<center><span class="news-text_italic-underline">Judgment Date: 19 March 2025</span></center>
In <span class="news-text_italic-underline">ABC v DEF [2025] EWHC 711 (Comm)</span>, the London Circuit Commercial Court considered an application under Section 72 of the <span class="news-text_italic-underline">Arbitration Act 1996</span> (“<span class="news-text_medium">AA 1996</span>”). The defendant had sought to rely on these arbitration agreements in ongoing LCIA arbitrations. The claimant sought declarations that no valid arbitration agreement existed between it and the defendant and that it could not be compelled to participate in the arbitrations. This case examines the application of Section 72 of the AA 1996, a provision that allows a party to seek judicial relief regarding the existence of an arbitration agreement when not participating in the proceedings.
Section 72 of the AA 1996 provides a mechanism for parties who have not participated in arbitration proceedings to challenge the tribunal's jurisdiction or the validity of an arbitration agreement. Under Section 72(1), a party may request the court to make a declaration, grant an injunction or provide other appropriate relief regarding the tribunal's jurisdiction. This provision is particularly relevant in cases where a party disputes the existence or scope of an arbitration agreement but has not yet participated in the arbitration.
The dispute arose from two contracts made between the defendant and two subsidiaries of the claimant: UK Ltd and Malaysia SDN.BHD. Each contract contained an arbitration agreement, governed by English law, which required disputes to be resolved through LCIA arbitration in London. The claimant was not a party to these contracts or their arbitration agreements.
The defendant claimed that there had been inadequate performance under these contracts and initiated two separate requests for arbitration (“<span class="news-text_medium">RFAs</span>”), one against UK Ltd and the claimant and the other against Malaysia SDN.BHD and the claimant. The defendant argued that the claimant was implicitly bound by the arbitration agreements based on its direct dealings with the defendant and its shared responsibilities with its subsidiaries.
In response, the claimant argued that it was not a party to the contracts or their arbitration agreements and applied to the court for declarations under Section 72 of the AA 1996. The claimant sought declarations that no valid arbitration agreement existed between it and the defendant and that it could not be compelled to participate in the arbitration.
The primary legal issue before the court was whether the claimant could be bound by the arbitration agreements made by its subsidiaries and whether the defendant could rely on these agreements in the context of the ongoing arbitrations. The defendant’s reformulated argument suggested that an implied contract had been created between the claimant and the defendant due to the claimant's performance or part-performance of the contracts. This implied agreement, according to the defendant, would include the same arbitration clauses as the original contracts.
HHJ Pelling KC granted the claimant’s application for declarations under Section 72 of the AA 1996, ruling that no valid arbitration agreement existed between the claimant and the defendant. The judge clarified that the claimant was not liable to be a party to the arbitration proceedings initiated by the defendant concerning alleged breaches of the contracts.
The court held that the relief under Section 72 applied to the arbitration proceedings initiated through the RFAs, where the claimant had not been a party to the arbitration agreements. The judge noted that the RFAs, which had been the basis of the arbitration proceedings, relied on arbitration agreements to which the claimant was not a party and as such, the claimant could not be compelled to participate.
In addition, the judge ruled that, should the defendant wish to pursue claims based on the implied agreement between the claimant and the defendant, it would need to initiate new or amended arbitration proceedings. The judge expressed doubt as to whether the current LCIA arbitrations could accommodate such claims, given that the RFAs did not reference an implied agreement between the parties.
The judge rejected the defendant's argument that the jurisdictional issue should be left to the arbitral tribunal under Section 30 of the AA 1996. While acknowledging the court's usual reluctance to interfere in arbitration matters, the judge found that the defendant had abandoned its original jurisdictional argument and was instead attempting to rely on a new implied agreement that had not been part of the original arbitration proceedings. The judge emphasised that Section 72 of the AA 1996 provided the claimant with the right to challenge the existence of an arbitration agreement, even if it had not participated in the arbitral reference.
The court refused the defendant’s application for permission to appeal, stating that there was no realistic prospect of success. The judge highlighted that the case had become straightforward after the defendant's shift in argument.
This case is significant for its focus on the scope of Section 72 of the AA 1996, particularly in determining whether a party can be bound by arbitration agreements involving its subsidiaries. The court's approach in limiting the jurisdictional challenge to the arbitration proceedings initiated under the RFAs reflects a consistent effort to ring-fence the court's jurisdiction under Section 72. This decision also underscores the importance of formulating clear jurisdictional arguments early in arbitration proceedings, as the defendant’s failure to adequately address the issue in the RFAs led to a straightforward ruling in favour of the claimant.
<span class="news-text_medium">Case:</span> <span class="news-text_italic-underline">ABC v DEF [2025] EWHC 711 (Comm)</span> (19 March 2025) (HHJ Pelling KC sitting as a judge of the High Court).
