Whether parties had entered into an arbitration agreement
The defendant applied for a stay of English proceedings (pursuant to section 9 of the Arbitration Act 1996) on the basis that the parties had entered into an arbitration agreement. The clause in question read as follows: “In the event of any dispute between the parties pursuant to this Agreement, the parties will endeavour to first resolve the matter through Swiss arbitration. Should a resolution not be forthcoming, the courts of England shall have non-exclusive jurisdiction”.
Cooke J held that this was not a binding arbitration agreement. He rejected the defendant’s argument that the use of the word “arbitration” was sufficient for a finding that there was an arbitration agreement between the parties. He held that an agreement to “endeavour” to first resolve a matter through arbitration was not the same as an agreement to refer a dispute to arbitration.
Also, difficulties can arise where parties choose arbitration in Switzerland but fail to specify a particular cantonal seat, and the parties had not addressed that issue and further agreement between the parties on this point would have been required.
Furthermore, “it is logically not possible to have an effective multi-tier clause consisting of one binding tier (i.e. arbitration) followed by another binding tier (i.e. litigation)”. If a dispute is to be referred to arbitration, any award arising out of that arbitration should be binding on the parties and ordinarily there should be no second stage thereafter.