Commercial Court gives guidance on section 70(7) of the Arbitration Act 1996

10/01/11

In A v B [2010] EWHC 3302 (Comm) (16 December 2010), the Commercial Court has given guidance on the circumstances when an order will be made under section 70(7) of the Arbitration Act 1996 requiring a party applying to the Court to challenge an arbitral award under sections 67, 68 or 69 of the Arbitration Act to bring any money payable under the award being challenged into Court or otherwise to secure it pending the determination of the application or appeal.

The case primarily concerned a section 70(7) application made in response to a section 67 application (challenge to the substantive jurisdiction of the arbitral panel). The question of principle that arose in the case - as to when the Court can and should exercise this power - was one in relation to which conflicting views had been expressed at first instance. Flaux J reviewed the decisions of Tomlinson J (as he then was) in Peterson Farms v C & M Farming Limited [2003] EWHC 2298 (Comm) and Morison J in Tajik Aluminium Plant v Hydro Aluminium AS [2006] EWHC 1135 (Comm) in light (amongst other things) of the decision of the Supreme Court in Dallah Real Estate v The Government of Pakistan [2010] UKSC 46, and concluded that Tomlinson J's approach was to be preferred. Accordingly, Flaux J concluded that ‘in most cases, there will be a threshold requirement that the party making the section 70(7) application demonstrates that the challenge to the jurisdiction is flimsy or otherwise lacks substance'. Furthermore and in addition to this threshold requirement, he concluded that ‘as a general principle the Court should not order security unless the applicant can demonstrate that the challenge to the award (whether under section 67 or, indeed, either of the other sections) will prejudice its ability to enforce the award. Often this will entail the applicant demonstrating some risk of dissipation of assets, although there may be other ways in which enforcement could be prejudiced'.

As for the question of when a section 70(7) order should be made in relation to a section 69 appeal (appeal on a point of law), Flaux J concluded that, in light of the stringency of the criteria that have to be satisfied in order to obtain permission to bring a section 69 appeal, in practice it was difficult to see when it would be appropriate to make a section 70(7) order in relation to a section 69 appeal. As such, ‘it it would only be in cases where the appeal might potentially be used as a delaying tactic and, in the meantime, assets otherwise available to satisfy the award might be dissipated that the Court might consider making an order under section 70(7), notwithstanding that it had formed the view that in principle permission to appeal should be granted'.

The judgment is here.