English High Court Confirms That A Non-participating Party May Contest Jurisdiction Even Though An Arbitrator Has Been Appointed

• Published date: 08 June 2022
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Corporate and Company Law, Arbitration & Dispute Resolution
• Law Firm: Herbert Smith Freehills
• Author: Mr Craig Tevendale and Louise Barber

In National Investment Bank Ltd v Eland International (Thailand) Co. Ltd and another [2022] EWHC 1168 (Comm), the English High Court considered the interaction between sections 72(1) and 18 of the English Arbitration Act 1996 (the "Act"). Section 72(1) allows a non-participating party to an arbitration to seek a declaration from the English Court as to the lack of jurisdiction of the tribunal, and section 18 of the Act gives the Court the power to appoint a tribunal where there is a failure of the appointment procedure between the parties.

The claimant, which was a non-participating party in an arbitration, sought a declaration from the High Court under section 72(1) that the sole arbitrator did not have jurisdiction. In response, the defendants argued that the effect of the Court having appointed the sole arbitrator pursuant to section 18 was to render the claimant a party to the arbitral proceedings and thus to preclude the claimant from relying on section 72.

The Honourable Mr Justice Foxton rejected this argument, finding that the section 72 application remained available notwithstanding the section 18 appointment and upheld the merits of the application. This decision will give comfort to non-participating parties to arbitration proceedings that the important protection for non-participants to an arbitration under section 72 remains firmly intact.

Background

This case arose from the commencement of conflicting court and arbitration proceedings in respect of the same matter. The claimant, NIB, entered into a series of agreements with the defendants, Eland Thailand and Eland Ghana (together, "Eland") which provided that disputes "may be referred to an Arbitrator under the Laws of the United Kingdom in London".

Eland Thailand commenced proceedings against NIB under these agreements before the courts in Accra, Ghana (the "Accra Proceedings"). Both NIB and Eland formally participated in the preliminary stages of the Accra Proceedings, with NIB seeking to join Eland Ghana as a party to its counterclaim.

However, Eland Ghana then applied to stay the Accra Proceedings in order to commence arbitration. The application was granted and Eland served a Notice of Arbitration on NIB. When NIB did not engage with the arbitration, Eland applied to the English High Court to appoint an arbitrator under section 18, with Mr Justice Baker ordering the appointment of a sole arbitrator.

In parallel, NIB successfully applied to set aside the stay of proceedings in the Accra Proceedings. NIB then applied to the High Court under section 72(1) for a declaration that the...