Commercial contract – Jurisdiction – Arbitration – Parties entering into commercial agreements containing governing law and jurisdiction clause – Contract providing parties to endeavour to first resolve disputes through arbitration – Whether clause constituting arbitration agreement – Application dismissed
The parties entered into three commercial agreements, each containing a governing law and jurisdiction clause which provided that “the parties will endeavour to first resolve the matter through Swiss arbitration” but where no resolution was forthcoming that the “courts of England shall have non-exclusive jurisdiction”. A dispute arose between the parties and the claimant commenced proceedings against the defendants.
The defendants applied to stay the proceedings pursuant to section 9 of the Arbitration Act 1996, contending that they had agreed with the claimant that any disputes arising out of the contracts would be submitted to arbitration. An issue arose whether the clause constituted an arbitration agreement within the meaning of section 6(1) of the 1996 Act as an agreement to submit to arbitration present or future disputes, whether they were contractual or not.
Held: The application was dismissed.
The first and most obvious difficulty in construing the clause as an arbitration agreement was that the parties had agreed to “endeavour” to first resolve the matter through Swiss arbitration but if no resolution was forthcoming either party could refer the matter to the English courts. The form of the clause plainly envisaged two stages in the resolution process and that involved something different from an agreement to refer a dispute to arbitration. In these contracts there was no agreement as to the number or identity of the arbitrators which would require further agreement on the part of the parties or the appointment of arbitrators by a court of the seat of arbitration. In order to commence arbitration, the parties had either to agree on the number and identity of the arbitrators or upon a Swiss cantonal court which would appoint arbitrators in default. In either eventuality, further agreement on the part of the parties was required before any arbitration could take place.
The nature of the obligation incumbent upon the claimant appeared from the form which an order for specific performance would take, if it were possible for the defendants to seek such an order. It would be an order that the claimant “endeavour to resolve the matter through Swiss arbitration”. The very nature of that obligation showed that there was not a binding agreement to arbitrate but merely an agreement to attempt to resolve the matter by a process of arbitration which had not been set out in the clause or elsewhere in the contract. The requirement to submit finally to a binding arbitration was absent and would, on the face of the clause, be inconsistent with its terms because of the two stage process envisaged.
Accordingly, the clause did not require the parties to refer any dispute to arbitration in the sense required by the Arbitration Act 1996 but merely envisaged them attempting to resolve the matter by arbitration, the process of which was not set out in the clause or elsewhere in the contract. It provided for the parties’ failure to reach such agreement and for the English courts to have jurisdiction in such circumstances on a non-exclusive basis.
Paul Sinclair (instructed by Cubism Law) appeared for the claimant; Paul Stanley QC (instructed by Byrne & Partners LLP) appeared for the defendant.
Eileen O’Grady, barrister
