In Dera Commercial Estate v Derya Inc  EWHC 1673 (Comm), the English Commercial Court provided useful guidance on when arbitration claims may be dismissed for inordinate and inexcusable delay under s.41(3) Arbitration Act 1996 (the “AA”).
Section 41(3) AA provides that, in an arbitration seated in England, the tribunal may make an award dismissing a claim if there has been inordinate and inexcusable delay on the part of the claimant in pursuing his claim, and that delay either (a) gives rise (or is likely to give rise) to a substantial risk that it is not possible to have a fair resolution of the issues in the claim; or (b) has caused, or is likely to cause, serious prejudice to the respondent.
The claimant (“Dera”) had purchased Indian maize from a third party, which was shipped on a vessel owned by the defendant (the “Owners”) from India to Jordan. The bills of lading incorporated Article III Rule 6 of the Hague Rules, under which claims for loss or damage must be brought within one year from delivery of the goods. The bills of lading also incorporated a provision for disputes to be referred to arbitration in London.
The cargo arrived at Jordan damaged, and Dera issued proceedings in Jordan against the Owners seeking damages. These proceedings were stayed by consent following an application for an anti-suit injunction brought by the Owners due to the arbitration clause in the bills of lading. Dera duly commenced arbitration in respect of the cargo damage on 7 October 2011 (within the one-year limitation period). However, it did not serve particulars of its claim until 1 June 2015, three years and nine months later.
The tribunal struck out Dera’s claim under s.41(3) on the basis that there had been inordinate and inexcusable delay by Dera which caused serious prejudice to the Owners and created a substantial risk that it was not possible to have a fair resolution of the issues, due to key evidence no longer being available. Dera challenged this decision under s.68 and s.69 AA.
Carr J dismissed the appeal.
She held that whether a delay was inordinate is a fact-sensitive exercise, and that any contractually-agreed limitation period (in this case, one year) sets the context in which to make that assessment. Where the parties have contracted for a particular limitation period, the statutory limitation period is irrelevant to this assessment. Carr J also confirmed that a delay cannot be inordinate if the contractual limitation period has not yet expired, however in assessing whether a delay was inordinate, the tribunal is permitted to take into account time elapsed from when the cause of action accrued.
In cases where there are periods of procedural activity and non-activity, Carr J held that it will normally be appropriate to assess individual periods of delay separately and distinctly, to arrive at a cumulative picture of overall delay.
Finally, Carr J held that the burden of proof is on the party relying on the delay to prove, on the balance of probabilities, not only that the delay was inordinate but also that it was inexcusable. She also confirmed that it was neither necessary nor helpful to talk of a shift of evidential burden, nor to lay down any hard and fast rule as to what evidential standard of proof the responding party has to meet. However, she added that if the delaying party has good reason for the delay, it will generally come forwards with an excuse. If it does not, the tribunal will normally be driven to the conclusion that there is probably no such excuse.
In this case, Dera had clearly been capable of particularising its case much earlier (as it had done in the Jordanian proceedings in 2011). Therefore, in the context of the one-year limitation period, the tribunal was entitled to conclude that a delay of three years and nine months was inordinate and inexcusable.
Authority on the operation of s.41(3) is scarce, and Carr J’s guidance is welcomed. Whilst the question of inordinate and inexcusable delay will always be fact-sensitive, parties should be aware that, even where a claim is filed inside the limitation period, a delay in prosecuting that claim (which is excessive in light of the agreed limitation period and for which there is no excuse) may render it liable to be struck out.