Court of Appeal confirms peremptory order despite pending jurisdictional challenge

In the case of S3D Interactive, Inc v Oovee [2022] EWCA Civ 1665, the Court of Appeal has dismissed an appeal of a decision to enforce a peremptory order under s42 of the English Arbitration Act (Act), finding that the Court retains the power to enforce a peremptory order even where a jurisdictional challenge is pending.

Background

The background to this case is summarised in our blogpost on the Commercial Court judgment, which can be found here. The appeal concerned only one element of the Commercial Court decision, which was Mr Justice Butcher's decision to enforce a peremptory order under s42 of the Act despite one party's contention that the sole arbitrator no longer had jurisdiction because there had been a repudiatory breach of contract. Mr Justice Butcher had concluded that the Court's power under 42 of the Act extended to a tribunal whose jurisdiction was subject to challenge.

S3D Interactive, Inc (which had been anonymised to RQP in the Commercial Court judgment) (S3D) appealed that decision. It argued that the judge should have decided whether or not the arbitral tribunal had jurisdiction before making a s42 order. It relied on the following arguments:

• The relevant condition for a peremptory order in this case was contained in s42(2)(b) of the Act, which provided that an application could be made "by a party to the arbitral proceedings with the permission of the tribunal…". However, a tribunal which lacks jurisdiction is not a "tribunal" within the meaning of the section.
• Section 42 only applied "Unless otherwise agreed by the parties". Where a tribunal lacks jurisdiction, the parties have "otherwise agreed", because the whole arbitral process is consensual, and the parties do not agree to the enforcement of peremptory orders by a tribunal that does not have jurisdiction. If the tribunal has no jurisdiction, then the court is not supporting the arbitral process.

Although the parties settled their dispute shortly after the hearing, the Court of Appeal nonetheless decided to issue a judgment explaining how it would have disposed of the appeal given that it raised a point of general interest.

Decision

The Court of Appeal concluded that S3D's construction of s42 of the Act was unsound. Section 42 is one of the sections of the Act in which the Court is empowered to make orders to support the arbitral process. S3D's contention that the Court had to first satisfy itself of the tribunal's jurisdiction under this section would cut across the careful structure of the limited circumstances in which the Court is entitled to address and determine a jurisdictional challenge.

The words "tribunal" and "party to arbitral proceedings" in s42(2) meant what they said in accordance with their natural meaning, irrespective of whether there was an unresolved issue as to the substantive jurisdiction of the tribunal.  This was also consistent with the way in which those words were used elsewhere in the Act, including sections 30, 31, 33, 34, 36, 37, 42, 44, 67(2) and 70(4). There was an established principle that where the same words are used more than once in a statute, the presumption is that they have the same meaning – see Bennion, Bailey & Norbury on Statutory Interpretation 8^th ed Section 21.3 and R (Good Law Project v Electoral Commission [2018] EWHC 2414.

The Court of Appeal also commented that S3D's reliance on the words "unless otherwise agreed" was misplaced: these referred to a specific agreement to oust the jurisdiction of the court to make an order under s42, and were not engaged by an argument that the tribunal lacked jurisdiction.

Finally, the Court of Appeal observed that if S3D's position were to be accepted, there would be consequences which were inconsistent with the general principles of minimal court intervention and the promotion of the efficiency of the arbitral process, both set out in s1 of the Act. If the Court were to address and determine the jurisdictional issue, this would be an impermissible intervention – the issue was already properly before the tribunal pursuant to s30 of the Act (which permits a tribunal to rule on its own jurisdiction in line with the principle of Kompetenz-Kompetenz) and Article 23 of the LCIA rules. The sole arbitrator had also declined to give permission for an application under s32, as he was entitled to do. The alternative course of action open to the Court would be to refuse the s42 application. However, this was also unsatisfactory, as it would permit a recalcitrant party to prevent the court from exercising this power simply by challenging the tribunal's jurisdiction.

Comment

This case provides welcome confirmation of the "pro-arbitration" approach of the English Court on jurisdictional matters and gives useful guidance on how the Court will approach jurisdictional challenges which it may consider as tactical. The English Act carefully circumscribes how and when parties may make applications to the Court to challenge jurisdiction, and the Court will not bypass these methods or interfere with the tribunal's jurisdictional powers (e.g. to rule on its jurisdiction or give permission, where applicable, for the point to be decided by the Court). In particular, raising a jurisdictional challenge to prevent the enforcement of a peremptory order under s42 will not have the desired effect.

For more information, please contact Craig Tevendale, Partner, Elizabeth Kantor, Professional Support Lawyer, or your usual Herbert Smith Freehills contact.