Premium Nafta Products Limited v Fili Shipping Company Limited (Fiona Trust litigation) - [2007] UKHL 40

The House of Lords has upheld the Court of Appeal’s decision that claims to rescind charterparties on the basis of bribery fell within the scope of a charterparty arbitration clause. Applying the doctrine of separability as enacted in s7 Arbitration Act 1996, the allegations of bribery did not directly impeach the arbitration agreement and the shipowners were required to arbitrate the dispute.

This decision marks a “fresh start” when it comes to construing arbitration agreements. Case law to date has established that an arbitration agreement which refers to disputes arising "out of" a contract is of broader scope than one which refers to disputes arising "under" a contract. The House of Lords called for an end to such arguments which do not lie well with the approach taken in other jurisdictions: the starting point from now on is a strong presumption that commercial parties intend all disputes to be determined in a single forum. This means that disputes will fall outside the scope of an arbitration clause only if excluded expressly or by clear implication. For the same reason, it is only where there is evidence which directly impeaches the arbitration agreement itself that parties will be able to avoid arbitrating.

Comment: this is a turning point for arbitration in English law. For the second time this year, the House of Lords have spoken out strongly in favour of arbitration. The first decision was West Tankers Inc v RAS Riunione Adriatica di Sicurita SPA [2007] UKHL 4 in which they referred the issue of whether the grant of an anti-suit injunction to restrain proceedings in other member states in breach of an arbitration agreement is consistent with the Judgment Regulation to the ECJ (see above under In brief). The House of Lords supported the English courts’ practice of making anti-suit injunctions in such circumstances but we are the only member state which does this. Arbitration is excluded from the scope of the Regulation and needs the support of the courts of member states but it is likely that the ECJ will use the West Tankers reference to revisit the boundaries of the arbitration exception so as to put an end to the English use of anti-suit injunctions to uphold arbitration agreements. Their previous decisions in Gasser GmbH v MISAT Srl and Turner v Grovit reject the use of anti-suit injunctions to interfere with the jurisdiction of the court first seised where proceedings have been brought in breach of an exclusive jurisdiction agreement, even in bad faith.