English Court Holds That Arbitration Clauses In Individual Sales Contracts Govern The Disputes Arising From Corrupt Arrangement To Induce The Contracts When An 'Umbrella Agent Agreement' Is Silent About Dispute Resolution

Co-authored by Noriaki Wakabayashi

In a decision dated 24 April 2018, the English Commercial Court (the "Court") dismissed challenges brought under s67 and s32 of the English Arbitration Act 1996 (the "Act") by Dreymoor Fertilisers Overseas PTE Ltd. ("Dreymoor").

The case concerned the construction and application of arbitration clauses to disputes arising out of a complicated business structure with multiple contracts between Eurochem Trading GMBH ("ECTG"), a fertiliser seller, and Dreymoor, an international trading company. Dreymoor sought to challenge the jurisdiction of tribunals constituted in two arbitrations (one LCIA and one ICC) commenced against it by ECTG, arguing (1) for a narrow interpretation of an LCIA arbitration clause to exclude non-contractual claims brought against it by ECTG; and (2) that there was no agreement to arbitrate between ECTG and Dreymoor in respect of the ICC arbitration.

The Court followed the liberal interpretation propounded in Fiona Trust & Holding Corporation v Privalov [2007] UKHL 40. The LCIA arbitration clause covered "any dispute or claim arising out of this Contract". Those words were wide enough to cover the non-contractual disputes which ECTG had referred to LCIA Arbitration and the s67 challenge was dismissed. In respect of the ICC arbitration, the Court again held that the terms of the arbitration clause were very wide and sufficient to cover the disputes referred under it against Dreymoor. The s32 action therefore also failed.

Background and Issues

ECTG and Dreymoor entered into two fertiliser distribution arrangements in respect of (1) Di-ammonium phosphate and Mono-ammonium phosphate (DAP/MAP); and (2) Urea. Dreymoor was to act as ECTG's sales agent in India and as ECTG's direct trading partner for the rest of the world. ECTG alleged that there were corrupt arrangements between Dreymoor and two former employees of ECTG which enabled Dreymoor to obtain more volume of high margin products deals and favourable appointment terms as an agent.

Each of the DAP/MAP and Urea arrangements involved (i) an Umbrella Agency Agreement (each an "Agency Agreement"); (ii) individual sales contracts between Dreymoor and customers outside India (the "Sales Contracts"); and (iii) sales contracts between ECTG and Indian companies, in which Dreymoor was acting as agent (the "Third Party Contracts"). There was no jurisdiction or dispute resolution clause in the DAP/MAP Agency Agreement, while the Urea Agency...