitrations” [32].
Applying the two tests, the Judge held that the respondent had therefore validly appointed JJJ as its arbitrator within the 14-day period as “JJJ had unconditionally communicated their willingness to accept the appointment”, and “following that confirmation, the Defendant had unequivocally communicated its appointment of JJJ both to JJJ and the Claimant” [30]. The respondent was therefore entitled to appoint a replacement arbitrator, and the claimant was not entitled to appoint GGG as sole arbitrator.
What the judgment means for appointing an arbitrator?
This decision is further evidence of the pro-arbitration stance of the English court in taking a pragmatic and non-technical approach to when a party may be considered to have made an appointment of an arbitrator. As the Judge noted, this also reflects the approach taken in practice by many arbitrators who accept appointments without first insisting on the conclusion of full terms of retainer. For those involved in international arbitration it is also a reminder of the need to ensure that if there are conditions to the acceptance of an appointment (such as clearing conflicts, or availability, or – in some cases – agreement of fees or other retainer terms), these must be dealt with expeditiously and prior to any deadlines. This is to ensure there is clear and unconditional acceptance or confirmation of willingness to act as an arbitrator, prior to communicating the appointment to the other party. For arbitrators, it is a reminder that any pre-conditions to accepting an appointment should be raised at the outset, especially where “the appointment of an arbitrator may be conducted against a background of significant time pressure” [12].
For further disputes related content click here to visit Disputes+
For further information, please contact:
Nick Peacock, Parnter, Bird & Bird
nicholas.peacock@twobirds.com
