[Arbitration Act 1996: hereafter “AA”. Unless otherwise stated, references to “the Act” or to “s.” are to this Act.]

Enforcement of foreign judgments—proceedings commenced in breach of an arbitration agreement—interpretation of arbitration agreements

A brought proceedings against M in the USA in connection with a consultancy agreement. M did not participate in the USA proceedings and A obtained default judgment. The agreement contained various provisions regarding jurisdiction: cl.15 stated the agreement would be governed by the laws of California and “Any case, controversy, suit, action, or proceeding” arising out of the agreement had to be brought in the courts of California; cl.16 provided that M consented to the personal and exclusive jurisdiction of the Californian courts and waived any objection as to the venue of any such proceeding; cl.17 provided that, except for claims under cll 7 and 8, “all claims, disputes, controversies, differences or misunderstandings between the parties arising out of, or by virtue of this Agreement” would be referred to arbitration. A applied for enforcement of the USA judgment.

At first instance,2 the judge held that the USA proceedings had been properly brought in the USA court. Even if the arbitration agreement in cl.17 was effective, it did not exclude the USA court’s jurisdiction if the proceedings included claims under cll 7 and 8. In any event, the arbitration clause was unenforceable under the Civil Jurisdiction and Judgments Act 1982, s.32, because it was irreconcilable with the other jurisdiction clauses. A was accordingly granted summary judgment. M appealed to the Court of Appeal.

Decision: Appeal allowed.

Held: (1) The parties are presumed to have intended the entire contract to take effect without irreconcilable conflict between express terms. The court must examine the precise drafting with care before determining that a conflict exists, striving to avoid a construction rendering a provision ineffective.