McNicholas Plc v AEI Cables Limited: TCC 25 May 1999

The claimant had subcontracted to supply cabling on the defendant’s project. The contract provided both for the exclusive jurisdiction of the English courts but also for arbitration. The defendant applied for the action to be stayed and referred to arbitration. The claimant said the clause was ineffective being uncertain within s9 of the 1996 Act, and also unenforceable as an unfair contract term
Held: The reference clause was effective, and the court action should be stayed for arbitration. ‘Wherever possible, a court will seek to uphold a contract rather than to destroy it. In my judgment it is plain that clause 8 of this sub-contract has two purposes. First, it selected the law that was to be applied to the contract. The reference to the English Courts having exclusive jurisdiction over the agreement is curious since both parties are English companies and the works are in England so this stipulation may be redundant, but equally there may have been a good reason for it. It is however clear that clause 9 is intended to ensure that disputes in a wide variety of circumstances should either be referred to arbitration or should be subject to some other regime. I have no doubt that the reference to the English courts having jurisdiction can be read satisfactorily with clause 9 since it must be taken to be the parties’ intention that in so far as it was necessary to have recourse to any court to deal with any matter arising out of the agreement which could not be dealt with by the arbitrator then the English courts would be the appropriate court. ‘
The abrogation clause was strikingly unclear, but remained effective. The court approved the statement: ‘Incapable of being performed’ connotes something more than mere difficulty or inconvenience or delay in performing the arbitration. There must be some obstacle which must be overcome even if the parties are ready, able and willing to perform the agreement.’ The agreement did not provide the claimant of an opportunity to have its disagreement dealt with fairly if the defendant gave notice to abrogate the agreement to arbitrate, but no such notice had been given.
The clause was unreasonable under the 1977 Act because it risked one party being unable to have its complaint adjudicated upon, and also being unable to have adjudicated an unrelated matter.


Humphrey Lloyd QC


Unreported 25 May 1999


Arbitration Act 1996 9, Unfair Contract Terms Act 1977 13(1)


England and Wales


CitedLovelock Limited v Exportles CA 1968
The contract provided both that a dispute must to be referred to arbitration in London and also for any other dispute must be referred to arbitration in Moscow.
Held: The conflicting requirements for arbitration were so ambiguous as to be . .
CitedPaul Smith Ltd v H and S International Holdings Inc ChD 1991
The contract between the parties said both that any disupte should be referred to arbitration, and that ‘The Courts in England shall have exclusive jurisdiction over it to which jurisdiction the parties hereby submit.’ The plaintiffs said the . .
CitedRedland Aggregates Limited v Shephard Hill Civil Engineering Limited CA 11-Dec-1998
The opinion which the contract provided for the main contractor to hold under the 1984 edition of the FCEC form had to be bona fide, and perhaps also reasonable. . .
CitedBremer Vulkan Schiffbau und Maschineenfabrik v South India Shipping Coroporation HL 1981
The parties had referred their dispute to arbitration, but there had been inordinate delay, and the plaintiffs complained that the delay had prejudiced them, and sought an injunction to prevent further contuance of the arbitration, saying that the . .
CitedWest of England Ship Owners Mutual Insurance Association (Luxembourg) v Cristal Ltd (The Glacier Bay) CA 26-Oct-1995
An agreement giving to a ‘sole judge’ the power to make a final decision was effective, and there was no appeal from his decision. The defendant’s decision in his capacity as Convention administrator was as a final arbiter and was unreviewable.
Lists of cited by and citing cases may be incomplete.

Construction, Arbitration

Updated: 11 April 2022; Ref: scu.136037