In Mylcrist Builders Limited v. Mrs G Buck [2008] EWHC 2172 (TCC) an important issue arose in respect of an arbitration clause in a construction contract between Mylcrist and Buck. One issue was the correct appointment of an arbitrator. The clause did not provide the mechanism for the appointment of an arbitrator and, accordingly, under s.16(3) Arbitration Act 1996, the parties were to jointly appoint an arbitrator. Mylcrist appointed an arbitrator but did this unilaterally and without the consent of Buck. In issue was s.17 Arbitration Act which stated that where two parties to an arbitration agreement were to appoint an arbitrator each and one party failed to do so the other party could appoint his arbitrator as sole arbitrator. The court found that s.17 Arbitration Act did not apply in these circumstances as there was no provision in the first place in the contract between Mylcrist and Buck that each party should appoint an arbitrator. The requirement was for the parties to jointly appoint a sole arbitrator and this had not been complied with. Consequently, the arbitrator lacked the substantive jurisdiction to make the Award that he did and the Award was therefore rendered unenforceable.

Another issue in Mylcrist was whether the arbitration clause was an "unfair" contract term as regulated by the Unfair Terms in Consumer Contracts Regulations 1999. It was held that the arbitration clause hindered the right of Buck (a consumer) to take legal action and caused a "significant imbalance" in the parties' rights and obligations to the detriment of Buck. The clause was part of a standard term contract not negotiated by Buck. Moreover, Buck would not have appreciated the consequences of the clause. The clause and its effects should have been more clearly and fully set out. Accordingly, the arbitration clause was not binding on Buck and therefore the Award unenforceable.

This case shows how important it is that parties properly comply with the provisions for the appointment of arbitrators whether provided in the contract between the parties or, in the absence of such contractual provisions, as set out in the Arbitration Act 1996. In respect of unfair contract terms, the case provides a stark warning to businesses that arbitration clauses and their effects should be made plainly clear to consumers. Insurers should note that the 1999 Regulations apply to insurance consumer contracts. The OFT has said that terms preventing consumers from taking disputes to court (such as arbitration clauses) are likely to be liable to challenge.