English Court of Appeal Finds Jurisdiction To Compel Non-Party Deposition in Aid of Foreign Arbitration
The “long-standing controversy” over whether orders made by English courts “for the purpose of and in relation to arbitral proceedings” under s.44 of the Arbitration Act of 1996 can be made against non-parties to the arbitration was at least partially resolved on March 19, 2020, when the English Court of Appeal ruled in A & B v. C, D & E.  EWCA Civ 409. The Court of Appeal held that section 44(2)(a), which provides for the Court’s powers in respect of “the taking of evidence of witnesses,” gives the Court power to order the deposition of a non-party witness in England in support of an arbitration seated in and being conducted in a foreign jurisdiction. Id. at . Respondents could still seek to appeal the ruling to the Supreme Court.
The case concerned a New York arbitration arising from a dispute between co-venturers in a Central Asian oil field. An issue arose concerning the proper categorization of certain payments and one witness involved in negotiating those payments, an English resident, refused to go to New York to give evidence. With the permission of the arbitration tribunal, the Appellants sought to compel his testimony and applied to the English Court under s.44(2)(a) of the Arbitration Act of 1996 for an order under CPR34.8 for the taking of his evidence by deposition, so that it might be adduced in the New York arbitration. Accordingly, the application was opposed, with the dispute centering on the Court’s power over “the taking of the evidence of witnesses” pursuant to s.44(2)(a).
After a careful review of the statutory language and authorities on the application of s.44 to persons other than the arbitrating parties, the English Commercial Court (Foxton J.) concluded that it “does not have jurisdiction under s.44 to make an order against a non-party to the arbitration agreement.”  EWHS 258 at  (emphasis added). The Commercial Court acknowledged that, absent authority, the Court’s view would have been that it had jurisdiction under s.44; however, the Court felt compelled to follow the interpretation of s.44 in Cruz City I Mauritius Holdings v. Unitech Ltd.,  EWHC 3704 (Comm), and DTEK Trading SA v. Morozov,  EWHC 1704 (Comm).  EWHC 258 at . Cruz City held that s.44(2)(e) “does not include any power to grant an injunction against a non-party” to the arbitration,  EWHC 3704 (Comm) , and DTEK held that s.44(2)(b) does not include jurisdiction to make an order for the preservation and inspection of a document in the possession of a non-party in the Ukraine,  EWHC 1704 (Comm). Recognizing the controversy over its ruling, the Court granted permission to appeal. See  EWCA Civ 409 at [1-2].
The Court of Appeal Ruling
The Court of Appeal decided the case on the “narrow approach,” holding “that section 44(2)(a) does give the Court power to make an order for the taking of evidence by way of deposition from a non-party witness in aid of a foreign arbitration, whatever the scope of the other heads of the subsection and whether or not they also apply in relation to non-parties.”  EWCA Civ 490 . The Court expressly declined to decide whether Cruz and DTEK were correctly decided with respect to the scope of the subsections of s.44(2) at issue in those decisions. Id.
The Court of Appeal held that section 44(2)(a) applies to non-parties based largely on the language of s.44(2)(a) with its reference to “the taking of evidence of witnesses,” not to “parties.” The Court noted: “[T]here is no justification in the wording of the statute for limiting ‘witnesses’ to those who are in the control of one or other of the parties. If Parliament had intended that limitation, it would have said so.”  EWCA Civ 490 ,  (Males LJ).
In addition, the Court of Appeal explained that the wording of s.44(1), when read with section 2(3) and the definition of “legal proceedings” in section 82(1) makes it clear that, provided the other limitations built into the section are satisfied, the English Court has the same powers under s.44(2)(a) in relation to arbitrations, wherever their seat, as it has in relation to civil proceedings before the High Court or the county court.  EWCA Civ 490 . Those powers include the power to take evidence on deposition wherever necessary and just to do so. Id. at ,  (Males LJ). Thus, the Court of Appeal ordered the examination of the non-party by deposition before an examiner of the Court. Id. at .
The Court of Appeal noted that its ruling leads to the “somewhat anomalous situation that the English Court can order a deposition in support of a foreign arbitration when it could not make an equivalent order in support of foreign court proceedings unless there was an inwards letter of request.” Id. at . The Court explains, however, that this situation is less anomalous that it would appear because in most instances, absent agreement of the parties or urgency, a party will need to first obtain permission of the tribunal under s.44(4) to make an application, and the Court always has discretion not to Order a deposition if it considers it inappropriate to do so. Id.; see also id. at  (Males LJ).
In sum, the decision appears to provide comparable discovery mechanisms under English law to those discovery mechanisms available under U.S. law. In the United States, 28 U.S.C. § 1782 (“Section 1782”) empowers U.S. federal courts to compel discovery from persons in the U.S. for use in foreign proceedings. While the issue of whether Section 1782 can be used for private arbitrations is currently unsettled, the express language of the statute only requires that the discovery target is “found or resides” in the district in which the discovery application is made. Further, the discretionary factors that generally guide U.S. courts in Section 1782 actions would weigh the target’s non-signatory (i.e., non-party to the arbitration) status in favor of granting discovery. See Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 264 (2004) (finding non-party status weighs in favor of granting discovery).
The Significance of the Ruling
The Court of Appeal decision in A & B v. C, D & E is important for two reasons. First, as a practical matter, those involved in arbitrations outside the U.K. can now seek the support of the English courts in obtaining testimony from a non-party witness present in England where the arbitration tribunal is otherwise powerless to compel that witness’s attendance. To that end, in a concurring opinion, Lord Justice Males offers practice guidance regarding depositions conducted pursuant to s.44(2)(a). According to Lord Justice Males, pursuant to CPR 34.9, “the examination must be conducted in the same way as if the witness were giving evidence at a trial.”  EWCA Civ 490  (Males J.). It follows that questions must be “calculated to elicit admissible evidence and that the witness will be entitled, if appropriate, to rely on such matters as legal professional privilege and the privilege against self-incrimination.” Id. at .
Second, the decision in A & B v. C, D & E suggests that, despite Cruz and DTEK, the Court of Appeal may be willing to revisit the correct interpretation of section 44 as a whole with respect to non-parties. The Court’s conclusion on s.44(2)(a), reached by construing s.44 as a whole, suggests that the Court may still apply a broader construction of s.44 to other subsections, allowing for injunctions and other interim relief to be ordered against non-parties in support of arbitrations, even where seated or conducted abroad. See  EWCA Civ 490  (“I would prefer to leave the issue of the scope of the other subsections and whether Cruz City and DTEK were correctly decided to an appeal where that issue arises directly.”);  EWCA Civ 490  (Males J.) (“I see no reason to doubt the actual decisions in Cruz City and DTEK, but I would reserve my opinion whether their reasoning on this point is correct as regards the other paragraphs of section 44(2). There are, in my view, strong arguments either way and it may be that the position varies as between the various paragraphs of subsection (2).”).
Finally, while the Court of Appeal did not grant permission to appeal its decision, an application for permission to appeal to the Supreme Court could still be made.