| ARBITRATION — Stay of judicial proceedings — Arbitration agreement — International investment treaty between United Kingdom and India containing arbitration agreement — Relationship between national court and international arbitration — Whether jurisdiction to grant stay of judicial proceedings only against a party to arbitration agreement or person claiming through or under party — Whether legal or commercial connection sufficient — Arbitration Act 1996, s9
Mayor and Commonalty and Citizens of the City of London v Sancheti [2008] EWCA Civ 1283; [2008] WLR (D) 364
CA: Laws, Richards and Lawrence Collins LJJ: 21 Nov 2008
A stay under s 9 of the Arbitration Act 1996 could only be obtained against a party to an arbitration agreement or a person claiming through or under such a party and a mere legal or commercial connection was not sufficient.
The Court of Appeal so held in a reserved judgment granting the defendant, Mr Anchok Sancheti, permission to appeal but dismissing his appeal against the decision of Judge Knight QC at Central London Civil Justice Centre on 12 February 2008 to dismiss his appeal from District Judge Mathias who on 5 January 2007 had refused his application for a stay under s 9 of the 1996 Act of proceedings brought by the claimant, the Mayor and Commonalty & Citizens of the City of London, concerning outstanding rent.
LAWRENCE COLLINS LJ said that the case concerned the relationship between international arbitration under a bilateral investment treaty (BIT) and national court proceedings, and, in particular, whether the decision in Roussel-Uclaf v GD Searle & Co Ltd [1978] 1 Lloyd's Rep 225 had been right in giving a very extensive interpretation of the stay provisions of what was now s 9 of the Arbitration Act 1996 so as to apply it to persons who were not parties to the arbitration agreement. The United Kingdom-India BIT, which contained an arbitration agreement, had come into force in 1995. The dispute in the present case concerned a lease granted in 1998 by which the claimant had let a floor of a building in London. By cl 4(4)(e) the lessors and the lessee submited "to the non-exclusive jurisdiction of the competent courts of England and Wales". The defendant had subsequently taken an assignment of the unexpired term of the lease which terminated in October 2004; the defendant had continued to occupy until Christmas 2004. At that time, there had been an outstanding rent review. In default of agreement, the increase in rent was to be determined by a surveyor. In due course a duly appointed surveyor had determined the increase. The claimant had sought to recover the balance of the revised rent from the defendant, who refused to pay. The defendant had served a notice of disputes under the BIT on the Treasury Solicitor. The claimant had commenced proceedings claiming £20,144.85 allegedly due by way of rent plus interest and one half of the surveyor's fee, whereupon the defendant hasd sought a stay under s 9 of the 1996 Act. His Lordship had no doubt that s 9 could not apply if the parties to the court proceedings were not the parties to the arbitration agreement or persons claiming through or under such a party: s 82(2). Nor was it sufficient for there to be a mere connection between the claimant and another person who was bound by the arbitration agreement. The defendant relied on Roussel-Uclaf v GD Searle & Co Ltd [1978] 1 Lloyd's Rep 225 in which a subsidiary of a party to an arbitration agreement had been held entitled to a stay because of the arbitration agreement with its parent company. In the present case the defendant sought a stay of proceedings brought against him by the claimant and thereby sought to impose upon the claimant the burden of an arbitration agreement to which it was not a party. But even without such a distinction his Lordship did not consider that the Roussel-Uclaf case assisted the defendant. In his Lordship's judgment it had been wrongly decided on that point and should not be followed. A stay under s 9 could only be obtained against a party to an arbitration agreement or a person claiming through or under such a party and a mere legal or commercial connection was not sufficient. In the present case the claimant was not a party to the arbitration agreement. The relevant party was the United Kingdom 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. However even in Roussel-Uclaf had been correctly decided and even if it could have been extended in the way which the defendant propounded, cl 4(4)(e) of the lease would have been decisive in the claimant’s favour since it amounted to a contractual agreement that if sued in England the party being sued would not object to the jurisdiction of the English court.
RICHARDS and LAWS LJJ agreed.
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