Background
A and B (“the Appellants”) and C and D (“the Respondents”) entered into two settlement agreements relating to the exploration and development of an oil field off the coast of Central Asia. Certain disputes arose regarding the same, which were subject to arbitration in New York.
A primary issue in this arbitration pertained to the ‘signature bonuses’ paid by the Respondents to the Central Asian government, and whether they were deductible as costs in calculating the sums due to the Appellants. The Appellants put forth that these sums, being bribes, were not properly deductible. While contending this, they relied on the indictment of G, who negotiated the payments on behalf of the Government, by a US court for violating the US Foreign Corrupt Practices Act. In this context, E (“the Witness/Third Respondent”) who was a non-party to the arbitration) was the lead negotiator for the respondents who negotiated directly with G.
Since the Witness was unprepared to go to New York to tender evidence, the Tribunal granted permission to the Appellants to approach the English courts to compel his testimony. In this regard, the Appellants made an Application before the High Court of Justice in London, seeking an order under Section 44(2)(a) of the Arbitration Act, 1996 to permit taking his testimony. However, the same was dismissed since the Witness was not a party to the arbitration (“Impugned Judgement”).
In the present Appeal against the said Impugned Judgement, the Appellants sought an Order permitting the Witness to take his evidence by deposition under the Civil Procedure Rule 34.8.
Issue and Decision
Whether a non-party to an arbitration can be directed to give evidence under Section 44(2)(a) of the Arbitration Act, 1996?
The Appellants submitted that the language employed in the statute allowed Section 44(2)(a) to give powers to the Court to issue orders against a non-party. They contended that the judgements in Cruz City Mauritius Holdings v Unitech Limited[i] and DTEK Trading SA v Morozov[ii] ought not to be relied upon, since they mainly dealt with the scope of CPR 62.5(1) on service out of the jurisdiction, and only elaborated on Section 44 as obiter. Further, they argued that the same meaning ought to be ascribed to the word ‘witness’ as given in Sections 38(5), 43 and 44 of the Arbitration Act. They drew the court’s attention to the pari materia provision of Section 12(6)(d) in the erstwhile Arbitration Act, 1950, which, as per the precedent set in Unicargo v Flotec Maritime (The Cienvik)[iii], applied to non-party witnesses too. Finally, relying upon the case of Commerce & Industry Insurance v. Certain Underwriters at Lloyd’s[iv](“Commerce & Industry Insurance”), they submitted that a conjoint reading of Section 44(2)(a) read with Section 2(3)(b) of the 1996 Act revealed that an order of deposition under CPR 34.8 could be made in relation to a foreign arbitral proceeding as well.
The Third Respondent submitted that the powers of the Court mirror the Tribunal and are only directed against the parties. This is evident from the usage of the words ‘unless otherwise agreed by the parties’ in Section 44(1) and the Court’s limited power to act with the tribunal’s permission or the parties’ agreement as mentioned in Section 44(4). It was contended that Section 44(2)(a) was not intended to deal with compulsion of evidence. Further, Section 43 was only applicable in cases of domestic arbitration, and was limited to ordering of witness summons. The phrase ‘taking of the evidence of witnesses’ in Section 44(2)(a) related only to the outward letters of request to a foreign court, and not the inward letters from a tribunal since the same was not a ‘court or tribunal’ as per Section 1 of the Evidence (Proceedings in Other Jurisdictions) Act 1975. Moreover, CPR 34.8 bestowed a narrow power with a limited role, and the same could not be used to aid a foreign arbitration.
The Court decided in favour of the Appellants, noting that Section 44(2)(a) does give the court power to order the taking of evidence from a non-party. Harmonising Section 44(1), 2(3) and 82(1) reveals that the English Court has the same powers related to arbitrations irrespective of the seat, as it has in civil proceedings. [¶36] Further, the use of the words ‘the taking of the evidence of witnesses’ extends to non-party witnesses too, in the absence of any plausible justification to limit it to party witnesses. [¶37]
The powers which the English court has with respect to ‘the taking of the evidence of witnesses’ in civil proceedings in the High Court or the county court include the power to order evidence to be given by deposition under CPR 34.8 even in case of foreign proceedings. [¶38] This power can be exercised by the Court once the thresholds in terms of the opening words of Section 44(1) and Section 44(4), are satisfied. [¶40]
It was also noted that an apparent inconsistency arises between the various heads of Section 44(2) wherein (2)(a) applies to non-parties too, as opposed to the other heads. [¶44] Another inconsistency lies in the fact that the court has the power to order a deposition in support of a foreign-seated arbitration but cannot do so in case of foreign court proceedings in the absence of an incoming letter of request. [¶69] However, the Court refused to narrowly construe the power only because this power may be used in limited circumstances. [¶42]
In deciding the present case, the Court relied heavily on Commerce & Industry Insurance[v], which was the only decision on the issue at hand. In that case though, the Court held that it has the requisite jurisdiction yet refused to order a deposition by exercising its discretion.
Case Details
Citation Codes: [2020] EWCA Civ 409
Date of Judgement: 19 March 2020
Forum: Court of Appeal (Civil Division), United Kingdom
Bench: Lord Justices Flaux, Newey and Males
[i] [2014] EWHC 3704 (Comm)
[ii] [2017] EWHC 1704 (Comm)
[iii] [1996] 2 Lloyd’s Rep 395
[iv] [2002] 1 WLR 1323
[v] Ibid.
Author(s)
Gunjan Jain
Student at RGNUL, Punjab