J&W Sanderson Ltd v Fenox (UK) Ltd & Ors

A stay under section 9 of the Arbitration Act 1996 requires the relevant court proceedings to involve the parties to the arbitration agreement, or persons claiming through or under them. A shareholder’s statutory petition is not brought under or through a shareholder’s separate contractual arbitration agreement merely because the shareholder may be controlled by a party to it. A discretionary stay should be granted only where the court can meaningfully assess the relationship between the court proceedings and the arbitration, together with factors including cost, convenience and the interests of justice. The absence of identified arbitration proceedings, issues and relief may justify refusal of a stay.

J&W Sanderson Ltd, a 50 per cent shareholder in Fenox (UK) Ltd, presented a petition concerning alleged management deadlock and purported acts by individuals said to be acting for the company. The petitioner sought, among other relief, transfer of the company’s shares in a Belarusian subsidiary to its shareholders. Mr Arbuzov and Fenox GmbH sought a stay pending arbitration of a wider dispute arising from a partnership agreement between Mr Arbuzov and Mr Vaganov.

The application relied on section 9 of the Arbitration Act 1996 and, alternatively, the court’s inherent jurisdiction and case-management powers. The central issues were whether a statutory shareholder petition could be stayed as of right and whether the circumstances justified a discretionary stay.

1. The applications were refused. The petition was not stayed under section 9 of the Arbitration Act 1996.

2. Section 9 could not apply because the original parties to the petition—the petitioner, Fenox GmbH and Fenox (UK) Ltd—were not parties to the partnership agreement or its arbitration clause. Mr Arbuzov’s joinder as an additional respondent was for the purpose of obtaining effective injunctions and did not make him, or Fenox GmbH, entitled to seek a stay against the petitioner. Under Mayor and Commonalty and Citizens of the City of London v Sancheti [2008] EWCA Civ 1283, the claimant also had to be a party to the arbitration agreement. Section 82(2) did not assist because the petitioner claimed in its own right as a registered shareholder for relief provided by English statute; it was not claiming under or through a party to the arbitration agreement.

3. Joining Mr Vaganov would not cure the defect. He would not become the claimant, so the requirement that the claimant also be a party to the arbitration agreement would remain unsatisfied.

4. The court had a separate discretionary power to stay proceedings under its inherent jurisdiction or case-management powers. The approach in Reichhold Norway ASA v Goldman Sachs International [2000] 1 WLR 173 required a careful assessment of the interrelationship between the arbitration and court proceedings, together with matters such as relative cost, convenience and the interests of justice. Stays in such circumstances were rare and required compelling circumstances.

5. No meaningful assessment could be made. No arbitration was in progress, the proposed issues and relief were unclear, and the offered undertaking to commence arbitration within 28 days did not resolve those uncertainties. There was also a real possibility of preliminary disputes concerning the tribunal’s jurisdiction.

6. The petition was an appropriate vehicle for resolving the dispute between the corporate shareholders of an English company under English law. The court could take account of any underlying partnership or quasi-partnership relationship proved by sufficient evidence and fashion relief accordingly. No compelling reason for a stay had been shown.

First-instance decision. The judgment records no appeal.