In issue 81 we highlighted the comments of Longmore LJ in the Fiona Trust case. The Judge said that a new approach needed to be taken by the English courts when considering questions relating to the jurisdiction of arbitration clauses in international commercial contracts. Longmore LJ indicated that:
"It seems to us any jurisdiction or arbitration clause in an international commercial contract should be liberally construed."
The case, albeit with a new name, has now reached the House of Lords, who unanimously approved the CA decision and the comments of Longmore LJ. The key issue related to the lengthy dispute resolution clause, which referred first to disputes "arising under" the contract, and later to disputes which have "arisen out of" the contract. The CA was asked to consider lengthy arguments about whether or not there was any difference in meaning between the two. Should "out of" have a wider meaning than "under", and if so, given the wording of this particular clause, which of the two should prevail? This lead the CA firstly to review the authorities and then to rule that the time had come to take a fresh approach. That approach was that the English Courts should not spend time considering the fine distinctions and minutiae of the wording of arbitration clauses. If a businessman did want to exclude disputes about the validity of the contract it would be comparatively simple to say so. This was a point taken up in the HL. In particular Lord Hope of Craighead, having expressly noted that the arbitration clause here was taken from a standard form, said this:
"The proposition that any jurisdiction or arbitration clause in an international commercial contract should be liberally construed promotes legal certainty. It serves to underline the golden rule that if the parties wish to have issues as to the validity of their contracts decided by one Tribunal and issues as to its meaning or performance decided by another, they must say so expressly. Otherwise they will be taken to have agreed on a single Tribunal for the resolution of all such disputes."
This HL decision is important because of the strong support given to the comments of the CA. In their view, 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 relationship which they have entered into be decided by the same tribunal. Any dispute resolution clause should be construed in accordance with this presumption unless the language made it clear that certain questions were intended to be excluded from (in this case) the arbitrator's jurisdiction. In the view of the HL the attempt to draw out differences between the meanings of the words "arising under" and "arising out of" was inappropriate. The distinction was at best a "fussy" one. This is something which is not without interest to the construction industry given the wording of the HGCRA which says that “a party to a construction contract has the right to refer a dispute arising under the contract for adjudication”.
Here the wording of the arbitration agreement made it clear arbitration may be chosen as a one-stop method of adjudication for the determination of all disputes. Lord Craig referred to the "simplicity of the wording". Taken overall, the purpose of the arbitration clause in question was to provide for the determination of disputes of all kinds, whether or not they were foreseen at the time when the contract was entered into. Lord Craig also noted that experience shows that as soon as a dispute of any kind arises from a contract, objections are very often immediately also raised against its validity. If the parties were operating in an international market, it is unlikely that they would intend that possible disputes arising from their transaction could be heard in two places. The rationale behind this judgment was clearly expressed by Lord Hoffman who said this:
"In my opinion 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 relationship to which they have entered or purported to have entered to be decided by the same Tribunal."
By stressing that the English Courts are not to become, in effect, bogged down in the detail of the wording of arbitration clauses, the HL have sent a clear message to parties to international commercial contracts that they can be much more certain that arbitration clauses will be upheld. Parties will know that, if arbitration is their chosen course, then it is the arbitrators who will be left to decide all the disputes which may arise, which is why Lord Craig referred to the "one stop method" of dispute resolution in his judgment. Thus taken with their decision in the Lesotho Highland Development Authority v Impregilo case, where it was held that an error of law does not necessarily mean that the arbitrators had exceeded their powers, it seems clear that this judgment of the HL can only serve to confirm the attractiveness of London and England as an arbitration centre.