Introduction

The claimant in the arbitration (the defendant in the court proceedings) sold two consignments of crude oil to the respondent pursuant to two separate contracts. These contracts were identical in all material respects; they were both governed by English law, incorporated the same general terms and conditions of sale, and contained an arbitration clause referable to the 2014 LCIA Rules. The consignments were also re-sold to a third party by separate contracts which mirrored the two crude oil contracts.

The claimant alleged that the respondent failed to pay the full purchase price due under the contracts and commenced LCIA arbitration for the price due under both contracts. The claimant delivered a single request for arbitration, accompanied by payment of a single registration fee. The respondent argued that a separate written request for each arbitration that identified the particular ‘dispute’ and the specific arbitration agreement to which it was related ought to have been made pursuant to Article 1 of the LCIA Rules (Request for Arbitration). This challenge was made shortly before the date on which the respondent’s Statement of Defence was due.

The arbitral tribunal made a partial award on jurisdiction dismissing the respondent’s challenge on the basis that it was brought too late. The respondent therefore made an objection to the award under section 67 of the English Arbitration Act 1996 (the ‘Arbitration Act’), seeking an order that it was of no effect. The contract was governed by English law and the place of arbitration was London.

Two questions arose for decision by the court. The first was the whether a single request for arbitration under the LCIA Rules was valid to refer disputes under two distinct contracts to arbitration (the ‘invalidity question"). The second was if the request was not valid, whether the respondent lost the right to object by failing to make the point until shortly before its Statement of Defence was due (the ‘timing question’).

The invalidity question

The claimant accepted that arbitration could only encompass a dispute arising under a single arbitration agreement but contended that the request validly commenced two separate arbitrations, one in relation to each contract. The claimant argued that the references to an arbitration (singular) in Article 1 of the LCIA Rules should be read as including arbitrations (plural) in light of section 61 of the Law of Property Act 1925, 1 and that it was therefore permissible to commence two arbitrations by a single request.

This submission was rejected by Judge Phillips J on the basis of a plain and literal reading of the LCIA Rules. He was persuaded by the fact that Article 22.1(x) of the LCIA Rules contained the power to consolidate arbitrations only with the agreement of the parties. In his view, the presence of a distinct agreement-based process for separate disputes to be brought within a single arbitration militated against the implication that closely-related disputes between the same parties could be commenced by a single request.

Philips J considered the judgment of Hamblen J in The Biz ([2011] 1 Lloyd's Rep 688) in which a single notice of arbitration that commenced ten separate arbitrations under ten bills of lading, was held to be valid on the basis that the notice of arbitration should be construed broadly and flexibly. Phillips J adopted the reasoning of Hamblen J but distinguished the current case on the basis that the prior case was one where no arbitral rules were applicable and because the arbitration notice was not drafted by lawyers, and regard was had to the substance and not the form of the request. He held that in the instant case, where the request was prepared by lawyers and submitted pursuant to the LCIA Rules, a reasonable person in the position of the recipient would have understood the request as starting a single arbitration, particularly because on its face it referred to a single arbitration agreement, sought a single amount by way of damages, and a single fee was paid for the commencement of one arbitration.

The timing question

In light of the invalidity of the request, the second question that fell to be decided was whether the respondent had lost the right to object to the substantive jurisdiction of the arbitral tribunal, since it had decided that ‘as soon as possible’ in Article 23.3 of the LCIA Rules meant raising the objection promptly and save in exceptional circumstances, this should be from at least, the service of the Response if the party has knowledge of the objection or reasonably ought to know of facts giving rise to such objection.

Philips J held that the respondent had not lost its right to challenge the tribunal’s jurisdiction as it had objected no later than the time for its Statement of Defence, being persuaded by the mandatory provisions of sections 31 and 73 of the Arbitration Act.

Particularly, section 31 of the Arbitration Act provides that an objection that the tribunal lacks substantive jurisdiction ought to be made by a party ‘no later than the time he takes the first step in the proceedings to contest the merits of any matter’. Section 73 provides for the consequences of a failure to object, setting out that a party to arbitral proceedings forbears his right to object for jurisdiction if he does not object and ‘he takes part or continues to take part in the proceedings without making, either forthwith or within such time as allowed by the arbitration agreement or the tribunal’. Philips J held that in light of the above, Article 23.3 of the LCIA Rules which provides that the objection shall be raised as soon as possible but not later than the time for its Statement of Defenceshould not be presumed to have an effect which materially diverges from the provisions of the Arbitration Act. He further noted that in light of the purpose and wording of this Article (which was drafted to be the equivalent of Article 16(2) of the UNCITRAL Model Law) the words ‘as soon as possible’ could not have intended to create a new, stricter regime for raising jurisdictional challenges. Had the intention been to do so, clearer words would have been required.

Philips J also commented, obiter, that if the LCIA Rules were to introduce a stricter time limit than that contemplated in section 31(1) of the Arbitration Act, the limit in the law would have to take precedence.

Conclusions

The judgment of the court on the invalidity question may be surprising to some arbitration practitioners as the strict, literal reading of the LCIA Rules appears to be out of sync with their clear commercial purpose, and the general permissive approach of English courts to the conduct of arbitration.

Parties conducting LCIA arbitration in a multiple contract situation will now need to file separate requests with separate registration fees, possibly appointing multiple arbitral tribunals and also making early requests for consolidation under Article 22.1(x) of the LCIA Rules. It is not clear, however, whether the decision will be appealed or if the LCIA Rules will be modified to address this lacuna, but the current status quo is unwieldy and uncompetitive given that a single request for arbitration is likely to be valid where different competing arbitral rules apply (such as those of the ICC or SIAC or the SCC) or where the arbitration is ad hoc. Rule 6 of the SIAC Rules 2016, for instance, specifically provides that the Notice of Arbitration can include a statement identifying each contract and arbitration involved. The same is true of Article 9 of the ICC Rules which expressly provides that claims arising out of or in connection with more than one contract may be made in a single arbitration.

The decision in A v B also contrasts with the approach of the English court in a recent, unreported decision of the Commercial Court (Agarwal Coal Corp (S) Pte Ltd v Harmony Innovation Shipping Pte Ltd, unreported, 20 November 2017). Although the case did not involve consideration of the LCIA Rules, Cockerill J held that an arbitration notice to two respondents under one contract was sufficient to commence two separate arbitrations against each respondent, on the basis that substance was more important than form.

The decision on the timing question is undoubtedly correct and the purposive approach adopted by Philips J is more consistent with the approach of the English courts to place value on the overall purpose of the arbitration agreement.



1
Section 61 of the Law of Property Act 1925 provides: ‘In all deeds, contracts, wills, orders and other instruments, made or coming into operation after the commencement of the Act, unless the context requires otherwise … (c) The singular includes the plural and vice versa’.