REUTERS | Ilya Naymushin

The protection of arbitral jurisdiction under English law: the approach to section 67 challenges

The modern approach of English law to arbitration (as reflected in the English Arbitration Act 1996 (AA 1996)) reflects the core principle of party autonomy: see the Departmental Advisory Committee on Arbitration Law Report on the Arbitration Bill (DAC Report) at paragraphs 19-22.

In this regard, it is now well-established that parties are likely to intend “any dispute arising out of the relationship into which they have entered” to be decided by the same tribunal, unless the language makes clear that certain matters were to be excluded from the tribunal’s jurisdiction (see Fiona Trust & Holding Corporation v Privalov per Lord Hoffmann at paragraph 13).

2018 produced a number of decisions which reflected this approach: see, for example, Catlin Syndicate Ltd v Weyerhaueser Co; Cavity Insulation Guarantee Agency Ltd v ThermaBead Ltd; Nori Holdings Ltd v Public Joint-Stock Company Bank Otkritie Financial Corporation; Dreymoor Fertilisers Overseas Pte Ltd v EuroChem Trading GmbH; Uttam Galva Steels Ltd v Gunvor Singapore Pte Ltd.

In similar vein, three very recent decisions of the Commercial Court re-affirm how, in general, English law will seek to preserve and maximise arbitral jurisdiction and limit the scope for challenge.

First, in Sonact Group Limited v Premuda SPA, disputes arose under a charterparty which contained an arbitration clause. The disputes were subsequently settled, but the settlement agreement contained no jurisdiction provision. Males J held, nevertheless, that the arbitration clause in the charterparty covered claims under the settlement agreement.

In so finding, the court held that the wording of the arbitration clause in the charterparty (“any and all differences and disputes of whatsoever nature”) was wide enough to encompass a claim under the settlement agreement (at paragraph 15), and that it was “inconceivable” that the parties had intended that the owner would be unable to pursue a claim under the settlement agreement in arbitration and would have to commence court proceedings (at paragraph 16-17). Males J added that there was “no bright line rule” that once parties enter into a new legal relationship, “an arbitration clause in the underlying contract necessarily can no longer apply” (at paragraph 20).

Second, in State A v Party B, the court considered an application for an extension of time for the bringing of a section 67 challenge. The threshold requirements identified in order for an extension to be granted reflect the reluctance of the English courts to intervene in arbitral jurisdiction.

The court (per Sir Michael Burton), in applying the tests for an extension of time laid down by Colman J in Kalmneft v Glencore International AG and approved by the Court of Appeal in Nagusina Naviera v Allied Maritime Inc, determined that where delay in making the section 67 challenge (and applying for the extension to do so) is lengthy but the application for an extension is based on fresh evidence, an extension will nevertheless only be justified where the fresh evidence is “transformational” or “seismic“ or “a game-changer” (at paragraphs 53-54 and 56). In that case, where the delay was a “colossal” 959 days from the last date for a section 67 challenge (but where the fresh evidence would not have changed the approach of the tribunal), an extension was refused.

Third, in Filatona Trading Ltd and another v Navigator Equities Ltd and others, it was held that an unnamed but disclosed principal of a party to a shareholders’ agreement (SHA) could sue under an arbitration agreement. The SHA named A and B as parties and provided for all disputes to be referred to arbitration. C (not a named party to the SHA) commenced arbitration proceedings against B, claiming that he (that is, C) was the disclosed principal of A (who was his nominee or agent) and, as such, the true party to the SHA and entitled to claim via the arbitration agreement.

Applying Aspen Underwriting Ltd and others v Credit Europe Bank NV and Kaefer Aislamientos de CV v AMS Drilling Mexico SA de CV, Teare J held that an undisclosed principal can sue and be sued on a contract provided that:

  • The terms of the written contract did not confine it to the named parties.
  • At the time of the relevant contract, the agent intended to contract on the principal’s behalf.
  • Entering into the contract was within the actual authority of the agent.

He held that the second and third points were satisfied on the evidence. As to the first, he held that the terms of the SHA (which did not unequivocally and exhaustively identify the contracting parties, despite an entire agreement clause) did not preclude the intervention of a disclosed principal: “very clear words” were required to show that only the named party, rather than its principal, was intended to have the right to perform the contract.

Thus, these decisions confirm that (as stated in the DAC Report at paragraph 22) “the Courts nowadays generally only intervene in order to support rather than displace the arbitral process”, and continue a trend of only reluctant intervention by the courts into arbitral jurisdiction.

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