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Set aside decision highlights important practice point for Requests for Arbitration under LCIA rules
Set aside decision highlights important practice point for Requests for Arbitration under LCIA rules
8 February 2018
Series
Blogs
8 February 2018
In A v B [2017] EWHC 3417 London’s Commercial Court held that the LCIA rules did not permit a Request for Arbitration filed by the claimant to include related claims under two contracts and their associated LCIA arbitration agreements (thereby denying the tribunal jurisdiction). Claimants in LCIA arbitrations may therefore well wish to consider filing multiple requests in like circumstances in future.
The claimant and respondent agreed the sale of two consignments of crude oil under two separate contracts (the “First Contract” and the “Second Contract”). Each contract was governed by English law and contained an LCIA arbitration clause.
The claimant alleged that the respondent failed to pay the price due under the contracts and commenced LCIA arbitration against the respondent (“the Arbitration”), delivering a single Request for Arbitration (“the Request”) accompanied by payment of a single registration fee. The claim was for full purchase price due under the First Contract and full purchase price due under the Second Contract. On 31 October 2016, the respondent served its Response, denying liability and reserving its rights to challenge the jurisdiction of the LCIA and any arbitral tribunal appointed.
On 24 May 2017, the respondent challenged the validity of the claimant’s Request on the ground that, by purporting to refer claims under both the First Contract and the Second Contract, the Request failed to identify the particular dispute and the particular arbitration agreement to which it related. The respondent made this challenge shortly before serving its Statement of Defence on 2 June 2017. The tribunal decided that the respondent’s right to object had been lost because it had been brought too late. The tribunal did not decide on the merits of the objection itself.
The respondent sought to challenge the tribunal’s award on jurisdiction by way of application under s.67 Arbitration Act 1996 (“AA”). That section permits, in relation to arbitrations with seat in England, a party to challenge the tribunal’s award on jurisdiction, or on the merits, on the basis that it had no substantive jurisdiction. A party may, however, lose the right to object (s.73 AA).
The questions for the court, therefore, were (i) whether a single request for LCIA arbitration, seeking to refer disputes under two separate contracts (each containing an LCIA arbitration clause), was valid; and (ii) whether, if the request was not valid, the respondent had lost the right to object by failing to take the point until after service of its Response and shortly before its Statement of Defence was due.
Was the Request invalid?
The respondent argued that Article 1 of the LCIA Rules makes clear that a request for arbitration must identify “the dispute” to which it relates and the particular arbitration agreement which is being invoked. In this case, the Request referred to two disputes, governed by two distinct arbitration clauses. This made it impossible to determine which dispute and which arbitration clause are properly the subject matter of the Arbitration. As such, the Request failed to commence an arbitration in relation to an identified dispute.
The claimant did not dispute that, in principle, an arbitration can generally only encompass a dispute arising under a single arbitration agreement but argued that the Request validly and effectively commenced two separate arbitrations, one relating to the First Contract and one relating to the Second Contract.
The Court rejected the claimant’s argument, finding that it is “entirely plain that the LCIA Rules treat a single request as giving rise to a single arbitration, the payment of fees for one arbitration and the formation of a single arbitral tribunal.” It found support for this literal reading of the relevant provisions of the LCIA Rules in further of their characteristics, such as the tribunal’s power to consolidate and the clear intent that a party would not be able to pay one filing fee to commence multiple arbitrations. The Court distinguished this case from previous English authorities which had taken a different approach on the basis that they related to ad hoc arbitrations, not a case where the LCIA Rules applied. Accordingly, the Court accepted a reading of those rules whereby separate Requests should deal with each arbitration.
Was the respondent’s objection out of time?
Having found that the Request was invalid, the Court then had to determine whether, applying Article 23.3 of the LCIA Rules, and s.31 and s.73 AA, those being the relevant procedural provisions of the seat, the respondent had lost its right to object. The debate was essentially whether, under those provisions, the respondent was entitled to raise its jurisdictional objection no later than the time for its statement of defence. The Court found that it was so entitled which meant, in this case, the respondent had not lost its right to object under English law.
The Court placed heavy emphasis in its analysis on the absence in Article 1 LCIA 2014 Rules of relevant references to the plural (in contrast with the recently revised rules of other arbitral institutions which expressly refer to the possibility of a request referencing claims arising under multiple arbitration agreements). It also stressed that its interpretation was consistent with other aspects of the LCIA Rules. This case therefore raises a significant practical point regarding the filing of Requests for Arbitration in LCIA arbitrations in cases with related disputes arising under multiple contracts containing LCIA arbitration agreements. As a result, the safest procedural play for claimants to consider in such circumstances (and to avoid the need to rely on, for example, any potential loss of the respondent’s right to object) would be to commence each dispute with a separate request and then to, in so far as is available, seek consolidation. A similar course of action may need to be considered to the extent that other institutional rules, or arbitral regimes, contain similar provisions in any given case.