In BT plc v SAE Group Inc (a recently published judgment dated February 2009), the High Court considered an application for a declaration that an arbitral tribunal lacked jurisdiction as there was no arbitration agreement between the parties. The application was primarily brought by BT as a Part 8 claim under the Civil Procedure Rules on the basis that, as there was no arbitration agreement, the English Arbitration Act 1996 (the "Act") did not apply. In the alternative, BT also brought court applications challenging jurisdiction under the Act (sections 32 and 72).

If BT had not framed its application as a Part 8 claim, neither the facts of this case, nor the judge's finding there was no arbitration agreement, would be remarkable. However, in respect of BT's primary claim under Part 8, the court determined:

  1. that there was no arbitration agreement;
  2. that the Act did not therefore apply; and
  3. that it was consequently entitled to exercise its inherent jurisdiction to make the declarations sought by BT.

It is difficult to reconcile this judgment either with the authority expressly relied on by the judge (Fiona Trust & Holding Corporation v. Yuri Privolov [2007] EWCA Civ 20) or with the purpose of the Act. The Court of Appeal in the Fiona Trust decision held that where the court has conflicting applications before it to stay court proceedings under section 9 in favour of arbitration and for a declaration under section 72 that there is no valid arbitration agreement, the application under section 9 is the first matter which it should decide. On the analysis of the judge in the present case, where a section 9 application fails (i.e. it is held that there is no valid arbitration clause covering the dispute in issue), the Act no longer applies. Consequently, and although there was no section 9 application in the present case, the judge first determined that the Act did not apply as there was no valid arbitration agreement, before then granting a declaration under the court's inherent jurisdiction rather than under the Act.

The judge's reasoning in first determining the applicability of the Act does not seem to have been contemplated by the Court of Appeal in Fiona Trust. Moreover, his decision would appear to be at odds with the overall scheme of the Act whose policy is that questions of jurisdiction should normally be decided by the arbitral tribunal. For this reason, sections 32 and 72 were intended to be narrow provisions with only a residual role for the court in resolving jurisdictional disputes.

For the court to employ its inherent jurisdiction in this instance on the basis that the Act did not apply seems to undermine the regime for challenges to jurisdiction carefully laid down in the Act. It also provides a mechanism for parties seeking to challenge the jurisdiction of an arbitral tribunal in the courts to circumvent the limitations to such recourse to the courts set out in the Act (e.g. the requirement for a party to take no steps in the arbitration under section 72). Going forward, while parties seeking to challenge arbitral jurisdiction in the courts may consider bringing a Part 8 claim for the court to exercise its inherent jurisdiction in line with this authority, the more reliable course would be to proceed within the regime set down in the Act.

(BT plc v SAE Group Inc [2009] EWHC 252 (TCC))