Bugsby Property LLC & Anor v Omni Bridgeway (Fund 5) Cayman Invt Limited & Anor

Section 18 of the Arbitration Act 1996 is a gateway provision. An applicant must show a failure in the agreed appointment procedure and a good arguable case that the proposed tribunal has jurisdiction. This is more than a merely arguable case, but need not be more likely than not to succeed.

Whether a contractual referral to counsel constitutes an arbitration agreement is a question of construction. The court must consider the language in its contractual context, including any competing dispute-resolution provisions. A final and binding opinion does not necessarily constitute an arbitral award or require a judicial procedure. Where a mandatory arbitration has already commenced, the court may refuse to constitute a further tribunal under a permissive alternative process.

The claimants applied under section 18 of the Arbitration Act 1996 for assistance in appointing an independent King’s Counsel to determine disputes arising under a variation agreement and a litigation funding agreement.

The variation agreement permitted referral of disputes to an independent King’s Counsel for a final and binding opinion. The funding agreement separately required disputes to proceed, after mediation, to LCIA arbitration. Omni had commenced an LCIA arbitration, and the claimants disputed the arbitrator’s jurisdiction.

The central issues were whether the King’s Counsel clause was an arbitration agreement, whether it covered the disputes despite the existing LCIA arbitration, and whether the court should exercise its section 18 discretion.

1. Application dismissed. The claimants failed to establish a good arguable case that clause 19.2 was an arbitration agreement.
2. Whether a contractual referral is an arbitration agreement is a matter of construction. The court considered whether the clause required a judicial inquiry, including submissions and evidence, and whether the decision-maker was to exercise a judicial function. Clause 19.2 instead referred disputes to an independent King’s Counsel who was instructed to provide an opinion. It contained no provision for submissions, evidence, an award or arbitral procedure.
3. The clause had to be read with the funding agreement. Section 10.2 provided in detailed terms for LCIA arbitration, including the language, governing law, seat and number of arbitrators. Clause 19.2 used materially different language and clause 19.3 expressly replaced only section 10.3. The contractual context therefore strongly indicated that clause 19.2 created a different, simpler and faster process rather than a second arbitration.
4. The reasoning in David Wilson Homes did not determine the issue because it concerned different wording and no competing dispute-resolution clauses. The indicia discussed in Arenson were guidance rather than a binding test applicable without regard to the facts. The contrast identified in Langham House was materially closer to the present case.
5. Even assuming that clause 19.2 was an arbitration agreement, the claimants failed to show a good arguable case that it conferred jurisdiction over the disputes after Omni had commenced the mandatory LCIA arbitration under section 10.2. The clauses contemplated distinct processes, and the permissive route was lost once the mandatory route had been invoked.
6. Alternatively, the court declined to exercise its section 18 discretion. Party autonomy supported holding the parties to the agreed mandatory LCIA route, which had been commenced for good reason and was already addressing whether clause 19.2 displaced section 10.2. The claimants’ preference for the alternative route because of different appeal rights was not a contractual rationale contemplated by the agreement.