Do the English courts have the power to reassure a party to an arbitration that the arbitral tribunal has jurisdiction over the claim? Where should they draw the line between supporting an arbitration and usurping the role of the arbitral tribunal?
In the recent decision of Silver Dry Bulk Company Ltd v Homer Hulbert Maritime Company Limited  EWHC 44 (Comm), the English Commercial Court considered this question in an application which tested the scope of its powers under s.18 of the Arbitration Act 1996. Here, the jurisdictional uncertainty which the court was asked to address stemmed from the fact that the respondent company had been defunct for some years before the arbitration was commenced.
The claimant company, Silver Dry, is a Maltese company, wholly owned by GNMTC, the Libyan national maritime company. Silver Dry claims that, until the overthrow of the Gadaffi regime, GNMTC was under the control of Colonel Gadaffi’s fifth son, Hannibal. Silver Dry bought a ship from a company called Homer Hulbert, a Marshall Islands special purpose vehicle, for $66.5 million. It claims that, as it later discovered, the purchase price included a secret payment of between $5 and $7 million to Hannibal Gadaffi. Its complaint is that it therefore paid between $5 and $7 million too much for the ship, and that this money was corruptly diverted to Hannibal Gadaffi’s company.
Silver Dry therefore invoked the arbitration clause in the contract with Homer Hulbert – but only after Homer Hulbert had been dissolved. Under Marshall Islands law, proceedings can be commenced against a company for three years after its demise – but Silver Dry served its notice of arbitration eight months after the three-year period had expired. It nominated one arbitrator; Homer Hulbert did not respond and therefore, pursuant to the terms of the arbitration clause, Silver Dry’s nominated arbitrator became the sole arbitrator. But the uncertainty remained – were the proceedings valid, given Homer Hulbert’s dissolution?
the court has various powers to give directions as to the appointment of arbitrators, or to make the appointments itself
On the face of it, seeking to arbitrate against a company which no longer exists and has no assets is a fairly pointless exercise. But as Males J explained, in its memorial on jurisdiction Silver Dry had argued that Homer Hulbert’s parent company, Sinokor, “should be made a party to this arbitration and ultimately be held liable for its assistance in embezzling funds out of GNMTC either by piercing its corporate veil or, alternatively, as the principal of its agent Homer Hulbert, or as proper party to the MOA”.  So as Males J summarised it, “Evidently it hopes to use the arbitration as a means of getting at Sinokor.”  However, as things stood before the court, Homer Hulbert was the only respondent.
As to the problem that Homer Hulbert was dissolved more than three years before the notice of arbitration, Silver Dry provided the court with an expert opinion on Marshall Islands law which set out two bases on which the notice of arbitration had only to comply with the six-year limitation period: firstly on the basis that the directors of the company had become its trustees, and secondly on the basis of a fraud exception. Sinokor, in the arbitration, had provided expert evidence to the contrary.
Looking for a mechanism to test the validity of the proceedings at an early stage, Silver Dry applied to the Commercial Court under s.18 of the Arbitration Act 1996, seeking an order that the arbitral tribunal had been validly constituted.
The court’s analysis of its powers relating to the constitution of a tribunal
Section 18 provides that, where the procedure for appointment of an arbitral tribunal has failed and the parties have not agreed what should happen in such circumstances, the court has various powers to give directions as to the appointment of arbitrators, or to make the appointments itself.
Reviewing the caselaw on s.18, Males J summarised its purpose as follows:
…it provides a way of getting an arbitration started, or at least prevents arbitral proceedings from being aborted by a failure in the agreed appointments process, but does so without requiring the final determination of issues affecting the arbitral tribunal’s jurisdiction with are better decided in some other way… 
Where there is an issue whether the tribunal which the court is asked to appoint would have jurisdiction, the test is whether the claimant can show a “good arguable case” on jurisdiction: a much-used test for applications at preliminary stages of litigation, but one with various possible meanings. Reviewing the caselaw, Males J considered the test to mean, in this context, “a case which is somewhat more than merely arguable but need not be one which appears more likely than not to succeed.”  If there is a “good arguable case” in this sense, the court has jurisdiction to make an order under s.18 but retains a discretion whether or not to do so.
Examining the purpose of the s.18 powers, Males J drew a clear distinction between appointing the members of the tribunal and deciding on the basis of its jurisdiction. As he said:
It is one thing to step in to prevent an arbitration from being strangled at birth. It is another when the arbitration is already alive and kicking and what the claimant is seeking is some endorsement from the court of its position that the tribunal has been validly constituted. 
Did s.18 empower the court to give Silver Dry the order it asked for – that is, to declare that the tribunal was validly constituted? It will be seen from this summary of the court’s analysis of s.18 that Silver Dry faced an uphill battle to persuade the court to use s.18 for this purpose.
On the facts, Males J held that:
- There was a good arguable case that Homer Hulbert continues in existence sufficiently for the purpose of being a respondent to an arbitration (although he did not think that Silver Dry had the better of that argument). 
- But the application failed because there had been no “failure” of the appointment procedure, in the sense intended by s.18: “The issue is more fundamental than that, namely whether one of the parties was in existence so as to be capable of being arbitrated against at all. But the appointment procedure worked perfectly well in accordance with the terms of [the arbitration clause].”  The failure of the respondent to appoint an arbitrator did not equate to the failure of the appointment process: on the contrary, the agreed appointment process kicked in to respond to the respondent’s failure by constituting the claimant’s appointee as sole arbitrator.
- Accordingly, the court lacked jurisdiction under s.18. But Males J went on to hold that, even if he had had jurisdiction, he would have declined to exercise it so as to make the declaration sought. To declare that the tribunal did in fact have jurisdiction would require a final ruling on the jurisdictional issues, not just a finding of a good arguable case, which was all the court was equipped to decide (and all that the claimants had asked it to decide).
The decision is an interesting analysis of the courts’ functions in supporting the arbitral process. The court considered that it was entitled to step in to help set the arbitration up in the first place, but not to give a party comfort as to the scope of the tribunal’s jurisdiction. There, the party had to take its chances with the tribunal itself. This illustrates the sometimes difficult balance which the courts must strike between supporting the arbitral process and usurping it.