Part of London’s appeal as one of the world’s leading seats of international arbitration is the English court’s deep bench of experience and precedent. The generally pro-arbitration exercise of its supervisory jurisdiction – respecting party autonomy and ensuring that parties who agree to arbitrate are not subsequently forced into court proceedings once a dispute arises – is also appealing.
Last year, the English court made several notable arbitration-related decisions, covering a range of topics from separability to the availability of interim measures. In doing so, they provided valuable guidance on where the line should be drawn between holding parties to their agreement to arbitrate and permitting the court to intervene.
One example of the court adopting a pro-arbitration approach is the High Court decision in NDK Ltd v HUO Holding Ltd and another [2022] EWHC 1682 (Comm). The case concerned a jurisdictional challenge under section 67 of the Arbitration Act 1996 of an anti-suit injunction. This was awarded by a London seated tribunal, restraining a party from pursuing foreign court proceedings in breach of an arbitration clause in a shareholders’ agreement. The party bringing the foreign proceedings argued that the proceedings arose from a breach of the articles of association of a joint venture company. However, the court found the arbitration clause in the shareholders’ agreement applied to any disputes between the parties that arose in connection with the failed joint venture. In reaching its conclusion, the court referenced the often-cited Fiona Trust presumption established by the House of Lords in 2007, which provides that rational commercial parties are likely to have intended any dispute arising out of their relationship to be decided by the same tribunal as part of a ‘one-stop shop’.
Similarly, the High Court in Aquavita International SA v Indagro SA [2022] EWHC 892 granted an anti-suit injunction restraining foreign proceedings that were commenced in breach of the parties’ agreement to arbitrate. The party commencing the foreign proceedings claimed the proceedings were merely an interim measure to obtain security over a ship. Rejecting this argument, the court reasoned that, although interim measures are commonly allowed in support of arbitration to ‘hold the ring’, the foreign proceedings in that case would involve granting the type of final relief which would follow from the enforcement of the parties’ substantive rights. If the foreign proceedings were permitted, there would have been no relief to pursue in the arbitration, therefore ‘outflanking’ the parties’ agreement to arbitrate.
Although the principle of party autonomy is important, competing policy considerations will sometimes call for a different approach to resolving arbitration-related court disputes. One notable example from last year is the Court of Appeal decision in Soleymani v Nifty Gateway LLC [2022] EWCA Civ 1297, which is one of the first English decisions relating to non-fungible tokens (NFTs).
The case concerned a consumer’s failure to pay for an NFT following an online auction run by a New York-based marketplace. The consumer commenced English court proceedings seeking a declaration that the auction terms were unfair and not binding. The marketplace applied for a stay of proceedings under section 9 of the 1996 act on the basis that the claim fell within the scope of the arbitration agreement contained in the auction terms. The court rejected the stay application, noting the dispute’s consumer rights context was an important factor. This meant the English court was better placed than a foreign tribunal to determine the validity of the arbitration agreement, and which supported the case being heard in a public forum. It remains to be seen whether the court will find the arbitration agreement is invalid. However, this case underlines the court’s willingness to take a more hands-on approach in consumer contexts.
The Court of Appeal again showed a willingness to intervene when the circumstances call for it in DHL Project and Chartering Ltd v Gemini Ocean Shipping Co Ltd [2022] EWCA Civ 1555. It upheld the High Court’s decision that a tribunal had no jurisdiction, following a challenge brought under section 67 of the act. The case concerned an award of damages based on the breach of a putative charterparty agreement, where it was disputed whether a valid agreement was ever entered into. The party seeking to uphold the tribunal’s decision argued that, even if the charterparty was void, the arbitration agreement remained valid and sought to rely on the doctrine of separability, which holds that arbitration clauses are separable from, and can survive the invalidity of, the underlying contract.
In finding the tribunal did not have jurisdiction, the court held the arbitration agreement was not saved by the principle of separability, or by the presumption of ‘one-stop’ dispute resolution because, on the facts, the parties never agreed to arbitrate in the first place. In considering the Fiona Trust presumption’s application to the case, the court noted: ‘One-stop shopping is all very well, but if the parties have not entered into an arbitration agreement, the shop is not open for business in the first place.’
The courts are likely to continue to grapple with similar issues this year. One important arbitration-related court case that is already on this year’s horizon is the UK Supreme Court appeal against Republic of Mozambique v Credit Suisse International and others [2021] EWCA Civ 329. The case relates to English court proceedings Mozambique brought against a bank alleging conspiracy to defraud. The bank sought a stay of proceedings under section 9 of the 1996 act on the basis the claims were caught by Swiss law-governed supply contracts containing an arbitration agreement. At first instance, the court accepted Mozambique’s argument that its claims did not arise from the supply contracts, but rather concerned English law-governed guarantees which provided for dispute resolution in the English courts. Therefore there was no ‘matter’ within the meaning of section 9 that was required to be determined with arbitration. Overturning the decision, the Court of Appeal noted that hearing Mozambique’s conspiracy claims would likely mean the parties end up arguing about the validity and genuineness of the supply contracts because of the ‘reasonably foreseeable’ defences the bank would likely employ in the conspiracy claim. The court justified this approach, in part, as necessary ‘to give effect to the principle of party autonomy’ as otherwise the arbitration agreement would be frustrated by the court proceedings. The Supreme Court is set to hear the appeal on 24 January 2023.
Looking ahead for 2023, with the ongoing war in Ukraine, rising inflation and the prospect of global recession, it is likely the demand for arbitration will continue to increase as international commercial parties face a period of rapid and tumultuous change. For example, we can expect an uptick in sanctions-related arbitrations, as parties terminate contracts following the imposition of wide-ranging sanctions regimes. While many arbitrations will go no further than confidential arbitral proceedings, some will make it through to the English courts, providing a rich source of precedent for arbitration practitioners and commercial lawyers alike.
Charlie Lightfoot is partner and chair, and Yahia Boussabaine an associate, in the international arbitration practice at Jenner & Block, London
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