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Conflicting Dispute Resolution Provisions: The Arbitration Clause Prevails

  • United Kingdom
  • International arbitration
  • Litigation and dispute management

26-11-2021

In two recent cases, the English High Court confirmed that where a contract contains an arbitration clause alongside a conflicting exclusive jurisdiction clause, English Courts will seek to determine the intention of the parties at the time the contract was entered into. In both cases, the English High Court concluded that the arbitration clause was to be construed as the primary dispute resolution mechanism, rejecting arguments that the exclusive jurisdiction clause in favour of the English Court displaced the parties’ choice of arbitration.

Introduction

Following the recent changes Brexit brought to the UK legal landscape, there has been some uncertainty as to how the English Courts would interpret rules pertaining to jurisdiction in cross-border disputes in a post-Brexit world. However, in a positive development for international arbitration, the first half of 2021 saw the English High Court (the ‘Court’) address this uncertainty in two jurisdiction-related judgments handed down in swift succession: Helice Leasing S.A.S v PT Garuda Indonesia (Persero) TbK in January 2021, and Melford Capital Partners (Holdings) LLP and others v Digby in April 2021.1

These cases, each involving two conflicting jurisdiction clauses contained within the contract in dispute, shed light on the English High Court’s approach to the construction of such clauses. The Court has adopted the position that an arbitration clause was generally to be construed as the principal dispute resolution mechanism, prevailing over a conflicting clause in the same contract that provides for the Court’s exclusive jurisdiction. The Court also emphasised the importance of using careful and unambiguous wording when drafting an agreement to avoid the litigation risks that may arise from the use of template precedents or the insertion of conflicting clauses in a contract.

The Helice Leasing decision

On 20 January 2021, the English High Court ruled in Helice Leasing S.A.S v PT Garuda Indonesia (Persero) TbK that court proceedings should be stayed under Section 9 of the English Arbitration Act 1996 in favour of arbitration proceedings, pursuant to an arbitration clause contained in an aircraft lease agreement. In doing so, it rejected the argument of Helice Leasing S.A.S (‘Helice’, the lessor) that the lease, which contained both an arbitration clause and a seemingly conflicting jurisdiction clause, should be interpreted as offering a unilateral option for the lessor (and only the lessor) to litigate either by way of court proceedings or arbitration.

Helice commenced proceedings against PT Garuda Indonesia (Persero) TbK (‘Garuda’, the lessee) in the English High Court, alleging an event of default under the lease for non-payment of rent. Helice sought from Garuda some US$ 15 million in rent arrears plus interest, together with an indemnity. Garuda had impliedly acknowledged its debt in correspondence and had not advanced any specific defence to Helice’s claims, nor disputed the quantum of the claims. Garuda applied for a stay of the proceedings pursuant to Section 9 of the Arbitration Act 1996, on the basis that the parties had agreed in the lease that any dispute had to be resolved by way of arbitration.

Originally posted in ICC Arbitration Bulletin Issue 3 – available at: https://2go.iccwbo.org/icc-dispute-resolution-bulletin-2021-issue-3.html

 


The decisions were handed by the Commercial Court of the
Queen’s Bench Division (in Helice Leasing S.A.S v PT Garuda
Indonesia [2021] EWHC 99 (Comm)) and the Chancery
Division of the Business and Property Courts (in Melford
Capital Partners (Holdings) LLP and others v Digby [2021]
EWHC 872 (Ch)), which are both subdivisions of the English
High Court. For consistency, throughout this article, we will
refer to these subdivisions as the ‘English High Court’ or
the ‘Court’.

[1] The decisions were handed by the Commercial Court of the Queen’s Bench Division (in Helice Leasing S.A.S v PT Garuda Indonesia [2021] EWHC 99 (Comm)) and the Chancery Division of the Business and Property Courts (in Melford Capital Partners (Holdings) LLP and others v Digby [2021] EWHC 872 (Ch)), which are both subdivisions of the English High Court. For consistency, throughout this article, we will refer to these subdivisions as the ‘English High Court’ or the ‘Court’.


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