REUTERS | David Bebber

32nd Annual Freshfields Arbitration Lecture: “Symbiosis or Sado-Masochism? The relationship between the courts and arbitration”

On 22 November 2017, Freshfields Bruckhaus Deringer’s International Arbitration Group hosted its 32nd annual arbitration lecture in conjunction with Queen Mary University of London’s (QMUL) School of International Arbitration. This year’s lecture was delivered by the Rt Hon Lady Justice Gloster DBE on the subject of “Symbiosis or Sado-Masochism? The relationship between the courts and arbitration”.

The annual event, which celebrated three decades of lectures in 2015, is a well-known highlight of the international arbitration calendar. Previous speakers include Sir Roy Goode, Sir Elihu Lauterpacht QC, Prof Gabrielle Kaufman-Kohler, James Crawford SC, Professor Lucy Reed and Lord Mance.

The lecture was well attended by over 400 members of the international arbitration community, including senior judges, arbitrators, barristers, arbitration practitioners, representatives of the leading arbitral institutions, academics and QMUL students.

Gloster LJ, a Court of Appeal judge and the first female judge to be appointed as head of the Commercial Court, presented a thought-provoking examination of the relationship between the English courts and arbitration. The thesis of her lecture was that the relationship between the courts and arbitration is principally one of “symbiosis”, rather than “sadism” or “masochism”.

In her opening remarks, Gloster LJ highlighted the prevalent view within the English arbitration community that the UK departure from the EU would have very little impact on the domestic landscape for international arbitration or the attractiveness of London-seated arbitrations, as none of the characteristics of the English arbitration system will be affected by Brexit.

A principally symbiotic relationship

On the topic of “symbiosis” (how the law helps the courts and arbitration to work to each other’s mutual advantage), Gloster LJ suggested that there are four key respects in which English law gives rise to a mutually supportive relationship.

First, Gloster LJ submitted that English law offers an “unparalleled level of support” to arbitration. She cited the restrictive approach of the English courts towards challenges to awards based on public policy at the enforcement stage; the courts’ cautious approach to granting interim relief; and judicial approval of anti-suit injunctions where they are available (and the use of alternative relief where they are not), thereby compelling parties to abide by an arbitration agreement.

Second, Gloster LJ suggested that the English courts minimise interference with arbitration, by upholding awards wherever possible. By way of illustration, she noted that 80% of challenges from 2012 to 2015 to arbitral awards under sections 67 (challenge on the basis of jurisdiction) and 68 (‘due process’ challenges, where there has been a serious irregularity) of the English Arbitration Act 1996 had failed.

Third, as “England and Wales is quite possibly the only major arbitral jurisdiction that allows appeals”, Gloster LJ submitted that section 69 of the Arbitration Act (appeal to a court on an error of law) “epitomises the symbiosis between English courts and arbitrations”. Gloster LJ suggested that section 69 contributes towards the ongoing development of English commercial law as many important cases have arisen from arbitration appeals. It also offers parties a restrained means to correct arbitral awards suffering from a serious error of law.

Fourth, the overlap of experience between those practising English litigation and arbitration helps to foster a symbiotic relationship. Those who are appointed as judges in the English courts are likely to have experience as counsel in arbitrations or as arbitrators. Retiring judges who go on to become arbitrators are also able to take their perspective from the bench into arbitration.

Perceived threat from the courts

From the perspective of “sadism” (how the law might be said to be making things painful for arbitrations), Gloster LJ addressed the perceived threat that the courts will refuse to enforce an award if an arbitral tribunal takes decisive action in relation to the management of the arbitration or if the arbitral process differs from conventional litigation. This ‘due process paranoia’, she argued, can stifle innovation in arbitration. In addition, failure to take decisive actions in arbitration for fear of challenge can result in hesitancy to embrace any form of summary determination or more forceful case management. Gloster LJ expounded that any “sadism” is really “more imagined than real”, submitting that there is a “limited respect in which courts are making things difficult”.

Improving the role of arbitration in the development of common law

In relation to “masochism” (how the law could be said to be making things painful for the courts themselves, by strangling the development of the common law or letting arbitration do so), Gloster LJ submitted that that there are two respects in which the role that arbitration plays in developing the common law could be improved. First, citing the example of the Financial Markets Test Scheme, which enables parties to obtain declaratory relief in relation to test cases in the financial markets, Gloster LJ suggested that specific procedural avenues could be made available to raise points of law in courts without first having to work their way through arbitration. Second, she suggested that it would be “mutually beneficial to both courts and arbitration to improve the profile of arbitral awards” through their publication, while stopping short of calling for all awards to be made public.

Gloster LJ concluded by reiterating that the relationship between the courts and arbitration is principally one of symbiosis: “there is good reason to suggest that English law is one of the most pro arbitration legal systems, despite Brexit.” Nevertheless, Gloster LJ noted that there are a “few blemishes in this symbiosis”, as the courts make life harder for arbitration, and also themselves, if arbitral tribunals feel that they are under scrutiny. However, Gloster LJ reflected that the tools to address these points are mostly provided by the Arbitration Act itself. She ended the lecture by stressing that, ultimately, “two way communication between the courts and arbitration (as in any relationship) is key”.

Freshfields Bruckhaus Deringer Natalie Sheehan Roopa Mathews

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