Introduction

Under section 67 of the UK Arbitration Act 1996 (“section 67”), a party to arbitral proceedings may apply to the court challenging any award of the arbitral tribunal as to its substantive jurisdiction.However, as can be seen from the recent English High Court decision Central Trading & Exports Limited v Fioralba Shipping Company (The “Kalisti”) [2014] EWHC 2397 (Comm), the Court may prevent a party from relying on evidence which is relevant and admissible, but was not adduced before the arbitrators.

Case Background

The Claimant claimed for loss and damage to a cargo of bagged rice pursuant to 5 bills of lading on board the Defendant’s vessel “Kalisti”. The voyage was completed and discharge was commenced, as long ago as 17 September 2009. The bills were subject to English law and each contained a London arbitration clause.The Claimant claimed that it became the holder of the bills and that rights of suit were transferred to it pursuant to the Carriage of Goods by Sea Act 1992 (“COGSA”), despite the fact that the bills had already been spent and discharge had taken place without production of the bills pursuant to letters of indemnity.

On the other hand, the Defendant argued that Claimant could not qualify as the holder of the bills under the COGSA.

The arbitrators held in favour of the Defendant that the Claimant did not have title to sue and they did not have jurisdiction. The Claimant subsequently made an application under section 67 seeking to overturn the arbitrators’ award.

Admission of Fresh Evidence in a Section 67 Application
The Claimant sought to rely on new evidence, which was not adduced before the arbitrators, at the substantive hearing of the section 67 application, and the Defendant objected to the admission of such evidence.

The Court held that in general a party is entitled to adduce evidence in a section 67 challenge (which involves a rehearing and not merely a review) notwithstanding that such evidence was not before the arbitrators. The Court will not normally exclude evidence which is relevant and admissible, even if it may cause prejudice to the other side.

However, the parties’ right to adduce evidence is constrained by the Court’s rules of procedure.  Amongst others, the Court retains the power to refuse to allow a party to produce documents selectively where that would prejudice the other party. The Court may equally refuse to admit evidence which does not comply with the Court’s rules for ensuring that evidence is presented in a fair manner.

It is important to note that in determining whether to admit fresh evidence in a section 67 hearing, the Court is not bound by the prior procedural rulings of the arbitrators, but the Court did not have an unfettered discretion to exclude relevant evidence.

The Court’s Ruling in The Kalisti

Claimant’s Failure to Comply with Arbitrators’ Order for Full Disclosure
The Court noted that the arbitrators gave an order that the Claimant will provide full and complete disclosure and/or relevant documents concerning title to sue. Further, they ordered that the Claimant will not be permitted thereafter to make any further disclosure on title to sue without the express prior consent of the tribunal.

The Court held that it was apparent that the Claimant deliberately failed to comply with the arbitrators’ order for full disclosure; even as at the date of the Judgment, the Claimant had not given full disclosure of documents relating to the title to sue issue which must exist or have existed and, if they no longer existed, it had no attempt to say what had become of them.

Non-admission of Fresh Evidence to Plug in Gaps Identified by Arbitrators
Against such background, the Court held that it would be unjust to permit the Claimant to rely on a selection of documents without giving the full disclosure which it was ordered to give in the arbitration.  The Court pointed out that it is not the function of an award to operate as an advice on evidence enabling the claimant to plug the gaps in its case identified by the arbitrators. The new and selected documents might possibly make all the difference to the outcome; if that were to be so, the Defendant would suffer an irremediable prejudice.

In addition, the Claimant did not offer to provide standard disclosure and it was probably too late for that to be provided without jeopardising the hearing dates for the substantive issues which were fixed by agreement of the parties.

Non-admission of Fresh Evidence in Defective “Witness Statement”
The Court also refused to allow the Claimant to adduce evidence in the form of a letter signed by two individuals in a bank’s legal department, lest the quality of evidence to be adduced in the section 67 hearing would be compromised. The said letter was not in the form of a witness statement comply with Part 32 of the English Civil Procedure Rules, and in particular, it contained no statement of truth. It was not at all apparent whether the signatories had personal knowledge of the matters of which they spoke or, if they did not, what was the source of their information. In fact, the said letter contained evidence which could have been given by an executive director of the Claimant; no reason was given as to why the executive director did not supply a witness statement on such, and a hearsay statement of his solicitor was supplied instead.

In the circumstances, the Court held that it would not be appropriate to permit evidence from the executive director to be given in the way which was proposed. Further, the Court considered that it would still be less than appropriate, even if the formal defects were to be cured, to permit such evidence without the Claimant providing the proper disclosure which would be necessary to enable the Defendant to test those assertions, either by cross examination or by submission.

In the end, the Court held that the fresh evidence proposed should not be admitted in the section 67 hearing, and the hearing would be limited to the material which was before the arbitrators.

Implications
Unsatisfied parties to arbitration are often tempted to challenge the Tribunal’s findings by the section 67 route. But as the Court pointed out in The Kalisti, the section 67 recourse would not be the most appropriate solution in handling arguments in relation to the jurisdiction of the arbitral tribunal. Parties should either agree to submit the jurisdictional issue to binding arbitration, or should agree not to arbitrate the jurisdictional issue but to go straight to the Court for a decision.

Nonetheless, failing such agreement the parties would have to pursue arbitration and potentially a section 67 challenge. In such circumstances, in order to avoid fresh evidence being excluded from the section 67 challenge, parties should disclose documents to the fullest extent during the course of arbitration and should not withhold any document from disclosure.

For enquiries, please contact our Litigation & Dispute Resolution Department:

E: shipping@onc.hk

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Important: The law and procedure on this subject are very specialised and complicated. This article is just a very general outline for reference and cannot be relied upon as legal advice in any individual case. If any advice or assistance is needed, please contact our solicitors.