Arbitration Clause Extends to Cover Disputes not Resolved under Separate Dispute Resolution Procedure

Czech Republic

Davies Middleton & Davies v Toyo Engineering Corporation (CA), [1998] 85 BLR 58

Commentary

The case again confirms the strict approach taken by the courts in staying court proceedings pursuant to section 9 of the Arbitration Act 1996 where the parties have contractually agreed to submit their disputes to arbitration. The interesting twist in this case was that once certain accounting disputes had arisen the parties agreed by letter agreement to deal with those disputes under a 'Procedure to Settle Final Account'. This agreement was held to be subject to the arbitration clause rather than to replace it and where the separate dispute resolution mechanism failed to resolve all issues in dispute between the parties the arbitration clause contained in the original contracts still applied.

Decision

The Court of Appeal found that the letter agreement between the parties, setting out a procedure for settling the final account between them, was a mechanism for resolving only this particular issue between the parties without resorting to litigation or arbitration but did not indicate how disputes arising from that letter agreement were to be resolved. If the original contracts contained a valid arbitration clause (this question was remitted to the Judge for his decision) such disputes as were not resolved by the parties under the separate dispute resolution mechanism were properly the subject of arbitration. The proceedings therefore had to be stayed pursuant to section 9 of the Arbitration Act 1996.

Background

The dispute arose under contracts for the installation of pipework which Toyo claimed were subject to its standard terms and conditions which contained an arbitration clause. The parties agreed by letter on a procedure for the settlement of a final account. The procedure failed to resolve all outstanding issues. DMD commenced proceedings and applied for summary judgment. Toyo applied for a stay of proceedings for arbitration.

For more
information please contact:

Neil Aitken or Charles Spragge in the International Arbitration Group, Cameron McKenna. Tel: 44 171 367 3000, Fax 44 171 367 2000 or by e-mail to nca@cms-cmck.com or to chs@cms-cmck.com