Survival Of The Arbitration Clause - Fraud, Forgery And Bribery

Fiona Trust & Others v. Privalov &

Others

This is reported at [2007] EWHC 1217 (Comm). This claim

concerned how allegations of bribery affected an arbitration

clause contained in charterparties. The arbitration clause

referred to; "Any disputes arising under this

charter". Court proceedings were commenced alleging the

charterparties had been validly rescinded for reasons of fraud

and bribery. An arbitrator under each of the charterparties was

appointed by the charterers.

Owners applied under s.72 of the 1996 Act restraining the

proceedings alleging the charterparties and arbitration

agreements were rescinded by reason of the bribery. The

charterers applied under s.9 to stay the owners' court

proceedings pertaining to the charterparties in favour of

arbitration.

The following issues arose.

Were the words; "Any dispute arising under this

charter" wide enough to cover claims for rescission for

bribery?

Yes. The court reviewed various authorities distinguishing

between "arising under " and "arising out

of". Historically, the former were narrower than the

latter, but the court said this should no longer apply. A

liberal and wide construction should be given to an arbitration

clause as it was presumed that commercial men favoured one-stop

arbitration.

Does the alleged invalidity of each charterparty go to the

validity of the arbitration clause?

Not in this case. Under s.7 of the 1996 Act an allegation of

a contract's invalidity does not prevent the invalidity

being determined under the (separate) arbitration agreement.

Owners argued they would not have made any contract had they

been aware of the bribes. The court said this did not impeach

the arbitration clause and that; "... there must be

something more than that to impeach the arbitration clause

...". The court of first instance said that even if the

tribunal did have jurisdiction (it said it did not) the court

would exercise its powers under s.72 to grant an injunction

restraining the arbitration, however the court would not grant

a stay under s.9. The Court of Appeal disagreed.

The relationship between s.9 and s.72 of the 1996 Act The

Court of Appeal made the following points:-

The 1996 Act contemplated that the tribunal would be the

first to consider whether they have jurisdiction to determine

the dispute. Bearing in mind the strict limitations placed on

court intervention (s.1(c)) the court should be very cautious

about using s.72. Here, s.72 had no application, but might

apply where the...