Ambiguous and contradictory arbitration clause in Russian: what could possibly go wrong?


Author: Frances Jenkins, Julia Iarmukametova


Frances Jenkins, Associate, Fladgate LLP (fjenkins@fladgate.com)

Julia Iarmukametova, Paralegal, Fladgate LLP (jiarmukametova@fladgate.com)

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In A v B [2018] EWHC 1370 (Comm), the Commercial Court has allowed a challenge under section 67 of the Arbitration Act 1996 on the basis that an ambiguous and contradictory arbitration clause drafted in Russian provided for ad hoc arbitration.

The initial dispute arose in relation to a Charterparty comprising two parts which were drafted in Russian but governed by English law. Clause J in Part I, literally translated, provided for “Arbitration proceedings – London international court, in accordance with the law of Great Britain…”.   Clause 24 in Part II provided for “Arbitration. Any disagreements and disputes … arising out of the C/P are to be resolved by arbitration in New York or London, according to which of these places is provided for in Part I”.  In case of conflict between Part I and Part II, the provisions of Part I would take precedence.

The arbitrators nominated by the parties accepted their appointments on the basis of the London Maritime Arbitration Association Terms 2012 (LMAA).  The defendant made no reservation as to jurisdiction or the terms of the arbitrators’ appointment.

The defendant subsequently challenged the tribunal’s jurisdiction under section 31 of the Arbitration Act 1996, arguing that the reference to an institution called “London international court” in clause J was meaningless and ineffective.

The tribunal obtained comments from Russian speaking lawyers in London and were particularly persuaded by the fact that if the term “London Court of International Arbitration” (LCIA) was to be translated into Russian, the result would be very similar to what was written in clause J[1].  The tribunal held therefore that it did not have jurisdiction over the dispute.  The arbitrators considered that clause 24 did not apply as it was in direct conflict with clause J.

The claimant challenged the tribunal’s award on the basis that the tribunal was wrong to consider clause J in isolation and that it should have looked at the proper purposive construction of it in the light of the contract as a whole.

Philips J allowed the challenge and held that the parties had actually agreed to an ad hoc arbitration in London.  He commented that the proper approach “…at least in the first instance, is to look at the provisions of the contract as a whole in construing their meaning”.

He provided the following reasons for setting aside the award:

  • the mechanism for appointing arbitrators in clause 24 was inconsistent with LCIA arbitration;
  • LCIA arbitration for maritime disputes is unusual;
  • if the parties had intended LCIA arbitration, they would have taken more care to ensure that the wording specifically identified that body; and
  • neither party objected to the appointment of arbitrators on the basis of LMAA Terms.

Philips J commented that when construing a clause in a foreign language where the proper translation is doubted, the court must determine the meaning of the clause by way of a combined process of using:

  • evidence of translation; and
  • the usual tools of construction.

The purpose of this is to “reach a proper interpretation of the meaning and effect of the contract as agreed by the parties”.

This decision is an important reminder for practitioners of the issues that can arise from a poorly drafted arbitration clause.  Thus, to avoid unnecessary risks, when drafting, it is advisable to ensure that:

  • clear and mandatory language that imposes a contractual obligation to arbitrate is used;
  • clauses are internally consistent and ambiguous language is avoided;
  • if opting for institutional arbitration, the chosen institution (and any applicable rules) are named correctly; and
  • when drafting an arbitration clause in a foreign language, English abbreviations or even fully agreed English translations are provided, to avoid doubts as to the specific institution referred to.

[1] The authors note that it may be of interest to English speaking practitioners who work regularly with Russian clients to know that Arbitrazh in Russian does not refer to “arbitration” in the English sense of the word but, in fact, to the Russian State Commercial Court. Arbitration is usually translated as razbiratyelstvo.

 

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