22 August 2018 Stephen Lacey ArbitrationLinks

English High Court considers interpretation of arbitration clause written in foreign language

A recent decision of the English High Court, A v B [2018] EWHC 1370 (Comm), provides important guidance about the interpretation of arbitration clauses under English law when first written in a foreign language. The essence of the judgment is that, where the translation is contested, any ambiguity should be resolved by standard methods of contractual construction.

Facts

A dispute arose between parties to a charterparty that was written in Russian but governed by English law. It contained arbitration provisions in two parts of the contract. The literal translation of the first read:

“Arbitration proceedings – London international arbitration court, in accordance with the laws of Great Britain …”  and the second read:

“Any disagreements and disputes … arising out of the C/P are to be resolved by arbitration in New York or London, according to which of these places is provided for in Part I … by a tribunal of three people, one appointed by the owners, one by the charterers, and one appointed by the two arbitrators elected in such a way”.

It was further provided that in the event of any inconsistency the provision in the first part would prevail.

A dispute arose and arbitrators were appointed by the parties on LMAA terms. The defendant then challenged the jurisdiction of the tribunal. The tribunal held that they did not have jurisdiction over the dispute. They had evidence before them that, if “London Court of International Arbitration” (i.e. the LCIA) were translated into Russian, the word order and capitalisation would be close to the wording present in the first part of the contract. This led them to read that as an LCIA arbitration clause, with the second part to be ignored as it was inconsistent (in the sense that it provided for party appointments, not nominations). The claimants challenged this under section 67 of the Arbitration Act 1996.

The High Court’s decision

Phillips J rejected the arbitrators’ mechanistic application of a reverse engineered translation of LCIA. Instead, where there was some doubt or ambiguity, the Court should reach a view on the meaning ‘by way of combined process of assessing the evidence as to the translation together with the usual tools of construction.’  In other words, the correct approach in such a case was to consider the meaning of the clause in the context of the contract as a whole in order to reach a proper interpretation [11-12].

On that basis, Phillips J, in the light of the parties’ competing translations of the clause, proceeded to apply those principles to the provisions which, in the light of the parties’ competing translations, were ambiguous. He concluded that there was no reference to LCIA arbitration considering the following factors:

  • the provisions in the second part of the contract suggested ad hoc arbitration: the mechanism for the appointment of arbitrators (in the sense that it spoke of appointments, not nominations) was more consistent with that concept as was the manner in which it treated the choice of seat. Read together with the first part the suggestion was of ad hoc arbitration;
  • it is unusual for maritime charterparty disputes to be referred to the LCIA; and
  • if the parties intended to refer disputes to the LCIA, they would have taken more care to specifically identify that body.

Phillips J’s conclusion was therefore that the clause provided for an ad hoc international arbitration in London, as opposed to the LCIA. The arbitral tribunal should be appointed in accordance with the mechanism in the charterparty. Therefore, Phillips J held that the arbitrators had jurisdiction over the dispute and ordered that the arbitral award be set aside so that the arbitration could proceed.

Comment and conclusions
A v B is an important judgment in its analysis of the approach to construing foreign language arbitration clauses under English law. Where there is legitimate dispute over the meaning of the translation, they are likely to be regarded as ‘ambiguous’ leading to the court seeking to derive the parties intentions from a purposive analysis of the text and admissible factual background. One key principle is that contractual provisions should be interpreted in the context of the contract as a whole.  A clause should not be read in isolation and may be best understood when considered in conjunction with related clauses. This contextual approach is consistent with the objective of contractual construction: ‘to reach a proper interpretation of the meaning and effect of the contract as agreed by the parties.’ [12]. Of course, irrespective of issues of translation, had the clause, in any event, been more coherently put together, there may have been less scope for dispute in the first place.

Click here for the judgment.

Stephen Lacey would like to thank Stephen Polesel for his assistance in the preparation of this article.