黑洞社区

There is a real chance that a House of Lords case will tidy up a nuisance point for everyday adjudication. True, the case is about arbitration, not adjudication and true, the case is about a whopper of a dispute in the shipping world, but the ripples of relief are washing our building industry鈥檚 shore.

Let me explain. When a dispute is brought to arbitration, or to adjudication for that matter, it never surprises me to have one of the parties raise a devilish complication. In adjudication the statute confers the right to bring disputes 鈥渁rising under the contract鈥�. In arbitration, the arbitration clause will invariably say the same thing. The problem is the confounded phrase 鈥渄isputes arising under the contract鈥�. One of the bright spark parties will raise the objection that part of the dispute doesn鈥檛; it only arises 鈥渋n connection with the contract鈥�.

Now, I don鈥檛 want to get overly complicated here, but disputes about building work or claims of professional incompetence are often brought 鈥渋n contract鈥� and also 鈥渋n negligence鈥�. The negligence is in connection with the contract. 鈥淵ou can鈥檛 bring that to an arbitration or adjudication,鈥� says the objector. 鈥淭he clause only talks about claims 鈥榰nder鈥� rather than claims 鈥榠n connection with鈥�.鈥� This is meat and veg to the pernickety world of lawyers.

But the House of Lords has just given all that a very big heave-ho. The case is best known as 鈥渢he Fiona鈥�, but the name used in the House of Lords is Premium Nafta Products vs Fili Shipping. It鈥檚 a claim for hundreds of millions of dollars. It鈥檚 the sort of dispute that is ideally suited to commercial arbitrators, who know their shipping better than judges might do.

In any case, five judges in the House of Lords last week confirmed what three judges in the Court of Appeal said earlier this year: the use of the words 鈥渄isputes arising under a contract鈥� is wide enough to include disputes in connection with the contract. Mind you, there have been umpteen cases over the years that reached completely opposite results. We have been waiting all this time for some brave soul to bring the question to the House of Lords. Their decision now binds all tribunals of whatever hue.

What the learned judges have decided is that when a word or a phrase is used, it always has to be put into context

And joyous as I am, and clever as the explanation is, my guess is that these eight learned judges had half an eye on 鈥減olicy鈥� when reaching their conclusion. The policy eye is to do with stamping out delays. Taking a technical point at the outset of an arbitration, or a construction industry adjudication for that matter, can derail the whole process. That is not to say it is improper to put a spoke in the arbitration wheel. What it can do, though, is divert all eyes, all thoughts and all efforts to the

wheel in the ditch. In the Fiona, the arbitration was stopped a year ago while the debate about what could or could not come to the arbitrator went through three court cases. It took a year to get the wheel back on the rails. These incidents are legitimate 鈥渟atellite鈥� diversions. The courts and parliament are the only folk who can clarify these points.

So, what did the learned judges decide? Easy really; they said that when a word or phrase is used, it always has to be put in context. And if a commercial contract contains an arbitration clause saying an arbitrator rather than a judge will decide disputes 鈥渁rising under a contract鈥�, then give those words the meaning that commercial people would intend. The commercial people will have recognised that their contracts do occasionally give rise to disputes of all sorts. And they have chosen arbitration to resolve them. Commercial people would be hardly likely to intend that some of their disputes go to an arbitrator and others to court. Rational business people would intend that the same tribunal would decide any dispute arising out of the relationship into which they have entered, or purported to have entered. I said it was easy, didn鈥檛 I?

Then what of adjudication? Does this House of Lords case apply here? What did parliament intend? Well, I guess it intended to give the construction industry what its rational business people asked for. It neatly provides that adjudication deal with all disputes whether 鈥渦nder鈥�, 鈥渋n connection鈥� or 鈥渁rising out of鈥� the contract. In short: the lot.