[2014] EWHC 1887 (Comm)

Benedetti made an application to stay proceedings brought by  Kruppa pursuant to section 9 of the Arbitration Act 1996. The main  question for Mr Justice Cooke to decide was whether or not the  clause in question constituted an arbitration agreement within the  meaning of the Act. The relevant clause reads as follows:

“Laws of England and Wales. 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.”

Benedetti said that this clause required the parties to arbitrate their  dispute. Further, the word “arbitration”, on its own, was sufficient  for an English court to find a binding arbitration agreement. The  clause here had been drafted by professionals and the words “Swiss  arbitration” referred only to arbitration and not to mediation or  some other form of ADR. Parties would be expected to know the  difference between “arbitration” and “mediation”. When the word  “arbitration” is used, it should be given its ordinary and natural  meaning. 

However, the Judge considered that there were a number of  difficulties with that approach. First, the parties had not specifically  agreed to refer any dispute to arbitration. They had agreed to  “endeavour” to resolve the matter through Swiss arbitration.  Secondly, the clause plainly envisaged the possibility of two stages  in the dispute resolution process. The parties had agreed to attempt  to resolve the matter first by arbitration and if that did not result in  a solution then there would be a need for litigation in the courts. 

The clause was a two-tier dispute resolution clause which provided  for a process referred to as “Swiss arbitration” with a right to  the parties to refer the matter to the jurisdiction of the English  court, “should a resolution not be forthcoming” through the  Swiss procedure envisaged. It was 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). 

In the Judge’s view, what the parties had in mind was that there  should be an attempt to agree a form of arbitration between them  in Switzerland. If they failed to do so, the English court was to have  non-exclusive jurisdiction. 

The nature of that obligation showed that there was not a binding  agreement to arbitrate but merely an agreement to attempt to  resolve the matter by a process of arbitration which itself had  not been set out in the clause or elsewhere in the contract. The  absence of provisions relating to the number of arbitrators, the  identity of the arbitrators, the qualifications of candidates for  arbitration or the means by which they should be chosen further  demonstrated the need for the parties to reach further agreement  on the subject because the reference to “Swiss arbitration” did not  specify the seat of the arbitration nor the court that could make any  appointment in lieu of the parties’ agreement. The requirement to  submit finally to a binding arbitration is absent and would, on the  face of the clause, be inconsistent with its terms because of the two  stage process envisaged. 

Benedetti’s application was dismissed.