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Appeal court rules on serving arbitration notice by E-mail -

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May 16 2013/  Contributed by Dorothy Ufot & Co

In Continental Sales Ltd v R Shipping Inc(1) the Lagos Court of Appeal ruled that serving an arbitration notice by email constitutes effective service of the arbitration notice under the English Arbitration Act 1996, for the purposes of registering and enforcing a foreign arbitral award in Nigeria.

Facts
The appellant entered into a time charter agreement with the respondent on July 10 2009. The charter stipulated that the relationship between the parties was governed by English law and disputes were to be referred to arbitration in London in accordance with the English Arbitration Act 1996.

By a further agreement dated August 11 2009, the appellant admitted to being in breach of the charter agreement; it acknowledged the lawful termination of the charter and the respondent's entitlement to recover damages as stipulated in the agreement. The agreement also incorporated the arbitral provision contained in the original charterparty agreement.

The agreed recoverable damages were $729,000, including costs.

The appellant failed to pay the admitted damages. The respondent referred the matter to arbitration as stipulated in the charter agreement.

The respondent appointed an arbitrator and notified the appellant of arbitration by an email dated August 31 2009, inviting the appellant to nominate its own arbitrator. The appellant acknowledged the invitation, but neglected to appoint an arbitrator.

The arbitrator appointed by the respondent agreed to act as the sole arbitrator to the proceedings, pursuant to Section 17 of the English Arbitration Act, and invited the parties to make submissions. The appellant refused to participate in the arbitration proceedings.

The sole arbitrator subsequently found in the respondent's favour and awarded it damages in the sum of $729,000 (as stipulated in the agreement of August 11 2009), together with interest at the rate of 2.5% from August 24 2009 until the date on which the payment was made. In addition, the respondent was required to pay $2,070 in arbitration costs plus interest at the rate of 4% per annum.

On December 15 2009 the respondent applied ex parte to the Lagos Federal High Court to register the arbitral award.

On January 15 2010 the court granted an interim application ex parte to register the award, but granted the appellant a period of time within which to apply to set aside the registration.
 

The appellant brought an application to set aside the registration order of the trial court, alleging that it had not been notified of the London arbitration proceedings.

In a ruling delivered on July 12 2010, the trial court dismissed the application to set aside the registration of the arbitral award and confirmed the earlier registration order.

Dissatisfied with this ruling, the appellant appealed to the Lagos Court of Appeal.

Legislation

In considering the appeal, the appeal court took into account the following legislation:

•Sections 14(4), 17(1)-(2), 76(1)-(3) and 76(4)(a)-(b) of the English Arbitration Act 1996; and

•Section 52 of the Arbitration and Conciliation Act 1990 (now 2004).(2)

Section 14(4) of the English Arbitration Act provides that where an arbitrator or arbitrators are to be appointed by the parties, arbitral proceedings are commenced when one party serves the other party with written notice requiring it either to appoint an arbitrator or agree to the appointment of an arbitrator.

Section 17(1) provides that unless the parties agree otherwise, where each of two parties to an arbitration agreement must appoint an arbitrator and one party refuses to do so, or fails to do so within the specified time, the other party, having duly appointed its arbitrator, may give written notice to the defaulting party that it proposes to appoint its arbitrator to act as sole arbitrator to the proceedings.

Section 17(2) provides that if the defaulting party fails to make the required appointment and notify the other party that it has done so within seven days of receiving the notice, the other party may appoint its arbitrator as sole arbitrator, whose award shall be binding on both parties, as if the arbitrator had been appointed by agreement.

Section 76(1)(3) provides that parties are free to agree on the manner in which any notice or other documents required or authorised to be given or served in pursuance of the arbitration agreement or for the purposes of the arbitral proceedings are to be served. If there is no such agreement, the arbitration notice or other documents may be served on a party by "any effective means".

Section 76(4) provides that if an arbitration notice is addressed, pre-paid and delivered by post to the addressee's last-known principal residence, business address or office, it shall be treated as effectively served.

Section 52(2)(a)(iii) of the Arbitration and Conciliation Act provides that where recognition or enforcement of an award is sought, or where application for refusal of recognition or enforcement thereof is brought, irrespective of the country in which the award is made, the court may refuse to recognise or enforce such award if the party against which it is invoked furnishes the court with proof that it was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings, or was otherwise unable to present its case.
 

Decision
In upholding the trial court's ruling to register the foreign arbitral award, the court of appeal held as follows:

•Where parties are to appoint arbitrators, arbitral proceedings are commenced when one party serves on the other party written notice requiring it to appoint an arbitrator or agree to the appointment of an arbitrator (Section 14(4) of the English Arbitration Act).

•The parties are free to agree on the manner in which any notice or other documents required or authorised to be given or served in pursuance of the arbitration agreement or for the purpose of the arbitral proceedings are to be served. If there is no such agreement, a notice or other documents may be served by any effective means (Section 76(1)-(3) of the English Arbitration Act).

•Previous dealings between the parties demonstrated that the parties had failed to indicate any limitation to their customary communication by email; this warranted an agreement as to the format of sending such emails. There was justifiable implied consensus that all communication between the parties may be concluded electronically.

•Email is a form of communication that is set down in writing. It is not oral. The fact that it is electronic is immaterial. It can be downloaded and is as real as a hard copy of a letter.

•Effective' means "achieving a result" or "producing the result that is wanted or intended". Since the intention of the email correspondence between the respondent, the respondent's solicitor and the appellant was to achieve the result of communicating the progress of the arbitration proceedings at its various stages, there had been 'effective' service of the entire arbitration process on the appellant. The spurious argument that the notice had not been served in writing did not hold water.

•It was obvious from the records that all communication between the parties, including the signing of agreements, had been performed electronically. Therefore, it was unconscionable for the appellant to claim that such form of communication had been ineffective. It stood to reason that any previously accepted and acceptable means of communication among the parties would remain an effective means of service of any subsequent notice of arbitration proceedings.

•Where recognition or enforcement of an award is sought, or where application for refusal of recognition or enforcement thereof is brought, irrespective of the country in which the award is made, the court may refuse to recognise or enforce the award if the party against which it is invoked furnishes the court with proof that it was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings, or was otherwise unable to present its case (Section 52(2)(a)(iii) of the Arbitration and Conciliation Act).

•A litigant which refuses to avail itself of the opportunity to be heard does so at its own peril. In the case at hand, the appellant was effectively apprised of all the stages of the arbitration process and was afforded every opportunity to be heard had it wished to state its side of the issue, but refused and neglected to do so.

Comment
The Lagos Court of Appeal's decision upholding the trial court's ruling to register the foreign arbitral award in this case is laudable.


Nigeria is a signatory to the New York Convention on the recognition and enforcement of foreign arbitral awards. The presentation of proof by a party against which an award is invoked that it was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present its case is a valid ground under Article V(1)(b) of the New York Convention and Section 52(2)(a)(iii) of the Arbitration and Conciliation Act for the court to refuse to recognise or enforce an award.

In this case, the entire transaction – including the signing of the contract containing the arbitration clause – had been concluded by email; consequently, the appellant had been notified of the appointment of the respondent's arbitrator by email.

Following its failure to appoint its own arbitrator, the appellant was further notified of the appointment of the respondent's arbitrator as the sole arbitrator to the proceedings, pursuant to Section 17 of the English Arbitration Act, and of the commencement of the arbitral proceedings. Rather than participate in the proceedings, the appellant sent the respondent a settlement proposal – also by email.

In resolving this dispute, the court of appeal considered:

"whether the trial court was right in registering the award dated 20th November, 2009 in spite of the assertion by the Appellant that it had no proper notice of the appointment of an arbitrator or of the arbitral proceedings contrary to the English Arbitration Act, 1996."

Considering the overwhelming evidence of service of all notices and processes on the appellant by email, the receipt of which the appellant had duly acknowledged, the court of appeal's decision that service of the arbitration notice and all other processes in the arbitration on the appellant by email constituted 'effective' service under Section 76(3) of the English Arbitration Act is laudable.

By this decision, the Federal High Court and the Lagos Court of Appeal ensured that the registration of this English arbitral award in Nigeria was not frustrated by technicalities arising from a restrictive interpretation of the phrase "any effective means" in Section 76(3) of the English Arbitration Act.

The decision clearly reflects the Nigerian courts' pro-enforcement stance regarding the enforcement of arbitration agreements and arbitral awards. What is required now is consistency in court decisions.
 

The Nigerian courts must continue to ensure the recognition and enforcement of all valid arbitration agreements and awards, particularly foreign arbitral awards, in line with the New York Convention, to which Nigeria is a signatory, if Nigeria is to be an attractive destination for international commercial and investment arbitration.

Since the entire business transaction in this dispute was conducted by email, the court of appeal's assessment that it was "unconscionable" for the appellant to claim that communication of the arbitration notice by email had been ineffective is encouraging.

Much as this decision is promising, it once again brings to the fore the urgent need for a review of the Arbitration and Conciliation Act in order to reflect modern technological realities (eg, use of the Internet, computers and email) in the conduct of international business transactions.

Section 17 of the English Arbitration Act must also be borne in mind; this provision produced a positive result for the respondent in the case at hand.

Recalcitrant parties often default in the appointment of an arbitrator with a view to derailing the arbitration process. However, in the case at hand, in the face of the appellant's default in appointing its own arbitrator, Section 17 of the English Arbitration Act proved useful for the prompt appointment of the respondent's appointed arbitrator as sole arbitrator to the proceedings, which ensured speedy determination of the dispute by arbitration.

There is no doubt that speed is one of the hallmarks of arbitration. Had the arbitration in this decision been governed by the Nigerian Arbitration and Conciliation Act, it would have been impossible to achieve the sort of result that was recorded in the London arbitration proceedings. The respondent would have had to turn to the courts for the appointment of the appellant's arbitrator under Section 7(2) of the Arbitration and Conciliation Act. This would inevitably have caused delays. In addition, the appointment may have been challenged up to the Supreme Court, which would ordinarily have taken no less than 10 to 15 years to conclude. This would have resulted in indefinite delay in commencing the arbitration proceedings - if not the complete derailment of the entire arbitral process.

By this decision, the court of appeal has given judicial approval for the use of email as an effective means of service of an arbitration notice, provided that the court is satisfied that email was an acceptable and ongoing means of communication between the parties during the course of their dealings.

 

For further information on this topic please contact Dorothy Ufot SAN at Dorothy Ufot & Co by telephone (+234 1 463 1723) or email (dorothy.ufot@dorothyufotandco.com).

Endnotes
(1) (2013) 4 NWLR (part 1343) 67.
(2) Cap A18, Laws of the Federation of Nigeria, 2004.

 

The materials published here was sourced from the International Law Office (a legal update service for major companies and law firms worldwide) are for general information purposes only and are subject to the disclaimer.

 



Tags: Appeal court ,  court rules ,  Arbitration Notice ,  Continental Sales Ltd ,  Email Constitutes ,  Proshare Law ,  Arbitral Provision , 


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