Lloyd's Maritime and Commercial Law Quarterly
CONSTRUCTION OF AN ARBITRATION AGREEMENT; DECONSTRUCTION OF AN ARBITRATION CLAUSE
Fiona Trust v. Privalov
The House of Lords, speaking through Lord Hoffmann,1
has delivered a resounding endorsement of the decision of the Court of Appeal in Fiona Trust & Holding Corp
v. Privalov
.2
As a result shipowners, who claimed to have rescinded certain charterparties which had, as they said, been procured by the charterers’ bribery of their senior officers, found their legal proceedings stayed for arbitration under the Arbitration Act 1996, s 9. The House of Lords dismissed as irrelevant the plea that, but for the bribe, the owners would have made no contract with the charterers, still less one which provided for arbitration. The House also rejected the relevance of previous authority which had considered whether a claim to rescind for pre-contractual bribery was one “arising under this charter”. Two consequences follow, for all practical purposes as rules of English3
law. First, the material scope of a reference to arbitration will be taken to be ample, wide. Little or no attention will be paid to the terminology of the written4
reference if its language might suggest a narrower scope, or support the contention that the dispute in question does not arise under, as distinct from alongside or before, a contract. This approach was attributed to commercial common sense, as no reasonable businessman would agree to refer to arbitration only some of all the disputes which might have been foreseen.5
Secondly, an arbitration agreement in a contract which had been rescinded or repudiated on grounds which would be, if sustained on the evidence, well founded, will be treated6
as valid and binding, in the sense that the court will not adjudicate its validity but will instead refer the parties to the tribunal for the making of the decision. This result was attributed to the principle that an arbitration agreement is semi-detached from the substantive contract or alleged contract to which it relates. Both conclusions are entirely predictable and defensible, though not beyond respectful doubt. But it is the third
1. Fiona Trust & Holding Corp
v. Privalov
(sub nom Fili Shipping Co Ltd
v. Premium Nafta Products Ltd
) [2007] UKHL 40; [2007] Bus LR 1719. Lord Hoffmann delivered the leading speech, with which Lords Hope of Craighead, Scott of Foscote, Walker of Gestingthorpe and Brown of Eaton-under-Heywood agreed. Lord Hope added some additional comments.
2. [2007] EWCA Civ 20; [2007] Bus LR 686; noted G McMeel [2007] LMCLQ 292.
3. That is, where they are terms of contracts governed by English law, or provisions of arbitration agreements which are themselves governed by English law.
4. Arbitration Act 1996 (by s 5) deals only with written references to arbitration.
5. On this point, the decision must be directly applicable to jurisdiction agreements; for agreements on choice of law, see below.
6. As distinct from the proposition that it is
valid and binding: see below.
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