Parties entering into a contract containing an LCIA arbitration clause agree that any disputes arising from the contract will be subject to arbitration by the Arbitral Tribunal in accordance with the Rules (presently the LCIA Rules 2020). Nonetheless, disputes pertaining to the jurisdiction of the Arbitral Tribunal as to various claims as brought before it, including those under the contract incorporating the arbitration clause are not uncommon.
Article 23.3 of the Rules provides a framework and, crucially, timescales for such challenges whereby it states that:
“An objection by a Respondent that the Arbitral Tribunal does not have jurisdiction shall be raised as soon as possible but not later than the time for its Statement of Defence.”
This rule differs significantly from the mirror provisions within the Civil Procedure Rules governing challenges to jurisdiction whereby r11.(4)(a) CPR requires such challenges to be made within 14 days of the filing of the acknowledgment of service.
While article 23.3 of the Rules is therefore considerably more generous in its timescales for bringing the challenge to the jurisdiction of the Arbitral Tribunal this is additionally complicated by the requirements set out in s.31 and s.32 (amongst others) of the Arbitration Act 1996, in particular where a Respondent may seek the court to ultimately determine jurisdiction.
Putting to one side the requirements of the Act and presuming that the Respondent has taken relevant steps to raise an “objection” as required therein in a timely manner here we explore an application under article 23.3 of the Rules by reference to a recent case in which IMD Corporate represented the Claimant who successfully saw off a challenge to the Arbitral Tribunal’s jurisdiction by a global conglomerate represented by a global top-100 law firm.
LCIA Arbitral procedure, involves a written stage that differs from traditional litigation. According to article 15.2 of the Rules, the Claimant is not required to serve its Statement of Case (i.e. it’s full pleaded case) until some 28 days after the formation of the Arbitral Tribunal.
Preceding this, on initiating the Arbitral Proceedings, the Claimant is required, to serve its Request for Arbitration. In contrast to the Statement of Case and save where the Claimant intends for its Request for Arbitration to stand as its Statement of Case, the Request for Arbitration need only contain the matters set out in article 1.1 of the Rules. As to the substantive case that the Respondent is to face, this is effectively limited, under sub-article (iii) to:
“statement briefly summarising the nature and circumstances of the dispute, its estimated monetary amount or value, the transaction(s) at issue and the claim advanced by the Claimant against any other party to the arbitration”
The required content of the Request for Arbitration falls in stark contrast with the fully pleaded case in the Particulars of Claim which would initiate the litigation and thus would be before the Defendant in litigation before it decides whether to lodge a challenge to the court’s jurisdiction under r11.(4)(a) CPR.
Whilst article 23.3 of the Rules does place a requirement on the Respondent to raise its challenge to jurisdiction of the Arbitral Tribunal “as soon as possible”, crucially it does not place the Respondent at a disadvantage of having to make an assessment on whether the Arbitral Tribunal’s jurisdiction should be challenged before it has a pleaded case before it, thus oftentimes it is advisable to wait until the Claimant has served its Statement of Case before such assessment can be made.
It therefore stands to reason that the service of the Response should not be the time when the jurisdictional objection is to be raised unless the case in the Request is abundantly clear. Jumping the gun, so to speak, can have dire financial consequences for the Respondent.
This was exemplified in a recent matter in which IMD Corporate represented the Claimant in Arbitral Proceedings before the LCIA Arbitral Tribunal. Here, upon service of the Request, the Respondent proceeded to initially raise the question of jurisdiction of the Arbitral Tribunal in its Response before seeking bifurcation of the Arbitral Proceedings and proceeding to make an application under article 23.3 of the Rules that the Arbitral Tribunal does not have jurisdiction over a part of the claim.
Crucially, the Respondent did not seek clarification of the relevant part of the claim, nor did the Respondent wait until the Claimant served its Statement of Case which the Claimant had expressed it will do.
The part of the claim in question, was a subsequent contract entered into by the Claimant, as a consequence of the Respondent’s alleged breach of contract with the Claimant. The said subsequent contract did not contain an arbitration clause nor was it being challenged in the Arbitral Proceedings by the Claimant.
The Respondent argued that by virtue of the said subsequent contract not containing an arbitration clause, the Arbitral Tribunal did not have jurisdiction to decide its substance. Yet its substance was not a question before the Arbitral Tribunal, something that would be clear had the Respondent had the benefit of considering a Statement of Case. The causal link between the breach and the commencement of the subsequent contract was the question before the Arbitral Tribunal.
The Respondent’s challenge was dismissed with the Respondent being ordered to pay Arbitration Costs and legal costs of the Claimant in responding to the Respondent’s application. It was found that the substance of the consequent agreement was not a matter brought before the Arbitral Tribunal and that the causal link fell within the Arbitral Tribunal’s jurisdiction.
The Request is critical in setting the stage for the Arbitral Proceedings. While it needs only to provide a brief summary, it lays the groundwork for the subsequent detailed Statement of Case. The Request is designed to give a preliminary outline of the dispute, allowing the Respondent to understand the nature of the claims without diving into extensive detail and does not start the clock on the jurisdictional challenge as it were. Misinterpretation of this initial summary can lead to premature and ill-advised jurisdictional challenges.
The lesson from this case is clear: strategic patience is paramount in Arbitral Proceedings and Respondents should avoid premature challenges to jurisdiction of the Arbitral Tribunal, in particular when relying on the content of the Request only before a full pleaded case is served.
Jurisdictional challenges in arbitration require careful consideration and this case underscores the importance of timing and clarity in jurisdictional challenges. Respondents should ensure they do not rush into challenges without a thorough understanding of the case and balance the need to act with alacrity, in particular the obligations under the Arbitration Act 1996 as well as the relevant rules, with the appropriate timing of the application. By doing so, they can avoid the pitfalls of premature applications and navigate the Arbitration Proceedings more effectively.
Comprehensive legal advice should be sought not only once the dispute has commenced as the inclusion or the construction of the arbitration clause can have drastic consequences for the dispute resolution process.
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.
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