Broda Agro Trade (Cyprus) Ltd v Alfred C Toepfer International GmbH

Section 72 of the Arbitration Act 1996 protects only a person who takes no part at all in the arbitral proceedings. It does not preserve a separate court challenge for a person who abstains from a jurisdictional phase but later participates on the merits. Such a person must challenge the award under section 67 within the applicable time limit, subject to the court’s power to extend time.

The statutory restrictions on jurisdictional challenges cannot be avoided by seeking a common-law declaration. A reasonable section 67 time limit, coupled with a power to extend it, is compatible with Article 6.

Toepfer commenced GAFTA arbitration alleging that Broda had contracted to supply milling wheat. Broda denied that any contract, and therefore any arbitration agreement, had been concluded.

The tribunal issued an interim award holding that it had jurisdiction. Broda thereafter made submissions on the substantive claim, while maintaining that there was no contract. The tribunal’s final award found Broda in breach and awarded damages, interest and costs.

Teare J dismissed Broda’s application for a declaration under section 72 of the Arbitration Act 1996, or an extension of time to challenge the interim award under section 67: [2009] EWHC 3318 (Comm). The central issue on appeal was whether participation on the merits prevented reliance on section 72.

1. Appeal dismissed. Stanley Burnton LJ gave the principal judgment, with which Lloyd and Mummery LJJ agreed.

2. Section 72(1) of the Arbitration Act 1996 applies only where the person alleged to be a party has taken no part in the arbitral proceedings. Its words could not be restricted by implication to participation in a separate jurisdictional stage. A person who participates either in the determination of jurisdiction or in the merits, and is dissatisfied with the tribunal’s decision, must use the section 67 procedure within its time limit, subject to a possible extension.

3. This construction reflects the purpose of section 72. A person who genuinely maintains that the arbitration is nothing to do with it may ignore the process and seek relief from the court. It would be artificial, and sometimes impossible, to divide participation concerning jurisdiction from participation on the merits, particularly where the existence of a contract is both the jurisdictional issue and central to the merits.

4. Section 30 did not introduce the doctrine of kompetenz-kompetenz into English law. A tribunal’s ruling on its own substantive jurisdiction is nevertheless subject to the court’s unqualified review under sections 67 or 72. That differs from a merits award, for which findings of fact generally bind the parties and any appeal on law is restricted. Caparo Group Ltd v Fagor Arrasate Sociedad Cooperative [2000] ADRJ 254 did not assist Broda, because Caparo had taken no further part in the arbitration and the issue now raised did not arise there.

5. Article 6 did not assist Broda. The section 67 limitation period, together with the power to extend time, gave a real and practical opportunity to obtain a public and reasoned court determination.

6. Teare J had carefully applied the relevant guidance when refusing an extension of about 14 months. Broda had not shown any error of law or principle. It had unreasonably failed to obtain English legal advice despite facing a substantial London arbitration. Nor could the statutory restrictions be circumvented by a claim for a common-law declaration.

• Court of Appeal (Civil Division) — dismissed Broda’s appeal: [2010] EWCA Civ 1100.
• High Court, Queen’s Bench Division, Commercial Court — Teare J dismissed Broda’s claims under sections 72 and 67 of the Arbitration Act 1996, while granting permission to appeal: [2009] EWHC 3318 (Comm).