A v B

Factual and Procedural Background

The present applications arise from a highly unusual arbitration dispute involving a family business and associated trusts. The Plaintiff and Defendant C, who are brothers, previously operated a successful trading business through a group of companies primarily trading in the Bahamas and London. A discretionary Bahamian trust ("the Trust") was established in 1984, with Defendant D acting as sole trustee from 2002 and Defendant C as protector.

Disputes emerged between the Plaintiff and Defendant C around 1999-2000 regarding participation and financial entitlements in the business group and the Trust. An oral settlement agreement was allegedly reached in November 2001, involving a substantial payment to Defendant C, with terms for repayment if C survived heart surgery. The Plaintiff alleges this agreement was breached.

Subsequent events saw the transfer of assets from the Trust to other trusts controlled by the Plaintiff, removal of company directors by the Plaintiff, and escalating disputes culminating in criminal complaints against the Plaintiff and multiple court actions in the Bahamas and Europe. The parties agreed to resolve disputes by arbitration under an agreement signed in July 2004, appointing Defendant B as sole arbitrator, with the seat of arbitration in Geneva governed by Swiss law.

During the arbitration, disputes arose over compliance and jurisdiction, with the Plaintiff challenging the validity of the arbitration agreement and alleging fraud, duress, and breaches of fiduciary duty by Defendants B, C, and D. The Plaintiff commenced proceedings in England seeking declarations that the arbitration agreement is void and various injunctive and damages relief against the Defendants. The Defendants applied to set aside service outside the jurisdiction and for a stay of proceedings.

The English Court of Appeal dismissed an appeal by the Plaintiff against refusal of an interim injunction restraining Defendant B from acting as arbitrator. The present judgment addresses the applications of Defendants C, D, and Company E to set aside service outside the jurisdiction and Defendant B’s application for a stay of the English proceedings.

Legal Issues Presented

1. Whether the English court should stay the proceedings against Defendant B, the arbitrator, given the arbitration agreement provides for the seat of arbitration in Geneva, Switzerland, and is governed by Swiss law.
2. Whether the English court has jurisdiction over Defendants C, D, and Company E, and if so, whether service of proceedings on them outside the jurisdiction should be set aside.
3. Whether the arbitration agreement is void or voidable due to allegations of fraud, duress, misrepresentation, and breaches of fiduciary and professional duties.
4. The appropriate forum for resolving disputes related to the arbitration agreement, the Trust, and the associated business interests, including the application of forum non conveniens principles.
5. The extent to which the English court may intervene in ongoing foreign arbitration proceedings, particularly in relation to challenges to the arbitrator’s jurisdiction and validity of the arbitration agreement.

Arguments of the Parties

Defendant B's Arguments

• The arbitration agreement designates Geneva, Switzerland, as the seat and Swiss law as governing law, making Swiss courts the appropriate forum for disputes.
• All substantive matters and jurisdictional challenges fall within the scope of the arbitration agreement and should be decided by the arbitrator initially.
• The English proceedings should be stayed under the Arbitration Act 1996 and/or the court’s inherent jurisdiction.
• If any matters are for court determination, they should be heard by Swiss courts or Bahamian courts where related proceedings are pending.
• The English court’s jurisdiction over B should be stayed as the proceedings constitute an abuse of process and an attempt to disrupt a foreign arbitration.

Defendant C's Arguments

• Alleged material non-disclosure by the Plaintiff on the without notice application, including failure to disclose prior proceedings, undertakings, and inconsistent positions regarding the arbitration agreement.
• The English court lacks jurisdiction over C as the arbitration agreement was made in the Bahamas and the oral agreement of 2001 was not entered into by C or his agent.
• The claims against C fall within the arbitration agreement and should be determined by the Swiss arbitral tribunal.
• Forum non conveniens applies, with Switzerland and the Bahamas being the appropriate forums rather than England.
• The Plaintiff has no reasonable prospect of success on the arbitration claims.

Defendant D's Arguments

• Material non-disclosure by the Plaintiff on the without notice application.
• Lack of jurisdiction as the arbitration agreement was made in the Bahamas and claims related to Company M proceedings lack merit.
• Claims against D relate to the Trust and fall within the arbitration agreement’s scope.
• Forum non conveniens applies; the English court should not exercise jurisdiction over these matters.
• The claims against D have no reasonable prospect of success.

Company E's Arguments

• The issues concerning Company E’s assets and the Company M proceedings fall within the scope of the arbitration agreement.
• The English court is an appropriate forum only if arbitration is unavailable; otherwise, the Bahamas is the appropriate forum.
• The claim against Company E should be stayed as it would cause procedural dislocation.

Table of Precedents Cited

Court's Reasoning and Analysis

The court identified the central issue as whether to stay the English proceedings against Defendant B, the arbitrator, given the arbitration agreement's clear designation of Geneva as the seat and Swiss law as governing law. The court acknowledged the Kompetenz-Kompetenz principle under Swiss arbitration law, which empowers the arbitrator to decide on his jurisdiction and challenges thereto, subject to review by Swiss courts.

The court noted that the arbitration agreement was a composite contract serving both as a settlement structure and dispute resolution mechanism, entered into with a high degree of confidence in Defendant B’s impartiality. The Plaintiff’s claims impugning the validity of the arbitration agreement were primarily directed at avoiding the arbitration and setting aside arbitral orders, thus falling within the arbitration exclusion under the Lugano Convention and related regulations.

The court rejected the Plaintiff’s submission that the English court should determine the validity of the arbitration agreement before granting a stay, emphasizing that the agreed seat of arbitration and governing law vested exclusive supervisory jurisdiction in the Swiss courts. Any challenge to the arbitration agreement’s validity and the arbitrator’s jurisdiction was to be decided initially by the arbitrator with recourse to Swiss courts, consistent with international arbitration principles.

The court found that the Plaintiff’s personal claims against Defendant B, unrelated to the arbitration, should be temporarily stayed to avoid parallel proceedings and conflicting decisions, pending the arbitration's conclusion.

Regarding Defendants C, D, and Company E, the court held that the claims against them fell within the scope of the arbitration agreement or related proceedings and that the English court should not exercise jurisdiction. The service of proceedings on these Defendants outside the jurisdiction was set aside, as the appropriate forums for these disputes were the arbitration in Geneva and the Bahamian courts.

The court also considered material non-disclosure allegations but concluded that even if those were accepted, the overriding considerations of international arbitration law and the risk of conflicting parallel proceedings mandated setting aside service outside the jurisdiction and granting a stay.

In sum, the court balanced the principles of party autonomy in arbitration, international comity, and procedural efficiency, recognizing the unique circumstances of the case but adhering to established legal principles governing foreign-seated arbitrations.

Holding and Implications

The court ordered:

• The arbitration claims against Defendant B are STAYED to allow the arbitration in Geneva to proceed under Swiss law.
• The Plaintiff’s personal claims against Defendant B are TEMPORARILY STAYED with liberty to apply for revival after the arbitration concludes or Defendant B becomes functus officio.
• The orders granting leave to serve Defendants C, D, and Company E outside the jurisdiction are SET ASIDE, effectively dismissing the claims against them in the English court.
• The injunction against Defendants C and D granted on 30 September 2005 and extended on 21 October 2005 is discharged.

The direct effect is to confine the resolution of the substantive disputes to the agreed arbitral forum in Geneva and the related Bahamian proceedings, avoiding duplicative and conflicting litigation in England. No new legal precedent was established; the decision applies established principles of international arbitration law, jurisdiction, and procedural discretion to a complex factual matrix.