English Arbitration Clause in foreign contract is upheld

The Supreme Court recently ruled that the English Courts have jurisdiction to restrain foreign proceedings which are brought in violation of a clause in a contract which provided for arbitration in England under English law – even where neither of the parties to the contract had started, or intended starting, arbitration proceedings.  

In this case, the defendant was the owner and the claimant was the operator of hydroelectric facilities in Kazakhstan. They were both parties to a 25-year concession agreement which had been entered into by the previous owners of the facility. The agreement was governed by Kazakh law but contained an arbitration clause providing for arbitration in London under English law. 

In 2004 the Republic of Kazakhstan, as the previous owner and grantor of the concession, obtained a ruling from the Kazakh Supreme Court that the arbitration clause was invalid. The defendant, as the current owner, subsequently brought proceedings against the claimant in a court in Kazakhstan and that court accepted jurisdiction. The claimant then issued proceedings in England seeking the declaration and anti-suit injunction. 

The Court ruled that an agreement to arbitrate disputes had positive and negative aspects. The agreement was that any arbitration would be undertaken in England and under English law. The unsaid, but nevertheless valid implication, of this is that neither party could seek arbitration in any other Country or Court.

Rob Stubbs, head of the Dispute Resolution department at Banner Jones Solicitors, comments “Whilst English company law can be complex, dealing with disputes in foreign jurisdictions can be a minefield.  Our expertise is there to help you navigated this”. 

If you would like assistance in a company commercial matter, call Rob Stubbs at Banner Jones Solicitors on 01246 560560 or info@bannerjones.co.uk for further information.