Wah (Aka Alan Tang) and Anr v Grant Thornton International Ltd and Others

[2012] EWHC 3198 (Ch)

Wah claimed that a final award made by a Tribunal appointed by the London Court of International Arbitration (“the LCIA”) was invalid because the Tribunal lacked jurisdiction. Mr. Justice Hildyard noted at the beginning of his judgment that like an agreement to agree, a provision for dispute resolution which lacks sufficient detail as to the process required to be undertaken cannot be enforced.

The arbitration clause in question included the statement that:

The relationships among the parties are in the nature of a long-term arrangement among professional firms. The resolution of any dispute or difference arising out of or in connection with this Agreement...requires special treatment. It is the desire of the parties that any such dispute or difference should be settled quickly and privately in a binding fashion.”

It then provided a three-step conciliation process. First, any dispute or difference was to be referred to the Chief Executive who “shall attempt to resolve the dispute or difference in an amicable fashion within one month.” If that failed, then the dispute would be referred to a panel of three governors who again would have a month to attempt to resolve the dispute or difference. Finally, the clause stated that until the earlier:

of (i) such date as the Panel shall determine that it cannot resolve the dispute or difference, or (ii) the date one (1) month after the request for conciliation of the dispute or difference has been referred to it, no party may commence any arbitration procedures in accordance with this Agreement.”

The Chief Executive declined to act because of his involvement in events relating to the dispute. Similarly no governor put themselves forward. As a result, the three-person panel was never constituted. Wah said that the steps of the pre-arbitration conciliation process were clearly set out. They were conditions precedent before an arbitral reference could be made. As they were not fulfilled, the reference was invalid and the Tribunal could not have had jurisdiction. The Tribunal in considering the issue relied on the judgment of Mr Justice Ramsey in Holloway v Chancery Mead Ltd (Issue 90) who said:

It seems to me that ...the ADR clause must meet at least the following three requirements: First, that the process must be sufficiently certain in that there should not be the need for an agreement at any stage before matters can proceed. Secondly, the administrative processes for selecting a party to resolve the dispute and to pay that person should also be defined. Thirdly, the process or at least a model of the process should be set out so that the detail of the process is sufficiently certain.”

The Judge considered other authorities including Sulamérica CIA v Enesa Engenharia (Issues 140 and 144) and was conscious of the tension in the context of provisions for mediation of disputes prior to arbitration or court proceedings between the desire to give effect to what the parties agreed and the difficulty in giving what they had agreed objective and legally controllable substance. He noted that agreements to negotiate in good faith, without more, must be taken to be unenforceable. Good faith is too open-ended a concept to provide a sufficient definition of what an agreement must involve and when it can objectively be said to be properly concluded.

The test to be applied is not whether a clause is a valid provision for a recognised process of ADR: the test is whether the obligations and/ or negative injunctions imposed are sufficiently clear and certain to be given legal effect. In the context of a positive obligation to attempt to resolve a dispute or difference amicably before bringing proceedings the test is whether the provision sets out, without the need for further agreement, both a sufficiently certain and unequivocal commitment to commence a process and the steps each party is required to take to put the process in place.

Further, a court must be able to determine objectively what under that process is the minimum participation required of the parties to the dispute and when or how the process will be exhausted or properly terminable without breach. In the context of a negative stipulation preventing a reference or proceedings until a given event, the question is whether the event is sufficiently defined and its happening objectively ascertainable to enable the court to determine whether and when the event has occurred.

The problem here was that whilst the reference to the Chief Executive was a clear requirement, nothing was said about what should happen other that it was to be undertaken “in amicable fashion”. What was the Chief Executive required to do? The same was true about the Panel. Nothing was said about what the form or process of resolution should be. What would constitute an “attempt to resolve” the dispute or difference? Should the Panel at least take some step calculated to lead to resolution of the dispute or could it determine that it could not resolve it without taking any steps at all? The failure to give any guidance as to the type of attempts to be made to resolve the dispute meant that the court could not determine whether the clause has been complied with or not. The Judge therefore concluded that the proposed conciliation process was:

too equivocal in terms of the process required and too nebulous in terms of the content of the parties’ respective obligations to be given legal effect as an enforceable condition precedent to arbitration.”