Toyota Tsusho Sugar Trading Ltd v Prolat SRL

Under Arbitration Act 1996, the court may determine an arbitral tribunal’s substantive jurisdiction where the statutory permission and cost-saving requirements are met. An arbitration agreement need not be signed if it is made in writing, evidenced in writing, made orally by reference to written terms, or recorded by a party with authority. A party may also be bound through its agent’s actual or ostensible authority, or by ratification through conduct. A broadly worded clause covering disputes arising out of or connected with a contract extends to both contractual claims and related claims falling within that connection.

The claimant sought a determination under section 32 of the Arbitration Act 1996 concerning the substantive jurisdiction of an arbitration tribunal appointed by the Refined Sugar Association. The defendant had commenced related proceedings in Naples and challenged the existence of any arbitration agreement, but did not participate in the English proceedings despite receiving notice.

The dispute concerned whether the parties had concluded a contract for the sale of approximately 10,000 metric tonnes of sugar, including three addenda, and whether those documents incorporated a valid arbitration clause governed by English law.

1. The requirements of section 32(2)(b) and section 32(3) of the Arbitration Act 1996 were satisfied. Factual issues required determination, an appeal from the tribunal’s decision was possible, the application was made without delay, and determination by the court was likely to produce substantial savings in costs.

2. The existence of an arbitration agreement was outside the scope of Regulation 44/2001 under its arbitration exclusion. The English court and the tribunal could therefore determine the arbitration issue notwithstanding the Italian proceedings. The later Regulation 121/2012 would produce no different result.

3. The putative contract was governed by English law. The contractual documents contained an express choice of law, and there was no manifestly closer connection with another country. The alternative rule for contracts for the sale of goods also pointed to English law.

4. The evidence established that Mr Dibranco had both actual and ostensible authority to negotiate and agree the contract and addenda for Prolat. The documents therefore bound Prolat although they had not been signed on its behalf. Independently, Prolat ratified and accepted the contractual terms by receiving the documents, taking delivery of the sugar and on-selling part of it.

5. The requirements of section 5 of the Arbitration Act 1996 were met. The arbitration terms were recorded in written contracts and addenda, agreed orally by reference to those written terms, and accepted directly and through Prolat’s conduct.

6. The clause covering any dispute arising out of or in connection with the contract was sufficiently wide to include Toyota’s claims and Prolat’s claims. The tribunal accordingly had substantive jurisdiction.

A declaration was granted in the terms sought. Prolat was ordered to pay Toyota’s costs, subject to detailed assessment if not agreed.

This was a first-instance application under section 32 of the Arbitration Act 1996. The tribunal had granted permission for the court to determine the jurisdiction questions.