TXM Olaj-ES Gazkutato KFT v Claxton Engineering Services Ltd

Permission to appeal may be granted where a proposed ground raises an arguable issue about whether the English court or an arbitral tribunal should determine the existence of an arbitration agreement. The scope of Arbitration Act 1996, section 9, and the principle of Kompetenz-Kompetenz may require examination on appeal, particularly where the parties have not agreed that the English court should decide the issue. Other arguable issues may concern contractual assent by silence, course of dealing, signed purchase orders and jurisdiction based on delivery. The court may grant permission generally across connected judgments and grounds.

Claxton Engineering Services Ltd and TXM disputed the terms governing nineteen purchase orders. Gloster J held that Claxton’s proposal for English law and English jurisdiction prevailed over TXM’s purchase-order terms providing for Hungarian arbitration and Hungarian law, and dismissed TXM’s application for a stay under section 9 of the Arbitration Act 1996.

Hamblen J subsequently granted Claxton an anti-suit injunction relating to arbitration proceedings in Hungary, on the premise that Gloster J’s judgment stood. TXM sought permission to appeal against both judgments. The central issue was whether the English court had to determine the existence of a binding arbitration agreement, or whether it was sufficient to establish a good arguable case for the tribunal to determine that question.

1. Applications granted. Rix LJ granted permission to appeal against both Gloster J’s judgment of 15 October 2010 and Hamblen J’s judgment of 1 February 2011. The applications were conjoined because the anti-suit injunction was premised on the earlier judgment.
2. The principal arguable ground concerned Ahmad Al-Naimi v Islamic Press Agency [2000] 1 Lloyd’s Rep 522. Gloster J had treated that decision as binding authority permitting the English court to decide whether a binding arbitration agreement existed. Rix LJ considered that Waller LJ had left open, at page 525, whether section 9 required such a decision. The critical feature of Ahmad Al-Naimi was that the parties had agreed that the English court would determine whether the arbitration clause applied. There was no such common ground here.
3. TXM’s submission that the court should ordinarily require only a good arguable case for an arbitration agreement, having regard to the philosophy of arbitration under the New York Convention and the importance of Kompetenz-Kompetenz, raised an arguable issue suitable for appeal. TXM had accepted only that, if it were necessary for the English court to decide the threshold question, no further evidence was required.
4. There were further arguable issues concerning whether English law and jurisdiction had been agreed by silence, in light of Jayaar Impex Ltd v Toaken Group Ltd [1996] 2 Lloyds Rep 437, and the effect of the parties’ course of dealing. At least six purchase orders had been signed without reservation while referring to Hungarian arbitration and law; others were signed under reservation or not returned. The legal effect of those differing circumstances remained for the appeal.
5. A further, weaker ground concerned whether delivery was ex-works in England, engaging article 5.1 of the Judgment Regulation, or occurred only at the ultimate destination in Hungary, engaging article 2. Permission was nevertheless granted generally, without limiting the grounds. Rix LJ counselled the parties to address the underlying merits and consider mediation before incurring disproportionate costs in interlocutory jurisdictional disputes.

• Court of Appeal (Civil Division): [2011] EWCA Civ 410. Permission to appeal granted against both judgments.
• High Court, Queen’s Bench Division, Commercial Court: Gloster J, judgment dated 15 October 2010. Claxton’s English law and jurisdiction terms were held to prevail; TXM’s section 9 stay application was dismissed.
• High Court, Queen’s Bench Division, Commercial Court: Hamblen J, judgment dated 1 February 2011. An anti-suit injunction relating to Hungarian arbitration was granted on the premise of Gloster J’s judgment.