• it accepts that it is a party to an agreement containing an arbitration agreement but considers that arbitration agreement does not cover the dispute in question , or
• where there is no dispute about the arbitration agreement or the fact that it covers the dispute in question , but there is a dispute as to the constitution of the tribunal in question
The DAC Report states that , in circumstances such as those listed above , it would undermine the substance of a party ’ s objections , and would be likely to lead to gross injustice , if that party was required to take part in the arbitration proceedings or to take positive steps to defend their position . The report confirms that such a party must be entitled , if they wish , to simply ignore the arbitral process but warns of the risk that , if the objection is not well-founded , an enforceable award may still be made against them .
Following analysis of the interrelationship between AA 1996 , s 72 and AA 1996 , s 32 , the court concluded that in circumstances where section 72 rights are engaged , this will preclude another party from using the section 32 procedure to obtain a judgment on jurisdiction . The application of this threshold further emphasises the narrow scope of section 32 , as well as reiterating the significant importance of the section 72 rights .
What was the background ?
Armada commenced arbitration proceedings against Schiste in respect of a number of unpaid invoices under a charterparty pursuant to which Armada time chartered a vessel to Schiste . Armada claimed the unpaid invoices to be due and payable by Schiste .
The charterparty was based on the BIMCO Supplytime 2005 standard form but contained a number of bespoke amendments agreed by the parties . The amendments to the arbitration agreement , at clause 34 of Part II of the charterparty , clearly indicated that it was the parties ’ intention to appoint a sole arbitrator in respect of any dispute arising out of or in connection with the charterparty , however , the anticipated process for appointing the arbitrator was not made sufficiently clear . In particular , clause 34 sought to incorporate both London Maritime Arbitrators Association ( LMAA ) Terms and the UNCITRAL Rules , which contain conflicting mechanisms for appointment .
Armada sought to agree the appointment of a sole arbitrator with Schiste but attempts to engage Schiste were unsuccessful . Consequently , Armada applied to the president of the LMAA to make the appointment pursuant to section 11 of the LMAA Terms .
While the president of the LMAA appointed Mr Jonathan Lux as sole arbitrator , Schiste continued to abstain from participating in proceedings . This created ongoing uncertainty for Armada and gave rise to concerns that , on an alternative interpretation of clause 34 of the charterparty , Schiste might at a later stage in proceedings seek to challenge the validity of Mr Lux ’ s appointment and consequently his jurisdiction to resolve the dispute . Inevitably this would result in significant wasted costs and efforts for Armada . With the permission of Mr Lux , Armada applied to the court pursuant to AA 1996 , s 32 ( 2 )( b ) for an order confirming the jurisdiction of Mr Lux as sole arbitrator .
What did the court decide ?
The court dismissed the section 32 application . Cockerill J concluded that a determination of the question of jurisdiction could place a non-participant in arbitral proceedings in an unacceptable position :
• by engaging in the section 32 process , the respondent would risk waiving the rights and protections afforded to a non-participant under AA 1996 , s 72 , but
• by simply ignoring the section 32 application , it would forego any opportunity to put forward its own submissions on jurisdiction and risk a determination that is contrary to its interests and is prima facie binding on it