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You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> C v D [2007] EWHC 1541 (Comm) (28 June 2007) URL: https://www.bailii.org/ew/cases/EWHC/Comm/2007/1541.html Cite as: [2007] EWHC 1541 (Comm), [2007] 2 All ER (Comm) 557, [2007] ArbLR 9 |
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QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Strand, London, WC2A 2LL |
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B e f o r e :
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C |
Claimant |
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- and - |
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D |
Defendant |
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Jonathan Hirst QC, Robert Howe and Shaheed Fatima (instructed by Robin Simon LLP) for the Defendant
Hearing dates: 20-21 June 2007
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Crown Copyright ©
Mr Justice Cooke :
Introduction
"(1) An injunction, pursuant to section 44 of the Arbitration Act 1996 and/or section 37 of the Supreme Court Act 1981 and/or the inherent jurisdiction of the Court, restraining the defendant from bringing any legal proceedings and/or taking any steps to:-
(a) challenge and/or vacate and/or review (otherwise than in the Courts of England and Wales) the Partial Award dated 13 March 2007 [the Partial Award] rendered by [The Tribunal] in a London arbitration between the claimant and the defendant (the "Arbitration") and/or challenge and/or vacate and/or review (otherwise than in the Courts of England and Wales) any other award rendered by the Tribunal in the Arbitration (a "Subsequent Award"); or
(b) enjoin or restrain the claimant from taking any steps to seek to confirm or enforce the Partial Award and/or any Subsequent Award or to seek in any court the registration or conversion into a judgment of the Award and/or any subsequent Award; or
(c) enjoin or restrain the claimant from taking any steps against the defendant in the Courts of England and Wales in respect of the Arbitration and/or the Partial Award and/or any Subsequent Award; or
(d) enjoin or restrain the claimant from taking any further steps in the Arbitration.
(2) Such further or other relief as may be just and appropriate.
(3) A declaration that the Partial Award is final and binding."
D applies for these proceedings to be stayed until after the conclusion of any challenge by it to the Partial Award and/or any subsequent Award in the courts of the United States. It is D's expressed intention to mount such a challenge in the Southern District of New York after the arbitrators have determined the remaining issues in the arbitration and issued their award in relation to them, if not before.
The Insurance Policy
"Any dispute arising under this Policy shall be finally and fully determined in London, England under the provisions of the English Arbitration Act of 1950 as amended…
If the party…notified of a desire for arbitration shall fail or refuse to nominate the second arbitrator…the party who first served notice of a desire to arbitrate will…apply to a judge of the High Court of England for the appointment of a second arbitrator…In the event of the failure of the first two arbitrators to agree on a third arbitrator…any of the parties may…apply to a judge of the High Court of England for the appointment of the third arbitrator….
The Board shall, within 90 calendar days following the conclusion of the hearing, render its decision on the matter or matters in controversy in writing…In case the Board fails to meet a unanimous decision, the decision of the majority of the members of the Board shall be deemed to be the decision of the Board and the same shall be final and binding on the parties thereto, and such decision shall be a complete defence to any attempted appeal or litigation of such decision in the absence of fraud or collusion."
"This policy shall be governed by and construed in accordance with the internal laws of the State of New York, except insofar as such laws may prohibit payment in respect of punitive damages hereunder and except insofar as such laws pertain to regulation by the Insurance Department of the State of New York of insurers doing insurance business or issuance or delivery of policies of insurance within the State of New York; provided, however, that the provisions, stipulations, exclusions and conditions of this policy are to be construed in an evenhanded fashion as between the Insured and the Company; without limitation, where the language of this policy is deemed to be ambiguous or otherwise unclear, the issue shall be resolved in the manner most consistent with the relevant provisions, stipulations, exclusions and conditions [without regard to authorship of the language, without any presumption or arbitrary interpretation or construction in favour of either the Insured of the Company and without reference to parol evidence]."
"In consideration of the premium charged it is hereby understood and agreed that in the event of failure by D (herein called "the Company") to pay any amount claimed to be due hereunder, the Company, at the request of the Insured, will submit to the jurisdiction of a court of competent jurisdiction within the United States. Nothing in this condition constitutes or should be understood to constitute a waiver of the Company's rights to commence an action in any court of competent jurisdiction in the United States to remove an action to a United States District Court, or to seek a transfer of a case to another court as permitted by the laws of the United States or of any state in the United States. It is further agreed that service of process in such suit may be made upon Counsel, [an address in New Jersey], or his or her representative, and that in any suit instituted against the Company upon this contract, the Company will abide by the final decision of such court or of any appellate court in the event of any appeal.
Further, pursuant to any statute of any state, territory, or district of the United States which makes provision therefor, the Company hereby designates the Superintendent, Commissioner, or Director of Insurance, other officer specified for that purpose in the statute, or his or her successor or successors in office as its true and lawful attorney upon whom may be served any lawful process in any action, suit, or proceeding instituted by or on behalf of the Insured or any beneficiary hereunder arising out of this contract of insurance, and hereby designates the above named Counsel as the person to which the said officer is authorized to mail such process or a true copy thereof."
The Reference to Arbitration
"2. Appointment of Tribunal
(a) The parties confirm their acceptance that the Tribunal composed of….has been validly established in accordance with article V of their Insuring Agreements…
8. Applicable Law
(a) Pursuant to article V[q] of the Agreement, the law governing the insurance policy is the law of the State of New York, USA.
(b) Pursuant to article V[o] of the Agreement, the juridical seat of the arbitration is London, UK. Accordingly the law governing the arbitration itself [Lex Arbitri] is the English Arbitration Act 1996, as amended and supplemented, regardless of whether meetings and hearings take place elsewhere in the interests of saving costs or convenience."
The Parties' Respective Cases
New York Law
i) A foreign award can be a non-Convention Award if it falls within the second sentence of section 202 of the Federal Arbitration Act (the FAA) which provides as follows:-
"an arbitration agreement or arbitral award arising out of a legal relationship, whether contractual or not, which is considered as commercial, including a transaction, contract or agreement described in [chapter 2 of the FAA] falls under the Convention. An agreement or award arising out of such a relationship which is entirely between citizens of the United States shall be deemed not to fall under the Convention unless that relationship involves property located abroad, envisages performance or enforcement abroad, or has some other reasonable relation with one or more foreign states".
Thus, notwithstanding the terms of Article 1(1) of the 1958 Convention which provides that "this convention shall apply to (1) the recognition and enforcement of arbitral awards made in the territory of a state other than the state where the recognition and enforcement of such awards are sought", D submitted that the US enabling act limited the enactment of that article with the result that a foreign award arising out of a legal relationship entirely between citizens of the United States and without any reasonable relation with a foreign state, was to be treated by the New York courts as a non-Convention award.
ii) A non-Convention award is governed by Chapter 1 of the FAA which permits a party to an arbitration to seek to confirm, modify or vacate an arbitration award pursuant to sections 9-11 in any US court where venue is proper under the general federal venue statute. Although not expressly stated in Chapter 1, a manifest disregard of New York Law is, by virtue of binding authority, a ground for review.
iii) The right of review under Chapter 1 of the FAA provides for a minimum standard of review from which the parties cannot derogate by contract.
iv) If an award is a Convention award for the purposes of New York law, the only right is to resist enforcement on the limited grounds set out in part V of the 1958 Convention.
v) The Partial Award is a non-Convention award, in the eyes of the United States court, because it arises out of a commercial legal relationship entirely between citizens of the United States without a reasonable relation with a foreign state.
English Conflict of Laws Principles
The Significance of the Seat of the Arbitration
"1. Not only was the meaning of the terms of the arbitration agreement to be determined in accordance with Swiss law but so also was the effect of the alleged misrepresentation and duress or breach of the fiduciary duty on the enforceability of the arbitration agreement….
2. Whether it should be the arbitrator or the court that decided in the first instance whether the arbitration agreement should be avoided ab initio or rescinded and, if the arbitrator, what right of recourse to the Swiss courts might be available to either party who wished to challenge the arbitrator's decision would be determined in accordance with Swiss law exclusively in the Swiss courts, Geneva being the place of the seat of the arbitration. For an agreement as to the seat of an arbitration is analogous to an exclusive jurisdiction clause. Any claim for a remedy going to the existence or scope of the arbitrator's jurisdiction or as to the validity of an existing interim or final award is agreed to be made only in the courts of the place designated as the seat of the arbitration. It is thus not merely, as was stated by Lord Phillips in the Court of Appeal judgment in this case, that the "natural consequence" of the arbitration agreement was that any issue as to the validity of the arbitration provisions would fall to be resolved in Switzerland according to Swiss law, but that it would be a breach of agreement to invite the courts of any other place to resolve such an issue or at least to order a remedy founded on such resolution. This analysis reflects international arbitration practice over the entire period since the coming into effect of the New York Convention. The provisions of Article V of that Convention rests on that basis…."
"The agreement as to the exclusive jurisdiction of the Swiss courts to resolve issues falling within their supervisory jurisdiction, even if the arbitration agreement subsequently were held by these courts to be voidable or invalid, would still be an effective means of vesting exclusive jurisdiction in them, for the Kompetenz - Kompetenz principle would apply as fully to that jurisdiction as to the jurisdiction of the arbitrator. Were it otherwise, the whole structure of the supervisory jurisdiction of the seat of an international arbitration would be completely undermined. Accordingly, just as a breach of an arbitration or jurisdiction agreement can properly be reflected in an award of damages, so breach of the jurisdiction agreement vesting supervisory jurisdiction in the courts of the seat of the arbitration can be remediable in damages and upon an application in which one party ignores that agreement and is unsuccessful in so doing, by an order for costs against that party on an indemnity basis."
The Proper Law of the Arbitration Agreement
i) This expressly provides for any dispute to be "finally and fully determined in London, England under the provisions of the English Arbitration Act of 1950 as amended" and thereby specifically brings in the terms of the English Arbitration Act.
ii) There is also express reference to applications to a Judge of the High Court in this country to make good defaults in the appointment of arbitrators.
iii) There is the express provision that the decision of the Board is to be "final and binding on the parties..and..a complete defence to any attempted appeal or litigation of such decision in the absence of fraud or collusion".
"Arbitration law is all about a particular method of resolving disputes. Its substances and processes are closely intertwined. The Arbitration Act contains various provisions which could not readily be separated into boxes labelled substantive arbitration law or procedural law, because that would be an artificial division.
….
The choice of law clause has to be considered in conjunction with the arbitration clause by which the parties chose that any dispute relating to the policy should be determined not only in London, but expressly under the provisions of the Arbitration Act 1996, with the modification that they waived any right to apply to the Court under s.45 for the determination of a question of law arising in the course of proceedings and any right of appeal under s.69 on a point of law…
…when..the arbitration clause provided that an award should be a complete defence to any attempted appeal or litigation of the decision in the absence of serious irregularity under s.68, it cannot have meant that such irregularity should be judged otherwise than by English law….
I concluded that by stipulating for arbitration in London under the provisions of the Act (other than ss.45 and 69) the parties chose English law to govern the matters which fall within those provisions, including the formal validity of the arbitration clause and the jurisdiction of the arbitral tribunal; and by implication chose English law as the proper law of the arbitration clause (although that final step is further than is necessary for the purpose of determining this application)."
The Consequences
Conclusion