Habas Sinai VE Tibbi Gazlar Isthisal Endustri A.S. v Sometal S.A.L.

General words may incorporate an arbitration clause where the parties are incorporating terms of an earlier contract made between themselves. The court should determine the parties’ intention by ordinary principles of construction and should not impose a special restrictive rule merely because the term concerns arbitration.

A stricter approach is appropriate where terms are incorporated from a contract made between different parties, particularly where linguistic adjustment is required. In a same-parties case, the court must identify the earlier terms intended to be incorporated and be satisfied that the parties intended to include the arbitration agreement. An arbitration clause is not ordinarily an onerous term requiring an extraordinary method of incorporation.

Habaş applied under section 67 of the Arbitration Act 1996 to set aside an LCIA tribunal’s interim final award on jurisdiction and costs. The tribunal had held that a clause in a June 2008 steel-scrap contract incorporated a London arbitration clause appearing in earlier contracts prepared by Sometal.

The parties had repeatedly contracted using short-form documents stating that the remaining terms would be the same as in previous contracts. The central issues were whether general words could incorporate an arbitration clause and whether, on the sequence and context of the contracts, the clause had in fact been incorporated.

1. The application under section 67 of the Arbitration Act 1996 was dismissed. The court was not confined to reviewing the tribunal’s decision.

2. The court distinguished between incorporation of terms from a contract made between the same parties and incorporation of terms from a contract made between different parties. The restrictive approach developed in bill-of-lading, reinsurance and similar two-contract cases does not automatically extend to same-parties cases.

3. Where parties agree the essential terms of a contract and provide that it shall include terms of previous contracts between them, the court must determine from the communications and context which provisions they intended to incorporate. It should not impose special rules limiting incorporation where ordinary construction establishes the agreement.

4. It must be clear which earlier terms are incorporated and that the parties intended to incorporate an arbitration clause, because such a clause concerns dispute resolution rather than substantive contractual obligations. That requirement is satisfied where the later contract incorporates all remaining terms of an earlier same-parties contract and the relevant terms can be identified from the parties’ course of contracting.

5. Terms which are particularly onerous or restrictive may require appropriate notice. An arbitration clause of the present kind is not ordinarily an onerous term requiring special attention or an extraordinary method of incorporation.

6. Applying those principles, the June contract referred to the relevant sequence of later contracts, excluding contracts in which the parties had merely agreed to agree the remaining terms. The Sometal contracts contained the London arbitration clause, and the replacement of a short-form contract by a fuller Sometal form confirmed the parties’ understanding. The clause was therefore incorporated.