Jersey Unreported Judgments

Arbitration - application by the plaintiff apply for a stay of proceedings.

[2018]JRC058

Royal Court

(Samedi)

14 March 2018

Before     :		T. J. le Cocq, Esq., Deputy Bailiff, and Jurats Blampied and Thomas
Between	Urbania International Management Consultancy		Plaintiff
And	Petrofac International Limited		Defendant

Advocate O. J. Passmore for the Plaintiff.

Advocate R. D. J. Holden for the Defendant.

judgment

the deputy bailiff:

1.        On 11th August, 2017, Urbania International Management Consultancy ("Urbania") commenced proceedings against Petrofac International Limited ("Petrofac") for the sum of Arab Emirate Dirhams 71,375,496 plus interest and costs.  The proceedings were started by a simple summons and the debt was said, in the summons, to arise out of a Services Agreement dated 29th June, 2011, (and varied in writing on 2nd February, 2014,) ("the Services Agreement").  Urbania asserts that it has provided advisory and other services under the Service Agreement for Petrofac and the value of those services is reflected in the sum claimed in the summons. 

2.        The Services Agreement, which is governed by English law, contains the following provisions:-

"29.     All disputes between Consultant and Petrofac arising out of or in connection with this Agreement shall be referred to arbitration under the rules of the International Chamber of Commerce and the place of the arbitration shall be London, England.  Arbitration proceedings shall be conducted in the English language. 

30.      This Agreement shall be deemed to have been executed and delivered in England and shall be interpreted and construed in accordance with the laws of England."

3.        When the summons was first presented before this Court Petrofac sought to place the matter on the pending list.  The basis on which it sought to do so were the provisions of Clause 29 of the Services Agreement.  It was Petrofac's position that the proceedings against it in Jersey should not have been brought, that there was a dispute between it and Urbania and that dispute must, pursuant to Clause 29 set out above, be referred for arbitration.  Accordingly Urbania's proceedings in Jersey should be stayed for that purpose. 

4.        Urbania does not accept that such a stay should be imposed and argues that the arbitration provision set out in Clause 29 above does not apply in the circumstances because of an exception within the applicable statute in Jersey. 

5.        The matter turns upon the interpretation of Article 5 of the Arbitration (Jersey) Law 1998 ("the Arbitration Law") which is in the following terms:-

"Mandatory stay of court proceedings where party proves arbitration agreement.

If any party to an arbitration agreement, or any person claiming through or under the party, commences any legal proceedings in any court against any other party to the agreement, or any person claiming through or under him or her, in respect of any matter agreed to be referred, any party to those legal proceedings may at any time before the expiration of a period of 3 weeks from the date on which the action was placed on the pending list or en prevue apply to the court to stay the proceedings; and the court, unless satisfied the arbitration agreement is null and void, inoperative or incapable of being performed or that there is not in fact any dispute between the parties with regard to the matter agreed to be referred, shall make an order staying the proceedings."  [emphasis added]

I refer to the part underlined above as "the exception wording".

6.        The first point to note from Article 5 is that there is no discretion involved and the requirement of the Court to make an order staying the proceedings is mandatory.  Secondly, in this case, it is not argued before us that the arbitration agreement is null and void, inoperative or incapable of being performed.  The sole argument before us is based on the exception wording, namely whether or not there is "in fact any dispute between the parties with regard to the matter agreed to be referred."  In order to refuse to order a stay we must be satisfied that there is not in fact any dispute. 

7.        It is Urbania's case in brief that there is no real dispute.  The obligation to pay those monies has never been challenged and Urbania's entitlement to them is not really in dispute.  Petrofac, for its part, simply says that the arbitration clause is binding and the mere fact that it has not paid would be sufficient to establish that there is a dispute between it and Urbania and therefore there should be a stay for reference to arbitration. 

8.        Had this matter fallen to be resolved purely by reference to English law then there does not appear to be any challenge to Petrofac's assertion that it would inevitably have been stayed for arbitration.  We have been shown an affidavit from leading counsel specialising in arbitration in England and Wales and in summary counsel informs us that under English law:-

(i)        A claim which remains unpaid constitutes a dispute and is therefore to be resolved by the arbitral tribunal rather than the court;

(ii)       Even if a defendant admits payment is owing there is still a dispute until payment is made.  Non-payment amounts to a dispute irrespective of any admission;

(iii)      It is not permissible under English law to disapply the arbitration agreement and take court proceedings instead, on grounds that a claim is or appears unanswerable;

(iv)      Any defence and/or relevance to the SFO investigation (as explained hereunder) would be a matter for the arbitral tribunal. 

Background

9.        It is not in our view necessary to go into a considerable amount of detail concerning the background of the matter. 

10.      The Services Agreement sets out the scope of services to be provided.  It defines Urbania as the consultant and makes references to the provision by the consultant of certain services to Petrofac for the preparation of the tender and execution of bids submitted by Petrofac for a number of projects listed in the first paragraph of the Services Agreement. 

11.      The scope of services are more specifically defined and it is not necessary to recite them in detail.  They may be characterised as providing assistance to identify a strategy to prequalify and develop a winning proposal to execute the project in question, to provide advice in respect of local requirements, to advise on local economic, political and social market conditions and existing and future laws applicable to the project in question and to provide other forms of advice and assistance. 

12.      The Services Agreement entitled Urbania to charge a fee of 1.25% of the value of the contract for the project.  The fee fell to be determined by a calculation based on figures provided by Petrofac. 

13.      It is alleged, and we do not take there to be any dispute, that Urbania worked for a significant period with Petrofac until the project in question was successfully awarded to Petrofac.  In order to enable Urbania to raise its fee Mr Bonucci who is the Group Head of Business Development at Petrofac, sent a breakdown of the contract value concerning the project so that Urbania's fee could be calculated. 

14.      Urbania then raised an invoice and submitted it to Petrofac and it has not been paid.  We are aware of no argument which disputes the nature of the work undertaken by Urbania nor the correctness of the quantification of Urbania's fee. 

15.      On 12th May, 2017, the Serious Fraud Office ("SFO") announced publicly that it was investigating Petrofac in connection with the activities of a company called Unaoil.  We are informed that Unaoil is not in any way connected with Urbania or the work they carried out for Petrofac. 

16.      A number of communications passed between Urbania and Petrofac.  Communication often took place by text between a Mr Amir Samhoun ("Mr Samhoun") of Urbania and Mr Bonucci.  On 10th May, 2017, Mr Bonucci confirmed that Urbania's invoice had been received and that he had "already started processing it". 

17.      We do not need to refer to the other messages passing between them save to say that on the 20th June, 2017, Mr Samhoun asked for an update on the question of the invoice and Mr Bonucci replied:-

"Amir, still chasing the compliance team.  The situation is getting worse as everything is frozen... let's wait some more time if it gets better." 

18.      Mr Samhoun's response was an indication that he may need to take legal steps to protect Urbania's rights. 

19.      It is perhaps also worth noting the contents of Mr Samhoun's affidavit detailing two telephone calls between Mr Samhoun and Mr Bonucci.  On 28th May, 2017, Mr Bonucci telephoned Mr Samhoun who enquired about the status of the invoice.  Mr Bonucci said that all payments had been frozen and he could not provide an estimated payment date.  Mr Samhoun indicated that Petrofac's issues with the SFO had nothing to do with Urbania and Mr Bonucci agreed with that.  Mr Bonucci stated, in response to Mr Samhoun's point that Urbania could not wait indefinitely, to the effect that:-

"No Amir, you have a legal and legitimate agreement, our internal committee has approved the invoice, the company will pay it."

20.      From the information that we have it does not appear, as we have said, that the invoice in terms of quantification and contractual entitlement is in dispute or, at least, no such dispute has been claimed or detailed.  When Urbania eventually instructed English legal advisers to write to Petrofac those legal advisers received what could only be described as a holding response and, thereafter, on 7th August, 2017, Petrofac's legal advisers wrote indicating that it was not appropriate at that point for Petrofac to authorise payment to Urbania because of the ongoing investigation by the SFO in the United Kingdom.  This was, so it was stated, because of allegations of bribery concerning Petrofac, its officers and agents. 

21.      The nature of the SFO's investigation and its existence was first notified to Urbania when the SFO  issued a press release in the following terms:-

"The SFO is investigating the activities of Petrofac PLC, its subsidiaries and their officers, employees and agents for suspected bribery, corruption and money laundering. 

This investigation is related to SFO's ongoing investigation into the activities of Unaoil."

22.      The letter from Petrofac's legal advisers Freshfields of 7th August ,2017, states as follows:-

"On 12th May 2017 the Serious Fraud Office announced that it is investigating Petrofac, its subsidiaries (which includes PIL), and their officers, employees and agents for suspected bribery, corruption and money laundering. 

In light of the SFO's investigation extending to Petrofac's agents, it is not considered appropriate, at this point in time, for Petrofac to authorise payment of Urbania's outstanding invoice.  PIL will of course notify you if, and as soon as circumstances change. 

Clearly, we reject your contention that proceedings to wind up PIL are in order.  The current circumstances do not allow Urbania to take any such step."

23.      The essence of Petrofac's argument is that there is a dispute between it and Urbania and consequently that dispute must be referred to arbitration.  Petrofac asserts that it has not on the face of the invoice or the claim admitted that the sums are due and also asserts that the effect of the investigation by the Serious Fraud Office on the matter of payment is a matter that should be determined within the arbitration proceedings. 

The Law

24.      We were referred to a number of cases and texts in connection with the appropriate interpretation of Article 5 of the Arbitration Law.  Many of the cases referred, not to statutory provisions, but to clauses in agreements providing for arbitration of 'disputes' or 'differences'. 

25.      The Arbitration Law was enacted in part, as appears from the long title, to "give effect to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Aawards...".

26.      Schedule 3 of the Arbitration Law contains the convention on the Recognition of Enforcement of Foreign Arbitral Awards done in New York on 10th June, 1958.  Article II(1) states:-

"Each contracting state shall recognise an agreement in writing under which the parties undertake to submit to arbitration or any differences which have arisen or may arise between them in respect of a defined legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration."

27.      And, at sub-paragraph (3):-

"The court of a contracting state, when seized of an action in a matter in respect of which the parties made an agreement within the meaning of this article, at the request of one of the parties, refer the parties to arbitration unless it finds the said agreement is null and void, inoperative or incapable of being performed."

28.      The exception wording is not contained in the New York Convention.  The exception wording is, however, contained within the English Arbitration Act of 1975. 

29.      The origin of the wording of Article 1 of the Arbitration Act 1975 is to be found in the report of the Committee of the Law and Arbitration 1927 known as the McKinnon Committee Report which says this:-

"Our attention has been called to a point that arises under the Arbitration Clauses (Protocol) Act 1924.  Section 1 of that Act in relation to a submission to which the protocol applies deprives the English court of any discretion with regards granting the stay of an action.  It is said that cases have already not infrequently arisen, where (e.g.) a writ has been issued claiming the price of goods sold and delivered.  The defendant has applied to stay the action on the ground that the contract of sale contains an arbitration clause, without being able, or condescending, to indicate any reason why he should not pay for the goods, or the existence of any dispute to be decided by arbitration.  It seems absurd that in such a case the English court must stay the action, and we suggest the Act might at any rate provide that the court shall stay the action if satisfied there is a real dispute to be determined by arbitration."

30.      There is a material distinction between the position in the United Kingdom at present and that which obtained in 1975.  The Arbitration Act of 1996 does not contain the exception wording and accordingly the Courts there no longer need to consider the meaning and effect of that wording.  That change, which of course has come about by an Act of Parliament, is not reflected in the Jersey position and the cases that concern the Arbitration Act 1975, which contained the exception wording, are prima facie more relevant to a consideration of the Arbitration Law than later cases under the Arbitration Act of 1996.

31.      In Mustil and Boyd (The Law and Practice of Commercial Arbitration) (2nd Edition) under the heading Clauses requiring a "dispute" or "difference", the learned authors say this:-

"Arbitration clauses usually define the jurisdiction in terms of "disputes" and "differences".  Under clauses in this form, the existence of a dispute or difference is a condition precedent to the right to arbitrate.  Two consequences flow from this:

(a) Undisputed claims

...Where the defendant has not actively admitted the claim, but has so far failed to deny it, this does not mean that there is no "dispute" then in existence, and the claimant can prosecute his claim by arbitration, rather than by action.  However, if he really believed that the defendant is saying nothing because he has nothing to say, he can bring an action and apply for summary judgment:

(b) A Genuine Dispute.

Theoretical problems of some difficulty may arise where the defendant does put forward an answer to the claim, but the claimant asserts that the answer does not raise a genuine dispute.  Such an assertion may take two forms.  First, where it is said the defendant does not believe what he is saying, and is merely looking for an expedient to avoid or postpone payment.  Second, where the defence is put forward with apparent good faith, but can nevertheless be seen to have no substance.  Plainly, it may be difficult in certain instances to be sure into which of these categories a defence can properly be assigned.

... Whatever might be the position as regards the defence which has manifestly put forward in bad faith, there are strong logical arguments for the view that a bona fide if insubstantial defence ought to be ruled upon by the arbitrator, not the court.  This is so especially where there is a non-domestic arbitration agreement, containing a valid agreement to exclude the power of appeal on questions of law.  Here the parties are entitled by contract and statute to insist that their rights are decided by the arbitrator and nobody else.  This entitlement plainly extends to cases where the defence is unsound in fact or law.  A dispute which, it can be seen in retrospect, the plaintiff was always going to win is nonetheless a dispute.  The practice whereby the court pre-empts the sole jurisdiction of the arbitrator can therefore be justified only if it is legitimate to treat a dispute arising from a bad defence as ceasing to be a dispute at all when the defence is very bad indeed.  The correctness of this approach is not self-evident.  Moreover, in all but the simplest of cases the court will require not merely to inspect the defence, but to enquire into it; a process which may, in matters of any complexity, take hours or even days.  When carrying out the enquiry, the court acts upon affidavits rather than oral evidence.  The defendant might well object that this kind of trial in miniature by the court is not something for which he bargained, when making an express contract to leave his rights to the sole adjudication of an arbitrator.    

Whatever the logical merits of this view, the law is quite clearly established to the contrary.  Where the claimant contends that the defence has no real substance, the court habitually brings on for hearing at the same time the application by the claimant for summary judgment, and the cross application by the defendant for a stay, it being taken for granted that the success of one application determines the fate of the other...."

32.      In Redfern and Hunter on International Arbitration (Fifth Edition) at 1.59 and 1.60 under the heading "The need for a dispute" the learned authors say this:-

"1.59 At first glance, this may seem to be an unnecessary question.  Surely, it might be said, if the parties are not in dispute, there is nothing to resolve?  The problem arises when one party has what it regards as an "open and shut" case, to which there is no real defence.  For example, someone who is faced with an unpaid cheque or bill of exchange may take the view that there cannot be any genuine dispute about liability and that, if legal action has to be taken to collect the money which is due, he or she should be entitled to go to court and ask for summary judgment.  Such a claim may be met, however, by the argument that there was an arbitration clause in the underlying agreement with the debtor and that the remedy is accordingly to go to arbitration, rather than to the courts.  The problem is that, in the time it may take to establish an arbitral tribunal, a judge with summary powers could well have disposed of the case. 

1.60 The expedient adopted in certain countries (including initially England) when legislating for the enactment of the New York Convention, was to add words that were not in that Convention.  This allowed the court to deal with the case, if the judge was satisfied 'that there is not in fact any dispute between the parties with regard to the matter agreed to be referred'.  In this way, it was possible to avoid a reference to arbitration and to obtain summary judgment.  English law has now followed the strict wording of the New York Convention.  It can no longer be argued in England that since there is not a genuine dispute, the matter should not be referred to arbitration; but such an argument may still remain sustainable in other countries." (emphasis added)

33.      It appears clear that the English courts gave meaning to the exception wording within the Arbitration Act of 1975.  The courts took the view that they were able to refuse to grant a stay for arbitration if there was no real dispute.  This appears to have been interpreted, as a claim not being genuinely disputable if it would justify, for example, an application for summary judgment.  In other words, if it is clear that any such "dispute" was not a real dispute because, if pleaded, it would give rise to the summary judgment then the court was satisfied that it had a basis not to grant a stay for arbitration but instead to enter summary judgment. 

34.      We will set out some of the authorities which have been put before us which appear to us to support the proposition that the English courts, whilst taking a fairly robust view of the requirement for a dispute within arbitration clauses (in other words that there was a dispute even when, for example, there was nothing more than a refusal to pay without any kind of justification), nonetheless construed the exception wording in the Arbitration Act 1975 as producing a basis to refuse a stay. 

35.      As we have said, the provisions of the Arbitration Law reflect not the current English statutory position but that which existed under the Arbitration Act of 1975 (under which Section 1(i) contains the exception wording in the same terms as Article 5 of the Arbitration Law). 

36.      There can be no doubt and we do not think it in dispute that raising an account pursuant to the Services Agreement and submitting that account for payment are matters that fall squarely within the Services Agreement and any dispute with regard to those matters are also themselves matters that fall within the Services Agreement and therefore are subject to the arbitration provisions. 

37.      Many of the authorities deployed before us dealt with the question of whether or not a matter is in dispute for the purposes of a clause containing such a provision within the relevant arbitration agreement.  They are not, in general, cases which touch upon the interpretation of the meaning of "dispute" within the Arbitration Act of 1975 and, by extension, Article 5 of the Arbitration Law.  There is authority to the effect that the English courts have taken a different approach in construing the meaning of the term "dispute" within the Arbitration Act of 1975. 

38.      The concern of the English courts under the Arbitration Act 1975 appears to be the belief that, by strict application of an arbitration provision, arbitration could be used to slow down the recovery of a claim in respect of which no reasonable dispute could be raised.  There was concern expressed that arbitration could take a long time and that it would be in effect an injustice to require a contracting party to go to arbitration when their claim was not capable of any serious dispute.  It is also clear that this approach of the English courts was not without criticism and did not reflect, perhaps, the approach to modern arbitration. 

39.      In Associated Bulk Carriers Limited-v-Coch Shipping Inc (The Fuohsan Maru) [1978] 2 All ER 254 the Court of Appeal dealt with a dispute relating to a charter party.  The plaintiffs lent a motor vessel to the defendants for a number of years during the course of which the defendants used a number of devices to get out of the charter.  They purported to terminate the charter party and redeliver the vessel and the plaintiffs treated the defendants conduct as a repudiation.  They accordingly brought a claim in damages.  The defendants had admitted liability but denied the plaintiffs were entitled to the amounts of damages claimed.  They applied for an order under the Arbitration Act of 1975 that the proceedings should be stayed and the dispute referred to arbitration in accordance with the charterparty.  The court found whereas undoubtedly the plaintiffs were entitled to a substantial sum in damages there was in fact a dispute between the parties with regard to the matter agreed to be referred and the matter must be stayed under the Arbitration Act of 1975.  The judgment of Lord Justice Browne at paragraph 263 of the judgment contains these words:-

"I wish I could agree with Lord Denning MR, but I'm afraid I cannot.  In my judgment this appeal must be dismissed.  Kerr J thought that the ship owners had all the merits and I have heard nothing which gives me the slightest reason to doubt that he was right.  But I am driven to the conclusion that he was also right in holding that the charterers have the law on their side.  The arbitration clause in the charter party ... provides: 

"All and any differences and disputes of whatsoever nature arising out of this charter shall be put to arbitration in the city of London pursuant to the laws relating to arbitration there in force...

By ... the Arbitration Act 1975:

"If any party to an arbitration agreement to which this section applies commences any legal proceedings in any court against any other party to the agreement ... in respect of any matter agreed to be referred, any party to the proceedings may ... apply to the court to stay the proceedings; and the court, unless satisfied that ... there is not in fact any dispute between the parties with regard to the matter agreed to be referred, shall make an order staying the proceedings."

40.      And at paragraph 264 of the judgment Geoffrey Lane LJ said this:-

"Despite the obvious temptation to decide this question in favour of the wholly meritorious plaintiffs against defendants who have less than no merits, it seems to be quite impossible to do so for two principle reasons.  First, even in circumstances where such an order can properly be made the plaintiff must assert and prove what he alleges to be the figure "indisputably due".  However unmeritorious the defendants may be, they are entitled to know the allegation they have to meet at a stage in the proceedings when they are in a position to meet it....".

41.      The case of Tradax Internacional SA-v-Cerrahogullari TAS (The M Eregli) [1981] 3 All ER page 344 was cited by Petrofac to support the argument that the claim that is not positively admitted it is in dispute.  In that case Kerr J was dealing with an arbitration clause which contained a time limit of nine months within which any claims under the relevant contract need be made.  At page 349 of the judgment the court said, at J:-

"In the present case the plaintiffs sought to rely on these decisions and submitted that they were in an a fortiori position, since their claim was for a liquidated sum in relation to which there had never been any arguable defence but which was not expressly admitted.  However, they were of course faced with the difficulty of the second sentence of the arbitration clause and the fact that in the decisions referred to above the arbitration clauses contained no time limit barring claims.  Their submission was that this difficulty could be overcome by treating the second sentence of the arbitration clause as subordinated to the first sentence beginning 'All disputes from time to time arising ...' and that, since there was effectively no dispute, the whole arbitration clause, including the second sentence, could simply be disregarded. 

I cannot accept this contention.  Where an arbitration clause contains a time limit barring all claims unless an arbitrator is appointed within the limited time, it seems to be that the time limit can only be ignored on the ground that there is no dispute between the parties if the claim has been admitted to be due and payable.  Such an admission would, in effect, amount to an agreement to pay the claim, and there would then clearly be no further basis for referring it to arbitration or treating it as time-barred if no arbitrator is appointed.  But if, as here, a claim is made and is neither admitted nor disputed, but simply ignored, then I think that the time limit clearly applies and that the claimant is obliged (subject to any possible extension of time) to appoint an arbitrator within the limited time.  The fallacy in the plaintiffs' argument can be seen at once if one considers what would have been the position if the plaintiffs had in fact purported to appoint Mr Barclay as their arbitrator within the time limit of nine months.  They could clearly have done so, and indeed any commercial lawyer or businessman would say that this is what they should have done under the clause to enforce their claim.  Arbitrators are appointed every day by claimants who believe, rightly or wrongly, that their claim is indisputable.  However, on the plaintiffs' own argument, Mr Barclay would have had no jurisdiction, since there was then, as they now say, no 'dispute' to which the arbitration clause could have applied.  In my view this argument is obviously unsustainable."

42.      In the case of Ellerine Bros (Pty) Limited and another-v-Klinger [1982] 2 All ER page 737 the English Court of Appeal in the judgment of Templeman LJ (page 741) said this:-

"Section 1(1) of the 1975 Act only applies, as indeed it expressly says it only applies, if an action is brought claiming in respect of any matter agreed to be referred to arbitration.  What is said is that all the plaintiffs were doing was seeking an order to which they were entitled under the terms of the agreement (they were entitled to an account, there can be no dispute about that) and therefore the writ which they issued did not constitute legal proceedings "in respect of any matter agreed to be referred" at the date when the writ was issued and the last phrase of the sub-section which enables the court to continue the action if "there is not in fact any dispute between the parties with regard to the matter agreed to be referred", does not avail the defendant, because it must again be supported by "a matter agreed to be referred" and was the proper subject of arbitration at the date of the writ.  If a dispute arose between the date of the writ and the date of the hearing by the court, nevertheless there was no relevant dispute, because the relevant time is the date when the writ was issued. 

... this would put a premium on plaintiffs issuing proceedings without waiting to hear from a defendant or without drawing reference to matters which were almost bound to be in dispute.  Again by the light of nature, it seems to me that Section 1(1) is not limited either in content or in subject matter; but if letters are written by the plaintiff making some request or some demand and the defendant does not reply, then there is a dispute.  It is not necessary, for a dispute to arise, that the defendant should write back and say, "I don't agree".  If, on analysis, what the plaintiff is asking or demanding involves a matter on which agreement has not been reached and which falls fairly and squarely within the terms of the arbitration agreement, then the applicant is entitled to insist on arbitration instead of litigation."

43.      In Hayter-v-Nelson [1990] Lloyds Law Reports Vol. 2 page 265 Saville J had to consider the meaning of dispute in an arbitration clause within the context of a reference to arbitration.  He cited at page 268 the judgment of Templeman LJ in Ellerine -v- Klinger (cited above) and then went on in the following terms:-

"As Lord Justice Templeman put it ...: 

"There is a dispute until the defendant admits that the sum is due and payable."

In my judgment in this context neither word "disputes" nor the word "differences" is confined to cases where it cannot there and then be determined whether one party or the other is in the right.  Two men have an argument over who won the university boat race in a particular year.  In ordinary language they have a dispute over whether it was Oxford or Cambridge.  The fact that it can easily and immediately be demonstrated beyond any doubt that one is right and the other is wrong does not and cannot mean that the dispute did not in fact exist.  Because one man can be said to be indisputably right and the other indisputably wrong does not, in my view, entail that there was therefore never any dispute between them. 

In my view this ordinary meaning of the word "disputes" or the word "differences" should be given to those words in arbitration clauses.  It is sometimes suggested that since arbitrations provide a great scope for a defendant to delay paying sums which are indisputably due, the court should endeavour to avoid that consequence by construing these words in arbitration clauses so as to exclude all such cases, but to my mind there are at least three answers to such suggestions."

44.      He then goes on to reject the assumption that arbitrations are necessarily slow processes, secondly that the parties have made an agreement that in the place of the courts their dispute should be resolved by arbitration, and then says:-

"In the third place, if the courts are to decide whether or not a claim is disputable, they are doing precisely what the parties have agreed should be done by the private tribunal.  An arbitrator's very function is to decide whether or not there is a good defence to the claimants' claims - in other words, whether or not the claim is in truth indisputable.  Again, to my mind, whatever the position in the past, when the courts tended to view arbitration clauses as tending to oust their jurisdiction, the modern view (in line with the basic principles of the English law of freedom of contract and indeed international conventions) is that there is no good reason why the court should strive to take matters out of the hands of the tribunal into which the parties have by agreement undertaken to place them."

45.      In Mayer Newman & Co Limited-v-A1 Farrow Commodities Corporation SA (The John C Helmsing) [1990] Lloyds Law Reports Vol. 2 at page 290 the court characterised the argument before them on an arbitration clause in the following way:-

"The argument in this court, very briefly summarised, was as follows.  Mr Caldin, for the plaintiffs, made four major submissions.  They were these:-

1.) The arbitration agreement between the parties in this case applies when there are differences arising out of the sale transaction. 

2.) The expression "differences" in this context means claims by one party against the other which the other does not admit. 

3.) ...

4.) If, in order to show a difference, it is necessary for the plaintiffs to show a reasonably arguable claim on the merits of the substantive claim, then in this case they do so. 

Mr Berry, in argument for the defendants, did not an indeed could not dispute Mr Caldin's proposition 1.  But he took issue with proposition 2.  He submitted that a difference in this context means a genuinely disputable issue - that is, not merely an unacceptable claim or a bare denial of liability, but a claim or a defence which the court could recognise as possibly capable of being made good."

46.      At page 296 in his judgment Bingham LJ stated as follows:-

"The differing submissions of the parties reflect different approaches to this question in decided cases.  Given the modern attitude to arbitration and if the matter were free from authority, I would for my part be much impressed by the arguments of logic and principle deployed by Mr Justice Saville and Mustill and Boyd.  But the matter is not free of authority and the defendants have a body of authority on their side.  The courts have treated the plaintiff's demonstration of a clear case under order 14 as a reason for not granting a stay, even where the defendant disputes the claim.  If there is no dispute then the plaintiff's claim is obviously good, it is difficult to see why there should be a dispute when the plaintiff's claim is obviously bad."

47.      It appears from the above quote that Bingham LJ felt constrained by authority placed before him although he did not need to resolve the issue as he addressed the matter by reference to different argument. 

48.      There is an interesting extract from the case of Exfin Fishing India Limited Mumbai and Telanhi Shipping Co Mumbai [2006] EWHC 1090 (Com) in which at paragraph 9 Langley J said this:-

"9. Mr Mocatta was referred to the Halki.  He recorded that the owner's argument before him, as before me, as simply put: "[Owners] are entitled to an amount under the terms of the charter party.  Charterers had admitted that.  [Owners] have demanded payment in full.  Charterers have refused to pay that amount, notwithstanding that it is admitted, immediately and in full as [Owners] are entitled to receive it...[Owners] have a claim.  Charterers have not and are not paying it despite their admission.  I simply fail to see how that cannot be regarded as a "dispute" under the terms of the charterparty..." 

10.  I agree.  ... if one party says you must pay now and the other refuses to do so they are in dispute."

49.      In Pledream Properties Limited-v-5 Felix Avenue London Limited [2011] L and TR 20 at page 291 Lewinson J, at paragraph 18, said this:-

"The judge did not accept this argument and nor do I.  First, whether the return has been agreed is, in my judgment, a question of fact.  Second, a dispute may arise in fact even if the outcome of a dispute is a foregone conclusion.  We all have experience of litigants advancing hopeless cases with no prospects of success.  It would be a misuse of language to say that there was no dispute simply because the outcome was inevitable.  This is consistent with the view of the ordinary meaning of the word "dispute" addressed by Saville J in Hayter -v- Nelson ...."

50.      In Channel Group-v-Balfour Beatty Limited [1993] AC 334 at 356 Lord Mustil states:-

"In recent times this exception to the mandatory stay has been regarded as the opposite side of the coin to the jurisdiction of the court under RSC Ord 14 to give summary judgment in favour of the plaintiff where the defendant has no arguable defence.  If the plaintiff to an action which the defendant has applied to stay can show that there is no defence to the claim, the court is enabled at one and the same time to refuse the defendant to stay and to give final judgment for the plaintiff.  This jurisdiction, unique so far as I am aware to the law of England, has been proved to be very useful in practice, especially in times when interest rates are high, for protecting creditors with valid claims from being forced into unfavourable settlement by the prospect that they will have to wait until the end of an arbitration in order to collect their money.  I believe however that care should be taken not to confuse the situation in which the defendant disputes the claim on grounds which the plaintiff is very likely indeed to overcome, with the situation with which the defendant is not really raising a dispute at all.  It is unnecessary for present purposes to explore the question in depth, since in my opinion the position on the facts in the present case is quite clear, but I would endorse the powerful warnings against encroachment on the parties' agreement to have their commercial differences decided by their chosen tribunals, and on the international policy exemplified in the English legislation that this consent should be honoured by the courts given by Parker LJ in Home and Overseas Insurance Co. Limited -v- Mentor Insurance Co. UK Limited [1991] 1 WLR 153 ... and Saville J in Hayter -v- Nelson [1990] 2 Lloyds Rep 265."

51.      In Hume-v-AA Mutual International Insurance Co. Limited [1996] LRLR 19 at 27 Clarke J said this:-

"If the defendant has an arguable defence a stay should be granted but, if he does not, a stay should be refused on the ground that the plaintiff's claim is not disputable.  In deciding on which side of the line the case falls it will be necessary to consider the evidence before the court and if, after the court has given sufficient consideration to the evidence to understand the facts and the suggested issues, it can readily be seen that the defendant has no arguable defence, a stay should be refused.  It seems to me however that because of the principles which have been referred to by Parker LJ and Saville J and which have been approved by Lord Mustil the burden of proving that the claim is not disputable is on the plaintiff and any doubt should be resolved in favour of a stay.  I would therefore adopt the test stated in Hayter -v- Nelson and Home Insurance Co namely that the stay must be granted unless it can be readily and immediately demonstrated by the plaintiff that the defendant has no good grounds for disputing the claim, provided it is understood that it is permissible for the plaintiff to carry out an analysis of the evidence in some detail in order to show that it can readily be demonstrated that the defendant has no arguable defence and that the claim is not therefore disputable.  Such an approach appears to me to be consistent with the passage in the speech of Lord Mustil in the Channel Tunnel case quoted above."

52.      Although considerable authority has been deployed before us, and we have referred to a part only, it seems to us the matter can be simply stated.  The Royal Court, at present, pursuant to the express terms of Article 5 of the Arbitration Law has the discretion if satisfied that there is no real dispute between the parties, to decline to stay a matter for arbitration.  That is no longer the position in the United Kingdom because the express provisions which had enabled it under the Arbitration Act of 1975 to do so have not appeared in the Arbitration Act 1996.  In determining whether or not there is a real dispute the Court should resolve any doubt in favour of a stay and should only decline to order a stay for the purposes of arbitration if satisfied to the standard necessary for a summary judgment that there can be no real argument or dispute put forward to defeat the claim. 

53.      In the Guernsey case of The States-v-Miller and Baird CI Limited Guernsey Law Reports 2005-2006 GLR 295, the Court of Appeal, Rokison JA delivering the judgment of the court, applied Section 4 of the Arbitration Guernsey Law 1982 which is, in effect, in identical terms to Article 5 of the Law.  The learned judge confirmed that the common practice in the English courts endorsed by Lord Mustill in the Channel Tunnel case should generally be followed unless and until Guernsey law is brought into line with the English Arbitration Act 1996 which, in his words, has considerably reduced the circumstances in which a court may decline to grant a stay in the face of a valid and effective arbitration agreement, in particular by removing the discretion of the court to refuse a stay if there is no real dispute.  At paragraph 43 the learned judge went on, in reference to the judgment of Saville J in Hayter-v-Nelson that:-

"... he concluded that, in the context of a non-domestic arbitration to which Section 1 of the 1975 Act applied, the words "there is not in fact any dispute" should be construed to mean: "there is not in fact anything disputable" and that, when considering an application for summary judgment in the cross application for a stay, only in the simplest and clearest cases, i.e. where it was readily and immediately demonstrable that the respondent had no good grounds for disputing the claim, should any party be deprived of his contractual right to arbitrate....".

54.      And, at paragraph 47, in referring to the judgment of Kerr LJ in SL Safia Liners Limited-v-State of India Limited [1985] 1 WLR at 1401 the Court of Appeal went on to say:-

"...

"If the contract between the parties contains an arbitration clause to which Section 1 of the Act of 1975 applies, then the court is not thereby precluded from considering whether there was any arguable defence to the plaintiff's claim.  If the court concludes that the plaintiffs are clearly right in law then it will still give judgment to the plaintiff.  In the same breath, as it were, it would then have decided that in reality there was not in fact any dispute between the parties.  If the court is satisfied that the plaintiffs are clearly right in law, and that the defendants have no arguable defence, then it will not avail the defendants to have raised a point of law which the court can see is in fact bad.  In those circumstances the defendants cannot be heard to say there was a dispute to be referred to arbitration.  But if the court concludes that the plaintiffs are not clearly entitled to judgment because the case raises problems which should be argued and considered fully, then it will give leave to defend, and it is therefore bound to refer the matter to arbitration under Section 1 of the Act of 1975.""

55.      And at paragraph 55, the court said:-

"55. Whilst this court invariably pays a high regard to decisions of the Court of Appeal in England, they are not technically binding upon it, and where there is, as there appears to be, a divergence of approach manifested in the English cases, this court is free to choose which line of authority (if either) it should follow. 

56. I would have no hesitation in preferring, as accurately reflecting the law to be applied in Guernsey, the judgment of Parker LJ in Home and Overseas -v- Mentor, that of Saville J in Hayter -v- Nelson and the opinion of Judge Bowsher in RM Douglas Construction Limited -v- Bass Leisure Limited.  I consider these judgments reflect the guiding principles expressed by Lord Selborne over 130 years ago to the effect that agreements to refer disputes to arbitration should be respected and enforced by the courts. 

57. Further, I give weight to the fact that the relevant passages in the judgment of Parker LJ and Saville J were referred to with approval by Lord Mustill in the Channel Tunnel case and to Lord Mustill's reference in that context to "the international policy exemplified in the English legislation."  I also note the reference in the judgment of Saville J to what he described as "the modern view (in line with the English law of Freedom of Contract and International Conventions)". 

...

59. I acknowledge, of course, that in construing and applying the Guernsey Law of 1982 it is not permissible to have regard to the provisions of the English 1996 Act, which Guernsey has not yet followed.  ..."

56.      On the facts of that case the Court of Appeal did not consider that the matter was so clear that the defendant should be denied its prima facie right to have the dispute referred to arbitration.  It, in allowing the appeal, ordered that the action was stayed pursuant to Section 4 of the Arbitration Guernsey Law 1982.

57.      Of course the context of this present application comes from the attempt on the part of Petrofac to place the matter on the pending list and then apply for a stay.  It is of course well understood that the terms of Rule 6/6(1) of the Royal Court Rules 2004 whilst apparently mandatory in its terms nonetheless were still subject to an inherent power in the court to protect litigants from an abuse of its process. 

58.      In its decision in Powell-v-Acorn Finance [2016] (1) JLR Note 10 the Court of Appeal said this:-

"Notwithstanding the mandatory wording of R6/61 of the Royal Court Rules... it was established that as a matter of principle the Royal Court could refuse to place an action on the pending list, and instead give judgment on the plaintiff's summons, when it was clear that there was no defence to the action.  It would be an abuse of process to prevent the plaintiff from having the judgment to which it was unquestionably entitled and instead to insist on further costs and delay in having the action proceed further.  Despite the mandatory terms of R6/6 the Court had an inherent power to protect other litigants from abuse of its process.  ..."

59.      Article 6 of the European Convention on Human Rights, which provides that in the determination of his civil rights and obligations everyone was entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law, was not inconsistent with the Royal Court's inherent power to refuse to place an action on the pending list if the defendant had no defence, with the result that summary judgment was given in favour of the plaintiff. 

60.      The States of Jersey has not seen fit to enact any changes to the Arbitration Law to reflect the alteration in the statutory position in the United Kingdom - we do not think that it is open to us to do so judicially.  The Court retains a power to refuse to stay in the event that it determines that there is no real dispute between the parties.  The policy behind what is termed as the exception provisions is to filter out cases where the defendant may be simply playing for time or not acting in a bona fide manner in asserting that there is a dispute or where there is in reality no dispute. 

61.      The argument put before us by Petrofac does not raise a substantial defence to the contractual obligation or the qualification exercise on which the claim is founded. 

62.      The Plaintiff refers to the Defendant's position as set out in paragraph 4.1 of the affidavit of Mr Roger Harwood which is in the following terms:-

"4.1 The defendant has not paid the invoice which is exhibited by the plaintiff ....  It is the defendant's position that a dispute therefore arises and that arbitration is the agreed dispute resolution forum."

63.      It can readily be seen that this offers no explanation as to what any substantive defence to the claim may be.  It relies purely on the absence of payment as creating a valid dispute which should be referred to arbitration. 

64.      We have of course taken into account the references to the SFO investigation which in the letter from Freshfields of 7^th August, 2017, referred to above simply states that repayment of the invoice, in the light of the SFO's investigation was "not considered appropriate".  It may conceivably be that there is some kind of argument that could be advanced but our difficulty lies in the fact that Petrofac has not condescended to provide the slightest detail as to what the basis for that assertion may be.  Absent that argument it is simply impossible for us to assess whether or not there is any force in it at all.  It is not, prima facie, readily apparent to us that the mere fact of an SFO investigation provides any real dispute as to the liability of Petrofac to pay Urbania on its invoice. 

65.      Accordingly we decline to stay Urbania's proceedings for reference to arbitration. 

Authorities

Arbitration (Jersey) Law 1998.

Arbitration Act of 1975.

Mustil and Boyd (The Law and Practice of Commercial Arbitration) (2nd Edition).

Redfern and Hunter on International Arbitration (Fifth Edition).

Associated Bulk Carriers Limited-v-Coch Shipping Inc (The Fuohsan Maru) [1978] 2 All ER 254.

Tradax Internacional SA-v-Cerrahogullari TAS (The M Eregli) [1981] 3 All ER.

Ellerine Bros (Pty) Limited and another-v-Klinger [1982] 2 All ER.

Hayter-v-Nelson [1990] Lloyds Law Reports Vol. 2.

Mayer Newman & Co Limited-v-A1 Farrow Commodities Corporation SA (The John C Helmsing) 1990 Lloyds Law Reports Vol. 2.

Exfin Fishing India Limited Mumbai and Telanhi Shipping Co Mumbai [2006] EWHC 1090 (Com).

Pledream Properties Limited-v-5 Felix Avenue London Limited [2011] L and TR 20.

Channel Group-v-Balfour Beatty Limited [1993] AC 334.

Hume-v-AA Mutual International Insurance Co. Limited [1996] LRLR 19.

The States-v-Miller and Baird CI Limited Guernsey Law Reports 2005-2006 GLR 295.

SL Safia Liners Limited-v-State of India Limited [1985] 1 WLR at 1401.

Arbitration Guernsey Law 1982.

Royal Court Rules 2004.

Powell-v-Acorn Finance [2016] (1) JLR Note 10.