Overview
In A v B [2017] EWHC 3417 (Comm), the High Court considered whether a single Request for Arbitration was valid in the context of multiple disputes arising under two separate arbitration agreements. The judgment provides clarification on the time limits for a party to issue a jurisdictional challenge when arbitral proceedings are underway.
Factual Background
The parties entered into two contracts, governed by English law, for two consignments of crude oil. The contracts were substantially the same in nature and both referred any disputes to LCIA arbitration. On 23 September 2016, B commenced arbitration proceedings against A by serving a single Request for Arbitration (the “Request“) which, inter alia, alleged that A had failed to pay the sums due under both contracts. B paid a single LCIA registration fee and sought damages under both contracts.
One month later, A served its Response to the Notice of Arbitration, refuting B’s claims and reserved the right to challenge the jurisdiction of the LCIA. On 24 May 2017, 3 months after the formation of the tribunal, the Respondent challenged the tribunal’s jurisdiction to resolve the dispute on the basis that B’s Request was invalid because it failed to stipulate what arbitration agreement the dispute had been commenced under. The Respondent subsequently served its Statement of Defence on 2 June 2017.
The tribunal ruled that A had lost the right to challenge the tribunal’s jurisdiction because it had objected too late. A sought to overturn the tribunal’s decision before the High Court pursuant to s.67 of the Arbitration Act 1996 (the “AA 1996“). The Commercial Court determined that the LCIA Rules do not impose a requirement that an objection should be made before service of the Statement of Defence, therefore the window for A to challenge the tribunal’s jurisdiction had not elapsed. It further found that the Request was invalid with the result that the tribunal did not have jurisdiction to make the Award.
A single Request for multiple arbitrations
The Court considered whether a single Request for LCIA arbitration, seeking to refer disputes under two separate contracts, was valid. It highlighted that the repeated use of a singular subject (“an arbitration”, “the dispute”, “the arbitration agreement”) in Article 1.1 of the LCIA Rules clearly contemplated the commencement of single, not plural, proceedings.
B argued that references to an arbitration (in the singular) can and should be read as including arbitrations (plural) and sought to rely on s.61(c) of the Law of Property Act 1925 which contains the provision “The singular includes the plural and vice versa” to substantiate this point. Mr Justice Phillips found that there was no merit in B’s claims because:
- it is inconceivable that the LCIA Rules could be read as permitting a party to pay only one fee when commencing multiple arbitrations; and
- it is impermissible to consolidate proceedings without first obtaining the consent of all parties.
B also relied on Easybiz Investments v Sinograin (The Biz) [2010] EWHC 2565 (Comm), [2011] 1 Lloyd’s Rep. 688, where a single Request was found to have validly commenced ten distinct arbitrations, and argued that the Court should take a similar approach in the circumstances and look towards the substance of the Request rather than its form. The Court distinguished the decision in The Biz from the case in hand because the former was in relation to an agreement where no institutional arbitral rules had been incorporated into the arbitration agreement. Given the Court’s analysis of the LCIA Rules, Mr Justice Phillips concluded that a reasonable person would have understood the Request as starting one single arbitration and no reasonable reader would conclude otherwise.
Time limit to challenge the tribunal’s jurisdiction
The Court also opined on whether the Respondent has lost the right to object to the tribunal’s jurisdiction because it had failed to take the point until after service of its Response and shortly before its Statement of Defence was due.
In consideration of this point, the Court analysed the time limits to bring a jurisdictional challenge imposed by the LCIA Rules, and sections 31 and 73 of the AA 1996, as follows:
- LCIA Rules Article 23.3: “An objection by a respondent that the Arbitral Tribunal does not have jurisdiction shall be raised as soon as possible but not later than the time for its Statement of Defence“;
- S. 31(1) AA 1996: “An objection that the arbitral tribunal lacks substantive jurisdiction […] must be raised by a party not later that the time he takes the first step in the proceedings […]”;
- S. 73 AA 1996: provides for the loss of the right to object unless an application is brought “forthwith“ (all emphasis added).
Whereas the tribunal found that the Respondent should have raised its objection by the date of service of the Response, the Court concluded that Article 23.3 should follow the application of s.31 AA 1996, which it interpreted as requiring any objection to be raised: (a) no later than the submission of the Statement of Defence (where pleadings are required); or (b) the equivalent stage at which the merits are contested (if no formal pleadings are required). In the circumstances, the time limit to launch an objection was service of the Statement of Defence because the LCIA Rules require formal pleadings.
Comments
The judgment is a cautionary tale for any client intending to commence a LCIA arbitration in respect of multiple arbitration agreements. If it is appropriate to consolidate multiple claims, joinder or consolidation is permitted under the following LCIA Rules:
- Article 22.1(viii): the tribunal may join one or more third persons to the proceedings, but only: (i) on the application of one of the existing parties to the arbitration, and (ii) if the third person expressly consents in writing to such joinder following the commencement date; and
- Article 22.1(x): the tribunal may consolidate arbitrations if they have been commenced under the same, or compatible, arbitration agreements, and providing that: (i) no arbitral tribunal has been formed for the later arbitration(s), or (ii) the same arbitrators have been appointed.
Since this judgment, this law firm has filed a single Request in respect of two arbitrations arising from identical agreements, accompanied by two Registration Fees. Baker McKenzie simultaneously sought the LCIA’s permission to consolidate proceedings and the Respondent’s consent under cover letter to the Request (pursuant to Article 22.1(x)). Following the Respondent’s agreement for the claims to be consolidated, the LCIA subsequently allowed for the proceedings to be consolidated into a single arbitration.
While this approach reduces the amount of paperwork to be drafted by lawyers at the outset and provides for a more streamlined approach in appropriate cases, should the LCIA Court find that there is no merit in consolidating multiple claims then the Claimant will be forced to resubmit separate Requests. Tactically, this may not be attractive to a client who is keen to catch the prospective Respondent off guard, therefore in such circumstances it would be prudent to follow the LCIA’s guidance arising from A v B and submit separate Requests.
The case also provides clarification on the time limits for bringing a jurisdictional challenge under the LCIA Rules 2014.
