International Arbitration - 'One-Stopness' In Arbitration Stops One Party Stopping Play

Companies in the energy sector make wide use of arbitration agreements. However, they are also well known to be very selective in picking and choosing when to use arbitration agreements and when not to. Normally whether arbitration agreements are used or not depends on the nationality of the parties, the nature of the contract, and the scope and location of the work being performed under it. Often in a project there will be many interlocking contracts. Only some of these contracts may contain arbitration agreements, with the parties deciding that some other contracts should contain another type of dispute resolution clause, either because of the scope of the work being performed or other factors.

A recent dispute in the energy sector provides an important reminder of the modern and liberalising approach of the English courts to the scope and effect of arbitration agreements. Where there was an arbitration on foot covering a dispute under a first contract, but where claims to set-off and counterclaims arose between the same parties from another (separate) contract that did not contain an arbitration agreement, these claims to set-off and counterclaims were held to fall within the jurisdiction of the arbitrator. If this result is a surprise.

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The Facts and the Decision

Over the last few years the wind has been blowing in the English courts towards an approach that arbitration agreements (i.e. arbitration clauses in contracts) should be interpreted widely, having regard to the intention of the parties and their commercial relationship, unless parties expressly provided for the contrary. In other words, a practical and commercially focussed interpretation of any arbitration agreement should be adopted (see Premium Nafta Products Limited & others v. Fili Shipping Company & others - sub-proceedings in the ongoing Fiona Trust proceedings) ( see link to law now dated 18.10.2007 entitled ""Arising under" or "arising out of" - it's all the same in arbitration clauses"). This trend, coupled with the principle that arbitration clauses will be enforced unless the parties clearly state otherwise ( see link to law now dated 08.02.2008 entitled "Arbitration clauses: courts demonstrate support") operates to limit the parties' ability to escape the applicability of an arbitration agreement.

In Norscot Rig Management PVT Ltd ("Norscot") v Essar Oilfields Services ("Essar") [2010] EWHC 195 (Comm)...