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	England and Wales High Court (Commercial Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> HC Trading Malta Ltd v Tradeland Commodities SL [2016] EWHC 1279 (Comm) (02 June 2016) URL: http://www.bailii.org/ew/cases/EWHC/Comm/2016/1279.html Cite as: [2016] WLR(D) 295, [2016] WLR 3120, [2016] 2 Lloyd's Rep 130, [2016] EWHC 1279 (Comm), [2016] 1 WLR 3120, 166 Con LR 94

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IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
COMMERCIAL COURT

		2 June 2016

HIS HONOUR JUDGE WAKSMAN QC:

INTRODUCTION

1. This is the application by the defendant, Tradeland Commodities S.L. ("Tradeland") to set aside the claim for declaratory relief made against it by the claimant, HC Trading Malta Limited ("HCT") and/or to set aside service out of the jurisdiction. At the end of the oral hearing I informed the parties of my decision that Tradeland's application had succeeded. In this judgment I now set out my reasons for that conclusion.
2. The central issue in the dispute between the parties is whether they ever concluded a binding contract under which Tradeland would purchase 250,000mt of clinker in bulk from HCT, to be shipped in a series of parcels. HCT says that they did and moreover the contract contained a London arbitration clause. Tradeland denies this.
3. However, no actual shipments occurred and on 11 June 2015, some months after the last significant communication between the parties, HCT asserted that there was a binding agreement which Tradeland should perform. For its part, Tradeland denied that there was any such contract. HCT's solicitors then asked Tradeland to agree to accept service of an arbitration notice at its London solicitors but Tradeland did not do so. It is common ground that it is HCT's settled intention to make its contractual claims against Tradeland in a London arbitration pursuant to the arbitration clause, and such an arbitration can therefore be viewed as imminent.
4. For its part, Tradeland has no claim of its own against HCT, not least because on its case, it never entered into any contract with it. So there is no threat or likelihood of any proceedings brought in any Court by Tradeland against HCT whether here or elsewhere. Its position is that when HCT commences the arbitration here it will contest the arbitrator's jurisdiction and thereafter, in so far as jurisdiction is established, it will defend the claim on the merits, or it may decide to take no part in those proceedings at all.
5. It is common ground that there is a serious issue to be tried as to whether, on a proper analysis of the documents passing between the parties and in particular a number of emails, a contract of sale was in fact concluded and this Court is not asked to decide that issue. But from a brief perusal of the documents and HCT's claim, this matter does not seem unduly complex and one might have expected HCT simply to get on with the arbitration in the usual way. However, it has taken what I consider in these circumstances to be an unusual course. It has issued a claim for declaratory relief in this Court, namely a declaration that there is (or is not) a binding arbitration agreement which is subject to English law and which covers HCT's proposed claims. No other relief is sought.

THE ISSUES ON THIS APPLICATION

6. Tradeland's response to this claim has been to issue its application effectively to strike it out. It does so on the following bases:

(1) In circumstances such as this, where HCT is about to commence an arbitration but where Tradeland does not threaten any proceedings anywhere about the same subject matter, and where, therefore, HCT is not applying for an anti-suit injunction, this Court simply has no jurisdiction to entertain the present claim, having regard to the scheme of the Arbitration Act 1996 (" the Act");

(2) Alternatively, even if this Court has jurisdiction to grant a declaration, in a case like this, it would be wrong in principle to do so;

(3) Alternatively insofar as this is a matter for the general discretion of the Court, it is plain that the discretion must be exercised against the grant of any relief.

7. Since I have decided that this application is well-founded, there is no need for me to decide two subsidiary applications made by Tradeland, namely that (a) service out of the jurisdiction was wrongly permitted anyway and (b) if there were grounds for service out, the Court permitting it was misled as to the law in respect of its jurisdiction to grant declaratory relief in circumstances such as this.

THE COURT'S JURISDICTION AND THE ACT

8. It is necessary at the outset to sketch out the basic position.

Power to make declarations

9. First, the Court of course has a general inherent power to grant declaratory relief and CPR 40.20 makes clear that it can make such declarations whether or not any other relief is claimed. In the same way (and because it is relevant later on) the Court has a general power to grant interim and final injunctions pursuant to s37 of the Senior Courts Act 1981 ("s37").

Relevant provisions of the Act

10. Second, and so far as the Act is concerned, there are the following material provisions all of which are in Part 1 thereof:

(1) By s1, the provisions of Part 1 are founded upon the following principles and shall be construed accordingly,

(a) the object of arbitration is to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense;

(b) the parties should be free to agree how their disputes are resolved subject only to safeguards in the public interest;

(c) in matters governed by Part 1, the Court should not intervene except as provided by that Part:

(2) By s30 (1), unless otherwise agreed by the parties, the arbitral tribunal may rule on its own substantive jurisdiction i.e. whether there is a valid arbitration agreement, whether the tribunal is properly constituted and what matters submitted to arbitration are in accordance with the arbitration agreement;

(3) By s30 (2), any such ruling can be challenged by any available arbitral process of appeal or review or in accordance with the provisions of Part 1;

(4) It is common ground that this gives effect to the doctrine of Kompetenz-Kompetenz; ie the tribunal has power to adjudicate upon its own jurisdiction;

(5) By s32, the Court may on the application of a party to arbitral proceedings upon notice to the other parties, determine any question as to the substantive jurisdiction of the tribunal. But the Court cannot consider such an application unless (a) it is made by consent or (b) with the permission of the tribunal and the Court is also satisfied that the determination of the question is likely to produce substantial savings in costs, the application was made without delay and there is good reason why the matter should be decided by the Court;

(6) It is plain, therefore, (and not challenged by HCT) that once the arbitration is on foot the Court's power to rule on the jurisdiction of the arbitrators is extremely circumscribed, subject to other provisions in the Act dealing with jurisdiction;

(7) By s67 (1), a party to arbitral proceedings may apply to the Court to challenge any award of the tribunal as to its substantive jurisdiction or for an order declaring an award made by the tribunal on the merits to be of no effect, in whole or in part, because the tribunal did not have substantive jurisdiction. It is for this reason that it is said that any ruling by the tribunal under s30 is not final because there is always this right to apply to the Court, subject only to certain defined cases where that right may be lost;

(8) Further, by s72, a person alleged to be a party to arbitral proceedings but who has taken no part in them may nonetheless question the arbitrators' jurisdiction in proceedings in Court for a declaration or injunction or other appropriate relief, as well as having the same right as other parties, among other things, to apply under s67;

(9) There is thus a detailed scheme under the Act for dealing with the resolution of issues as to the arbitrator's jurisdiction, once the arbitration is on foot (and indeed before in the case of a s9 application for a stay);

(10) Finally, by s81 (1), nothing in Part 1 should be construed as excluding the operation of any rule of law consistent with the provisions of that Part.

The DAC Report

11. The following parts of the Departmental Advisory Committee on the Arbitration Bill of February 1996 ("the DAC Report") provide useful guidance in relation to those provisions of the Act, as follows:

(1) At paragraph 147 it states that what became s32 provides for exceptional cases only and was not intended to detract from the "basic rule" set out in what became s30, namely that although not having the final word on jurisdiction, it is for the tribunal itself to pronounce upon that question. It was anticipated that the Courts would take care to prevent the exceptional provision in s32 from becoming the normal route to challenging jurisdiction and since it concerned a power to be exercised by the Court in relation to jurisdiction it was important enough to be mandatory. That can only mean, in my view, that the intention was that when the arbitration was on foot, a party could only apply to the Court if the conditions in s32 were made out. To that extent it limited the jurisdiction which the Court might otherwise have had;

(2) At paragraph 311, it said that it would neither be practicable nor desirable to attempt to codify the whole of English arbitration law and hence what became s81; at paragraph 312 it stated that it had been suggested to the DAC that such a provision would enable arguments to be raised and accepted which were contrary to the spirit and the intent of the Bill. They did not think this would happen because of the opening words of what became s81 and the statements of principle in what became s1. It also stressed (as does paragraph 9 of the DAC Report) that the common law rules are preserved insofar as consistent with what became the Act.

JURISDICTION

12. As noted above, Tradeland's principal argument is that in a case such as this, the Court has no jurisdiction to grant the declaratory relief sought or alternatively it would be wrong in principle to do so. Since, if it is right in either contention, HCT's claim must be dismissed, the distinction between these two ways of putting its case might be considered to be academic.
13. While that is true for this case, I think it important to analyse the matter correctly. If it is a question of jurisdiction, then, as Ms Blanchard QC concedes, the only basis for saying that the Court is deprived of its declaratory jurisdiction here is because the Act has impliedly removed it. She does not contend (nor could she) that the Supreme Court in the leading case of AESUK v U-K JSC [2013] 1 WLR 1889 so decided.
14. But if this partial exclusion of jurisdiction had been the intention of Parliament, it would surely have been expressly stated in the Act; it would be bold indeed, and wrong in my view, to say that the Act had achieved this "sub- silentio". In AESUK Lord Mance came to the same view when considering the argument there that the effect of the Act had been to deprive the Court of its jurisdiction under s37 in the case before it - see paragraphs 55- 57 of his judgment. Even though, in that case, the jurisdiction said to be cut down was the well-established power to grant anti-suit injunctions as opposed to the claimed declaratory power here, the point about treating with caution arguments based upon implied abrogation remains.
15. In my judgment, the better way to consider the issue is in terms of principle rather than jurisdiction. To this I now turn.

PRINCIPLE

The relevance of the Act at the pre-arbitration stage

16. Mr Sharma accepts that once an arbitration has been commenced, the ability of a party to apply to the Court (for declaratory relief as to jurisdiction or anything else) is circumscribed by the express provisions of the Act. So he accepts that if the arbitration his client intends to commence had commenced, HCT would have to await a s30 determination by the arbitrator (from which it could then apply under s67) or it could apply under s32 if (which is unlikely) it could satisfy the conditions thereunder. There would be no parallel right to apply at common law. See, for example, ABB Lummus v Keppel Fells [1999] 2 Lloyds 24, and the judgment of Clarke J (as he then was) at page 30.
17. But he says that since the arbitration has not commenced (because HCT has declined yet to start it) it is, as it were, "open season" as regards applications to the Court.
18. In my judgment, that is plainly wrong. Where the Act has laid down an extensive code for the governance of arbitrations from start to finish the very fact of this scheme is highly relevant when considering the scope of the Court's powers prior to commencement. While s 1(c) deals directly only with the question of construction, and the word used is "should" and not "shall", Ms Blanchard QC is right to say that there is here a principle enunciated by the Act that in general terms, the Court must be extremely slow to intervene where an arbitration is concerned. Mr Sharma accepts that principle of respect for the arbitral process but says that it is not violated if the Court can generally exercise its declaratory powers in a case like this because, after all, the Court will then say whether there is a binding arbitration agreement or not. If there is, the Court then leaves the parties to their arbitration and if there is not, there is no arbitral process to respect. I think that this puts the matter too narrowly. The arbitral agreement made or allegedly made between the parties means not only that they must deal with their substantive disputes that way but also that even their disputes as to the existence or scope of the arbitration agreement should be determined by the detailed provisions of the Act, and in particular, as a starting point, by s30. The only exception is where the Court has to "fill a gap", as with anti-suit injunctions for example. In other words, respect for the arbitral process includes respect for the scheme of and the principles underlying the Act. That scheme and those principles would be frustrated where an arbitration is on foot or contemplated if the parties were simply able to invoke a general declaratory power of the Court, limited only by a broad exercise of discretion. As explained below, there is nothing in the judgment of the Supreme Court in AESUK which contradicts that proposition.
19. Mr Sharma also seeks to support the contention that there is a difference in principle here where the arbitration has not yet started by referring to the fact that the agreement to arbitrate is considered to be a separate and new agreement between the parties - see, for example, Black Clawson v Papierwerke [1981] 2 Lloyds rep. 446 at p455 (where the Court said there were in fact two new separate agreements) and paragraph 23.5 of the LCIA Rules. I agree that a valid arbitration agreement is a separate contract. But I fail to see why that means that the Act should be regarded as irrelevant prior to commencement of an arbitration.
20. On a more practical level, Mr Sharma then argues that if all of this means that a party in the position of HCT is obliged to start the arbitration and then deal with jurisdiction, (a) it will cost more and (b) it may be a waste of time since it is likely that the parties will end up before the Court anyway pursuant to s67 or s72 or (perhaps) s32. I do not accept this. First, it would not necessarily be more costly for HCT to start the arbitration and proceed immediately to a s30 determination in which Tradeland might or might not participate. Indeed, it may cost less. Secondly, while the spectre of the parties ending up before the Courts anyway is sometimes invoked, it may well be unrealistic. After all, both parties may accept the ruling of the tribunal as to jurisdiction in any event and move on. Or they may await the outcome of the decision on the substantive claim since that might favour the party objecting to jurisdiction so the latter point becomes academic. Third, the parties might settle. Neither of the practical considerations advanced by Mr Sharma, to the extent they have any real weight, can begin to dislodge the point of principle made above.

The case-law

Vale de Rio

21. The high water-mark of Tradeland's position can be found in the well-known judgment of Thomas J (as he then was) in Vale de Rio v Bao Steel [2000] 2 Lloyds Rep 1. This was a case where the claimant ship-owners applied for a declaration that the first defendant, which it said had entered into a contract of affreightment through the second defendant brokers, was bound by an arbitration agreement. It joined the brokers to that application. The first defendant did not take any part in the proceedings but the brokers applied to set aside the arbitration claim as against them. Thomas J accepted the brokers' first two contentions which were that the claim was not within the arbitration exception in the Lugano Convention nor did it fall within CPR PD49G, dealing with arbitrations, and accordingly, the proceedings against them were set aside. However, the brokers had a third argument which was that the Act did not permit the owners to make an application for a declaration as against the first defendant that they were party to an arbitration agreement anyway and if so, there could be no claim against the brokers either. While it was not necessary for Thomas J, therefore, to deal with the point he did so, although briefly as follows:

"50 The provisions of Part I of the Act regulate all matters not only after constitution of the tribunal by the appointment of an arbitrator but prior to that; see for example s. 9, s. 12 and s. 44(5) which all relate to powers that can be exercised prior to the appointment of the arbitral tribunal.

51 In my view therefore the present application for the determination of whether there is an arbitral agreement is a matter regulated by Part I of the Act and in accordance with s. 1(c), the Court must approach the application on the basis it should not intervene except in the circumstances specified in that part of the Act.

52 I accept the owners' submission that the use of the word "should" as opposed to the word "shall" shows that an absolute prohibition on intervention by the Court in circumstances other than those specified in Part I was not intended …However it is clear that the general intention was that the Courts should usually not intervene outside the general circumstances specified in Part 1 of the Act.

53 The circumstances in this case which the owners say are ones in which the Court should intervene cannot have been unanticipated by the draftsmen of the Act. It is very common for a person who is alleged to be party to an arbitration agreement but denies that he is, to make his position clear before an arbitrator is appointed by the person contending that there is a binding arbitration agreement. Thus the argument of the owners must be premised on the assumption that the draftsmen of the Act intended to allow a party to an arbitration agreement recourse to the Courts without any conditions, if he took that step prior to the appointment of an arbitrator, but imposed the conditions in s. 32 if he had appointed an arbitrator. If the owners are right, then a party to an arbitration agreement which is disputed can obtain the decision of the Courts without being subject to the restric tions by the simple step of not appointing an arbitrator.

54 I do not consider that this can have been the intention. The Act sets out in very clear terms the steps that a party who contends that there is another party to an arbitration agreement should take. First he should appoint an arbitrator. If the other party appoints an arbitrator, then s. 31(1) makes it clear that his appointment of an arbitrator does not prevent him challenging the substantive jurisdiction of the tribunal. If the other party does not appoint an arbitrator, then the default provisions (s. 17) or failure of appointment procedures (s. 18) apply. Once the arbitral tribunal is constituted, then in accordance with the policy of the Act it is for that tribunal to rule on its own jurisdiction, save in the circumstances specified in s. 32. Any award made can then be changed under s. 67. The rights of the party who challenges the existence of the arbitra tion agreement and takes no part are protected by s. 72; he is given the right of recourse to the Courts in the circumstances set out. Those provisions, in my view, provide a clear and workable set of rules which the owners should have followed in this case. I can see no reason which would justify the Court intervening in the circumstances of this particular case, as it is no different from many others.

55 The owners contended that it would be in the overall interest of justice for the Court to hear this application because it would generally be convenient to do so and that the argument over the validity of the arbitration agreement was bound to arise at a later stage. However this argument fails to take into account one of the underlying principles of the Act that the parties should resolve their dispute by the methods they have chosen and the Court's intervention should be limited."

22. Although in paragraph 60 of his judgment Thomas J later stated that the observations quoted above meant that they were further reasons why the Court had no "jurisdiction" here, given his earlier reference to the wording of s1(c) I doubt that he was drawing any particular distinction between whether the Court had jurisdiction in this instance or in any event it would be wrong in principle to exercise it. But certainly, the spirit of what he said, even if strictly obiter would support Tradeland's general position. However, it is necessary to consider those observations again, as they feature in the judgments of both Lord Mance in the Supreme Court and Rix LJ in the Court of Appeal in AESUK. I turn now to that case.

AESUK

23. At the oral hearing, Mr Sharma, correctly in my view, accepted that he could not submit that the decision of the Supreme Court in AESUK actually supported the application made here (although HCT had taken that stance initially – see paragraph 6 of the witness statement of Andrew Purssell, its solicitor, dated 4 December 2015 in respect of its application to serve out). However he continued to maintain that certain dicta of Rix LJ in the Court of Appeal (whose decision was upheld by the Supreme Court) did. In those circumstances it is appropriate to examine that case to see what it did, and did not, decide.
24. The facts are important. The claimant, AESUK, asserted the existence of a London arbitration agreement made with the defendant, JSC. It had, however, no intention of bringing an arbitration claim against JSC since it had no substantive claim to make. However, JSC in alleged breach of the arbitration agreement, had commenced proceedings against AESUK in the Courts of Kazakhstan. AESUK therefore applied to the Court for an anti-suit injunction which was granted in a limited fashion at first instance together with a limited declaration that all claims must be made pursuant to the arbitration agreement and not otherwise. This order was confirmed both by the Court of Appeal and the Supreme Court. In the Supreme Court, the single issue was whether the English Court had power to decide that JSC's claim could only be brought in an arbitration and/or to injunct the foreign proceedings. Both of these powers were of course linked, because unless the Court could pronounce upon the validity or otherwise of the arbitration agreement it could not go on to make the injunction.
25. So far as the injunction itself was concerned, which Lord Mance, in giving the judgment of the Court, considered was the primary issue, he stated that it was not a pre-requisite that an arbitration had already been started or was imminent. That was because the rights conferred by an arbitration agreement included the separate and negative right not to be sued elsewhere i.e. otherwise than pursuant to the agreement; and such a right existed irrespective of whether the party relying upon it intended to arbitrate a claim of their own or not. On that basis then, implicitly, the Court must have had at least the jurisdiction to grant an anti-suit injunction in such circumstances.
26. In particular, Lord Mance stated as follows:

"32 JSC's submissions in this area give rise to two questions. The first is the extent to which it is correct to regard the 1996 Act as a complete and workable set of rules for the determination of all jurisdictional issues in all situations. The other is what is meant by the word "should" in section 1 (c). As to the first, section 1(c) is limited to "matters governed by this Part", and it is clear that the drafters of the Act were not attempting a complete code of arbitration law. …

33 The use of the word "should" in section 1(c) was also a deliberate departure from the more prescriptive "shall" appearing in article 5 of the UNCITRAL Model Law. .. Even in matters which might be regarded as falling within Part I, it is clear that section 1(c) implies a need for caution, rather than an absolute prohibition, before any Court intervention. …

39 In support of its submissions, JSC relies on cases in which commercial judges have refused to permit the pursuit of Court proceedings for a declaration as to the existence of a binding arbitration clause brought by a claimant in current or proposed arbitration proceedings: ABB Lummus Global Ltd v Keppel Fels Ltd (formerly Far East Levingston Shipbuilding Ltd) [1999] 2 Lloyd's Rep 24; Vale do Rio Doce….. In the Vale do Rio case, Thomas J observed that it could not have been the intention that a party to a disputed arbitration agreement could obtain the decision of the Courts on its existence without being subject to the restrictions contained in section 32 by the simple step of not appointing an arbitrator: para 53. …he …said that "it is clear that the general intention was that the Courts should usually not intervene outside the specific circumstances specified in Part I of the 1996 Act": para 52.

40 These cases have no direct bearing on the present situation. Here, no arbitration proceedings are on foot and AESUK does not intend or wish to institute any. Sections 30, 32, 44 and 72 of the Act are all in terms inapplicable. No arbitration tribunal exists to determine its own competence under section 30. The principle of Kompetenz-Kompetenz…makes sense where a tribunal is asked to exercise a substantive jurisdiction and hears submissions at the outset as to whether it has such a jurisdiction. Even then, the Court has the last word in establishing whether the substantive jurisdiction actually exists. But the principle has no application where no arbitration is on foot or contemplated. On JSC's case, a party wishing relief in relation to foreign proceedings brought or threatened contrary to an arbitration agreement, must however commence, or should be required to undertake to commence, an arbitration against the other party who is rejecting the existence or application of any arbitration agreement. Further, the only substantive relief that JSC could suggest might be sought in such an arbitration would be an order, within the power afforded by section 48 (5) (a) of the 1996 Act, not to commence or continue any foreign proceedings; and the efficacy of any such order as arbitrators might make, in any such arbitration, if they held that they had jurisdiction, would depend on the Court determining for itself that the tribunal had jurisdiction, and then enforcing the tribunal's order under either section 44 or section 66 of the Act with the backing of the Court's contempt jurisdiction.

41 In these circumstances, there is, in my opinion, every reason why the Court should be able to intervene directly, by an order enforceable by contempt, under 37. … "

27. Ms Blanchard QC submitted that while Lord Mance was clearly stating here that the Court had jurisdiction to consider the arbitration agreement in the context of an anti-suit injunction especially where the claimant had no intention to commence an arbitration, he was not saying that the Court would otherwise have jurisdiction to entertain such an application in circumstances where the party seeking the declaration was about to enter into the scheme provided by the Act. Indeed, he did not have to answer that question at all. Nonetheless, it is plain from what he said in paragraph 40 of his judgment that the reason why he considered the cases he referred to in paragraph 39 (including the dicta of Thomas J in Vale de Rio) had no application here was because no arbitration was on foot or intended. Accordingly, there was no real prospect of the arbitral tribunal ever being seised of a substantive claim and so the opportunity for it to rule upon its own jurisdiction would realistically never arise. To force a party in those circumstances to start an arbitration claim solely for the purpose of establishing that the arbitrator would have jurisdiction in the event that the claim was made, was clearly absurd, even assuming that it would be possible to start an arbitration simply on those grounds. And in any event, if the claimant, as there, needed to restrain the other party from suing it elsewhere in breach of the agreement, any declaration by the arbitral tribunal by itself would be of little assistance, as compared with the enforcement powers of the Court. Accordingly I agree that it cannot be said from these passages that Lord Mance was disapproving of the spirit of the dicta of Thomas J in Vale de Rio.
28. Moreover, what the Court was doing in AESUK was in essence to fill a gap. Section 44 of the Act, dealing with injunctive relief granted by the Court where the arbitration was underway or proposed, could not even in theory be available because there would be no such arbitration. Moreover, as other cases have established, s44 would not be apposite since the relief sought here was to enforce the negative right not to be sued elsewhere as opposed to dealing directly with any arbitration. Therefore, the jurisdiction of the Court under s37 was essential. By way of contrast, there is no "gap" in this case which needs to be filled by the declaratory jurisdiction of the Court. Where a party starts or is about to start an arbitration, the full range of powers of the arbitrators and thereafter the Court in respect of jurisdiction, as set out in the Act are available and will come into play.
29. While Mr Sharma realistically accepted that there was nothing in the speech of Lord Mance which he could rely upon as giving support to the jurisdiction or at least the proper exercise of that jurisdiction to grant the relief sought here, he referred me to a number of passages in the judgment of Rix LJ in the Court of Appeal in AESUK.
30. First, he argued that Rix LJ considered in more detail than Lord Mance the position of the Court outside the instant case of the anti-suit injunction and had expressed the view that the Court clearly had jurisdiction to consider the validity or otherwise of a claimed arbitration agreement, so that it could perhaps be said here that not only did the Court have jurisdiction in this case but also that the exercise of that jurisdiction should be untramelled. He relied in particular upon the following paragraphs:

"82 Thus, a question of jurisdiction may come before the Court in a number of different situations. It might arise where one party goes to Court with a claim and the defendant seeks a stay for arbitration: the claimant may say there is no contract or no arbitration agreement, and the Court will have to investigate that question for the purpose of dealing with the application to stay. Or a party may commence an arbitration, and the other party may say there is no agreement or no agreement to arbitrate, in which case the matter is prima facie for the arbitrators to decide in the first instance pursuant to section 30. In a plain case, the arbitrators may proceed to determine their own jurisdiction, but equally the parties may agree to come straight to Court to determine the question, or the arbitrators may give permission for the issue to be taken to Court and the Court may agree to accept the issue at that stage. Or the respondent in the arbitration may stand aloof, and come to Court under section 72, or, following an award, under section 67. Or, a party may start proceedings in another country and the defendant there then comes to the English Court to ask it to uphold their arbitration agreement by granting an anti-suit injunction. That is the equivalent of a party seeking a stay where an action is begun in England. Where the action in breach or alleged breach of an arbitration agreement is begun in a foreign country, the respondent may or may not seek a stay there, but here he may ask for an anti-suit injunction.

83 There are further variations thrown up by the cases. In some cases, it is reasonably plain that an arbitration agreement has been made, but there may be an issue as to its scope, or as to whether there has been a repudiation of it, or, as here, as to its surviving effectiveness. In other cases, there is a factual dispute as to whether any agreement has ever been made in the first place, or a legal dispute as to whether an arbitration clause has been incorporated into the parties' contract. Moreover in some cases, what is sought from the Court is an interim injunction, which is among the subject matters of section 44, and in other cases what is sought is a final injunction, which is not within section 44 but, subject to contrary agreement by the parties, may be within the powers of an arbitral tribunal in a final award: see section 48 of the AA 1996.

84 Moreover, a distinction may have to be made between a declaration as to the existence or effectiveness of an arbitration agreement about which parties are in dispute, which is a form of final relief as to the parties' legal rights and an anti-suit injunction which, at any rate in its interim form, is intended to hold the ring until some tribunal, whether it is the Court itself at some later date, or an arbitral tribunal, can grapple with the merits of the parties' dispute.

85 This variety of situations suggests to my mind that it is not possible to be dogmatic about where the principle in section 1(c) of the AA 1996 leads. It is also relevant to observe that the Saville Report has nothing to say about anti-suit injunctions. … "

31. I agree that in paragraph 82, Rix LJ set out a number of situations where the question of jurisdiction might come before the Court. But all of the examples there were where a stay for arbitration was sought (as provided for by section 9) or where the parties agree to come straight to the Court or the arbitrators permit it (which would have to be under s32) or because s67 or s72 is invoked. It is true that in the first part of paragraph 83 it is suggested that the issue of the scope or existence of the arbitration agreement might be decided by the Court but these were said to have occurred in particular cases, not cited. However, as will be seen hereafter, Mr Sharma has been quite unable to show me a case lending any support to an application of this kind in circumstances like this. Paragraph 84 to my mind does not take the matter much further because it deals with anti-suit injunctions as opposed to simple declarations. Finally, the upshot of these observations as noted in paragraph 85 is simply that Rix LJ said that he could not be dogmatic about where the principal in s1(c) led, all, of course, in the context of the application before him.
32. Mr Sharma then referred to some later passages:

"93 The essential question … is …: Is a litigant who asserts that he and his contractual counter party are parties to an arbitration agreement, but who has no current dispute with his counter party on the substantive merits of their contractual relations, and has no claim to make against or defend in opposition to his counter party, other than a long grumbling dispute as to the validity of their arbitration agreement itself, obliged, if he wishes to resolve that dispute, to proceed to arbitration; or can he come to the English Court to pronounce on the validity of his arbitration agreement, and in connection with that issue seek an interim or final anti-suit injunction to prevent his counter party from using foreign Court proceedings against him, being proceedings otherwise than in accordance with the arbitration agreement which he asserts to bind them?

94 The answer … is that although there might be much to argue about the exercise of the Court's discretion in such circumstances, either to grant a declaration, which is always a discretionary remedy, or to grant an injunction, as to which the same applies, there is no statutory or principled objection to the jurisdiction of this Court . ...

95 Secondly, in circumstances where section 44 applies, it would I think be true to say that it would be wrong as a matter of principle to utilise section 37 to get round the limitations of section 44. Thus, for instance, if an arbitration were afoot or a proposed arbitration were close to being commenced, and some remedy were needed for which there was no urgency, so that it did not matter in the slightest whether or not the applicant waited for the arbitral tribunal to exercise its own powers, on the hypothesis that it possessed them (see section 38 of the AA 1996), it would be wrong for this Court to intervene superfluously, under its section 37 powers, in a dispute which the parties had already referred or were shortly to be referring to arbitration. But it is only subsections 44(5) and 44(6) which limit the Court's powers.

97 Thirdly, however, where there is no arbitration in being and none realistically in prospect, a situation which is in this case now a matter or common ground, section 44 simply does not apply….

98 Fourthly, it seems to me to be going too far to say that because an arbitral tribunal "may rule on its own substantive jurisdiction" …, therefore the Court ought always to regard the position as though there is an obligation on the parties and/or on the arbitrators for the arbitrators to rule on any dispute about their substantive jurisdiction. Anything may happen. The potential dispute may not be pressed. The disputing party may stand aloof and come to Court. The parties may join issue in the arbitration, but agree to go to Court for a preliminary issue on jurisdiction. The parties may not be able to agree on such a preliminary issue, but an application may be made to the Court with the permission of the arbitrators for such a preliminary issue. The Court may or may not accept such an application.

99 In such circumstances, I do not with respect agree with an interpretation of the Vale do Rio case…which regards it as laying down a rule of jurisdiction that it is in all circumstances necessary for a party who wishes to raise with the Court an issue of the effectiveness of an arbitration clause first to commence an arbitration and go through the procedures and provisions or sections 30—32 and/or section 67 and/or section 72. If, however, that is what Thomas J was saying in the Vale do Rio case, then I would not with respect agree with that view. In any event, since the alleged party to the charter and the arbitration agreement in that case was not as yet a party to the Court proceedings (not having been served) and only a non-party (the brokers) were involved in the Court proceedings, I would not regard any view expressed there as other than obiter. Thomas J did not in any event consider the role of s37…In my judgment at any rate in a case where no arbitration has been commenced and none is intended to be commenced, but a party goes to Court to ask it to protect its interest in a right to have its disputes settled in accordance with its arbitration agreement, it is open to the Court to consider whether, and how best, if at all, to protect such a right to arbitrate. Whether it will assist a claimant at all, and if so, how, is a matter for its discretion: but it would to my mind be an error of principle and good sense for the Court to rule that as a matter of jurisdiction, or even as a matter of the principled exercise of its discretion, it has no possible role in the protection and support of arbitration agreements in such a context."

33. These passages make it clear how different the context was there from what it is here. Moreover it is important to note that in paragraph 96 he took the view that where section 44 applied, it would be wrong in principle to utilise s37 to get round the limitations imposed by s44. That is in my judgment analogous to the view expressed above, which is that where it is open to a party by starting an arbitration which he wishes to do, to get to s30 and also s32 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 s32. It is true that in paragraph 99, Rix LJ took the view that if Thomas LJ in Vale do Rio was saying that in all circumstances and as a matter of jurisdiction, it was necessary for a party wishing to raise with the Court in issue as to the effectiveness of the arbitration clause first to commence an arbitration he would not agree with that view which was in any event obiter. But he expressed that view "at any rate in a case where no arbitration has been commenced and none is intended to be commenced." And paragraphs 106-108 of his judgment clearly emphasise the particular (anti-suit) context of his observations. It can therefore be said that he should not be taken to have been disapproving of the spirit of Thomas J's observations in a case like this.
34. Overall therefore, I do not consider that the judgment of Rix LJ can be said to provide any realistic support for the proposition that it would be right in principle for the Court to exercise its declaratory jurisdiction in a case like this. I therefore turn to some other cases relied upon by Mr Sharma to support the availability in principle of declaratory relief here.

Other Cases relied upon by HCT

35. A number of such cases were simply examples of how the Court might exercise its powers to stay under s9 and in particular whether to decide the question of the validity of the arbitration agreement finally and if so, how. But such applications are, as Lord Mance put it in paragraph 60 of his judgment in AESUK is simply the other side of the anti-suit coin but in a domestic situation. The context is therefore as different from this case as it was is AESUK.
36. It is true that in Al-Naimi v Islamic Press [2000] 1 Lloyds Rep 522, Waller LJ said at p525 that there was also an inherent jurisdiction to stay so that even if (as required by s9) the claimant could not satisfy the Court that there was a relevant arbitration agreement, the Court might still stay the action while leaving all other matters to the arbitrators. I cannot see how that assists HCT in the present context. Further, the fact that in the context of a s9 discretion the Court took into account factors such as cost and convenience is no basis for saying that they should be the guiding factors here.
37. Mr Sharma also referred to T & N Ltd v Royal and Sun Alliance [2002] EWHC 2420. In this unusual case, the defendant insurer had been defending the claim on the merits when it said that it had found evidence that the claimant had in fact settled its claim by an agreement which contained an arbitration clause. The defendant then applied under s9 to stay the claim. This was rejected by Lloyd J on the simple ground that while the terms of the settlement agreement may have been governed by the arbitration agreement, the principal claim on any view was not and so s9 did not arise. He went on to say that there remained the inherent jurisdiction to stay and while in theory he could have stayed the action while the issue of whether the settlement bound the parties here was dealt with in arbitration, that made little sense when the Court was already seised of the principal dispute; and so the Court should also decide the issue of the applicability of the settlement. I cannot see how this helps HCT either beyond the bare acknowledgment of an inherent jurisdiction to stay.
38. In El Nasharty v Sainsbury [2004] 1 Lloyds Rep 309, Julian Flaux QC (as he then was) sitting as a Deputy Judge held that an application for a stay under s9 was made out but then said obiter that had he not so found, because the Court could not have been sure that there was a relevant arbitration agreement, he would have said that the Court should go on to resolve that issue and not (as in Al-Naimi) left that to the arbitrator, in the context of the inherent jurisdiction to grant a stay. I see that but again, the context is wholly different.
39. Finally, Mr Sharma referred me to Through Transport Mutual v New India Assurance [2005] 1 Lloyds Rep 67. Here the Court granted an anti-suit injunction but it was submitted that the case fell within the Brussels Regulation and as the Finnish Court was first seised, Article 27 dictated that the English Court should stay its own proceedings. However, the claimant argued that because an arbitration agreement was involved, the case fell outside the Regulation. The Court here held that it could decide the existence or otherwise of the arbitration agreement for Brussels Regulation purposes, and not cede that issue to the Finnish Court. Yet again, that is an entirely different context from the instant case.

Conclusions on Principle

40. Accordingly, for the reasons given above, my clear conclusion is that it is wrong in principle to grant declaratory relief in circumstances such as this and on that ground Tradeland's application must succeed. Indeed, for my part, I would say that it would be wrong in principle for the Court to entertain any such application by a claimant where there are at least the following three factors:

(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.

DISCRETION

41. Finally, even if there is no principled argument against the granting of declaratory relief here and it is all a matter of discretion, I would unhesitatingly refuse to exercise it in favour of granting relief here for the following reasons:

(1) It is a needless invocation of the Court's powers where there is another body particularly suited to declaring the validity or otherwise of the arbitration agreement, namely the arbitral tribunal itself;

(2) It is impossible to say now (for the reasons given in paragraph 20 above) that it would necessarily be quicker and/or cheaper to use the Court process rather than the arbitrators;

(3) In a case such as this, there is a very real risk that in deciding the issue as to the existence or otherwise of the arbitration agreement, the Court will probably be deciding the central issue between the parties which is whether there was a binding contract of sale at all - that is, on any view, the province of the arbitrators;

(4) There is no practical impediment to HCT commencing the arbitration right away here and none has been suggested;

(5) It is said that to grant a declaration here would not usurp the function of the arbitrators. In fact it might - if the Court was to decide a central issue between the parties, as noted above. But putting that to one side, I agree in a narrow sense that there would be no usurpation for reasons given in paragraph 18 above. But in a wider sense there would be, because simply allowing the Court to decide the matter would be failing to give any weight to the scheme established by the Act and in particular s30. Even if the scheme and principles of the Act are not such as to "trump" other matters so as to make it wrong in principle to exercise the discretion in a case like this, they still have force as a discretionary factor;

(6) Finally, it is said that a negative determination would ensure that Tradeland will not become subject to the process to which it did not agree. That is true, but on the other hand, the arbitrators can do the same under s30.

42. For all those reasons there is no basis at all for exercising any discretion to grant the declaratory relief sought here, even if open to the Court in principle.

CONCLUSION

43. Accordingly the present claim must be dismissed. I am most grateful to Counsel for the excellence of their oral and written submissions.