Courts have previously been reluctant to hold that arbitration clauses can act to exclude ancillary proceedings as well as substantive proceedings. Indeed, until now the commercial view of Scott v Avery clauses like clause 29 has been that they act only to exclude substantive (and not ancillary) proceedings.
However, Flaux J commented on the various commercial interpretations of such clauses in his judgment and concluded that “whilst limitation of the clause to the exclusion of substantive proceedings and not ancillary proceedings has been regarded…as commercially desirable, I do not myself think that construction is justified by the wording of” clause 29. Flaux J also commented that, while holding clause 29 amounts to an exclusion of ancillary proceedings “may be surprising to some of those who trade in the commodity markets”, this should not prevent the wording of clause 29 having its clear meaning and effect.
Based on the wording of the clause, Flaux J was of the firm view that the relevant paragraph of clause 29 was sufficiently wide to and did, on its true construction, exclude all proceedings anywhere, including England, whether substantive or ancillary or supportive of the arbitration. Flaux J went on to say that it was clear to him, as a matter of language, that proceedings are ‘in respect of a dispute’ not just when they seek to determine the substance of the dispute, but also when they are ancillary to the dispute or are seeking security for it.
Flaux J noted that the provisions of the 1950 Act were mandatory and there was no provision for contracting out of the supervisory powers of the court. Flaux J distinguished between the 1950 Act and the 1996 Act by explaining that one of the fundamental principles established by the 1996 Act was that of party autonomy; while the 1996 Act does contain some mandatory provisions, section 44 of the 1996 Act is a non-mandatory provision and as such parties to arbitration clauses are free to agree not to be bound by such provisions.
On this basis, S’s application to the court was granted and B’s freezing injunction against S was discharged.