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English High Court considers interpretation of arbitration clause written in foreign language
English High Court considers interpretation of arbitration clause written in foreign language
22 August 2018
Series
Blogs
22 August 2018
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.
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.
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:
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.