Case comment: Bond v Mackay [2018] EWHC 2475 (TCC)

Introduction: In a decision of 25 September 2018, Jonathan Acton Davis QC (sitting as a High Court judge) partially set aside an arbitral award under section 67 Arbitration Act 1996. Unlike applications to annul awards under section 68 – which are very rarely successful – arbitral awards in England and Wales are more frequently varied or set aside by the High Court on the jurisdictional grounds contained within section 67. However, as will be seen below, this type of challenge is often avoidable.

Facts: The claimants owned land. In 1993, they entered into a deed with British Gas. The deed permitted British Gas to lay gas pipelines under the claimants’ land. In 2011, the claimants obtained planning permission to extract ball clay (a scarce mineral), sand, and gravel from their land. The 1993 deed provided that the claimants were entitled to compensation from British Gas (or its successor) if the pipelines became an obstruction and were not moved. This is because if the pipelines remained, the land would have to be sterilised prior to the extraction of the valuable minerals.

In 1994, the claimants also granted a lease to BP (now Perenco) in like terms. It permitted Perenco to lay oil pipelines under the same land, with the same proviso as to compensation.

Both deeds provided that any dispute about the amount of compensation payable to the claimants (triggered by clause 2(i)) would be referred to arbitration by a single arbitrator to be agreed or appointed by the Royal Institute of Chartered Surveyors (RICS) (clause 3). The deeds also contained various other clauses. These provided that in the event of a dispute regarding those other covenants, a single arbitrator would be agreed between the parties, and in default of agreement the matter would be determined in the Lands Tribunal (clauses 5 & 6 respectively). The deeds effectively contained multiple arbitration agreements within the space of only a few paragraphs. The judgment does not provide any comment on this oddity.

There was an impasse between the parties. The claimants wanted to begin extraction works but the defendants were concerned about the impact on their pipelines. The defendants sought an undertaking (prior to seeking an injunction) to prevent further works by the claimants. The claimants then commenced arbitration.

The defendants, Perenco and Southern Gas Networks (the successors in title of British Gas), initially denied that RICS had jurisdiction to appoint an arbitrator. This was on the basis that the deeds provided for disputes to be resolved by proceedings in the tribunal. That was correct in respect of clauses 5 & 6. The claimants (seemingly acting in person at the time) had not pleaded in their request for arbitration that the defendants were in breach of clause 2(i). However, the defendants fully participated in the arbitration proceedings. All the while, the claimants failed to refer to the key clause which triggered the right to compensation (clause 2(i)) and instead expressly relied upon clauses 5 & 6.

The claimants subsequently sought to place reliance on clause 2(i) and bring it into the arbitration by reference, or by consolidation to the existing arbitration claim. The arbitrator dismissed these requests and indeed he dismissed claimants’ claims under clauses 5 & 6. The claimants applied to set aside the award.

Issue: Was the issue of compensation under clause 2(i) properly before the arbitrator, or was the arbitration pursuant to clauses 5 & 6 only?

Decision: The award was varied and the costs order set aside. The matter relating to clause 2(i) was before the arbitrator. The claimants’ statement of case did not expressly refer to clause 2(i), but it was plain that this was what the arbitration was all about [60].

The Court must take a broad view of the factual matrix when deciding whether or not a dispute or issue is before an arbitrator. In this case, it was. There were no “terms of reference” but the issue of compensation under clause 2(i) was on the table. The whole case was about compensation payable to the claimants on account of the defendants failing to move the pipelines. It was irrelevant that clause 2(i) had not been expressly pleaded. The arbitrator should have dealt with it.

Conclusion: There are three points which can be derived from this case. First, this decision should reinforce best practice: define the list of issues carefully, even where there is no formal “terms of reference” procedure. This ensures that the issues in dispute are clearly flagged at an early stage.

Second, it is essential to ensure that, if you wish to challenge jurisdiction, you raise your objection at an early stage and maintain it. If you delay, you may lose the right to challenge (section 73 Arbitration Act 1996).

Third, be prepared. An application under section 67 is treated as a re-hearing. Therefore, a judge is far likelier to engage with the evidence that was before the arbitrator. The arbitrator’s reasoning or even the parties’ arguments during the arbitration are (or can be) immaterial. In this case, the judge focussed on the particular facts and investigated the correspondence between the parties to establish how the parties had framed their dispute.

Case comment: Bestfort Developments LLP v Ras Al Khaimah Investment Authority [2016] EWCA Civ 1099

Case comment: Bestfort Developments LLP v Ras Al Khaimah Investment Authority [2016] EWCA Civ 1099

Principle: The correct test on an application for security for costs under CPR r25.13(2)(a), against a party that is not resident in a Convention state, is whether on objectively justified grounds there is a real risk that that the defendant would not be able to enforce a costs order against the claimant, and that it is just in all the circumstances to make an order for security. The test is not whether there is “likely” to be a substantial obstacle or burden to enforcement. The hurdle for an applicant for security for costs against a non-resident party is therefore lower, after the Court of Appeal’s decision to allow this appeal.

Case comment: National Iranian Oil Company v Crescent Petroleum Company International & Crescent Gas [2016] EWHC 1900 (Comm)

National Iranian Oil Company v Crescent Petroleum Company International & Crescent Gas [2016] EWHC 1900 (Comm)

Principle: This decision confirms that there is a discretion to set aside a Notice of Discontinuance in proceedings under the Arbitration Act 1996 where there is an abuse of process. This had been suggested, correctly, by Aikens J. in Sheltam Rail Company (Proprietary) Limited v (1) Mirambo Holdings Limited (2) Primefuels (Kenya) Limited [2008] EWHC 829 (Comm). A party cannot invoke the supervisory jurisdiction of the English courts by applying under s.68 Arbitration Act 1996 and then discontinuing its appeal before the conclusion of that process for strategic reasons, without first offering an acceptable undertaking to the Court.

Facts: NIOC and Crescent entered into a gas supply and purchase contract. A dispute arose when NIOC failed to supply gas. The dispute proceeded to arbitration. Crescent was successful and obtained a majority award. NIOC appealed the award under s.68 Arbitration Act 1996. NIOC alleged that there were serious irregularities in the arbitral proceedings. NIOC complained, amongst other things, that its nominated arbitrator was excluded from deliberations between the other two arbitrators, and that the panel failed to control regular discourtesy shown towards it and witnesses by leading counsel for Crescent.

Arguments: NIOC lost on all of its grounds of appeal at a hearing of preliminary issues in March 2016 (see my case comment here). The balance of the grounds of appeal fell to be heard on 18-19 July 2016. Ten days before the hearing, NIOC’s solicitors served a Notice of Discontinuance on Crescent. They abandoned the remainder of NIOC’s appeal under s.68 Arbitration Act 1996. By letter, NIOC’s solicitors explicitly reserved their client’s rights to raise the remaining arguments contained within the grounds of appeal in another forum. Crescent applied to set aside the Notice of Discontinuance. On the eve of the hearing, NIOC through its solicitors offered an undertaking to:

not resist the recognition or enforcement of the Tribunal Award dated 31 July 2014 by raising any argument based upon Grounds II(D), III(C) or III(D) of the Grounds of Appeal

Crescent refused to accept the undertaking and maintained its application to set aside the Notice of Discontinuance. The proposed undertaking did not refer to all of the remaining grounds of appeal.

Decision: Teare J. set aside the Notice of Discontinuance. It appeared to have been served by NIOC for tactical reasons, in order to preserve its ability to frustrate enforcement proceedings in another New York Convention court. The undertaking belatedly offered by NIOC was inadequate. This is because it left open the possibility that NIOC could delay or resist enforcement in another state in future. Whilst NIOC did not require permission to discontinue, under CPR Part 38, the Court had a residual discretion to set aside a Notice of Discontinuance in such circumstances.

Does arbitration depend on the court system?

The DIFC Courts, Dubai

The DIFC Courts, Dubai

Introduction. Arbitration and litigation are traditionally considered as competing dispute resolution processes. International commercial arbitration is often argued to be ultimately reliant on national courts, fostering the view that it is less preferable to litigation as a system of adjudication. This article addresses whether arbitration is dependent on the courts and some of the circumstances in which the two processes interact.

The basis of arbitration is contractual and therefore legal. Parties must agree to refer a dispute to arbitration. They may consent at the time of contracting or after a dispute arises. In either situation, the agreement to arbitrate is a bargain between the parties. This has two main consequences. First, the arbitration agreement must be construed carefully, because it is the source of an arbitrator’s authority. Tricky questions over interpretation are routinely decided by arbitral tribunals, but then often a second time around by a court. Second, if there is a breach or anticipated breach of an arbitration clause, the innocent party may seek relief in a court. The courts in arbitration-friendly jurisdictions will typically grant such relief (for instance an anti-suit injunction under s.9 Arbitration Act 1996) to give effect to the arbitration agreement. In this sense, arbitration defers to litigation and the court system.

Courts may fulfil an active supervisory function. National courts can play a critical role during the course of an arbitration. Much will depend on the institutional rules that govern the particular arbitration proceedings, and how litigious the parties wish to be. If there are no institutional rules (an “ad hoc” arbitration), or where the rules and the parties’ agreement permit, the state courts will have considerable powers to regulate the conduct of arbitration proceedings. A curial court may be asked to give directions on the appointment and removal of arbitrators (s.15 et seq. Arbitration Act 1996), give teeth to a tribunal’s peremptory orders (s.42 Arbitration Act 1996), and decide questions of law (s.45 Arbitration Act 1996). Some of the provisions in the Arbitration Act 1996 are mandatory, while the parties can opt out of others such as the three identified above (s.4 Arbitration Act 1996, and Schedule I). Thus, whilst arbitration may help to resolve a dispute privately, this does not mean that a court will not be involved at several stages of the arbitration process.

Arbitration often depends on the assistance of a court for enforcement. An award would be meaningless if the award debtor failed to voluntarily comply and there were no mechanism for enforcement. National courts do not enforce awards, in the same way that they do not enforce judgments. In England and Wales, an award creditor has the same remedies open available to it as a judgment creditor (s.66 Arbitration Act 1996). The efficacy of a particular national court’s orders may differ. There may be an inconsistency of approach, depending for instance on whether enforcement is sought at a sensible seat or somewhere less predictable. Nevertheless, the power to make orders in aid of enforcement is a significant feature of the relationship between arbitration and the courts.

Parties challenge and seek to set aside awards in court. The laws in most jurisdictions provide for the challenge and appeal of awards on certain similar grounds such as a lack of jurisdiction and serious irregularity (see s.67 and s.68 Arbitration Act 1996). For this reason, the end of an arbitration process and receipt of a final award may not be the end of the journey for the parties, especially if due to political, tactical, or pure financial considerations an award debtor seeks to frustrate the creditor. The law of England and Wales goes a step further by permitting an appeal on a point of law (s.69 Arbitration Act 1996). It is correct to note that such appeals rarely get off the ground, let alone succeed. One has to only look at the stiff requirements in s.69(3) Arbitration Act 1996 to see why. However, these provisions as a whole act as something of a safety net. They lend further legitimacy to the arbitration process, even if they do introduce a level of uncertainty and reliance on the courts.

Arbitration aids the development of the law. A great deal has been written about the historic contribution of arbitration to the development of the common law. It has recently been suggested in a lecture by the Lord Chief Justice, Lord Thomas of Cwmgiedd, that the Arbitration Act 1996 has impeded the further development of the common law by restricting the scope for appealing awards. In this analysis, s.69 Arbitration Act 1996 sets the bar too high. Yet, there are a good number of cases (albeit mostly derived from the maritime industry) which began life as arbitrations and which have established significant legal principles. In time, it may well be that the statutory hurdles to appealing an award are lowered, but this is not a proposal that would sit well with many in the business community.

Relieving the burden from civil courts and fostering healthy competition. It is clear that arbitration has the potential to alleviate some of the increased burden on the civil courts. High Court judges in the Commercial Court are just as qualified and experienced as professional arbitrators to deal with issues that arise in commercial arbitration, but they certainly do not currently enjoy a similar level of resources. Arbitration is justifiably viewed as more streamlined and user-friendly. However, there is a growing trend in the creation and development of international commercial courts, for example in Singapore (SICC) and Dubai (DIFC), with an English-language court in Amsterdam due to open in 2017. The practices in these courts are modelled on the examples set by many arbitral bodies and tribunals. These include the internationalisation and specialisation of the judiciary, the clarity of procedural rules, and the use of new technology. Furthermore, the 2005 Hague Choice of Court Convention – which promotes comity by requiring countries to recognise and enforce forum selection clauses and foreign court judgments – is gradually being ratified in the major jurisdictions. The Hague Convention is conceptually little different from the 1958 New York Convention, which set a universal standard for the recognition and enforcement of arbitral awards. It can only be positive for users to have a wide choice of cross-border adjudication systems.

Conclusion. Overall, it is fair to conclude that arbitration depends on the court system more than the courts benefit from arbitration. But for the analysis to stop there is not particularly helpful. It is more instructive to compare these processes, as well as other forms of ADR, in order to create an effective, widely accessible, and truly global system of dispute resolution.

Niraj specialises in commercial and property litigation & arbitration. He is a Member of the Chartered Institute of Arbitrators, the Young International Arbitrators’ Group, the Young Arbitrators’ Forum, and the Chancery Bar Association.

National Iranian Oil Company v Crescent Petroleum Company International & Crescent Gas [2016] EWHC 510 (Comm)

National Iranian Oil Company v Crescent Petroleum Company International & Crescent Gas [2016] EWHC 510 (Comm)

This is a case with a bit about everything: the nuts and bolts of an arbitration agreement, contractual interpretation, bribery allegations, and the hurdles involved when seeking to challenge an award in the Commercial Court.

Principles established

  1. Where the seat of an arbitration is England and Wales, by default it is the law of England and Wales that governs the arbitration agreement. Often, this may well be different to the law of the substantive contract.
  2. Where a clause provides for a party to obtain prior written consent from another contracting party, that requirement is satisfied where consent is requested, granted, and put into writing. It is unnecessary for the written consent to be supplied to, or received by, the party requiring consent.
  3. A contract procured by bribery is not unenforceable or invalid by reason of public policy. Further, there is no public policy reason to refuse to enforce a contract where it follows a failed attempt at a bribe, where the contract itself is not illegal.

Facts of the case

NIOC and CPCI entered into a gas supply and purchase contract. The contract was governed by Iranian law. It contained an arbitration clause. CPCI sought to assign the contract to a subsidiary, Crescent Gas. Both CPCI and Crescent Gas began arbitration proceedings, alleging that NIOC was in breach of contract for failing to supply gas. The parties chose London as the venue for the arbitration proceedings.

NIOC claimed that the arbitrators did not have jurisdiction to hear the dispute, because of alleged corruption and corrupt arrangements between members of the Board of NIOC and CPCI. NIOC also argued that the assignment of the contract by CPCI to Crescent Gas was invalid, because no written copy of the consent had been provided by NIOC.

The arbitrators found in favour of CPCI and Crescent Gas. They dismissed NIOC’s defence and counterclaim. NIOC applied to the High Court under sections 67 & 68 of Arbitration Act 1996 (“the 1996 Act”) to set aside the award.

Decision of Burton J in the Commercial Court

The principle of separability meant that the agreement to arbitrate and the main contract were to be treated as having been separately concluded. The invalidity of the main gas supply and purchase contract did not invalidate the arbitration agreement. This principle is enshrined in s.7 of the 1996 Act. It was amplified in the House of Lords case of Fiona Trust v Privalov [2008] 1 Lloyd’s Rep 254.

Where the parties choose England as the seat, either in the agreement or subsequently, or the seat is designated by an institution or the tribunal itself (s.3), English law applies to the arbitration agreement. There is no question that Iranian law only applies to the substantive (main) contract. Choosing a different law for the substance of a contract does not disapply s.7 of the 1996 Act. The parties could have chosen that a different law should apply to the arbitration agreement, but they did not. Therefore, the s.67 challenge failed.

The NIOC Board passed and minuted a resolution granting consent to CPCI’s proposed assignment to Crescent Gas. The word “obtaining” did not require physical delivery and receipt by CPCI. The s.67 challenge failed on this ground.

On the third issue, the tribunal found that there was evidence of misconduct, and circumstantial evidence as to corrupt arrangements being discussed by CPCI at the time of the contract. However, the gas supply and purchase contract was not illegal or procured by corruption. The fact that the main contract might have been “tainted” by misconduct was an inadequate reason to set aside the award on the ground of public policy. Therefore, NIOC’s s.68 application was struck out.

Comment

This is a significant decision of the English Commercial Court for three reasons. First, it demonstrates the restrictive approach taken by the Commercial Court in such applications. Public policy is narrowly defined in England and Wales. This is in contrast to the practice in other jurisdictions, where public policy has gained the epithet “unruly horse”. Public policy is a fertile ground for satellite litigation in attempts to avoid recognition or enforcement of arbitration awards. The decision also confirms the reasoning of Ramsey J. in Honeywell International Middle East v Meydan Group [2014] 2 Lloyd’s Law Rep 133. That was also a case arising out of arbitral proceedings. The losing party sought to avoid enforcement of the award in England. It was held that bribery and contracts to bribe are contrary to English public policy, but contracts procured by bribes are not automatically unenforceable. They may not be enforced, at the option of the innocent party.

Second, a court is likely to adopt a sensible approach to the construction of contractual provisions. The case of Arnold v Britton [2015] UKSC 36, which was not cited, re-affirms the principle that a court should interpret words according to their natural and ordinary meaning. It was argued that the word “obtain” denotes physical acquisition. This is even more likely where the clause contemplates written permission, in contrast to oral permission. Yet, the clause also provides that consent could not be unreasonably withheld where the assignment was to a subsidiary, as it was in this case. The Court was probably not enamoured with NIOC’s rather technical argument here, coupled with its refusal to ever provide a copy of the written consent to CPCI and Crescent Gas, even after the conclusion of the arbitration proceedings.

Third, the decision is notable because it draws attention to the latitude afforded to arbitrators generally. The tribunal produced a 362-page award, following a 30-day hearing and lengthy submissions. They had given full consideration to the allegation of corruption. It must be said that no new evidence of corruption was provided to the Court, so it is easier to identify why the arbitrators’ decision was not interfered with. Having said this, arbitrators are “masters of the facts” (per Steyn LJ in The Baleares [1993] 1 Lloyd’s Rep 215). More often than not, on an application under s.68 of the 1996 Act, a High Court judge will be minded to accept without qualification the arbitrators’ findings of fact.

Charging orders… what can go wrong?

Introduction:  Your client wins at trial. You obtain a final charging order. You know that it is secured on valuable real property, and there is at least some equity in it. What can possibly go wrong? Well, nothing, in this case, as it happens! But there are issues and problems to watch out for.

Banwaitt v Dewji & Dewji [2015] EWHC 3441 (Ch)

Download the official transcript here: UKT_2015_11_37705635

Facts:  B obtained judgment against D1 following trial for ~£1.5 million, representing damages for fraudulent misrepresentation. B obtained a charging order over D1’s beneficial interest in Ds’ jointly-owned matrimonial home.

In 2014, Ds transferred the property into the sole name of D2 by way of a transfer on form TR1. The amount of consideration (some £13,500 it seems) was purportedly calculated by reference to the value of D1’s beneficial interest in the home at that time. D2 applied to the Land Registry to remove the standard-form restriction against the title. The Land Registry refused. B sought an order for sale.

Issues:  This was a trial of a preliminary issue. Was B’s equitable charge overreached by the transaction, such that B’s claim now lay against the proceeds of sale of D1’s interest? Or did B’s charge remain intact, because there was no overreaching and only a sale of D1’s beneficial interest and a bare transfer of legal title?

Decision:  Master Matthews accepted B’s argument that, in order to decide the issue, the Court must look to the parties’ intentions (a question of fact), before categorising the transaction (a question of law), and considering public policy if relevant.

The documents, including the TR1 and correspondence, suggested that the arrangement was one whereby D2 bought D1’s beneficial interest in the property. D2 did not become the purchaser of the legal estate within the meaning of section 2 Law of Property Act 1925. D2 bought D1’s beneficial interest subject to the charge.

In any event, the purchase price had not been paid to both Ds (i.e. to the “trustees” within the meaning of section 27 Law of Property Act 1925) but to D2 alone. Thus, there could be no overreaching.

Comment:  There is a commendable clarity about this short judgment, which makes it a very good read for the nuts and bolts of the circumstances in which a charging order attaches to (and continues to affect) beneficial interest in property. The reasoning is sound, although it must be said that the case was decided on its particular facts and contemporaneous evidence (or the lack of it) regarding the nature of the transaction.

Of most interest is what is said about overreaching, and in turn what this says about the precarious nature of an equitable charge against a beneficial interest (as opposed to an equitable charge against the legal estate, which would have been possible had the judgment for ~£1.5 million been against both Ds).

1.  The assessment of the context of the transaction is all well and good, but focus on the parties’ intentions has its own difficulties. The judge correctly states that the fact that overreaching would occur only if the legal and beneficial interest were transferred by Ds does not mean that this is what Ds must have intended. But a focus on intention, without any corresponding protection for creditors if the transaction is a sham or at an undervalue and designed to defeat creditors, has its risks.

2.  A sale of the entire legal estate of the Ds to D2 alone, or to X, would have resulted in B’s interest being overreached. The subsequent registration of X as proprietor would have meant that B’s charge would have lost all protection (under sections 27 & 29 Land Registration Act 2002).

But what if X bought with knowledge of the charge or was otherwise not a bona fide purchaser? Could the charge bind X, at least in equity, on the basis that a final charging order operates as an equitable charge? Or does this import principles which are anathema to the scheme of Land Registration Act 2002?

3.  It is unclear whether the Form K restriction was complied with, since it remained to be proved that notice of the disposition was given to B before registration. What is the remedy for a breach of a restriction? A Form K restriction is flimsy protection as it is; there is every reason for a judgment creditor to seek a non-standard restriction when obtaining a final charging order, so that the person with the benefit of the charge is given adequate time to prevent registration if the charge is not first satisfied. Yet, there does not appear to be any obvious mechanism for enforcing a breach of the wording of a restriction. Of course, a restriction is not a legal right but an indicator on the register of title that rights and obligations may exist.

Conclusion:  The arguments raised in this case, and the obiter comments of the judge, rather than the decision itself, are revealing. They demonstrate that a charging order can have very limited utility, particularly where it is made only against a co-owner’s beneficial interest in land. It may well be that D1’s beneficial interest was not much more than £13,500, so B is unlikely to recover anywhere near as much as ~£1.5 million by enforcing the charge.

A judgment creditor should always consider alternative methods of enforcement as well. If a charging order is the best option, it pays to ensure that the restriction is tightly worded and a close eye is kept on a judgment debtor’s dispositions of property.

Arbitration in landlord and tenant disputes

Most landlord and tenant disputes end up in court. From the perspective of landlords, this can be a lengthy, frustrating, and costly process. For tenants, the experience is often uncertain, draining, and also costly. Is there a place for arbitration in this?

Introduction.  Arbitration is the consensual, private, and binding resolution of disputes outside the court system. It differs from litigation, since the parties are neither unwilling participants nor at the mercy of the court process. It differs from mediation, which is also a consensual and confidential process that facilitates (but may or may not result in) the resolution of a dispute.

Arbitration is widely used in disputes involving international corporations and states. There are many advantages to arbitration, for example flexibility, the parties’ ownership of the process (referred to widely as “party autonomy”), ease of enforcement of arbitral awards, the opportunity for confidentiality as well as privacy, and often (but not always) greater speed and lower cost. This is particularly true, given the limited avenues for appealing or setting aside arbitral awards.

Most disputes can be arbitrated. Some practitioners and academics would say that all disputes are in fact arbitrable, including, for instance, environmental disputes, trusts claims, and international human rights issues. Yet, apart from disputes arising out of tenancies of agricultural land, adjudication in tenancy deposit cases (which is not arbitration per se), and rent reviews in commercial property, one does not often encounter domestic arbitration of landlord and tenant disputes. Why is this?

1. Restrictions on consumer arbitrations.  The Consumer Rights Act 2015 (previously the Unfair Terms in Consumer Contracts Regulations 1999) most probably applies to residential leases.

Terms which are unfair, not individually negotiated, and which significantly disadvantage the consumer are rendered automatically void. This would, on the face of it, apply to an arbitration clause within a standard form tenancy agreement. It is of course possible for parties to agree to submit a dispute to arbitration after a dispute has arisen, but a standard arbitration clause in a tenancy agreement might well fall foul of the 2015 Act.

In addition, arbitration agreements in respect of claims valued at below £5,000 are automatically deemed unfair under the 1999 Regulations and 2015 Act. However, this would not on the face of it disqualify a large number of claims for rent arrears, or counterclaims for significant disrepair.

2. Failure to comply with the lease.  If a lease contains an arbitration agreement expressed in mandatory terms, then subject to the point on restrictions above, there should be no question: the parties are required arbitrate. If a party litigates in breach of such an arbitration clause, that is a breach of contract (or breach of covenant). Court proceedings would be stayed… that is, if the defendant/respondent sought to uphold the arbitration agreement.

It may be that, due to unfamiliarity, no-one notices the arbitration agreement, or a defendant is happy to ignore and waive the breach.

3. Litigation is the habit.  Most legal professionals and the judiciary in the County Court might raise an eyebrow or two if a landlord and tenant sought to arbitrate a residential possession claim. But there is no express prohibition in the Housing Act 1988 and nothing to conclusively suggest that the court has exclusive jurisdiction to determine such disputes, or that the court’s jurisdiction cannot be ousted. Incidentally, the position in England and Wales is in contrast to the German Arbitration Law (section 1030), which prohibits arbitration in relation to certain residential lease disputes.

It may well be that a landlord is better advised to arbitrate certain disputes, given the powers that the parties have in controlling the arbitration process. Whilst this may be an advantage, the fact that an arbitrator would not be bound by the Civil Procedure Rules (unless the parties both agree) means that the process might not afford certainty.

As an aside, some practitioners may recall “small claims arbitration” in the days before the Civil Procedure Rules. However, that was never really arbitration at all, but a method of allocating the lowest-value cases to be dealt with by district judges in the days before the small claims track.

Conclusion.  There is scope for the arbitration of landlord and tenant claims. The infrastructure is in place. Both the Royal Institute of Chartered Surveyors (RICS) and the Chartered Institute of Arbitrators (CIArb) are pre-eminent. They have considerable expertise, established rules, and dispute resolution systems (the RICS has its Dispute Resolution Service, and the CIArb has its Dispute Appointment Service). Both organisations frequently appoint arbitrators in other civil disputes.

The appetite for this type of arbitration does not currently exist. Yet, with increasing court fees, further cuts and closures of courts in the pipeline, and the uncertainties over online courts on the horizon, there is a case to be made for the arbitration of landlord and tenant disputes.

Don’t be caught out by the Deregulation Act 2015

I gave a talk to solicitors today on the forthcoming changes to possession procedure using a section 21 notice. Here are 5 key points about the changes. The reforms discussed below are contained within sections 33-41 Deregulation Act 2015. This is important for all landlords in the private rented sector. The changes will take effect for all new fixed term assured shorthold tenancies (ASTs) from 1 October 2015, and for all ASTs whether fixed or statutory periodic from 1 October 2018.

1. Use the prescribed section 21 notice

This new provision mirrors the requirement to use a prescribed form for notices served under s.8 Housing Act 1988. A prescribed form is a good idea, although, firstly, it is not yet available to download because the form has not yet been prescribed, and secondly the anticipated form is likely to be minimal. All that a s.21(1) notice needs to do is give two months’ notice that possession of the dwelling-house is required, and in the rare cases where a s.21(4) notice needs to be served it must give at least two months’ notice ending on the last day of a period. See s.21(8)-(9) Housing Act 1988.

2. Give the tenant all the prescribed information and comply with prescribed requirements

We are awaiting the “prescribed information” that must be given to tenants from October. It may look something like this (which applies to long leasehold properties as required by s.153 Commonhold and Leasehold Reform Act 2002). Ideally, the prescribed information should be incorporated into the written tenancy agreement to minimise the risk that a tenant alleges it was not given to them. Compliance with prescribed requirements (e.g. having an EPC, carrying out yearly gas safety checks, and regular checks on electrical appliances) is already required under statute. From 1 October 2015, if a landlord fails to comply with prescribed requirements, any s.21 notice served will be invalid until the landlord has complied. See s.21A & s.21B Housing Act 1988.

3. Don’t serve notice too early…

It will not be possible to serve a s.21 notice within the first four months of a fixed term AST (but it may be served at any time thereafter, even if the fixed term AST rolls over into a periodic tenancy or a replacement tenancy is granted). Therefore, take care not to give the s.21 notice until after the first four months; otherwise, it will be invalid. See s.21(4B) & s.21(4C) Housing Act 1988.

4. … but use it or lose it

A claim relying on a s.21 notice will need to be commenced within 6 months of service of a s.21(1) notice, or within 4 months of the expiry date of a s.21(4) notice. If not, there is a bar on claiming possession. The possession claim will be struck out or dismissed. Thus, there will now be an expiry date on s.21 notices, much like s.8(3)(c) Housing Act 1988 in relation to the 12-month window for bringing a claim following the service of a s.8 notice. See s.21(4D) & s.21(4E) Housing Act 1988.

5. Take proper note of disrepair

Sections 33 and 34 Deregulation Act 2015 deal with retaliatory or ‘revenge’ evictions. Landlords must respond adequately if a tenant complains of disrepair, in order to avoid a s.21 notice being invalidated retrospectively. If the landlord does not respond promptly or adequately, or if the local authority serves an improvement notice, there is a bar serving a s.21 notice and, in all likelihood, if the tenant has complained to the local authority, on obtaining possession. Check whether the exceptions in s.34 Deregulation Act 2015 apply. See s.33 & s.34 Deregulation Act 2015.

The Deregulation Act 2015 introduces fundamental changes to the steps for taking possession under section 21 of the Housing Act 1988. Along with the above, there are changes to tenancy deposits and rent repayment, when tenants vacate before the end of a rental period. As with most reforms, it may not be possible to predict with certainty how the changes will impact on the private rented sector. The above tips provide some indication of how landlords can be best prepared from October 2015.