Introduction

In a recent decision in The Republic of Sierra Leone v SL Mining Limited [2021] EWHC 286 (Comm), the English Commercial Court (the “Court”) considers whether the compliance with a pre-arbitration condition to attempt to reach a settlement within 3 months is a question of admissibility (which can be determined by the arbitral tribunal) or jurisdiction (which can be determined by the Court).

Background

The Republic of Sierra Leone (the “Plaintiff”) cancelled a mining licence previously granted under a mining licence agreement to SL Mining Ltd (the “Defendant”). Clause 6.9 of the agreement provides that the parties shall attempt to reach an amicable settlement in the event of any disputes. If the parties fail to reach a settlement within 3 months from a written notice by one party to another specifying the nature of the dispute, either party may submit the matter to the exclusive jurisdiction of ICC Arbitral Tribunals (the “Pre-Arbitration Conditions”).

The Defendant did not comply with the Pre-Arbitration Conditions. The Defendant brought arbitration proceedings by filing a request for arbitration before the expiry of 3 months from the notice of dispute. In the arbitral hearing, the Plaintiff contended that the arbitrators were acting without jurisdiction. The arbitrators rejected the Plaintiff’s contention. The Plaintiff then made an application to the Court under section 67 of the Arbitration Act 1996 (the “Act”) to challenge the tribunal’s award.

Section 67 of the Act provides that:

“(1) A party to arbitral proceedings may (upon notice to the other parties and to the tribunal) apply to the court—

(a) challenging any award of the arbitral tribunal as to its substantive jurisdiction; or…”

Section 82(1) of the Act provides that “substantive jurisdiction” refers to the matters specified in section 30(1)(a) to (c). Section 30(1) of the Act provides that the arbitral tribunal may rule on its own substantive jurisdiction as to whether there is a valid arbitration agreement, whether the tribunal is properly constituted and what matters have been submitted to arbitration in accordance with the arbitration agreement.

Issues

The 2 major issues in this application are therefore as follows:

1.        whether the Plaintiff’s challenge to the alleged breach of the Pre-Arbitration Conditions was a challenge to the substantive jurisdiction of the Tribunal within section 67 or a challenge to the admissibility of the Tribunal; and

2.        whether the Plaintiff has waived non-compliance of the Pre-Arbitration Conditions by the Defendant.

Decision

Issue 1: Distinction between admissibility and jurisdiction

The Court first look into English case laws which suggest that there are differences between a challenge that a claim was not admissible before arbitrators and a challenge that the arbitrators had no jurisdiction to hear a claim. Only when the challenge is on jurisdiction may parties apply to the Court under section 67 of the Act.

In both cases of Emirates Trading Agency LLC v Prime Mineral Exports Pte Ltd [2015] 1 WLR 1145 and Tang v Grant Thornton International Limited [2013] 1 AER (Comm) 1226, the English Court has dealt with a challenge on time condition precedent in an arbitration clause. On this occasion, the Court did not find the previous UK judgments persuasive. In the previous UK judgments, no arguments on the distinction between admissibility and jurisdiction were made and therefore the jurisdiction under section 67 of the Act was assumed. As such, they were criticized by academic writers.

The academic writers in Merkin and Flannery on the Arbitration Act 1996 opined that a condition precedent to arbitration should be presumed not to be jurisdictional. The requirements for cooling off negotiation are procedural issues regarding the timing and conduct of the arbitration. Therefore, they are inherently aspects of the arbitration procedure and are best suited to be dealt with by the arbitral tribunal. Also, it is assumed that parties would desire a single, centralized forum for resolving their disputes.

The Court has also found support for admissibility in decisions in other jurisdictions. In two decisions by the Singapore Court of Appeal BBA v BAZ [2020] 2 SLR 453 and BTN v BTP [2020] SGCA 105, there were discussions on differences between jurisdiction and admissibility in the context of pre-condition to arbitration. The Singaporean Court defined jurisdiction as “the power of the tribunal to hear a case”; whereas admissibility as “whether it is appropriate for the tribunal to hear the case”. The Singaporean Court of Appeal confirmed that regarding pre-conditions to arbitration, the fulfilment of condition precedents such as conciliation provisions before arbitration are matters of admissibility but not jurisdiction.

Therefore, the Court sided with the Tribunal’s ruling and held that the Tribunal was in the best position to decide whether Pre-Arbitration Conditions have been fulfilled.

Issue 2: Waiver to the non-compliance of Pre-Arbitration Conditions

Alternatively, the Defendant also raised that even if the Pre-Arbitration Conditions are a question of jurisdiction, the Plaintiff has already waived the non-compliance of Pre-Arbitration Conditions and would be barred from objecting to a premature arbitration.

In a telephone hearing before the arbitrator, the Plaintiff’s counsel stated that the Defendant should file papers according to the ICC Rules. While the arbitrator expressly stated that it is possible for parties to serve the request for arbitration together with a request for a stay of the arbitration, the Plaintiff did not seek for a stay of arbitration. Therefore, the Court found that the Plaintiff has, in any event, waived the non-compliance of Pre-Arbitration Conditions to the arbitration.

Takeaway

The English Court clarifies that pre-arbitration conditions are matters of admissibility and therefore should best be determined within the arbitral tribunal. Given Hong Kong Court’s encouragement in cost-effective dispute resolution, it is expected that the decision will also be followed by the Hong Kong Courts as to interpretation on clauses on Pre-Arbitration Conditions.