Global Vantage: Function over form, an arbitration appointment taleOctober 2022
In ARI v WXJ  EWHC 1543 (Comm), the High Court was asked to consider whether an arbitrator had been validly appointed, in the absence of concluded contract regarding their appointment. The Court took a commercial approach, finding that where:
- there had been a clear and unconditional communication of acceptance of the appointment by the arbitrator; and
- that acceptance has either been notified by the arbitrator or appointing party to the other party,
then for the purpose of the arbitration clause in question, a valid appointment had been made baring the other party from appointing its arbitrator as the sole arbitrator.
A copy of the case can be found here.
Facts of ARI v WXJ
The relevant arbitration clause of the contract stated:
‘This Contract shall be governed by and construed in accordance with English law and any dispute arising out of or in connection with this Contract shall be referred to arbitration in London in accordance with the Arbitration Act 1996 …
The arbitration shall be conducted in accordance with the London Maritime Arbitrators Association (LMAA) Terms current at the time when the arbitration proceedings are commenced.
The reference shall be to three arbitrators. A party wishing to refer a dispute shall appoint its arbitrator and send notice of such appointment in writing to the other party requiring the other party to appoint in its own arbitrator within 14 calendar days of that notice and stating that it will appoint its arbitrator as sole arbitrator unless the other party appoints its own arbitrator and gives notice that it has done so within the 14 days specified. If the other party does not appoint its own arbitrator and give notice that it has done so within the 14 days specified, the party referring a dispute to arbitration may, without the requirement of any further prior notice to the other party, appoint its arbitrator as sole arbitrator and shall advise the other party accordingly. The award of a sole arbitrator shall be binding on both parties as if he had been appointed by agreement.’
A Claimant delivered a Notice of Appointment of an Arbitrator to the Respondent. Following an urgent conflict check, the Respondent’s nominated Arbitrator confirmed their willingness to act. On the last of the 14 day period, the Respondent sent an email to the Claimant, copying its proposed Arbitrator in, giving notice of its appointment.
At the time that the Respondent sent the email, it had not agreed on the terms of appointment or remuneration with its chosen Arbitrator. The question before the Court was in the absence of this, had the Respondent validly appointed the Arbitrator.
Under section 16 of the Arbitration Act 1996, ‘parties are free to agree on the procedure for appointing the arbitrator or arbitrators’, with section 14 setting out the steps to be taken when commencing an arbitration. Justice Foxton noted that when considering these sections, a broad and non-technical approach was to be adopted, noting that arbitration was widely used by commercial parties, sometimes under time pressure and without legal advice.
For a proper appointment, Justice Foxton quoted a previous decision of Lord Denning, noting that ‘three things were necessary to constitute the appointment of an arbitrator – it was necessary to tell the other side; to tell the appointee himself and the appointee “should be willing to act and have intimated his willingness to accept the appointment”’. This being the case even where an arbitrator could be told of the nomination at the same time as the other party.
Applying a pragmatic and commercial reality approach to the wording of the relevant arbitration clause, as had been the approach taken by Lord Denning and similar previous decisions when considering the Arbitration Act 1996, Justice Foxton found that determining acceptance by the Arbitrator required:
‘…a 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’.
In the circumstances, Justice Foxton found that due to the confirmation of willingness by the Arbitrator and clear communication by the Respondent of the appointment, there had been a valid appointment. Alternatively, the Court found that there was a valid appointment where the only caveat to the Arbitrator’s acceptance was them being conflicted, which was cleared and not the case. It did not matter that the terms or remuneration of the Arbitrator had not yet been agreed, due to the wording of the relevant arbitration clause.
ARI v WXJ, as is commonly the case, turned on the drafting of the specific contract and arbitration clause. However, with London remaining a leading seat for international Arbitration, ARI v WXJ reiterates the broad interpretation to the application of the Arbitration Act 1996 that a Court can take. Further parties should keep in mind the requirement for strict drafting of contractual dispute clauses, should they not want uncertainty or benefits to be conveyed to the other party to a dispute.Download PDF