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Jurisdiction issues in arbitration

On 20 February 2018, about 80 participants attended Quadrant Chambers’ biannual international arbitration seminar. The topic for discussion and debate was “Jurisdiction Issues in Arbitration”. The panel event was chaired by Simon Rainey QC of Quadrant Chambers and the speakers were Louis Flannery (now QC), Head of International Arbitration at Stephenson Harwood, Philippa Charles, Head of International Arbitration at Stewarts, and former High Court judge, now full time arbitrator, Sir David Steel of Arbitrators at 10 Fleet Street.

Louis Flannery kicked off the event looking at two topics:

In relation to the former, Louis noted that the countries in the UK were the only legal jurisdictions which sought to define the jurisdiction of the arbitral tribunal: England, Wales and Northern Ireland by section 30 of the Arbitration Act 1996 (AA 1996), and Scotland by Rule 19, Part 2 of Schedule 1 to the Arbitration (Scotland) Act 2010. In broad terms, both pieces of legislation seek to define jurisdiction by reference to:

  • Whether there is a valid arbitration agreement.
  • Whether the tribunal is properly constituted.
  • What matters have been submitted to arbitration in accordance with the arbitration agreement.

Louis focused on section 30 of AA 1996. His view was that the courts wrongly treat the three elements set out in section 30 as exhaustive, and therefore seek to “smash” jurisdiction issues into those three pegs. Whilst considering this issue in detail, Louis noted that arbitral tribunals (and the courts) often get confused and look at issues of admissibility as issues of jurisdiction. As the Chartered Institute of Arbitrators (CIArb) Guidelines on Jurisdictional Challenges notes (at paragraph 6 of the preamble):

“When considering challenges, arbitrators should take care to distinguish between challenges to the arbitrators’ jurisdiction and challenges to the admissibility of claims. For example, a challenge on the basis that a claim, or part of claim, is time-barred or prohibited until some precondition has been fulfilled, is a challenge to the admissibility of that claim at that time i.e. whether the arbitrators can hear the claim because it may be defective and/or procedurally inadmissible. It is not a challenge to the arbitrators’ jurisdiction to decide the claim itself.”

In this context, Louis was critical of the decision of Teare J in Emirates Trading Agency LLC v Prime Mineral Exports Private Ltd.

Louis then considered the role of the International Chamber of Commerce (ICC) Court under Article 6(4) of the ICC Rules, noting that the ICC is the only arbitral institution which carries out a gate keeper function in relation to jurisdiction. It does so in cases where the Secretary General refers matters to the ICC Court for its decision pursuant to Article 6(4). The ICC Court then decides whether and to what extent the arbitration shall proceed. Louis then looked at the statistics of the number of cases referred to the ICC Court and their outcomes, concluding that the gate keeper power was useful for the ICC Court to have.

Philippa Charles then spoke on “deciding your own jurisdiction”. She addressed three questions:

  • Is the role or responsibility of the tribunal to take a view on jurisdiction whether or not the parties raise it?
  • The approach to determining questions of jurisdiction, premise, burden and construction.
  • Pragmatism and effective solution finding.

In relation to the first of these issues, Philippa noted that section 30 of the AA 1996 gives an English-seated tribunal the power, but not the obligation, implicitly to determine its own jurisdiction, whether or not on the application of a respondent. In exploring this issue, Philippa looked at issues of enforcement (particularly under Article V.1(d) of the New York Convention) and whether it made a difference to the position of the tribunal if the respondent was non-participating or not represented by appropriate counsel. She went on to discuss an example of a claimant (represented by inexperienced counsel – it was their first ever international arbitration) who issued a single London Court of International Arbitration (LCIA) reference in respect of payments due under five separate contracts, where five separate references should have been commenced and an application to consolidate made. The question she posed was, “What should the tribunal do?”

In relation to determining jurisdiction, Philippa examined a number of issues including:

  • Whether a tribunal should approach the question with a predisposition to finding jurisdiction where possible, or on the assumption that the challenge is justified or completely neutrally.
  • Who had the burden of proof? The party seeking to say that the claim was within the arbitration clause or the party challenging jurisdiction?
  • Whether the balance should be tipped in favour of arbitration if the alternative is the bringing of claims in a court system which is objectively more difficult (with a particular focus on the Kyrgyz mobile saga).

Lastly, Philippa sought to give some pragmatic solutions (looking at submission agreements by way of example), the upshot of which was: don’t leave it to the tribunal if you can avoid it!

Sir David Steel then considered section 67 of the AA 1996 and whether the English Commercial Court should retain a role. He started by noting that the Commercial Court has been very supportive of arbitration, but that the arbitral community often saw section 67 challenges as an obstruction of arbitration. In his view of ten years as a judge of the Commercial Court, he could not remember a single instance of a section 67 challenge which was demonstrably misconceived. He was also of the view that it was correct that section 67 was a re-hearing and not simply a review of the arbitrator’s own decision on jurisdiction.

Sir David then considered alternatives to the current system, including one suggestion that findings of fact, made by the tribunal when considering their own jurisdiction, should be unchallenged. In his view, that would be wrong for four reasons:

  • If there is no contract at all (and therefore no agreement to arbitrate), how can a tribunal make a binding decision on fact?
  • In international arbitration, the governing law of the claim is often not English law and questions of foreign law are questions of fact.
  • The demarcation between fact and law is difficult to draw.
  • The Commercial Court does not care whether a jurisdiction challenge under section 67 succeeds or not, but an arbitral tribunal has a potential conflict of interest in that they may be tempted (unconsciously) to make findings of fact, as the financial significance of the outcome to them may be great.

Following the panel’s presentations, there were questions from the floor and a lively and thought provoking debate followed. At the end, Simon Rainey QC put to the participants whether section 67 should be looked at again – the overwhelming response from the audience was no.

Quadrant Chambers Ruth Hosking

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