Halki Shipping Corpn v Sopex Oils Ltd

Where parties agree to arbitrate any dispute, a claim becomes disputed when liability is denied or payment is refused. The claim remains a dispute even if the defence appears unarguable. It need not be shown that the defence is real, genuine or reasonably arguable.

Section 9 of the Arbitration Act 1996 therefore requires the court to stay proceedings concerning such a dispute unless the arbitration agreement is null and void, inoperative or incapable of performance. Parliament's omission of the former exception for cases in which there was not in fact any dispute removed the court's jurisdiction to decide, through summary judgment proceedings, whether anything was genuinely disputable.

A shipowner claimed demurrage from a charterer under a voyage charterparty containing an agreement to refer any dispute arising from or connected with the charterparty to London arbitration. The charterer denied liability and applied under section 9 of the Arbitration Act 1996 to stay the shipowner's court proceedings. The shipowner sought summary judgment, contending that the charterer had no arguable defence to most or all of the claim.

Clarke J, whose decision was reported at [1997] 1 WLR 1268, granted a stay. He held that, absent an admission, a dispute remained within the arbitration agreement even if the defence was unarguable. The central issue on appeal was whether section 9 preserved the former practice of determining a summary judgment application and a stay application together.

By a majority, Henry and Swinton Thomas LJJ, Hirst LJ dissenting, the appeal was dismissed.

1. The ordinary meaning of “dispute” in an arbitration agreement includes a claim which the other party refuses to pay or denies. The existence of a dispute does not depend upon whether the defence is sound, reasonably arguable or capable of resisting summary judgment. Until the claimed sum is admitted to be due and payable, the disagreement is a dispute which the parties agreed to arbitrate.

2. The words formerly appearing in section 1(1) of the Arbitration Act 1975—that there was not in fact any dispute—constituted a separate statutory ground for refusing a stay. They permitted the court to investigate whether there was anything genuinely disputable and, if not, to give summary judgment. That statutory inquiry was distinct from construing the unqualified word “dispute” in the arbitration agreement.

3. Parliament omitted that separate ground from section 9(4) of the Arbitration Act 1996. Read with the principles of party autonomy and limited judicial intervention in section 1, the omission removed the former summary judgment jurisdiction in respect of matters falling within an effective arbitration agreement. Once section 9(1) applies, the court must grant a stay unless the agreement is null and void, inoperative or incapable of performance. None of those exceptions applied.

4. Henry and Swinton Thomas LJJ followed Ellerine Bros Ltd v Klinger and the reasoning in Hayter v Nelson. They treated Nova (Jersey) Knit Ltd v Kammgarn Spinnerei GmbH and the authorities concerning indisputably due sums as decisions founded upon the former statutory exception, which ceased to govern after its repeal.

5. Hirst LJ dissented. He considered Nova (Jersey) binding authority that “dispute” meant a genuine dispute and concluded that Parliament had not abolished the established summary judgment practice by implication.

The appeal was dismissed with costs. Leave to appeal to the House of Lords was granted on counsel's undertaking not to pursue the arbitration meanwhile.

1. Court of Appeal: By a majority, dismissed the shipowner's appeal from the order staying the action. Leave to appeal to the House of Lords was granted.
2. High Court, Queen's Bench Division, Commercial Court: Clarke J granted a stay under section 9 of the Arbitration Act 1996, holding that a dispute remained despite the alleged absence of an arguable defence: [1997] 1 WLR 1268.