Law Debenture Trust Corporation Plc v Elektrim Finance Bv and others: ChD 1 Jul 2005

A bond contained an arbitration clause subject to a further clause giving the claimant an ‘exclusive right at its option to apply to the courts of England to settle any disputes which may arise out of or in connection with these presents’. The defendants started an arbitration challenging the claimant’s assertion that events of default had occurred; the claimant then started proceedings to recover the full amount due under the bond to which it added a section 72 claim asking for an injunction to restrain the arbitration. The defendants retaliated with an application for a stay under section 9, CPR 62.8(3) and section 49(3) Supreme Court Act 1981.
Held: The court rejected the general submission that the 1996 Act required the court to allow the arbitrators to decide whether they had jurisdiction. The claimant could therefore invoke section 72 (if it applied) to ask the court to decide the jurisdiction issue. The court rejected the defendants’ arguments that the claimant could not bring itself within section 72 because once the claimant opted for litigation, there was no longer an arbitration agreement. The decision depended on the deed: if, as he found, the claimant was entitled to litigate then obviously he would not grant a stay and vice versa. Thus the section 9 point did ‘not really arise as a contentious point’. The judge had no need to consider the separability of the arbitration clause but only had to decide if the litigation option had been rightly exercised by the party seeking to litigate. He decided that it had been and that accordingly the section 72 application for a declaration and an injunction should be granted and the stay application should be dismissed.
Mann J
[2005] EWHC 1412 (Ch), [2005] 2 Lloyds Rep 755
Arbitration act 1996 72, Supreme Court Act 1981 49(3)
England and Wales
Cited by:
CitedFiona Trust and Holding Corporation and others v Privalov and others CA 24-Jan-2007
The court was asked whether when contracts have been induced by bribery and have been rescinded on discovery of the bribery, that constitutes a dispute which can be determined by arbitration in the context of a common form of arbitration clause.
Updated: 22 March 2021; Ref: scu.228237