ENGLISH HIGH COURT REFUSES TO DETERMINE THE EXISTENCE OF A DISPUTED ARBITRATION CLAUSE PRIOR TO THE COMMENCEMENT OF ARBITRATION PROCEEDINGS
Chris Parker (Partner) James Allsop (Senior Associate) Herbert Smith Freehills
In a recent decision, the English High Court determined that it would be wrong in principle for the court to determine whether parties to a disputed contract had entered into a binding arbitration agreement in circumstances where one party intended to commence arbitration proceedings on the basis of the disputed arbitration agreement: HC Trading Malta Ltd v Tradeland Commodities S.L. [2016] EWHC 1279 (Comm) (click here for the full judgment).
The decision highlights the respect afforded to the arbitral process under the Arbitration Act 1996 ("the Act") and affirms that it is only in circumstances where the court is required to "fill a gap", such as with anti-suit injunctions preventing a party from commencing or continuing proceedings in another forum, that it will rule on the jurisdiction of an arbitral tribunal.
Background
The claimant alleged that the parties had entered into a binding contract under which the defendant was to purchase 250,000mt of clinker in bulk from the claimant, to be shipped in a series of parcels. The claimant further alleged that the contract contained a London arbitration clause. The defendant never received any parcels of clinker and denied that there was any contract of sale.
The claimant's solicitors asked the defendant to agree to accept service of an arbitration notice at its London solicitors, but the defendant did not do so. The defendant did not have any claim of its own against the claimant and took the position that it would contest the arbitrator's jurisdiction if the claimant commenced arbitration in London. The claimant sought a declaration that there was a binding arbitration agreement which was subject to English law and which covered the claimant's intended claims. The defendant applied to set-aside the claimant's claim for declaratory relief on the following bases: (a) the court had no jurisdiction to entertain the claim under the Act; (b) alternatively, even if the court had jurisdiction it would be wrong in principle to do so; and (c) insofar as it was a