Claxton Engineering Services Ltd v TXM Olaj-Es Gazkutato KFT

Where the existence of an arbitration agreement is disputed, the court may decide the threshold issue itself or stay proceedings for determination by an arbitral tribunal. The choice depends on the circumstances, the clarity of the evidence, the parties’ interests, proportionality and whether arbitration will proceed in any event.

In a battle of the forms, the traditional offer and acceptance analysis generally applies unless the documents and conduct show a common intention that different terms should prevail. Continued performance may accept a counter-offer where the other party has been given a clear opportunity to respond.

Claxton claimed payment for engineering equipment supplied to TXM. TXM applied under section 9 of the Arbitration Act 1996 for a stay, asserting that its general terms contained an agreement to arbitrate in Hungary. Alternatively, it relied on Article 2 of Council Regulation (EC) 44/2001 and contended that Hungary was the proper forum.

Claxton contended that contracts had been formed through written instructions and performance, and that its subsequent counterproposal replaced the Hungarian arbitration and governing-law provisions with an exclusive English jurisdiction clause and English law. The issues included who should decide the threshold jurisdiction question, which terms governed, and whether the English proceedings should be stayed.

1. Threshold issue. The court was entitled to determine whether an arbitration agreement existed. Applying Ahmad Al Naimi v Islamic Press Agency [2000] 1 Lloyds Rep 522 and the factors identified in Birse Construction Limited v St. David Limited [1999] BLR 194, it was appropriate to decide the issue because the evidence was substantially written, the parties agreed that no cross-examination was needed, and referring the matter to an unconstituted tribunal risked unnecessary cost and delay.
2. Formation and terms. The parties’ course of dealing showed that contracts were formed when TXM gave written instructions to proceed, or at the latest when Claxton confirmed that it had begun manufacture. Formal purchase orders usually followed formation and were not operative offers or acceptances. Claxton’s 19 June 2006 communication was an objective counter-offer rejecting Hungarian arbitration and Hungarian law and proposing exclusive English jurisdiction and English law.
3. Battle of the forms. Following Tekdata Interconnections Ltd v Amphenol Ltd [2009] EWCA Civ 1209, the traditional offer and acceptance analysis applied. TXM’s continued trading and performance, without rejecting Claxton’s counter-offer, amounted to acceptance of the English jurisdiction and governing-law terms. Alternatively, if that analysis was not adopted, there was no consensus on those matters. The court accepted that arbitration clauses are separable, but found no agreement to arbitrate.
4. Jurisdiction and stay. The disputed contracts, except invoice 8671, were subject to exclusive English jurisdiction, engaging Article 23.1 of the Regulation. Invoice 8671 was not subject to arbitration and fell within Article 5.1(b), because delivery was ex-Claxton’s works in Great Yarmouth. The Hungarian courts were not a more appropriate forum.
5. TXM’s application for a stay was dismissed.