Film Finance Inc v The Royal Bank of Scotland

An arbitration clause referring disputes relating to delivery is construed according to the natural and ordinary meaning of its language, read in the commercial context of the agreement as a whole. Where the agreement contains detailed procedures directed principally to disputes with distributors, those procedures may be modified so far as necessary to apply to a dispute between other parties to the agreement. The clause is not confined to the narrow technical question whether delivery occurred if that would fragment the parties’ dispute between arbitration and litigation. A dispute concerning the contractual completion and delivery of a film, including allegations that the other party’s conduct caused or affected non-compliance, may therefore fall within the arbitration agreement.

Film Finance Inc sought a determination under Arbitration Act 1996, section 32, that a dispute with The Royal Bank of Scotland was subject to arbitration by Mr Nik Powell. The arbitrator had determined that he had jurisdiction.

The dispute arose under a completion guarantee for a film. RBS claimed payment on the basis that the film had not been completed and delivered as contractually required. FFI argued, among other things, that RBS’s interference had caused any failure and that the dispute fell within the arbitration clause in clause 14. RBS contended that the clause covered only disputes with distributors concerning whether delivery had occurred.

1. Jurisdiction. The application under section 32 of the Arbitration Act 1996 was properly before the court. The statutory conditions concerning permission, delay, substantial costs savings and good reason were satisfied.
2. Construction of clause 14. The phrase “dispute relating to delivery hereunder” referred to delivery under the Completion Guaranty and to disputes between its parties. RBS’s proposed construction, which excluded every dispute between FFI and RBS, would deprive the first sentence of clause 14 of meaningful application and would allow Schedule III to emasculate the operative arbitration agreement.
3. There was a tension between clause 14 and Schedule III, which was principally directed to disputes between FFI and distributors. Applying the principle that contractual provisions may be read subject to necessary modifications and with inapplicable or insensible words disregarded, the arbitration provisions in paragraph 4 of Schedule III could be read as referring to FFI and RBS where appropriate. This was consistent with the parties’ commercial intention.
4. The arbitration agreement was not limited to the bare question whether delivery had occurred. Paragraph 4(iv) required the arbitrators to determine that question but did not confine their jurisdiction to it. A narrow construction would risk fragmented proceedings and undermine the apparent intention that disputes should ordinarily be resolved in one forum.
5. The dispute, viewed as a whole, concerned whether Completion and Delivery of the Film had occurred, including whether RBS’s alleged interference affected the contractual obligation and whether FFI could rely on contractual, estoppel or related arguments. In ordinary language it was a dispute relating to delivery. The approach was supported by the commercial preference for liberal construction of arbitration clauses and one-stop arbitration, identified in Fiona Trust & Holding Corporation v Privolov [2007] EWCA Civ 20.

Mr Nik Powell therefore had jurisdiction to determine the dispute.