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8 BREACH OF THE ARBITRATIONAGREEMENT: STAY OF JUDICIALPROCEEDINGS

Arbitration Law

Chapter 8 BREACH OF THE ARBITRATIONAGREEMENT: STAY OF JUDICIALPROCEEDINGS GENERAL PRINCIPLES Concurrent arbitration and judicial proceedings 8.1 It has long been established, both at common law and in equity, that the existence of an agreement to arbitrate does not prevent either party from commencing judicial proceedings, 1 a rule originally based on the principle that the parties may not agree to oust the jurisdiction of the English courts. 2 This is so even though the arbitrator has been appointed and the arbitration has commenced at the time that the claim form is issued, although it would seem that it is too late to commence judicial proceedings once the award has been made. 3 The principle that concurrent proceedings are possible means that if arbitration proceedings and the judicial proceedings are held concurrently, any arbitration award issued by the arbitrator is necessarily of no effect. 4 However, in practice concurrent proceedings are rare and the courts will, so far as possible, ensure that if the parties have agreed to go to arbitration then there will not be concurrent judicial proceedings either in this jurisdiction or elsewhere. As far as domestic proceedings are concerned any judicial action will be stayed if it is in breach of a valid arbitration clause which extends to the dispute, and as far as overseas proceedings are concerned then as long as there is sufficient connection with this jurisdiction the English courts will normally issue an anti-suit injunction to restrain such proceedings. Stays and anti-suit injunctions are both explored in detail later in this chapter. If there is a breach of an arbitration clause then, although authority appears to preclude an order for specific performance of an arbitration agreement as such, 5 the court may appoint an arbitrator if the reluctant party has failed to do so and the tribunal so constituted may proceed to an award even if that party refuses to appear. It is also likely, but not inevitable, that the act of commencing judicial proceedings as breach of an arbitration clause, a breach which is probably not regarded as repudiatory of the obligation to arbitrate 6 but which nevertheless gives rise to an action in damages for any loss caused to the defendant in those proceedings: damages will often be nominal, 7 although where appropriate the courts can award substantial damages representing the costs of defending judicial proceedings on jurisdictional grounds. 8 An illustration of the point that judicial proceedings are not necessarily a breach of the arbitration clause is provided by Hydro Agri Espana SA v. Charles M Willie & Co (Shipping) Ltd. 9 In this case, jurisdiction was in issue in the arbitration, and the arbitrators ultimately declined jurisdiction, leaving the claimants out of time for service of their claim form: the Court of Appeal held that the modern “cards on the table” approach to litigation demanded service of the claim form in due time. In the light of this ruling, it would be difficult to sustain an argument that the commencement of judicial proceedings is breach of the arbitration agreement itself, at least where jurisdiction is disputed. It has indeed been recognised that an agreement to arbitrate with England as the seat implies an agreement that the English courts have curial jurisdiction to restrain proceedings brought in contravention of the arbitration clause, even if the arbitrators themselves have jurisdiction to dismiss the proceedings should the claim come before them. 10

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