The Commercial Court recently decided that the proper approach is to look at the provisions of the contract as a whole in construing their meaning. By doing so, the Commercial Court concluded on the balance of probabilities that the parties did not intend to refer to LCIA arbitration, but to an ad hoc arbitration in London. The tribunal’s jurisdiction was therefore restored.

Background

In A v B [2018] EWHC 1370 (Comm), parties had commenced an arbitration in relation to a dispute under a charterparty entered on 16 June 2015, the details of which are not mentioned in the judgment. The charterparty itself was in the Russian language and governed by English law.

The charterparty contained an arbitration clause (Part I Clause J) stipulating that “arbitration proceedings – London international arbitration court, in accordance with the laws of Great Britain…”. It also contained a Clause 24 in Part II stating that:

“Arbitration. Any disagreements and disputes … arising out of the C/P are to be resolved by arbitration in London, according to which of these places is provided for in Part I … by a tribunal of three people, one appointed by the owners, one by the charterers, and one appointed by the two arbitrators elected in such a way.”

After the parties had appointed their respective arbitrators and the arbitrators had accepted their appointment on the basis of LMAA Terms 2012, the Defendant (Respondent in the arbitration) decided to challenge the jurisdiction of the arbitrators under section 31 of the Arbitration Act 1996. The Defendant argued that the reference in Clause J to “ London international arbitration court” was ineffective and “pathological”, as there was no such body.

The tribunal then issued an Award on 15 December 2017 ruling that the intention of Clause J was to refer disputes to the LCIA (while leaving aside Clause 24). The arbitrators considered that a Russian translation of the term “London Court of International Arbitration” (i.e. the LCIA, the well-known body that does exist) would see the word order change, resulting in only the first word to be capitalised which would be the formulation which was used in Clause J, or something very similar. The arbitrators held that:

“… Clause 24 did not affect that conclusion. Clause 24 was in direct conflict because it provided for the appointment of arbitrators by the parties, whereas the LCIA Rules provide that the LCIA will appoint arbitrators … Accordingly, the conflict provision came into play such that Clause J must prevail and, in those circumstances, the arbitrators held that they did not have jurisdiction over the dispute.”

The Decision

As the Award was challenged under section 67 of the Arbitration Act 1996, Phillips J had to decide whether the arbitrators were wrong to determine the construction of Clause J in isolation.

According to Phillips J it is key to “look at the provisions of the contract as a whole in construing their meaning.” He also considered that any conflict provision “only comes into effect if there is indeed a conflict between the relevant provisions. In determining whether there is a conflict, one must first construe the clauses. That requires taking them together.”

Phillips J further concluded that it was clear that there was an ambiguity in Clause J and the arbitrators should therefore not have ignored Clause 24 to construe the proper meaning of Clause J:

“It is only if those two clauses cannot be read together that the conflict provision, which provides that Clause J take priority, comes into effect.”

In order to reach a proper interpretation of the meaning and effect of the contract as agreed by the parties, the court then used a combined process of assessing the evidence as to the translation together with the usual tools of construction. This led Phillips J to conclude that:

“… the words used are capable of referring either to the LCIA or, more generally, to an international arbitral body in London appointed ad hoc by the parties. That ambiguity falls to be resolved.”

Approaching the matter more broadly, Phillips J considered the following factors:

“Firstly, … Clause 24 is inconsistent with an LCIA arbitration. Reading Clause J together with Clause 24 would suggest that LCIA arbitration was not intended.”

“Secondly, … it is at least doubtful that the parties would have intended to limit themselves to an LCIA arbitration in a case [maritime dispute] such as this.”

“Thirdly, … if it had been the intention to specify LCIA arbitration then more care would have been taken to ensure that the wording used did so specifically identify that body… the words used do not mirror the Russian version used by LCIA itself, nor do they take any simple step which could have been used, for example, by putting the words “LCIA” in brackets or making reference to English words so as to put the matter beyond doubt.”

Not beyond doubt, Phillips J finally decided on the balance of probabilities that the parties did not intend to refer to LCIA arbitration, but to an ad hoc arbitration in London. And such international arbitration to be conducted before a tribunal appointed according to Clause 24. He specifically paid attention to the fact that:

“The parties are agreed that the word used in Russian translated as “court” is capable of referring to a range of bodies, including tribunals. I am satisfied that that is the intention here. I therefore disagree with the conclusion of the arbitrators that they do not have jurisdiction because it was an LCIA arbitration clause.”

Comment 

This judgment demonstrates the difficulty of interpreting contractual clauses, amongst which arbitration clauses, especially when arbitrators have produced a carefully detailed and fully reasoned Award. It shows that interpretation goes beyond an assessment of available translations. Furthermore, it shows that the English Court expects parties to pay detailed attention to the chosen wording in their contracts. This is in line with the recent Supreme Court’s decisions in Arnold v Britten [2015] UKSC 36, Wood v Capita [2017] UKSC 24 and MT Højgaard v E.ON [2017] UKSC 59.