English High Court finds that a failure to comply with a requirement to mediate does not affect the tribunal’s jurisdiction
In NWA & anor v FSY & ors  EWHC 2666 (Comm), the English High Court considered whether the parties’ failure to comply with a contractual requirement to mediate their dispute before arbitration was a matter relevant to admissibility before the tribunal, rather than jurisdiction.
The relevant agreement included a dispute resolution clause, which provided that the parties were to first seek to mediate their dispute, and, if not settled by mediation within 30 days, the dispute was to be referred to arbitration pursuant to the LCIA rules.
A dispute arose and the Defendants sent a request for arbitration to the LCIA and the Claimants, which also requested that the arbitration immediately be stayed following its commencement to allow the parties to mediate in accordance with their agreement. The Claimants refused, for a prolonged period, to engage with the mediation proposal. Against that background, the sole arbitrator handed down a partial award on jurisdiction in which he assessed the mediation clause, and conduct of the parties so far, and concluded that he had jurisdiction to proceed to hear the dispute.
The Claimants challenged the award under s 67 of the Arbitration Act 1996 (which in an English seated arbitration permits an award on jurisdiction to be challenged in court). This raised an important point of principle, namely whether s 67 was available at all since, if the point correctly went to the admissibility of the claims before the tribunal, its decision was a procedural one and not ordinarily capable of challenge.
Jurisdiction or admissibility?
The Court held that the effect of the failure to mediate was a question that went to the admissibility of the claim, not the tribunal’s jurisdiction. In reaching this conclusion, the Court reasoned that:
- the objective intention of the dispute resolution clause was to allow the parties to resolve their disputes swiftly by arbitration;
- the Claimants’ position would mean that one party could refuse to mediate and deprive the tribunal of jurisdiction, despite the parties’ clear intention that their disputes be resolved by arbitration. That would be an absurd result, which would not give the clause business common sense and would not be a construction that a rational businessperson could have intended; and
- this conclusion was reinforced by a separate provision of the agreement, which allowed the arbitrator to consolidate disputes arising out the same dispute resolution clause and expressly stated that there would be no requirement to refer those disputes to mediation before they were consolidated.
In reaching its conclusion, the Court also agreed with the recent decision in Sierra Leone v SL Mining Limited  EWHC 286 (Comm), which was handed down after the tribunal’s award and addressed a similar issue (and which itself distinguished two other prior authorities in which it was assumed s 67 applied without argument). The court also relied on extensive commentary by leading authorities in the field that decisions on objections regarding preconditions to arbitration are matters of admissibility not jurisdiction.
Other grounds for dismissal
The Court then also went on to consider two further arguments relied on by the Claimants in an attempt to cast the issues as a matter of jurisdiction. First, they argued that a failure to mediate should render the arbitration agreement “inoperative” (meaning there was no “valid” arbitration agreement). The Court rejected this argument, finding that the arbitration agreement itself was plainly valid and that the failure to comply with a procedural condition did not affect its validity or render the arbitration agreement itself inoperative. Second, the Claimants attempted to say that a failure to mediate raised questions as to the scope of the matters submitted to arbitration in accordance with the arbitration agreement. Again, the Court disagreed with this argument as it confused issues of scope (which concern whether the dispute is actually arbitrable) with the issue here, which was whether it was procedurally inadmissible.
This decision provides a clear indication that, without clear wording suggesting otherwise, compliance with contractual preconditions to arbitration will be a matter going to admissibility of the dispute and not the tribunal’s jurisdiction – a conclusion which is in line the tribunal having primacy in determining disputes over all aspects of the parties’ contractual relationship. Although this will be the case in deciding whether any ADR, or other, conditions precedent to arbitration have been met, the distinction between admissibility and jurisdiction does not mean parties can ignore any such valid provisions – they should still take care to comply to avoid the tribunal ruling that their dispute is inadmissible.Click here for the judgment.