The High Court Shows Support For Arbitral Process

Law FirmCooley LLP
Subject MatterLitigation, Mediation & Arbitration, Arbitration & Dispute Resolution
AuthorJuan Nascimbene
Published date02 February 2023

In its instructive judgment in RQP v ZYX 1, the High Court of England and Wales has provided helpful commentary on two aspects of the arbitration process, namely: (i) the limited circumstances in which a tribunal may have jurisdiction over a set-off counterclaim; and (ii) the scope of the courts' role in enforcing orders made by tribunals.

Background

The dispute between the parties related to the development and modification of a product owned by ZYX ('the Product'). The Product was originally developed under a consultancy agreement between ZYX and Mr X (the 'Consultancy Agreement'). Under the terms of the Consultancy Agreement, ZYX was to pay Mr X royalties for his work.

Subsequently, under a license agreement between ZYX and RQP, RQP was entitled to develop enhancements to the Product in return for payment of royalties to ZYX (the 'License Agreement'). The License Agreement contained an agreement to arbitrate under the LCIA rules.

In January 2020, ZYX commenced arbitral proceedings against RQP for various breaches of the License Agreement. ZYX claimed, among other things, that RQP had failed to pay it royalties totalling approximately US$26 million.

RQP counterclaimed that Mr X had assigned the Consultancy Agreement to it and, in breach of that agreement, ZYX had failed to pay royalties. RQP asserted that the royalties ZYX owed to it under the assigned Consultancy Agreement should be set off against any sums it owed to ZYX under the License Agreement.

The tribunal's jurisdiction over RQP's counterclaim

Both parties raised objections as to the tribunal's jurisdiction. The arbitrator rejected RQP's arguments that the tribunal did not have jurisdiction over some of ZYX's claims but expressed a view that it did not have jurisdiction over RQP's set-off counterclaim for royalties under the Consultancy Agreement.

RQP issued an arbitration claim form, seeking an order from the High Court under s.67 of the Arbitration Act 1996 (the 'Arbitration Act') setting aside the Tribunal's 'award as to jurisdiction'.

Mr Justice Butcher held that the arbitrator had not in fact made an award that was capable of appeal in respect of the tribunal's jurisdiction over ZYX's claims. While the judge was also of the view that the arbitrator had not made an award in respect of the tribunal's jurisdiction over RQP's set-off counterclaim, it was common ground between the parties that he had. The judge therefore considered whether the arbitrator was right to reach the conclusion that...

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