Lombard North Central Plc & Anor v GATX Corporation

For the purposes of a stay under section 9 of the Arbitration Act 1996, proceedings are “in respect of” a referred matter where that matter will foreseeably arise for determination, even if other issues are also involved. The court examines the substance of the issues, not merely the claimant’s formulation or subjective purpose. It does not assess the merits or arguability of the referred dispute. A dispute about the scope of the arbitration agreement may itself be a referred matter where it affects the enforceability of another contractual obligation. “Inoperative” under section 9(4) concerns circumstances such as waiver, termination, incapacity for arbitration or non-enforcement, and does not simply mean that the dispute falls outside the clause’s scope. The statutory stay regime does not exclude the inherent jurisdiction, which remains available exceptionally to uphold the parties’ agreement and manage closely connected proceedings.

Lombard and GATX were parties to agreements concerning the financing, leasing and sale of railway vehicles. Clause 9.4 of the amended agreement contemplated the establishment of a joint venture and provided for arbitration in London of disputes relating to its creation. No joint venture was established by the specified date.

Lombard commenced Part 8 proceedings seeking declarations that its remaining obligation was only to negotiate in good faith and that the contractual amendments remained effective. GATX applied for a stay under section 9 of the Arbitration Act 1996, alternatively under the court’s inherent jurisdiction. The central issues were whether the declarations concerned matters falling within the arbitration agreement and whether that agreement was inoperative.

1. Stay under section 9. GATX was entitled to a stay of the claim for the first declaration, and the whole proceedings were stayed. Section 9 requires an arbitration agreement, party identity, and proceedings in respect of a matter referable under that agreement. The court must consider what questions will foreseeably arise for determination, rather than being confined to the claim form or the claimant’s subjective purpose.
2. Proceedings need not be principally concerned with the referred matter. They may concern referred and non-referred matters, in which case section 9 permits a stay so far as they concern the referred matter. The court must not, however, grant a stay merely because the proceedings disclose a difference about an issue, including jurisdiction. Here, deciding whether the good-faith negotiation obligation was enforceable required consideration of whether the arbitration clause covered the contemplated negotiations. That brought the scope of the arbitration agreement within the first claim.
3. The court was not to decide the merits or arguability of the parties’ competing interpretations of the arbitration clause. The statutory scheme required the court to determine whether a referred matter existed. GATX’s broader construction was arguable, which was sufficient under the applicable Court of Appeal authority.
4. “Inoperative” in section 9(4) does not mean merely that the dispute falls outside the scope of the arbitration clause. It concerns circumstances in which the right to invoke the agreement has been lost or the arbitration cannot properly operate, including waiver, accepted repudiation, incapacity for arbitration or non-enforcement by the court. The court rejected Lombard’s wider construction.
5. The inherent jurisdiction to stay remained available, although only exceptionally and consistently with the statutory scheme. If section 9(1) had not applied, a stay would have been justified to uphold the parties’ agreement that the arbitral tribunal should determine its own jurisdiction. The court would not have used that jurisdiction if the agreement were inoperative.

The court granted the stay, subject to hearing submissions on safeguards to ensure that the dispute could be referred to arbitration.