Cottoning on to arbitration time limits
21 April 2023: Following Cooke, Young & Keidan’s recent success in resisting an application by an award debtor for an extension of time to file its English Arbitration Act challenge to an International Cotton Association (ICA) arbitration award, Jon Felce and Florence Sandberg explain why even short delays in bringing arbitration claims can be fatal and therefore why parties to English-seated arbitrations need to cotton on to deadlines in a timely manner.
In late 2020, Cooke, Young & Keidan’s client (“C”) entered into a contract for the sale of cotton with O. The contract provided “SETTLEMENT: AMICABLE OTHERWISE ICA RULES AND ARBITRATION”. A pre-contractual email had provided that any contract would be subject to “ICA Rules and Arbitration. Other usual terms”. The eventual contract was prepared in the English language on the letterhead of O and signed and stamped by both parties. There was also evidence before the Court of other contracts concluded by O on or around the same date and which were subject to ICA arbitration.
In early 2021, C commenced arbitration proceedings before the ICA. O did not raise any jurisdictional objection, but (i) asked the 1st tier tribunal to find that the contract had been frustrated on grounds of force majeure, (ii) confirmed “that the requirements as per the rules of ICA shall be complied with henceforth”, and (iii) requested the appointment of its own arbitrator. C subsequently argued before the English court that these steps meant that O had lost its right to object on the basis that the tribunal lacked substantive jurisdiction.
In September 2022, the 1st tier tribunal made an award in C’s favour. O exercised its right of appeal to an appeal committee under the ICA rules, raising some numerous grounds of challenge including that there was no binding submission to ICA arbitration. That appeal was rejected on 22 June 2022. That meant that the time for O to challenge the award in England and Wales (the seat of the arbitration) under section 67 Arbitration Act 1996 (which was the section ultimately relied upon by O) expired on 20 July 2022, pursuant to section 70(3) Arbitration Act 1996.
On 26 June 2022, O wrote to the ICA to find out if it had any further rights of appeal with the ICA. Having been informed the following day that it did not, on 2 July 2022 O asked whether the ICA could advise on remedies before the English court. In response, the ICA confirmed later that day that it could not advise on this and suggested to O that it should seek English legal advice.
O eventually issued a challenge to the award on 27 July 2022, 7 days late, on the basis that the ICA tribunal did not have substantive jurisdiction to issue the award. O’s position was that the arbitration clause was too uncertain to be enforced.
O also applied for a retrospective extension of time pursuant to section 80(5) Arbitration Act 1996 and CPR 62.9, given that its section 67 challenge was 7 days late. O’s position was that (i) the delay was short, (ii) no prejudice would be caused to C, and (iii) O was an overseas party and was unfamiliar with the English legal system and had not appreciated how strict the deadline was, but acted expeditiously upon realising the same. In its application, O did not explain amongst other things what had happened between its last communication with the ICA on 2 July 2022 and the issue of the section 67 challenge. It became apparent from its reply evidence that it had not instructed English solicitors until 23 July 2022.
The criteria for determining extensions of time in these circumstances were principally set out by Colman J in Kalmneft v Glencore  2 All ER 577, and involve consideration of (i) the length of the delay, (ii) whether the party applying for the extension was acting reasonably in all the circumstances in permitting the time limit to expire and allowing the subsequent delay to occur, (iii) whether the respondent to the extension application or the tribunal contributed to the delay, (iv) prejudice to the respondent, (v) whether the arbitration has continued during the delay and if so the impact on any ongoing arbitration, (vi) the strength of the challenge, and (vii) unfairness to the applicant were its request for extension to be denied.
The Court considered all of the factors and in particular focussed upon the length of the delay, the reasons for the delay, the strength of the challenge and unfairness.
Length of delay
Although the Court considered that the period of 7 days was short, that delay needed to be considered in the light of the policy of “speedy finality” which underpins the Arbitration Act 1996, and the short 28 day period which that Act provides.
Whether O was acting reasonably in relation to the expiry of the time limit and delay
It was C’s position that there is public interest in litigants treating rules as rules to be complied with, and parties wishing to take advantage of the ability to challenge or appeal an award should ensure that they make such applications within the relevant timeframe. Further, C submitted that it was incumbent on O to adduce evidence to explain its conduct, failing which adverse inferences should be drawn by the Court.
The Court accepted that O acted unreasonably: (i) it had comfortably appealed the 1st tier tribunal award within a 28 day time limit, (ii) it was part of a large international group, and (iii) it ought by the time of the appeal award have appraised itself of its legal rights if it wished to challenge that appeal award. In particular, the Court concluded that O did not provide an adequate explanation for the delay on its part between 2 July 2022, when its communications with the ICA ended, and 23 July 2022, when it instructed English solicitors.
Strength of the challenge
The Court considered that the suggestion that the ICA arbitration clause was too certain to be unenforced ran strongly counter to English arbitration law. There was a clear reference to the ICA rules, which is known to be based in England and whose arbitration rules are generally known to those trading cotton internationally.
Further, the Court accepted C’s argument that O would have to overcome the argument that it had lost any right of challenge under section 73 Arbitration Act 1996, having participated to at least a degree in the 1st tier arbitration without raising any jurisdictional objection.
Unfairness to O
The Court also accepted C’s submission that it would not, in a broad sense, be unfair to O to deny its application. In particular, (i) having been able to bring an appeal to the appeal committee, O was in effect seeking a third hearing, (ii) the merits of its challenge were weak, and (iii) the expeditious determination of commodity disputes in the nature of the case in question was of particular importance.
Whilst, in recent years, there have been some extensions of time granted in Arbitration Act challenges where the extensions sought were measured in years, those cases have tended to be outliers with very case-specific reasons for granting such extensions (often based upon fraud or some similarly egregious conduct).
Conversely, the present case demonstrates that time extensions might not be granted in cases of short delays that can be measured in days. It is apparent that the fact that a party is overseas or unfamiliar with the English legal system is not of itself sufficient. A party should seek to provide cogent reasons for its failure to meet a deadline for bringing an Arbitration Act claim, and an intrinsically weak challenge will count against any application for an extension of time.
Whilst the length of, and reasons for, a delay are two of a number of factors that a Court will considers in applications for extensions of time for bringing Arbitration Act claims, if a party wishes to avail itself of the procedures available under the Arbitration Act, then it needs to take English law advice at an early stage so that it can familiarise itself with those procedures in good time and in particular cotton on to the time limits involved.
Jon Felce and Florence Sandberg acted for the successful party, C.