Court Intervenes Where Arbitrator Held Not to Have Power to Act Effectively

Pacific Maritime (Asia) Ltd. v. Holystone Overseas Ltd., 2007 WL 2944844, [2007] EWHC 2319 (Queen’s Bench Div., Commercial Ct.)

Pacific sold an accommodation vessel to Holystone under an agreement which made special provision for the return of a block of accommodation or its equivalent to Pacific.  Under s.44 of the Arbitration Act 1996 (the “Act”), and in advance of commencement of arbitration, Pacific applied for and obtained a freezing order on the grounds of Holystone’s failure to provide a replacement accommodation block.  Arbitration then commenced and Holystone applied for the discharge of the freezing order partly on grounds that the arbitrator had jurisdiction to grant the relief Pacific wanted.

The court first considered the arbitrator’s interim power over property under s.38(4) of the Act.  The court then turned to its power under s.44, noting that its own jurisdiction to make orders for the preservation of evidence or assets applies only if or to the extent that the arbitral tribunal has no power or is unable for the time being to act effectively.  The applicant for discharge of the freezing order being a British Virgin Islands corporation with no other assets, and the arbitrator in this case not having power under the Act to bind third parties to the arbitration, the court found, on the instant facts, that the arbitrator therefore lacked the power to act effectively to prevent third parties such as harbour authorities from allowing removal of the vessel.