HC Trading Malta v Tradeland Commodities: Whether court can grant a declaration on whether the parties are bound to arbitrate before an arbitration is commenced

http://www.bailii.org/cgi-bin/format.cgi?doc=/ew/cases/EWHC/Comm/2016/1279.html&query=(tradeland)

Clyde & Co (Fanos Theophani and Lucinda Roberts) for defendant

In AES LLP v JSC (see Weekly Update 22/13), the Supreme Court held that the English court had power to grant an anti-suit injunction in favour of arbitration (where proceedings had first been commenced in a non-EU court), even though no actual arbitration had been commenced yet. Of issue in this case was whether the English court could grant a declaration that the parties were bound by an arbitration agreement, even though no arbitration had been commenced (although arbitration was imminent).

HHJ Waksman QC held that the English court does have jurisdiction to grant declaratory relief. However, he further held that such relief cannot be granted where arbitration has not  yet been commenced.

Generally, the English courts are reluctant to intervene where arbitration is concerned. Section 30 of the Arbitration Act 1996 provides that the arbitral tribunal should rule on its own jurisdiction. A party can apply to court under section 32 to determine any jurisdiction question with the consent of the other side or the permission of the tribunal. A party can also challenge an award for lack of jurisdiction under section 67, and section 72 provides that a party who has taken no part in arbitral proceedings may question jurisdiction by seeking a declaration or other relief from the court.

The judge noted that the Act therefore provides a detailed scheme for resolving issues as to the arbitrator's jurisdiction once the arbitration is on foot. However, that does not mean that it is "open season" as regards applications to court if arbitration has not been commenced. Where a party can start arbitration, and therefore use section 30 or 32 of the Act, it "would be wrong in principle for him to utilise the Courts' declaratory powers to get round the particular restrictions on such an application contained in section 32".

The judge summarised that a declaration as to jurisdiction cannot be sought from the court where at least the following 3 factors exist: (1) The claimant asserts that there is a binding arbitration agreement; (2) The claimant has a claim which it wishes to assert and which therefore (on the claimant's own case) can only be litigated by way of arbitration; and (3) The claimant is clearly able to commence an arbitration in pursuance of that agreement whether or not he has yet done so, and whether or not it is imminent.