KAYE V NU SKIN UK LTD

[2009] EWHC 3509 (Ch), Chancery Division, Mr Justice Kitchin, 11 November 2009

Arbitration - Stay of proceedings - Distribution contract governed by English law with arbitration clause specifying Utah - Whether clause brought to attention of claimant - Whether clause unfair - Unfair Contract Terms Act 1977, section 13(2) - Arbitration Act 1996, section 9

NSUK employed K as a distributor under a contract governed by English law but with disputes subject to arbitration in Utah, the place where NSUK's parent company was established. K was dismissed and commenced proceedings in England against NSUK alleging breach of contract. NSUK sought a stay under section 9 of the Arbitration Act 1996 on the ground that any proceedings were to be brought in arbitration in Utah. K asserted that the arbitration clause was void and that her claim should be tried in England. Kitchin J ruled that there was an issue to be tried as to the validity of the arbitration clause, and that the matter should be resolved by the English court, so that a stay would be refused. In the court's view, it was arguable that the arbitration clause was ineffective under the principle in Interfoto Library Ltd v Stiletto Ltd [1989] 1 QB 433 that a particularly onerous or unusual term contained in a standard form contract was not to be treated as binding on the other party unless the term was specifically drawn to the other's attention. That principle applied to arbitration clauses. In the present case: the terms were not easy to understand; K had no experience of such contracts and had not obtained independent legal advice; K had been led to believe that disputes would be resolved in England; and although NSUK had a variety of contractual rights, the only right open to K was arbitration in Utah. Kitchin J rejected, however, the alternative argument that the clause was void for being unfair under the Unfair Contract Terms Act 1977: section 13(2) of that Act excludes arbitration agreements from its scope, and the exclusion extends to all parts of the arbitration clause and not just merely to the obligation to arbitrate.