Court of Appeal disallowed arbitrators from hearing challenge
as to whether or not they had jurisdiction since this is only
permissible in "exceptional" cases
Sadruddin Hashwani (i) Zayer Petroleum Corp Ltd (ii)
Ocean Pakistan Ltd (iii) v OMV Maurice Energy
This important decision illustrates the Court of Appeal's
reluctance to allow arbitrators to decide questions of their own
jurisdiction as well as the critical importance of parties
including clear drafting in their agreements to prevent costly
disputes over forum.
After an ICC arbitration was commenced by OMV Maurice Energy Ltd
against two oil exploration companies (Ocean Pakistan Ltd and Zaver
Petroleum Corporation Ltd) who disputed the arbitrators'
jurisdiction in the English courts, the High Court stayed the court
proceedings to allow the arbitrators to decide whether they had
jurisdiction. There were various agreements between the parties.
Article 28 of the first "Concession" Agreement provided
for arbitration but this was limited to disputes between foreign
working interest owners or between foreign working interest owners
and the "President". The second, "Joint
Operating" Agreement provided that any dispute arising out of
it was to be dealt with "mutatis mutandis" in accordance
with the arbitration clause in the first agreement. The dispute
between OPL, Zaver and OMV arose out of that second agreement.
However, although OPL was a foreign working interest owner, Zaver
was a Pakistani working interest owner and arguably, fell outside
the remit of the arbitration clause.
The Court of Appeal disagreed that the question of jurisdiction
between Zaver and OMV should be decided by the arbitrators. The
fact that there was going to be an ICC arbitration raising similar
issues between OMV and OPL was not a reason for leaving to the ICC
arbitrators the unrelated question of jurisdiction over the
parallel dispute between OMV and Zaver. Furthermore, Albon v
Naza Motor Trading (2007) provided that "it will only be
in exceptional cases that a court faced with proceedings which
require it to determine the jurisdiction of arbitrators will be
justified in exercising its inherent power to stay those
proceedings to enable the arbitrators themselves to decide the
Although arbitrators have jurisdiction to decide their own
jurisdiction, that is not the "the final word", since the
parties can still challenge the award under section 67 of the
Arbitration Act 1996, on the ground that the arbitrators lacked
The Court of Appeal observed that if the parties had wanted to
ensure that such parallel disputes were treated as a single dispute
for the purposes of the arbitration agreement, they should have
made that clear. Regarding the dispute between OMV and Zaver, after
reviewing the agreement, the Court held that the arbitrators did
have jurisdiction, stating: "one matter that emerges clearly
from Article XXVIII as a whole is an intention to resolve disputes
involving foreign working interest owners by arbitration outside
Pakistan. ...effect can be given to the expression "mutatis
mutandis" by substituting "a Pakistani working interest
owner" for "the President" in Article 28.3. The
result would be that disputes between Zaver and a foreign working
interest owner would be referred to arbitration abroad and disputes
between Zaver and another Pakistani working interest owner would be
referred to arbitration in Pakistan. ...once the parties'
intention has been identified from the documents as a whole, a
simple substitution of one name for another, which is well within
what that expression contemplates, can easily be made. For these
reasons I am satisfied that OMV is also entitled to pursue a claim
for sums due under the JOA in arbitration against Zaver under the
rules of the ICC."
On 26 October 2016, the Court of Appeal delivered its judgment in Kazakhstan Kagazy Plc & 6 others v (1) Baglan Abdullayevich Zhunus (2) Maksat Askaruly Arip (3) Shynar Dikhanbayeva  EWCA Civ 1036.
With high cost and inefficiency top of the list of party concerns about the arbitral process, institutions, arbitrators, practitioners and indeed legislators are keen to find ways to address those concerns.
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