Kruppa v Benedetti & Anor

A clause requiring parties to endeavour to resolve disputes through Swiss arbitration, followed by non-exclusive English court jurisdiction if no resolution is forthcoming, is not an arbitration agreement under the Arbitration Act 1996. The wording describes an attempt to agree and use an arbitral process, rather than a binding submission of disputes to arbitration. The absence of essential machinery, including a specified seat and arrangements for appointing arbitrators, reinforces that conclusion. A fallback court clause can operate where the contemplated arbitral attempt does not resolve the dispute.

The claimant brought proceedings against the defendants under three agreements containing identical governing law and jurisdiction clauses. The defendants applied under section 9 of the Arbitration Act 1996 for a stay, arguing that the reference to Swiss arbitration constituted an arbitration agreement within section 6(1).

The clause required the parties first to endeavour to resolve any dispute through Swiss arbitration and provided that, if a resolution was not forthcoming, the English courts would have non-exclusive jurisdiction. The central issue was whether that wording required disputes to be referred to arbitration in the statutory sense.

1. The applications were dismissed with costs. The clause did not constitute an arbitration agreement within section 6(1) of the Arbitration Act 1996.
2. The clause had to be construed by reference to its precise wording. The parties had agreed to endeavour to resolve the dispute through Swiss arbitration, not to refer the dispute to arbitration as a binding adjudicative process. The clause expressly contemplated two stages: an attempt at resolution through the Swiss procedure, followed by litigation in the English courts if no resolution was forthcoming.
3. A binding arbitration would ordinarily produce a binding award and resolve the dispute. That was inconsistent with the clause’s express contemplation that the substantive dispute might proceed to the English courts. The clause therefore did not merely provide for what would happen if an arbitration agreement became null, void, inoperative or incapable of performance under section 9(4).
4. The reference to Swiss arbitration was also incomplete. The agreements specified neither the number nor identity of the arbitrators, the qualifications or method of selection, a Swiss canton as the seat, nor the relevant cantonal court for making appointments in default. Further agreement was required before arbitration could take place.
5. The court distinguished cases involving separate arbitration and jurisdiction provisions requiring reconciliation. This clause itself created a two-stage process and made the fallback court jurisdiction depend on the failure of the contemplated arbitral attempt. It therefore imposed an obligation to attempt to agree and use an arbitral process, rather than a binding obligation to submit the dispute to arbitration.