In A v B, [2017] EWHC 3417 (Comm), the High Court of Justice of England and Wales has recently held that an arbitrator in an arbitration commenced by a single request to arbitrate did not have jurisdiction to decide disputes under multiple arbitration agreements.

What makes this decision so important and interesting is that the British Columbia Supreme Court recently arrived at a somewhat different result. As I reported in my article posted on January 2018, in South Coast British Columbia Transportation Authority v. BMT Fleet Technology Ltd. 2017 CarswellBC 2587, 2017 BCSC 1683, the B.C. Supreme Court held that a single Notice to Arbitrate to initiate an arbitration under several arbitration agreements was not totally invalid. The court held that disputes under multiple arbitration agreements could not, absent the parties’ consent, be resolved in a single arbitration, but that the arbitral authority (the British Columbia International Commercial Arbitration Centre (BCICAC)) had the authority to separate the disputes into separate arbitrations which could validly proceed.

The question of whether there can be a single notice to arbitration under multiple arbitration agreements is of fundamental importance to construction law. This is because, in a single construction project, there are usually multiple building contracts. Each contract may contain its own arbitration clause. Disputes under these contracts usually involve basically the same facts, and over-lapping parties. A single notice to arbitrate reflects the reality of the single construction project. But the issue still arises as to whether arbitral statutes, arbitral agreements and the rules of arbitral authorities allow a single notice arbitrate to be issued under several arbitration agreements, and if so, whether the arbitrator under that single notice to arbitrate may decide disputes under those multiple arbitration agreements.

In A v B, the English court held that a single notice to arbitrate under several arbitration agreements was invalid and the arbitrator had no authority to decide disputes under several arbitration agreements. Let’s explore the basis upon which that decision was arrived and then consider the differences, if any between the decision in that case and the B.C. Supreme Court in South Coast, and whether these two decisions can be reconciled.

Background

B sold two consignments of crude oil to A pursuant to two separate contracts. Each contract was governed by English law and contained an arbitration clause requiring arbitration pursuant to the rules and procedures of the London Court of International Arbitration (LCIA). Each contract also incorporated B’s General Terms and Conditions, including an LCIA arbitration clause.

These consignments were re-sold by A to a third part C under separate contracts which mirrored (save for a mark- up) the contracts between A and B, including the incorporation of LCIA arbitration clauses.

On September 23, 2016 B commenced one LCIA arbitration against A, claiming that A had failed to pay the price due under the two contracts. B delivered a single Request for Arbitration and paid a single registration fee to the LCIA. B claimed the purchase price under both contracts with A.

On October 31, 2016 A served its response to the Request denying liability and stating that the Response should not be construed as submission to the arbitral tribunal’s jurisdiction to hear the claim as currently formulated; and reserving A’s rights to challenge the jurisdiction of the LCIA and any arbitral tribunal appointed. A included similar statements and reservations in its correspondence with the LCIA and the arbitral tribunal which was appointed by the LCIA.

On October 31, 2016 A commenced a separate LCIA arbitration against C, mirroring B’s claim against it.

On February 8, 2017, the LCIA appointed the Tribunal for the arbitration between A and B.

On March 23, 2017, C challenged the jurisdiction of the arbitral tribunal in the arbitration between A and C on the grounds that A’s request for arbitration was invalid. That challenge was upheld on 11 May 2017.

On May 24, 2017, A challenged the validity of the B’s Request for Arbitration under both of the crude contracts between A and B. This challenge was made shortly before the date (June 2, 2017) on which A’s Statement of Defence was due in the arbitration. A served its Statement of Defence on that date, reserving its position with respect to the jurisdiction of the arbitral tribunal.

On July 7, 2017, the arbitral tribunal made a partial award in which it dismissed A’s challenge to its jurisdiction on the ground that it was brought too late. The tribunal held that the requirement in the LCIA that a jurisdictional objection be raised “as soon as possible after the matter alleged to be beyond its jurisdiction is raised” meant that A was required to specifically raise its objection based on the “two arbitration agreement” issue at the time of its response to the Request for arbitration. When it raised that objection at the time of filing its Statement of Defence, it was too late.

A then commenced proceedings in court on August 4, 2017 to set aside the arbitral tribunal’s decision.

The Position of the Parties

On the jurisdictional issue, A’s position was that a request for arbitration could only validly encompass a dispute under one arbitration agreement, and that therefore B’s Request for arbitration failed to validly commence an arbitration. A said that there remained the question of whether the Request for arbitration could be amended to refer to only one arbitration agreement, but that in its present form, the Request for arbitration was invalid.

B did not dispute that an arbitration could only encompass a dispute under a single arbitration agreement, but submitted that its request for arbitration validly commenced two arbitrations, one under each contract. B argued that the reference in the LCIA rules to “an arbitration” could encompass two arbitrations, relying on general statute law that states that, in deeds and contracts, the singular includes the plural and vice versa. B relied upon the decision in The Biz, [2011] 1 Lloyd’s Rep. 688 in which it was held that a single notice to arbitrate validly commenced 10 separate arbitrations under 10 bills of lading each of which contained a London arbitration clause.

Decision of the Court

The judge in A v B said that “the approach set out in The Biz is correct and [I] adopt it in full.” However, he went on to hold that The Biz “was a case where no arbitral rules were applicable, let alone the LCIA rules.” He held that the LCIA rules precluded the same result in the present case, for the following reasons:

  1. It was “entirely plain” that the “LCIA Rules treated a single request [to arbitrate] as giving rise to a single arbitration, the payment of fees for one arbitration, and the formation of a single arbitral tribunal.”
  2. In addition, and “perhaps conclusively in this regard, Article 22.1(x) [of the LCIA Rules] gives the arbitral tribunal (once formed) the power to consolidate the arbitration with one or more other arbitrations, but only where all parties agree (reflecting the statutory restriction on consolidation of arbitration proceedings under section 35 of the [English] 1996 Act)”.
  3. In light of these provisions, it was “inconceivable that the LCIA Rules could be read as permitting a party to pay only one fee when commencing multiple arbitrations” and it was “undoubtedly impermissible to read them as giving rise to consolidated proceedings without the consent of all parties.

Accordingly, the English court held that the Request to arbitrate was “an ineffective attempt to refer separate disputes to a single arbitration. It was accordingly invalid.”

The court disagreed with the arbitral tribunal’s finding that the objection to the tribunal’s jurisdiction had been raised too late. In the English Arbitration Act, 1991, the requirement that an objection to jurisdiction must be raised “as soon as possible” applied to jurisdictional objections arising during the course of the arbitration, not to those raised at its inception. As to those latter objections, the English Act plainly required them to be raised by the time of the delivery of the taking of the first step in the proceeding. That wording closely followed the wording of the UNCITRAL Model Law which requires such an objection to be made no later than the delivery of the statement of defence. It was “inconceivable” that the LCIA Rules intended to impose an earlier date than that. “It would entail that a party could lose the most fundamental of objections (such as that it was not party to the relevant agreement or that there was no LCIA arbitration clause in an agreement to which he was a party) without having taken any steps in the arbitration and without even having appointed an arbitrator (a step which would not, in itself, amount to a waiver of the right to object to jurisdiction).”

If it had been necessary for him to decide the issue, the English judge said that he would have held that the provision in the English Arbitration Act, 1991 as to the time limit within which to raise a jurisdictional objection prevailed over any shorter time limit imposed by the LCIA Rules.

The court concluded as follows: “I find that the Request was invalid, with the result that the Tribunal did not have jurisdiction to make the Award. I further find that A has not lost the right to challenge the Tribunal’s jurisdiction as it objected not later than the time for its Statement of Defence.”

Discussion

There are many important aspects of this decision. I will not address the second issue – whether the LCIA Rules could validly, or did, impose a shorter time limit for objection than that contained in the applicable arbitration statute. That issue is itself worthy of further analysis. It is interesting that the English Court would have held that the LCIA Rules relating to raising jurisdictional objects were trumped by the provisions of the English Arbitration Act, 1991, yet it held that the LCIA rules were effective to preclude the single arbitration of disputes under more than one arbitration agreement.

Rather, this discussion will focus on the English Court’s finding that the Request for arbitration was “invalid” and the arbitral tribunal did not have jurisdiction because the Request included disputes relating to more than one arbitration agreement. This decision seems to be at odds with the decision of the B.C. Supreme Court in the South Coast decision. There, the B.C. court held that the initiation, by one originating document, of an arbitration proceeding relating to several arbitration agreements was substantively valid, but procedurally invalid, and the arbitral authority (BCICAC) had jurisdiction under its rules to correct that invalidity by allowing the claimant to pay the fees for multiple arbitrations and file requests for the appointment of arbitrators for each of the three arbitrations encompassed in the original originating document. I refer readers to my article dated January 18, 2018 for a fuller discussion of the South Coast decision.

In A v B, neither of the parties (and in particular, B, the claimant) sought to correct the alleged invalidity by asking the LCIA to divide the file into separate arbitrations, and by paying the fees for separate arbitrations. Nor did either party submit to the court that the original Request for arbitration should be preserved in this fashion. Accordingly, the court in A v B did not decide whether the LCIA (or the arbitral tribunal appointed by the LCIA) would have had the authority to effectively sub-divide the original Request for arbitration into separate arbitrations.

The issue of whether a single request for arbitration can validly commence one arbitration under several arbitration agreements is not an academic exercise. It may be crucial for limitations purposes. If the single request for arbitration is entirely invalid, then a limitation period may be missed.

What then can be made of these three decisions: A v. B, The Biz and South Coast? Are they reconcilable on the question of whether a single request for arbitration of disputes under several arbitration agreements is substantively valid or invalid? Let me take a stab at trying to reconcile them by proposing the following principles:

  1. If the provisions of the applicable arbitration agreements and arbitral statute do not otherwise provide, a single notice requesting arbitration under several arbitration agreements is substantively valid to commence separate arbitrations under each agreement, provided that the notice contains all the facts, allegations and other elements required to assert separate claims under each arbitration agreement.

Each of these three decisions seems to be consistent with this principle. This principle seems to be what the courts in South Coast and The Biz decided. The court in A v B accepted that principle as correct, but held that the single request to arbitrate in that case was invalid due to the provisions of the LCIA Rules.

  1. The Rules of an arbitral authority or an arbitration agreement may prohibit or allow a single request for arbitration to initiate arbitration under multiple arbitration agreements. Upon objection from the respondent, the arbitral authority or tribunal is required to sub-divide the disputes into separate arbitrations on a timely basis.

This principle may be more debatable. Certainly, in South Coast the B.C. Supreme Court applied this principle. It examined the rules of the BCICAC and held that those rules allowed the BCICAC to accept a single request for arbitration and then, when an objection was raised by the respondent, to divide the file into separate arbitrations. While this issue was not squarely addressed in A v B, the fact that the court analyzed the LCIA Rules and held that those Rules precluded a single request for arbitration from having any validity seems to indicate that the court could have come to the opposite conclusion if it had the opposite view of the effect of those Rules.

It is unfortunate that the court in A v B did not have a copy of the decision in South Coast because the B.C. Court analysed the “single fee” issue and still decided that BCICAC Rules allowed the BCICAC to divide the request for arbitration into several arbitrations. Indeed, the BCICAC had subdivided the request for arbitration and received fees for the several sub-divided arbitrations by the time the issue came to court. This fact may distinguish the South Coast decision from the A v B decision.

Also, in South Coast, the B.C. Supreme Court held that, once the BCICAC accepted the single request for arbitration, then by the very wording of its rules, a valid arbitration had been commenced. In effect, the court said that, once having accepted that request and having stated to the parties that an arbitration had been commenced, the BCICAC could not maintain that a valid arbitration had not been commenced and it was the BCICAS’s obligation to figure out what to do next, not the parties’.

Could that submission be made under Rule 1.4 of the LCIA Rules (2014)? That rule states: “The date of receipt by the Registrar of the Request shall be treated as the date upon which the arbitration has commenced for all purposes (the “Commencement Date”), subject to the LCIA’s actual receipt of the registration fee.“  (Underlining added) If the LCIA accepts the Request to arbitrate and appoints the arbitral tribunal, can the LCIA assert to that an arbitration has not been commenced, and if not, can any other party?

  1. Unless the arbitral agreement or the applicable rules of the arbitral authority so provide or the parties agree, the arbitrator does not have authority to conduct a single arbitration in respect of disputes under more than one arbitration agreement.

This principle appears to flow from all three decisions. Indeed, in each of them the parties themselves appear to have conceded that the arbitral tribunal did not have authority to conduct a single arbitration in respect of disputes under several arbitration agreements.

This principle separates the commencement of the arbitration from the conduct of the arbitration. The commencement of the arbitration by one commencing document would be considered to be valid, but the conduct of arbitrations under multiple arbitration agreements by a single arbitral tribunal to be invalid.

If this is the case, instead of saying that “the Request is invalid”, the court in A v B could have said: “The arbitral tribunal has no jurisdiction to conduct a single arbitration in respect of disputes under more than one arbitration agreement.” If it had done so, would that have entitled either the LCIA or the arbitral tribunal to make an order separating the arbitration into two arbitrations, as was done in The Biz and South Coast?

Of course, the jurisdictional objection may be waived, in particular by filing a Statement of Defence in the arbitration without making any objection to the fact that it purports to be an arbitration about disputes arising from more than one arbitration agreement.

  1. There is no point in issuing a single notice or request to arbitrate in respect of disputes under more than one arbitration agreement, unless the arbitral agreement or the rules of the applicable arbitral authority permit, or the parties agree, to a consolidated arbitration hearing.

The lesson from these three cases is that (unless the arbitral rules or arbitration agreement permit arbitration hearings to be held together or consolidated) the issuance of such a single notice or request to arbitrate is futile. If the respondent objects to such a notice or request, then it will only result, at the very best, in the arbitral authority or tribunal ordering that separate arbitrations proceed under each arbitration agreement, putting the parties back to where they would have been if separate notices or requests to arbitrate had been issued. At the worst, it may result, as it did in A v B, in the notice or request being held to be invalid.

See Heintzman and Goldsmith on Canadian Building Contracts (5th ed.), chapter 11, part 4

A v B, [2017] EWHC 3417 (Comm)

Arbitration – Commencement of arbitral proceedings- Single arbitration of disputes under multiple arbitration agreements – Time for objecting to jurisdiction of the arbitral tribunal

Thomas G. Heintzman O.C., Q.C., LL.D. (Hon.)                                April 4, 2018

www.heintzmanadr.com

www.constructionlawcanada.com