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Arbitration case law update

In Tang, the Honourable Mr Justice Hildyard dismissed a claim under s67of the Arbitration Act 1996 that a final LCIA Award should be found to be of no effect on grounds that the Tribunal had lacked substantive jurisdiction to determine the dispute in question. 

In his judgment, Hildyard J has provided an extremely useful summary of the law (from 56 to 61) relating to the enforceability and effect of ADR provisions that purport to provide for the conciliation and meditation of disputes prior to the issue of arbitration or court proceedings.


The underlying arbitral proceedings had been brought (and allegedly compromised) in respect of disputes arising in connection with a multi-party cross jurisdictional business agreement.

Amongst other things, the business agreement contained provision that, upon one construction, provided certain other steps with a view to ADR had to be taken before substantive arbitral proceedings were initiated. In the event, arbitral proceedings were issued and in due course allegedly compromised between a majority of the parties to the reference.

That majority then applied to the Tribunal for the termination of the reference.

The Tang Claimants had objected on grounds including that the Tribunal had lacked jurisdiction to determine the dispute in the first place as, they alleged, the ADR provisions were conditions precedent to the issue of arbitral proceedings that had not been complied with. The Tribunal found that it had had substantive jurisdiction. The Tang Claimants appealed to the Courts. 

Questions arising

In the appeal to the Court in Tang the question (and the essence of the Tang Claimants’ case) was "whether the provisions in issue had enforceable contractual effect and operated as conditions precedent such that the tribunal cannot have had jurisdiction and was wrong in its determination that it had"[4].

En route to his decision, Mr Justice Hildyard found [22 and 23] that following Dallah Estate & Tourism Holding Co v Ministry of Religious Affairs, Government of Pakistan [2010] UKSC 46, the Court was to treat the challenge to a tribunal’s jurisdiction as a rehearing rather than a review.

While finding that the Court was neither bound nor restricted by the tribunal’s reasoning or findings as to its jurisdiction, the Judge noted that per Lord Hope in Dallah (at 31), a Court considering the issue would "examine carefully and with interest, the reasoning of an arbitral tribunal that has undertaken a similar examination."

Conciliation / mediation as a condition precedent to arbitration?

Following a review of relevant caselaw (including Sulamerica CIA Nacional de Seguros SA and others v EnesaEngenharia SA – Enesa and others [2012] EWCA Civ 638), the Judge set out a summary of guidelines that emerged on the question of the enforceability and effect of provisions for conciliation or mediation of disputes prior to arbitration/court proceedings:

  1. This recitation of authority illustrates the tensions, in the context of provisions for conciliation or mediation of disputes prior to arbitration or court proceedings, between the desire to give effect to what the parties agreed and the difficulty in giving what they have agreed objective and legally controllable substance.

  2. Agreements to agree and agreements to negotiate in good faith, without more, must be taken to be unenforceable: good faith is too open-ended a concept or criterion to provide a sufficient definition of what such an agreement must as a minimum involve and when it can objectively be determined to be properly concluded. That appears to be so even if the provision for agreement is one of many provisions in an otherwise binding legal contract, with an exception where the provision in question can be construed as a commitment to agree a fair and reasonable price.

  3. However, especially when the relevant provision is but one part of a concluded and otherwise legally enforceable contract the Court will strain to find a construction which gives it effect. For that purpose it may imply criteria or supply machinery sufficient to enable the Court to determine both what process is to be followed and when and how, without the necessity for further agreement, the process is to be treated as successful, exhausted or properly terminated. The Court will especially readily imply criteria or machinery in the context of a stipulation for agreement of a fair and reasonable price.

  4. The Court has been in the past, and will be, astute to consider each case on its own terms. The test is not whether a clause is a valid provision for a recognised process of ADR: it is whether the obligations and/or negative injunctions it imposes are sufficiently clear and certain to be given legal effect.

  5. In the context of a positive obligation to attempt to resolve a dispute or difference amicably before referring a matter to arbitration or bringing proceedings the test is whether the provision prescribes, without the need for further agreement, (a) a sufficiently certain and unequivocal commitment to commence a process (b) from which may be discerned what steps each party is required to take to put the process in place and which is (c) sufficiently clearly defined to enable the Court to determine objectively (i) what under that process is the minimum required of the parties to the dispute in terms of their participation in it and (ii) when or how the process will be exhausted or properly terminable without breach.

  6. In the context of a negative stipulation or injunction preventing a reference or proceedings until a given event, the question is whether the event is sufficiently defined and its happening objectively ascertainable to enable the court to determine whether and when the event has occurred.

Take home points

For those drafting conciliation / mediation provisions, the objective is to ensure that the provisions is drafted in a way that satisfies the principles of certainty identified by Hildyard J- including as precise a definition as possible of the obligations to, and method by which, conciliation/mediation is to be undertaken by the parties together with a clear procedure as to how the process will come to an end (so as to permit a reference to arbitration).

Please click here to view a copy of the judgment.