British Telecommunications Plc v SAE Group Inc

Where the existence of an arbitration agreement is disputed, the court must first determine whether an agreement exists and covers the dispute. If no such agreement exists, the Arbitration Act 1996 does not restrict the court’s ordinary jurisdiction.

A clause providing for an independent third party to act as an expert, whose decision is final subject to manifest error, is an expert-determination provision rather than an arbitration agreement. A draft dispute-resolution clause contained in an agreement which the parties never executed has no contractual effect.

BT sought declarations concerning dispute-resolution provisions in a contract under which SAE had supplied equipment, software and services. The contract included a draft IPR Information Deposit Agreement in Appendix 4 to Schedule 2. Its clause 17 provided for disputes to be referred to an independent third party acting as an expert.

SAE had unilaterally procured the appointment of Dr Gaitskell and later sought to restart the proposed proceedings. BT maintained that Appendix 4 had never been agreed, that clause 17 was not an arbitration clause, and that it would not cover SAE’s claim for payment following termination. The central issues were whether the court should determine those matters and whether the Arbitration Act 1996 applied.

1. Threshold jurisdiction. The court was entitled to determine whether an arbitration agreement existed before deciding whether the restrictions and procedures in the Arbitration Act 1996 applied. If no arbitration agreement existed, sections 72 and 32 did not limit the court’s ordinary jurisdiction.
2. No agreement to Appendix 4. The evidence established that BT had not requested SAE to enter into the IPR Information Deposit Agreement and that the parties had not executed it. The draft terms, including clause 17, therefore had no binding contractual effect.
3. Expert determination, not arbitration. Even if clause 17 had been agreed, it would have provided for expert determination. The express requirement that the third party act as an expert, the finality provision subject to manifest error, and the absence of any obligation to conduct a judicial inquiry or hear evidence were inconsistent with an arbitration agreement. The court distinguished the construction reached in David Wilson Homes Ltd v Survey Services Ltd [2001] BLR 269.
4. Scope. Clause 17 concerned disputes under, connected with, or arising from the IPR deposit agreement. It did not extend to SAE’s claim for payment under clause 25.4 of the General Conditions following termination of the principal contract. The broad approach to arbitration clauses in Fiona Trust & Holding Corporation v Yuri Privolov [2007] 2 Lloyd’s Rep 267 and [2008] 2 Lloyd’s Rep 254 did not produce a different result.
5. Alternative statutory analysis. If the Act applied, BT had taken no part in the purported arbitration and could proceed under section 72. The requirements of section 32(2)(b) were also satisfied: court determination was likely to save substantial costs, the application was made without relevant delay, and the tribunal’s own suggestion of a section 32 application supplied good reason for the court to decide the issue. Section 73 did not require BT to pursue its objection after making it.
6. Declarations. The court declared that there was no arbitration or expert-determination agreement; the Appendix 4 draft terms were ineffective; clause 17 was not an arbitration clause and would not cover the termination-payment dispute; Dr Gaitskell had no jurisdiction; his purported appointment was null and void; and the purported proceedings were null and void.