JSC BTA Bank v Ablyazov & Ors

Under section 9 of the Arbitration Act 1996, a party seeking a stay must establish a written arbitration agreement. The party resisting the stay must then satisfy the court that the agreement is null and void, inoperative or incapable of being performed. A challenge that the underlying contract is voidable does not necessarily impeach the arbitration agreement, which is separable from the main contract. The court must choose one of the recognised procedures for resolving any dispute about the existence or validity of the arbitration agreement. It cannot leave that issue unresolved merely because related claims remain before the court. Broad wording covering disputes arising from or connected with the contract may extend to non-contractual claims connected with the contractual relationship. A related claim may also be stayed on case-management grounds where its determination substantially depends on the outcome of the arbitration.

The Bank brought claims concerning loans made to Tekhinvest and other companies. It alleged that the transactions were affected by undisclosed related-party interests, dishonesty and breaches of Kazakh law. Tekhinvest applied under section 9 of the Arbitration Act 1996 for a stay, relying on arbitration clauses in the loan agreements. The Bank argued that the alleged invalidity of the loan agreements also invalidated the arbitration clauses and that the arbitration clauses did not cover its non-contractual claims.

Colligate, Tekhinvest’s parent company, sought a stay on case-management grounds because the claims against it depended substantially on the claims against Tekhinvest. The central issues were whether an arbitration agreement had been concluded, whether it was invalid or incapable of performance, and whether it covered the claims pleaded.

1. Tekhinvest’s application granted. The loan agreements contained or incorporated written arbitration agreements. The Bank’s pleading sought declarations that the transactions were invalid or not binding, rather than asserting that it had already avoided them. The agreements therefore constituted arbitration agreements for the purposes of section 9(1) of the Arbitration Act 1996 (paras [23]-[27]).
2. Section 9 requires the court to distinguish between the conclusion of an arbitration agreement and the separate question whether it is null and void, inoperative or incapable of being performed. The applicant must establish the written agreement. The burden of satisfying the court on the invalidity conditions lies on the party resisting the stay. An arguable case that the arbitration agreement is not invalid is sufficient for a stay, subject to the court’s assessment under section 9(4) (paras [31]-[36], [46]-[49]).
3. The separability principle means that invalidity or rescission of the main contract does not necessarily invalidate the arbitration agreement. A direct challenge to the arbitration agreement is required. The Bank’s case was that the agreements were voidable by court order because of non-disclosure and lack of approval; it was not that no agreement had come into existence or that the arbitration agreement had been terminated. The Bank had not shown that the arbitration agreement was null and void, inoperative or incapable of performance (paras [41]-[49]).
4. The court had to adopt one of the recognised procedures for resolving a dispute about the existence or validity of an arbitration agreement. It was not permissible to leave the question unresolved on the basis that it was the principal issue in the action. An issue should be tried only where the investigation can be confined to a relatively circumscribed area, rather than requiring determination of the substantive dispute (paras [28]-[30], [38], [50]).
5. The Kazakh jurisdiction provision did not govern proceedings in England and Wales or displace the Arbitration Act 1996. The arbitration clause, construed according to the ordinary meaning of its broad words and the applicable principles of Kazakh law, covered the Bank’s non-contractual claims because they arose from or were connected with the loan agreements (paras [51]-[65]).
6. Colligate’s application was also granted. It made no case-management sense for the claim against Colligate to proceed without Tekhinvest, since the existence and extent of any loss depended substantially on the outcome of the Tekhinvest arbitration. The proceedings against Colligate were stayed pending that arbitration (paras [66]-[72]).