Reichhold Norway ASA v Goldman Sachs International

The court may, under its inherent jurisdiction, grant a temporary stay of a bona fide English action pending related arbitration against a different party. A claimant's ordinary freedom to choose whom to sue remains important, but it is not absolute where rare and compelling circumstances show that the interests of justice favour prioritising the related proceedings.

The court must weigh the overlap between proceedings, the parties' contractual arrangements, likely delay and prejudice, cost, convenience, and whether the claimant will retain an effective remedy. Such stays should be exceptional and compatible with the claimant's right of access to a court. An appellate court will not interfere with a discretionary stay absent legal misdirection or manifest error.

Reichhold Norway ASA and its associated company bought shares in a Norwegian company from Jotun AS. The sale agreement contained warranties and required disputes between buyer and seller to be arbitrated in Oslo. Reichhold later began Norwegian arbitration against Jotun and also brought an English negligent-misstatement claim against Goldman Sachs International, Jotun's financial adviser.

The Commercial Court stayed the English action under the inherent jurisdiction preserved by section 49(3) of the Supreme Court Act 1981, pending final determination of the Norwegian arbitration. Reichhold appealed. The central question was whether a temporary stay of an action against one defendant could lawfully and properly be ordered to give priority to related arbitration against another.

1. Appeal dismissed unanimously. Lord Bingham CJ, with whom Otton and Robert Walker LJJ agreed, held that the inherent jurisdiction preserved by section 49(3) of the Supreme Court Act 1981 was broad enough to permit the temporary stay ordered.

2. A claimant with a bona fide claim ordinarily has an important freedom to choose whom to sue. That principle did not prevent a court, in rare and compelling circumstances, from regulating the order in which connected proceedings should be pursued. The order did not finally prevent Reichhold from suing Goldman Sachs. It postponed that action while Reichhold's existing arbitration against Jotun was determined.

3. The court distinguished the more intrusive effect of a forum non conveniens stay. Here the arbitration and action substantially overlapped, the contractual arrangements made arbitration against Jotun the natural route to compensation, and the arbitration could be completed relatively quickly. The claimant identified no legitimate advantage in pursuing the more complex English claim first. Its only material prejudice was delay, for which interest could compensate.

4. The court accepted that connected proceedings involving different defendants may sometimes require judicial prioritisation. It approved the judge's assessment of overlap, contractual relationships, cost, convenience, delay, and the interests of all parties. Stays of this kind should nevertheless remain exceptional, and courts must be mindful of Article 6 of the European Convention on Human Rights.

5. The judge had made no error of law or manifest error in exercising his discretion. The stay pending the final Norwegian arbitration was therefore upheld, with costs against Reichhold.

• Court of Appeal: Appeal dismissed. The court upheld the temporary stay of the English action pending the Norwegian arbitration.
• High Court, Queen's Bench Division, Commercial Court (Moore-Bick J): On 25 November 1998, stayed further proceedings under section 49(3) of the Supreme Court Act 1981 pending final determination of the arbitration against Jotun AS in Norway.