In Uttam Galva Steels Ltd -v- Gunvor Singapore Pte Ltd  EWHC 1098 (Comm) the English High Court considered whether an arbitration clause in a sale contract extended to disputes under bills of exchange. Hill Dickinson acted for the successful defendant.
This was an appeal by Uttam Galva Steels Ltd from a US$ 28 million interim payment award in LME arbitration in favour of Gunvor Singapore Pte Ltd on the grounds of want of jurisdiction. The arbitrator had made his award pursuant to bills of exchange which did not contain LME arbitration clauses. The parties had entered into a sale contract which contained an arbitration clause. They were also the parties to the bills of exchange which were the means of payment under the sale contract. The bills of exchange did not contain any jurisdiction clause. The question before the judge was whether the words ‘all disputes arising out of or in connection with’ in the sale contract were wide enough to incorporate disputes under the bills of exchange. Mr Justice Picken dismissed the appeal first of all on the ground that, according to LME arbitration regulation 10.3, the jurisdiction of the tribunal should have been disputed no later than when defence submissions were filed. Uttam Galva had failed to raise a lack of jurisdiction arguments by this time in the underlying arbitration and the arbitrator had rejected jurisdiction arguments raised before him in previous interlocutory hearings because of that failure. Picken J then considered whether the arbitration clause in the sale contract extended to disputes under the bills of exchange. Picken J said that ‘in agreeing an arbitration clause, reasonable… businessmen would not contemplate fragmentation as regards dispute resolution’. Reasonable businessmen would not envisage that disputes relating to a sale contract would be dealt with in English arbitration whereas disputes under bills of exchange used as part of performance of that sale contract would have to be resolved before a court in another country. The words ‘all disputes arising out of or in connection with’ in the sale contract were wide enough to incorporate disputes under the bills of exchange in the judge’s view. The judge followed the general principle set out in the House of Lords case Fiona Trust & Holding Corp. & Ors -v- Privalov & Ors  UKHL 40 that ‘the construction of an arbitration clause should start from the assumption that the parties, as rational businessmen, are likely to have intended any dispute arising out of the[ir] relationship…decided by the same tribunal.’ The judge reached this conclusion in spite of the House of Lords case of Nova (Jersey) Knit -v- Kammgarn Spinnerei  1 WLR 713 relied upon by Uttam Galva where Lord Fraser had said ‘a very plain manifestation of intention to extend an arbitration clause to claims under bills of exchange is needed to rebut the presumption that businessmen neither wish nor expect bills of exchange to be taken into arbitration.’ Picken J though noted that this case was concerned with German law rather than any English law principle and the case significantly pre-dated the Fiona Trust. Uttam Galva also relied upon a Singapore case of Rals International Pte Ltd -v- Cassa di Risparmio di Parma e Piacenza SpA  SGCA 53 where a similarly worded arbitration clause in a sale contract was held not to extend to disputes under promissory notes which were considered ‘separate and autonomous’. Mr Justice Picken recognised in his judgment however that the concern of the Singapore Court appeared to be that indorsees of the promissory notes, who were not parties to the original sale contract, would not have knowledge of its terms. This is the multi-party contract situation where, as with negotiable instruments such as bills of lading, to incorporate arbitration clauses in charter parties, express words of incorporation are required. But the judge pointed out that was not the situation here: ‘it seems to me that it is entirely appropriate to conclude that the parties to that sale contract intended that disputes between them under a related promissory note or bill of exchange are to be governed by the arbitration agreement even if those same parties…are to be regarded as not having the same intention as regards disputes where a third party indorsee has become involved.’
Thus, in a modern context, there is a presumption of non-fragmentation of dispute resolution jurisdictions when it comes to interpreting the scope of an arbitration clause which will bind parties in disputes as between them under related payment documents.