The meaning of "matters" in section 9 of the Arbitration Act 1996/arbitration agreements and third parties
The following two issues were considered by Popplewell J in this case:
(1) The interpretation of section 9 of the Arbitration Act 1996, which provides that "A party to an arbitration agreement against whom legal proceedings are brought ... in respect of a matter which under the agreement is to be referred to arbitration may... apply to the court in which the proceedings have been brought to stay the proceedings so far as they concern that matter". The issue in this case was whether "matter" in this context includes a defence, even if the claim to which it relates does not fall within the arbitration agreement. The judge concluded that it does and that "matter" means a dispute or difference and that the court should stay the proceedings to the extent of any issue which falls within the scope of the arbitration agreement: "The objection that this approach leads to fragmentation of proceedings is not a sufficient reason for departing from these principles".
The judge also noted that prior caselaw stood "as authority for the proposition that if A brings a claim against B, and B advances a counterclaim which amounts to a defence by way of transactional set-off, A cannot have B's counterclaim stayed in favour of arbitration under section 9. There is an obvious justice in that result, because A should not be allowed to obtain judgment on his claim whilst insisting that a defence be stayed for arbitration, so that the court is confined to the facts A has chosen to prove and prevented from examining related facts which may amount to a defence".
(2) A clause in the underlying agreement provided that "With the exception of Affiliates... the Parties agree that the terms of this Agreement are not enforceable under the Contracts (Rights of Third Parties) Act 1999" ("the 1999 Act"). Section 8(1) of the 1999 Act provides (broadly) that where a third party wishes to enforce a right under a contract (to which he/she is not a party), he/she is bound to arbitrate to enforce that right if there is an arbitration agreement in that contract. Section 8(2) deals with the situation where the third party has a right to arbitrate, but no right under the contract which it wishes to enforce.
The judge was asked to decide whether a claim against the affiliates should go to arbitration, given that the underlying agreement contained an arbitration agreement. The judge held that, since the agreement gave the affiliates a defence, they were not bound to arbitrate: "Section 8(1) is concerned with the situation where the third party seeks to enforce substantive rights under the contract, not where the contract gives him a defence". On the facts, however, section 8(2) applied instead here, and the affiliates were entitled to a stay of court proceedings in favour of arbitration.
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