The CA has recently held that the court's discretion to appoint an arbitrator under s10(1) of the Arbitration Act 1950 is completely unfettered.
In Frota Oceanica Brasileira SA and Another v (Steamship Mutual Underwriting Association) (Bermuda) Ltd (The Frotanorte), (The Times, 13 August 1996), it held that inordinate and inexcusable delay in applying for such an appointment, even in the absence of prejudice, was a proper ground for refusing to exercise their discretion in that party's favour.
The delay in this case was extraordinary. The dispute stemmed from a collision between the Frotanorte and another vessel off Puerto Rico on 21 August 1978. The case was an appeal by the plaintiffs Frota Oceanica Brasileira SA and Instituto de Reseguros against the decision of Longmore J in the Commercial Court where, having upheld their disputed contention that there was a binding arbitration agreement in existence between them and the defendant P & I Club, (Steamship Underwriting Association)(Bermuda) Ltd (the Club), he dismissed their application pursuant to s10 of the Arbitration Act 1950 to appoint an arbitrator to resolve the dispute. Longmore J declined to exercise his discretion to make an appointment on the ground that the 'awe inspiring' delay had been so inordinate and inexcusable that, even in the absence of prejudice, it would be wrong to allow the arbitration to proceed. He based his decision specifically on the delay between November 1991 and October 1994 against the background of earlier extended periods of delays. A party who thought so little of his rights that he took no steps to enforce them for nearly three years after the expiry of the last extension of time and for five years after he is aware of his opponent's contention that his cause of action is time barred, deserved no sympathy.
The underlying statutory framework is contained in s10 (1) Arbitration Act 1950 which provides:
'10. Power of court in certain cases to appoint an arbitrator or umpire
(1) In any of the following cases -
(a) Where an arbitration agreement provides that the reference shall be to a single arbitrator, and all the parties do not, after differences have arisen, concur in the appointment of an arbitrator;
(b) If an appointed arbitrator refuses to act, or is incapable of acting, or dies, and the arbitration agreement does not show that it was intended that the vacancy should not be supplied and the parties do not supply the vacancy;
(c) Where the parties or two arbitrators are required or are at liberty to appoint an umpire or third arbitrator and do not appoint him;
(d) Where an appointed umpire or third arbitrator refuses to act, or is incapable of acting, or dies and the arbitration agreement does not show that it was intended that the vacancy should not be supplied and the parties or arbitrators do not supply the vacancy; any party may serve the other parties or the arbitrators, as the case may be, with a written notice to appoint, or, as the case may be concur in appointing an arbitrator, umpire or third arbitrator, and if the appointment is not made within seven days after the service of the notice, the High Court or a judge thereof may, on application by the party who gave the notice, appoint an arbitrator, umpire or third arbitrator who shall have the like powers to act in the reference and make an award as if he had been appointed by consent of all parties.'
In the CA, Hirst LJ rejected the argument that the Club's lack of urgency furnished an excuse. A more fundamental question was whether inordinate and inexcusable delay in the absence of prejudice was a proper ground for refusing to exercise a s10 discretion. The appellants argued that the Judge at first instance had erred because the Court should extend to s10(1) well established principles in cases of striking out for want of prosecution laid down by Allen v Sir Alfred McAlpine and Birkett v James. Hirst LJ disagreed. The leading case on s10 was Bjornstad v Ouse Shipping which clearly demonstrated that the court's discretion was completely unfettered. Moreover, there was nothing in the wording of s10 to suggest the discretion was anything other than completely unfettered. There was no obligation to read into it the requirement of proof of prejudice stipulated in the striking out cases which had attracted strong judicial criticism.
In his judgement Longmore J was correct in holding that the absence of prejudice was not fatal to the exercise of the s10 discretion against an applicant who had been guilty of inordinate and inexcusable delay. In the exercise of his discretion he took all the relevant factors into account, including, of course the absence of prejudice, and Hirst LJ could see no good reason to interfere with his decision.
Nourse LJ concurred with Hirst LJ and went on to say:
'in every case there must come a time when the court can properly refuse to grant it not because its dignity has been affronted nor in order to punish the applicant, but simply because it is wrong to grant a remedy to someone who has for so long neglected his right to seek it. The power to refuse relief in such circumstances is one which every court in the land would wish to preserve'.
S18(3) of the new Arbitration Act 1996 repeats the position under s10(1)(a) of the 1950 Act and provides that if the appointment procedure fails and the parties have not agreed a default procedure, an application to court may be made under s18(2). The powers open to the court are set out in 18(3) but the Act does not specify how the court's discretion is to be exercised. It is thought that the courts would still take the robust approach that the CA has followed in this case.
This note is intended to provide general information about some recent and anticipated developments which may be of interest. It is not intended to be comprehensive nor to provide any specific legal advice and should not be acted or relied upon as doing so. Professional advice appropriate to the specific situation should always be obtained.