BIICL 13th Arbitration Act Review Session 2: Enforcement of Arbitration Agreements

Arbitration agreements and EU law

David Brynmor Thomas8 February 2010

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Introduction

• Early involvement of EU law in arbitration in England and Wales

• Phillip Alexander Securities and Futures Limited v Bamberger and others; 12 July 1996, Court of Appeal (Civil Division) – distinction between international and domestic arbitration incompatible with EC law

• Increased influence of the EU

National Navigation Co v Endesa Generacion SA [2009] EWCA Civ 1397 (Comm); overturning National Navigation Co v Endesa Generacion SA [2009] EWHS 196 (Comm)

Accentuate Ltd v Asigra Inc [2009] EWHC 2655 QB

1. National Navigation Co v Endesa Generacion SA

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1. National Navigation v Endesa

• First Instance – limited scope of West Tankers

• Court of Appeal – extends West Tankers and affects both arbitration agreements and the principle of kompetenz-kompetenz

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Facts (1)

• National Navigation agreed to deliver coal to Endesa

• Bill of lading expressly incorporated terms of charterparty

• Charter provided for arbitration in London, subject to English law

• Damage to National Navigation’s ship failure to deliver coal

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Facts (2)

• Endesa commenced court proceedings in Almeria, Spain

• National Navigation commenced court proceedings in England for declaration of non-liability

• Almeria court – Spanish law applied

• National Navigation commenced arbitration proceedings in London seeking:

disclosure of the voyage charter

a declaration that the arbitration clause was incorporated

an anti-suit injunction

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Decision at first instance

• Anti-suit injunction refused in wake of West Tankers

• Arbitration agreement upheld by declaration

• Almeria court judgments were Brussels Regulation judgments

• Declaratory proceedings fell within the arbitration exception (Brussels Regulation Article 1(2)(d))

• English court did not have defer to Almeria court 

• Or public policy reason not to follow Spanish decision

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Appeal

Three key findings:

1. Judgment on a preliminary issue eg incorporation of an arbitration clause is a Regulation judgment if part of proceedings the main scope of which falls within the Regulation. Almeria decision creates issue estoppel for other Member State courts

2. Almeria judgments were binding on arbitration proceedings though outside the Regulation. " a [R]egulation judgment can...give rise to an issue estoppel as much in Arbitration proceedings excluded from the [R]egulation as in any other proceedings in an English court"

3. No public policy rationale for refusing to recognise Almeria judgments

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Problems raised by National Navigation v Endesa

1. Widening of scope of arbitration exception harder to give effect to arbitration agreement within EU

2. Arbitration agreements can be interpreted differently under different laws

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1. The arbitration exception

• Lord Justice Moore-Bick: proceedings characterised by reference to subject matter

• Does dispute re existence of arbitration agreement form

the main subject matter of the proceedings; or

is it ancillary to a substantive dispute which itself falls within the Regulation?

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1. The arbitration exception (cont.)

Current thinking at EU level

• Proposals of European Commission's Report and Green Paper, 21 April 2009:

A (partial) deletion of the arbitration exception such that court proceedings in support of arbitration would come within the scope of the Regulation.

The introduction of a uniform conflict rule connecting the validity of arbitration agreements to the law of the place of arbitration.

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2. Interpretation of the arbitration agreement

Arbitration clause in the head charter:

"Present Clause (was) to be deemed fully incorporated into Bill(s) of Lading."

Almeria court followed Spanish law held no arbitration agreement existed.

In its judgment dated 31 July 2008:

" the requirements for … agreement/incorporation under Spanish law had not been satisfied; in particular, Spanish law required the arbitration agreement and the choice of law agreement to be either expressly stated in the contract between the parties, or referenced in that contract and set out in "other documents that directly bound the parties".

"by commencing the Commercial Court action NNC had waived the right to arbitrate the dispute under the alleged arbitration agreement and to challenge the jurisdiction of the Spanish court on the grounds that the dispute was referable to arbitration".

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2. Interpretation of the arbitration agreement (cont.)

First instance: • English law applied• arbitration agreement was incorporated

Appeal: • no duty on English courts to examine existence of arbitration

agreement court first seised determines whether or not an arbitration agreement exists according to its own laws

Benefit - no risk of conflicting decisions as regards the validity of an arbitration agreement

BUT undermines law of the seat as chosen by parties

2. Accentuate Ltd v Asigra Inc

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• Application of the Commercial Agents (Council Directive) Regulations 1993

• When does EU law need to be applied and where?

• Litigation of a dispute arising out of the Regulations despite Canadian arbitration clause

even where parties choose a non-EU law to govern their agreement, mandatory EU law must be followed.

2. Accentuate Ltd v Asigra

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Facts (1)

• Software distribution agreement between English distributor and Canadian licensor

• Arbitration agreement and Canadian governing law clause

• Breach distributor threatened to bring claim in England under the Regulations

• Licensor commenced arbitration in Toronto for declaration that distributor had no claims

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Facts (2)

• Award - the laws of Ontario (and federal laws of Canada) applied, NOT Regulations

• Distributor applied to English District Court for permission to serve licensor out of jurisdiction

• Licensor applied to Court for s.9 stay

• District judge found no jurisdiction but granted permission to appeal

• Distributor appealed to High Court argued choice of law amounted to evasion of EU law rendering arbitration agreement invalid

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Decision – the interplay between EU law and arbitration

• Justice Tugendhat agreed with the distributor

• Arbitration clause in favour of Canadian law was "null and void" and "inoperative" re questions of mandatory EU law

• Recognition of resulting awards would be refused on public policy grounds

• Stay of High Court litigation lifted; permission to serve licensor out of jurisdiction confirmed

• Ingmar GB Ltd v Eaton Leonard Technologies Ltd [2000] EUECJ C-381/98 - mandatory nature of EU law notwithstanding non-EU choice of law

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Decision – the interplay between EU law and arbitration (cont.)

Impact of mandatory EU law on two elements of the agreement to arbitrate :

• the choice of governing law; and

• the choice of forum

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1. Choice of governing law

• Accepted that mandatory rules can displace chosen law

• BUT should a tribunal apply mandatory EU law alongside chosen law?

• Increasingly open approach to questions of arbitrability / powers of arbitrators to consider claims arising from mandatory statutory rights

• E.g. Private competition law remedies are arbitrable

• Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 637 n.19 (U.S. S.Ct. 1985)

• US Supreme Court held: arbitrators in Japan had authority to deal with US anti-trust claims, despite Swiss choice of law clause

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2. Choice of forum – EU displaces choice of parties to arbitrate

Consequence of decision: dispute not arbitrable if requires the application of mandatory EU law where:

• chosen law of the contract is not the law of an EU Member State; and

• seat of the arbitration is outside the EU

Narrowing of the concept of arbitrability

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2. Choice of forum – EU law need not displace choice of parties to arbitrate (cont.)

• Held: England most appropriate forum to hear the claim

• Court chose not to uphold the parties' arbitration agreement

• Could Canadian tribunal have given effect to mandatory EU law alongside the law of Ontario?

• Regulations invalidated choice of law AND choice of forum

• Court failed to give effect to the principle of kompetenz-kompetenz

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What links can be drawn between these two cases?

National Navigation v Endesa - relationship between jurisdictions within the EU

Accentuate v Asigra - application of EU law outside the EU

• Result - EU law invalidates agreement to arbitrate. Where choice of law affects choice of arbitration negates doctrine of separability

• Brussels Regulation - introduction of a uniform conflict rule would assist in Endesa scenario. Would not affect outcome of Accentuate as seat outside EU

• Role of mandatory EU law. Can a tribunal apply it and where?

• To what extent does mandatory EU law trump kompetenz-kompetenz?

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Conclusion

Endesa - EU procedural law trumps:

• the choice of forum – the case winds up in the Spanish court; and

• the choice of the seat - its law plays no part in determining the validity of the arbitration agreement

Accentuate - mandatory EU law trumps:

• the choice of governing law; and

• the choice of forum– the case winds up in the English court

The Lisbon Treaty – EU Law set to trump the ability of Member States to enter into treaties

EU policy makers decide / English judiciary interprets the role that EU law should play in the resolution of disputes in this forum