Sumukan Ltd v The Commonwealth Secretariat

Factual and Procedural Background

An arbitration clause existed in a contract between Company A (predecessors in title of Company B) and an international organization (The Secretariat). Arbitrators issued an award dated 25th April 2005 in favor of The Secretariat. Company A applied to the court for leave to appeal on a point of law under section 69 of the Arbitration Act 1996. The first instance judge ruled that the parties had "otherwise agreed" to exclude the jurisdiction of the court to hear such appeals, incorporating an exclusion clause into the contract as a matter of English domestic law. The judge refused permission to appeal to the Court of Appeal from this decision. On application for permission to appeal to the Court of Appeal, permission was refused on the incorporation issue but granted on the Human Rights point concerning Article 6 of the European Convention on Human Rights (ECHR).

The Secretariat applied to set aside the permission granted by the Court of Appeal on the basis that no appeal lay following the refusal of leave by the first instance judge. The Court of Appeal considered its jurisdiction to hear the appeal on whether the exclusion agreement existed.

Legal Issues Presented

1. Whether the Court of Appeal has jurisdiction to hear an appeal from a first instance judge’s decision that an exclusion agreement precludes the court's jurisdiction to grant leave to appeal under section 69 of the Arbitration Act 1996.
2. Whether an exclusion agreement incorporated by reference in a contract excludes the right of appeal on a point of law under section 69 of the Arbitration Act 1996 as a matter of English domestic law.
3. Whether Article 6 of the European Convention on Human Rights and section 3 of the Human Rights Act 1998 affect the validity or incorporation of the exclusion agreement.

Arguments of the Parties

Appellant's Arguments

• A decision that parties have agreed to exclude court jurisdiction is not a decision "under section 69" to grant or refuse leave to appeal and thus is not subject to the restrictions on appeals in subsections (6) and (8) of section 69.
• The question of exclusion agreement goes to jurisdiction, and if the first instance judge errs in holding there is no exclusion, the granting of permission to appeal would be without jurisdiction and thus appealable.
• Authorities such as Cetelem SA v Roust Holding and the Ontario Court of Appeal decision in Denison Mines Ltd v Ontario Hydro support that decisions made without jurisdiction are not decisions under the relevant section and may be appealed despite refusal of leave by the first instance court.
• The exclusion agreement is an onerous or unusual term that requires clear and express incorporation, especially considering the imbalance of bargaining power and lack of awareness of the exclusion clause.
• Article 6 ECHR requires any waiver of the right to appeal to be voluntary, with full knowledge and express agreement, which was not present here.

Respondent's Arguments

• The decision as to whether parties have "otherwise agreed" under section 69 is clearly a decision under section 69 and subject to the appeal restrictions therein.
• The distinction between jurisdictional decisions and decisions to grant or refuse permission to appeal is a false one; both fall under section 69.
• Case law, including ASM Shipping Ltd v TTMI, establishes that decisions on issues such as waiver or exclusion agreements are decisions under the relevant section and unappealable if permission is refused.
• The exclusion agreement was validly incorporated by reference as a matter of ordinary domestic contract law and is not an onerous or unusual clause triggering special notice requirements.
• Article 6 rights can be waived voluntarily by contract, and the arbitration clause including the exclusion of appeal rights was voluntarily agreed; thus, no infringement of Article 6 arises.

Table of Precedents Cited

Court's Reasoning and Analysis

The court carefully analyzed the relevant sections of the Arbitration Act 1996, focusing on the language of section 69 and related provisions concerning leave to appeal and exclusion agreements. It emphasized that the decision whether parties have "otherwise agreed" to exclude the court's jurisdiction is a preliminary jurisdictional question under section 69(1).

The court considered competing interpretations of whether an exclusion agreement decision is appealable despite refusal of leave by the first instance court. It reviewed authorities including Cetelem and Denison Mines, noting that decisions made without jurisdiction are not decisions under the section and thus may be appealed. However, it distinguished these cases, concluding that the court does have jurisdiction to decide whether an exclusion agreement exists as part of the section 69 process.

The court found that the Court of Appeal possessed jurisdiction to hear the appeal on the existence of the exclusion agreement notwithstanding the first instance judge's refusal of leave to appeal.

On incorporation, the court held that by ordinary principles of English contract law, the exclusion clause incorporated by reference into the contract was valid and binding. The exclusion clause was not considered onerous or unusual such as to trigger the Interfoto principle requiring special notice. The court regarded the exclusion of the right to appeal as a common commercial term in arbitration contracts.

Regarding Article 6 of the ECHR, the court accepted that Article 6 rights may be waived voluntarily and that the waiver must be informed and free from constraint. It held that the exclusion clause did not infringe Article 6 rights because the clause was incorporated into a written contract, was not onerous or unusual, and did not exclude mandatory court safeguards against partiality or serious irregularity under sections 67 and 68 of the Arbitration Act. Consequently, no necessity arose to read down the words "otherwise agreed" to avoid an Article 6 infringement.

Ultimately, the court dismissed the appeal, affirming the exclusion of the right to appeal on a point of law as incorporated and compatible with domestic law and Article 6.

Holding and Implications

The court's final decision was to DISMISS THE APPEAL.

This ruling confirms that under the Arbitration Act 1996, the Court of Appeal has jurisdiction to hear appeals on the existence of exclusion agreements despite refusal of leave by the first instance court. Furthermore, exclusion clauses incorporated by reference into arbitration agreements are valid under English domestic law and do not inherently infringe rights under Article 6 of the ECHR, provided statutory safeguards remain.

The decision clarifies the interpretation of section 69 regarding appeals on points of law and confirms the approach to incorporation of exclusion agreements, reinforcing the finality and efficiency objectives of arbitration law without undermining fundamental fairness protections.