Factual and Procedural Background
The Plaintiff, an English company engaged in dismantling and reassembling industrial units, entered into a written contract dated 8 February 2008 with the Defendant, an Indian company manufacturing aluminium foils and laminates. The contract concerned dismantling a manufacturing plant located in the Netherlands, with completion due by 28 May 2008. A dispute arose regarding unpaid instalments under the contract, with the Plaintiff seeking payment of £95,524. The Defendant counterclaimed £300,790 alleging breach of contract related to packaging methods.
The contract contained an arbitration clause stating disputes unresolved by mutual discussion would be referred to arbitration under prevailing European Union laws, with the arbitrator's decision final and binding. The Defendant declined to consent to the Plaintiff’s proposed arbitration tribunal and sought to refer the dispute to an arbitral tribunal in India or apply for an arbitrator appointment under Indian law.
The Plaintiff issued an arbitration claim form and obtained permission to serve it outside the jurisdiction pursuant to CPR 62.5(1)(c). The Defendant did not acknowledge service. The court was subsequently asked to exercise its powers under section 18 of the Arbitration Act 1996 due to a failure in the appointment procedure of the arbitral tribunal.
Legal Issues Presented
- Whether the court should grant permission for service of the arbitration claim form outside the jurisdiction under CPR 62.5.
- Whether the seat of arbitration is or will be within the jurisdiction of England and Wales, or whether the conditions of section 2(4) of the Arbitration Act 1996 are satisfied to support the arbitral process.
- Whether the court should exercise its power under section 18 of the Arbitration Act 1996 to appoint an arbitrator due to failure of the parties to agree on the arbitral tribunal.
- The appropriate authority to appoint the arbitrator in this international arbitration context.
Arguments of the Parties
Plaintiff's Arguments
- The Plaintiff sought payment of outstanding instalments under the contract and invoked the arbitration clause due to non-payment.
- The Plaintiff proposed the appointment of an arbitrator and sought the court’s assistance under section 18 of the Arbitration Act 1996 due to failure to agree on the arbitral tribunal.
- The Plaintiff contended the seat of arbitration should be within England and Wales or at least supported by the court under section 2(4) due to the connection with England.
- The Plaintiff proposed the President of the Law Society of England and Wales to appoint the arbitrator.
Defendant's Arguments
- The Defendant declined to consent to the Plaintiff’s proposed arbitral tribunal and sought to refer the dispute to an arbitral tribunal in India.
- The Defendant raised a counterclaim based on alleged breach of contract related to packaging methods.
- The Defendant’s advocate argued the cause of action arose in India and the contract was executed there, supporting Indian jurisdiction and arbitration under Indian law.
Table of Precedents Cited
| Precedent |
Rule or Principle Cited For |
Application by the Court |
| Seaconsar Far East Limited v Bank Markazi Jomhouri Islam Iran [1994] 1 AC 438 (HL) |
Test for permission to serve out of jurisdiction requires a good arguable case that the claim falls within the relevant grounds. |
The court applied this test flexibly in considering permission to serve the arbitration claim form outside the jurisdiction. |
| Canada Trust Company v Stolzenberg (No 2) [1998] 1 WLR 547 |
Clarification of the test for permission to serve out of jurisdiction and its flexible application. |
Supported the court’s approach to assess the good arguable case for service out of jurisdiction. |
| Jagdish Singh v Natthu Singh AIR 1992 SC 1604 |
Indian Civil Procedure Code rules on service of documents. |
Used to confirm that service on the Defendant in India was proper despite refusal to accept service. |
| International Tank & Pipe S.A.K. v Kuwait Aviation Fuelling Co. K.S.C. [1975] QB 224 (CA) |
English courts may exercise jurisdiction to support arbitration where the proper law is English law despite no agreed seat of arbitration. |
Supported the court’s finding that English law likely governs the contract and that the court may support arbitration under section 2(4) of the 1996 Act. |
| Channel Tunnel Group v Balfour Beatty Ltd [1993] AC 334 |
Principle that arbitration proceedings should be brought in courts of the jurisdiction of the seat of arbitration. |
Used to explain the type of jurisdictional clash the court should avoid under section 2(4) of the 1996 Act. |
| Whitworth Street Estates (Manchester) Ltd. v. James Miller and Partners Ltd. [1970] A.C. 583 |
Distinction between the law governing the arbitration clause and the procedural law governing arbitration proceedings. |
Supported the court’s reasoning that English law governs the arbitration clause even if procedural law differs. |
Court's Reasoning and Analysis
The court first considered whether to grant permission to serve the arbitration claim form outside the jurisdiction. Applying the test from Seaconsar and Canada Trust, the court found a good arguable case that the claim fell within the grounds for service out of jurisdiction under CPR 62.5, as the Plaintiff sought a remedy affecting an arbitration agreement and the seat of arbitration was or would be within the jurisdiction or conditions of section 2(4) of the Arbitration Act 1996 were satisfied.
Regarding service, the court was satisfied that the Defendant was properly served in India according to Indian law, despite refusal to accept service, and that notice of the hearing had been given. It was appropriate to proceed in the Defendant’s absence.
The arbitration clause was silent on the seat of arbitration. Under section 2(4) of the Arbitration Act 1996, the court may support the arbitral process where no seat has been designated but there is a sufficient connection with England and Wales. The court analysed the contract’s connections: the Plaintiff’s principal place of business in England, the characteristic performance (dismantling the plant) performed by the Plaintiff in England, and payment provisions indicating connection with England.
The court considered the likely applicable law to the contract’s substance would be English law, applying principles from the Rome Convention and Dicey, Morris and Collins on conflict of laws. The arbitration clause’s reference to European Union laws suggested the procedural law governing arbitration was likely European, possibly English, rather than Indian. There was no clash with foreign jurisdictions that would preclude the court’s involvement.
Given these connections, the court found it appropriate to exercise its powers under section 18 of the Arbitration Act 1996 to appoint an arbitrator due to the parties’ failure to agree on the arbitral tribunal. The court rejected the Plaintiff’s proposal that the President of the Law Society of England and Wales appoint the arbitrator, considering it inappropriate for an international dispute. Instead, the court appointed the President or Vice-President of the London Court of International Arbitration (LCIA), a respected international arbitration institution, to make the appointment.
Holding and Implications
Holding: The court granted permission for service of the arbitration claim form outside the jurisdiction, proceeded with the substantive hearing in the Defendant’s absence, and exercised its powers under section 18 of the Arbitration Act 1996 to order that the President or Vice-President of the London Court of International Arbitration appoint a sole arbitrator to constitute the arbitral tribunal.
Implications: This decision enables the arbitration process to proceed as intended by the parties despite their failure to agree on the tribunal and the absence of an agreed seat of arbitration. The court’s exercise of jurisdiction under section 2(4) of the Arbitration Act 1996 was justified by the connections with England and Wales, particularly the likely applicable law and the Plaintiff’s principal place of business. No new precedent was established beyond affirming the court’s supportive role in international arbitrations with such connections.