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Thank you Doug
for that generous introduction.
This is an
emotional occasion for me.
First, I have
admired the Clayton Utz Sydney University lecture series from afar for many
years and I consider it a great honour to follow in the footsteps of many
distinguished arbitration practitioners who have preceded me in delivering
this lecture, so I thank Doug Jones and his colleagues as well as Chester
Brown and his colleagues from Sydney University for this invitation to share my
thoughts with you this evening. In fact I was with one of the previous lectures
from this series, Sally Harpole, a few days ago
participating in a conference in Los Angeles and she is following this
lecture online tonight.
Secondly, I am
returning to a place which has special meaning for me. Apart from being born
in Sydney, I spent 1966 and 1967 as a member of the Law Faculty at Sydney
University at 167 Phillip Street, so I know this street very well.
My topic was torts
and I had to teach this subject under the guidance of Professor Bill Morrison
who was one of the founding members of this faculty, someone whom everyone
held in awe. The only problem was that his lectures were at such a high plane
for Law 1 students that Ross Parsons, another icon of the faculty, once said
to him, "Bill I think maybe you should try giving your lectures in the crypt
of St Mary's". He said "why?". "Because your
lectures are so cryptic." It was into this climate that I came fresh
from Oxford to start my teaching career. I shall say no more about it than to
mention the fact that in my class there were some stars in the Sydney legal
constellation including former Chief Justice Spigelman, Geoffrey Robertson QC
and Alan Cameron. However there are many distinguished who themselves by
their absence from my lectures, so when I'm asked about how many of my
students became famous practitioners I answer that my students succeeded in
their careers in inverse ratio to the number of my lectures that they
attended. I'm mostly enormously grateful to the Sydney Law School for
honouring me with this honorary Doctorate of Laws – by the way conferred on
me by my former student Alan Cameron – and this lecture is a small way of
repaying my debt to the Law School.
I have been sent
this question as a topic of my lecture, "Commercial Courts and
International Arbitration – Competitors or Partners". The answer to the
question could possibly be answered in one word and we could all go home – and
the short answer is "both". They are both competitors and they're
both partners. Whether that is a good or bad thing is another story which I
will develop in the rest of this lecture. This morning I was unable to arrive
in Sydney in time to hear a lecture delivered by Chief Justice Allsop on the
courts and rule of law in the Asia-Pacific region. I have had a very quick
look at it and it is a very fine survey of the problems which actually
complements what I'm about to say, so I'm going to build on Chief Justice
Allsop's paper which all of you should read in due course because I think we
are both on the same page.
Most model law
countries agree that curial courts should adopt an arbitration-friendly
policy and that is manifested by:
- an unwillingness to set aside awards
for error of fact or law, however gross
- a tendency to read awards generously
and not look assiduously for defects in process unless really serious
violations of due process have occurred; and
- of course, real prejudice.
Furthermore,
courts should intervene quickly in support of arbitration by issuing
appropriate orders enforcing tribunal decisions where judicial assistance is
needed.
In short, courts
should supervise with a light touch but assist with a strong hand. I will
make some very quick remarks about how other courts, both common law and
civil law, have perhaps not quite followed this maxim.
In India we are
familiar with what might generally be called eccentric decisions in their
interpretation of arbitration laws despite the fact that India's 1996 Act is
meant to be based on the model law. In fact Chief Justice Allsop in his paper
has covered quite extensively the position in India. I do commend all of you
to get that so I don't need to really take this particular subject much
further.
I will mention in
passing the situation in the United Arab Emirates, primarily in Dubai. Dubai
is a very active arbitration jurisdiction. DIAC, the Dubai International
Arbitration Centre, has over 400 new filings a year. The problem with the UAE
is that it's not yet a model law country and it works on a handful of
provisions relating to arbitration in an all-civil procedure code based on Egyptian
principles as opposed to a comprehensive arbitration code. This means that
model law standards of curial review are not yet in place in mainland Dubai. However
in the Dubai International Financial Centre, which I will call the DIFC,
there is in force an Arbitration Law 2008 which is firmly based on the model
law and the DIFC courts will apply contemporary principles of model law
jurisprudence in carrying out their role as curial courts of arbitrations
which are seated in the DIFC. More about this later.
But there are
limits to arbitration.
On the
theoretical plane there is the concept of arbitrability.
Some subjects are simply not capable of resolution in arbitration, although
where the reliefs claimed are beyond the powers of an arbitrarial tribunal
the underlying contractual dispute can very often still be fought out and
decided by a tribunal leaving a national court only the function of enforcing
the decision of the tribunal in a practical way or in a legally enforceable
way.
From the
practical point of view there are also constraints on individual arbitration.
This problem comes mainly from the construction industry, the insurance
industry and the commodities industry and I'm talking about the problem of
string contracts. Where you have a web of contracts between different parties
in related transaction – some having arbitration clauses and some having not,
or each having arbitration clauses but with different parties – it is very
difficult to get an ideal solution that resolves all of the contractual
problems in a consistent way. This is highlighted by the fact that in the
construction industry most contracts have an arbitration clause. Nevertheless
in England the Technology and Construction Court remains a sought-after forum
and the reason is where you have these string contracts the only tribunal
with power to consolidate or join third parties without the consent of all
parties concerned will normally be a national court, and the problem of
multiple party arbitrations remains an unsolved one in arbitration.
Let me now move
on to another topic of current interest. What is the role of the forthcoming
Singapore International Commercial Court, which I'll call the SICC and that
will be launched in January next year? I have no mandate for speak for the Singapore
Government or the Singapore judiciary but what I tell you is based on public
knowledge and private briefings for senior counsel of the Singapore Bar. In
short what will happen next year will be the establishment of a separate
division of the High Court of Singapore, which is equivalent to your Supreme
Court, to hear international, commercial and offshore cases (and these are
all defined terms). The main aims of the SICC can be summarised as follows:
First, to establish the Singapore brand for dispute
resolution in line with the country's increasingly sophisticated
jurisprudence.
To cater to the expected growth in cross-border multi‑jurisdictional
dispute resolution services as Asia becomes an increasingly popular
destination for foreign trade and investment.
To harmonise the existing differences between legal
systems in Asia, which have led to uncertainty and inconsistency, by
developing a freestanding body of international commercial law which other
national courts might follow.
To provide a solution to some of the limits of arbitration
such as the issue of arbitrability, joinder of non‑parties,
and creating a right of appeal.
And, fifth, to further Singapore's goal of being a centre
of legal excellence and the legal hub of dispute resolution in Asia.
Singapore intends to leverage its image of four points of
view:
1.
first, neutrality;
2.
second, legal expertise;
3.
third, integrity;
4.
four, efficiency.
People who are involved in cross-border disputes will rely
on the courts in London or New York if they do not want to arbitrate. What
Singapore wants to do is to be the default court for Asia. The source of
jurisdiction of the SICC will be:
·
Jurisdiction agreements from parties to refer
the disputes to the SICC – in other words, elective choice of the SICC as the
forum;
·
Cases which are filed in the Singapore High
Court and which the High Court determines come within the jurisdiction of the
SICC without a jurisdiction agreement. In other words, cases which have
already been filed in the regular High Court will be looked at again in
January and when the Chief Justice decides that they fit the criteria set out
for cases to be tried in the SICC he will have the power to transfer the
cases over, after consultation with the parties.
There are other interesting features about the
jurisdiction of the SICC. One of the negative criteria is that the claims
cannot be seeking relief against the State or the sovereign of the State, nor
can the parties seek administrative law relief in the sense of prerogative
orders.
There are many other interesting features of the SICC but
for purposes of this lecture my only analysis would be this. What is the
likely effect of the SICC on the work and reach of the Singapore
International Arbitration Centre, which I will call the SIAC?
First, the SICC
is not meant to cannibalise the case load of the SIAC. The special appeal of
having a court with certain attributes of arbitration procedure can be
attractive to certain parties who would not otherwise choose international
arbitration as practiced by arbitration institutes, let alone consider ad hoc
arbitrations. But these parties would also not be happy with national courts,
particularly the national courts of one of the parties to the dispute. The
target client pool of the SICC would therefore be parties which have disputes,
actual or potential, with the counterparties who do not immediately feel that
arbitration is an option.
The best example of how international commercial courts
exist side by side with international arbitration centres in complete harmony
comes from London which arguably has the most successful commercial court in
the world. Yet London is one of the major centres for international
arbitration, not simply through the London Court of International Arbitration
(LCIA) but as a seat for many other institutional and ad hoc arbitrations, as
well as being home to CEDR which is one the world's leading mediation
institutions. Singapore shares many of the characteristics of the London
scene, especially in the financial sector, and I expect that both the SICC
and the SIAC will complement each other in providing dispute resolution
options to commercial parties.
Secondly, to
some extent the SICC will have to compete for new business in the same way as
a fledgling international arbitration centre has to, and as the SIAC had to
struggle for many years until achieving its present level of case load in the
last five years. The SICC will have to learn to market its services,
particularly to overseas parties. That is a task to which courts are not
accustomed and it may have to learn from the SIAC how it will be a long slog
before the number of new filings at the SICC starts becoming significant. Even
on the most optimistic scenario, a serious campaign of overseas marketing
would take at least a year or two, after which SICC would hope that parties
will start writing SICC jurisdiction clauses into their contracts. Judging
from the experience of arbitration institutions it is not likely that there
will be significant numbers of post‑dispute submissions to the
jurisdiction of the SICC, so they have to catch them by getting the SICC
written into their commercial contracts. The SICC would then have to wait for
disputes under those agreements to arise a year or two after the date of
entry into those agreements, so we are looking at a timeline of perhaps three
to four years, or even longer, after marketing begins before any new cases
are filed.
But the SICC has one big advantage which may enable it to
kick-start its marketing efforts in a way which would not be available to any
new arbitration institution. I've earlier referred to one source of
jurisdiction that the SICC will have. The High Court can transfer cases which
meet the requirements of SICC jurisdiction – in other words international,
commercial and/or offshore – to the SICC after consultation with the parties.
Assuming that the High Court could secure the consent of the parties – and
possibly even if such consent is not forthcoming – there could be a steady
pool of cases coming through the SICC quite soon after its launch. Actual
numbers would not necessarily be critical at this stage but the point is that
the SICC would be working, and be seen to be working, almost immediately
after its launch, and the commercial world can then see how the new court and
its advertised advantages will work. Publicity will be given to its cases in
a way that cannot be done for arbitration because of the need for
confidentiality, so the public awareness of the SICC would be much higher
than when the SIAC was launched.
Thirdly, to the
extent that some of the features of the SICC procedure prove popular,
arbitration institutions can re-examine their own procedures and practices to
see if these can be modified or even replaced by an equivalent SICC
procedure. This will enable the SIAC and indeed other arbitration
institutions to remain alive to the preferences of their client pool and
improve their services to meet client demands. Institutions are already
sensitive to client preferences and responses to new initiatives because of
the relatively close nature of the arbitration market where there are endless
conferences and a plethora of publication from best practices in arbitration.
The result is that every new initiative in arbitration is broadcast and
discussed, and starting a bandwagon is not therefore difficult.
The best example of this is the way in which arbitration
institutions over the last few years have, one after the other, introduced
the emergency arbitrator procedure. There is every reason to believe that
innovative procedures introduced by the SICC will be closely studied not only
by other commercial courts but by arbitration institutions as well. The same
can also be said of the DIFC courts which have from their inception
introduced innovative dispute resolution solutions, such as a Small Claims
Tribunal which offers mediation services and fast-track adjudication of small
claims without legal representation, a pro bono program, as well as having a
female judge on our Bench. All these innovations have been followed in one or
more other Middle East jurisdictions. Therefore the success of the DIFC
courts in introducing innovations which other legal systems can emulate may augur
well for the success of the SICC in being the potential leader of legal
change in East and South Asia.
Fourthly, some
may worry about the degree of international enforceability of SICC judgments
as compared to the breadth of coverage of international arbitration rewards,
bearing in mind that more than 150 countries have acceded to the New York
Convention. It's true that people tend to think about treaty arrangements for
reciprocal enforcement of judgments. Between Commonwealth countries there is
usually reciprocal enforcement of judgments, but this reciprocity is not universal
even within the Commonwealth. For non‑Commonwealth countries bilateral
or multilateral arrangements are necessary but they are uncommon in the Asia-Pacific
region. So how does the SICC hope to make its judgments widely enforceable? In
the first place SICC judgments will be enforceable in common law countries,
and by that term I include the USA, and they can be enforced by a common law
action to enforce a foreign judgment which applies even without reciprocity
and to judgments from civil law countries as well. Enforcement of such
judgments may even be faster under common law than under the New York
Convention because of the availability of the summary judgment procedure for
a fast-track judgment, compared to a disputed enforcement application under
the New York Convention which would require full arguments of fact and law in
respect of any ground under Article 5 of the Convention which is relied on to
support a denial of enforcement.
These points have all been noted by the DIFC courts which
have utilised the common law action on a foreign judgment to highlight the
wide enforceability of our own judgments and we have done so by signing
memoranda of guidance which we will call MOGs with different Commonwealth
countries, starting with the English Commercial Court followed by the Supreme
Court of New South Wales and the Federal Court of Australia and soon to be
joined by Kenya later this month, Singapore in January next year and a
Judicial Court of the Southern District of New York in March, thus proving my
point that the doctrine of suing on a common law judgment extends to the US. We
call them memoranda of guidance rather than memoranda of understanding
because MOUs usually import some positive undertakings by each party. In our
MOGs neither party undertakes anything. The MOG is a common declaration of
the broad principles which guide common law courts in recognising and
enforcing foreign judgments. Each party speaks the law in practice in its own
courts and the statements by the two jurisdictions are for all practical
purposes the same apart from differences in procedural practice which are
identified in the MOGs.
But I know that Singapore is banking its hopes to some
degree on the Hague Convention and choice of court agreements which is a sort
of mini version of the New York Convention for the enforcement of court
judgments. Until April this year only Mexico, the USA and the European Union,
excepting Denmark, had signed the Convention and only Mexico has ratified it.
But once the EU ratifies the Convention you will immediately have 27 more
countries which will recognise and enforce judgments of any court which has
been expressly chosen as a dispute resolution forum of the disputing parties.
Now that the US signed the Convention Singapore is hoping that there will be
a bandwagon effect, with other countries particularly in the Asia-Pacific
region signing and ratifying as well. The idea is therefore that the concept
of Singapore as a dispute resolution hub will persuade those law firms which
have the task of advising their international clients, particularly those
with businesses or investments in Asia, to look seriously at Singapore as a
dispute resolution centre to resolve their disputes with their international
counterparties because Singapore will be offering a variety of dispute
resolution solutions, one of which should fit the particular client's needs
and preferences. In passing I would add that the same could be said of Dubai
in relation to the Middle East as I will elaborate later.
So the conclusion is that the SICC and the SIAC will to
some degree be competitors because there will be parties who when faced with
a choice of the Singapore High Court and the SIAC might have chosen the SIAC,
and would now be attracted by some features of the SICC. However the greater
likelihood is that the SICC will attract a breed of disputants who
essentially prefer or need the dispute to be resolved by litigation before a
national court rather than arbitration by an arbitration institution or ad
hoc and would have chosen the most suitable neutral national court outside
the courts of either of the disputants, typically London or perhaps New York.
Those disputants will now have an additional choice of a national court specifically
designed to cater to the needs of international parties with little or no
connection to Singapore and which also recognises their special needs. I'm
now going to describe some features of the SICC which have already been made
public:
·
First, the SICC will have more limited
discovery and interrogatories than traditional common law rules. In this
respect the SICC is following the DIFC courts' example in adopting document
disclosure rules based on the IBA Rules and the taking of evidence in
international arbitration.
·
Second, as all of you know confidentiality
normally attaches to arbitration whereas court hearings are normally in open
court, but for the SICC the indications are that the court will be receptive
to applications for confidentiality in terms of private hearings and
restrictions on the release of information concerning the case to the public.
·
Third, there will be special provisions
relating to joinder and consolidation, again addressing one of the perceived
shortcomings of arbitration.
·
Fourth, there will be the exclusion of normal
rules of evidence and substitution of foreign rules of evidence where
appropriate, so this is very arbitration-like.
·
Proof of foreign law may be made by
submissions from qualified foreign law experts rather than by affidavit
evidence subject to cross-examination. What this means is that again the SICC
is following a typical arbitration practice where, instead of bringing
experts on foreign law to give affidavits and be cross-examined on the
affidavits of expert report, the foreign experts will simply be treated as
counsel and making the submissions directly to the court without cross-examination.
·
Finally, and this is good news for the
international litigation or arbitration community, allowing parties the right
to appoint foreign counsel to appear for them in cases where there is no
substantial connection with Singapore save for the choice of the SICC and the
choice of Singapore law. This will apply to what is defined as offshore cases,
which are those which have no substantial connection with Singapore except
that you have chosen Singapore to fight your case.
So in this respect the SICC is like a hybrid. While it's
emulating some of the distinctive features of international arbitration, it
is clearly intended to remain a national court but one possessing certain
features peculiar to arbitration tribunals. Let me complete the picture of
the dispute resolution landscape in Singapore. Last week the Singapore
International Mediation Centre (SIMC) was launched. Chaired by Edwin Glasgow,
a distinguished English QC, and having a panel of experienced international
mediators, SIMC is poised to attract mediation for international disputes to
be held under the auspices of a dedicated mediation centre catering for the
needs of international clients. The SIMC will therefore complete the suite of
dispute resolution options available in Singapore and which are also available
to non‑Singaporean disputants by opt-in jurisdiction.
Let me now turn to another commercial court, the DIFC
Courts. A very brief word on the essential features of these courts: I have
described them as a common law island in a civil law ocean because UAE laws
are based on a civil law while the governing law and the DIFC are laws
enacted specifically for the DIFC and based on common law. The DIFC is an
area of approximately 110 acres situated in the heart of the Emirate of Dubai
which is well publicised internationally by its iconic symbol, The Gate. It's
a free trade zone of which there are many in Dubai, but what distinguishes
this zone is that it has its own civil and financial administration, its own
legal system and its own courts.
Our legal system is based substantially on English law in
codified form but with civil law influence. We have an Arbitration Law 2008
which is based closely on the model law and applies to all arbitration seated
in the DIFC. The DIFC is a separate seat from Dubai itself, so contractual
references to arbitration in Dubai will be interpreted as meaning seated in
the Emirate of Dubai excluding the DIFC, and those arbitrations will be
subject to the UAE federal laws on arbitration and supervised by the Dubai
National Courts as the curial court. If an analogy is needed for this
remarkable experiment one may find it in China with Hong Kong living under
one country, two systems.
The DIFC courts can be characterised as an international
court in two ways: first nearly all of our cases involve at least one party
which is not from Dubai or the UAE, which is to be expected since our primary
jurisdiction is over cases related to parties incorporated or registered in
the DIFC, or cases which relate to something happening within the DIFC. Secondly
we have since the end of 2011 had opt-in jurisdiction in the same way as the
SICC now has, and we now have jurisdiction to hear cases which are the
subject of the written jurisdiction agreement. That puts us in the same
position as the SICC will be, except that we do not have a separate court
with special rules. Arguably we do not need such special rules like the SICC
since our practices and procedures are largely based on the English Civil
Procedure Rules, the CPR, particularly the rules of the English Commercial
Court which are generally accepted as being the most suitable set of rules to
determine the trying of complex commercial cases.
We have foreshadowed the problem of courts versus
arbitration when the DIFC was first established in 2006. The original concept
was that the DIFC courts would have a partnership with the proposed DIFC LCIA
Arbitration Centre, we handling litigation and the Arbitration Centre
handling arbitration and mediation. When the courthouse was built the DIFC
courts shared our premises with the Arbitration Centre for some years until
our expansion made it necessary for the Arbitration Centre to move out and
seek alternative premises.
However we have turned full circle and as from this year
the courts and the Arbitration Centre are now legally housed under an
overarching authority known as the Dispute Resolution Authority which
comprises two arms: first, the DIFC Courts with myself as the Chief Justice
and second, the DIFC Arbitration Institute which owns the Arbitration Centre
which is currently operated by the LCIA. I am the head of this Institute. So
we have an unusual situation of a Chief Justice who not only heads the courts
but also acts as the nominal head of the Arbitration Centre. I should point
out that this is not unique because Singapore has such a situation up to four
years ago when the SIAC was housed in the Supreme Court building and was
managed under the supervision of the Academy of Law whose president was the
Chief Justice.
Under our arbitration law all arbitration seated in the
DIFC, which as I've said is an independent seat within the Emirate of Dubai,
will be supervised by the DIFC courts which will therefore act as the curial
court of the Arbitration Centre as well as other arbitration seated there. To
prevent conflict of interest I have appointed a board of trustees who will
effectively manage the business and case load of the Arbitration Centre and
who will not report to me.
Despite this separation of powers and responsibilities
this new authority fulfils a dream that the DIFC authorities and my
predecessor, former Chief Justice Sir Anthony Evans, had of making our
courthouse a house of justice in its different forms.
The DIFC courts have one significant advantage concerning
the enforceability of our judgments over the SICC. DIFC court judgments are
under Dubai law registrable in the State Court of mainland Dubai without any
challenge posed to the substance of the judgment. In other words, there can
be no challenge on merits. When registered, those judgments translated into
Arabic will become judgments of the mainland Dubai courts and will be treated
as such in the UAE. There is an organisation called the Gulf Co-operation
Council which is made up of six GCC countries: Jordan, Bahrain, Qatar,
Kuwait, Oman and the UAE. There is a GCC Convention which provides for mutual
recognition and enforcement of all court judgments between GCC countries. This
makes the DIFC courts' judgments fully enforceable throughout the Gulf Region,
which is why last year we undertook a marketing trip to Australia and had
discussions with certain large Australian companies suggesting that they
might consider writing in DIFC courts for the disputes anywhere in the Middle
East because if they got a DIFC court judgment they could take that anywhere
else in the Gulf Region.
But the significance of this arrangement is that neither
the DIFC courts nor the Arbitration Centre considers such co-operation to be
against their own interests and like Singapore the imperative is to make DIFC
the legal hub of the Middle East and North Africa, the MENA region, by
offering a suite of legal options for dispute resolution and making sure that
each option is satisfactorily delivered in accordance with parties'
expectations. Like Singapore, Dubai has been inspired by London's example in
maintaining a number of vibrant legal forms of dispute resolution, thereby
enlarging the pool of disputes being resolved in our legal hub and
interlinked to each other as necessary, for example between arbitration and
mediation.
We enter the home strait now. This is perhaps the most
interesting part of the lecture. We are now about to launch in the DIFC an
experiment without parallel in arbitration history. We have recently
circulated for public consultation a draft practice direction setting out an
initiative in the form of a guidance note that will have the effect of
"converting" court judgments into arbitration awards. As I will
explain later I use the term "convert" as shorthand for a more
complex process.
Now for the next part of this lecture can I ask you please
to refer to the handout and on the first page of the handout should have the
relevant guidance note. Let me read that very quickly. What the practice note
says is that when parties submit to the jurisdiction of the DIFC courts by
jurisdiction agreement, in other words by choosing the DIFC courts as their
forum of choice, they may include within that submission agreement an
arbitration clause in the following terms:
"Any dispute arising out of
or in connection with the enforcement of any judgment given by the DIFC
courts, including any dispute or enforceability of the State judgment, and
satisfying all of the referral criteria shall be and finally resolved by
arbitration under the Arbitration Rules of the Arbitration Centre".
In your copy I think it says LCDAI Arbitration Centre but
I think in the final version we will leave that blank because feedback has
shown that parties want to have a choice of which arbitration centre they might
want to refer to.
"Which Rules meaning the
rules of the relevant centre are deemed to be incorporated by reference into
this clause. The number of arbitration shall be one or 3. The seat of the
arbitration shall be the DIFC. The language to be used in the arbitration
shall be English. The contract, including any provisions relating to a choice
of forum, shall be governed by and construed in accordance with the laws of
the DIFC."
Now the critical term in that clause is referral criteria
and that is defined as follows:
1.
Judgment is taken effect in accordance with
Rule 36.29 [that basically means immediately].
2.
The judgment is a judgment for payment of
money.
3.
There is an enforcement dispute in relation to
the judgment.
4.
The judgment is not subject to any appeal and
the time permitted for a party to the judgment to apply for permission to
appeal is expired.
5.
The judgment creditor and judgment debtor have
agreed in writing that any enforcement dispute between them shall be referred
to arbitration pursuant to the Practice Direction.
Now the most important criterion is the term
"enforcement dispute" and that is defined as a "dispute
between a judgment creditor and judgment debtor with regard to money
including costs claimed as due under a judgment ,including a failure to pay
on demand a sum of money due under the judgment". I'll leave out the
last few words. Now bear with me a moment while I summon up a quote that I
want to read to you.
"The net effect of this initiative
is we hope that following a money judgment of the DIFC courts the judgment
creditor will be able to demand payment of the judgment sum and if payment is
not made pursuant to that demand for any reason the judgment creditor will be
able to consider that an enforcement dispute has arisen and can refer the
dispute to arbitration at our Arbitration Centre or indeed any other
arbitration centre. The Arbitration Centre in turn will progress the
arbitration and appoint one or 3 arbitrators that the parties have chosen in
their arbitration agreement and the dispute will then be referred to the
Tribunal for its decision in the usual way in accordance with the relevant
Arbitration Rules."
This process is what I meant to explain by the term
"conversion" of a judgment into an arbitration award but it is not
a conversion in the strict sense of that word. The process enables a judgment
creditor to have an additional option for enforcement of its judgment without
losing its rights under the judgment in any way.
After our public consultation we received a fair number of
comments from the law firms within the DIFC. Two principal worries have been
raised and I will just take you through them.
First, many respondents felt that our definition of
enforcement dispute will not work in creating a dispute on a judgment sum,
which in their view cannot be disputed and the question is whether another
national court which has to enforce the arbitration award will consider that
it was a mere rubberstamping. Now my reply to that is this. There is a long
line of common law jurisprudence which clearly establishes that for the purposes
of arbitration a dispute exists when one party makes a claim for payment of
the sum allegedly due of another party and the respondent either refuses to
pay or keeps silent but in any event does not make payment. This is so even
if the issue of whether the debt is owing is beyond dispute. Only an
admission of liability or actual payment will mean that there is no dispute.
If you look at section 4 of the English Arbitration Act
1950 the words in bold explain that under that Act there was to be a
mandatory stay of court proceedings if there was an arbitration agreement "unless
the court is satisfied that there is no in fact any dispute between the
parties with regard to the matter agreed to be referred". It was this
phrase which led to a series of cases in England about what is meant by a
dispute and the classic formulation or rather the classic example given which
everybody quotes and some of you may well be familiar with it comes from a
case called Hayter v Nelson Home Insurance, a
famous example given by Justice Saville, later Lord Saville. He said
"Two men have an argument over who won the University boat race in a
particular year. In ordinary language they have a dispute over whether it was
Oxford or Cambridge. The fact that it can be easily and immediately
demonstrated beyond any doubt that one is right and the other wrong does not
and cannot mean that the dispute did not in fact exist. Because one man can
be said to be indisputably wrong does not in my view entail that there was
never any dispute between them". And that is the short answer to that
particular problem.
But then that led to another problem which is not raised
by any respondent but I have now raised myself. What if a clever judgment
debtor reads Lord Saville's dictum and he replies to the judgment creditor,
"I acknowledge my liability for the judgment debt but I simply have no
liquid assets to satisfy the judgment and I seek time for payment." Will
there still remain a dispute for the purposes of a valid arbitration?
Now my view is that this problem can be resolved by
expanding the definition of enforcement dispute to include any dispute about
the judgment debtor's ability or willingness to make payment of the judgment
sum.
Accordingly, with appropriate amendments to meet the concerns
of our users we hope to launch the actual initiative early next year. The
overall reactions from our legal community in the DIFC have been largely
encouraging of our intention to give DIFC judgments more global reach. If our
experiment subsequently proves successful we will have developed an important
tool to synthesise litigation and arbitration by giving concurrent remedies
for enforcement, and thereby resolve one of the great problems of
international litigation – but only if you litigate in the DIFC.
This would be the ultimate partnership between commercial
courts and arbitration so I hope that all of you will wish us good luck in
this venture. Thank you.
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