HC Trading Malta Ltd v Tradeland Commodities SL

Where a claimant asserts a binding arbitration agreement, has a substantive claim which it wishes to arbitrate, and can commence the arbitration, it is wrong in principle for the Court to determine the agreement’s existence or validity by declaratory relief before the arbitral process is engaged. The Arbitration Act 1996 establishes a scheme under which the tribunal should ordinarily address its own substantive jurisdiction under section 30, subject to the limited court procedures in sections 32, 67 and 72. The Court’s inherent declaratory jurisdiction is not impliedly removed, but it should not be used to circumvent that statutory scheme. Even if the issue is treated as discretionary, relief should be refused where arbitration provides an available and suitable route.

HC Trading Malta Ltd claimed a declaration that it had concluded a binding contract with Tradeland Commodities SL for the sale and shipment of clinker, including an arbitration agreement subject to English law. No shipments had occurred. Tradeland denied that any contract had been concluded and applied to set aside the declaratory claim and/or service out of the jurisdiction.

The parties accepted that there was a serious issue to be tried on whether the contractual documents and emails created a sale contract. HC Trading intended to commence London arbitration, while Tradeland had no threatened court claim of its own. The central question was whether, in those circumstances, the Court should determine the existence and scope of the alleged arbitration agreement before arbitration commenced.

1. Application allowed; claim dismissed. The Court did not decide whether the parties had concluded a contract. The subsidiary applications concerning service out of the jurisdiction did not require determination.
2. The Court retained its general inherent jurisdiction to grant declarations, including declarations where no other relief was claimed, under CPR 40.20. The Arbitration Act 1996 did not expressly or impliedly abolish that jurisdiction. Implied abrogation of an established jurisdiction should not readily be inferred; the reasoning of the Supreme Court in AESUK v U-K JSC supported that caution (paras [8]-[15]).
3. That did not answer whether declaratory relief should be granted. The Act provided an extensive scheme governing jurisdictional questions in arbitration. Section 30 made the tribunal the starting point for determining its own substantive jurisdiction. Sections 32, 67 and 72 supplied defined routes for court involvement. Section 1(c), read with the statutory scheme, required the Court to be extremely slow to intervene outside it (paras [16]-[20]).
4. The distinction between an arbitration already commenced and one merely contemplated was not decisive. A claimant could not avoid the statutory scheme by delaying commencement and invoking the Court’s general declaratory power. Respect for the arbitral process included respect for the scheme and principles underlying the Act. The exception was where the Court had to fill a genuine gap, as in the anti-suit context considered in AESUK v U-K JSC. No such gap existed here because arbitration could be commenced and the statutory jurisdictional procedures would then be available (paras [23]-[34]).
5. Alternatively, the Court would refuse relief in its discretion. Arbitration was an available and suitable forum; court determination might not be quicker or cheaper, risked deciding the central contractual issue, and would give insufficient weight to section 30. The three relevant circumstances were that the claimant asserted a binding arbitration agreement, wished to pursue a claim which it said had to be arbitrated, and could commence arbitration (paras [40]-[42]).

The claim was dismissed.

First-instance decision. No prior appellate decision is stated in the judgment.