English High Court takes a “broad view of the factual matrix” in deciding scope of matters referred to arbitration
The English High Court decision of Bond v Mackay and others  EWHC 2475 (TCC) concerned a situation where, when a claimant sought to bring further issues before an arbitral tribunal, the court was asked to determine whether those issues fell within the scope of the matters referred to the arbitrator and therefore within his jurisdiction. In assessing this, the court took a “broad view of the factual matrix”, finding that the second claim fell within the substantive jurisdiction of the existing arbitration.
The dispute first arose in 2011, when the claimant notified the second and third defendants of its intention to claim compensation with respect to the sterilization of minerals extracted near oil and gas pipelines. The claimant sought compensation under two separate agreements: (i) a BG Deed and (ii) a lease. There were three arbitral regimes in the BG Deed:
1. disputes arising under clauses 2 and 3 were to be determined by a single arbitrator to be agreed or appointed by the President of the Royal Institute of Chartered Surveyors (RICS);
2. disputes arising under clause 5 were to be determined by a single arbitrator to be agreed by the parties, and in the default of such agreement, by the Lands Tribunal (now the Upper Tribunal); and
3. disputes arising under clause 6 were to be determined in accordance with the same arbitral regime under clause 5.
In May 2013 the claimant gave notice to the second and third defendants of its intention to appoint an arbitrator in relation to compensation claims under clauses 5 and 6 of the BG Deed. In August 2013, the President of RICS appointed Mr Mackay (the first defendant) as arbitrator, despite the BG Deed providing that an arbitrator for claims under clause 5 and 6 should be agreed by the parties or, in the absence of such an agreement, by the Upper Tribunal. The second and third defendants initially objected to the arbitrator’s appointment and jurisdiction, but subsequently participated in the arbitration without any reservation of that position.
The arbitrator dismissed the claims in an award issued in July 2015 but the claimant appealed successfully to the High Court. The contents of the court order were not relevant to the latest challenge.
Having successfully appealed the dismissal of its claims, in 2017, the claimant wrote to the second and third defendants, notifying them of a potential dispute under clause 2(i) of the BG Deed and claiming that the third defendant had breached that clause (the “Clause 2(i) Dispute”). The claimant received no response and so in May 2017 requested that Mr Mackay be appointed as arbitrator for the Clause 2(i) Dispute. The claimant also requested that the Clause 2(i) Dispute be joined with the current, ongoing arbitration of the other issues, its case being that it was within the ambit of that arbitration and that “there is in effect only one dispute”.
The arbitrator’s second award was delivered to the parties in February 2018, and then amended in March 2018. He disagreed with the claimant’s position and found that the Clause 2(i) Dispute was not within the scope of the initial reference of the ongoing arbitration. The claimant challenged this under section 67 of the Arbitration Act 1996 (which permits, in an arbitration with seat in England, a challenge to the tribunal’s award as to its substantive jurisdiction).
The High Court’s decision
Davis QC (sitting as Deputy High Court judge) disagreed with the arbitrator’s finding that the Clause 2(i) Dispute was not within the initial reference to arbitration. The court noted that the reasons behind the arbitrator’s award were difficult to follow and that the court was essentially rehearing the matter of jurisdiction. In this respect the principal issue appeared to be whether a dispute under clause 2(i) was outside the matters referred to the arbitrator because the arbitration had initially proceeded on the basis of disputes under different clauses of the BG Deed. The judge disagreed with such an approach. He instead found that the court should take a “broad view of the factual matrix” in determining what had been referred, including the wider factual background such as correspondence leading up to the appointment of the arbitrator and the acceptance of the appointment.
Against that context, the judge accepted the claimant’s argument that the matter referred to the arbitrator was correctly seen as a claim for “compensation”, “whether that be under Clause 2(i), 5 or 6” . Thus, the fact that a breach of clause 2(i) was not initially referred to from the outset did not mean that it was outside the arbitrator’s jurisdiction.
CommentIn Bond v Mackay the court took a somewhat liberal approach to determine which matters had been referred to arbitration, looking at the situation in the round rather than allowing itself to be tied down by the particularities of what is pleaded. This is a practical approach (in recognising that there was a single dispute in this case (the claim for compensation) which could be more efficiently resolved in a single arbitration), although it also needs to be seen in context. The judge noted that this was not a situation where, for example, terms of reference were required under institutional rules, so in circumstances where the matters to be referred to the tribunal have been defined and agreed upon at an early stage, there may not be the latitude (or the need) for such an approach.
Read the full judgment here.
Sadie Buls and Stephen Lacey would like to thank Seraphina Chew for her assistance in the preparation of this article.