Sovarex SA v Romero Alvez SA [2011] EWHC 1661 (Comm)

The Applicant alleged that it had agreed a contract, by telephone and e-mail, with the Respondent for the sale of sunflower seeds. The Respondent denied that a contract had ever been concluded. When disputes arose, the Applicant commenced FOSFA arbitration proceedings in London, unaware that the Respondent had already commenced court proceedings in Spain seeking a declaration that the contract did not exist. The Spanish court held that Spanish law did not allow such a remedy, but it also dismissed the Applicant’s application for a stay of the Spanish proceedings in favour of the FOSFA arbitration. The Spanish proceedings continued, and the Court held that the validity of the contract would be determined in Spain.

The tribunal found in the Applicant’s favour, and the Applicant applied to the Commercial Court to enforce the award under s.66 of the Arbitration Act 1996 (the “Act”). The Applicant argued that, by corresponding with both FOSFA and the tribunal, the Respondent had lost its right to raise objections to enforcement as a result of s.73 of the Act. The Respondent argued that s.66 provides a summary procedure which is unsuitable for the trial of issues of fact, and that the Applicant should commence fresh proceedings by way of action on the award.

Alternatively, the Respondent argued, the court should either decline jurisdiction or stay its proceedings because (a) the English proceedings would interfere with the Spanish court’s jurisdiction and (b) the English court was bound by Article 33 of the Brussels Regulation to recognise the Spanish court’s dismissal of the Applicant’s application for a stay, including its finding that the validity of the contract would be determined in Spain.  

The Court held that:  

  1. The Respondent had not lost its right to raise objections under s.73. This issue turned on whether the Respondent had taken part in the arbitration proceedings, which was to be determined objectively. There is a distinction between protesting that the tribunal has no jurisdiction, and asking the tribunal to consider the issue of jurisdiction. In this case, the Respondent had done no more than the former, and had not recognised that the tribunal had jurisdiction. As a result, it had not lost its rights under s.73.
  2. section 66 allows all applications to be addressed, provided that they can be dealt with without a trial, and this includes disputed issues of fact. By way of the proviso in s.66(3), the issue of whether the tribunal lacked substantive jurisdiction could be dealt with under the s.66 procedure. That section was meant to deal with enforcement generally, and there was nothing either in that section or in the CPR which required an alternative procedure to be adopted in the event of the application being challenged on the facts. The burden of proof under s.66 is on the party resisting enforcement, but this is not contrary to principle and is in line with both the New York Convention 1958 and the UNCITRAL Model Law.
  3. A determination of the validity of the arbitration agreement by the English court (as the court of the seat of the arbitration) did not amount to an interference with the Spanish proceedings. The existence of the contract was not a live issue before the Spanish court, and so there was no duplication of proceedings. As a result, the Respondent’s argument that the court should either decline jurisdiction or stay its proceedings failed.