Noble Denton Middle East & Anor v Noble Denton International Ltd

This has come on before me today by way of an application to set aside my order for the service of an arbitration claim form on the applicant/Defendant's solicitors, rather than making an order for service out of the jurisdiction. That aspect has been corrected by the subsequent obtaining from Steel J ex parte of an order for service out, which I would have granted had I been asked for that. But the costs of setting aside my order and as of now recognising the validity of Steel J's order should be paid by the Claimants, who thereby wasted the costs of the necessary corrective action.

Apart from that aspect, the substantive application before me has been an application by the Defendant to the claim form, based upon its case that there is no arbitration clause or arbitration agreement as between it and the Claimants, and that there is pending in the United States a claim by it and other parties against the Claimants (and other parties) in respect of the matters which the Claimants seek to have arbitrated, namely events in Dubai.

The issue between the Claimants and the Defendant both in the United States and here has become the same, namely that the Claimants assert that there is an arbitration clause and an arbitration agreement and the Defendant asserts that there is not. This is because the Defendant’s claim is that the relevant contractual relations relating to the work done in Dubai are based upon a 2003 agreement between different parties, but which they say binds all subsequent transactions between associated members of the relevant two groups, while the Claimants assert that the work done was done under an acknowledgment of order containing conditions which contained an arbitration clause.

The Defendant accepts that there is a good arguable case that there exists an arbitration clause, while the Claimants accept that their case is only arguable and at least at this stage not capable of being disposed of summarily, even if it was appropriate to do so.

The issue before me has been twofold. One, whether, in an application under s18 of the Arbitration Act for appointment of a sole arbitrator in default of agreement, the issue to be resolved is whether there is an arbitration agreement, or simply whether there is a simply a good arguable case for an arbitration agreement. Secondly, what the impact is of the lis alibi pendens, the case going forward in the United States of America which is pending; and, indeed, in relation to which the learned judge has only very recently made an order and a judgment in the southern district of Texas, Houston Division which I have read.

I am entirely satisfied that the authorities make it plain that s18 is simply what might be categorised as a gateway. It is the way in which an arbitrator is appointed and s17 of the Act applies in different circumstances, but to the same effect.

I have been referred to the learned authors of the books on arbitration, both Mustill & Boyd and Arbitration Law by Professor Merkin, and to the Departmental Advisory Committee on Arbitration law. I have looked at and gained considerable assistance from two authorities, in particular the decision of Thomas J in Vale do Rio v Shanghai Bao Steel [2000] 2 Lloyd's Law Rep 1 and The Lapad, a decision of Moore-Bick J [2004] 2 Lloyd's Law Rep at 109. I have also been reminded of s1 of the Arbitration Act and, of course, of s30 of that Act.

It is quite plain that the primary purpose of the statutory regime for arbitration, fulfilling the well understood international approach to arbitration, is that a decision to arbitrate reflects what is often called the "autonomy of the parties" and should only very exceptionally be overridden by the courts. And the authorities and the textbooks, to which I have referred, underline the fact that arbitrators must, and are entitled to, decide not only issues, but also the question of their own jurisdiction; the concept of Kompetenz Kompetenz, as it is described, hence s30 of the Arbitration Act among other provisions.

Of course, there are occasions when the court will intervene. First, it will intervene after an arbitration when an application is made under s67 by a losing party, if appropriate. Secondly, there can be references by the arbitrators in appropriate cases (or by the parties) under s32. Thirdly, a non-party to arbitration, a party which has taken no part in an arbitration and wishes to assert that it is not bound by an arbitration, can take steps under s72. But in the absence of one of those three fall back statutory protections, the party denying the existence of an arbitration still has the protection that the arbitrator itself can be invited to and does decide its own jurisdiction, as I have described.

In those circumstances it is not surprising and indeed, in my judgment, is correct that the test on s18 is only one of whether there is an arguable case. It does appear that this point was overlooked at first instance in Midgulf International Limited v Groupe Chimique Tunisien [2000] 2 Lloyd's Reports 411, and that when it was attempted to be put right in the Court of Appeal in Midgulf International Limited [2010] EWCA Civ 166, the Court of Appeal understandably concluded that it was too late for the point to be taken.

But, that apart, it seems quite clear to me that all the authorities, and particularly those that I have mentioned, drive in one direction, namely (a) that the proper international approach to arbitrations means that it is not for the court to decide this kind of question and (b) that the arbitrator can and will decide that very question.

In those circumstances, I am satisfied that there is in this case - as I have pointed out, actually conceded for the purposes of today by the Defendant - a good arguable case that there exists an arbitration agreement, and that is enough for me to operate section 18.

I was asked as an alternative by Mr Templeman QC, for the Defendant, to consider making directions for the hearing of an issue by the court. For the reasons I have given, I conclude that that is wholly inappropriate and that that is an issue wholly for the arbitrator. There could and would have been a route whereby Mr Templeman could have invited the court to rule, because of the preservation of the position for someone denying the existence of an arbitration agreement by s72, to which I have referred. In the case helpfully referred to me by both parties of Sinochem International Oil (London) Co Ltd v Fortune Oil Co Ltd [2000] 1 Lloyd's Law Rep 682, it is apparent that there were before Toulson J at the same time applications both under s18 and under s72. S72 plainly trumped s18, and there was just such a determination of an issue as to whether there was, in fact, an arbitration agreement.

The decision in the Lapad, to which I have referred, did not in terms address the question, but I am satisfied that, had the point been raised, Moore-Bick J would have come to the same conclusion as I have done, namely that, in the absence of a s72 application, it is inappropriate for there to be an issue tried under s18.

Consequently, all I would be doing today would be to direct the appointment of an arbitrator. The identity of that arbitrator is already not a matter of contention, namely Sir Anthony Colman, and I so do.

The outstanding issue is the question of the stay application. So far as the stay is concerned, I am faced for the purposes of today with a good arguable case that there is an arbitration agreement governed by English law, with an arbitrator set up to decide the issue of his own jurisdiction at English law. I am invited to stay the application on the basis of lis alibi pendens, not primarily forum conveniens, although some evidence has been produced as to where the witnesses might be likely to be in terms of trial of the issue, but that plainly is of very minimal consideration in, volcanoes permitting, these modern days of easy air travel.

There is of course no doubt whatever that the Texas court is as competent as this court to decide these questions, even though they would be questions of English law. But the crucial question here is that there is, sufficiently for the purposes of today, an English arbitration clause. That is equivalent to an exclusive jurisdiction clause, if not more so. In a recent decision of mine in Deutsche Bank AG v V Sebastian Holdings Inc [2010] 1AER (Comm) 808, [2009] EWHC 3069 (Comm), I have set out, with guidance from counsel, a collection of what seemed to me to be the most significant authorities on the question of a stay on forum non conveniens and/or lis alibi pendens grounds where there are exclusive jurisdiction clauses. In that case the lis was in New York. I am satisfied by reference to the authorities, including House of Lords authorities, which I there set out, that there need to be exceptional circumstances, or strong or very strong reasons why, in that case New York, was clearly the more appropriate forum, so as to override an exclusive jurisdiction clause, and, in my judgment, similarly, or probably all the more so, where there is an arbitration clause. And the American court, like any other court such as the United Kingdom court, bows to the existence of arbitration, particularly where, as here, there will be the opportunity for the arbitrator to decide that he has no jurisdiction.

In those circumstances, I do not to begin to be satisfied that there are exceptional circumstances or strong or very strong reasons why I should grant a stay, and I refuse the application.

In those circumstances, having refused the stay, I make the order under s18 for the appointment of Sir Anthony Colman.

Further, having heard the argument as to costs, subject to the order for costs in favour of the Defendant in relation to the setting aside of my order for service on the solicitors, I award the costs of the balance of today's applications to the Claimants, that is both in respect of the stay and the s18 application. This could and should have been -- and I ascribe no blame of course at all because the parties are perfectly entitled to have the matter resolved by the court -- a straightforward administrative application, or indeed none made at all, but there could have been agreement to the arbitrator, and he could then have decided his own jurisdiction without any kind of prejudice to the Defendant's case. The Defendant chose to oppose this application and did so in a very dignified way, but it has lost, and in those circumstances in my judgment should pay the costs.