Heifer International Inc v Helge Christiansen & Ors

A written arbitration agreement is effective where made in writing, evidenced in writing, or made by reference to written terms. An arbitration clause may be severable from the underlying contract and may continue to regulate disputes after other contractual provisions have expired, depending on the parties’ intention and conduct.

A company may qualify as a consumer where it obtains services for purposes outside its trade, business or profession. An arbitration clause is not unfair merely because it requires disputes with foreign contractors to be resolved in the contractors’ home jurisdiction. The assessment depends on negotiation, influence, good faith, significant imbalance and all circumstances at the time of contracting.

The claimant, an offshore company beneficially owned by a family resident in England, brought claims concerning the refurbishment of a Surrey property against a Danish architect, his firm and three Danish specialist contractors.

The defendants applied under section 9(1) of the Arbitration Act 1996 for a stay, relying on arbitration clauses referring disputes to the Danish Building and Construction Arbitration Board. The claimant disputed incorporation, contractual formation and the continuing effect of the clauses. It also alleged that the clauses were unfair under the Unfair Terms in Consumer Contracts Regulations 1999. The architect and his firm alternatively relied on the Brussels jurisdiction rules.

The central issues were whether written contracts incorporating the arbitration provisions existed, whether the claimant was a consumer and whether the clauses were unfair, and, if arbitration did not govern, where the relevant contractual obligation was performed.

1. Applications granted. The proceedings against the Second to Fifth Defendants were stayed or otherwise referred to the Danish Building and Construction Arbitration Court in Copenhagen. The First Defendant was not separately the contracting party.
2. The December 2005 discussions did not create a binding oral agreement. The later written framework agreement was made between Heifer and the Second Defendant. Although expressed to be temporary and intended to be replaced by a final agreement, it was intended to govern the parties’ relationship while negotiations continued. Clause 15.1, incorporating Article 9 of ABR 89, therefore provided a written arbitration agreement.
3. The arbitration clause was incorporated in accordance with sections 5(2) and 5(3) of the Arbitration Act 1996. The Third Defendant’s offer incorporated AB 92. The Fourth Defendant’s agreement was either a written contract with Heifer or a contract evidenced in writing. The Fifth Defendant read the Stevns contract and agreed to be bound by its terms, satisfying section 5(3).
4. The arbitration agreement was separable under section 7. Even if other provisions of the framework agreement expired or were varied, the arbitration provisions continued to regulate disputes. The parties’ substantial performance and conduct supported giving effect to the commercial bargain.
5. Heifer was acting for purposes outside its trade, business or profession and therefore came within the consumer definition. Nevertheless, the clauses were not unfair. They were prepared or negotiated through Heifer’s own independent Danish lawyers, Heifer had the opportunity to influence their substance, and there was no lack of good faith or significant imbalance contrary to the Regulations.
6. The Brussels Convention issue was alternative only. If arbitration had not applied, Article 5(1) would have provided jurisdiction in England because the principal obligation was management and execution of renovation works in England. Article 5(3) did not apply.