General Words Sufficient to Incorporate Arbitration Clause into Sale Contract

Habas Sinai Ve Tibbi Gazlar isthisal Endustri AS v Sometal SAL [2010] EWHC 29 (Comm)

Background

The seller, S, sought to bring a claim against the buyer, H, in London arbitration for alleged repudiatory breach of a sale contract for steel scrap. H countered that there was no arbitration agreement incorporated into their contract with S dated June 2008. The issue was whether the London arbitration clause that appeared in some of the previous contracts between the same parties was incorporated into the June 2008 contract, given that it was not expressly referred to in that contract.

The contractual history of the parties was as follows. There had been 15 contracts in all between H and S. The first three had been drafted by H and provided for UNCITRAL Arbitration Rules / Turkish arbitration. The subsequent contracts were either prepared by S and were full form contracts setting out all the applicable terms, including a London arbitration provision, or were prepared by S's agent, M, and were short form contracts which did not contain the full terms or any arbitration provision, but stated that "the rest will be agreed mutually" or "all the rest will be same as our previous contracts". M prepared the 15th contract, the June 2008 contract in respect of which the dispute arose, on behalf of S and that short form contract contained the words "all the rest will be same as our previous contracts".

The Arbitral Tribunal decided, as a preliminary issue, that it had jurisdiction over the substantive claim and issued an Interim Award to this effect. H applied to the court under section 67 of the Arbitration Act 1996 to set aside the Tribunal's Award as to its own jurisdiction over the contractual claim. H argued inter alia that there either had to be an express reference to the London arbitration clause or wording that showed a clear intention if incorporation were to be effective. The application was dismissed.

Commercial court decision

The judge reviewed the relevant case law relating to the incorporation of an arbitration clause where only general words of incorporation were used in the contract and no specific reference had been made to the arbitration provision. He said that the courts had traditionally taken a more restrictive approach to the incorporation of terms in "two-contract cases" (i.e. incorporating terms from one contract into another) than in "single contract" cases (e.g. incorporation of one of the party's standard terms into the main...