UK: Cases Under The 1996 Arbitration Act

Last Updated: 2 December 1998

The new English Arbitration Act 1996 has now been in force for almost two years. This is perhaps a convenient time to review the manner in which the courts have been applying the Act. A selection of the more important cases decided under the new arbitration law is reviewed below.

(a) Stay of Legal Proceedings - Section 9

Perhaps the best known of all cases, and one of the earliest decided under the Act, is Halki Shipping Corporation v Sopex Oils [1998] 1 WLR 726. The Court of Appeal had to apply section 9, which provides that, where a contract contains an arbitration clause, any court proceedings which are brought must be stayed unless the arbitration agreement is null and void, inoperative or incapable of being performed.

The Court in Halki had to decide whether it was still open to a plaintiff to bring summary proceedings to enforce a claim where the contract contains an arbitration clause, but where the defendant has no arguable defence to the claim. This was the situation under the old law.

The Court found that the reduced scope of the new section 9 did not allow summary judgment to be granted in the presence of an arbitration clause (even where it might be said that there was "no dispute" or arguable defence to the claim) and, thus, the matter came within the arbitration clause.

(b) Extensions of Time for Beginning Arbitral Proceedings -Section 12

In three cases, the courts have recently had to consider the scope of their powers to extend time for the beginning of arbitral proceedings under the new arbitration law.

In order to grant an extension of time under section 12, the courts must be satisfied, either that circumstances are "outside the reasonable contemplation of the parties" and that it would be just to extend the time limit, or that the conduct of one party makes it unjust to hold the other party to the strict terms of the time provision in question.

Vosnoc Ltd v Transglobal Projects Ltd [1998] 1 WLR 101, shows an initial judicial tendency to be flexible in regards to extentions of time. This case involved a contract subject to the one year limitation provisions of the 1922 Hague Rules. The plaintiff sought to commence arbitration proceedings by sending the defendant a letter which advised that the dispute between them was referred to arbitration. The Court held that this letter did not effectively commence arbitration proceedings as it did not request the defendant to nominate an arbitrator, with the result that the action was time-barred.

The Court considered, however, that it had to take into account "the whole of the circumstances" when deciding whether or not to grant an extension. It held that it was not in the parties' reasonable contemplation that a letter referring a dispute to arbitration might fail to bring about the intended result. In view of a number of factors, in particular, the fact that it was not clear that the plaintiff's letter had failed to commence proceedings, the plaintiff's clear intention to give notice in order to prevent time running against it, the defendant's knowledge of the plaintiff's intention, and the substantial amount of the claim, the Court held that it was just to grant an extension of time under section 12.

However, in the case of Cathiship S.A. v Allanasons Ltd (The "Catherine Helen") [1998] 3 All ER 714, the Court declined to extend time under section 12 on the ground that parties must be held to the bargain they strike under arbitration clauses which contain time bars. In view of the commercial purpose of such clauses, mere notice of a possible future claim was held to be insufficient compliance with a requirement under a Centrocon clause that a claim be made in writing within a one year period.

(c) Interrelationship between Sections 9 and 12

The relationship between sections 9 and 12 of the Act was considered in the case of Grimaldi Compagnia di Navagazione SpA v Sekihyo Lines Ltd (1998) The Times, 20 July 1998. Charterers had applied to the courts for a declaration that the Hague Rules were not incorporated in the charterparty. In the alternative, they sought an extension of time for the commencement of arbitration under section 12. In response, the owners argued for a stay under section 9 of the Act as the charterparty contained an arbitration agreement.

The Court decided that, where there was an arbitration agreement and one party insisted on arbitration, matters should be resolved by section 9. There was nothing in section 12 to lead to a contrary conclusion. The Court could and should interpret the relationship of sections 9 and 12 in such a way as reflected the parties' agreement to have their substantive disputes determined by arbitration whilst preserving the Court's residual role to intervene by granting an extension under section 12 if and when necessary.

Incorporation of arbitration clause - Section 6(2)

The issue before the Court in Trygg Hansa Insurance Co Ltd v Equitas Ltd (1998) (unreported) was whether an arbitration clause in a primary insurance contract was incorporated by reference in a reinsurance contract. The relevant part of Section 6(2) provides that reference in an agreement to a document containing an arbitration clause constitutes an arbitration agreement if the reference is such as to make that clause part of the agreement. The Court held that in the absence of special circumstances general words of incorporation were not to be treated as effective for the purposes of section 6(2) and that the arbitration clause in the primary insurance contract was not incorporated into the reinsurance contract.

(d) Arbitrator's duty to act fairly - Section 33

The arbitrator's duty under Section 33 to act "fairly and impartially" as between the parties, giving each party a "reasonable opportunity" of putting his case and dealing with that of his opponent, was considered recently in the case of Gbangbola and another v Smith & Sherriff Ltd [1998] 3 All ER 730. The plaintiffs challenged a cost order made by the arbitrator on the grounds of "serious irregularity" under section 68 of the Act. They alleged that the arbitrator, in making his costs order, had relied on matters which neither party had raised.

The court held that the arbitrator's duties under section 33 extend to awards of costs:

"A tribunal does not act fairly and impartially if it does not give a party an opportunity of dealing with arguments which have not been advanced by either party. It is not suggested by the claimant contractor that either of the two points mentioned in the arbitrator's letter was raised by it in the arbitration as being influential on the overall burden and determination of costs. Unless such an opportunity is given there is danger that the final result will not be determined fairly against the party who would be ordered to pay the costs."

(e) Arbitrator's jurisdiction - Sections 30 and 67

Section 30 of the Act allows the arbitral tribunal to rule on its own substantive jurisdiction while section 67 allows a party to challenge such an award. To date, there have been a few test cases regarding these provisions. In Azov Shipping Co v Baltic Shipping Co (1998) (unreported), the arbitrator, using powers granted by section 30, concluded that he had jurisdiction and that Azov was a party to an agreement which contained an arbitration clause. This finding was challenged by Azov under section 67 of the Act. Azov also sought a direction that there should be oral evidence and cross- examination on this issue. This request was granted by the Court which found that, although there may be some prejudice to the speedy and economical disposal of the application by allowing oral evidence, justice required it.

In Ranko Group v Antarctic Maritime SA (the "Robin") [1998] LMLM 492, an arbitrator was appointed under the LMAA Small Claims Procedure for three companies in a demurrage dispute arising out of a charterparty which contained a London arbitration clause. Two of the companies asked the arbitrator to rule on his own jurisdiction pursuant to section 30. By way of response, on 14 October 1997, the arbitrator wrote a letter stating that he had been directly appointed under the provisions of the small claims procedure and that all disputes arising under the charterparty had been submitted to arbitration in accordance with the arbitration agreement.

On 28 November 1997, the arbitrator published his award relating to the disputes and the reasons for his ruling on jurisdiction which had been given on 14 October. On 23 December, the three companies tried to challenge the jurisdiction finding under Section 67 of the Act. The Court found that, as the time for challenging an award was usually 28 days from the award, the companies were out of time as the ruling had been made on 14 October. The Court also refused to grant an extension of time, stressing that the role of the Court in relation to the Act was essentially one of review rather than rehearing.


The courts appear to have adjusted to the new Arbitration Act without difficulty and to have made use of the new concepts and principles it introduced into English arbitration law.

This note is intended to provide general information about some recent and anticipated developments which may be of interest. It is not intended to be comprehensive nor to provide any specific legal advice and should not be acted or relied upon as doing so. Professional advice appropriate to the specific situation should always be obtained.


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