Asghar & Ors v Legal Services Commission & Anor

A contractual dispute-resolution clause may create a binding arbitration agreement even where earlier stages, such as internal review and review, are optional. Once the Contract Review Body has made a decision and that decision remains disputed, the unresolved dispute must proceed to mediation and, if necessary, arbitration.

Wording referring to disputes “concerning alleged breaches” is broad. It may confer jurisdiction on the arbitrator to determine tortious and other non-contractual claims where deciding those claims requires resolution of an alleged contractual breach. The court should avoid parallel proceedings where contractual and non-contractual claims substantially overlap.

The claimants, a firm of solicitors and its partners, brought proceedings against the Legal Services Commission and the Law Society concerning an investigation at their offices, the removal of documents and alleged breaches of contract, torts and Article 8 rights.

The Legal Services Commission applied for a stay of the proceedings against it, relying on clause 23 of its General Civil Contract. The claimants argued that the clause made arbitration optional, that it referred only a decision rather than a dispute, and that their non-contractual claims fell outside its scope.

The issues were whether clause 23 contained an arbitration agreement and, if so, what disputes were subject to it.

1. Stay granted. The Legal Services Commission was entitled to a stay of all proceedings against it in respect of matters required by the Contract to be referred to arbitration. A decision by the Contract Review Body was required first, followed by arbitration with expedition.

2. Clause 23 established a binding arbitration agreement within section 6 of the Arbitration Act 1996. The claimants had options whether to pursue internal review and review. However, if they disputed the Contract Review Body’s decision, mediation and, if unresolved, arbitration became compulsory. Clause 23.3 also provided that failure to pursue the contractual procedures resulted in acceptance of the decision and loss of the right to dispute it.

3. The reference in clause 23.23 to the “decision of the Contract Review Body” was merely a semantic objection. Read with clause 23.22, it referred the unresolved dispute in respect of which the decision had been made, satisfying the statutory requirement for an agreement to submit present or future disputes to arbitration.

4. The phrase “disputes concerning alleged breaches of the Contract” was deliberately wide. It was not confined to contractual causes of action. Where determination of a tort or other claim required deciding whether a contractual breach had occurred, the arbitrator had jurisdiction to determine that issue and the associated claim.

5. All the pleaded claims against the Legal Services Commission depended materially on whether there had been an Official Investigation and whether the Commission had acted in breach of contract, in good faith and lawfully. The contractual and non-contractual claims therefore could not sensibly or practically be separated. All proceedings against the Legal Services Commission were stayed to prevent overlapping arbitration and court proceedings.