Musawi v RE International (UK) Ltd & Ors

At common law, a contractual choice of governing law must identify English law or the law of another country. A non-national system of rules may instead be selected as the basis for arbitration where Arbitration Act 1996, section 46(1)(b), applies. An unstamped instrument that is chargeable with stamp duty cannot be admitted in evidence or form the basis of a claim unless the statutory requirements are met. The scope of an arbitration agreement is determined objectively from its wording, context and the parties’ submissions. Where the agreement refers generally to a dispute concerning property and related matters, it may encompass the whole ownership dispute rather than a subsidiary issue. An award binds a beneficial owner who was a party to the arbitration through an authorised agent and participated fully in the proceedings.

The claimant sought declarations concerning his beneficial interest in a Wembley development site and enforcement of an arbitration award made by Ayatollah Mohsen Araki. The defendants resisted enforcement, contending that the award exceeded the arbitration agreement and that the necessary owners of the defendants’ interest had not been parties. The parties had also relied on a series of earlier agreements, including an unstamped 1990 agreement and a 2002 note which was said to record a binding settlement. The court had to determine the applicable law, the effect of the unstamped agreement, whether the 2002 note created a contract, the scope and parties of the arbitration agreement, and whether the award was final and binding.

1. Applicable law. The proper law of a contract at common law must be English law or the law of another country. The court treated the statement in Amin Rasheed Shipping Corp v Kuwait Insurance Co [1984] AC 50 as authoritative. The arbitration decisions relied on by the defendants concerned the basis on which arbitrators could decide disputes and did not alter the ordinary common-law rule. The later statutory distinction in section 46 of the Arbitration Act 1996 confirms that parties may agree to other principles for arbitration.
2. Stamp duty. The 1990 agreement was chargeable to stamp duty under section 59(1) of the Stamp Act 1891. Under section 14, it was inadmissible and could not support a claim. The court followed Re Brown & Root McDermott Fabricators Ltd’s application [1996] STC 483 in holding that secondary evidence was also unavailable.
3. 2002 note. The note did not create a binding agreement. It stated that an earlier letter should form the basis of an agreement, left the treatment of management charges unresolved, and contemplated that the agreement would be finalised later. The parties’ subsequent correspondence and conduct strongly confirmed that no final or sufficiently certain contract had been made.
4. Arbitration. The arbitration agreement covered the entire dispute concerning ownership of the Wembley land and related matters, including income and management charges. Its wording, the surrounding dispute and the parties’ submissions showed that it was not confined to management charges. The award was a final award despite the arbitrator’s later hearing not taking place. The time for challenge under section 70(3) of the Arbitration Act 1996 had also expired.
5. RE International was a party to the arbitration. Reza and Saleh signed as its agents, and RE International participated fully through Reza. It was therefore bound by the award. The defendants’ counterclaim and their defences to enforcement were dismissed. The claimant’s primary claim was upheld, with the form of order left for further submissions.

First-instance judgment. No appellate history is stated in the judgment.