While nearly all international arbitral institutions now make provision in their rules for interim relief, national courts are often in a stronger position to provide and enforce such relief. Despite this, recent cases have demonstrated the increasing reluctance of the courts to undermine arbitral proceedings or to permit dual proceedings based on the same dispute. The recent case of Swallowfalls Ltd v (1) Monaco Yachting & Technologies Sam and (2) Peter Landers JR (2015) is a good example of this. The dispute concerned alleged breaches of a construction agreement and a related loan agreement. While the construction agreement contained an arbitration clause, the related loan agreement did not, thereby giving rise to concurrent proceedings:
- arbitration proceedings initiated by Monaco Yachting & Technologies Same (“Monaco Yachting”), who alleged breaches of the construction agreement by Swallowfalls Ltd (“Swallowfalls”); and
- court proceedings initiated by Swallowfalls Ltd, who also alleged breaches of the construction agreement by Monaco Yachting and who sought payment under the related instant loan agreement and a guarantee, neither of which fell within the scope of the arbitration agreement.
The presence of concurrent proceedings in respect of the same dispute resulted in a stay being imposed on the court proceedings that had been initiated by Swallowfalls while the arbitral claim progressed. During the course of the arbitration, the arbitral tribunal made a final order that Monaco Yachting either provide £200,000 as security for costs or provide its company accounts to the arbitral tribunal. Monaco Yachting failed to do either and the arbitrators dismissed their arbitral claim on the basis of non-compliance with an order under s.41(6) of the Arbitration Act.
Swallowfalls, relying on the dismissal of the arbitral claim, sought a court order that the stay on the court proceedings be lifted. Monaco Yachting contended that the dismissal of the arbitration proceedings on the basis of non-compliance with an order did not constitute a determination on the merits of its claim and that they should therefore be allowed to raise the same arguments in the current court proceedings. The court disagreed, holding that the dismissal of Monaco Yachting’s arbitral claim, even on the narrow ground of non-compliance, had the ordinary consequences of finality and that allowing Monaco Yachting to raise the same arguments in the court proceedings would constitute an abuse of process.
The case demonstrates that while arbitral tribunals may not yet have equivalent capabilities as the courts to make and enforce interim relief such as security for costs, courts will generally respect such orders made by the arbitral tribunal. Parties should therefore be wary of seeking to rely on the separate nature of arbitral proceedings and court-based litigation to their advantage, as courts are increasingly reluctant to allow duplicate proceedings and to permit parties to have two bites of the cherry.
