In an important judgment handed down on 17 October 2007, the English House of Lords endorsed the pro-arbitration stance adopted by the Court of Appeal in the Fiona Trust case in relation to the construction of arbitration agreements in international commercial contracts and the separability of arbitration agreements.
The case concerned various charter contracts containing an arbitration clause which referred primarily to disputes "arising under" the contract. The Owners of the relevant vessels had purported to rescind the contracts on the basis that they were allegedly procured by bribery, and argued that the arbitration clause was not applicable to this dispute because: (i) the question of whether the contracts were procured by bribery was not a dispute "arising under" the contract; and (ii) the arbitration clause had been rescinded and was therefore no longer in force.
The House of Lords dismissed the Owner's arguments on both grounds. In holding that the question of whether the contracts were procured by bribery or not fell within the arbitration clause, Lord Hoffman (who delivered the leading judgment) observed that some previous authorities drew a distinction between disputes "arising under" a contract and disputes "arising out of", "in relation to" or "in connection with" a contract. He then suggested that many draftsmen regard these phrases as mutually interchangeable and applauded the Court of Appeal's opinion that "the time has come to draw a line under the authorities to date and to make a fresh start". It was held that the courts must seek to give effect to the reasonable commercial expectations of the parties, the starting point being a strong presumption that the parties intend all their disputes to be resolved in the same forum.
In relation to the Owners' second argument, the House of Lords emphasised that the principle of separability of arbitration agreements enshrined in the English Arbitration Act makes clear that an arbitration agreement may only be voided on a ground which relates to it directly. Premium Nafta Products Limited & ors v Fili Shipping Company Limited & ors UKHL 40.