Agreement (item (1)) created uncertainty. Reasonable business people would not have intended that such an uncertain jurisdictional position should apply to a dispute, as opposed to the specified dispute resolution mechanism in the individual Sales Contracts. The Court similarly rejected Dreymoor’s argument that the dispute fell neither under the Urea Sales Contracts arbitration clauses (item 5) – because the "centre of gravity" was the two sets of Agency Agreements (items (1) and (4)) – nor under the arbitration clause in the Urea Agency Agreements (item (4)) – because it was too narrow – but instead was to be resolved in an unspecified court. This was “lacking in common sense or commercial reality.” Since the parties had included arbitration clauses in both the individual Sales Contracts and the Urea Agency Agreement, the Court found it unlikely, in the absence of clear indications to the contrary, that they intended that disputes such as the present should be resolved under neither.
Accordingly, applying the “commercially-rational construction” approach of the English Court of Appeal in Sebastian Holdings4 to give effect to the clear terms of the relevant agreements, Butcher J considered the current disputes could and should be arbitrated under the LCIA Arbitration clauses in the DAP/MAP and Urea Sales Contracts.
ICC Arbitration
The Court did not accept Dreymoor’s argument that it was not a party to the DAP Third Party Sales Contracts (item (2)), and that the arbitration clauses in those contracts did not apply to disputes between Dreymoor and ECTG. These contracts named ECTG as the Seller, the Indian companies as the Buyer, and Dreymoor as the Agent. Each agreement was signed by all three “Parties”, including Dreymoor. Dreymoor’s role in the contract was specified in express terms. Dreymoor was accordingly held to be a party to the DAP Third Party Sales Contracts.
The arbitration clause in the DAP Third Party Sales Contracts covered "any dispute, controversy or claim arising out of or relating to this contract, or the breach, termination or validity thereof”. The Court held that if a dispute falling within one of these categories was one which involved Dreymoor, as Agent, then the arbitration clause applied to it. The bribery allegation fell within this wide clause.
Equally, the Court rejected Dreymoor’s arguments regarding the mechanism for the appointment of arbitrators in the DAP Third Party Sales Contracts, whereby Dreymoor was not expressly given a power to appoint. Looking to the governing intention of the Contract, notwithstanding the appointment mechanism, the Court found that Dreymoor should be a party to the arbitration clause and all disputes arising out of or relating to the Contract should be subject to arbitration.
Our comments
The Court’s reluctance to accept Dreymoor’s arguments, which were considered to be “lacking in common sense or commercial reality”, and the Court’s striving to give effect to the parties’ intentions for dispute resolution via arbitration even when faced with a complex network of contracts, offers some reassurance to commercial parties.
Nevertheless, the case is a useful reminder of the need for careful drafting where there are multiple potentially applicable contracts to ensure that dispute resolution clauses operate harmoniously – and to ensure that no contract is left without a dispute resolution clause. This is particularly pertinent for commercial relationships which touch multiple jurisdictions, like the Dreymoor-ECTG arrangement in this case, leaving open the prospect of litigation in an unspecified and possibly undesirable country.