What is the applicable law (and prevailing practice) where a respondent fails to participate in the arbitration? Can the local courts compel parties to arbitrate? Can they order third parties to participate in arbitration proceedings?
Austrian statutes provide for a series of provisions to ensure that a respondent’s failure to participate in arbitral proceedings does not obstruct their further progress. Among these, the ACCP provides for the substitute selection of arbitrators before the tribunal is constituted and a general clause that the proceedings shall continue, if without showing sufficient cause, a party fails to participate in any way. Parties, however, cannot be compelled to arbitrate.
As explained above, local courts only intervene in arbitrations were the law expressly so provides. In general, third parties cannot be compelled to participate in arbitral proceedings. By way of judicial assistance of national courts, however, arbitral tribunals may request that, in accordance with Austrian civil procedure, witnesses may be ordered to appear before the tribunal and, failing their appearance, be penalised by the court.
The person responsible for administering the arbitration or, if there is no such person, the juge d’appui will nominate the arbitrator in lieu of the respondent (see Question 13 and 14). Then arbitral proceedings shall proceed notwithstanding whether respondent participated or not in the arbitration. An award shall be rendered. In this regard, French courts have held that an award that was rendered against a respondent that wilfully did not participate in the arbitration despite the fact that it was notified of the various stages of the proceedings and had the chance to participate in the proceedings shall not be set aside.
Non-signatories can be compelled to arbitrate disputes relating to the contract in question in different situations where it can be deduced from the facts of the case or the behaviour of the non-signatory that the non-signatory consented to be bound by the arbitration agreement. In French law, the analysis can take into account both:
• The non-signatory’s actual (express or tacit) consent.
• Behaviour that can be “deemed” to constitute consent (such as extensive participation in performance of the contract containing the arbitration clause, in certain circumstances).
French courts are more likely to compel a non-signatory to arbitrate in the context of international arbitration than in that of domestic arbitration. For example, in the case of a group of companies, where the parent company of the signatory was actively involved in the negotiation and performance of the contract, it was held that the parent was bound by the arbitration clause contained in the contract (Paris Court of Appeal, 21 October 1983, 1984 Rev Arb 98).
In addition, in the case of a group of contracts, where only one of the contracts contains an arbitration agreement, the French courts have considered that a party to a related contract or sub-contract that does not contain an arbitration agreement can be compelled to arbitrate its disputes when it was involved in the performance of the contract containing the arbitration agreement (Paris Court of Appeal, 7 December 1994, 1996 Rev Arb 245, Jaguar; for chains of contract, see Court of Cassation, First Civil Chamber, 27 March 2007, No. 04-20.842, ABS).
French courts have also accepted that an arbitration clause signed by a private party and a state-owned company can be extended to a state that did not sign the arbitration clause in certain circumstances (Paris Court of Appeal, 17 February 2011, 2011 Rev Arb 286).
If the respondent fails to present its statement of defence, the arbitral tribunal shall continue the proceedings without treating such failure in itself as an admission of the claimant’s allegations. Should the defendant fail to appear at a hearing, the arbitral tribunal shall continue the proceedings and make the award on the evidence presented by the claimant. The arbitral tribunal may however, in case it deems the default justified, allow a party to perform the omitted act.
Resort to arbitration depends always, in addition to an arbitration clause, the initiative of one of the parties. Parties cannot be compelled to resort to arbitration. Should there be an arbitration clause and one of the parties initiate a proceeding in a State court, if the other party does not claim the court’s incompetence on such grounds, the State court cannot, on its own initiative, declare its incompetence.
Third parties are allowed to join ongoing arbitral proceedings, provided that they accept the current composition of the tribunal and that the court considers that such joinder does not unduly disrupt the normal course of the arbitral proceedings and that there are relevant reasons that justify the joinder.
Neither the arbitral tribunal nor the local courts can compel the parties to arbitrate or third parties to participate in arbitration proceedings. Once a dispute has been referred to arbitration, it can examine the case and render an award irrespective of whether one or both parties participate in the proceedings. In order to ensure a fair trial, the parties must only be duly notified of the arbitral proceedings, their actual participation in the proceedings being entirely their choice.
Failure of one party, although duly notified, to attend the hearing shall not prevent the progress of the proceedings, unless the absent party submits, at least 3 days before the scheduled date of the hearing, a request to the arbitral tribunal for adjournment of the hearing on solid grounds and notifies the other party and the arbitrators thereof.
If a party without valid cause fails to appear at a hearing or otherwise fails to comply with an order of the tribunal, such failure shall not prevent the continuation of the proceedings and a resolution of the dispute. However, the dispute must be adjudicated on the merits, i.e. “default awards” are not available for the tribunal.
The local courts cannot compel parties to arbitrate, and cannot order third parties to participate in the arbitration proceedings.
Under the CPC, if either party fails to appear and/or participate in the proceedings, the tribunal may begin and/or resume the proceedings despite the absence of the defaulting party until it renders its award. The DIAC and ADCCAC Arbitration Rules provide similar rules.
The non-participation of respondents is a common problem in onshore UAE arbitrations, with some respondents choosing only to appear in the local courts at the point of ratification.
Both the DIFC Arbitration Law and ADGM Regulations provide that the parties may determine the appropriate procedure to be followed in the event of default. Absent such agreement, both arbitration regimes confer upon tribunals the power to:
- terminate proceedings where a claimant fails to communicate properly its statement of claim;
- continue with the proceedings and proceed to issue an award on the evidence before it where the respondent fails to communicate properly its statement of defence or where a party fails to appear at a hearing or to produce evidence.
Except where a party fails to appoint an arbitrator when establishing the arbitral tribunal (in which case the state court will step in in lieu of the defaulting party), Swiss law does not entrust the state courts at the seat of the arbitral tribunal with authority to compel parties to arbitrate.
After an arbitral tribunal has been established, it is up to the arbitral tribunal to deal with a defaulting party. As Swiss law requires the arbitral tribunal to treat parties equally and to ensure the parties’ right to be heard, the arbitral tribunal must ensure that the parties – including non-participating parties to a proceeding – are properly served and informed. If these conditions are met, a default award is generally considered valid and enforceable.
In Swiss Rules arbitration, art. 28 Swiss Rules stipulates the procedure for the arbitral tribunal in case a party fails to take procedural acts. Provided that the parties are duly notified, the arbitral tribunal may proceed with the arbitration in case one of the parties fails to appear at a hearing without showing sufficient cause for its failure. On the same basis, the arbitral tribunal may render an award based on the evidence available to it if a party fails to produce evidence.
If a respondent fails to communicate a statement of defence, the tribunal shall continue the proceedings without treating the respondent’s non-participation as an admission of the claimant’s allegations (article 25(b) of Schedule 1 of the Act). If any party fails to appear at the hearing or produce documentary evidence, the arbitral tribunal may continue the proceedings and make the award on the evidence before it (article 25(c) of Schedule 1).
Local courts would not, and arguably cannot, compel parties to substantively participate in an arbitration, although (as noted above), they can stay court proceedings commenced in breach of an arbitration agreement. A fortiori, local courts cannot require third parties to participate as parties in an arbitration (see below).
In principle, arbitral proceedings may continue despite the non-participation of a party provided that the non-participating party is given due written notice to of each stage of the arbitration and its outcome.
While Malaysian courts cannot order parties to pursue arbitration, they are able to negatively compel parties to arbitrate by ordering a stay of court proceedings pending the completion of an arbitration (Section 10, AA).
Malaysian courts lack jurisdiction to compel third parties to participate in arbitral proceedings to which they are not a party.
The FAA does not address the subject of the failure of a party to participate in the arbitration. Under the rules of the major arbitral institutions, however, it is generally recognized that if a party has received sufficient and timely notice of the time and place of the arbitration hearing, but nevertheless fails to be present or to obtain an adjournment, the arbitration may proceed in the party’s absence. U.S. courts have enforced awards rendered in such circumstances.
Where a valid arbitration agreement exists, the FAA requires courts, upon the motion of a party seeking enforcement of the arbitration agreement, to compel arbitration and to stay any court disputes covered by the arbitration agreement. In such a situation, courts may only stay the case; they may not dismiss it.
Before U.S. courts will so compel arbitration or stay litigation in favor of arbitration, however, they must determine that there is a valid and enforceable agreement between the parties to arbitrate. A court will decide the question of validity itself, rather than leaving the matter to the arbitrators. Validity has both formal and substantive components.
Arbitration agreements generally bind only the contracting parties. In limited circumstances, third parties and non-signatories can be bound by arbitration agreements (or enforce them) through traditional principles of contract and agency law, such as assumption, piercing the corporate veil, alter ego, incorporation by reference, third-party beneficiary, waiver, estoppel, and agency.
Under the IAA, unless otherwise agreed by the parties, if, without showing sufficient cause:
- the claimant fails to communicate its statement of claim, the arbitral tribunal shall terminate the proceedings;
- the respondent fails to communicate its statement of defense, the arbitral tribunal shall continue the proceedings without treating such failure in itself as an admission of the claimant’s allegations; or
- any party fails to appear at a hearing or to produce documentary evidence, the arbitral tribunal may continue the proceedings and make the award on the evidence before it. IAA, First Schedule, Article 25.
The IAA is silent on whether Singapore courts can compel parties to arbitrate if they fail to participate in the arbitration. If a party initiates court proceedings for matters covered by an arbitration agreement, the Singapore courts can stay the court proceedings and compel that party to arbitrate instead. IAA, Section 6.
The IAA does not contain specific provisions on ordering third parties to participate in arbitration proceedings. In Singapore, the common law principle that arbitration is a creature of contract made between consenting parties is well-established. As such, generally, third parties which have not signed an arbitration agreement cannot be compelled to arbitrate.
Article 7 of Law nº 9.307/96 provides that existing arbitration clause and existing resistance about the arbitration institution, the interested party can request the service of the other party to attend in court in order to celebrate the compromissum by designating the judge hearing especially for that purpose. About this procedure, we highlight its main rules: 1) the plaintiff must indicate precisely the object of the arbitration, instructing the application with the document that contains the arbitration clause; 2) attending the parties to the hearing, the judge will try previously conciliation on the dispute; not succeeding, the judge will try to bring the parties to the celebration, by mutual agreement, of the compromissum; 3) not agreeing the parties on the terms of the compromissum, after hearing the defendant, the judge will decide on its content, at the same hearing or within ten days, respecting the provisions of the arbitration clause and including the mandatory requirements that should be included in the compromissum; 4) if the arbitration clause has not provides on the appointment of arbitrators, it will be up to the judge, after hearing the parties, to set out at respect, may appoint a sole arbitrator for the dispute; 5) the absence of the plaintiff, without good cause, in the hearing designated for the drafting of compromissum, will result in the dismissal of the case without trial of merit; 6) not attending the defendant at the hearing, it will be up to the judge, after hearing the plaintiff, to set out at about the content of the compromissum, appointing a sole arbitrator; and 7) the award which grant the application shall be regarded as the compromissum. Based on the foregoing, we conclude that, existing arbitration clause and the refusal of a party to institute arbitration, local courts can compel the parties to commence arbitration. However, if there is no arbitration clause, local courts cannot compel the parties to conduct arbitration.
Can they order third parties to participate in arbitration proceedings?: Yes, but only in cases of compulsory joinder of parties in which the third party signed the contract with the arbitration clause, as will be explained in item 20 below.
Under Article 25 of the Model Law, the tribunal continues the proceedings if a party fails to appear at the hearing or produce documentary evidence. The tribunal may make an award based only on the evidence provided in a party’s absence. Tribunals will give a party every opportunity to participate. The courts may assist in gathering evidence from third parties.
Where a respondent fails to participate in the arbitration, the Panama Arbitration Law provides that the proceedings may continue and that the arbitral tribunal may render an award.
There are no provisions in the Panama Arbitration Law allowing local courts to compel parties to arbitrate or to order third parties to participate in arbitration proceedings.
There are no case law about the courts forcing a party to arbitrate. The courts will intervene appointing the arbitrators and, from that moment on, the arbitrators can decide and render a final award that would be binding for all the parties, even if one party does not want to participate (art. 31 Arbitration Law).
In case the respondent does not submit its response, the proceeding continues without considering this as the acceptance of the case or cognizance of the allegations of the claimant. In case one of the parties do not attend the hearing without a valid reason or abstain from submitting its evidences; the sole arbitrator or the arbitral tribunal can continue the proceeding and decide by considering the available evidences in the file. The local courts cannot compel the parties to arbitrate or order third parties to arbitration proceeding.
If a respondent fails to reply to a request for arbitration or fails to make an appearance at a hearing, the arbitral tribunal shall continue the proceedings and shall ultimately issue the arbitration award based in the insights it has obtained otherwise (section 1048 (2) and (3) ZPO). The absence of a party in an oral hearing is not considered as an admission of the submissions made by the other party. The parties are free to determine specific rules as to the consequences of the absence or default of a party.
Local state courts cannot force a party to arbitrate, however, the state courts can determine upon request of a party that a dispute falls within the scope of an arbitration agreement.
The local state courts cannot force a third party to participate in arbitration proceedings.
The arbitral tribunal cannot force a party that does not want to appear in the arbitration proceeding to do so. However, once the arbitral tribunal is established and all the formal requirements regarding the service of the relevant deeds and the principles of due process are respected, the arbitral tribunal examines the case and renders an award regardless of the fact that a party failed to participate in the proceeding. Arbitrators cannot order a third party to participate in arbitration proceedings.
Parties cannot be compelled to arbitrate, but an application can be made to court for the appointment of an arbitrator (see question 14 above), who will then have the power to determine their own jurisdiction (see question 17 above) and proceed appropriately.
The tribunal may dismiss a defence (section 41) where the respondent fails to (a) attend a hearing or (b) comply with a peremptory order.
Third parties cannot be ordered to participate in arbitral proceedings, save as stated in question 9.
If the respondent fails to appear at a hearing or to produce documentary evidence, the arbitral tribunal may continue the proceedings and make the award on the evidence before it. In the event, the respondent fails to communicate his statement of defence, the arbitral tribunal shall continue the proceedings without treating such failure in in itself as an admission of the claimant’s allegations. The Irish Courts cannot order a party to participate in arbitration proceedings.
The arbitration law enables proceeding with the arbitration despite the respondent’s failure to participate. If the respondent fails to file a statement of defence, the arbitral tribunal shall continue the proceeding, but such failure shall not be deemed admission of the facts alleged in the statement of claim.
If a party fails to appear at a hearing or produce documents that the party was ordered to produce, the arbitral tribunal may continue the proceeding and issue an award on the basis of the evidence collected, unless the default is sufficiently excused.
Local courts cannot compel either parties or third parties to participate in arbitration proceedings.