Secretary of State for Transport v Stagecoach South Western Trains Ltd

An arbitration clause referring disputes about the amount of a contractual payment may extend to disputes concerning payments which will fall due in the future. It is not confined to disputes about payments already notified or accrued, unless the contractual language requires that result. A construction which would send the same dispute to court or arbitration solely according to its timing is commercially unattractive and should not be adopted where the language permits a coherent alternative. The “one stop shop” principle does not govern an agreement which expressly allocates different disputes between the courts and arbitration.

The Secretary of State applied under section 72(1)(c) of the Arbitration Act 1996 for a declaration that a revenue support dispute identified by Stagecoach had not been submitted to arbitration under the parties’ Franchise Agreement.

The dispute concerned the proper construction of the revenue support provisions and the calculation of future Revenue Support Adjustments for reporting periods beginning after the fourth anniversary of the franchise start date. The issue was whether the dispute fell within paragraph 2.6 of Schedule 8.1, which referred to disputes about the amount of a Franchise Payment.

1. The application was dismissed. The Revenue Support Dispute fell within the arbitration clause in paragraph 2.6 of Schedule 8.1.
2. The “one stop shop” principle discussed in Fiona Trust v Privalov [2008] 1 Lloyd’s Rep 254 was inapplicable. The Franchise Agreement expressly provided for court jurisdiction except where a dispute fell within one of several arbitration clauses.
3. The expression “disputes the amount of a Franchise Payment” was not limited to disputes about payments already notified under paragraph 2.1. The contractual definition of “Franchise Payment”, referring to the amount determined for “any” Reporting Period, was capable of including future payments. Paragraph 1.1 of Schedule 8.1 likewise was not confined to payments already notified.
4. The clause was also apt to cover disputes of contractual construction. A dispute about the amount of a Franchise Payment could involve determining the proper construction of the Franchise Agreement and was not limited to mathematical or accounting errors.
5. The structure of paragraph 2 gave some support to the Secretary of State’s narrower construction, particularly because the later part of paragraph 2.6 concerned payment of an amount already notified. That consideration did not overcome the wider natural meaning of the first part of the clause.
6. Commercial good sense strongly favoured Stagecoach’s construction. The narrower construction would allow the same dispute to fall within court or arbitral jurisdiction depending only on when proceedings were brought, creating unnecessary uncertainty, possible jurisdictional overlap and a race to judgment.
7. The court therefore declined to grant the declaration. Counsel were invited to assist with the order and costs.

First-instance decision. No prior appellate decision is stated in the judgment.