Saturday, June 22, 2024

London Arbitration: jurisdictional challenge and peremptory order

London Arbitration 21/22 & 22/22 considered issues about jurisdictional challenge and peremptory order. This practice area only cites general observations and not the above awards.

General observations-comments

A tribunal will dismiss an unsuccessful jurisdictional challenge and award costs on the general principle that “costs should follow the event” unless the tribunal determines otherwise (s 61 of AA 1996, para 3 (a) & para 8 of LMAA SCP 2021). Notably, based on the Arbitration Act 1996 ss 30-32, the tribunal may rule on its own jurisdiction, a party can challenge the tribunal’s substantive jurisdiction, and the court may determine a preliminary point of jurisdiction. In addition, s 67 provides that a party can apply to the court to challenge an award because the tribunal had no substantive jurisdiction.

Sections 41 (5) to (7) empower the tribunal to make peremptory orders when a party fails to comply with an order or direction. In appropriate cases, s 42 provides for orders to be enforced by the court.

In a previous decision, the Charterers raised the point that section 34(3) of the Act applied in the situation covered by section 41(7), namely breach of a peremptory order. The tribunal held that there was no authority that section 34(3) did qualify section 41(7). The whole point of a peremptory order was to prevent parties from disregarding the tribunal’s orders. Another point made by the Charterers’ solicitors was that the tribunal did not indicate which alternative penalties would apply under s 41 (7). However, the tribunal said that “the Act did not require the tribunal to do that. Normally that was something the tribunal would do, but in the present case, the tribunal was focused on whether it should be a peremptory order and, if so, of what duration, something the Act did require to be specified..”.

Therefore, it may be desirable to state the intended sanction to be imposed under s 41 (7) upon giving notice to a party of failure to comply with a peremptory order to avoid further debate and argument. Such an order must expressly state it is a peremptory order and include a time limit for compliance.

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