Examination of Witnesses (Questions 40-59)
Mr Richard Fentiman
10 JUNE 2009
Q40 Chairman: They are related proceedings
rather than co-defendants.
Mr Fentiman: Yes.
Q41 Chairman: We have discussed competing
litigation both generally and in the context of choice of court
clauses and industrial property, what about the situation where
you have a competition between litigation and arbitration? The
Commission has suggested that certain specific points relating
to arbitration might be addressed "not for the sake of regulating
arbitration, but... to ensure the smooth circulation of judgments
in Europe and prevent parallel proceedings". On that basis
it suggests a partial deletion of the arbitration exception and
the assignment of jurisdiction over various points relating to
arbitration to the law and courts of place of arbitration. Do
you agree?
Mr Fentiman: I should begin by saying that I
think this is a very positive and welcome suggestion in that it
makes respectable—if I can use that word—a possibility
which at one time was regarded certainly amongst arbitration practitioners
as being absolutely unthinkable. If at one time you had said to
arbitration practitioners that arbitration should in some sense
fall within the scope of the Brussels Regulation they would have
said no, and indeed in their replies to the questionnaire that
was sent out to different Member States by the Heidelberg team
they did say no. However, what is now clear—and became clear
in the Heidelberg Report and is clear in the Green Paper—is
that a fine line is going to be drawn and that the objective of
this is simply to facilitate and not to regulate in an intrusive
way the conduct of arbitration. I think the first thing to say
is that this has put something on the table by the way it is expressed
which I think previously many arbitration practitioners would
have discounted. The question is, how successfully are the proposals
in the Green Paper going to achieve that? The proposal that you
support arbitral awards by providing expressly for the non-recognition
of civil judgments inconsistent with those awards has been universally
welcomed. That, in a very obvious sense, is a way in which the
Regulation can support arbitration. I think less clear and much
more controversial are the proposals for co-ordinating ancillary
proceedings in different Member States in matters concerning arbitration.
That is to say, in particular, attempting to regulate parallel
proceedings in different Member States concerning the validity
of an arbitration agreement. The suggestion is that essentially
the civil courts of the country in which the arbitration is seated
will have exclusive jurisdiction in that matter. In principle
that is something which is hard to object to and in principle
it achieves the harmonisation of a particular area of civil litigation,
that is to say civil proceedings concerning arbitration, and in
a sense of course it is supportive of arbitration by adding clarity
to the validity of a jurisdiction agreement. The difficulty however
is this—and it is a very serious difficulty—that if
we in effect allocate exclusive jurisdiction in any matter to
the courts of a particular country you do that because you make
one of two assumptions. One assumption is that the courts of that
country have some kind of unique interest in resolving the matter;
the alternative assumption is that the issue involved (the validity
of an arbitration agreement) is regulated by common rules to the
extent that it does not really matter in a sense where that issue
is resolved as long as you find an appropriate place in which
it can be resolved. The difficulty is that the whole notion of
exclusive jurisdiction (which is essentially what we have here)
is predicated on one of those two assumptions but it is very unclear,
and is widely doubted by practitioners, that either of those assumptions
is actually correct. In other words, you are trying to establish
an exclusive jurisdiction over the validity of an arbitration
agreement where really there are no grounds for doing so. It may
be because practitioners are very used to the idea of parallel
proceedings involving validity but certainly in my experience
practitioners in this area are not persuaded that the seat of
the arbitration has any particular claim to resolve these issues.
I think practitioners like to keep open the possibility of having
the issues resolved in other countries where of course that would
suit the interests of their own clients.
Q42 Chairman: Can I just ask you,
the seat of the arbitration may be clearly defined by the arbitration
agreement but not necessarily, surely?
Mr Fentiman: Indeed.
Q43 Chairman: An ICC arbitration
does not necessarily tell you where it is going to take place.
Mr Fentiman: Indeed, and that gives rise to
a further problem that in order to make this work the Regulation
itself has to introduce rules which have the effect of telling
you what the seat of the arbitration is, otherwise it does not
work because there must be a degree of certainty about that. That
of course is one of the difficulties because when you come to
address that question it may be difficult to get agreement. I
do not mean agreement between the parties, I mean agreement between
Member States as to how the place should be located.
Q44 Chairman: I see in footnote 14
of the Green Paper suggests that if you cannot find agreement
as to the seat in the contract then it is suggested to connect
to the courts of the Member State which would have jurisdiction
over the dispute under the Regulation in the absence of an arbitration
agreement. That could lead to anything, could it not, depending
on which head of jurisdiction you look at?
Mr Fentiman: Indeed. That is very much a default
rule because it is necessary to have a rule rather than a default
rule which actually expresses any particular connection between
the arbitration and a Member State.
Q45 Chairman: It does not even necessarily
lead to one state; several states could have jurisdiction under
the Regulation.
Mr Fentiman: Indeed. This makes my point that
it is very difficult in reality to argue for the position that
there is one court which has a unique interest in resolving this
dispute.
Q46 Chairman: Under the New York
Convention arbitration awards are enforceable directly anywhere
in the world without getting the imprimatur of the law
of the seat of the arbitration. Could this proposal interfere
with that?
Mr Fentiman: It could, although you could equally
well say that it strengthens the enforceability of your award.
I think there is a related question as well which is the distinct
one of whether or not there is any assurance that the courts of
any Member State seised of the question of the validity of an
arbitration agreement will come to the same answer on the question
of validity. If that were the case then there may be some reason
for saying that the question of jurisdiction should be allocated
to a particular place such as the seat. In order to achieve a
degree of certainty on the question of validity the Regulation
in fact steps into the realms of choice of law by introducing
a conflict of laws rule which essentially says that the law of
the seat will govern. I think that causes real difficulty insofar
as Member States differ markedly from each other, not simply in
how they answer the question of which law governs the validity
of an arbitration agreement, but also of course as to whether
or not that is a justiciable issue anyway. In some Member States
once the arbitration has started there is no question of challenging
the validity of the arbitration agreement. I think that causes
a difficulty, not simply a conceptual difficulty because this
is a regulation trespassing into the realms of a choice of law
in a sense, but my impression is that it would be very hard to
get agreement between Member States (and agreement within the
arbitration community) that this is the right approach to determining
the validity of an arbitration agreement.
Q47 Chairman: I think what you have
been referring to just now is that in some Member States arbitrators
have competence to decide over their own competence.
Mr Fentiman: Indeed, yes.
Q48 Chairman: What about some rule
which regulated the relationship between a European judgment or
perhaps a worldwide judgment and an arbitration award if the judgment
was given on a matter which was subject to an arbitration? Is
that a desirable aim, a special exception to the recognition and
enforcement of judgments if and when, contrary to an arbitration
agreement or award?
Mr Fentiman: I think in principle it does have
the effect of strengthening arbitration in a way which would be
acceptable. I think the difficulty is in actually formulating
the precise nature of the proposal.
Q49 Chairman: Do you agree with the
Commission's analysis of problems about provisional measures and
with its suggestions as to how they might be addressed? Do you
have any further comments?
Mr Fentiman: I think I would certainly welcome
the thrust of the Green Paper and the Heidelberg Report upon which
it was based because there is a clear sense that provisional measures
such as, for example, freezing injunctions, have to be supported
and have to be made to work. In the Heidelberg Report there is
an openness to allowing Member States to grant such relief as
they recognise under their own law even if that is not widely
recognised in other systems. To put it bluntly, there is a recognition
that there is nothing inherently wrong with the English worldwide
freezing injunction, nor the fact that it operates in personam
and therefore can be granted even in situations where there are
no assets in England. I welcome the general thrust of the Green
Paper but I have two difficulties with it. One difficulty is the
suggestion that instead of addressing the circumstances in which
a court granting an ancillary injunction in support of proceedings
in another Member State can do so—which is the way we look
at things at the moment after the Van Uden decision—it
is suggested that we should not worry about that issue any more,
presumably with the effect that the courts of Member States can
grant whatever relief is available under their own law on the
assumption that the primary court—the court seised of the
substance of the issue—will have a power to vary or discharge
the order that has been granted in the secondary proceedings.
In one sense that is a very neat solution because it assumes that
there is no need for the secondary court, as it were, to worry
about compliance with some Community principle for the grant of
provisional measures. Instead the primary court regulates whether
or not the secondary court's remedy is going to be effective.
In one sense that is in conformity with principle because it recognises,
so to speak, the primacy of the primary court. But I think it
causes considerable uncertainty. One wonders why you go to court
X for a remedy when there is the risk that the order which that
court considers is valid and enforceable can be varied in some
way or discharged by the primary court. It seems to me that that
is a recipe for uncertainty. I would actually favour adopting
the basic approach which the Court of Justice has adopted thus
far which is saying that the secondary court can grant such relief
as is available under its own law provided there is a sufficient
link between the relief sought and the courts of that country.
I would favour retaining that general approach but merely clarifying
it, and in particular clarifying it to make it clear that that
test is satisfied if a court grants an in personam order
based on a defendant's personal connection with its jurisdiction.
Q50 Chairman: The Commission's suggestion
might be thought to depart from the principle of mutual trust
or at least non-interference with foreign courts' decisions.
Mr Fentiman: It does, but it also reflects a
policy which one can see in various proposals in the Green Paper
which is an attempt to ensure that for any particular issue there
is one court and one court only which ultimately has responsibility
for this. That idea is hard to square with the notion of provisional
measures in a secondary court.
Q51 Chairman: Just to wrap up, we
have in mind a rather long list of other matters which the Commission
has touched on. Perhaps I can deal with it by just asking you
in relation to the areas identified in section eight of the Green
Paper do you consider action is merited? Are there any particular
ones which you want to highlight for us to look at?
Mr Fentiman: It did not seem to me that there
was any matter which particularly needed attention. I suppose
that is precisely why these matters are collected at the back
of the Green Paper. There are perhaps three particular matters
which I think are just worthy of note. The suggestion is that
there should be a common definition of domicile. What this means
of course is a common definition of domicile for natural persons
because there is already in the Regulation a common definition
of corporate domicile. In a way one has to say yes but I am not
sure it is strictly necessary. My own experience is that although
national laws may in fact differ in terms of idiom and terminology,
the practical effect is actually the same. So yes, but it perhaps
makes no difference. On a related theme is the idea that there
should be a common definition of the seat of a corporation. I
suppose in English law we are immediately struck by the impossibility
of this since the concept of a seat is not one which exists in
English law. I am not at all sure why that should be suggested
because although we do not have a common definition of a seat
we do of course have a common definition of corporate domicile
already in the Regulation so one wonders why that should be thought
to be of importance. I think the third thing which is striking
is the reference to the possibility of awards made in support
of fiscal authorities being embraced within the rules of recognition
and enforcement. Of course such a thing—the enforcement
of tax laws—is not something which we would normally regard
as falling within the definition of a civil and commercial matter
which is the normal scope of the Regulation as we understand it.
Q52 Chairman: That is quite a political
subject.
Mr Fentiman: Very much so.
Q53 Chairman: I think they extend
it to other sorts of penalties as well, not just fiscal.
Mr Fentiman: Yes.
Q54 Chairman: Unless there are any
other questions by members of the Committee or points that you
want to mention, we are very grateful for extremely fluent and
clear evidence and it is going to help us a lot.
Mr Fentiman: Thank you.
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