AHMAD AL-NAIMI (T/A BUILDMASTER CONSTRUCTION SERVICES) v. ISLAMIC PRESS AGENCY INC.

Before staying court proceedings under section 9 of the Arbitration Act 1996, the court should ordinarily be satisfied that an arbitration agreement exists and that the dispute falls within its scope. Section 30 does not require a person who denies the existence or applicability of an arbitration agreement to submit that issue to the arbitrator.

The court may determine jurisdiction itself or, under its inherent jurisdiction, stay proceedings so that the arbitrator considers jurisdiction first. The choice should promote the parties’ interests and avoid unnecessary delay and expense. Where both parties ask the court to resolve jurisdiction on affidavit evidence, it should do so if the issue can properly be decided without oral evidence.

A building contractor commenced proceedings for payment for additional second-fix works. The employer sought a stay under section 9 of the Arbitration Act 1996, relying on the arbitration clause in a JCT agreement dated 12 July 1996.

The contractor maintained that the additional works were performed under a separate oral contract containing no arbitration agreement. His Honour Judge Bowsher QC stayed the action on 2 October 1998 without deciding whether the additional works fell within the JCT agreement. He considered that the arbitrator should determine that issue.

The contractor appealed. The central questions were whether the court should itself decide if the claim fell within the arbitration agreement and whether that question could be resolved on the affidavit and documentary evidence.

1. Appeal dismissed unanimously. Lord Justice Waller and Lord Justice Chadwick held that the judge had adopted the wrong approach by declining to determine whether the additional works were covered by the arbitration agreement. The Court of Appeal determined that issue itself and concluded that the action was properly stayed under section 9 of the Arbitration Act 1996.

2. Per Lord Justice Waller, the court should ordinarily be satisfied both that an arbitration clause exists and that the subject matter of the action falls within it before granting a statutory stay. Section 30, which permits an arbitral tribunal to rule on its own substantive jurisdiction, does not compel the court to refer every jurisdictional dispute to the tribunal.

3. The court may decide the jurisdictional issue, give directions for its trial, or use its inherent jurisdiction to stay proceedings while the arbitrator considers it. The governing considerations include the parties’ interests, economical litigation management, and the avoidance of unnecessary delay, expense and duplicative hearings. An inherent-jurisdiction stay may be sensible where detailed factual inquiry is required, the claim is likely to fall within the clause, and arbitration of related issues will occur in any event.

4. If the court elects to decide jurisdiction and material factual disputes require oral evidence, it should ordinarily direct a trial of the issue unless the parties agree that affidavit evidence will suffice. Where both parties request summary determination, the court should meet that request if it properly can. The court may nevertheless require oral evidence where necessary.

5. In this case, both parties asked for a decision on the affidavits. The factual disputes were slight and the contemporaneous documents pointed compellingly to one contract performed in two phases. The additional second-fix works were an extension of the original JCT contract, not a separate oral contract. The arbitration clause therefore covered the matters pleaded in the action.

6. The appeal was dismissed with costs. The jurisdictional issue left open below was resolved in favour of the employer.

1. Court of Appeal (Civil Division): The appeal was dismissed. The court held that the arbitration clause covered the pleaded claim and that the action was properly stayed under section 9 of the Arbitration Act 1996.

2. Technology and Construction Court: On 2 October 1998, His Honour Judge Bowsher QC stayed the contractor’s action under section 9 without deciding whether the claim fell within the arbitration agreement. The Court of Appeal held that he should have determined that issue on the affidavit evidence because both parties requested that course and the documents permitted a clear conclusion.