Whether court should stay proceedings for arbitrators to hear jurisdiction challenge


After an ICC arbitration was commenced by OMV against two parties (OPL and Zaver), those parties issued an application to the English court under section 72 of the Arbitration Act 1996 ("the Act"), seeking a declaration that the ICC did not have jurisdiction. OMV sought a stay under section 9 of the Act, or pursuant to the court's inherent jurisdiction. The judge decided to stay Zaver's application in order to give the ICC arbitrators an opportunity to decide whether they had jurisdiction to act. His reasoning was that there would be an arbitration in any event (the arbitrators having jurisdiction over the dispute between OMV and OPL) and so the question of jurisdiction should be left to the arbitrators. In so doing, the judge had relied on earlier caselaw to the effect that a stay is appropriate if the court can be virtually certain that there is an arbitration agreement and that the dispute falls within it.

The Court of Appeal has now held that the judge erred in his approach. This was not a case where it was clear that there was an arbitration agreement between OMV and Zaver. Furthermore, support was given to the views expressed by Lightman J in Albon v Naza Motor Trading (see Weekly Update 14/07) that "it will only be in exceptional cases that a court faced with proceedings which require it to determine the jurisdiction of arbitrators will be justified in exercising its inherent power to stay those proceedings to enable the arbitrators themselves to decide the question". That is because, although arbitrators have jurisdiction to decide their own jurisdiction, that will not be "the final word", since the parties can still challenge the award under section 67 of the Act, on the ground that the arbitrators lacked substantive jurisdiction and "In simple terms, a party is not bound by the award of a tribunal on a matter that he did not agree to refer to it. It may be that in a few cases there may be practical reasons for allowing the tribunal to reach a decision on its own jurisdiction before the court finally rules on the matter, but such cases are likely to be rare. In the present case a decision by the tribunal might have had some persuasive authority, but could not finally determine the matter before the court".