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

Thu, 06 June, 2019

This article was first published in the Practical Law Arbitration Blog and can be found here.

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 CoCavity Insulation Guarantee Agency Ltd v ThermaBead LtdNori Holdings Ltd v Public Joint-Stock Company Bank Otkritie Financial CorporationDreymoor Fertilisers Overseas Pte Ltd v EuroChem Trading GmbHUttam 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 charterpartywhich 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.

        

Nevil Phillips

A significant proportion of Nevil’s practice involves high-value (unreported) International Arbitration work, especially in the Energy and Shipbuilding fields. Recent examples include a dispute regarding disclosure of commission rights between a business and finance development agent in the Middle East and the US commercial entity seeking finance and venture capital investment with regard to eventual IPO; as leading counsel in a USD 20 million dispute regarding the construction of a very high profile Offshore Support/Emergency Towing Vessel; as leading counsel in USD35 million multi-vessel shipbuilding dispute; as counsel for a shipyard in a USD35 million shipbuilding dispute involving issues of unlawful conduct; as counsel for the buyer in a complex USD 25 million technical dispute concerning shipment and supply of fuel and source material for an Imperial Smelting Plant; and as counsel in a multi-million Euro joint venture dispute between international ferry operators.

Much of Nevil’s practice involves him leading a team, very often against Silks.  He is especially well-regarded for his skills as a subtle cross-examiner, especially of experts.

“A top QC without the badge – a terrier and the ideal add-on to any winning team.” (Legal 500 Asia-Pacific, 2019)

“Very hands-on. A complete team player. ... Engaging and user-friendly. ... Fabulously clever. He can be relied on to get to grips with difficult issues.” (Chambers UK, 2019)

“...Has an encyclopaedic knowledge of the law, combined with an extremely high standard of advocacy and commercial understanding...” (Legal 500, 2019)

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