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In 2007, the House of Lords, the highest appellate court in the United
Kingdom, used precedents from foreign law to decide an important appeal on
the construction and separability of an arbitration clause governed by English
law. Fiona Trust and Holding Corpn and others v. Privalov and others or
Premium Nafta Products Limited and others v. Fili Shipping Company Limited
and others as it reached the House of Lords was a dispute about bribery.1
The case raised two important questions of law: first, whether the word
under in the arbitration clause 2 was wide enough to encompass the dispute
Barrister, Lincolns Inn; LL.M. (London School of Economics); LL.B. (City University,
London); B.A. (University of Oxford) (UK). This article is up to date as of 7 August 2009. The views
expressed in this article are those of the author alone. Responsibility for any error lies solely with
the author. I am grateful to Professor Gus van Harten of Osgoode Hall Law School, Toronto, for
his kind comments on an earlier draft of this article. Thanks are also due to Professor Alejandro
Garro for his general encouragement.
Email: <john.w.j.townsend@university-college.oxon.org>.
1
The High Court proceedings on the merits: Fiona Trust v. Privalov [2006] EWHC 2583,
[2007] 1 All ER (Comm) 891. Both appellate decisions are authoritatively reported in the Business
Law Reports [Bus LR]. On appeal to the Court of Appeal: Fiona Trust v. Privalov [2007] EWCA Civ
20, [2007] Bus LR 686. On further appeal to the House of Lords [from 1 September 2009, the UK
Supreme Court]: Premium Nafta Products Limited and others v. Fili Shipping Company Limited
and others [2007] UKHL 40, [2007] Bus LR 1719. See also the related procedural litigation: Nikitin
& Ors v. Richards Butler LLP & Ors [2007] EWHC 173 (QB) (Langley J; unsuccessful application by
Mr Nikitin and others for Norwich Pharmacal order [order for disclosure of evidence against
facilitators of torts] against Fiona Trust and others); Fiona Trust v. Privalov [2006] EWHC 758
(Comm) (Mackie J; unsuccessful application by Mr Nikitin and others to increase Fiona Trusts
security for costs); Fiona Trust v. Privalov [2007] EWHC 39 (Comm) (Steel J; unsuccessful
application by Fiona Trust and others for disclosure of privileged material); Fiona Trust v. Privalov
[2007] EWHC 1217 (Comm) (Steel J; successful application by Fiona Trust to freeze Nikitin and
other assets). The merits litigation as a whole will be referred to in this article as Fiona Trust, with
attention drawn to the different judgments by footnotes when they are discussed.
2
The relevant clause is reported in full at [5] of the Court of Appeal decision, [2007] Bus
LR 686, 692-693. It is reproduced from [5] in an Appendix to this article.
555
John Townsend
556
The merits dispute in Fiona Trust turned upon allegations of bribery. Eight
companies within the Sovcomflot group had entered into charterparties as
owners with three chartering companies. The Sovcomflot group, of which
Fiona Trust itself is a subsidiary, is owned by the Russian State and is one of
the largest commercial shipping groups in the world. Each of the
charterparties contained a law and litigation clause providing for any
dispute arising under this charter to be decided in England and conferred on
either party a right to elect for any dispute to be referred to arbitration. A
dispute arose regarding a Mr Nikitin, a Mr Privalov and other Russian
individuals who were resident in England. These individuals were alleged to
have, inter alia, bribed directors and employees of Fiona Trust in order to
procure lucrative contracts and uncommercial transactions for their own
benefit. The owners purported to rescind the charters on that basis. In June
2005, the owners commenced claims against the charterers to recover a sum
of over $US 500 million for the torts of conspiracy, bribery and breach of
fiduciary duty.7 In response, the charterers elected to enforce their rights
under the charters and commenced arbitration against the owners under the
Terms of the London Maritime Arbitrators Association.8 The owners applied to
the Court for an injunction to restrain the arbitration and a declaration that the
arbitration agreement was invalid.9 Against that application, the charterers
sought a stay of the rescission claims to allow the arbitration to run its
course.10
7
8
9
557
John Townsend
The facts of the alleged bribery were complex, and were recognised to be
only a part of a wider dispute between the parties.11 At first instance,
Morison J summed up the allegations of the owners as follows:
It is alleged that this corrupt activity spanned a period from 2001-2005
and involved diversion of commissions from Fiona to Nikitin companies
to the tune of about $US 32m; a deception whereby Fiona was tricked
into paying an additional $US 3.4m in relation to a debt owed to RCB, a
Russian bank; uncommercial sale and leaseback arrangements with
Nikitin companies and others involving eight vessels and a claim for
compensation for $US 14.03m in respect of the entry into the sale and
leaseback transactions and for $US 71,672,596 in respect of the
termination of the sale and leaseback transactions; the exercise by Nikitin
companies and others of a series of shipbuilding options and the
acquisition of shares in Fiona companies holding the benefit of
shipbuilding contracts, all of which were said to have been obtained at
no or no proper consideration, leading to a claim of $US 172m; and the
surrender of rights owned by Fiona companies to Nikitin companies at a
substantial undervalue ($US 64-77m). In pursuit of the conspiracy it is
alleged that documents were forged, in the sense that they were
backdated and purported to be made when they were not, in relation
both to a release of security acquired by Fiona for no consideration and
to a service contract with Mr Privalov.12
The evidence indicated that there was an arguable case as to the owners
allegations of bribery.13
At the first instance merits hearing before Mr Justice Morison, the owners
were granted an injunction to restrain the arbitration and the Court declined to
order a stay of the bribery claims.14 But on appeal to the Court of Appeal this
decision was reversed.15 Lord Justice Longmore, giving the judgment of the
court, decided to make a radical fresh start in the construction of English
arbitration clauses.16 Cutting through many decades of precedent, Longmore
LJ held that the clause was wide enough to cover any dispute between the
11
12
13
14
15
16
558
Per Longmore LJ at [3], [2007] EWCA Civ 20, [2007] Bus LR 686, 691.
[2006] EWHC 2583 at [34], [2007] 1 All ER (Comm) 81, 84-5.
Per Lord Hoffmann at [1], [2007] Bus LR 1719, 1721.
[2006] EWHC 2583; [2007] 1 All ER (Comm) 81.
[2007] EWCA Civ 20; [2007] Bus LR 686.
Per Longmore LJ, [2007] EWCA Civ 20 at [17]; [2007] Bus LR 686, 695.
parties; that, in spite of the alleged bribery, the arbitration clause remained
separable and therefore valid; and that a stay of the rescission claims should
be granted, consistent with the United Kingdoms obligations under the New
York Convention.17 Giving leading judgments in the House of Lords, Lord
Hoffmann and Lord Hope upheld the judgment of Longmore LJ.18 The owners
were unable to rescind the contracts on grounds of bribery, and the arbitrators
appointed by the charterers were recognised to be a one-stop tribunal with
competence to adjudicate on the merits of the entire dispute.19 Unless an
arbitration clause stated expressly that certain questions were intended to be
excluded from the arbitrators jurisdiction, it was to be presumed that the
parties intended that any dispute arising out of their dealings was to be
decided by the arbitrator rather than a court.20 Significantly, the Law Lords
made broad-minded use of authority from Germany, Australia and the United
States to hold that the arbitration clause was indeed separable from the
contract allegedly procured by bribery and that the arbitrators had jurisdiction
to decide the dispute as to the bribery.21
III. POINTS OF LAW RAISED BY THE DISPUTE
The effect of the bribery on the separability of arbitration clauses, and of the
jurisdiction it conferred on the arbitrators if separable, were the points of law
which justified the prolonged process of appeal from the first instance merits
decision before Morison J to the Court of Appeal, and then upwards to the
House of Lords. In English law, such an appeal is to be distinguished from
judicial review because it does not question whether or not the first instance
17 New York Convention 1958, Art II. 3: The court of a Contracting State, when seized of
an action in a matter in respect of which the parties have made an agreement within the meaning
of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it
finds that the said agreement is null and void, inoperative or incapable of being performed.
Longmore LJ stated that Section 9 of the English Arbitration Act 1996, is the statutory enactment of
the relevant article of the New York Convention, to which the United Kingdom is a party. [2007]
EWCA Civ 20 at [37], [40]; [2007] Bus LR 686, 702, 703.
18 Per Lord Hoffmann at [21], [2007] Bus LR 1719, 1726; Lord Hope at [34], [2007] Bus LR
1719, 1730.
19 Per Longmore LJ at [19], [2007] Bus LR 686, 696.
20 Per Lord Hoffmann at [12], [2007] Bus LR 1719, 1724.
21 Per Lord Hoffmann at [14], [2007] Bus LR 1719, 1725: Bundesgerichtshofs Decision of
27 February 1970; per Lord Hope at [31] [2007] Bus LR 1719, 1729: A&T Technologies Inc. v.
Communications Workers of America 475 U.S. 643 (1986); Comandate Marine Crop v. Pan
Australia Shipping Pty ltd [2006] FCAFC 192; and at [32]: Prima Paint Corp. v. Flood and Concklin
Manufacturing Co. (388 U.S. 395, 1967).
559
John Townsend
The facts of the Fiona Trust dispute provided an opportunity for the collision
of two rival streams of English precedent on the construction of arbitration
clauses.23 The authorities cited to the court can perhaps be divided into those
cases which were decided before the enactment of the Arbitration Act 1996,
and those which were decided in anticipation of or after the 1996 Act. The
pre-1996 approach illustrates the traditional approach of English Courts to the
construction of arbitration agreements. Relying heavily on leading cases that
were decided before 1996, Morison J approached the construction of the
arbitration clause with a view to making a fine distinction between disputes
arising under and out of the charterparty of which the arbitration clause
was a part.
On the traditional view, an agreement that disputes arising out of a
contract were to be referred to arbitration was regarded as a wider agreement
than those contractual disputes which merely arose under a contract.24
Morison J quoted grammatical approach of Nourse LJ in Fillite Runcorn Ltd v.
Aqua Lift with approval:
The preposition under presupposes that the noun which it governs
already has some existence. It operates in time as well as in space. I think
that it means as a result of and with reference tothe material words
are not wide enough to include disputes which do not concern
obligations created by or incorporated in the contract.25
22 Procedure Direction [1988] 2 All ER 831. The same test will be used by the new UK
Supreme Court.
23 The word construction refers to the process by which a court determines the meaning
and legal effect of a contract. Chitty on Contracts, 29th ed., Sweet & Maxwell, London (2004),
Vol. 1 at para 12-041.
24 See REDFERN / HUNTER, supra note 2, at para. 3.39. Per Longmore LJ, [2007] Bus LR 695,
692 at [9].
25 (1989) 26 Con LR 66, 79; [2006] EWHC 2583 at [14], [2007] 1 All ER (Comm) 81, 87.
560
This literalism was once typical of the English approach. But a new
approach has since been pioneered by the High Court in the 1995 case of The
Angelic Grace. In that case, an arbitration clause which regarded disputes
arising out of the contract was held by Mr Justice Rix (as he then was) to be
wide enough to cover the collision claims which arose.26 In upholding The
Angelic Grace on appeal, Lord Justice Leggatt relied on the dictum of the then
Mr Justice Mustill in The Playa Larga that a tortious claim arose out of a
contract containing an arbitration clause, provided that there was a sufficiently
close connection between the tortious and contractual claims.27 Such
authority provided the foundation for the alternate stream of precedent.
Morison Js reliance upon the Fillite case led him to conclude in Fiona
Trust that the material issue for him to decide was whether the word under
in the arbitration clause included, disputes between the parties as to whether
the charterparty is void by reason of the alleged bribes which are said to have
induced the making of the contract. 28 Morison J found as a fact that, there
is direct evidence that Mr Nikitin paid bribes to Sovcomflot officials with
whom he did business. 29 Therefore, the owners had never truly agreed to
enter into the contracts or, if severable, the arbitration agreements. 30 For this
reason, Morison J held as a matter of construction of the arbitration clause that
the word under was not wide enough to arbitrate the bribery claims brought
by the charterers.
This issue of construction, reliant on pre-1996 precedents, also went to
the jurisdiction of the arbitrators. On this issue, Morison J formulated this
deeply flawed dictum:
Although the modern trend is to treat the arbitrators as having power to
decide for themselves their own jurisdiction (Kompetenz-Kompetenz)
English Law gives the Courts the ultimate right to determine such
issues.31
561
John Townsend
32
33
34
35
Per Longmore LJ, [2007] EWCA Civ 20 at [17]; [2007] Bus LR 686, 695.
Per Lord Hoffmann at [12], [2007] Bus LR 1719, 1724.
Ibid.
Ibid., mutually interchangeable at [12], 1724, per Lord Hope, fussy distinctions, at
[27], 1728.
36 Per Lord Hoffmann at [12], [2007] Bus LR 1719, 1724.
562
agreement to arbitrate. In his judgment, Lord Hoffmann cited the Bundesgerichtshofs Decision of 27 February 1970:
There is every reason to presume that reasonable parties will wish to
have the relationships created by their contract and the claims arising
therefrom, irrespective of whether their contract is effective or not,
decided by the same tribunal and not by two different tribunals.37
As this presumption was applicable to the dispute, Lord Hoffmann
accordingly held that the arbitration clause was wide enough to confer
jurisdiction. Lord Hope noted further that the Federal Court of Australia in the
Pan Australia case had regard to the sensible commercial presumption that
the parties did not intend two hearings for their dispute, particularly when
operating in a truly international market. 38 Both judges also had regard to
the judgment of the United States Supreme Court in Prima Paint, which is
considered in this article below on the issue of separability.39
From an international perspective, the confusion of the streams of
precedent in the English authorities on the construction of disputes arising
under or out of an arbitration clause could seem startling. It is said to be
one of the virtues of the common law that the doctrine of stare decisis to
stand by decided matters ensures consistency in the application of
principle. How can the errors in the first instance judgment be understood? It
may be the case that Morison J paid more attention to precedent than
principle in the construction of the arbitration clause. Perhaps the best that
can be said of the first instance decision is that it was a triumph of advocacy
for the owners lawyers.40 It may also be the case that the abundance of
English precedents on the distinction between under and out of confused
the first instance judge in Fiona Trust, because he wrongly ascribed precedential value to decisions which were of no relevance to the interpretation of
the 1996 Act. What is now clear, however, following the House of Lords
decision, is that there the confusion on this issue has been resolved, by the
notable consideration and application of foreign legal precedents.
37 Per Lord Hoffmann at [14], [2007] Bus LR 1719, 1725; (1990) Arbitration International,
Vol. 6, No.1, p. 79; BGH 1970, JZ 1970, 730-733.
38 Per Lord Hope at [31], [2007] Bus LR 1719, 1729: Comandate Marine Crop v. Pan
Australia Shipping Pty Ltd [2006] FCAFC 192
39 Prima Paint Corp. v. Flood and Concklin Manufacturing Co. (388 U.S. 395, 1967)
40 Julian Flaux QC, Philip Jones QC, Justin Higgo and Jennifer Haywood.
563
John Townsend
2.
On this issue, the owners contended that the bribery allegations had
implications as to whether their consent to the arbitration clause in the
charterparty was validly given and that the arbitration agreement, although
formally separate, could also be rescinded. As Lord Hope pointed out in the
House of Lords, this argument, was essentially one of causation. 41 But for
the bribes, the owners claimed that they would never have entered into the
charters at all. At first instance, Mr Justice Morison commented that his
understanding of the dispute that it was, akin to a case of non est factum and
mistake which goes to the root of the contract it is not simply the fact that
the matrix contract has been rescinded: it is the basis on which that has been
done. 42 The owners relied on the judgment of Mr Justice Millett (later Lord
Millett) in Logicrose Ltd v. Southend United Football Club Ltd, in which it was
held that a transaction induced by bribery could be rescinded by the innocent
party.43 Principally on this authority, Morison J held that no arbitration could
be commenced under the arbitration agreement if the principal or matrix
contract was found to have been procured by bribery. The owners consent
could not have been validly given to the matrix contract, of which the
arbitration clause was merely a part. The branch fell with the tree.
Before the Court of Appeal, the owners clearly aware of the
vulnerability of their position sought to push the Logicrose precedent further
by submitting that in fact the contract procured by bribery never existed at all,
because the owners employees had no authority as a matter of agency law to
accept the bribes. Whilst accepting the correctness of this submission as a
matter of English agency law, Longmore LJ expressly rejected Morison Js
reliance on the Logicrose case in the context of an arbitration agreement. The
established proposition of agency law, is no argument for saying that a
separable arbitration clause cannot be invoked for the purpose of resolving the
issue whether bribery occurred. 44 Morison Js reasoning that the owners
validly rescinded an arbitration agreement on grounds of bribery was
overruled by the Court of Appeal. To the contrary, Longmore LJ held that, if
arbitrators can decide whether a contract is void for initial illegality, there is
no reason why they should not decide whether a contract has been procured
41
42
43
44
564
by bribery 45 Bribery was thus a lesser evil than illegality, but even so did
not impeach the arbitration clause itself.
The owners appealed that point as well, and contended before the House
of Lords that the contract could be rescinded, as a matter of law, on grounds
of bribery. Rejecting this contention, Lord Hoffmann held that this had been
put beyond doubt by the principle of separability in Section 7 of the
Arbitration Act 1996.46 Section 7 of the Arbitration Act 1996 provides the
English articulation of the separability principle:
Unless otherwise agreed by the parties, an arbitration agreement which
forms or was intended to form part of another agreement (whether or not
in writing) shall not be regarded as invalid, non-existent or ineffective
because that other agreement is invalid, or did not come into existence or
has become ineffective, and it shall for that purpose be treated as a
distinct agreement.47
Accordingly, the arbitration agreement could only be invalidated on
grounds which related to it directly.
The separability doctrine is no stranger to English arbitration. It is, in the
words of Lord Steyn after his appointment to the House of Lords, part of the
very alphabet of arbitration law that an arbitration clause forms a separate
and distinct agreement from the principal agreement of which it is a part.48
Once again reaffirming these sentiments, Lord Hoffmann held in Fiona Trust
that:
if (as in this case) the allegation is that the agent exceeded his authority
by entering into a main agreement in terms which were not authorized or
for improper reasons, that is not necessarily an attack on the arbitration
agreement. It would have to be shown that whatever the terms of the main
agreement or the reasons for which the agent concluded it, he would have
had no authority to enter into an arbitration agreement.49
45 [2007] EWCA Civ 20 at [29]; [2007] Bus LR 686, 700.
46 Per Lord Hoffmann at [9], [2007] Bus LR 1719, 1723.
47 Per Lord Hope, [31] [32], [2007] Bus LR 1719, 1729.
48 Lesotho Highlands Development Authority v. Impregilo SpA [2005] UKHL 43, [2006] 1
AC 221, at [21], per Lord Steyn. Also seen in Heyman v. Darwins Ltd [1942] AC 356, Bremer
Vulkan Shiffbau v. South India Shipping Corp [1981] AC 909; Paul Smith Ltd v. H&S International
Holdings Inc [1991] 2 Lloyds Rep. 127; Harbour Assurance Co (UK) v. Kansa General Insurance
Co Ltd [1993] QB 701. Quoted in Dicey, Morris & Collins, supra note 5 at para. 16-011.
49 Per Lord Hoffmann at [18]-[19], [2007] Bus LR 1719, 1725-1726.
565
John Townsend
566
3.
The use of foreign precedents by the House of Lords in Fiona Trust raises
important normative questions as to the appropriate precedential value to be
attributed to the reasoning of prior decisions of foreign Courts and
international awards in the law and practice of arbitration.55 There was no
formal precedential weight to any of the foreign judgments which the House
of Lords used to uphold the fresh start heralded by the Court of Appeal for
the construction of English arbitration clauses. But the foreign decisions were
nonetheless of significant persuasive value. Lord Hope himself recognised in
Fiona Trust that the trend of recent authority has risked isolating the approach
that English law takes to the wording of such clauses from that which is taken
internationally. 56 It could be fairly said that foreign precedents justified a
presumption of construction which had a uniform approach consistent with
that of other jurisdictions. It could well also be said that the appellate judges
recognised the value of the norms which the foreign precedents established.
Lord Hope recognised certainty as one such norm: the proposition that any
jurisdiction or arbitration clause in an international commercial contract
should be liberally construed promotes certainty. 57 The sentiments of the
English Law Lords may thus have implications for international arbitrators.
Professor Kaufman-Kohler has recently observed that it may be debatable
whether arbitrators have a legal obligation to follow precedents probably
not but it seems well settled that they have a moral obligation to follow
precedents so as to foster a normative environment that is predictable. 58 The
normative value of predictability and certainty in the construction of English
arbitration clauses in Fiona Trust is an important conclusion which can be
drawn from the points of law raised by the case.
IV. THE INTERPRETATION OF THE ARBITRATION ACT 1996
Fiona Trust is also of interest for its approach to the interpretation of the
Arbitration Act 1996. The Act applies to all arbitrations commenced after 31
55 See the recent debates as to whether international arbitration contains a jurisprudence
constante, and in particular, Tai-Heng CHENG, Precedent and Control in Investment Treaty
Arbitration, 30 Fordham International Law Journal (2007), 1014.
56 Per Lord Hope at [29], [2007] Bus LR 1719, 1729.
57 Ibid.
58 Gabrielle KAUFMAN-KOHLER, Arbitral Precedent: Dream, Necessity or Excuse?,
Arbitration International (2007), Vol. 23, No. 3, 357 at 374.
567
John Townsend
January 1997, and to all applications made to the court on or after 31 January
1997 in respect of arbitrations yet to be commenced at the time of application.
It is based substantially on the UNCITRAL Model Law of 1985, and in this
sense it already incorporates many accepted norms of international practice.59
It may be a step towards the uniformity of international commercial law which
many prominent academics desire.60 The Act, however, is an unusual English
statute because it was drafted in user friendly language and incorporates
three statements of general principle by which the Act is to be construed or
interpreted.61 Party autonomy is reinforced by Section 4, which provides for
mandatory and non-mandatory provisions. The latter can be excluded by the
parties agreement, or by their agreeing to apply institutional rules, or simply
by the inclusion of their own provisions in the arbitration agreement. A list of
mandatory provisions is scheduled to the Act, and it includes amongst them
Section 9 (stay of legal proceedings where valid arbitration agreement),
Section 31 (objection to substantive jurisdiction of tribunal), Section 32
(determination of preliminary point of jurisdiction); Section 66 (enforcement of
award), Section 67 (challenging the award: substantive jurisdiction), Section
68 (challenging the award: serious irregularity), and Section 72 (saving for
rights of person who take no part in proceedings).62
It is to be noted that it is these mandatory Sections which differ most from
the provisions of the UNCITRAL Model Law. The DAC report justified the
reason for their inclusion: In general the mandatory provisions are there in
order to support and assist the arbitral process and the stated object of
59
Professor Goode notes that the Department Advisory Committee on Arbitration had in
1989 initially been somewhat hostile to the UNCITRAL Model Law, but later saw the merits of it.
Roy GOODE, Commercial Law, 3rd ed., Penguin, London (2004), 1169. The Department Advisory
Committee Report on the Arbitration Bill (1996) (chaired by Lord Saville) [hereinafter DAC
Report] states at [4] that the final draft bill which became the 1996 Act owed much to both the
structure and the content of the Model Law. The DAC report is often used a as a guide to
568
arbitration. 63 In the Act, the stated object of arbitration is to obtain the fair
resolution of disputes by an impartial tribunal without unnecessary delay or
expense. 64 The mandatory provisions of the Arbitration Act were thus
regarded by the DAC as the minimum safeguards of the arbitral process which
English Courts should provide. The principle of party autonomy is accordingly
qualified to the extent that the parties cannot vary or exclude these provisions.
Nonetheless, apart from these mandatory provisions, the English Act generally
follows the spirit of the UNCITRAL Model Law in restricting court supervision of
the arbitral process. As one English practitioner has noted, court applications
under the Act are still very much the exception rather than the rule. 65
Moreover, the substantive English provisions as to the restriction of court
interference, the separability principle, the importance of party autonomy and
perhaps most importantly the very limited grounds for refusing recognition
and enforcement of a foreign arbitral award are all broadly comparable to
provisions of the Model Law.66
If the Arbitration Act 1996 had already introduced these uniform
doctrines by statute into English law, there is something of a jurisprudential
puzzle surrounding Fiona Trust. Why was there any need for a fresh start in
the construction of arbitration clauses, if the 1996 Act itself had already
provided for an approach to arbitration substantially in line with other leading
jurisdictions? The answer to this question can only be that the endorsement of
the fresh start by the House of Lords in Fiona Trust was regarded as
important to shaping international perceptions of English arbitral law and
practice. This may be important to international observers. As one eminent
international arbitrator has commented, Perception is the most important of
all realities (even on the premise, much debated in philosophy, that there is
any other reality). 67 What was achieved by the Law Lords in Fiona Trust was
a clear signal to the English bar, judiciary and international observers that
English arbitration law perceives itself to be uniformly in line with
international practice. English judges may now be expected to construe and
interpret provisions of the Act in line with international practice.
63 DAC Report at [19].
64 S.1 (a).
65 Peter J. REES, The Conduct of International Arbitration in England: the Challenge has
Still to be Met, Arbitration International (2007), Vol. 23, No. 3, 505.
66 S. 1 (c) of the English Act and Art 5 of the Model Law; s. 7 and Art 16; ss.100-104 and
Art 36.
67 Jan PAULSSON, The Denial of Justice in International Law, Cambridge University Press,
Cambridge (2005), 19.
569
John Townsend
570
there was no point in gilding the lily. Lord Hoffmanns leading judgment is
only twenty-one paragraphs long, and considered only seven previous English
cases. By contrast, Longmore LJ referred to twenty-one cases, and had sixty
others referred to him in oral argument or written skeleton arguments.70 It
may be that the House of Lords was only seeking to give a snapshot
overview of international practice by promoting a new approach to the
construction and interpretation of the Arbitration Act. Yet the brevity of the
case is worthy of comment. Although such a minimalist approach is in itself
not without precedent in the House of Lords, it is still perhaps an unusual
approach for a superior English appellate court to take. Perhaps one reason for
the lack of consideration of French judgments is a perceived French
exceptionalism as to the exclusive jurisdiction of the arbitrators highlighted
by English writers Tweedale and Tweedale.71 This may indicate that there
could still be material points of departure between English and French law,
which English law may yet come to adopt. There may come a time when
English and French approaches to separability and jurisdiction will coincide.
On the other hand, such differences as there are may be overstated, and may
simply indicate a difference of emphasis rather than substance.
V. HUMAN RIGHTS AND THE COMMERCIAL CONTEXT OF ENGLISH ARBITRATION
571
John Townsend
73 Rights Brought Home: the Human Rights Bill (1997) (Cm 3782: London: HMSO).
74 S. 3 (1), Human Rights Act 1998; s.4 Human Rights Act 1998.
75 This proposition did not mean that an individual who believed that his or her rights
under the European Convention had been infringed by the UK state before 1998 could not make
an application directly to the European Court of Human Rights (or the Commission, before its
abolition in 1999), but this procedure was recognised to be lengthy and costly. See Lord Bingham
of Cornhills lecture of March 1993, published in T BINGHAM, The European Convention on
Human Rights: Time to Incorporate, in The Business of Judging: Selected Essays and Speeches,
Oxford University Press, Oxford (2000), 140.
76 S. 19, Human Rights Act 1998. This is known as a statement of compatibility. The
statement must be in writing and published as the minister thinks appropriate: s. 19(2).
77 City of Moscow v. Bankers Trust [2004] EWCA Civ 314; [2004] 2 All ER (Comm) 193.
572
573
John Townsend
81 Stretford v. Football Association Ltd, per Clarke MR at [50], [2007] Bus LR 1068.
82 Ibid. The Bankers Trust case was not considered in the Court of Appeals judgments in
Stretford and Sumukan, even though it contained much pertinent dicta.
83 Stretford, per Clarke MR at [66], [2007] Bus LR 1074.
84 Sumukan, at [61], [2007] Bus LR 1068.
574
85 See also on human rights and arbitration, El Nasharty v. J. Sainsbury plc [2007] EWHC
2618 (Comm) (2008) 1 Lloyds Rep 360 (if there was duress or undue influence or mistake which
invalidated the arbitration agreement there would be no waiver of relevant rights under Art. 6; but
in the circumstances the fact that the main agreement was entered into under duress did not
impeach the arbitration agreement); Republic of Kazakhstan v. Istil Group Ltd [2007] EWCA Civ
471 (2007) 2 Lloyds Rep 548 (restriction on rights of appeal compatible with art 6); ASM Shipping
v. TTMI [2006] EWCA Civ 1341 (2007) 1 Lloyds Rep 136 (no overarching principle laid down by
the ECHR that an award tainted by apparent bias had to be set aside); CGU International Insurance
PLC v. Astrazeneca Insurance Co Ltd [2006] EWCA Civ 1340 (2007) Bus LR 162 (s.69 of the
Arbitration Act did not exclude judicial review on grounds of unfairness of process, but no
unfairness on the facts).
575
John Townsend
V. CONCLUSIONS
Some conclusions can be drawn from the decisions of the Court of Appeal
and House of Lords in Fiona Trust. The reasoning of the appellate judges in
both Courts demonstrates that any suggestion that English commercial law
remains insular and eccentric is unfair. In particular, the House of Lords, the
UKs highest appellate court, considered foreign precedents from other leading
arbitral jurisdictions. It could be said fairly that this was done in order to
achieve uniformity in the application of a domestic statute that was based on
an internationally drafted and approved UNCITRAL Model Law. It is to be
hoped that, in this sense, the Court of Appeal and House of Lords decisions
can be recognised as two leading cases on the fundamentals of international
commercial arbitration. Sensitivity to the international commercial context has
also been shown by English appellate courts in other recent unsuccessful
challenges to the English Arbitration Act on the grounds that it is incompatible
with provisions of the ECHR. Finally, one of the most extraordinary facts of the
Fiona Trust litigation was that not one of the parties were themselves English.
The international disputes which take place under English law and the continued
residence of wealthy foreign-domiciled individuals in England may yet provide
future opportunities for arbitrators and judges to bring English commercial law
into line with other uniform aspects of international commercial law.
***
APPENDIX THE ARBITRATION CLAUSE (A LAW AND LITIGATION CLAUSE) 86
41 (a) This charter shall be construed and the relations between the parties determined in
accordance with the laws of England.
(b) Any dispute arising under this charter shall be decided by the High Court in London
to whose jurisdiction the parties hereby agree.
(c) Notwithstanding the foregoing, but without prejudice to any partys right to arrest or
maintain the arrest of any maritime property, either party may, by giving written notice of
election to the other party, elect to have any such dispute referred to arbitration in
London, one arbitrator to be nominated by Owners and the other by Charterers, and in case
the arbitrators shall not agree to the decision of an umpire, whose decision shall be final and
binding upon both parties. Arbitration shall take place in London in accordance with the
London Maritime Association of Arbitrators, in accordance with the provisions of the
Arbitration Act 1950, or any statutory modification or re-enactment thereof for the time
being in force.
[]
86 See supra note 2. Per Longmore LJ, [2007] Bus LR, 686, 692-693 at [5]; [2007] 1 All ER
(Comm) 891, 896 at [5].
576
(i)
and
(b) it fails to give notice of election to have this dispute referred to arbitration
not later than 30 days from the date of receipt of such notice of dispute
mim
577