LG Caltex Gas Co Ltd v China National Petroleum Corpn

An arbitral award which, in substance, determines that the tribunal lacks substantive jurisdiction is challengeable under section 67(1)(a) of the Arbitration Act 1996. Its classification depends on its legal effect, rather than its form or the inclusion of a declaration that the respondent has no contractual liability.

Section 67(1)(b) concerns an award on the merits made after the tribunal has held that it has jurisdiction. It does not govern an award in which the tribunal has held, expressly or implicitly, that it has no jurisdiction. A separate agreement may confer binding jurisdiction to decide an otherwise jurisdictional question, but such an agreement is not lightly inferred where jurisdiction was known to be disputed and was consistently reserved. Section 73 does not bar a challenge to the tribunal's own ruling that it lacked jurisdiction.

The appellants alleged that the respondents were bound by a charterparty and a supply contract, each containing provision for London arbitration. The respondents denied that they were parties to either contract or to any arbitration agreement. They agreed to the appointment of a sole arbitrator but reserved their position on jurisdiction.

After a full hearing, the arbitrator issued final awards declaring that the respondents were not bound by the alleged contracts and were accordingly not liable. Aikens J held that the parties had made an ad hoc agreement authorising a final determination of the central contractual issue, that the awards were awards on the merits, and that section 73 of the Arbitration Act 1996 barred the appellants' challenge.

The appeal concerned whether there was such a separate agreement, whether the awards were awards as to substantive jurisdiction under section 67(1)(a), and whether section 73 precluded the challenge.

1. Appeal allowed unanimously. Lord Phillips MR delivered the judgment, with Pill and Keene LJJ agreeing. The arbitrator's awards were awards as to substantive jurisdiction within section 67(1)(a) of the Arbitration Act 1996.

2. The distinction between an award as to jurisdiction and an award on the merits must be determined by substance and legal effect. Under section 31(4), a tribunal that holds it has jurisdiction may proceed to determine the merits. A tribunal that holds it has no jurisdiction cannot validly make an award on the merits. The arbitrator's findings that the respondents were not parties to the alleged contracts necessarily entailed that they were not parties to arbitration agreements and that he had no substantive jurisdiction.

3. The declarations that the respondents were under no liability did not alter that result. The reasons addressed only whether the respondents were bound by the contracts, which was also the jurisdictional issue. The awards should therefore be treated as rulings on jurisdiction under section 30, not as merits awards under section 67(1)(b). Issue 2 consequently did not arise.

4. Parties can make a separate ad hoc arbitration agreement authorising a final and binding determination of whether an earlier contract or arbitration agreement exists. The mandatory character of sections 31 and 67 does not prevent parties from enlarging an arbitrator's jurisdiction by such an agreement. If an award is made under that separate agreement, a section 67(1)(a) challenge fails on the facts because the arbitrator had that separately conferred authority.

5. No such agreement was made here. The solicitors' correspondence and conduct were consistent with the statutory procedure: the respondents contested jurisdiction and reserved their right to challenge it, while the claimants invited the arbitrator to exercise the section 30 power. Where experienced parties recognise and reserve a jurisdictional dispute, a binding ad hoc submission should not be inferred without clear objective agreement.

6. Section 73 did not apply. The appellants were not objecting to the tribunal's lack of jurisdiction after participating in proceedings; they challenged the tribunal's ruling that it lacked jurisdiction under section 67(1)(a). The court allowed the appeal, answered question 1 affirmatively, questions 3 and 4 negatively, and awarded the appellants their costs.

• Court of Appeal (Civil Division) — appeal allowed: the awards were treated as awards as to substantive jurisdiction under section 67(1)(a) of the Arbitration Act 1996 ([2001] EWCA Civ 788).
• Queen's Bench Division — Aikens J had ruled for the respondents on four preliminary issues, holding that there was an ad hoc submission, that the awards were on the merits, and that section 73 barred the challenge.