JUDGMENT: London arbitration is the winner, says solicitor


The House of Lords came out strongly in favour of arbitration last week, saying that parties that had agreed an arbitration clause must treat it as the way to determine all disputes, including those about the very validity of their contract.



Giving the lead judgment in Premium Nafta Products Ltd (20th defendant) & Ors v Fili Shipping Company Ltd & Ors [2007] UKHL 40, Lord Hoffman upheld the primacy of an arbitration clause in a dispute between the Russian state-owned Sovcomflot group and certain charterers of its vessels.



Alleging fraud, Sovcomflot purported to rescind those charters, even though some, but not all, had been fully performed by that time. The charterers denied the accusation. But the Law Lords ruled that Sovcomflot could not take the case to court, as it had agreed to arbitrate and that the clause was valid.



Mike Lax of London shipping firm Lax & Co, who acted for the successful charterers, said: 'Whatever the outcome of the arbitration, there is already one clear winner as a result of the House of Lords ruling, and that is London arbitration itself... There may now be few instances where a party which, on the face of it, has agreed to arbitrate its disputes, will be able to seek refuge in the courts instead.'



Simon Kamstra, head of international arbitration at Addleshaw Goddard, added: 'This is incredibly welcome. The weakness of arbitration, ironically, is where its strengths of speed and jurisdictional clarity are hamstrung by the delay and expense that can be triggered by occasional vulnerability to technical challenges of the kind the House of Lords has now finally confirmed should cease or reduce.'



Nick Fletcher, an international arbitration partner at Clifford Chance, said: 'It reaffirms the primacy of the agreement to arbitrate, and if the parties have agreed to refer their case to arbitration, then the courts are going to respect that.'



Rupert White