Exmek Pharmaceuticals SAC v Alkem Laboratories Ltd

An arbitration clause should, where commercially possible, be construed so that it is effective. A clause giving the courts of the United Kingdom exclusive jurisdiction may coexist with an arbitration clause where the provisions can be understood as allocating supervisory jurisdiction to the courts and arbitral jurisdiction to the tribunal. An imprecise reference to UK law or courts does not necessarily invalidate the agreement where the commercial context identifies England and Wales as the intended forum. Silence and inactivity do not, without more, establish abandonment of an arbitration agreement. A party defending foreign proceedings while preserving its jurisdictional objection does not thereby submit to the foreign court’s jurisdiction.

The claimant challenged under section 67 of the Arbitration Act 1996 an arbitrator’s award that he had jurisdiction over a dispute concerning a distribution agreement. The agreement referred to the law and courts of the UK and separately required disputes to be referred to arbitration in the UK. The defendant had participated in proceedings in Peru, unsuccessfully challenging the application of Peruvian law and later pursuing appeals, while following legal advice intended to preserve its jurisdictional objection.

The issues were whether there was a valid arbitration agreement, whether it had been abandoned, whether the defendant had submitted to the Peruvian courts or the Peruvian judgments should be recognised, and whether the arbitrator had been improperly appointed or was disqualified by nationality.

1. Jurisdictional review. The court had to determine jurisdiction for itself from the beginning, although it could consider the arbitrator’s reasoning where helpful: Dallah Co v Ministry of Religious Affairs of Pakistan [2011] 1 AC 763.
2. Validity and construction. Articles 13 and 14 were capable of consistent construction. Article 13 identified the governing law and the courts supervising the arbitration; Article 14 provided for arbitration. The reference to UK law and courts meant, in this commercial context, the law and courts of England and Wales. The agreement therefore provided an effective arbitration clause, with London as the intended seat or venue. The court applied a construction favouring validity, commercial common sense and the avoidance of surplusage, relying on Paul Smith Ltd v H & S International Holdings Inc, [1991] 2 Lloyd's Rep 127, Shell International Petroleum Co Ltd v Coral Oil Co Ltd [1999] 1 Lloyd's Rep 72, AXA Re v Ace Global Markets Ltd [2006] Lloyd’s Rep IR 683, Fiona Trust & Holding Corp v Privalov [2007] Bus LR 1719 and Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900.
3. The absence of express wording making the award final and binding did not invalidate the clause. That consequence was inherent in arbitration and was in any event supplied by section 58(1) of the Arbitration Act 1996.
4. No abandonment or submission. The defendant’s failure to respond to requests for an addendum did not amount to abandonment. Applying the principles in The Hannah Blumenthal [1983] 1 AC 854 and Allied Marine Transport v Vale do Rio Doce Navegacao SA [1985] 1 WLR 925, abandonment required conduct from which agreement or a reasonable belief in abandonment could be inferred. The defendant’s conduct in Peru was directed to preserving its jurisdictional challenge, not accepting the Peruvian court’s jurisdiction. The approach in AES Ust-Kamenogorsk-Hydropower Plant LLP v Ust-Kamenogorsk Hydropower Plant JSC [2012] 1 WLR 920 (CA) was applicable. Sections 32 and 33 of the Civil Jurisdiction and Judgments Act 1982 also meant that the English court was not bound by the Peruvian court’s conclusions on the arbitration agreement.
5. Appointment and nationality. The parties had clarified, rather than varied, the agreement by agreeing to three arbitrators, so the defendant was entitled to invoke section 17. The arbitrator’s nationality did not raise a jurisdictional objection under English law. Any complaint about fairness or procedural guidance drawn from LCIA rules was a matter under section 68, which was not pursued under the challenge before the court.
6. The claimant’s application under section 67 failed.