| Date | 2 April 1997 |
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| Judgment | Delta Civil Engineering -v- London Docklands Development Corporation Court of Appeal 11 October 1996, [1997] 11 Bliss 2 |
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| The Issue | Whether an arbitrator can rule upon his own jurisdiction. |
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| Implication |
Unless the 1996 Arbitration Act applies an arbitrator cannot conclusively decide his own jurisdiction at the outset of the arbitration, but once properly constituted he may be authorised to decide whether the parties have subsequently narrowed that jurisdiction. |
printThe 1996 Arbitration Act will change what had become established law that a arbitrator cannot conclusively decide his own jurisdiction at the commencement of an arbitration. Under the new Act the arbitrator will, in some circumstances, be able to bind the parties by a decision as to whether he has jurisdiction in the first place. In the case of Delta Civil Engineering -v- London Docklands Development Corporation (LDDC), Lord Justice Staughton described this as a curious example of the boot straps effect; by deciding that he is an arbitrator he makes himself an arbitrator. Clearly unimpressed by this idea the Lord Justice wryly commented that "the Bill was promoted by the Board of Trade, so it must be what commercial people like". The provisions of the 1996 Act did not however apply to the arbitration between Delta and LDDC who had appointed an arbitrator to decide a dispute concerning unforeseen ground conditions. Soon after commencing arbitration the employers wrote to the contractors proposing to pay a sum of £93,000 plus "interest to be agreed". The contractors' representatives replied "We are instructed and authorised to accept your offer in settlement of this dispute. No doubt the writer will now be able to agree the appropriate figure for interest. Once you have acknowledged our agreement we will notify the arbitrator accordingly in order that he may issue his award by consent". Neither letter made any mention at this stage of who should pay the costs of the arbitration and it may be said that both parties were playing with fire in omitting to clarify this issue. In due course the amount of interest, or finance charges, was agreed between the parties and the representatives for the contractor drafted a consent award which contained provisions as to costs being paid by LDDC. LDDC's lawyers replied saying that there was no agreement to pay costs. In consequence the contractors had no option but to request the arbitrator to become involved in resolving this issue. At that point the solicitors for LDDC wrote to the contractor with a copy to the arbitrator saying that there was no jurisdiction for the parties or the arbitrator to open up the terms of the agreement. Their position was that the agreed terms provided for payment of a sum of money in full and final settlement. Undaunted the arbitrator went ahead and published an award for the agreed sum and including a paragraph saying that the employer should pay the contractors' costs of the arbitration. From believing that they had rapidly and sensibly settled the dispute at an early stage, now the legal costs started to soar. LDDC refused to pay the full amount of the award. Accordingly the contractors issued a summons seeking leave to enforce the award under Section 26 of the 1950 Arbitration Act. That summons came, in the first instance, before a Masters of the Queen's Bench Division who refused leave. He held that the arbitrator had no jurisdiction to make the award he did. Next there was an appeal from this decision to the High Court. Once again the contractor was denied enforcement of the award. With remarkable staying power and an apparently bottomless legal fighting fund, the contractor came back a third time to the Court of Appeal. Third time lucky. Lord Justice Staughton considered that it was irrelevant to ask whether the decision which the arbitrator reached was wrong. "Once an arbitrator has jurisdiction he has jurisdiction to be wrong as well as to be right." As to whether the initial notice referring the dispute to the arbitrator was wide enough to comprise the dispute that eventually did reach the arbitrator, he had no doubt that this was the case. A more difficult point put by LDDC however was that the correspondence between the parties concerning settlement of the dispute had the effect of narrowing the jurisdiction of the arbitrator. Not so, said Lord Justice Staughton. Whether or not the 1996 Arbitration Act applies, once an arbitrator is appointed with appropriate jurisdiction, he is authorised to decide, in cases such as this, whether the parties have subsequently narrowed that jurisdiction. By awarding costs to the contractor the arbitrator was effectively and conclusively dealing with the question of his jurisdiction in relation to costs. Delta were therefore entitled to succeed on their appeal and lest there should be any further dispute, were entitled to recover their costs of the appeal.
CJ-9713
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