City of London v Ashok Sancheti [2008] EWCA Civ 1283

It would be wholly inconsistent with the purpose and structure of the Arbitration Act 1996, and of s.9 in particular, if a stay of proceedings could be obtained against a claimant who was not a party to the arbitration agreement (or a person claiming through or under such a party). A mere legal or commercial connection was insufficient. The contrary decision in Roussel-Uclaf v GD Searle & Co Ltd (No2) (1978) 1 Lloyd’s Rep 225 was wrong and should no longer be followed.  To read the judgment, click here.

City of London v Sancheti: S, a solicitor of Indian nationality, had taken an assignment of a lease of business premises from the local authority. When the lease expired, S vacated the premises at a time when there was an outstanding rent review under the lease. The rent increase was eventually determined and the local authority sought to recover the balance of the revised rent from S. S served a notice of disputes under the United Kingdom-India bilateral investment treaty, complaining of discrimination by different organs and functions of the UK, including complaints against the local authority for harassment, racial discrimination and misfeasance. The local authority commenced proceedings against S in the county court, claiming the amount allegedly due by way of rent and S applied for a stay of proceedings under the Arbitration Act 1996 s.9, relying on the arbitration provisions in the treaty. The local authority was not, however, a party to the treaty – the relevant party was the UK government. The fact that, in certain circumstances, a state might be responsible under international law for the acts of one of its local authorities, or might have to take steps to redress wrongs committed by one of its local authorities, did not make that local authority a party to the arbitration agreement.

In any event, under the lease, the lessor and lessee ‘submit[ted] to the non-exclusive jurisdiction of the competent courts of England and Wales’. That amounted to a contractual agreement that, if sued in England, the party being sued would not object to the jurisdiction of the English court.