Court of Appeal disallowed arbitrators from hearing challenge as to whether or not they had jurisdiction since this is only permissible in "exceptional" cases
This important decision illustrates the Court of Appeal's reluctance to allow arbitrators to decide questions of their own jurisdiction as well as the critical importance of parties including clear drafting in their agreements to prevent costly disputes over forum.
After an ICC arbitration was commenced by OMV Maurice Energy Ltd against two oil exploration companies (Ocean Pakistan Ltd and Zaver Petroleum Corporation Ltd) who disputed the arbitrators' jurisdiction in the English courts, the High Court stayed the court proceedings to allow the arbitrators to decide whether they had jurisdiction. There were various agreements between the parties. Article 28 of the first "Concession" Agreement provided for arbitration but this was limited to disputes between foreign working interest owners or between foreign working interest owners and the "President". The second, "Joint Operating" Agreement provided that any dispute arising out of it was to be dealt with "mutatis mutandis" in accordance with the arbitration clause in the first agreement. The dispute between OPL, Zaver and OMV arose out of that second agreement. However, although OPL was a foreign working interest owner, Zaver was a Pakistani working interest owner and arguably, fell outside the remit of the arbitration clause.
The Court of Appeal disagreed that the question of jurisdiction between Zaver and OMV should be decided by the arbitrators. The fact that there was going to be an ICC arbitration raising similar issues between OMV and OPL was not a reason for leaving to the ICC arbitrators the unrelated question of jurisdiction over the parallel dispute between OMV and Zaver. Furthermore, Albon v Naza Motor Trading (2007) provided that "it will only be in exceptional cases that a court faced with proceedings which require it to determine the jurisdiction of arbitrators will be justified in exercising its inherent power to stay those proceedings to enable the arbitrators themselves to decide the question."
Although arbitrators have jurisdiction to decide their own jurisdiction, that is not the "the final word", since the parties can still challenge the award under section 67 of the Arbitration Act 1996, on the ground that the arbitrators lacked substantive jurisdiction.
The Court of Appeal observed that if the parties had wanted to ensure that such parallel disputes were treated as a single dispute for the purposes of the arbitration agreement, they should have made that clear. Regarding the dispute between OMV and Zaver, after reviewing the agreement, the Court held that the arbitrators did have jurisdiction, stating: "one matter that emerges clearly from Article XXVIII as a whole is an intention to resolve disputes involving foreign working interest owners by arbitration outside Pakistan. ...effect can be given to the expression "mutatis mutandis" by substituting "a Pakistani working interest owner" for "the President" in Article 28.3. The result would be that disputes between Zaver and a foreign working interest owner would be referred to arbitration abroad and disputes between Zaver and another Pakistani working interest owner would be referred to arbitration in Pakistan. …once the parties’ intention has been identified from the documents as a whole, a simple substitution of one name for another, which is well within what that expression contemplates, can easily be made. For these reasons I am satisfied that OMV is also entitled to pursue a claim for sums due under the JOA in arbitration against Zaver under the rules of the ICC."