The recent decision of the South Australian Supreme Court in Hurdsman v Ekactrm Solutions Pty Ltd [2018] SASC 112 shines a light on the importance of checking that your arbitration agreement works in practice.

The case concerned an interlocutory application for a permanent stay on the basis that the parties were bound by an agreement to arbitrate.

The substantive proceedings related to an alleged breach of a Share Sale Agreement (SSA). Clause 28 of the SSA required that all disputes regarding the SSA be referred to a mediator, for determination in accordance with the rules of the Singapore International Arbitration Centre (SIAC). Clause 28 of the SSA was ambiguous; there are no rules for mediation prescribed by SIAC.

In attempting to resolve the ambiguity, the Court considered communications between the parties prior to executing the SSA, including drafts of the SSA and a Memorandum of Understanding between the plaintiffs and an Indian company that was related to the defendant.

The application was ultimately dismissed, and clause 28 of the SSA was held not to be an agreement to arbitrate or mediate, because: "Neither construction is coherent in the context of the agreement as a whole and especially in light of the communications between the parties prior to entering into the contract."

This case serves as a reminder to check that your arbitration clause is effective. While courts are generally reluctant to interfere where parties have agreed to arbitrate, and will take a broad approach to the interpretation of arbitration agreements, if your arbitration clause doesn't work in practice it won't be enforceable.