Flight Training International v International Fire Training Equipment Ltd

A dispute resolution clause must be construed in its contractual and commercial context. Where it refers disputes to a body offering conciliation, mediation and arbitration, an express reference to mediation strongly indicates that mediation, rather than arbitration, was intended. A costs provision referring to the party that prevails at mediation is not necessarily inconsistent with mediation. The court should not convert such a clause into an arbitration agreement merely because the named body cannot provide the contemplated service for the dispute in question.

The claimant sought directions under section 18 of the Arbitration Act 1996 for the appointment of an arbitrator. The defendant applied to strike out the claim, contending that the Heads of Terms Agreement contained no valid arbitration agreement.

The Agreement referred disputes concerning its performance to ACAS and stated that legal fees and costs would be paid by the party that did not prevail at mediation. ACAS did not resolve commercial disputes. The central issue was whether the clause, properly construed, required binding arbitration or instead contemplated mediation.

1. The defendant’s application succeeded. Clause XI did not contain an agreement to submit future disputes to arbitration within sections 5 and 6 of the Arbitration Act 1996.
2. ACAS provided distinct conciliation, mediation and arbitration services in the employment-relations field. The clause’s express reference to mediation strongly indicated that the parties intended mediation, rather than conciliation or arbitration.
3. The costs provision was capable of operating within a mediation clause. If a mediated result favoured one party, the other could bear the mediation costs. The provision therefore did not compel an arbitration construction.
4. The court applied the ordinary principles of contractual construction, considering the language used and the relevant commercial context. The clause could not be recast as an arbitration agreement merely because ACAS did not provide commercial mediation services.
5. The claim for appointment of an arbitrator was accordingly struck out.