City of London v Sancheti

Section 9 of the Arbitration Act 1996 requires the parties to the court proceedings to be parties to the arbitration agreement, or to claim through or under such a party. A legal or commercial connection with a person bound by the agreement is insufficient. A state's responsibility under international law for a local authority's acts does not make that authority a party to the arbitration agreement. A contractual submission to the non-exclusive jurisdiction of the English courts may also show that the matter is not one agreed to be arbitrated. The court held that Roussel-Uclaf v GD Searle & Co Ltd [1978] 1 Lloyd's Rep 225 was wrongly decided on the relevant stay issue.

Mr Sancheti, an Indian solicitor, had taken an assignment of a commercial lease from the Corporation of London. Following a rent review, the Corporation brought County Court proceedings to recover rent. Mr Sancheti had also invoked arbitration under the United Kingdom-India bilateral investment treaty, alleging discrimination and other improper conduct by United Kingdom authorities.

He applied for a stay under section 9 of the Arbitration Act 1996 or under the court's inherent jurisdiction. District Judge Mathias refused the application, and His Honour Judge Knight QC dismissed the appeal. The Court of Appeal considered whether the Corporation was party to, or claiming through or under a party to, the BIT arbitration agreement, and whether the contractual and treaty disputes had a sufficient connection to justify a stay.

Lawrence Collins LJ gave the judgment of the court. Richards and Laws LJJ agreed.

1. Disposition. Permission to bring the second appeal was granted because the issue concerning Roussel-Uclaf was of general importance, but the appeal was dismissed.
2. Section 9. A stay under section 9 of the Arbitration Act 1996 requires the parties to the court proceedings to be parties to the arbitration agreement, or persons claiming through or under such parties. The reference in section 9 to proceedings concerning a matter agreed to be arbitrated does not remove that requirement.
3. Party status. Mere legal or commercial connection with a person bound by an arbitration agreement is insufficient. The court held that the relevant part of Roussel-Uclaf v GD Searle & Co Ltd [1978] 1 Lloyd's Rep 225 was wrongly decided and should not be followed. The Corporation of London was not a party to the BIT arbitration agreement. The United Kingdom's possible responsibility under international law for the Corporation's acts did not alter that conclusion.
4. Jurisdiction clause. Independently, clause 4(4)(e) of the lease submitted the parties to the non-exclusive jurisdiction of the competent courts of England and Wales. The rent proceedings were therefore not proceedings concerning a matter which the arbitration agreement required to be referred to arbitration.
5. Inherent jurisdiction. The wider arguments about the jurisdiction of BIT tribunals over contractual claims and the distinction between contractual and treaty claims did not arise for decision. The judge was entitled to refuse a discretionary stay because there was insufficient nexus between the contractual rent claim and the vague treaty complaints. There was no basis for appellate intervention.

• Court of Appeal (Civil Division) [2008] EWCA Civ 1283: permission to appeal was granted on the renewed application, but the appeal was dismissed.
• Central London Civil Justice Centre: His Honour Judge Knight QC dismissed the appeal from the refusal of a stay in a judgment handed down on 12 February 2008.
• Central London County Court: District Judge Mathias refused a stay under section 9 of the Arbitration Act 1996 and under the inherent jurisdiction on 5 January 2007.