Jurisdictional Issues: Arbitration

The US Court of Appeals for the Third Circuit has held that ultra vires challenges to the formation of a contract with an arbitration clause are non-arbitrable.

We have published an article discussing the treatment of the "arbitration exclusion" in the recast of the Brussels Regulation.

The recast of Council Regulation (EC) 44/2001 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Brussels Regulation) has been published in the Official Journal. It will apply from 10 January 2015.

The United States Court of Appeals for the Eighth Circuit has affirmed a District Court’s denial of a request for a mandatory stay of litigation for resolution of a related arbitration, because the suit was not covered by the arbitration clause.

Sao Tome and Principe has acceded to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention).

A table summarising the application of the kompetenz-kompetenz principle in France, India, Sweden, UK and US, based on information provided in the latest Arbitration multi-jurisdictional guide. The Arbitration guide answers key questions on arbitration law and practice from the perspective of leading practitioners.

Francisco M. Gutiérrez (Partner) and Federico Campolieti (Senior Associate), M. & M. Bomchil In a decision rendered on 25 October 2011, and published on 26 April 2012, the Federal Contentious-Administrative Court of Appeals, Chamber II, seated in Buenos Aires, declared its lack of jurisdiction to decide on a request for annulment against an arbitral tribunal's decision on jurisdiction. However, the Court of Appeals redirected the annulment application to the lower court (federal judge).

Stephan Wilske (Partner) and Claudia Krapfl (Associated Partner), Gleiss Lutz In a decision dated 4 April 2011, but only recently published, the Higher Regional Court of Frankfurt am Main held that a party who, in court proceedings, raises the objection of a valid arbitration agreement is barred from objecting to the jurisdiction of the arbitral tribunal in arbitration proceedings. This behaviour is contradictory and is in violation of the principle of good faith.

Abby Cohen Smutny (Partner) and Lee A. Steven (Counsel), Leah Witters (Associate), White & Case LLP The United States District Court for the Middle District of Florida has found that an arbitrator, and not the court, must decide whether the actions of the parties prior to filing in court were sufficient to fulfill the conditions precedent to arbitration included in the parties’ arbitration agreement.

Priyanka Gandhi (Associate) and Neha Samant (Trainee), Juris Corp In a recent decision, the Supreme Court of India held that an appeal against an interim order passed by an arbitral tribunal seated outside India is not maintainable as the seat of arbitration was outside India and the arbitration proceedings were governed by foreign law. The court held that Part I of the Indian Arbitration and Conciliation Act 1996 was impliedly excluded.

John Choong (Senior Associate), Freshfields Bruckhaus Deringer In a decision rendered on 8 June 2011, the Hong Kong Court of Final Appeal provisionally decided that absolute state immunity applies in Hong Kong. However, the court referred certain questions of state immunity to the Standing Committee of the National People’s Congress, on the basis that a Hong Kong court does not have jurisdiction over foreign affairs, which fall within the responsibility of the Central People’s Government. The Standing Committee issued its response on 26 August 2011.

In Wilky Property Holdings Plc v London & Surrey Investments Ltd [2011] EWHC 2226 (Ch), Richard Snowden QC, sitting as a deputy judge of the High Court considered whether a dispute resolution clause that expressly referred to expert determination was, in reality, an arbitration clause.

Abby Cohen Smutny (Partner) and Lee A. Steven (Counsel), Leah Witters (Associate), White & Case LLP The District Court for the Southern District of New York has found that where one provision in an arbitration clause included the term New York, the parties clearly intended arbitration to take place in New York. This was the case even though the parties failed to specify in another provision whether arbitration would be in New York or London, and relied on the federal policy favouring arbitration to enjoin proceedings in Brazil.

PD Dr. Nathalie Voser (Partner) and Dr. Petra Rihar (Associate), Schellenberg Wittmer (Zurich) In a German-language decision dated 18 April 2011, published on 8 June 2011, the Swiss Supreme Court dismissed an appeal to set aside an award by the Court of Arbitration for Sport (CAS) for lack of jurisdiction, stating that a reference to an arbitration clause contained in the statutes of an association suffices to establish CAS' jurisdiction.

Andrew Robertson (Partner), Piper Alderman In a decision dated 1 April 2011, the New South Wales Supreme Court has held that a dispute relating to patents was arbitrable and that the arbitrator had jurisdiction to resolve disputes even on facts which had not yet occurred.

PD Dr. Nathalie Voser (Partner) and Anya George (Associate), Schellenberg Wittmer (Zurich) In a French-language decision of 19 April 2011, published on 16 May 2011, the Swiss Supreme Court upheld the decision of an arbitral tribunal which had found that it had jurisdiction to hear the claims of a third party beneficiary in relation to a dispute opposing promisor and promisee.

Nicholas Peacock (Partner) and Chris Ross (Senior Associate), Herbert Smith LLP The Singapore High Court dismissed an originating summons filed by one of the parties to prevent an arbitration from proceeding on the basis that the parties had concluded a settlement agreement. The High Court held that the jurisdiction to determine whether a dispute exists or whether a settlement had been reached by the parties lies with the arbitral tribunal.

PD Dr. Nathalie Voser (Partner) and Eliane Fischer (Associate), Schellenberg Wittmer (Zurich) In a recent French-language decision dated 11 January 2011 and published on 1 February 2011, the Swiss Supreme Court rejected challenges to the jurisdiction of the Court of Arbitration for Sport (CAS). It held that a letter of default threatening to bring the dispute before a state court did not amount to a tacit waiver of arbitration. Further, it confirmed that the principle of "good faith" which is one of the principles constituting substantive public policy (ordre public) is to be understood in the same way as under Article 2 of the Swiss Civil Code.

Abby Cohen Smutny (Partner) and Lee A. Steven (Counsel), Lauren Mandell (Associate), Leah Witters (Associate), White & Case LLP The Second Circuit Court of Appeals has held that courts must decide whether a valid contract exists even when the party contesting the agreement to arbitrate has requested an arbitral body to decide the issue.

Ruth Byrne and Joanne Greenaway, Herbert Smith LLP In Broda Agro Trade (Cyprus) Ltd v Alfred C Toepfer International GmbH [2010] EWCA Civ 1100, the Court of Appeal confirmed that section 72 of the Arbitration Act 1996 is not restricted to arbitral proceedings concerning the substantive jurisdiction of the arbitrators. Section 72 entitles a person "who takes no part in [arbitral] proceedings" to challenge the tribunal's jurisdiction by proceedings in court.

An update on the European Parliament's Committee on Legal Affairs' draft report on the review of the Brussels Regulation, which rejects the proposal to abolish the arbitration exclusion in the Regulation.

An Ask the team article about the law which governs an arbitration agreement in the absence of an express choice of law.

Abby Cohen Smutny (Partner) and Lee A. Steven (Counsel), White & Case LLP The Supreme Court has heard oral arguments in a labour arbitration case as to whether the federal district court has jurisdiction to determine whether a collective bargaining agreement containing an arbitration clause was formed, or if that question is for the arbitrator. 

An update on Broda Agro Trade (Cyprus) Limited v Alfred C Toepfer International GmbH [2009] EWHC 3381 (Comm), which concerned the meaning of "taking part" in arbitration proceedings for the purposes of section 72 of the Arbitration Act 1996.

Ruth Byrne (Solicitor Advocate), Herbert Smith LLP In a recent judgment,  the English High Court dismissed an application by Serbia to challenge an arbitral award for lack of substantive jurisdiction under section 67 of the Arbitration Act 1996 on the ground that Serbia had conferred substantive jurisdiction on the arbitrator by virtue of the Terms of Reference.

PD Dr. Nathalie Voser (Partner) and Dr. Petra Rihar (Associate), Schellenberg Wittmer (Zurich) In a decision dated 25 August 2009, published on 22 September 2009, the Swiss Federal Supreme Court held that conduct which would justify the piercing of the corporate veil would, in principle, fall within the scope of an applicable arbitration provision and thus would preclude the jurisdiction of the Swiss court. However, in view of the specific circumstances the court did not confirm the lower court's decision but sent the case back for further consideration.

The Advocate-General has issued her opinion in West Tankers, finding that the grant of anti-suit injunctions in support of arbitration agreements is inconsistent with the Brussels Regulation.

On 4 September 2008, Advocate General Kokott delivered her opinion that anti-suit injunctions against proceedings in another member state brought in breach of an arbitration agreement are incompatible with EC law.

In Verity Shipping SA v NV Norexa & ors [2008] EWHC 213 (Comm), Teare J refused to continue an anti-suit injunction which had been granted to the claimant shipowners to restrain proceedings which had been commenced against them in the Antwerp commercial court by cargo interests. The injunction was originally granted without notice on the grounds that the Antwerp proceedings had been commenced in breach of arbitration clauses contained in bills of lading. The case is a reminder that careful thought needs to be given to the timing of any application for anti-suit relief, and the forum in which any third party indemnity claims are commenced. Here, it was the shipowners' own decision to advance indemnity claims in the Antwerp court which ultimately precluded the continuation of anti-suit injunctive relief in the English court.

In Sumukan Ltd v Commonwealth Secretariat [2007] EWCA Civ 1148, the Court of Appeal has held that a failure to comply with contractual requirements relating to the appointment of an arbitrator had the effect of invalidating the appointment. Setting aside the first instance judgment of Toulson J, the Court of Appeal held that the arbitrator lacked jurisdiction and that the arbitral award should be set aside pursuant to section 67 of the Arbitration Act 1996. The judgment of the Court of Appeal contains several points of interest, including a discussion of the circumstances in which a failure to comply with appointment procedures will invalidate the tribunal's jurisdiction, and confirmation that the "de facto" doctrine has no place in arbitration law.

In E D & F Man Sugar Limited v Kryton Lendoudis [2007] EWHC 2268, Christopher Clarke J refused to allow the claimant to amend an arbitration claim form seeking enforcement of an arbitration award in England and Wales. He also refused retrospectively to grant permission to serve the amended claim form out of the jurisdiction. The original basis of the claimant's application to enforce the award had been defective, and to allow him to amend it so as to plead a new and different basis for enforcement (in this case a fresh action on the award) would have the effect of allowing the claimant to introduce a new cause of action and a new basis of claim. To allow such amendment in practice meant that the court would be helping the claimant to circumvent the procedure for obtaining permission to serve proceedings out of the jurisdiction. This principle had been established pre-CPR but the judge considered it would also apply post-CPR.The rules governing service changed on 1 October 2008, under the Civil Procedure (Amendment) Rules 2008 (SI 2008/2178) which include a new Part 6 (Service of documents) and consequential amendments to other rules. All references to CPR 6 in this update are to the rules which were in force prior to 1 October 2008.

In Fiona Trust v Privalov [2006] EWHC 2583 (Comm), the claimant shipowners alleged that charterparties had been procured by bribery, and commenced proceedings in the commercial court seeking a declaration that the charterparties had been validly rescinded. The charterparties contained arbitration clauses, and the defendant charterers accordingly applied for a stay of proceedings pursuant to section 9 of the Arbitration Act 1996. The Court of Appeal, overturning the first instance decision of Morison J, granted a stay. (For our report of the Court of Appeal decision, see Bribery and arbitration agreements: new Court of Appeal guidance.) The House of Lords has unanimously dismissed the shipowners' appeal from the Court of Appeal decision. (The judgment is reported as Premium Nafta Products Ltd v Fili Shipping Company Ltd [2007] UKHL 40). Delivering the leading opinion, Lord Hoffman held that, as a matter of construction, the owners' claims fell within the terms of the charterparty arbitration clauses. Furthermore, the allegation of bribery did not directly impeach the arbitration clause (as opposed to the underlying charterparty), which was to be regarded as separate as required by section 7 of the Arbitration Act 1996. The Lords' reasoning is substantially the same as that of the Court of Appeal. In particular, the Lords endorsed the Court of Appeal's view that English courts should make a "fresh start" with regard to issues of construction. Older English authoriti

In (1) Loon Energy Inc (2) Loon Brunei Ltd v (1) Integra Mining (B) Sendirian Berhad (2) Bumico Sendirian Berhad [2007] EWCH 1876 (Comm), the claimant sought declarations in the English courts relating to certain contracts made with the defendants. The claimant and first defendant had signed a confidentiality agreement which provided for any disputes arising out of or in relation to the confidentiality agreement to be determined by Texan law and arbitration. The parties subsequently entered into a series of agreements subject to English law and jurisdiction. A dispute arose and the claimant sought declaratory relief in the English courts. The defendants commenced arbitration in Texas under the confidentiality agreement. The claimant submitted that the English law agreements superseded the confidentiality agreement. It was held that the English law agreements did not supersede the arbitration clause in the confidentiality agreement. There was no dispute that the confidentiality agreement was part of the context in which the English law agreements fell to be interpreted. The arbitration clause was in wide terms and therefore the court had no jurisdiction to grant relief in respect of "any dispute arising out of or in relation to" the confidentiality agreement. The case highlights the importance of careful consideration of the requisite methods of dispute resolution and choice of law on each occasion when parties, with ongoing contractual relationships, enter into new

We have previously reported on the decision of the Court of Appeal in Fiona Trust Holding Corp v Privalov [2007] EWCA Civ 20 in which the court granted a stay of the respondents' rescission claims and dismissed their claims for declaratory and injunctive relief (see Legal update, Bribery and arbitration agreements: new Court of Appeal guidance ). The House of Lords granted permission to appeal against that judgment on 29 March 2007. The Court of Appeal has now, separately, refused to extend an interlocutory injunction restraining the appellants from continuing with the arbitration pending judgment in the House of Lords. It held that the court should adopt a cautious approach to injunctive relief in the arbitration context, that the respondents would have to show a strong case of potential prejudice before the court would intervene, and that on the facts the respondents' case was not strong enough. The Court did, however, require the appellants to give three undertakings, firstly that the respondents could participate in the arbitration without prejudice to their rights under section 72; secondly that the respondents should be permitted to appoint their own arbitrator (in place of the default appointment made by the appellants) and finally that any additional costs incurred as a result of the arbitration would be borne by the appellants if it is eventually decided that the arbitration should not proceed. Case: Fiona Trust and Holding Corp v Privalov [2007] EWCA Ci

The case of Markel International Co Ltd v Craft and Others [2006] EWHC 3150 (Comm) concerned the circumstances in which the English courts will be prepared to grant an anti-suit injunction to restrain foreign proceedings where the underlying contract relating to the dispute contains an arbitration agreement. The interesting issue that arose in this case was whether an anti-suit injunction should be granted against a third party to restrain him from pursuing foreign court proceedings which were arguably in breach of an arbitration agreement which may, prima facie, be binding on him. This, in turn, raised the question of whether the stautory right which the third party was pursuing in the foreign proceedings existed independently of the contract containing the arbitration agreement or whether the third party was, in reality, seeking to enforce an obligation contained in the underlying contract and was therefore bound by the arbitration clause contained in it.