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England and Wales High Court (Commercial Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Claxton Engineering Services Ltd v TXM Olaj-Es Gazkutato KTF  EWHC 345 (Comm) (01 February 2011)
Cite as:  1 Lloyd's Rep 510,  EWHC 345 (Comm),  2 All ER (Comm) 128,  ArbLR 1
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QUEEN'S BENCH DIVISION
London WC2A 2LL
B e f o r e :
|CLAXTON ENGINEERING SERVICES LIMITED||Applicant/Claimant|
|- and -|
|TXM OLAJ-ES GAZKUTATO KTF||Respondent/Defendant|
101 Finsbury Pavement London EC2A 1ER
Tel No: 020 7422 6131 Fax No: 020 7422 6134
Web: www.merrillcorp.com/mls Email: email@example.com
(Official Shorthand Writers to the Court)
MR S SHACKLETON (instructed by Mundays LLP) appeared on behalf of the Defendant
Crown Copyright ©
Background and History of Proceedings
"12. Mr. Stewart Shackleton, solicitor advocate and partner in the firm of SR Shackletons LLP, formerly a partner in Eversheds LLP, the solicitors formerly acting for TXM, submitted that the correct approach was for this court to conduct only a prima facie review of the existence of an arbitration agreement and refer the merits of all objections raised as to the scope, existence and validity of an arbitration agreement to a future Hungarian arbitral tribunal, for it to decide. He submitted that this was consistent with: (i) the United Kingdom's obligations to enforce arbitration agreements under the New York Convention 1 ; (ii) the principle of compétence-compétence, now entrenched in the Arbitration Act 1996 ("the Act"); and (iii) the non-interventionist policy of the Act. He further submitted that the parties' contracts in this case referred to an arbitration agreement in writing. Accordingly, he submitted an arbitration agreement has prima facie been concluded and governed the parties' disputes. On this basis he submitted that the court should grant a stay of proceedings and remit the issue as to whether an arbitration agreement in fact existed to a Hungarian Tribunal.
13. In support of his arguments, Mr. Shackleton relied upon: the decision of Thomas J (as he then was) in Vale do Rio Doce Navagaçao SA and Anr v Shanghai Bao Steel Ocean Shipping Co Ltd and Anr ; 2 the decision of Toulson J (as he then was) in XL Insurance Limited v Owens Corning : 3 and the decision of HH Judge Thornton, QC in Signet Health Care plc v Higgins City Ltd . 4
14. Mr. Matthew Cook, counsel acting on behalf of Claxton, submitted that, following the Court of Appeal decision in Ahmad Al Naimi v Islamic Press Agency 5, the established position is that, in circumstances such as the present, it is appropriate for the court to decide threshold questions of jurisdiction rather than deferring such questions to arbitral tribunals. He submitted that the cases to which Mr. Shackleton referred related to cases where the issue was whether a contract, that would have included an arbitration clause, had been formed. He submitted that the issue in this case, in any event, is whether the English High Court or a Hungarian arbitral tribunal has jurisdiction. Given that the English High Court is first seized of that issue, and, depending upon the resolution of that issue, may have exclusive jurisdiction to resolve all disputes between the parties, he submitted that there was no basis for the English High Court to defer to an unformed arbitral tribunal to resolve the threshold issue.
15. Both Mr. Cook and Mr. Shackleton agreed that, if it were necessary for the English court to decide the threshold question as to whether the relevant contract between the parties contained a Hungarian arbitration clause or an English court exclusive jurisdiction clause, it could do so on the basis of the evidence before the court on the application, without the need for further evidence or cross-examination. That is because all the relevant communications consist of written or e-mail communications between the parties, save in one or two instances which are not material for the purposes of my determination.
16. In my judgment, the correct approach in circumstances such as these is that set out by the Court of Appeal in Ahmad Al Naimi v Islamic Press Agency 6, which is binding on me. In a case where the issue is whether the underlying dispute is subject to an arbitration agreement at all, the court has a choice whether to decide that issue itself, or to stay proceedings whilst that issue is referred to arbitration. The Court of Appeal approved the approach taken by His Honour Judge Humphrey Lloyd QC in Birse Construction Limited v St. David Limited 7 where the latter identified a number of factors which may influence a court as to what choice it makes. These factors include the circumstances of the application, the clarity of the evidence as to whether an arbitration agreement existed in relation to the particular dispute, the interests of the parties, the avoidance of unnecessary cost and expense, whether it would be more sensible to leave the matter to the arbitrators to decide, and whether an arbitration was going to take place in any event.
17. In the circumstances of this case, where Claxton is contending that the contract is subject to an exclusive English court jurisdiction clause, and TXM is contending that it is subject to a Hungarian arbitration agreement, and both parties have agreed that the matter is capable of being resolved on the basis of the written evidence before me, without cross-examination or further evidence, it seems to me to be wholly appropriate that this court should resolve the threshold issue. The cases cited by Mr. Shackleton relate to very different situations from those in the present case. If Claxton is right, it has an entitlement to have its claim litigated subject to the exclusive jurisdiction of the English Court, and subject to English law. If TXM is correct, the Hungarian arbitration will proceed in any event and the Hungarian tribunal will be spared the task of determining whether it has jurisdiction. Conversely, were the matter to be remitted to a Hungarian tribunal forthwith, and subsequently a Hungarian tribunal were to decide that it did not have jurisdiction, further time and costs would have been wasted whilst the dispute was resubmitted to the English court.
18. Accordingly I propose to decide the threshold question."
"The agreement shall be governed by and interpreted in accordance with the laws of England and the parties hereby submit to the exclusive jurisdiction of the English courts."
a) The judge was correct to follow Ahmed Al Naimi  1 Lloyd's Rep 522 and determine the matter on the materials before her. She was faced with an action properly brought in England pursuant to Article 5.1(b) of Regulation (EC)44/2001. The defendants sought a stay because they argued that it had been agreed that any dispute should be referred to arbitration in Hungary; the defendants had therefore to show that such an agreement existed; the separability of the agreement to arbitrate (if it existed) does not help to determine whether any such agreement did, in fact, exist.
b) The judge was likewise correct to determine that no such agreement existed for the simple reason that Ms Claxton made it clear to TXM on 19th June 2006 that she was not prepared to agree any such arbitration.
c) & d) Ms Claxton also made it clear that she wanted both parties to submit to the exclusive jurisdiction of the English courts. Whether or not the parties did so agree does not matter because the English court has jurisdiction pursuant to Article 5.1(b) above.
The judge was right, therefore, to dismiss the defendant's application and also the defendant's application that the proceedings be stayed pending any application for permission to appeal. The parties should proceed to have the merits of the dispute determined rather than resorting to unnecessary interlocutory wrangles."
"It is incompatible with Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters for a court of a Member State to make an order to restrain a person from commencing or continuing proceedings before the courts of another Member State on the ground that such proceedings would be contrary to an arbitration agreement."
"(1)The High Court may by order (whether interlocutory or final) grant an injunction or appoint a receiver in all cases in which it appears to the court to be just and convenient to do so. (2)Any such order may be made either unconditionally or on such terms and conditions as the court thinks just."
" … every arbitration must have a 'seat' or locus arbitri or forum which subjects its procedural rules to the municipal law which is there in force. … Prima facie, i.e. in the absence of some express and clear provision to the contrary, it must follow that an agreement that the curial or procedural law of an arbitration is to be the law of X has the consequence that X is also the law of the 'seat' of the arbitration. The lex fori is then the law of X and accordingly X is the agreed forum of the arbitration. A further consequence is then that the courts which are competent to control or assist the arbitration are the courts exercising jurisdiction at X."
"The court of a Contracting State, when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed."