Chancery Division (England And Wales High Court):- Arbitration Mandate: Intention Trumps Uncertainty

The England & Wales High Court (Chancery Division) held:

Courts should avoid holding a clause void for uncertainty, especially in case of a partly-performed contract; Mere difficulties of interpretation are not the same as ambiguity to the meaning of a clause; Courts/Arbitrators to decide based on parameters fixed in the contract and implied terms should address ambiguities in a clause. Introduction

The Chancery Division of the England & Wales High Court ("High Court") in the case of Associated British Ports ("ABP") versus Tata Steel UK Limited ("Tata Steel")1 recently reiterated the parameters of "certainty" of an arbitration clause for its enforceability.

Background Facts

ABP owns and operates several ports in United Kingdom including Tidal Harbour in Wales, situated near Tata Steel's iron and steel works. All commodities used by Tata Steel were imported through Tidal Harbour. ABP and Tata Steel entered into a license agreement dated 1st March 1995 ("License") to facilitate Tata Steel's use of the facilities of Tidal Harbour. The Licence granted Tata a licence to use ABP's jetty at the Tidal Harbour for the purpose of receiving Tata's vessels, goods and materials intended for use at Port Talbot and Llanwern works.

Clause 22 of the License provided that in the event of "any major physical or financial change in circumstances" post September 15, 2007 affecting the operation of Tata's works or the operation of the Tidal Harbour, either party could serve notice on the other requiring the terms of the License to be re-negotiated. The parties were then required to amend terms "reflecting such change in circumstances". In the event of failure to do so within six months mutually, the matter would be referred to an Arbitrator, whose decision would be binding.

In February 2016, Tata Steel gave notice of a major financial change in circumstances, citing inter alia significant market challenges and rightsizing of their operations. Tata Steel requested a 50% reduction in the fixed License fees. ABP, in response, argued that the reasons set out in the notice was insufficient to trigger the operation of Clause 22 and therefore it was unenforceable.

Issues

ABP initiated proceedings before the High Court for declaratory relief with respect to the proper construction of the arbitration clause in the License. In response, Tata filed an application for stay of the proceedings under Section 9 of the English Arbitration Act, 1996 ("Act"). The issues before the...