B v S

A Scott v Avery arbitration clause in the standard FOSFA form may exclude applications to the English court for ancillary relief, including a freezing injunction. The words prohibiting any action or other legal proceedings in respect of the dispute are sufficiently wide to cover supportive proceedings as well as proceedings determining the merits.

Under the Arbitration Act 1996, section 44 is non-mandatory. The parties may therefore agree to exclude the court’s powers without using a special form of words. Earlier decisions under the Arbitration Act 1950 do not establish a contrary construction, because the court’s powers under section 12(6) of that Act could not be contracted out of.

B sought a worldwide freezing injunction against S in support of two FOSFA arbitrations concerning contracts for the sale of sunflower seed oil. The injunction was granted without notice under section 44 of the Arbitration Act 1996.

S applied to discharge it. The central issue was whether clause 29 of FOSFA 54, requiring disputes to be heard and determined in arbitration before either party brought any action or other legal proceedings, excluded an application for a freezing injunction before an award. The court considered the effect of earlier authorities decided under the Arbitration Act 1950 and the significance of party autonomy under the 1996 Act.

1. Application allowed. The freezing injunction was obtained in breach of clause 29 and was discharged.

2. On its true construction, the second paragraph of clause 29 was wide enough to prohibit all proceedings in respect of the dispute before an award, including ancillary or supportive proceedings seeking security. The words did not justify a distinction between substantive proceedings and ancillary proceedings, or between proceedings in England and abroad.

3. The earlier decisions in Mantovani v Carapelli and the cases following it were decided against the mandatory regime of section 12(6) of the Arbitration Act 1950. That provision prevented the parties from excluding the court’s power to grant security. Those cases therefore did not establish that the language of a Scott v Avery clause permitted ancillary relief in England.

4. The Arbitration Act 1996 introduced a different statutory scheme based on party autonomy. Section 44 is non-mandatory, and the words “unless otherwise agreed by the parties” require the court to construe the arbitration agreement to determine whether the parties agreed to exclude its powers. No special or express formula is required. A standard arbitration clause without the Scott v Avery element would not itself be sufficient, but clause 29 was sufficient.

5. The reference in the FOSFA rules to arbitration being conducted in accordance with the 1996 Act did not make section 44 mandatory or narrow the natural meaning of clause 29. Excluding the court’s supervisory powers did not frustrate the arbitration agreement, since those powers regulate the arbitral dispute rather than assist enforcement of a future award.