Unpaid ICC costs: Can an Arbitration Agreement Be Abandoned?
The plaintiff and the Defendant No. 2 entered into a Hire Purchase agreement in July, 2008 with respect to a timber flooring machine manufactured by Defendant No. 2. The agreement contained an ICC Arbitration Clause.
Disputes arose between the Parties because the machine did not function properly and the Plaintiff initiated proceedings in the High Court claiming damages for breach of contract. Defendant no. 2 applied for a stay of proceedings under Section 9 of the Arbitration Act, 1996[2] arguing that the dispute was subject to a valid arbitration clause. The stay was granted by the Court and a request for arbitration was submitted to the ICC by Defendant no. 2.
ICC issued a Notice to the Parties informing them that the estimated fees based on Defendant no. 2’s claim of €100,000 was $34,311 for three arbitrators, to be paid in equal part by both the Parties. The Parties subsequently notified ICC that they had agreed to appoint only one arbitrator, upon which ICC adjusted the advance to $11,000.
Within a month, ICC issued another notice to the parties informing them that the advance fees had been increased to $95,000 because the Plaintiff had submitted a counter-claim valued at £1.249m. The Parties were requested to deposit the advance fees at the earliest. However, they both did not deposit the fees because they were unhappy with the amount demanded by ICC. Defendant no. 2 wrote to ICC that the arbitration proceedings were uneconomical and the advance fees seemed unfair and arbitrary to both parties.
Consequently, ICC issued a notice stating that, “Following the (Defendant no 2’s) objection to the application of Article 36(6) of the Rules (which contained provisions as to the payment of costs), on 4 September 2014, the International Court of Arbitration of the International Chamber of Commerce (“Court”) decided that the claims are considered withdrawn…… without prejudice to the reintroduction of the same claims in another arbitration.”
Subsequently, the Plaintiff approached the Court to get the stay lifted.
The Court opined that the grounds on which a Court can remove a stay are the same as the grounds on which a reference to arbitration can be refused, namely, that the arbitration agreement is null and void, inoperative or incapable of being performed.[3]
The court relied on the interpretation of “Inoperative” given in Russell on Arbitration[4] and held that the failure of both Parties to pay the advance costs to ICC and proceed with arbitration is evidence of abandonment of the arbitration agreement rendering the same “inoperative” within the meaning of Section 9. The Court while granting the stay had given the Parties 28 days to commence arbitration. However, after 18 months the request for arbitration stood withdrawn. In light of the same, the Court held that failure of the Parties to pay the advance fees, in the absence of any financial hardship, rendered the arbitration agreement inoperative on grounds of abandonment. Therefore, the stay was lifted and the plaintiff was allowed to continue the proceedings in Court.
[1] Trunk Flooring Ltd v HSBC Asset Finance (UK) Ltd and Costa Rica SRL [2015] NIQB 23
[2] Section 9 of the Arbitration Act, 1996: (1) A party to an arbitration agreement against whom legal proceedings are brought (whether by way of claim or counterclaim) in respect of a matter which under the agreement is to be referred to arbitration may (upon notice to the other parties to the proceedings) apply to the court in which the proceedings have been brought to stay the proceedings so far as they concern that matter.
[3] Section 9 of the Arbitration Act, 1996: (4) On an application under this section the court shall grant the stay unless satisfied that the arbitration agreement is null and void, inoperative or incapable of being performed.
[4] Russell on Arbitration, Sweet & Maxwell; 24th edition, Para 7.046.
By : Adv. Niharika Dhall info@lawsenate.com
Skip & continue
Disclaimer
In Compliance with Indian Regulations, Kindly Review the User Acknowledgement and Disclaimer below and then Proceed.
User Acknowledgement
By proceeding further and clicking on the "ACCEPT" button herein below, I acknowledge that I of my own accord wish to know more about Law Senate (LS) for my own information and use. I further acknowledge that there has been no solicitation, invitation or inducement of any sort whatsoever from Law Senate (LS) or any of its members to create an Attorney-Client relationship through this website. I further acknowledge having read and understood the Disclaimer below
This website (www.lawsenate.com) is a resource for informational purposes only and is intended, but not promised or guaranteed, to be correct, complete, and up-to-date. Law Senate (LS) does not warrant that the information contained on this website is accurate or complete, and hereby disclaims any and all liability to any person for any loss or damage caused by errors or omissions, whether such errors or omissions result from negligence, accident or any other cause. Law Senate (LS) further assumes no liability for the interpretation and/or use of the information contained on this website, nor does it offer a warranty of any kind, either expressed or implied. The owner/Partners of this website do not intend links from this site to other internet websites to be referrals to, endorsements of, or affiliations with the linked entities. Law Senate (LS) is not responsible for, and makes no representations or warranties about, the contents of Web sites to which links may be provided from this Web site.
This website is not intended to be a source of advertising or solicitation and the contents of the website should not be construed as legal advice. The reader should not consider this information to be an invitation for a lawyer-client relationship and should not rely on information provided herein and should always seek the advice of competent counsel licensed to practice in the reader's country/state. Transmission, receipt or use of this website does not constitute or create a lawyer-client relationship. No recipients of content from this website should act, or refrain from acting, based upon any or all of the contents of this site.
Furthermore, the owner of this website does not wish to represent anyone desiring representation based solely upon viewing this Web site or in a country/state where this website fails to comply with all laws and ethical rules of that state. Finally, the reader is warned that the use of Internet e-mail for confidential or sensitive information is susceptible to risks of lack of confidentiality associated with sending email over the Internet.
As per the rules of the Bar Council of India, lawyers are not permitted to advertise themselves. The information about the Firm, its Key Practice Areas or its Key Team Members provided under this website is only for informational purposes and it should not be interpreted as soliciting or advertisement of any nature whatsoever.
The information provided on this website is for general information only. It is not intended to create or promote an attorney-client relationship and does not constitute and should not be relied upon or construed as legal advice.
Communications via this website also do not create an attorney-client relationship. Visitor should always seek appropriate professional advice before acting on the basis of any information contained herein.
