English High Court upholds two challenges to jurisdiction

The English High Court has recently set aside two arbitration awards under section 67 of the Arbitration Act 1996 (1996 Act) on the grounds of lack of substantive jurisdiction. A tribunal will lack substantive jurisdiction if, inter alia, there is no valid arbitration agreement.

In Hyundai Merchant Marine Company Limited v Americas Bulk Transport Limited [2013] EWHC 470 (Comm) a contract for a time charter and an alleged arbitration agreement were contained in the same document. Eder J found that if there was no consensus between the parties as to the charter, there could be no binding arbitration agreement. On the facts, there was no evidence that the parties intended the alleged arbitration agreement to have effect independently of the existence of the main agreement. In the circumstances, the court found that the questions of whether there was a binding main contract and/or binding arbitration agreement stood or fell together.

In Lisnave Estaleiros Navais SA v Chemikalien Seetransport GmbH [2013] EWHC 338 (Comm) the court found that an arbitration clause in a shipyard’s General Conditions applicable to individual ship repair contracts was not incorporated by way of a prior course of dealing into a Ship Repair Fleet Agreement (the Fleet Agreement) between the shipyard and the agent of the ship owners.

The test for incorporating terms into a contract by way of a prior course of dealing is whether the parties must have intended the relevant term to form part of their contract. The court found that it was impossible to conclude that it was obvious that the parties intended the arbitration clause to apply. The judge urged caution in relying in cases such as this on Lord Hoffmann’s comments in Fiona Trust v Privalov [2008] 1 Lloyd’s Rep 254 to the effect that it should be assumed that parties, as rational businessmen, are likely to have intended any dispute arising from their relationship to be decided by the same tribunal. Lord Hoffmann’s comments were made in the context of construction of arbitration agreements to which the parties have expressly agreed. It was an entirely different matter to apply this line of reasoning to the incorporation of arbitration clauses to which the parties have not expressly agreed.

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