Out-Law Analysis | 01 Dec 2015 | 10:56 am | 3 min. read
The Court of Appeal overturned High Court judge Mr Justice Burton's decision to stay proceedings in relation to complex commercial arrangements governing oil exploration in Pakistan, on the grounds that the International Chamber of Commerce (ICC) tribunal should decide on the issue of jurisdiction. According to Lord Justice Moore-Bick there was a "considerable risk" that the issue of the arbitrators' jurisdiction could return to the court if left to the tribunal. In his judgment he found that both disputes were subject to arbitration under the ICC.
The decision seems to conflict with the well established 'kompetenz-kompetenz' principle: that is, the ability of the arbitral tribunal to rule on the question of its own jurisdiction. However, by making what was effectively a case management decision in response to a request from one of the parties, the court instead resolved questions over jurisdiction once and for all.
The judgment is good news for arbitration in England and underlines the commitment of the English courts to arbitration. The Court of Appeal has prioritised effective case management and showed itself unwilling to stay proceedings for arbitrators to resolve jurisdiction issues themselves except in exceptional circumstances.
The case concerned a multi-party, multi-contract dispute over alleged breaches of a joint operation agreement (JOA) for oil exploration in Pakistan. OMV Maurice Energy Ltd, a company incorporated in Mauritius, began arbitration in the ICC against US company Ocean Pakistan Ltd (OPL) and Zaver, a Pakistani company, which applied to the High Court in England to have the arbitration set aside on the grounds that the ICC did not have jurisdiction to determine the dispute.
In the High Court Mr Justice Burton confirmed that the dispute between OMV and OPL and between OMV and Zaver were two separate disputes. He said that the ICC did have jurisdiction in the dispute between OMV and OPL. However, he was unsure of its jurisdiction in the dispute between OMV and Zaver, and therefore ordered a stay to the court proceedings to allow the ICC to determine the question of jurisdiction itself.
OPL and Zaver appealed to the Court of Appeal, while OMV cross-appealed on the grounds that the two disputes should be disposed of in the same way. The Court of Appeal upheld the decision that the ICC had jurisdiction, but disagreed with Mr Justice Burton's decision to stay the second dispute. It said that referring the matter back to the ICC was not effective case management as it would be unlikely to provide finality on the question. Under section 67 of the 1996 Arbitration Act any of the parties could have challenged the tribunal's decision on the grounds that it lacked jurisdiction.
Lord Justice Moore-Bick said that although it was "difficult to ascertain exactly what the parties had in mind" when they entered into their various contractual arrangements, it was reasonable to assume that the contracts would have been clearer if disputes involving more than two of the parties were to be treated as one dispute for the purposes of the arbitration agreement. For this reason, he agreed with the High Court judge that there were two separate disputes in this case.
OPL and Zavar had sought a declaration under section 72 of the 1996 Arbitration Act that the ICC did not have jurisdiction in the matter. Lord Justice Moore-Bick said that this gave the court a "responsibility to decide the question on the basis of the evidence the parties have chosen to put before it", unless it was able to justify its refusal to resolve the question.
Adding that there was "good reason" for this, he said that although arbitrators "have jurisdiction to decide their own jurisdiction, they do not have the final word on the subject, because it is open to the parties to challenge their award under section 67 of the Act on the grounds that they lacked substantive jurisdiction".
"In simple terms, a party is not bound by the award of a tribunal on a matter that he did not agree to refer to it," he said.
"It may be that in a few cases there may be practical reasons for allowing the tribunal to reach a decision on its own jurisdiction before the court finally rules on the matter, but such cases are likely to be rare. In the present case a decision by the tribunal might have had some persuasive authority, but could not finally determine the matter before the court," he said.
In this particular case, there was a "very considerable risk" that the court would have been required to rule on the jurisdictional point whatever the arbitral tribunal ultimately decided, given the complexities of the various underlying agreements. For this reason, the High Court judge had been wrong to refer the question back to the tribunal, he said.
Alistair Calvert and Daniel Gardiner are international arbitration experts at Pinsent Masons, the law firm behind Out-Law.com.