The defendant associated companies used the claimant financial services company for matched principal brokerage services. The defendants entered into with the claimant, inter alia, an exclusivity agreement, which was governed by English law with provision for the courts of England and Wales to have jurisdiction. A separate sale agreement, to which neither the claimant nor defendants were party but which contemplated that there would be contracts between the claimant and defendants for the provision of services, provided that any dispute, controversy or claim arising out of or relating to the agreement “shall first be submitted to non-binding arbitration” under and in accordance with the Commercial Arbitration Rules of the American Arbitration Association (“the AAA”). The claimant and the buyer under the sale agreement commenced an arbitration under the AAA Rules against the seller under the sale agreement and the defendants. The arbitrators accepted jurisdiction, on the express basis that the arbitration would be non-binding. The claimant subsequently issued the claim against the defendants alleging breach of the exclusivity agreement and claiming damages. The defendants applied for a stay of the claim pursuant to either section 9 of the Arbitration Act 1996 or section 49(3) of the Senior Courts Act 1981 until 28 days after receipt of a final written award in the AAA process, which was ongoing. On the applications the questions arose, on the assumption that the meaning and effect of the sale agreement was that each party to that agreement was obliged not to commence court proceedings until the non-binding arbitration process was completed, whether (1) there was an equivalent agreement between the claimant and defendants that amounted to “an agreement to submit to arbitration present or future disputes” under section 6(1) of the 1996 Act and/or section 58 of the 1996 Act meant that the agreement was an arbitration agreement, such that, all other conditions being agreed to be satisfied, the court was obliged to grant a stay by section 9(4) of the 1996 Act; or, alternatively, (2) a stay under section 49(3) of the 1981 Act should be granted because the parties had agreed that the AAA process should be undertaken and completed before the parties be allowed to proceed to litigation.
On the applications—
Held, (1) application for a stay under section 9 of the Arbitration Act 1996 refused. A procedure that was not intended to result in a decision, or which was intended to result in a decision not enforceable by legal process, was not an arbitration governed by the statutory and common law principles which constituted the English law of arbitration, and therefore an agreement to follow such a procedure was not an arbitration agreement within section 6(1) of the 1996 Act. Section 58(1) of the 1996 Act did not have the effect of rendering such an agreement an arbitration agreement. It was a necessary requirement, before an agreement between commercial parties relating to disputes between them as regards their rights and liabilities inter se could be an arbitration agreement within the meaning of section 6(1) of the 1996 Act, that it provide for them to submit those disputes to be determined by an individual or panel of individuals, by whose decision and consequent award the parties would, by their agreement and subject to any process of review or appeal as referred to in section 58(2) of the 1996 Act, be bound. Given that the AAA process was a non-binding process in substance (and not just in the language used), it could not therefore be an arbitration within the meaning of section 6(1), and notwithstanding the use of the words “submission” and “arbitration” in the relevant contractual provision (paras 47–48, 49, 51, 52, 56, 64, 65).
(2) Application for a stay under section 49(3) of the Senior Courts Act 1981 refused. On the facts, there was no promise by the claimant to the defendants or vice versa that no litigation would be commenced or that no suit would be brought in England and Wales relying on the English law and jurisdiction provision of the exclusivity agreement until after the AAA process had been completed, and therefore there was no relevant bargain to uphold and considerations as to whether a stay should be granted in such circumstances were irrelevant. The decision for the court was instead a purely case management decision, and the facts were not such as to justify the court exercising its discretion as a matter of case management to stay the claim under section 49(3) (paras 73–79, 81, 83–85, 87–88, 89).
Jeff Chapman QC and Marianne Butler (instructed by Keystone Law Ltd) for the defendants.
Adam Al-Attar (instructed by Harbottle & Lewis LLP) for the claimant.