IS Prime Ltd v TF Global Markets (UK) Ltd & Ors

A process described as non-binding arbitration is not an arbitration agreement under Arbitration Act 1996, s 6(1), where the parties are not bound by the tribunal’s decision and the process will not determine their legal rights. Substance prevails over labels.

A court may stay proceedings under Senior Courts Act 1981, s 49(3), in favour of an agreed pre-litigation process, but only where the relevant agreement is established. Participation in a non-binding process does not, without unequivocal communications or conduct, establish a promise to delay litigation. Ordinary case-management considerations may justify allowing litigation and alternative dispute resolution to proceed in parallel.

IS Prime Limited claimed damages and other relief against associated companies arising from an alleged breach of an exclusivity agreement concerning brokerage services.

The defendants sought a stay. They relied principally on an ongoing American Arbitration Association process involving the parties, which produced only a non-binding assessment. They applied under s 9 of the Arbitration Act 1996 and, alternatively, under s 49(3) of the Senior Courts Act 1981.

The central issues were whether the process amounted to arbitration within s 6(1), and whether the parties had agreed to complete it before pursuing proceedings in England.

1. The applications for a stay were dismissed. The AAA process was non-binding and would not determine the parties’ legal rights. It was therefore not arbitration within s 6(1) of the Arbitration Act 1996.

2. The essential characteristic of arbitration is the consensual submission of disputes to an individual or tribunal whose decision binds the parties, subject to any agreed appeal or review process. The use of the words “arbitration”, “submission” or “non-binding” cannot determine the issue. The substance of the process governs.

3. The court followed the ratio identified in Berkeley Burke SIPP Administration LLP v Charlton et al. [2017] EWHC 2396 (Comm): determinative jurisdiction is a necessary ingredient of arbitration. Section 58(1) permits agreement concerning the finality and binding effect of an award, but does not permit a process which will never determine or bind the parties to be treated as arbitration.

4. J v B (Family Arbitration Award) [2016] EWHC 324 (Fam) and Hayley v Hayley [2020] EWCA Civ 1369 concerned a different process: an award intended to be final and binding, subject to the court’s role in reviewing or embodying it in an order. They did not assist the defendants.

5. There was no unequivocal agreement between IS Prime and the defendants that litigation in England would await completion of the AAA process. Their participation conveyed willingness to obtain a non-binding assessment, not a promise to defer litigation.

6. The ordinary case-management discretion under s 49(3) did not justify a stay. The parties’ expenditure, disclosure, depositions and expert evidence in the AAA process did not outweigh the prejudice and delay that would result from postponing the English claim. Directions were given for the claim to proceed, with case management scheduled after the anticipated final hearing of the AAA process.