UK: Survival Of The Arbitration Clause – Fraud, Forgery And Bribery

Last Updated: 14 August 2008

Fiona Trust & Others v. Privalov & Others

This is reported at [2007] EWHC 1217 (Comm). This claim concerned how allegations of bribery affected an arbitration clause contained in charterparties. The arbitration clause referred to; "Any disputes arising under this charter". Court proceedings were commenced alleging the charterparties had been validly rescinded for reasons of fraud and bribery. An arbitrator under each of the charterparties was appointed by the charterers.

Owners applied under s.72 of the 1996 Act restraining the proceedings alleging the charterparties and arbitration agreements were rescinded by reason of the bribery. The charterers applied under s.9 to stay the owners' court proceedings pertaining to the charterparties in favour of arbitration.

The following issues arose.

Were the words; "Any dispute arising under this charter" wide enough to cover claims for rescission for bribery?

Yes. The court reviewed various authorities distinguishing between "arising under " and "arising out of". Historically, the former were narrower than the latter, but the court said this should no longer apply. A liberal and wide construction should be given to an arbitration clause as it was presumed that commercial men favoured one-stop arbitration.

Does the alleged invalidity of each charterparty go to the validity of the arbitration clause?

Not in this case. Under s.7 of the 1996 Act an allegation of a contract's invalidity does not prevent the invalidity being determined under the (separate) arbitration agreement. Owners argued they would not have made any contract had they been aware of the bribes. The court said this did not impeach the arbitration clause and that; "... there must be something more than that to impeach the arbitration clause ...". The court of first instance said that even if the tribunal did have jurisdiction (it said it did not) the court would exercise its powers under s.72 to grant an injunction restraining the arbitration, however the court would not grant a stay under s.9. The Court of Appeal disagreed.

The relationship between s.9 and s.72 of the 1996 Act The Court of Appeal made the following points:-

  • The 1996 Act contemplated that the tribunal would be the first to consider whether they have jurisdiction to determine the dispute. Bearing in mind the strict limitations placed on court intervention (s.1(c)) the court should be very cautious about using s.72. Here, s.72 had no application, but might apply where the existence of the agreement is denied by a party who did not commence English proceedings and had no wish to do so.

  • S.9 is the primary remedy and for it to apply there must be an arbitration agreement. If its existence is disputed this issue will be decided under s.9. The court endorsed the guidelines of the four possible approaches to deciding whether an agreement exists to which s.9 applies and set out in Birse Construction Limited v. St. David Limited [1999] BLR p.194; (1) determine if an agreement exists on the evidence before the court. If it exists the stay is mandatory, (2) stay the proceedings to allow the jurisdiction to be decided by the tribunal (under s.30 of the 1996 Act if an English tribunal), (3) do not decide but make directions for the issue to be tried, and (4) determine that no agreement exists.

Albon v. Naza Motor Trading Sdn Bhd

This is reported at [2007] All ER (D) 495 (Jul). Proceedings were commenced by A against N (a Malaysian company) alleging breach of an oral agreement subject to English law. N sought a stay alleging the parties agreed a Joint Venture Agreement ("JVA") providing for arbitration in Malaysia to be governed by Malaysian law. A alleged the JVA was a forgery and refused to participate in the arbitration. The court considered a number of issues:-

What are the requirements of s.9 of the 1996 Act and did N satisfy them?

The court said there were two requirements to ordering a stay. First, a concluded arbitration agreement. Second, the issue falls within the scope of the arbitration clause.

How did the court respond to the guidelines laid down in Birse Construction?

The court should try to decide whether an arbitration agreement was concluded subject to one qualification. This concerned the third guideline. Where the issue cannot be resolved by the available evidence the court can stay the proceedings for the foreign tribunal to decide the matter by reference to its inherent jurisdiction: see Al-Naimi v. Islamic Press Agency Inc. This was the approach in A v. B. Before the court there were unresolved issues of fact as to whether the JVA and arbitration agreements were concluded.

Should the court exercise its inherent jurisdiction to grant a stay and remit the issue of whether a JVA was concluded to the arbitration proceedings?

In exercising its inherent jurisdiction the court had to take into account the following:-

  • Did the court proceedings precede the arbitration proceedings? In this case, yes.

  • Is a decision of the arbitrators on this issue subject to review by a court? The evidence before the court was that in Malaysia there is no statutory jurisdiction equivalent to s.30(2), 67 and 72 to interfere with a tribunal's decision as to the arbitration agreement's existence and conclusion and they had no inherent jurisdiction to do so.

The court decided not to exercise its inherent jurisdiction to order a stay, but to give directions for the expedited trial by the court on the authenticity of the JVA.

This decision provides an interesting contrast to A v. B as to how the court exercised its inherent jurisdiction. In A v. B proceedings were stayed and the issue of whether the tribunal had jurisdiction was decided by the foreign tribunal.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.