Associated British Ports v Tata Steel UK Ltd

A contractual arbitration clause is not void for uncertainty merely because its precise boundaries are difficult to identify. The court should uphold a commercial bargain where the words, read in context, provide a workable standard. A trigger such as a major physical or financial change may be sufficiently certain if some events clearly fall within it and others clearly fall outside it. An arbitrator may revise existing contractual terms where the revision must reflect the relevant change and is confined by the dispute referred. A clause requiring renegotiation and binding determination by an independent arbitrator is more than an unenforceable agreement to agree.

Associated British Ports sought declarations concerning the construction and enforceability of an arbitration clause in its long-term licence agreement with Tata Steel UK Ltd. Tata had served notice alleging a major financial change in circumstances and seeking a substantial reduction in licence fees.

The court considered whether the arbitration clause was binding, whether its scope included the licence fee, and whether it was void for uncertainty because the trigger lacked precision or because the arbitrator lacked objective criteria for revising the licence terms. Tata also sought a stay under section 9 of the Arbitration Act 1996.

1. Scope. The licence fee fell within the arbitration clause. Clear words would be required to exclude so central an element of the bargain from a clause contemplating extensive revision of the licence terms.
2. Trigger. The expression “any major physical or financial change in circumstances” was sufficiently certain to create a binding obligation to arbitrate. Some changes could clearly be identified as within the clause, while others could clearly be excluded. Difficult borderline questions were justiciable issues for the arbitrator.
3. Revision of terms. The arbitrator was not required to devise a new contract in a vacuum. The existing licence provided the starting point, and any revision had to reflect the effect of the major change on the operation of the facilities. The task was confined to revising the licence.
4. Agreement to agree. Clause 22 was more than an agreement to negotiate. Its requirement that an independent arbitrator impose a binding solution if negotiations failed showed that the parties had surrendered their freedom simply to agree or disagree.
5. The court declared that clause 22 was binding, that its trigger was not too uncertain, and that the arbitration covered the licence fee. Further proceedings were stayed under section 9.