Resolution Issue 19 Case In Brief

Dispute Resolution Clauses: A song of (dis)harmony

Article by Fiona Tregonning & Kalyani Dixit

The English High Court has dismissed challenges to the jurisdiction of two arbitral tribunals in a case which – notwithstanding the outcome – highlights the importance of parties ensuring their network of contracts have clear, express and aligned dispute resolution clauses.

The claimant, Dreymoor Fertilisers Overseas PTE Ltd (Dreymoor), had sought to challenge under the English Arbitration Act 1996 (the Act) the jurisdiction of two tribunals in separate LCIA and ICC arbitrations initiated by the defendant Eurochem Trading GMBH (ECTG).  The case involved multiple contracts and complex relationships – including some alleged bribery. Dreymoor argued that:

1. the LCIA arbitration clause only covered breaches of the relevant sales contracts, and did not extend to bribery allegations (whether framed in contract or tort) which were the foundation of ECTG’s claims – a challenge under s67(1)(a) of the Act; and

2. the ICC arbitration agreements did not cover claims in relation to Dreymoor at all, and accordingly there was no agreement to arbitrate – a challenge under s32 of the Act.

Both arguments were rejected by the High Court.  The Court took a “liberal or generous interpretation, avoiding narrow distinctions” when construing the LCIA arbitration clause, with the wording “any dispute or claim arising out of this contract” held to be wide enough to cover non-contractual claims such as bribery inducing entry into a contract.  The Court also found that the very wide wording of the ICC arbitration clause meant that Dreymoor was a party, as this was the “governing intention” of the contract, notwithstanding that under the contract there was no provision for Dreymoor itself to appoint an arbitrator.

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