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In Orange Transgroup Ltd ("Orange") and IT Way v Shein Distribution UK Ltd. ("Shein"), the English High Court addressed the procedural interaction between challenging jurisdiction (Civil Procedure Rules, Part 11) and staying proceedings for arbitration (section 9, Arbitration Act 1996 (the "Act")). The Court refused to require a Part 11 application where the defendant had: (i) indicated an intent to contest jurisdiction in the acknowledgment of service; and (ii) filed a timely section 9 application to stay proceedings. While the decision provides helpful confirmation, parties may still adopt a 'belt-and-braces' approach to avoid the risk and cost of having to argue this procedural point.
Background
The case involved a dispute between claimants, Orange and IT Way (the "Claimants"), and the defendant, Shein. Shein relied on the arbitration clause contained in a written service agreement ("SA"). Whilst it was not disputed that Orange had provided services to Shein, Orange disputed the authority of the person who signed the SA as its representative to enter into the SA.
After the relationship came to an end in early 2025, both sides raised claims against each other. Shein claimed return of advance prepayments made by it, which it raised in arbitration relying on the arbitration clause in the SA. Orange (and IT Way) commenced proceedings in the English High Court claiming damages arising from, amongst others, fraudulent misrepresentation, abuse of dominance, breach of contract, unjust enrichment and unlawful interference with business.
The Court considered two issues. Firstly, the Claimants sought a declaration that Shein had accepted jurisdiction on the basis that Shein had not filed an application under Part 11 of the CPR. The Court needed to determine whether Shein had accepted the Court's jurisdiction, such that the arbitration commenced by Shein should be stayed. For its part, Shein sought a stay of the Claimants' claims on the basis that the dispute should be resolved by way of arbitration in view of the arbitration agreement between it and Orange.
Had Shein accepted the Court's jurisdiction?
Shein argued that it had not accepted the Court's jurisdiction because it had filed an acknowledgment of service indicating that it intended to dispute the Court's jurisdiction and had also filed an application under section 9 of the Act seeking a stay of the proceedings on the basis that the dispute was required to be resolved by arbitration. Shein argued that having done so, and having complied with the requirements of CPR Part 62, which deals with applications relating to arbitration, it was not necessary for it to file a separate application under Part 11.
The Court accepted Shein's argument, concluding that it would be "unnecessarily duplicative" to have to comply with the requirements of section 9 and Part 62 and also to file an application under Part 11.
The Court also proceeded to examine, if it was wrong regarding its conclusion above, the "Part 11 submission" and considered whether, assuming Shein was required to file a Part 11 application, the Court could correct the omission to refer to Part 11 (under CPR 3.10) and treat Shein as having raised a Part 11 application. In this connection, the Court considered the following authorities:
- Hoddinott and others v Persimmon Homes (Wessex) Ltd [2007] EWCA Civ 1203: in Hoddinott, the Court of Appeal held that where a defendant files an acknowledgment of service without ticking the box indicating that the defendant intends to contest jurisdiction and fails to file an application under Part 11 under 14 days, the defendant is to be treated as having accepted the court's jurisdiction.
- Pitalia & Anor v NHS England [2023] EWCA Civ 657 and The Tintometer Ltd & Anor v Pitmans (a firm) & Anor [2024] EWHC 370 (Ch): In Pitalia and Tintometer, even though the defendants had filed an acknowledgment of service without ticking the box indicating that they intended to contest jurisdiction and their application to strike out the claims did not refer to Part 11, it was held that the court could treat the application as one under Part 11, by correcting the omission to refer to Part 11 under CPR 3.10. This was because the defendants' intent to contest jurisdiction (or their request that the court not exercise its jurisdiction) had been made clear to the claimants.
Applying the above rationale, the Court concluded that, even if a Part 11 application was necessary, Shein could not be treated as having accepted the Court's jurisdiction and its section 9 application would be treated as an application disputing jurisdiction under Part 11. In its analysis, the Court considered that there was no doubt as to the substance of Shein's application to stay the proceedings in favour of arbitration and that a jurisdiction dispute was the "obvious consequence" of Shein's reliance on the arbitration clause.
Whether the English High Court proceedings should be stayed or the arbitration?
The Court also considered the parties' respective requests for injunctive relief and concluded that Orange's and IT Way's claims should be stayed and not the arbitration.
On the question of whether there existed a valid arbitration agreement between Orange and Shein, the Court considered that there had been an unsatisfactory level of evidence provided by both sides. The Court concluded that the question of a valid agreement was not one that could be determined on the papers before it and found there to be a clear triable issue. The Court observed that the most expeditious route to resolution was arbitration and Orange's signatory's authority to enter into the SA would be best tried by the arbitrator. The Court referred to the presumption noted by the Court of Appeal in Fiona Trust and Holding Corpn and others v Privalov and others [2007] Bus. L.R. 686 that the arbitral tribunal should determine its own jurisdiction first.
Accordingly, the Court granted an interim stay under the court's inherent jurisdiction under CPR 3.1 in favour of Shein. The Court noted that this course of action would reduce the risk of duplication, the potential for inconsistent decisions and costs. If the arbitrator were to conclude that she lacked jurisdiction, the parties could return to the Court for further case management directions.
Comment
This decision provides useful clarity to parties that filing a Part 11 application is unlikely to be necessary where a party has made it clear that it intends to dispute the court's jurisdiction by ticking the relevant box on the acknowledgment of service and by bringing an application, within time, under section 9 of the Act. Nevertheless, given this point has repeatedly been raised by claimants, parties may consider a 'belt-and-braces' approach to avoid litigating this issue again.
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