Preliminary Determination in Arbitrations

1. Often, parties in arbitrations may attempt to short-circuit the whole process by an application for preliminary determination. Although a meritorious preliminary determination could potentially save on significant time and cost, such applications ought to be considered carefully.

2. As a starting point, the law is clear that preliminary determinations should only be resorted to sparingly and with great caution to avoid the escalation of costs and prolongation of the dispute. As observed by Lord Hope in the UK House of Lords decision of SCA Packaging Ltd v Boyle [2009] UKHL 37 (“SCA Packaging”) at [9]:-

   “...[T]he power that tribunals have to deal with issues separately at a preliminary hearing should be exercised with caution and resorted to only sparingly… preliminary points of law are too often treacherous short cuts. Even more so when the points to be decided are a mixture of fact and law… There are, however, dangers in taking what looks at first sight to be a short cut but turns out to be productive of more delay and costs than if the dispute had been tried in its entirety… The essential criterion for deciding whether or not to hold a pre-hearing is whether… there is a succinct, knockout point which is capable of being decided after only a relatively short hearing. This is unlikely to be the case where a preliminary issue cannot be entirely divorced from the merits of the case, or the issue will require the consideration of a substantial body of evidence”.

3. In the UK High Court decision of Lexi Holdings Plc v Pannone & Partners [2009] EWHC 3507(Ch), Briggs J observed (at [4]) that “questions of case management, questions of cost, delay and the use of the parties’ and the court’s resources must come first and foremost in the consideration whether any particular issue should be dealt with as a preliminary issue”.

4. The UK High Court decision of Steele v Steele [2001] CP Rep 106 as cited in the case of Binstead & Anor v Zytronic Displays Ltd [2018] EWHC 2182 identified, inter alia, the following factors to guide a tribunal’s decision whether to order a preliminary determination:-

   a. If the preliminary issue is an issue of law, the court should ask itself how much effort will be involved in identifying the relevant facts for the purpose of the preliminary issue;

   b. If the preliminary issue is an issue of law, to what extent is it to be determined on agreed facts;

   c. Where the facts are not agreed, the court should ask itself to what extent that impinges on the value of a preliminary issue;

   d. Whether the determination of a preliminary issue may unreasonably fetter either or both parties or, indeed, the court, in achieving a just result which is, of course, at the end of the day what is required of the court at the trial;

   e. The court should ask itself to what extent the determination of the preliminary issue may turn out to be irrelevant;

   f. Is there a risk that the determination of the preliminary issue could lead to an application for the pleadings to be amended so as to avoid the consequences of the determination; and

   g. Taking into account the previous points, is it just to order the preliminary issue.

5. In totality, whether to proceed with a preliminary determination in arbitrations is a fact sensitive exercise. Our team had successfully defended against high quantum preliminary determination in international arbitration and would be glad to assist in this regard.

Disclaimer: The content of this article does not constitute legal advice and should not be relied on as such. Specific advice should be sought about your specific circumstances.