A recent Commercial Court case emphasises the limitations on court intervention in arbitration, and demonstrates that parties must think carefully about when and how to raise jurisdictional issues.

In HC Trading Malta Ltd v Tradeland Commodities SL[1] the Commercial Court held that it would be wrong in principle for a court to grant declaratory relief in support of an arbitration clause, despite noting the court’s general jurisdiction to intervene.

The Facts and Judgment

The claimant, HC Trading Malta Ltd (“HCT”), applied for a declaration from the court that there was a binding contract of sale requiring the defendant Tradeland Commodities SL (“Tradeland”) to purchase goods from HCT and that the contract contained a binding arbitration clause. Tradeland denied any contract and sought to set aside the application on the basis that the court had no jurisdiction to grant the relief or should use its discretion to refuse it.

The Commercial Court set aside the application finding that if a claimant intends to refer a claim to arbitration and is able to commence the arbitration, the court should not intervene and should allow the tribunal to rule on jurisdictional issues. Therefore the proper course for HCT was to commence arbitration and ask the tribunal to deal with jurisdiction.

The court also ruled it would be “wrong in principle” to grant declaratory relief where the claimant:

• asserts that there is a binding arbitration agreement;
• has a claim that it wishes to assert and which therefore (on the claimant’s own case) can only be resolved by way of arbitration; and
• is clearly able to commence an arbitration in pursuance of that agreement whether or not he has yet done so, and whether or not it is imminent.

The court distinguished this case (where an arbitration was intended) from a 2013 Supreme Court judgment encouraging court intervention[2] (where no arbitration was intended and an anti-suit injunction was justified).

Who can rule on jurisdiction?

An arbitral tribunal’s jurisdiction derives from the arbitration agreement. Under section 30 of the Arbitration Act, unless otherwise agreed by the parties, a tribunal can rule on its own substantive jurisdiction including whether there is a valid arbitration agreement, whether the tribunal was properly constituted and what matters have been submitted to arbitration.

An objection to the tribunal’s jurisdiction may be raised with the tribunal (under section 31) or, with the agreement of all parties or the permission of the tribunal, to the court (under section 32). Court intervention is much more common via jurisdiction-based challenges to arbitral awards (under section 67), and the court may confirm, vary or set aside the award, in whole or part.

In this case, the court noted its general jurisdiction to intervene under the Act, rejecting Tradeland’s argument that it did not have jurisdiction to grant declaratory relief. Section 1(c) of the Act provides that “in matters governed by this Part the court should not intervene except as provided by this Part”, and the court stated that Parliament would have inserted clear wording into the Act if it had intended to remove the court’s general jurisdiction.

Comment

Despite this general jurisdiction, the extent of court intervention regarding a tribunal’s jurisdiction remains limited as the court noted it “must be extremely slow to intervene where an arbitration is concerned.” The court recognised that the Act would “be frustrated where an arbitration is on foot or contemplated if the parties were simply able to invoke a general declaratory power of the Court.”

Parties should think carefully about when and how to raise jurisdictional issues, which should usually be raised with the tribunal at the outset.

[1]              HC Trading Malta Ltd v Tradeland Commodities SL [2016] EWHC 1279 (Comm)

[2]              Ust-Kamenogorsk Hydropower Plant JSC v AES Ust-Kamenogorsk Hydropower Plant LLP [2013] UKSC 35 (AES).

This post was prepared with the assistance of Eleanor Scogings in the London office of Latham & Watkins.