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England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Bilta (UK) Ltd (In Liquidation) v Nazir & Ors  EWHC 1086 (Ch) (17 May 2010)
Cite as:  EWHC 1086 (Ch),  2 Lloyd's Rep 29,  Bus LR 1634
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Strand, London, WC2A 2LL
B e f o r e :
| Bilta (UK) Limited (in liquidation)
|- and -
Pan 1 Limited
Aman Ullah Khan
Sheikh Zulfiqar Mahmood
Trading House Group Limited (BVI)
Muhammad Fayyaz Shafiq
Mr Graham Charkham (instructed by MacFarlanes LLP) for the Sixth Defendant
Hearing dates: 5/4/10
Crown Copyright ©
Mr Justice Sales :
The legal framework
"9. Stay of legal proceedings
(1) A party to an arbitration agreement against whom legal proceedings are brought (whether by way of claim or counterclaim) in respect of a matter which under the agreement is to be referred to arbitration may (upon notice to the other parties to the proceedings) apply to the court in which the proceedings have been brought to stay the proceedings so far as they concern that matter.
(2) An application may be made notwithstanding that the matter is to be referred to arbitration only after the exhaustion of other dispute resolution procedures.
(3) An application may not be made by a person before taking the appropriate procedural step (if any) to acknowledge the legal proceedings against him or after he has taken any step in those proceedings to answer the substantive claim.
(4) On application under this section the court shall grant a stay unless satisfied that the arbitration agreement is null and void, inoperative, or incapable of being performed. …"
"11-(1) A defendant who wishes to –
(a) dispute the court's jurisdiction to try the claim; or
(b) argue that the court should not exercise its jurisdiction,
may apply to the court for an order declaring that it has no such jurisdiction or should not exercise any jurisdiction which it may have.
(2) A defendant who wishes to make such an application must first file an acknowledgement of service in accordance with Part 10.
(3) A defendant who files an acknowledgement of service does not, by doing so, lose any right that he may have to dispute the court's jurisdiction.
(4) An application under this rule must –
(a) be made within 14 days after filing an acknowledgement of service; and
(b) be supported by evidence.
(5) If the defendant –
(a) files an acknowledgement of service; and
(b) does not make such an application within the period for specified in paragraph (4),
he is to be treated as having accepted that the court has jurisdiction to try the claim. …"
"62.8 – (1) An application notice seeking a stay of legal proceedings under section 9 of the 1996 Act must be served on all parties to those proceedings who have given an address for service.
(2) A copy of an application notice under paragraph (1) must be served on any other party to the legal proceedings (whether or not he is within the jurisdiction) who has not given an address for service, at –
(a) his last known address; or
(b) a place where it is likely to come to his attention.
(3) Where a question arises as to whether –
(a) an arbitration agreement has been concluded; or
(b) the dispute which is the subject-matter of the proceedings falls within the terms of such an agreement,
the court may decide that question or give directions to enable it to be decided and may order the proceedings to be stayed pending its decision."
The nature of Bilta's claims against Jetivia
Ground 1 - The Framework Agreement
"8.7 This Agreement and sale and buy transactions shall be governed by Swiss law without regard to conflict of law provisions. Any dispute arising under, out of or in connection with this Agreement or under, out of or in connection with sale and buy transactions shall be resolved by arbitration. The language of arbitration shall be English. The appointing authority shall be the Secretary General of the Permanent Court of Arbitration. The number of arbitrators shall be three. The place of arbitration shall be Hague, The Netherlands, and the applicable rules of arbitration shall be the Optional Rules for Arbitration of Disputes Relating to Natural Resources and/or the Environment, as in effect at the time of commencement of arbitration."
Ground 2 – The scope of clause 8.7
Ground 3 - Has Jetivia lost the right to seek a stay of the court proceedings?
i) The ethos of the 1996 Act is to support and encourage arbitration as a free-standing system which is not to be regarded as a poor relation to court proceedings: see Lesotho Highlands Development, paras. -. This general objective supports the view that Parliament did not intend that rights to seek to refer disputes to arbitration should be lost with undue ease and hence supports the view that the procedural code in section 9 should be taken at face value and not read subject to other technical procedural limits not spelled out in it;
ii) The 1996 Act was drafted with the terms of the UNCITRAL Model Law on International Commercial Arbitration (1985) in mind: see Patel v Patel  QB 551, 556C-F (Lord Woolf MR). So far as is relevant to the interpretation of section 9, Article 8 of the Model Law provides:"(1) A court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed…"That provision frames a right for a party to require a court to refer the parties to arbitration ("a court… shall, if a party so requests… refer the parties to arbitration…") provided the application is made before the party submits his first statement on the substance of the dispute. Section 9(4) of the 1996 Act, taken with section 9(1), indicates that section 9 was intended to create such a right in domestic law. Since section 9 was intended to give effect to the right in the Model Law, which would be incompatible with the operation of CPR Part 11 being overlaid on top of the regime in section 9, this also indicates that Parliament intended that the regime in section 9 should displace any possible application of that in CPR Part 11;
iii) The part of the CPR which is expressed to apply in relation to arbitration proceedings and which covers applications under section 9 of the 1996 Act is CPR Part 62. There is no indication in CPR Part 62 that CPR Part 11 applies in relation to applications for a stay made under section 9 of the 1996 Act. On the contrary, CPR Part 62.8(1) refers to the application for a stay as being made under section 9 of the 1996 Act, which reinforces the impression that section 9 is to be taken to create the legal code which governs such applications;
iv) There is nothing in the commentary on CPR Part 62 in the White Book to suggest that CPR Part 11 applies to applications for a stay under section 9 of the 1996 Act. The stray reference in para. 11.1.1 of the notes in the White Book which suggests that CPR Part 11 may apply in relation to such an application is unsupported by citation of authority. None of the leading commentaries on commercial arbitration to which I was taken (Ambrose & Maxwell, London Maritime Arbitration, 3rd ed. 2009; Merkin, Law of Arbitration; Mustill & Boyd, Commercial Arbitration) contain any suggestion that CPR Part 11 applies in relation to an application for a stay under section 9 of the 1996 Act. Moreover, according to counsel's researches, in all the years of case law on section 9 of the 1996 Act there is no authority which suggests that the procedural regime set out in the primary legislation concerning arbitrations is also subject to CPR Part 11. The Court of Appeal in Hoddinott did not address this point. I agree with Mr Charkham for Jetivia that this absence of any reference to CPR Part 11 in the arbitration authorities would be an extraordinary lacuna, if Parliament had really intended that applications under section 9 should be subject to CPR Part 11.
"On those authorities, it seems to me that in order to deprive a defendant of his recourse to arbitration a "step in the proceedings" must be one which impliedly affirms the correctness of the proceedings and the willingness of the defendant to go along with a determination by the Courts of law instead of arbitration."
"… (e) An act which would otherwise be regarded as a step in the proceedings will not be treated as such if the applicant has specifically stated that he intends to seek a stay."
He also referred to the further principle set out in the commentary in Merkin as follows:
"The right to apply for a stay will also be lost if the defendant in the judicial proceedings has expressly or impliedly represented that he does not intend to refer the issues in dispute to arbitration. The matter is determined by the usual rules applicable to estoppel, i.e. has the defendant unequivocally represented that there will be no reference to arbitration, and has the plaintiff conducted his affairs on the basis that the matter will be determined by the court, in reliance on that representation?"
In that case, in an affidavit served shortly after the application to set aside the judgment was issued, the defendant stated that he intended to seek a stay of the proceedings. Otton LJ held that this also had the effect that no relevant step in the proceedings falling within section 9(3) had been taken. Ward LJ agreed with both judgments.
Jetivia's relationship with your client is governed by a Framework Agreement dated 4 March 2009 ("the Framework Agreement"). A copy is enclosed. It is unclear why you have made no reference to this at all in the Particulars of Claim.
We refer you to clause 8.7 of the Framework Agreement. Please explain on what basis you contend that your client is entitled to bring proceedings against Jetivia in the English courts, given those provisions. We expressly reserve Jetivia's position in respect of the jurisdiction of the English court. The remainder of this letter is without prejudice to Jetivia's right to contend that this matter must be dealt with by arbitration in accordance with the contract."
MacFarlanes then proceeded to set out Jetivia's position on the facts to explain why it did not consider it had any liability to Bilta and asking for explanations about Bilta's and the liquidator's conduct. The letter concluded:
"In the light of the above, we invite you to provide a full and proper explanation of the matters raised in this letter as a matter of urgency.
Furthermore, we propose extending the time for service of our clients' defence by 21 days to 13 January 2010. The extension of time would give your client an opportunity to address the matters raised in this letter and give our clients the further information necessary to better understand the basis of your client's claim against it. We should be grateful if you would confirm your agreement to the proposed extension of time for service of the defence."
Future conduct of the proceedings