ABC v DEF

Under Arbitration Act 1996, s.72, a non-participating person may apply to the court to determine whether the arbitration agreement invoked in existing proceedings is valid and binding on that person. The court may grant declaratory relief where the proceedings rely on an arbitration agreement to which the applicant is not a party and the respondent has abandoned that jurisdictional case.

Corporate personality cannot be disregarded merely because a parent and subsidiary operate on an integrated basis or share personnel. A separate implied agreement, if relied on, must be identified as the jurisdictional basis of the reference. The court need not determine a fact-sensitive implied-contract issue where it does not arise on the reference before it.

The claimant applied under s.72 of the Arbitration Act 1996 for declarations that it was not party to arbitration agreements contained in two contracts made between the defendant and the claimant’s subsidiaries. The defendant had commenced LCIA arbitrations naming the claimant as a respondent, relying in the requests for arbitration on those contracts and their arbitration clauses.

In the proceedings, the defendant abandoned that case and relied instead on an alleged separate implied agreement under which the claimant had assumed contractual obligations and an arbitration agreement in equivalent terms. The central issue was whether the court should determine the claimant’s status by reference to the existing references or leave the issue to the tribunal under s.30.

1. Declarations under s.72. The claimant was entitled in principle to declarations that it was not party to the arbitration agreements in the two subsidiary contracts and was not liable to be a party to arbitral proceedings concerning alleged breaches of those contracts. The final wording of the order was to be settled, with possible reformulation to allow for an application to amend or commence a new reference.
2. Contractual parties and corporate personality. The contracts unambiguously identified the defendant and the relevant subsidiary as their parties. Applying English law, the claimant could not be treated as a party merely because it was the parent company, controlled the subsidiaries, or operated with them on an integrated basis. Corporate personality may be disregarded only where necessary to prevent abuse, which was not established.
3. Written variation and novation. Clause 17 required a variation, discharge, modification or waiver to be in writing and signed by the party against whom it was relied upon. The defendant’s abandoned case could not avoid that requirement by treating the claimant as a party to agreements that expressly excluded it.
4. Scope of the existing references. The requests for arbitration invoked only the arbitration agreements in the subsidiary contracts. The alleged implied agreement between the claimant and defendant was a different contractual and jurisdictional basis, was not identified in the requests, and had not been made the subject of a new reference. The defendant could not resist the application by relying on a case absent from the existing references.
5. Judicial caution. Although the court should exercise caution before interfering with arbitration and tribunals may rule on their own jurisdiction under s.30, that caution did not prevent relief where the applicant had not participated and the existing proceedings did not invoke a valid arbitration agreement binding it. The court therefore did not need to investigate the proposed implied contract or determine how it would have managed that issue if properly raised.
6. Costs. The claimant recovered its costs on the standard basis. Indemnity costs were refused: opposing an application, even unsuccessfully and emphatically, was not conduct outside the norm. Proportionality required assessment by reference to the lowest amount reasonably necessary for proficient conduct, applying the London 1 guideline rates and reducing excessive time claims.
7. Permission to appeal was refused because the proposed appeal had no realistic prospect of success.

First-instance decision. Permission to appeal was refused; any further application was to be made to the Court of Appeal.