"Matter" for the purpose of a stay in favour of arbitration means "dispute or difference"

The Commercial Court has clarified the interpretation of the word “matter” in section 9(1) of the Arbitration Act 1996, which defines when proceedings must be stayed in favour of arbitration, after a dispute arose between the parties as to whether it referred only to a claim or cause of action, or also to a defence or individual issue.

Procedural background

In Sodzawiczny v Ruhan and others [2018] EWHC 1908, Mr Sodzawiczny entered into a settlement with a number of parties to the effect that he would receive a payment from one of the parties in exchange for the release of certain claims against all of them. The settlement agreement contained an arbitration clause providing for LCIA arbitration in London.

After a shortfall in the agreed payment, Mr Sodzawiczny obtained an award from an LCIA tribunal, but was unable to enforce it as the paying party had gone into liquidation. He then brought court proceedings for breach of fiduciary duty and deceit against various of the remaining parties. The defendants argued that any such claims had been released by the settlement and, in any event, should be stayed on the basis that they fell within the arbitration clause.

Legal background

The question of a stay turned on the meaning of the phrase “a matter which under the agreement is to be referred to arbitration” in section 9(1) of the Arbitration Act. Mr Sodzawiczny took the position that it meant a claim or cause of action. The defendants argued that it could include a defence or individual issues.

The Commercial Court decision

The Commercial Court agreed with the defendants, setting out the following principles:

1. A “matter” was any issue which was capable of constituting a dispute or difference which might fall within the scope of an arbitration agreement.
2. If the issues were not yet fully identified or developed, the court should ask whether the issues were reasonably foreseeable.
3. The court should stay the proceedings to the extent of any issue which fell within the scope of the arbitration agreement. It did not have to be a “main” or “substantial” issue in the case.
4. To avoid allowing claimants to circumvent an arbitration agreement, the court should look at the nature and substance of the claim rather than the form in which it was pleaded.
5. While this approach could lead to the fragmentation of proceedings, “unification of process must give way to the sanctity of contract."

Taking this approach, Popplewell J concluded that all the issues in the present proceedings fell within the scope of the arbitration agreement, and he granted the stay.

Comment

There is relatively little case law regarding the meaning of the word “matter” as used in section 9(1) of the Arbitration Act. This decision provides helpful guidance on how the courts will approach this question when considering whether or not a claim should be stayed in favour of arbitration.

For further information, please email the authors or your usual CMS contact.

The authors would like to acknowledge the assistance of Sara Freitas (intern, CMS London) in preparing this update