What happens when a respondent fails to participate in the arbitration? Can the local courts compel parties to arbitrate?
International Arbitration (3rd edition)
A Tribunal cannot compel a party to attend. If a party is properly notified and fails to attend, the procedures may continue in its absence.
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 Questions 13 and 14). Then arbitral proceedings shall proceed irrespective of whether the respondent participated 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 (see Paris Court of Appeal, 7 February 1991, 1992 Rev Arb 634).
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 the 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).
When a respondent fails to participate in the arbitration, whether that is a failure to appear or failure to submit defense, evidence and documents, the procedure continues by default and the arbitrator will issue an award based on the material placed before it.
The arbitration proceedings must be consensual between the parties and a written agreement is needed. The Court may only issue a summons to examine an individual or to be presented with any documents that concerns the arbitration process.
Under Czech law, no one can be compelled to participate in an arbitration. The respondents’ participation is not required and the proceedings can continue without it.
As per the CPC, failure of a party to participate in the arbitration does not impede the adjudication of the dispute, provided that the party was duly summoned to appear in front of the arbitral tribunal.
To the extent that the party did not receive an official communication regarding the arbitral proceedings, it is entitled to request, no later than 3 days prior to the arbitration hearing, a postponement of the proceedings.
Consequently, the parties to an arbitration may not be compelled to appear in front of the arbitral tribunal, and the procedure will continue in their absence.
Act on Arbitration contains a number of provisions aimed at compelling the respondent to participate in the arbitration.
These include provisions on appointment of arbitrators in case a party refuses to participate in the appointment process, as well as the rule that, if a party fails to deliver the statement of defense or participate at the hearing, this does not prevent the proceedings to continue.
Anyhow, local courts do not have the authority to compel a party to arbitrate.
Under Article 42 of the Arbitration Law, if the respondent is served with a notice in writing but does not appear before the tribunal without reasonable reasons or leaves the tribunal room during a hearing without the permission of the arbitral tribunal, an award by default may be given.
There is no legislation in China that empowers the court to compel parties to arbitrate.
a. If the respondent does not participate, the Arbitral Tribunal can continue the proceedings and decide the case on its merits. Offering a “default award” is not a possibility.
The arbitration law enables proceeding with an arbitration despite the respondent’s failure to participate. If the respondent fails to file a statement of defence, the arbitral tribunal continues the proceedings, but such failure shall not be deemed admission of the facts alleged in the statement of claim.
Local courts cannot compel either parties or third parties to participate in arbitration proceedings.
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 servswitzed 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.
Under the UAE Arbitration Law a respondent cannot be compelled to participate in the arbitration process.
Should a respondent choose not to participate in an arbitration, the respondent may attempt to nullify the final award.
The respondent may base its claim for nullification within Article 53(d).
Article 53(d) provides for nullification on the grounds that the respondent was ‘unable to submit his statement of defence due to that he was not given a proper notice of….the arbitration proceedings’
A claimant may easily prove its compliance with the requirement to properly notify the respondent, if the arbitration was administered by the courts or an arbitral institution.
In an ad hoc arbitration, where notifications may not be as authoritative as they would be in an institutional arbitration, a party may utilise the services of a UAE Federal Court bailiff to deliver a legal notice (or any other formal notice) informing the other party of the commencement of arbitral proceedings or of any other procedural part that is of critical importance to communicate.
The 1996 Act allows the parties to agree on the powers of the tribunal in case a respondent (or claimant) fails to participate in the arbitration (s.41(1)). The tribunal is empowered to dismiss the claim, continue the proceedings in the absence of that party, or issue a peremptory order (see s.41).
To our knowledge, there is no legal authority that suggests that Saudi courts will compel parties to arbitrate. However, when a valid arbitration agreement/clause is present in a contract, Saudi courts will refuse to hear the case.
Article 35 of the Law of Arbitration states that if either party fails to appear at a hearing after notification or to submit required documents, the arbitration tribunal may continue the arbitration proceedings and issue an award in the dispute, based on available evidence.
If a respondent fails to participate in an arbitration, the FAA empowers federal courts to compel the respondent’s participation. 9 U.S.C. § 4. Most state laws empower state courts to do the same. See, e.g., NY CPLR § 7503 (2012).
Under Austrian arbitration law, if a party refuses or fails to participate in the arbitration, the tribunal shall continue with the proceedings. It may not treat the non-participation as consent to the assertions of the other party. Local courts may not compel a party to participate in an arbitration.
Where a respondent fails to state his/her defence as required under the ACA, the arbitral tribunal can continue the proceedings without treating such failure in itself as an admission of the claimant’s allegations. See section 21(b) of the ACA. Also, where any party fails to appear at a hearing or to produce evidence, the arbitral tribunal may proceed with the proceedings and make an award. See section 21(c) of the ACA.
Nigerian courts cannot compel the parties to arbitrate but may stay proceedings and direct the parties to arbitrate where a party to the arbitration agreement has commenced litigation instead of arbitration.
If a Respondent fails to participate in the arbitration, namely by not submitting its opposition, the arbitral tribunal will still proceed with the process. Such omission shall not be considered as an acceptance of the allegations of the Claimant (contrarily to the rules of civil procedure which determine that if a Respondent does not submit its opposition, the facts alleged by the Claimant can be considered as admitted).
Also, if a party does not attend a hearing or does not produce documental evidences within a given deadline, the tribunal may also proceed with the proceedings and issue an award with basis on the submitted evidence.
The local courts may only compel parties to arbitrate if there is a breach of an arbitral agreement and if such breach has been invoked in the local court (see question 18 above).
Local courts cannot order third parties to participate in arbitration proceedings. Third parties can only participate in arbitral proceedings already in course if they are bound by an arbitration agreement and upon authorization from the arbitral tribunal after hearing the parties, if the intervention does not disrupt the normal course of the proceedings and if there are relevant reasons to do so.
Even if a duly served respondent fails or refuses to participate in the arbitration, this does not prevent a tribunal from considering a case and making an award. Russian courts do not have the power to compel a party to arbitrate.
Pursuant to Article 18 of the Model Law, the parties must be treated equally and must be given a full opportunity to present their respective cases. Pursuant to Article 25 of the Model Law, where a party is in default and fails to show sufficient cause, or fails to appear at a hearing, the arbitral tribunal may continue the proceedings and determine the matter. Under Article 27 of the Model Law an arbitral tribunal may seek assistance from the courts in taking evidence. The courts do not have power to compel parties to arbitrate, in the sense of having to actively engage in the arbitration.
If the respondent, without reasonable grounds, fails to submit a reply to the claimant’s statement of claim, the arbitral tribunal shall continue the arbitration. However, the failure to submit a reply shall not be considered to be an admission of the claimant’s claim.
If a party, without reasonable grounds, is absent from an oral hearing or fails to submit documentary evidence, the arbitral tribunal may continue the arbitration and make the award based on the evidence already presented.
The local courts cannot compel the parties to arbitrate.
Should a respondent fail to reply to the request for arbitration pursuant to section 1046 (1) ZPO, the arbitral tribunal shall continue the proceedings, without the failure to comply with procedural rules as such being deemed to be an acknowledgment of the assertions made by the plaintiff. The arbitral tribunal may even issue an award on the basis of the evidence before it if the respondent fails to appear at the oral hearing or to produce documentary evidence although he was given sufficient advance notice (section 1048 (3) ZPO).
Local courts can neither compel a respondent nor third parties to participate in the arbitration.
In case the respondent fails to participate in the arbitration, the arbitration court shall continue the proceedings, whilst the respondent’s omission per se will not be treated as an admission of the claimant’s allegations.
If the respondent fails to participate in arbitration, and the arbitral tribunal has not yet been constituted, both national and international regulations allow the local courts to appoint the arbitrator(s) in order to commence the arbitration procedure. For national arbitration, Article 232 of the CJO states as a general rule, that the appointment of the arbitrator shall be upon unanimous parties’ agreement. Nevertheless, if such agreement is not met, the ordinary judicature shall appoint a sole arbitrator, who must be a different individual of the first two options indicated by the parties. If such procedure is not possible due to the failure of one of the parties to participate, the ordinary judicature shall appoint the arbitrator under the CCP rules for the appointment of experts.
Regarding international arbitration, Article 11 of the ICAL provides for arbitrators appointment procedures to be applicable when a party fails to participate in the arbitration.
These procedures allow the arbitration to move forward, despite the respondents default and without the need of compelling by local courts.