Effect of restriction of remedies open to arbitrator

Where the parties have agreed to go to arbitration but have restricted the remedies which may be granted by the arbitrator, it might be thought that the proper construction of the agreement would be that the parties are required to go to arbitration but subject to a restriction in remedies: the court is not to be involved. However, in Vertex Data Science Ltd v Powergen Retail Ltd [2006] EWHC 1340 (Comm) there was a specific reservation of a right to go to court where a dispute was not capable of resolution under the arbitration clause. Tomlinson J, with some reluctance, concluded that the effect was to preserve the right of the parties to go to court if the remedy sought was not one open to the arbitrator.

Vertex: the facts

Powergen, a supplier of electricity to domestic customers in the UK, in October 2002 acquired the business of another energy company, TXU, and thereby inherited its rights and liabilities. TXU had, earlier in 2002, entered into an outsourcing agreement with Vertex under which Vertex was to supply various services to TXU. The agreement was renegotiated and replaced by a master services agreement made in July 2005, which was due to expire in May 2012 although there was an option for termination by either party after four years. The contract was extremely complex and required day-to-day cooperation between the parties. The relationship broke down relatively quickly, and in March 2006 Powergen served notice of termination, alleging various breaches of contract by Vertex, stemming to a large extent from the use by Vertex of customer call centres in India. For its part Vertex disputed the right of Powergen to terminate the contract and commenced the present action for a permanent injunction and declaratory relief to restrain Powergen from acting on its notice of termination and from taking any steps which would prevent or hinder Vertex’s future performance. The question before the court in the instant proceedings was whether a temporary injunction should be granted, which in turn raised two issues in accordance with the principles relating to the grant of temporary injunctions laid down by the House of Lords in American Cyanamid v Ethicon [1975] AC 396: did Vertex have a real prospect of succeeding at trial; and, if so, was the balance of convenience in favour of granting temporary relief?