Foreign Law and Uniformity in English Arbitration :

Fiona Trust v. Privalov

John Townsend
I. INTRODUCTION

In 2007, the House of Lords, the highest appellate court in the United
Kingdom, used precedents from foreign law to decide an important appeal on
the construction and separability of an arbitration clause governed by English
law. Fiona Trust and Holding Corpn and others v. Privalov and others or
Premium Nafta Products Limited and others v. Fili Shipping Company Limited
and others as it reached the House of Lords was a dispute about bribery.1
The case raised two important questions of law: first, whether the word
under in the arbitration clause 2 was wide enough to encompass the dispute

Barrister, Lincolns Inn; LL.M. (London School of Economics); LL.B. (City University,
London); B.A. (University of Oxford) (UK). This article is up to date as of 7 August 2009. The views
expressed in this article are those of the author alone. Responsibility for any error lies solely with
the author. I am grateful to Professor Gus van Harten of Osgoode Hall Law School, Toronto, for
his kind comments on an earlier draft of this article. Thanks are also due to Professor Alejandro
Garro for his general encouragement.
Email: <john.w.j.townsend@university-college.oxon.org>.
1
The High Court proceedings on the merits: Fiona Trust v. Privalov [2006] EWHC 2583,
[2007] 1 All ER (Comm) 891. Both appellate decisions are authoritatively reported in the Business
Law Reports [Bus LR]. On appeal to the Court of Appeal: Fiona Trust v. Privalov [2007] EWCA Civ
20, [2007] Bus LR 686. On further appeal to the House of Lords [from 1 September 2009, the UK
Supreme Court]: Premium Nafta Products Limited and others v. Fili Shipping Company Limited
and others [2007] UKHL 40, [2007] Bus LR 1719. See also the related procedural litigation: Nikitin
& Ors v. Richards Butler LLP & Ors [2007] EWHC 173 (QB) (Langley J; unsuccessful application by
Mr Nikitin and others for Norwich Pharmacal order [order for disclosure of evidence against
facilitators of torts] against Fiona Trust and others); Fiona Trust v. Privalov [2006] EWHC 758
(Comm) (Mackie J; unsuccessful application by Mr Nikitin and others to increase Fiona Trusts
security for costs); Fiona Trust v. Privalov [2007] EWHC 39 (Comm) (Steel J; unsuccessful
application by Fiona Trust and others for disclosure of privileged material); Fiona Trust v. Privalov
[2007] EWHC 1217 (Comm) (Steel J; successful application by Fiona Trust to freeze Nikitin and
other assets). The merits litigation as a whole will be referred to in this article as Fiona Trust, with
attention drawn to the different judgments by footnotes when they are discussed.
2
The relevant clause is reported in full at [5] of the Court of Appeal decision, [2007] Bus
LR 686, 692-693. It is reproduced from [5] in an Appendix to this article.

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as to the bribery which allegedly procured the principal or matrix contract;

second, the separability of the arbitration clause from the matrix contract
allegedly procured by bribery. The question of bribery in international
arbitration was a matter Judge Gunnar Lagergren famously encountered in ICC
arbitration No. 1110.3 Although the judgments in the House of Lords did not
discuss that famous case, nor the important policy issues surrounding bribery
in international commerce, the decision in Fiona Trust is notable for its use of
foreign legal precedents.
T.D. Grant has fully discussed the bribery aspect of the Court of Appeals
decision in Fiona Trust in an interesting paper published in the International
and Comparative Law Quarterly.4 The more limited aim of this article is to
present a doctrinal commentary and analysis on the key passages of the
appellate judgments in Fiona Trust for the benefit of an international
audience. The case is of interest because it raised the general policy of the
English Courts towards cases arising in an international commercial
context. 5 This article will suggest that Fiona Trust can be understood in
terms of a desire by the House of Lords to achieve uniformity in the practice
of arbitration under English law with other leading jurisdictions. Foreign legal
precedents were used by the House to justify an approach to the construction
of English arbitration clauses and the interpretation of the English Arbitration
Act that was consistent with other jurisdictions and thus arguably uniform.6 In
parts one and two of the article, the judgments of the Courts in Fiona Trust
will be analysed. The desire of the Law Lords to interpret the English
Arbitration Act 1996 (which is grounded upon the Convention on the
Recognition and Enforcement of Foreign Arbitral Awards (New York
Convention of 1958) and the UNCITRAL Model Law on International
Commercial Arbitration of 1985 (UNCITRAL Model Law of 1985)) in line with
other leading arbitral jurisdictions will be discussed in part three. In part four,
the article will consider other recent developments in which the English
Arbitration Act 1996 has interacted with the due process guarantees in
3
See A. REDFERN / M. HUNTER, Law and Practice of International Commercial
Arbitration, 4th ed., Sweet & Maxwell, London (2004), 3.20-3.22.
4
T.D. GRANT, International Arbitration and the English Courts, 56 International and
Comparative Law Quarterly (2007), 871.
5
Per Longmore LJ, [2007] EWCA Civ 20 at [17], [2007] Bus LR 686, 695.
6
The word foreign is not a term of art: the word foreign as used by this book
normally means simply not English. It does not mean foreign in the political sense. Lawrence
Collins et al (eds.), Dicey, Morris & Collins on the Conflict of Laws, 14th ed., Sweet & Maxwell,
London (2006), Vol. 1 at para. 1-070.

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Construction and Separability of English Arbitration Clauses

Article 6 of the European Convention on Human Rights, where an awareness

of foreign law has also been evident. Finally, conclusions will be drawn in
part five of the general significance of the case.
II. THE MERITS DISPUTE IN FIONA TRUST

The merits dispute in Fiona Trust turned upon allegations of bribery. Eight
companies within the Sovcomflot group had entered into charterparties as
owners with three chartering companies. The Sovcomflot group, of which
Fiona Trust itself is a subsidiary, is owned by the Russian State and is one of
the largest commercial shipping groups in the world. Each of the
charterparties contained a law and litigation clause providing for any
dispute arising under this charter to be decided in England and conferred on
either party a right to elect for any dispute to be referred to arbitration. A
dispute arose regarding a Mr Nikitin, a Mr Privalov and other Russian
individuals who were resident in England. These individuals were alleged to
have, inter alia, bribed directors and employees of Fiona Trust in order to
procure lucrative contracts and uncommercial transactions for their own
benefit. The owners purported to rescind the charters on that basis. In June
2005, the owners commenced claims against the charterers to recover a sum
of over $US 500 million for the torts of conspiracy, bribery and breach of
fiduciary duty.7 In response, the charterers elected to enforce their rights
under the charters and commenced arbitration against the owners under the
Terms of the London Maritime Arbitrators Association.8 The owners applied to
the Court for an injunction to restrain the arbitration and a declaration that the
arbitration agreement was invalid.9 Against that application, the charterers
sought a stay of the rescission claims to allow the arbitration to run its
course.10
7
8
9

[2007] EWHC 173, per Langley J at [5].

See <http://www.lmaa.org.uk/terms/lmaaterms2006.pdf>.
Pursuant to s. 72 Arbitration Act 1996. Morison J referred to the injunction in [2006]
EWHC 2583 at [48], [2007] 1 All ER (Comm) 81, 102 as an anti-arbitration injunction. Although
illustrative, this phrase is not a term of art.
10 Pursuant to s. 9 of the Arbitration Act 1996. The interrelationship between Sections 9
and 72 of the English Arbitration Act was another important aspect of the Court of Appeal
decision. Longmore LJ held that these Sections were mirror images of one another. At [2007]
EWCA Civ 20 at [40], [2007] Bus LR 695, 703 Longmore LJ held that Section 72 does not trump
Section 9, and that it is consistent with the UKs obligations under the New York Convention to
consider the application for a stay under s. 9 first, rather than the s.72 application. For more on
this, see GRANT, supra note 3, 874-876.

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The facts of the alleged bribery were complex, and were recognised to be
only a part of a wider dispute between the parties.11 At first instance,
Morison J summed up the allegations of the owners as follows:
It is alleged that this corrupt activity spanned a period from 2001-2005
and involved diversion of commissions from Fiona to Nikitin companies
to the tune of about $US 32m; a deception whereby Fiona was tricked
into paying an additional $US 3.4m in relation to a debt owed to RCB, a
Russian bank; uncommercial sale and leaseback arrangements with
Nikitin companies and others involving eight vessels and a claim for
compensation for $US 14.03m in respect of the entry into the sale and
leaseback transactions and for $US 71,672,596 in respect of the
termination of the sale and leaseback transactions; the exercise by Nikitin
companies and others of a series of shipbuilding options and the
acquisition of shares in Fiona companies holding the benefit of
shipbuilding contracts, all of which were said to have been obtained at
no or no proper consideration, leading to a claim of $US 172m; and the
surrender of rights owned by Fiona companies to Nikitin companies at a
substantial undervalue ($US 64-77m). In pursuit of the conspiracy it is
alleged that documents were forged, in the sense that they were
backdated and purported to be made when they were not, in relation
both to a release of security acquired by Fiona for no consideration and
to a service contract with Mr Privalov.12
The evidence indicated that there was an arguable case as to the owners
allegations of bribery.13
At the first instance merits hearing before Mr Justice Morison, the owners
were granted an injunction to restrain the arbitration and the Court declined to
order a stay of the bribery claims.14 But on appeal to the Court of Appeal this
decision was reversed.15 Lord Justice Longmore, giving the judgment of the
court, decided to make a radical fresh start in the construction of English
arbitration clauses.16 Cutting through many decades of precedent, Longmore
LJ held that the clause was wide enough to cover any dispute between the
11
12
13
14
15
16

558

Per Longmore LJ at [3], [2007] EWCA Civ 20, [2007] Bus LR 686, 691.
[2006] EWHC 2583 at [34], [2007] 1 All ER (Comm) 81, 84-5.
Per Lord Hoffmann at [1], [2007] Bus LR 1719, 1721.
[2006] EWHC 2583; [2007] 1 All ER (Comm) 81.
[2007] EWCA Civ 20; [2007] Bus LR 686.
Per Longmore LJ, [2007] EWCA Civ 20 at [17]; [2007] Bus LR 686, 695.

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parties; that, in spite of the alleged bribery, the arbitration clause remained
separable and therefore valid; and that a stay of the rescission claims should
be granted, consistent with the United Kingdoms obligations under the New
York Convention.17 Giving leading judgments in the House of Lords, Lord
Hoffmann and Lord Hope upheld the judgment of Longmore LJ.18 The owners
were unable to rescind the contracts on grounds of bribery, and the arbitrators
appointed by the charterers were recognised to be a one-stop tribunal with
competence to adjudicate on the merits of the entire dispute.19 Unless an
arbitration clause stated expressly that certain questions were intended to be
excluded from the arbitrators jurisdiction, it was to be presumed that the
parties intended that any dispute arising out of their dealings was to be
decided by the arbitrator rather than a court.20 Significantly, the Law Lords
made broad-minded use of authority from Germany, Australia and the United
States to hold that the arbitration clause was indeed separable from the
contract allegedly procured by bribery and that the arbitrators had jurisdiction
to decide the dispute as to the bribery.21
III. POINTS OF LAW RAISED BY THE DISPUTE

The effect of the bribery on the separability of arbitration clauses, and of the
jurisdiction it conferred on the arbitrators if separable, were the points of law
which justified the prolonged process of appeal from the first instance merits
decision before Morison J to the Court of Appeal, and then upwards to the
House of Lords. In English law, such an appeal is to be distinguished from
judicial review because it does not question whether or not the first instance
17 New York Convention 1958, Art II. 3: The court of a Contracting State, when seized of
an action in a matter in respect of which the parties have made an agreement within the meaning
of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it
finds that the said agreement is null and void, inoperative or incapable of being performed.
Longmore LJ stated that Section 9 of the English Arbitration Act 1996, is the statutory enactment of
the relevant article of the New York Convention, to which the United Kingdom is a party. [2007]
EWCA Civ 20 at [37], [40]; [2007] Bus LR 686, 702, 703.
18 Per Lord Hoffmann at [21], [2007] Bus LR 1719, 1726; Lord Hope at [34], [2007] Bus LR
1719, 1730.
19 Per Longmore LJ at [19], [2007] Bus LR 686, 696.
20 Per Lord Hoffmann at [12], [2007] Bus LR 1719, 1724.
21 Per Lord Hoffmann at [14], [2007] Bus LR 1719, 1725: Bundesgerichtshofs Decision of
27 February 1970; per Lord Hope at [31] [2007] Bus LR 1719, 1729: A&T Technologies Inc. v.
Communications Workers of America 475 U.S. 643 (1986); Comandate Marine Crop v. Pan
Australia Shipping Pty ltd [2006] FCAFC 192; and at [32]: Prima Paint Corp. v. Flood and Concklin
Manufacturing Co. (388 U.S. 395, 1967).

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judgment was lawful. Judicial review is the control of administrative action by

public bodies (including lower Courts). The appeal in Fiona Trust was
concerned only with the points of law. As a matter of practice, a petition for
leave to appeal to the House of Lords is only to be granted if the petition
raises an, arguable point of law of general public importance. 22 The very
fact that Fiona Trust reached the House of Lords is, therefore, indicative of the
importance of the points of law raised by the dispute.
1.

Construction of the arbitration clause under or out of?

The facts of the Fiona Trust dispute provided an opportunity for the collision
of two rival streams of English precedent on the construction of arbitration
clauses.23 The authorities cited to the court can perhaps be divided into those
cases which were decided before the enactment of the Arbitration Act 1996,
and those which were decided in anticipation of or after the 1996 Act. The
pre-1996 approach illustrates the traditional approach of English Courts to the
construction of arbitration agreements. Relying heavily on leading cases that
were decided before 1996, Morison J approached the construction of the
arbitration clause with a view to making a fine distinction between disputes
arising under and out of the charterparty of which the arbitration clause
was a part.
On the traditional view, an agreement that disputes arising out of a
contract were to be referred to arbitration was regarded as a wider agreement
than those contractual disputes which merely arose under a contract.24
Morison J quoted grammatical approach of Nourse LJ in Fillite Runcorn Ltd v.
Aqua Lift with approval:
The preposition under presupposes that the noun which it governs
already has some existence. It operates in time as well as in space. I think
that it means as a result of and with reference tothe material words
are not wide enough to include disputes which do not concern
obligations created by or incorporated in the contract.25
22 Procedure Direction [1988] 2 All ER 831. The same test will be used by the new UK
Supreme Court.
23 The word construction refers to the process by which a court determines the meaning
and legal effect of a contract. Chitty on Contracts, 29th ed., Sweet & Maxwell, London (2004),
Vol. 1 at para 12-041.
24 See REDFERN / HUNTER, supra note 2, at para. 3.39. Per Longmore LJ, [2007] Bus LR 695,
692 at [9].
25 (1989) 26 Con LR 66, 79; [2006] EWHC 2583 at [14], [2007] 1 All ER (Comm) 81, 87.

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Construction and Separability of English Arbitration Clauses

This literalism was once typical of the English approach. But a new
approach has since been pioneered by the High Court in the 1995 case of The
Angelic Grace. In that case, an arbitration clause which regarded disputes
arising out of the contract was held by Mr Justice Rix (as he then was) to be
wide enough to cover the collision claims which arose.26 In upholding The
Angelic Grace on appeal, Lord Justice Leggatt relied on the dictum of the then
Mr Justice Mustill in The Playa Larga that a tortious claim arose out of a
contract containing an arbitration clause, provided that there was a sufficiently
close connection between the tortious and contractual claims.27 Such
authority provided the foundation for the alternate stream of precedent.
Morison Js reliance upon the Fillite case led him to conclude in Fiona
Trust that the material issue for him to decide was whether the word under
in the arbitration clause included, disputes between the parties as to whether
the charterparty is void by reason of the alleged bribes which are said to have
induced the making of the contract. 28 Morison J found as a fact that, there
is direct evidence that Mr Nikitin paid bribes to Sovcomflot officials with
whom he did business. 29 Therefore, the owners had never truly agreed to
enter into the contracts or, if severable, the arbitration agreements. 30 For this
reason, Morison J held as a matter of construction of the arbitration clause that
the word under was not wide enough to arbitrate the bribery claims brought
by the charterers.
This issue of construction, reliant on pre-1996 precedents, also went to
the jurisdiction of the arbitrators. On this issue, Morison J formulated this
deeply flawed dictum:
Although the modern trend is to treat the arbitrators as having power to
decide for themselves their own jurisdiction (Kompetenz-Kompetenz)
English Law gives the Courts the ultimate right to determine such
issues.31

26 [1995] 1 Lloyds LR, 87; ibid. at [16], 87-88.

27 [1983] 2 Lloyds LR 171; [2006] EWHC 2583 at [18], [2007] 1 All ER (Comm) 81, 88.
28 Per Morison J, [2006] EWHC 2583 at [21], [2007] 1 All ER (Comm) 81, 89.
29 Per Morison J, [2006] EWHC 2583 at [50], [2007] 1 All ER (Comm) 81, 102.
30 Per Morison J, [2006] EWHC 2583 at [34], [2007] 1 All ER (Comm) 81, 95.
31 [2006] EWHC 2583 at [26], [2007] 1 All ER (Comm) 81, 90. The words in square
brackets are not an authorial clarification: the judge referred to the German doctrine of
Kompetenz-Kompetenz as quoted.

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John Townsend

This proposition was disapproved of in the strongest possible terms by

Longmore LJ and Lord Hoffmann. Lord Justice Longmores disapproval of that
proposition is worth considering in full:
Not all these authorities are readily reconcilable but they are well known
in this field and some or all are invariably cited by counsel in cases such
as this. Hearings and judgments get longer as new authorities have to be
considered. For our part we consider that the time has now come for a
line of some sort to be drawn and a fresh start made at any rate for cases
arising in an international commercial context. Ordinary businessmen
would be surprised at the nice distinctions drawn in the cases and the
time taken up by argument in debating whether a particular case falls
within one set of words or another very similar set of words.32
It was this fresh start which was applauded by Lord Hoffmann on
further appeal to the House of Lords.33
Reflecting on the older pre-1996 authorities on disputes arising under
and out of the contract, Lord Hoffmann concluded that, the distinctions
which they make reflect no credit upon English commercial law. 34 He went
on to hold that the meaning as to whether the dispute arises under or out
of the relevant contract was, mutually interchangeable. In Lord Hopes
words, such debates were fussy distinctions. 35 The construction applied by
the court to an arbitration clause should be liberal. Lord Hoffmann held that
the presumption of construction is now that businessmen are to have intended
to refer any dispute to the same tribunal, unless the language is clear, that
certain questions were intended to be excluded from the arbitrators
jurisdiction. 36 Accordingly, it was to be presumed that the parties were to
have intended that any dispute arising out of their dealings was to be decided
by the arbitrator rather than a court.
This is perhaps a trite proposition of international commercial law, but
what is striking is that it was unanimously justified in the House of Lords by
reference to foreign precedents as to the autonomy and separability of the

32
33
34
35

Per Longmore LJ, [2007] EWCA Civ 20 at [17]; [2007] Bus LR 686, 695.
Per Lord Hoffmann at [12], [2007] Bus LR 1719, 1724.
Ibid.
Ibid., mutually interchangeable at [12], 1724, per Lord Hope, fussy distinctions, at

[27], 1728.
36 Per Lord Hoffmann at [12], [2007] Bus LR 1719, 1724.

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agreement to arbitrate. In his judgment, Lord Hoffmann cited the Bundesgerichtshofs Decision of 27 February 1970:
There is every reason to presume that reasonable parties will wish to
have the relationships created by their contract and the claims arising
therefrom, irrespective of whether their contract is effective or not,
decided by the same tribunal and not by two different tribunals.37
As this presumption was applicable to the dispute, Lord Hoffmann
accordingly held that the arbitration clause was wide enough to confer
jurisdiction. Lord Hope noted further that the Federal Court of Australia in the
Pan Australia case had regard to the sensible commercial presumption that
the parties did not intend two hearings for their dispute, particularly when
operating in a truly international market. 38 Both judges also had regard to
the judgment of the United States Supreme Court in Prima Paint, which is
considered in this article below on the issue of separability.39
From an international perspective, the confusion of the streams of
precedent in the English authorities on the construction of disputes arising
under or out of an arbitration clause could seem startling. It is said to be
one of the virtues of the common law that the doctrine of stare decisis to
stand by decided matters ensures consistency in the application of
principle. How can the errors in the first instance judgment be understood? It
may be the case that Morison J paid more attention to precedent than
principle in the construction of the arbitration clause. Perhaps the best that
can be said of the first instance decision is that it was a triumph of advocacy
for the owners lawyers.40 It may also be the case that the abundance of
English precedents on the distinction between under and out of confused
the first instance judge in Fiona Trust, because he wrongly ascribed precedential value to decisions which were of no relevance to the interpretation of
the 1996 Act. What is now clear, however, following the House of Lords
decision, is that there the confusion on this issue has been resolved, by the
notable consideration and application of foreign legal precedents.

37 Per Lord Hoffmann at [14], [2007] Bus LR 1719, 1725; (1990) Arbitration International,
Vol. 6, No.1, p. 79; BGH 1970, JZ 1970, 730-733.
38 Per Lord Hope at [31], [2007] Bus LR 1719, 1729: Comandate Marine Crop v. Pan
Australia Shipping Pty Ltd [2006] FCAFC 192
39 Prima Paint Corp. v. Flood and Concklin Manufacturing Co. (388 U.S. 395, 1967)
40 Julian Flaux QC, Philip Jones QC, Justin Higgo and Jennifer Haywood.

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2.

Separability and the claim for rescission

On this issue, the owners contended that the bribery allegations had
implications as to whether their consent to the arbitration clause in the
charterparty was validly given and that the arbitration agreement, although
formally separate, could also be rescinded. As Lord Hope pointed out in the
House of Lords, this argument, was essentially one of causation. 41 But for
the bribes, the owners claimed that they would never have entered into the
charters at all. At first instance, Mr Justice Morison commented that his
understanding of the dispute that it was, akin to a case of non est factum and
mistake which goes to the root of the contract it is not simply the fact that
the matrix contract has been rescinded: it is the basis on which that has been
done. 42 The owners relied on the judgment of Mr Justice Millett (later Lord
Millett) in Logicrose Ltd v. Southend United Football Club Ltd, in which it was
held that a transaction induced by bribery could be rescinded by the innocent
party.43 Principally on this authority, Morison J held that no arbitration could
be commenced under the arbitration agreement if the principal or matrix
contract was found to have been procured by bribery. The owners consent
could not have been validly given to the matrix contract, of which the
arbitration clause was merely a part. The branch fell with the tree.
Before the Court of Appeal, the owners clearly aware of the
vulnerability of their position sought to push the Logicrose precedent further
by submitting that in fact the contract procured by bribery never existed at all,
because the owners employees had no authority as a matter of agency law to
accept the bribes. Whilst accepting the correctness of this submission as a
matter of English agency law, Longmore LJ expressly rejected Morison Js
reliance on the Logicrose case in the context of an arbitration agreement. The
established proposition of agency law, is no argument for saying that a
separable arbitration clause cannot be invoked for the purpose of resolving the
issue whether bribery occurred. 44 Morison Js reasoning that the owners
validly rescinded an arbitration agreement on grounds of bribery was
overruled by the Court of Appeal. To the contrary, Longmore LJ held that, if
arbitrators can decide whether a contract is void for initial illegality, there is
no reason why they should not decide whether a contract has been procured
41
42
43
44

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Per Lord Hoffmann at [23], [2007] Bus LR 1719, 1726.

[2006] EWHC 2583 at [34], [2007] 1 All ER (Comm) 81, 96.
[1988] 1 WLR 1256. Eventually appointed to the House of Lords as Lord Millett.
[2007] EWCA Civ 20 at [26]; [2007] Bus LR 686, 699.

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by bribery 45 Bribery was thus a lesser evil than illegality, but even so did
not impeach the arbitration clause itself.
The owners appealed that point as well, and contended before the House
of Lords that the contract could be rescinded, as a matter of law, on grounds
of bribery. Rejecting this contention, Lord Hoffmann held that this had been
put beyond doubt by the principle of separability in Section 7 of the
Arbitration Act 1996.46 Section 7 of the Arbitration Act 1996 provides the
English articulation of the separability principle:
Unless otherwise agreed by the parties, an arbitration agreement which
forms or was intended to form part of another agreement (whether or not
in writing) shall not be regarded as invalid, non-existent or ineffective
because that other agreement is invalid, or did not come into existence or
has become ineffective, and it shall for that purpose be treated as a
distinct agreement.47
Accordingly, the arbitration agreement could only be invalidated on
grounds which related to it directly.
The separability doctrine is no stranger to English arbitration. It is, in the
words of Lord Steyn after his appointment to the House of Lords, part of the
very alphabet of arbitration law that an arbitration clause forms a separate
and distinct agreement from the principal agreement of which it is a part.48
Once again reaffirming these sentiments, Lord Hoffmann held in Fiona Trust
that:
if (as in this case) the allegation is that the agent exceeded his authority
by entering into a main agreement in terms which were not authorized or
for improper reasons, that is not necessarily an attack on the arbitration
agreement. It would have to be shown that whatever the terms of the main
agreement or the reasons for which the agent concluded it, he would have
had no authority to enter into an arbitration agreement.49
45 [2007] EWCA Civ 20 at [29]; [2007] Bus LR 686, 700.
46 Per Lord Hoffmann at [9], [2007] Bus LR 1719, 1723.
47 Per Lord Hope, [31] [32], [2007] Bus LR 1719, 1729.
48 Lesotho Highlands Development Authority v. Impregilo SpA [2005] UKHL 43, [2006] 1
AC 221, at [21], per Lord Steyn. Also seen in Heyman v. Darwins Ltd [1942] AC 356, Bremer
Vulkan Shiffbau v. South India Shipping Corp [1981] AC 909; Paul Smith Ltd v. H&S International
Holdings Inc [1991] 2 Lloyds Rep. 127; Harbour Assurance Co (UK) v. Kansa General Insurance
Co Ltd [1993] QB 701. Quoted in Dicey, Morris & Collins, supra note 5 at para. 16-011.
49 Per Lord Hoffmann at [18]-[19], [2007] Bus LR 1719, 1725-1726.

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Lord Hoffmann thus reiterated the approach of the English Courts to

separability. The principal contract and the arbitration agreement were held to
have been separately concluded, and the arbitration agreement could only be
invalidated on grounds which related to it directly.
The foreign precedents considered by the English Courts were also
regarded as authority for the separability of the arbitration agreement, and the
ability of the arbitrators to determine their own jurisdiction.50 In the Court of
Appeal proceedings in Fiona Trust, Lord Justice Longmore made reference to
the well-known dicta 51 of Fortas J in the U.S. Supreme Court case, Prima
Paint v. Flood & Conklin Manufacturing Co. To be sure, Fiona Trust was not
the first English case to have regard to the authority of Prima Paint. In Harbour
Assurance v. Kansa Insurance, Leggatt LJ approved the approach of Mr Justice
Steyn (as he then was) as to the separability of the arbitration even where the
matrix contract was void ab initio for illegality. Only if (in the words of Steyn J
in Harbour Assurance) the arbitration clause itself were directly impeached
by the wrongdoing complained of could it be defeated.52 Although Harbour
Assurance has been superseded by Section 7 of the Arbitration Act 1996, Lord
Hope reaffirmed in precisely the same terms as Steyn J that the doctrine of
separability requires direct impeachment of the arbitration agreement before it
can be set aside. 53 Here, a more traditional use of English precedent was
evident, although Lord Hope made it clear that he regarded Section 7 of the
English Act as, to the same effect as Section 4 of the United States
Arbitration Act 1925, being the subject of the decision in Prima Paint.54

50 The doctrine of Kompetenz-Kompetenz, although it was not referred to in these terms

by the judges in the House of Lords.
51 Also considered by the tribunal in Elf Aquitaine v. Nat. Iranian Oil Co. (1994)
International Law Reports (eds Lauterpaucht and Greenwood) Vol. 96 (3), 273-274 at para [33]:
Prima Paint Corp. v. Flood and Concklin Manufacturing Co. (388 U.S. 395, 1967) a party to an
agreement containing an arbitration clause, maintaining that the agreement was induced by fraud,
sought to enjoin the other party from proceeding with arbitration. The U.S. Supreme Court held as
summarized in the syllabus of the case, Since the claim of fraud here relates to inducement of the
consulting agreement generally rather than in the arbitration clause and there is no evidence that
the parties intended to withhold this issue from arbitration, there is no basis for granting a stay...
52 Per Longmore LJ, [2007] EWCA Civ 20; [2007] Bus LR 686, 698; Per Leggatt LJ in
Harbour Assurance Co (UK) Ltd v. Kansa General International Insurance Co Ltd [1993] QB 701 at
717E; Prima Paint Corp. v. Flood & Conklin Manufacturing Co (1967) 388 US 395.
53 Per Lord Hope at [35], [2007] Bus LR 1719, 1729.
54 Ibid.

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Construction and Separability of English Arbitration Clauses

3.

Conclusion: The normative value of certainty and predictability in

arbitration

The use of foreign precedents by the House of Lords in Fiona Trust raises
important normative questions as to the appropriate precedential value to be
attributed to the reasoning of prior decisions of foreign Courts and
international awards in the law and practice of arbitration.55 There was no
formal precedential weight to any of the foreign judgments which the House
of Lords used to uphold the fresh start heralded by the Court of Appeal for
the construction of English arbitration clauses. But the foreign decisions were
nonetheless of significant persuasive value. Lord Hope himself recognised in
Fiona Trust that the trend of recent authority has risked isolating the approach
that English law takes to the wording of such clauses from that which is taken
internationally. 56 It could be fairly said that foreign precedents justified a
presumption of construction which had a uniform approach consistent with
that of other jurisdictions. It could well also be said that the appellate judges
recognised the value of the norms which the foreign precedents established.
Lord Hope recognised certainty as one such norm: the proposition that any
jurisdiction or arbitration clause in an international commercial contract
should be liberally construed promotes certainty. 57 The sentiments of the
English Law Lords may thus have implications for international arbitrators.
Professor Kaufman-Kohler has recently observed that it may be debatable
whether arbitrators have a legal obligation to follow precedents probably
not but it seems well settled that they have a moral obligation to follow
precedents so as to foster a normative environment that is predictable. 58 The
normative value of predictability and certainty in the construction of English
arbitration clauses in Fiona Trust is an important conclusion which can be
drawn from the points of law raised by the case.
IV. THE INTERPRETATION OF THE ARBITRATION ACT 1996

Fiona Trust is also of interest for its approach to the interpretation of the
Arbitration Act 1996. The Act applies to all arbitrations commenced after 31
55 See the recent debates as to whether international arbitration contains a jurisprudence
constante, and in particular, Tai-Heng CHENG, Precedent and Control in Investment Treaty
Arbitration, 30 Fordham International Law Journal (2007), 1014.
56 Per Lord Hope at [29], [2007] Bus LR 1719, 1729.
57 Ibid.
58 Gabrielle KAUFMAN-KOHLER, Arbitral Precedent: Dream, Necessity or Excuse?,
Arbitration International (2007), Vol. 23, No. 3, 357 at 374.

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John Townsend

January 1997, and to all applications made to the court on or after 31 January
1997 in respect of arbitrations yet to be commenced at the time of application.
It is based substantially on the UNCITRAL Model Law of 1985, and in this
sense it already incorporates many accepted norms of international practice.59
It may be a step towards the uniformity of international commercial law which
many prominent academics desire.60 The Act, however, is an unusual English
statute because it was drafted in user friendly language and incorporates
three statements of general principle by which the Act is to be construed or
interpreted.61 Party autonomy is reinforced by Section 4, which provides for
mandatory and non-mandatory provisions. The latter can be excluded by the
parties agreement, or by their agreeing to apply institutional rules, or simply
by the inclusion of their own provisions in the arbitration agreement. A list of
mandatory provisions is scheduled to the Act, and it includes amongst them
Section 9 (stay of legal proceedings where valid arbitration agreement),
Section 31 (objection to substantive jurisdiction of tribunal), Section 32
(determination of preliminary point of jurisdiction); Section 66 (enforcement of
award), Section 67 (challenging the award: substantive jurisdiction), Section
68 (challenging the award: serious irregularity), and Section 72 (saving for
rights of person who take no part in proceedings).62
It is to be noted that it is these mandatory Sections which differ most from
the provisions of the UNCITRAL Model Law. The DAC report justified the
reason for their inclusion: In general the mandatory provisions are there in
order to support and assist the arbitral process and the stated object of

59

Professor Goode notes that the Department Advisory Committee on Arbitration had in

1989 initially been somewhat hostile to the UNCITRAL Model Law, but later saw the merits of it.
Roy GOODE, Commercial Law, 3rd ed., Penguin, London (2004), 1169. The Department Advisory
Committee Report on the Arbitration Bill (1996) (chaired by Lord Saville) [hereinafter DAC
Report] states at [4] that the final draft bill which became the 1996 Act owed much to both the
structure and the content of the Model Law. The DAC report is often used a as a guide to

interpretation of the Act by English Courts.

60 See R.B. Lillich / C.N. Brower (Eds.), International Arbitration in the 21st Century:
Towards Judicialization and Uniformity, 12th (1992) Sokol Colloquium Series, Transnational
Publishers (Irvington, N.Y. (1994).
61 S. 1 (a) (c), Arbitration Act 1996: (a) the object of arbitration is to obtain the fair
resolution of disputes by an impartial tribunal without unnecessary delay or expense; (b) the
parties should be free to agree how their disputes are resolved, subject to such safeguards as are
necessary in the public interest; (c) in matters governed by this Part the court should not intervene
except as provided by this Part.
62 Schedule 1, Arbitration Act 1996.

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Construction and Separability of English Arbitration Clauses

arbitration. 63 In the Act, the stated object of arbitration is to obtain the fair
resolution of disputes by an impartial tribunal without unnecessary delay or
expense. 64 The mandatory provisions of the Arbitration Act were thus
regarded by the DAC as the minimum safeguards of the arbitral process which
English Courts should provide. The principle of party autonomy is accordingly
qualified to the extent that the parties cannot vary or exclude these provisions.
Nonetheless, apart from these mandatory provisions, the English Act generally
follows the spirit of the UNCITRAL Model Law in restricting court supervision of
the arbitral process. As one English practitioner has noted, court applications
under the Act are still very much the exception rather than the rule. 65
Moreover, the substantive English provisions as to the restriction of court
interference, the separability principle, the importance of party autonomy and
perhaps most importantly the very limited grounds for refusing recognition
and enforcement of a foreign arbitral award are all broadly comparable to
provisions of the Model Law.66
If the Arbitration Act 1996 had already introduced these uniform
doctrines by statute into English law, there is something of a jurisprudential
puzzle surrounding Fiona Trust. Why was there any need for a fresh start in
the construction of arbitration clauses, if the 1996 Act itself had already
provided for an approach to arbitration substantially in line with other leading
jurisdictions? The answer to this question can only be that the endorsement of
the fresh start by the House of Lords in Fiona Trust was regarded as
important to shaping international perceptions of English arbitral law and
practice. This may be important to international observers. As one eminent
international arbitrator has commented, Perception is the most important of
all realities (even on the premise, much debated in philosophy, that there is
any other reality). 67 What was achieved by the Law Lords in Fiona Trust was
a clear signal to the English bar, judiciary and international observers that
English arbitration law perceives itself to be uniformly in line with
international practice. English judges may now be expected to construe and
interpret provisions of the Act in line with international practice.
63 DAC Report at [19].
64 S.1 (a).
65 Peter J. REES, The Conduct of International Arbitration in England: the Challenge has
Still to be Met, Arbitration International (2007), Vol. 23, No. 3, 505.
66 S. 1 (c) of the English Act and Art 5 of the Model Law; s. 7 and Art 16; ss.100-104 and
Art 36.
67 Jan PAULSSON, The Denial of Justice in International Law, Cambridge University Press,
Cambridge (2005), 19.

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John Townsend

Indicative of this is the approach taken by the House of Lords to the

statutory principle of separability in Section 7 of the Arbitration Act. Lord
Hoffmann stated that the Section was enacted to enable the Courts to give
effect to the reasonable commercial expectations of the parties about the
questions which they intended to be decided by arbitration. But Section 7 will
not achieve its purpose if the Courts adopt an approach to construction which
is likely in many cases to defeat those expectations.
In his interpretation of the Section, Lord Hoffmann directed English
Courts as to the proper approach to take when dealing with a dispute as to an
arbitration clause which arises in an international commercial context. The
Courts must have regard to the international context of the arbitration
agreement, and of the role of the English Courts in supporting the arbitral
process by interpreting the Act. In this way, foreign law could also be said to
have accomplished an important new approach in the construction and
interpretation of the English Arbitration Act.
There is, however, a wrinkle to this analysis. Although it is commendable
that the appellate judges were broad-minded in their use of foreign precedents
from America, Australia and Germany, it is noteworthy that there is an
absence of French authority in both the English appellate decisions. The only
civilian authority on separability cited by the House of Lords was the
Bundesgerichtshofs decision of 27 February 1970. This is perhaps interesting,
because the earliest expression of the separability doctrine is from the 1963
Gosset decision of the Cour de cassation:
the arbitration agreement, whether concluded separately or included in
the contract to which it relates, shall, save in exceptional circumstances
have full legal autonomy and shall not be affected by the fact that the
aforementioned contract may be invalid.68
As is recognised by Fouchard, Gaillard and Goldman, this principle has
been consistently reaffirmed by the Cour de cassation. 69
A comparative lawyer may question why the English judges did not
consider the Gosset decision, or one of the more recent decisions of the
French court. One answer is that the points of law were short points and that
68 Cass. 1e civ., May 7 1963, Ets Raymond Gosset v. Carapelli, JCP, Ed. G., Pt. II, No.
13,405 (1963), quoted in Fouchard Gaillard Goldman on International Commercial Arbitration,
Kluwer, Deventer (1999) at 198-199.
69 Ibid. See also Editions du Seuil v. Editions Phidal Inc and Quarto Childrens Books Ltd,
Cour de cassation (1e civ.) 16 October 2001, n de pourvoi: 99-19319, Bulletin 2001, I, No. 254,
(p.) 160; (2002) Rev Arb, 919.

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Construction and Separability of English Arbitration Clauses

there was no point in gilding the lily. Lord Hoffmanns leading judgment is
only twenty-one paragraphs long, and considered only seven previous English
cases. By contrast, Longmore LJ referred to twenty-one cases, and had sixty
others referred to him in oral argument or written skeleton arguments.70 It
may be that the House of Lords was only seeking to give a snapshot
overview of international practice by promoting a new approach to the
construction and interpretation of the Arbitration Act. Yet the brevity of the
case is worthy of comment. Although such a minimalist approach is in itself
not without precedent in the House of Lords, it is still perhaps an unusual
approach for a superior English appellate court to take. Perhaps one reason for
the lack of consideration of French judgments is a perceived French
exceptionalism as to the exclusive jurisdiction of the arbitrators highlighted
by English writers Tweedale and Tweedale.71 This may indicate that there
could still be material points of departure between English and French law,
which English law may yet come to adopt. There may come a time when
English and French approaches to separability and jurisdiction will coincide.
On the other hand, such differences as there are may be overstated, and may
simply indicate a difference of emphasis rather than substance.
V. HUMAN RIGHTS AND THE COMMERCIAL CONTEXT OF ENGLISH ARBITRATION

In paragraph 20 of his judgment in Fiona Trust, Lord Hoffmann dismissed en

passant a further argument of the owners on appeal that the approach to
construction and separability adopted by the Court of Appeal infringed the
owners right of access to a court for the resolution of their civil disputes,
contrary to Article 6 of the European Convention on Human Rights. 72 This
argument raised another important question of the compatibility English
arbitration and procedural law with uniform standards of international
practice. Since the passing of the Human Rights Act 1998, an Act by which
the first Blair government sought to bring home human rights and allow
English Courts to scrutinise domestic law on those grounds for the first time,
the UK executive is obliged to pass such laws as are compliant with the
70 [2007] Bus LR, 687-689.
71 While the principle Kompetenz-Kompetenz has almost universal recognition it is not
generally recognized as an exclusive right which the arbitral tribunal possess. In this regard the
French jurisprudence appears as the exception and not the rule within England, Switzerland,
and India the principle of kompetenz-kompetenz is recognized; although the arbitral tribunal does
not have exclusive authority to deal with this issue. Andrew TWEEDALE / Keren TWEEDALE,
Arbitration of Commercial Disputes, Oxford University Press, Oxford (2005) at 5.87.
72 Per Lord Hoffmann at [20], [2007] Bus LR 1719, 1726.

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European Convention on Human Rights (ECHR).73 Under the Human Rights

Act, English Courts do not have the power to invalidate an Act of Parliament
found to be incompatible with the ECHR, but they have a duty to interpret
legislation in a way compatible with the Convention and may declare that a
statutory provision breaches the ECHR.74
It is, of course, true that the UK government was bound by the ECHR
before the passing of the 1998 Act as a signatory State, but the Conventions
status prior to the 1998 Act as merely international law meant that it was
unenforceable before domestic UK Courts unless in some way incorporated
by domestic legislation.75 As the Arbitration Act 1996 had been passed before
the Human Rights Act 1998, it had not been subjected to the legislative
procedure that is now required whereby the minister responsible for a Bill in
either House of Parliament must certify before the Second Reading of the Bill
that the government believes it to be compatible with the Convention.76 The
English Arbitration Act was thus untested at the legislative stage against the
European Convention. The compatibility of certain provisions of the English
Arbitration Act with the European Convention was first raised in 2004
proceedings before Lord Justice Mance (as he then was) in Department of
Economic Policy and Development of the City of Moscow and another v.
Bankers Trust Co and another.77
Bankers Trust turned on the ability of the English Commercial Court to
restrict publication of court applications to support arbitral proceedings and
other hearings in circumstances where the parties had agreed that their
dispute was confidential. The victorious party in the arbitration (Moscow)
sought publication of the court proceedings scrutinising the award to
demonstrate that it had not committed any default in a loan agreement.

73 Rights Brought Home: the Human Rights Bill (1997) (Cm 3782: London: HMSO).
74 S. 3 (1), Human Rights Act 1998; s.4 Human Rights Act 1998.
75 This proposition did not mean that an individual who believed that his or her rights
under the European Convention had been infringed by the UK state before 1998 could not make
an application directly to the European Court of Human Rights (or the Commission, before its
abolition in 1999), but this procedure was recognised to be lengthy and costly. See Lord Bingham
of Cornhills lecture of March 1993, published in T BINGHAM, The European Convention on
Human Rights: Time to Incorporate, in The Business of Judging: Selected Essays and Speeches,
Oxford University Press, Oxford (2000), 140.
76 S. 19, Human Rights Act 1998. This is known as a statement of compatibility. The
statement must be in writing and published as the minister thinks appropriate: s. 19(2).
77 City of Moscow v. Bankers Trust [2004] EWCA Civ 314; [2004] 2 All ER (Comm) 193.

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Construction and Separability of English Arbitration Clauses

Moscow contended that the confidentiality of the arbitration was an unlawful

restriction of Article 6 ECHR. In giving judgment, Mance LJ held that:
nothing in art. 6 conflicts with the voluntary waiver by parties of
court proceedings in favour of arbitration, although even such a waiver
should not necessarily be considered to amount to a waiver of all rights
under art. 6: see Suovaniemi v. Finland App No 31737/96 (23 February
1999, unreported)
Mance LJ went on to hold on the authority of the European Court of
Human Rights cases Hkansson v. Sweden and Deweer v. Belgium that
commercial parties can only waive their right to a public trial if the waiver is
voluntary and does not run counter to any important public interest.78
Accordingly, Mance LJ regarded the autonomy of the parties as permitting an
agreement that their disputes were to be private and confidential, and could
be justified against the Convention standard of due process:
businessmen can be confident that their privacy and confidentiality in
arbitration will, where appropriate, be preserved. 79
Before the appeal of Fiona Trust in the House of Lords, the Arbitration
Act had been challenged in two further 2007 cases of the Court of Appeal.
Stretford v. Football Association and Sumukan v. Commonwealth Secretariat
were challenges to provisions of the English Arbitration Act on the grounds
of their alleged incompatibility with Article 6.80 Both cases were once again
concerned with the due process provisions of Article 6 of the European
Convention, and the ability of an individual to waive their right of access to
the court by agreeing to submit their dispute to arbitration. Stretford raised
the point whether the mandatory stay under s. 9 of the Act of court
proceedings brought in breach of an arbitration agreement was Conventioncompliant. Sumukan was concerned with the question whether the
exclusion of the parties to appeal to the court for errors of law in the arbitral
award under s. 69 of the Act (which is a non-mandatory provision that can
be excluded by the agreement of the parties) deprived access to the court
under Article 6.
78 [2004] EWCA Civ 314; [2004] 2 All ER (Comm) 193, 209, per Mance LJ at [27].
Hkansson v Sweden (1991) 13 EHRR 1; Deweer v. Belgium (1980) 2 EHRR 439 In 2005, Lord
Justice Mance was appointed a Lord of Appeal in Ordinary [soon to be the UK Supreme Court].
79 Ibid., [2004] 2 All ER (Comm) 193, 216 at [41].
80 Stretford v. Football Association Ltd [2007] EWCA Civ 238, (2007) Bus LR 1052;
Sumukan Ltd v. Commonwealth Secretariat [2007] EWCA Civ 243, (2007) Bus LR1075.

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Mr Stretford was a football players agent who needed to obtain licenses

from FIFA and the English Football Association to negotiate with clubs and
players. These licenses contained arbitration clauses. Mr Stretford contended
that the compulsory arbitration clause was in breach of his rights under Article 6
ECHR. Sir Anthony Clarke MR (now Lord Clarke of Stone-cum-Ebony, a Justice
of the UK Supreme Court) held that, in order for a waiver of court access to be
compatible with Article 6,
the arbitration agreement must be agreed without constraint and not
run counter to any important public interest. 81
As justification for this proposition, he cited the three Strasbourg authorities
noted by Mance LJ in the Bankers Trust case: Deweer, Suovaniemi and
Hkansson.82 Clarke MR held that Mr Stretford had voluntarily waived his right
to a court hearing in a commercial contract which contained an arbitration
clause, and that there were no public interest considerations to overturn the
agreement. Indeed, the learned judge noted that the public interest encourages
arbitration in cases of this kind. 83 A similarly drafted arbitration clause in the
Sumukan case as to a dispute over a contract to develop a website was held by
the same judges of the Court of Appeal to constitute an effective waiver of the
right to appeal to the court on the grounds that the arbitrators had made an error
of law. Waller LJ noted the commercial context of the contract, in which it
was common to exclude such a right, and recognised that the right waived in
this context was not onerous or unusual. 84
Both Stretford and Sumukan turned on the valid waiver of Convention
rights in international commercial contracts. This issue was a further question
of uniformity: was English arbitration law sufficiently compatible with the
uniform standards of due process required by the Convention in signatory
States? These recent decisions on the interrelationship between arbitration and
the due process provisions of Article 6 ECHR recognise the need to give full
effect to the autonomy of the parties, when consent to arbitration is exercised
freely in the commercial context. Lord Hoffmann stated this explicitly in Fiona
Trust when he dismissed the owners appeal:

81 Stretford v. Football Association Ltd, per Clarke MR at [50], [2007] Bus LR 1068.
82 Ibid. The Bankers Trust case was not considered in the Court of Appeals judgments in
Stretford and Sumukan, even though it contained much pertinent dicta.
83 Stretford, per Clarke MR at [66], [2007] Bus LR 1074.
84 Sumukan, at [61], [2007] Bus LR 1068.

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Construction and Separability of English Arbitration Clauses

The European Convention was not intended to destroy arbitration.

Arbitration is based upon agreement and the parties by agreement can
waive the right to a court. If it appears on a fair construction of the
charter that they have agreed to an arbitration of a particular dispute,
there is no infringement of their Convention right.
The approach taken in Bankers Trust, Stretford, and Sumukan has been
reinforced by Fiona Trust. The arguments of the owners that the provisions of
the English Arbitration Act were incompatible with the European Convention
on Human Rights were rightly dismissed.
It may be safely concluded that English Courts look to the commercial
context of a particular transaction in order to approve the exercise of the
parties autonomy in agreeing to submit their disputes to arbitration and
waiving access to the Court, only reasoning to the contrary where the
circumstances of the waiver are uncommercial or there is an unusual
inequality of bargaining power. It is nonetheless apparent from the case law
on arbitration clauses and Article 6 ECHR that this will be very rare in the
commercial context.85 An English Court, of course, is under an obligation to
ensure the Arbitration Act is compliant with the practice of those other
jurisdictions in the cases where the European Court of Human Rights
approved the voluntary waiver of convention rights in commercial
arbitration. Yet the judges in Bankers Trust, Stretford, Sumukan and Fiona
Trust also recognised the commercial value of achieving uniformity in
arbitration by reference to the law of human rights. Uniform norms of best
practice in international commercial law may therefore not only emerge
from consensual agreement, but also, clearly, from mandatory standards of
due process.

85 See also on human rights and arbitration, El Nasharty v. J. Sainsbury plc [2007] EWHC
2618 (Comm) (2008) 1 Lloyds Rep 360 (if there was duress or undue influence or mistake which
invalidated the arbitration agreement there would be no waiver of relevant rights under Art. 6; but
in the circumstances the fact that the main agreement was entered into under duress did not
impeach the arbitration agreement); Republic of Kazakhstan v. Istil Group Ltd [2007] EWCA Civ
471 (2007) 2 Lloyds Rep 548 (restriction on rights of appeal compatible with art 6); ASM Shipping
v. TTMI [2006] EWCA Civ 1341 (2007) 1 Lloyds Rep 136 (no overarching principle laid down by
the ECHR that an award tainted by apparent bias had to be set aside); CGU International Insurance
PLC v. Astrazeneca Insurance Co Ltd [2006] EWCA Civ 1340 (2007) Bus LR 162 (s.69 of the
Arbitration Act did not exclude judicial review on grounds of unfairness of process, but no
unfairness on the facts).

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V. CONCLUSIONS

Some conclusions can be drawn from the decisions of the Court of Appeal
and House of Lords in Fiona Trust. The reasoning of the appellate judges in
both Courts demonstrates that any suggestion that English commercial law
remains insular and eccentric is unfair. In particular, the House of Lords, the
UKs highest appellate court, considered foreign precedents from other leading
arbitral jurisdictions. It could be said fairly that this was done in order to
achieve uniformity in the application of a domestic statute that was based on
an internationally drafted and approved UNCITRAL Model Law. It is to be
hoped that, in this sense, the Court of Appeal and House of Lords decisions
can be recognised as two leading cases on the fundamentals of international
commercial arbitration. Sensitivity to the international commercial context has
also been shown by English appellate courts in other recent unsuccessful
challenges to the English Arbitration Act on the grounds that it is incompatible
with provisions of the ECHR. Finally, one of the most extraordinary facts of the
Fiona Trust litigation was that not one of the parties were themselves English.
The international disputes which take place under English law and the continued
residence of wealthy foreign-domiciled individuals in England may yet provide
future opportunities for arbitrators and judges to bring English commercial law
into line with other uniform aspects of international commercial law.
***
APPENDIX THE ARBITRATION CLAUSE (A LAW AND LITIGATION CLAUSE) 86

41 (a) This charter shall be construed and the relations between the parties determined in
accordance with the laws of England.
(b) Any dispute arising under this charter shall be decided by the High Court in London
to whose jurisdiction the parties hereby agree.
(c) Notwithstanding the foregoing, but without prejudice to any partys right to arrest or
maintain the arrest of any maritime property, either party may, by giving written notice of
election to the other party, elect to have any such dispute referred to arbitration in
London, one arbitrator to be nominated by Owners and the other by Charterers, and in case
the arbitrators shall not agree to the decision of an umpire, whose decision shall be final and
binding upon both parties. Arbitration shall take place in London in accordance with the
London Maritime Association of Arbitrators, in accordance with the provisions of the
Arbitration Act 1950, or any statutory modification or re-enactment thereof for the time
being in force.
[]

86 See supra note 2. Per Longmore LJ, [2007] Bus LR, 686, 692-693 at [5]; [2007] 1 All ER
(Comm) 891, 896 at [5].

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(i)

A party shall lose its right to make an election only if:

(a) it receives from the other party a written notice of dispute which
(1) states expressly that a dispute has arisen out of this charter;
(2) specifies the nature of the dispute; and
(3) refers expressly to this clause 41(c)

and
(b) it fails to give notice of election to have this dispute referred to arbitration
not later than 30 days from the date of receipt of such notice of dispute

mim

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