Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd

LORD KEITH OF KINKEL
For the reasons given in the speech to be delivered by my
noble
and learned friend Lord Mustill, which I have had the
opportunity
of considering in draft an with which I agree, I would
dismiss
this
appeal.
I would add that I also agree with the
observations
contained
in the speech of my noble and learned
friend
Lord
Browne-Wilkinson.
LORD GOFF OF CHIEVELEY
My Lords,
For the reasons given by my noble and learned friend Lord
Mustill, I too would dismiss the appeals.
I also wish to express
my agreement with the point raised by my noble and learned
friend Lord Browne-Wilkinson. Like him, I am concerned that the
jurisdiction to grant -ai'iin junction, which is unfettered in the
statute, should be rigidly confined to exclusive categories by
judicial decision.
LORD JAUNCEY OF TULLICHETTLE
My Lords,
I have the advantage of reading in draft the speech
prepared by my noble and learned friend, Lord Mustill. 1 agree
with him, and for the reasons which he gives, I, too-;- wciiJ1d dismiss
the a ppeal.

LORD BROWNE-WILKINSON
My Lords,
I have read and agree with the speech of my noble and
learned friend Lord Mustill. For the reasons which he gives I too
would dismiss the appeal.
[ add a few words of my own on the submiss ion that the
decision of this House in "Siskina" (Owners of Cargo lately laden
on Board) v. Distos Compania Naviera S.A. 1979 A.C. 210 would
preclude the grant of any injunction under section 37(1) of the
Supreme Court Act, 1981, even if such injunction were otherwise
appropriate. If correct, that submission would have the effect of
severely curtailing the powers of the English courts to act in aid,
not only of foreign arbitrations, but also of foreign courts. Given
the international character of much contemporary litigation and
the need to promote mutual assistance between the courts of the
various jurisdictions which such litigation straddles, it would be a
serious matter if the English courts were unable to grant
interlocutory relief in cases where the substantive trial and the
ultimate decision of the case might ultimately take place in a
court outside England.
Section 37(0 of the Supreme Court Act, 1981, provides:
"The High Court may by order (whether interlocutory or
final) grant an injunction or appoint a receiver in all cases
where it appears to the court to be just and convenient to
do so."
Despite the breadth of these words, in the Siskina this
House laid down certain limits on the powers which it confers. In
that case, the plaintiffs were seek ing leave to serve the
defendants out of the jurisdiction. The only ground on which the
plaintiffs could rely under order 11 was the then sub-rule (j) viz •
that the writ claimed an injunction against the defendants dealing
with their assets within the jurisdiction.
Since the contract in
question contained a foreign exclusive jurisdiction clause, the only
injunction capable of being granted by the English courts in the
ordinary course of events would have been an interlocutory
injunction. In that context, Lord Diplock said, (at p. 256C-E):
"The words used in sub-rule (;) are terms of legal art. The
sub-rule speaks of 'the action' in which a particular kind of
relief, 'an injunction' is sought.
This pre-supposes the
existence of a cause of action on which to found "the
action". A right to obtain an interlocutory Injunction is not
a cause of action.
It cannot stand on its own.
It is
dependent upon there being a pre-existing cause of action
against the defendant arising out of an invasion, actual or
threatened by him, oY- a legal or equitable right of the
plaintiff for the enforcement of which the defendant is
amenable to the jurisdiction of the court.
The right to
obtain an interlocutory injunction is merely ancillary and
incidental to the pre-existing cause of action."

This passage, read in isolation, suggests that there are only
two limits on the general power conferred by section 37 . viz.
(1)
that the court must have personal jurisdiction over
the defendants in the sense that they can be duly served
either personally or under order 11 (other than sub-rule (i));
and
plaintiffs
have
However it was submitted for
In
Lord
Diplock's
other passages
requirement, VIZ.
a
cause
of action
under
the respondents that two
speech
impose a
third
(2)
that the
English law.
(3)
that the interlocutory injunction must be ancillary to
a claim for substantive relief to be granted in this country
by an order of the English court.
It was said that this third limit is to be found in two other
passages in Lord Diplock's speech, at pages 254E and 256H:
presupposes the existence of an action, actual or potential,
claiming substantive relief which the High Court. has
jurisdiction to grant and to which the interlocutory orders
referred to are but ancillary.
{in
To come within [sub-rule
the injunction sought in the
action must be part of the substantive relief to which the
plaintiff's cause of action entitles him; and the thing that
it is sought to restrain the foreign defendant from doing in
England must amount to an invasion of some legal or
equitable right belonging to the plaintiff in this country and
enforceable here by a final judgment for an injunction."
On the basis of tha t alleged third requirement, the
respondents contended that since the contract in the present case
contains a foreign arbitration clause which the Arbitration Act,
1975, requires the action to be stayed, the court has no power to
grant an interlocutory injunction.
Although the respondents have
been validly served (i.e. there is jurisdiction in the court) and
there is an alleged invasion of the appellants' contractual rights
(i.e. there is a cause of action in English law), since the final
relief (if any) will be granted by the arbitrators and not by the
English court, the English court, it is said, has no power to grant
the interlocutory injunction.
In my judgment that submission is not well founded. I can
see nothing in the language employed by Lord Diplock (or in later
cases in this House commenting on the Siskina) which suggest that
a court has to be satisfied, at the time it grants interlocutory
relief, that the final order, if any, will be made by an English
court.
The two passages I have quoted refer to the substantive
relief being relief which the English court has "jurisdiction to
grant" and to rights "enforceable here":
see also, at p. 256F
"some legal or equitable right which it has jurisdiction to enforce
by final judgment".
These are words which indicate that the
relevant question is whether the English court has power to grant
the substantive relief not whether it will in fact do so. Indeed, in
many cases it will be impossible, at the time interlocutory relief
is sought, to say whether or not the substantive proceedings and
the grant of the final relief will or will not take place before the
English court.
My noble and learned friend Lord Mustill has
demonstrated in his speech that in the context of arbitration
proceedings whether it is the court or the arbitrators which make
such final determination will depend upon whether the defendant
applies for a stay. The same is true of ordinary litigation based
on a contract having an exclusive jurisdiction clause:
the
defendant may not choose to assert his contractual right to have
the matter tried elsewhere. Even more uncertain are cases where
there is a real doubt whether the English court or some foreign
court is the forum conveniens for the litigation:
is the English
court not to grant interlocutory relief against a defendant duly
served and based on a good cause of action just because the
English proceedings may subsequently be stayed on the grounds of
forum non conveniens?
~
I therefore reach the conclusion that the Siskina does not
impose the third limit on the power to grant interlocutory
injunctions which the respondents contend for. Even applying the
test laid down by the Siskina the court has power to grant
interlocutory relief based on a cause of action recognised by
English law against a defendant duly served where such relief is
ancillary to a final order whether to be granted by the English
court or by some other court or arbitral body.
Finally I should make it clear that I have merely been
considering the effect of the decision in the Siskina on the
assumption that it correctly states the law.
The tests it laid
down in absolute terms have already received one substantial
modification: see Castanho v. Brown and Root (U.K.) Ltd. (1981]
A.C. 557;
British Airways v. Laker Airways [J985] A.C. 58.
Moreover,
in South Carolina Insurance Co. v. Assurantie
Maatschappij "de Zeven Provincien" N.V. [J98?] A.C. 24, Lord Goff
of Chieveley (with whom Lord Mackay of Clashfern agreed)
reserved the question whether the law as laid down by the Siskina
(as subsequently modified) was correct in restricting the power to
11 grant injunctions to certain exclusive categories. With respect, I
, share the same doubts as are there expressed a nd reserve the
question for consideration when it arises.
LORD MUSTILL
My LordS,
Since this is a long judgment I will state at the outset my
answers to the questions posed in argument, before developing the
reasons.
1.
Should the action
respondents be stayed?
to
brought
by
t he a ppellants against the
consider that the action can and should be s t ayed pursuant
the inherent jurisdiction of the court to inhibi t proceedings
- 4 . !

brought in breach of an agreed method of resolving disputes.
thus arrive at the same conclusion as the Court of Appeal, but by
a different route. It is therefore unnecessary to decide whether,
as held by the Court of Appeal, the court would also have power
to stay the action under section I of the Arbitration Act, 1975
("the 1975 Act").
I nevertheless briefly state reasons for
concluding, with some hesitation, that such a power does exist in
the circumstances of the present case.
2.
Is there in fact any dispute between the parties with regard
to the subject matter of the action?
In common with the Court of Appeal I conclude that this
question should be answered in the affirmative.
3.
Does the court have power to grant an iniunction to prevent
the respondents from ceasing work under an agreement dated 13
August 1986 ("the construction contract")?
The Court of Appeal held that no such power is conferred
by section 12(6)(h) of the Arbitration Act, 1950 ("the 1950 Act"),
and I agree.
In the result I would dismiss the appeals.
I
The Court of Appeal also held that the court had no power
to grant the injunction under section 37( 1) of the Supreme Court
Act, 1981. As I understand it the Court of Appeal would in any
event have declined to uphold the grant of an injunction. For my
part I consider that such a power does exist, but that it should
not be exercised in the circumstances of the present case. Again,
therefore, I reach the same conclusion as the Court of Appeal but
by a different route •
1.
INTRODUCTION
The Contract
The appellants are the concessionaires under a concession
granted by Her Majesty's Government and the Government of the
French Republic for the construction and operation of the Channel
Tunnel.
1.
The respondents are a joint venture of :
(a)
"Trans link",
the members of which are five British
construction companies, the first to fifth respondents, who
are themselves carrying on business in joint venture; and
(b)
The sixth respondents, GIE Transmanche Construction. The
members of which are five French construction companies,
the seventh to eleventh respondents.
Under an agreement dated 13 August 1986 ("the construction
contract") the appellants employed the respondents to design and
commission the Tunnel.
The works to be c arried out under t he c onstruct ion contract
are divided into :
-
~
-

(a)
target work s
(b)
lump sum works
(c)
procurement items.
The target works broadly comprise the boring and lining of
the three tunnels. That work is more or less complete.
The lump sum works essentially comprise:
the design and construction of the terminals a t each end of
the tunnels; and
(b)
the design, supply, installation and commissioning of
mechanical and e lectrical fixed equ ipment in the tunnels and
terminals ("fixed equipment").
(a)
There is provision in the- contract for variation of the
works.
Clause 51 of the conditions of contract allows the
appellants to "make any variation of the form, quality or quantity
of the works or any part thereof that may, in [its] opinion, be
desirable"
and provides that no such variation will in any way
vitiate or invalidate the contract. The clause provides that the
appellants and the respondents should seek to agree the terms of
the variation; if no agreement is reached, the appellants may
confirm the order, and, subject t o certain exception, the
respondents must the n comply.
When the c ontract was signed, it was envisaged that the
tunnel would eventually require a cooling system, but that it would
not be required at the opening. Accordingly, the lump sum works
originally ' included provis ion for the design of such a system, but
not the supply of the mechanical works forming the system itself.
Later it became apparent that a cooling system would be needed,
even at the opening.
Accordingly, the appellants issued a
Variation Order No. 3 for the prov ision of suc h a system.
The
order was confirmed in April 1988. Thereupon t he cooling system
itself became part o f t he fixed equipment a nd the lump sum
works.
The present dispute a rose, inter alia, because the parties
failed to agree the price for the variation and because of the
discontinuance of an interim agreement to pay the respondents on
a cost plus basis (see below). The contract contains a number of
provisions for the assessment and payment of sums due under it.
In particular, clause 60(2) of the conditions of contract provides
for the contractor to submit monthly statements including {in
respect of the lump sum works} an estimate of the likely value of
lump sum works to be executed in that and the following month.
Clause 60(3) provides for the employer to review the contractor's
statement and to issue a "certificate of advance payment" stating
in relation to each of the items set out in the contractor' s
statement, what in the employer's opinion is the proper figure.
Clause 60(3) then provides that the amount stated as payable in
the certificate of advance payment shall be payable on the first
banking day of the next month.

Clause 52 of the conditions of contract provides for the
valuation of variations to the works, by reference to the rates or
prices set out in the contract or in the breakdown of the lump
sum price approved under the contract; if none are applicable, the
rates or prices are to be agreed between the parties or - failing
agreement - fixed by the employer at such rates or prices as in
its opinion shall be reasonable and proper.
Clause 52(5) provides that if the contractor does not accept
any rate or price fixed by the employer under clause 52 as
reasonable and proper, the dispute shall be referred to a panel of
experts for determination under clause 67.
"67(1) If any dispute or difference shall arise between the
employe~ and the contractor during the progress of
the works (but not after the issue of the maintenance
certificate for the whole of the works or the last of
such
certificates
under clause 62(1) or after
abandonment of the works or termination or alleged
termination of the contract), then, subject to article
6(4) clauses 73(5) and 74(4) and the rules of the
procedure for the calling in of the performance Dond
in schedule 25, such dispute or difference shall at the
instance of either the employer or the contractor in
the first place be referred in writing to and be
settled by a panel of three persons (acting as
independent experts but not as arbitrators) who shall
unless otherwise agreed by both the employer and the
contractor within a period of 90 days after being
requested in writing by either party to do so, and
after such investigation as the panel think fit, state
their decision in writing and give notice of the same
to the employer and the contractor. The panel shall
be constituted in the manner set out in clause 67(6) .
1
"Settlements of disputes
~
Clause 67 provides as follows:
The contractor . shall in every case continue to
proceed with the works with all due diligence and the
contractor and the employer shall both give effect
foriliwith to every such decision of the panel
(provided that such decision shall have been made
unanimously) unless and until the same shall be
revised by arbitration as herinafter provided.
Such
unanimous decision shall be final and binding upon the
contractor and the employer unless the dispute or
difference has been referred to arbitration as
hereinafter provided.
"(3)
Subject to article 6(4) of the contract agreement, if:
"(2)
either the employer or the contractor be
dissatisfied with any unanimous decision of the
panel given under clause 67(1), or
Oil
The panel shall fail to give a unanimous
decision for a period of 90 days, or such other

period a s may be ag reed by both the emp loyer
and the contractor, after being requested by
either party to do so, or
any unanimous decision of the panel is not
given effect in accordance with clause 67(2)
(iii)
then either the employer or the contractor may within 90
days after receiving notice of such decision or within 90
days after the expiration of the said period of 90 days or
such other period as may be agreed by the employer and
the contractor (as the case may be) notify the other party
in writing that the dispute or difference is to be referred to
arbitration.
If no such notice has been given by either
party to the other within such periods, the panel's decision
shall remain final and binding upon the parties.
"(4)
All disputes or differences in respect of which a
notice has been given under" Clause 67(3) by either party
that such dispute or difference is to be referred to
arbitration and any other dispute or difference of any kind
whatsoever which shall arise between the employer or the
Maitre d 'Oeuvre and the contractor in connection with or
arising out of the contract, or the execution of the works
or after their completion and whether before or after the
termination, abandonment or breach of the contract shall be
finally
settled under the Rules of Conciliation and
Arbitration of the International Chamber of Commerce by
three arbi tra tors appointed under such Rules. The employer
and the contractor shall each nominate and a ppoint one
arb itrator a nd the third arbitrator shall be appo inted by the
International Chamber of Commerce.
The s~t 9f_ SlJ~
arbitration shall be Brussels.
Save as provided in clause
61(3), the sald arbltraTor!s shall have full power to open up,
rev ise and review any decision, opinion, direction, certificate
or valua tion of the employer and/or the Maitre d'Oeuvre.
Neither party shall be lim ited in the proceedings before suc h
a rb itrator/s to the evidence or arguments put before the
panel for the purpose of obtaining his said decision.
No
decision given by the panel in accordance with the foregoing
provisions shall disqualify a member of the panel from being
called as a witness and giving evidence before the
arbitrator/s on any matter whatsoever relevant to the
dispute or difference referred to the arbitrator/s as
aforesaid.
\i
The
reference
to
arb itration
may
proceed
notw ithstanding that the works shall not then be or be
alleged to be complete, provided always that the obligations
of the employer and the contractor shall not be altered by
reason of the arbitration being conduc ted during the progress
of the works."
The provision just quoted refers to the Rules of Conciliation
and Arbitration of the International Chamber of Commerce
(hereafter "ICC"). The English text of these Rules (the
corresponding French vers ion is not before your Lordsh ips' Housel
prov ides as follows :
.. Article 8. 5

"Before the file is transmitted to the arbitrator • • • the
parties shall be at liberty to apply to any competent judicial
authority for interim
or conservatory measures, and they
shall not by so doing be held to infringe the agreement to
arbitrate or to affect the relevant powers reserved to the
arbitrator..
"Article 24
"1.
The arbital award shall be final.
"2.
By submitting the dispute to the International
Chamber of Commerce, the parties shall be deemed to have
undertaken to carry out the resulting award without delay
and to have waived the right to any form of appeal insofar
as such waiver can be validly made."
Clause 6& of ·:he contract is to the following effect:
"The construction, validity and performance of the contract
shall in all respects be governed by and interpreted in
accordance with the principles common to both English law
and French law, and in the absence of such common
principles by such general principles of international trade
law as have been applied by national and international
tribunals. Subject in all cases, with respect to the works to
be respectively performed in the French and in the English
part of the site, to the respective French or English public
policy (ordre public) provisions."
It is common ground that the first stage of the procedure reference to the panel of experts under clause 67(1) - is not itself
an arbitration within the Arbitration Act 1975, but that the second
stage is an arbitration.
2.
The dispute
Variation Order No.3 was issued on 16 November 19&7 and
confirmed as an order under clause 51 on 29 April 19&&, and the
parties entered into discussions as to the price payable in respect
of that variation. The extent of the work was not fully defined.
In December 19&9, the respondents indicated that the programme
required them to order pipeline materials in the very near future,
and the respondents asked that the appellants fund the committed
cost of procurement on an interim basis pending final agreement
on the total sales value. The appellants agreed to this expressly
on the basis that it was an interim measure until a final price was
settled.
Prior to March 1991, the respondents therefore billed,
and the appellants paid, on a cost plus basis.
The parties were unable to reach agreement regarding the
price of Variation Order No.3. By the end of 1990, the parties'
estimates (in 19&5 values) were respectively £112 million (the
respondents) excluding the cost of additional delay and disruption,
and £ 7& million (the appellants), inclusive of delay and disruption,
in each case excluding building and civil works.

Therefore, by letter dated 19 March 1991, the appellants
informed the respondents that they would no longer continue with
the interim arrangement and indicated that they would thenceforth
issue certificates of advance payment based on its estimates of
value.
The appellants stated that they were willing to discuss
the matter further but that in the event that agreement was not
possible the appellants would have no option but to fix a rate
pursuant to the contract.
From then on, the appellants issued its monthly certificates
and made their
monthly payments on the basis of their own
estimates of value. Between the beginning of March and the end
of September 1991, seven such monthly payments were made. The
respondents sought payment on the basis of their own estimates of
value, thereby making clear that they did not accept the
appellants' valuation.
Neither side referred the difference on
valuation to the panel for determination by it under clause 67.
By the end of July 1991· the respondents had made a
submission to the appellants claiming a right to a "reasonable sum"
In respect of the whole of the fixed equipment works.
By September 1991, the cumulative difference between the
sums applied for by the respondents (excluding sums relating to
delay and disruption) and those paid by the appellants amounted to
about £ 17 million (in 19&5 values).
The respondents claimed to
have been approaching a point at which the amount certified would
not even cover the costs which they were incurring by, and that
this point was ultimately reached in November 1991.
The
appellants claim that this is not correct.
that the appellants agree to respondents proposed figure for
the construction of the Sangatte buildings (part of the
cooling system works excluded from the estimates); and
(b)
that the appellants pay the respondents in full in accordance
with the amounts applied for in respect of all cooling works,
pending the final valuation of Variation Order No.3.
(a)
By letter dated 3 October 1991, the respondents required:
Unless the appellants agreed to these requirements in
writing at close of business on Monday 7 October 1991 the
respondents would ''be obliged to suspend all work relating to the
cooling system".
The letter went on to draw the appellants '
attention to "the very serious consequences" which would ensue,
and it itemised some of them. The matter was widely publicised
in the French press and media on 7 and 8 October 1991.
After correspondence between the parties in the week
commencing 7 October 1991, the respondents wrote on 14 October
1991 effectively confirming their position. On the same day, the
appellants issued the present proceedings for an injunction to
restrain the respondents from carrying out that threat.
The
respondents did not then, and did not thereafter suspend the
cooling system works.
Meanwhile the responde nts had submitted a claim to the
appellants t o the effect that there had been such a fund
amental
United

change to the character of the works that the originally agreed
lump sum price was no longer applicable, and that they were
accordingly entitled to be paid a reasonable price for the fixed
equipment works on a cost plus basis. This claim led to a panel
reference resulting, nearly four months after the decision of the
Court of Appeal in the present action, in a ruling that unless the
parties could reach an agreement on interim funding the appellants
should make large extra monthly payments for the fixed
equipment. Having received this favourable award the respondents
intimated to the appellants
that they did not intend to suspend
works on the cooling system.
However, on 23 April 1992 the
appellants lodged a request for arbitration with the ICC seeking to
set aside the decision of the panel. This led to an award made by
the arbitrators on 30 September 1992 which set aside the decision
of the panel and substituted a provision for the retention by the
respondents, for the account of the appellants, of the amounts thus
far paid by the appellants pursuant to the decision of the panel •
The Ii tiga tion
1
The writ in the present action was issued by the appellants
on III October 1991. The relief claimed was as follows:an Injunction restraining the defendants a nd each of
them, by themselves, their se rvants or agents in
breach of their obligations under an agreement In
writing dated 13 August 1986 made between the
plaintiffs and the defendants ('the contract') from
suspending work relating to the cooling system;
"(a)
(b)
(el
Costs;
Such further or other relief as to the court seems
just .. n
Three days later the appellants issued an app lication in the
Commercial Court for:
"(1)
t
an Injunction restraining the defendants and each of
them, by themselves, their servants or agents In
breach of their obligations under an agreement In
writing dated 13 August 1986 made between the
plaintiffs a nd the defendants ('the contract') from
suspending work relating to the cooling system."
On the same day the respondents issued a c ross-application
to stay all further proceedings in the action pursuant to section I
of the Arbitration Act, 1975 (hereafter "the 1975 Act").
There
followed in short order a n exchange of eleven affidavits, supported
by hundreds of pages of exhibits. These prepared the ground for a
hearing before Evans J. at the conclusion of which on 27
November 1991 the learned judge read a prepared judgment,
leading to an order that:
I.
Upon the present repondents
undertaking not to
suspend work on the coo ling system without giving the
appellants III days' notice , no order should be made
1 on Eurotunnel's application fo r a n injunction.
Without
~ this undertaking Evans J . United
would Kingdom
have granted an
_
1 I
_

~ 2.
The application by the respondents for a stay of the
action was refused.
There followed an appeal by the respondents, which was
heard by the Court of Appeal (Neill, Woolf and Staughton L.JJ.)
during three days commencing on 18 December 1991.
On 22
January 1992 the Court of Appeal handed down written judgments,
of which the leading judgment was that of Staughton L.J.
Reversing the judgment of Evans J. the court stayed the action.
It also refused an injunction [J 992] Q.B. 656.
-
I pause to draw attention to these dates. At the conclusion
of his judgment Staughton L.J. paid tribute to the quality of the
arguments, and the way in which all papers had been prepared.
would like to echo this and to add my own appreciation of the full
and careful judgments delivered. As will appear, I find that after
an exchange of printed cases, full oral argument and ample time
for reflection I am led to differ .from these judgments in certain
respects.
Nevertheless, I respectfully suggest to your Lordships
that to carry this complex and difficult matter through from the
commencement of the proceedings to the conclusion of judgment in
the Court of Appeal within the period of three months reflects the
greatest credit on all concerned.
I
The legislative background
3.
If any party to an arbitration agreement to which this
section applies, or any person claiming through or
under him, commences any legal proceedings in any
court against any other party to the agreement, or
any person claiming through or under him , in respect
of any matter agreed to be referred, any party to the
proceedings may at any time after appearance, and
before delivering any pleadings or taking any other
steps in the proceedings, apply to the court to stay
the proceedings; and the court, unless satisfied that
the arbitration agreement is null and void, inoperative
or incapable of being performed Or that there is not
in fact any dispute between the parties with regard
to the matter agreed to be referred, shall make an
order staying the proceedings.
"1(1)
The centre of the dispute is section I of the 1975 Act:
(2)
This section applies to any arbitration agreement
which is not a domestic arbitration agreement; and
neither section 4(1) of the Arbitration Act 1950 nor
section 4 of the Arbitration Act (Northern Ireland)
1937 shall apply to an arbitration agreement to which
this section applies.
(4)
In this section 'domestic arbitration agreement' means
an arbitration agreement which does not provide,
expressly or by implication, for arbitration in a State
other than the United Kingdom and to which neither-

(~)
an individual who is a national of, or habitually
resident in, any State other than the United
Kingdom; nor
(!?)
a body corporate which is incorporated in, or
whose central management and control is
exercised in, any State other than the United
Kingdom;
a
party at the
commenced."
time
the
proceedings
are
is
Next, there is section 12(6)(b) of the 1950 Act
"(6) The High Court shall have, for the purpose of and in
relation to a reference, the same power of making orders in
respect of -
interim injunctions
receiver;
(!!)
or
the appointment of a
as it has for the purpose of and in relation to an action or
matter in the High Court
"
Reference was also made in argument to section 25 of the
Civil Jurisdiction and Judgments Act, 1982:The High Court in England and Wales or Northern
Ireland shall have power to grant interim relief where-
"(1)
proceedings have been or are to be commenced
in a contracting state other than the United
Kingdom or in a part of the United Kingdom
other than that in which the High Court in
question exercises jurisdiction; and
they are or will be proceedings whose subjectmatter is within the scope of the 196&
Convention as determined by article 1 (whether
or not the Convention has effect in relation to
the proceedings).
Her Majesty may by Order in Council extend the
power to grant inter relief conferred by subsection (I) so as
to make it exercisable in relation to proceedings of any of
the following descriptions, namely-
(3)
(~)
proceedings commenced or to be commenced
otherwise than in a contracting state;
(!?)
proceedings whose subject-matter is not within
the
scope
of
the
196&
Convention
as
determined by article 1;
arbitration proceedings. .

(5)
An Order to Council under subse ction (3) wh ich
confers power to grant interim relief in relation to
arbitration proceedings may provide for the repeal of any
provision of section 12(6) of the Arbitration Act 1950 or
section 21(1} of the Arbitration Act (Northern Ireland) 1937
to the extent that it is superseded by the provisions of the
Order• . • .
or
a warrant for the arrest of property;
(7)
In this section 'interim relief', in relation to the High
Court in England and Wales or Northern Ireland, means
interim relief of any kind which that court has power to
grant in proceedings relating to matters within its
jurisdiction, other than-
order
to
council
has
yet
been
made
under
No
23(3)( C).
provision for obtaining evidence."
section
Finally I must refer to section 3(1) of the Supreme Court
Act 1981:
THE APPLICA nON FOR A STAY
II.
"The High Court may by order (whether interlocutory or
final) grant an injunction or appoint a receiver in all cases
where it appears to the court to be just and convenient to
do so .. "
There are two ways in which the respondents seek to uphold
the grant of a stay.
First, on the ground that the dispute is
between parties "to an arbitration agreement to which this section
applies", and that the dispute between them is "in respect of any
matter agreed to be referred", within the meaning of section I of
the 1975 Act, so that the court is obliged to stay the action .
Secondly, because this is an appropriate case in which to exercise
the inherent power of the court to stay proceedings brought before
it in breach of an agreement to decide disputes in some other
way.
Whilst proposing both solutions Mr Pollock Q.C. for the
respondents showed little warmth for the second;
no doubt
because it offered his clients a remedy which was discretionary, in
contrast to the mandatory stay under section 1. Nevertheless, I
am satisfied that this is the correct route, and that the court not
only possesses a discretion to grant a stay in such cases such as
the present, but also that this is a remedy which ought to be
exercised in the present case.
~
First, as to the existence of the power to stay proceedings
in a case which come close to section 1 of the 1975 Act, and yet
falls short either because of some special feature of the disputeresolution clause, or because for some reason an agreement to-artbitrate cannot immediately, or effectively, be applied to the
dispute in question. It is true that no reported case to this effect
was cited in argument, and in the only one which has subsequently
com e to light, namely Etri Fans Ltd. v. N.M .B. (U.K.) [1987] 1
W.L.R. 1110, the c ourt whilst assuming the existence o f the
powe r
United

did not in fact make an order. I am satisfied however that the \
undoubted power of the court to stay proceedings under the I
general jurisdiction, where an action is brought in breach of
agreement to submit disputes to the adjudication of a foreign
court, pro v ides a decisive analogy.
Indeed until 1944 it was
believed that the power to stay in such a case derived from the
arbitration statutes.
This notion was repudiated in Racecourse
Betting Control Board v. Secretary for Air [1944] Ch. 114, but the
analogy was nevertheless maintained. Thus, ~ Mackinnon L.J., at
p. 126:
"It is, I think, rather unfortunate that the power and duty
of the court to stay the action [on the grounds of a foreign
jurisdiction clause] was said to be under section 4 of the
Arbitration Act 1889. In truth, that power and duty arose
under a wider general principle, namely, that the court
makes people abide by their contracts, and, therefore, will
restrain a plaintiff from bringing an action which he is
doing in breach of his agreement with the defendant that
any dispute between them shall be otherwise determined."
So also, in cases before and after 1944, per Atkin L.J. in
The Athe nee (1922) II Lt. L. Rep. 6, and Willmer J. in The
Fehmarn U957] I W.L.R. 815, 819, approved on appeal [I958T!
W.L.R. 159, 163.
I see no reason why the analogy should not· be
reversed.
If it is appropriate to enforce a foreign jurisdiction
clause under the general powers of the court by analogy with the
discretionary power under what is now section 4(1) of the 1950
Act to enforce an arbitration clause by means of a stay, it must
surely be legitimate to use the same powers to enforce a disputeresolution agreement which is nearly an immediately effective
agreement to arbitrate, albeit not quite.
I would therefore hold
that irrespective of whether clause 67 falls within section I of the
1975 Act, the court has jurisdiction to stay the present action.
My Lords, I also have no doubt that this power should be
exercised here.
This is not the case of a jurisdiction clause,
purporting to exclude an ordinary citizen from his access to a
court and featuring inconspicuously in a standard printed form of
contract.
The parties here were large commercial enterprises,
negotiating at arms length in the light of a long experience of
construction contracts, of the types of disputes which typically
arise under them, and of the various means which can be adopted
to resolve such disputes. It is plain that clause 67 was carefully
drafted, and equally plain that all concerned must have recognised
the potential weaknesses of the two-stage procedure and concluded
that despite them there was a balance of practical advantage over
the a lternative of proceedings before the national courts of
England and France. Having made this choice I believe that it is
in accordance, not only with the presumption exemplified in the
English cases cited above that those who make agreements for the
resolution of disputes must show good reasons for departing from
them, but also with the - itlterests of the orderly regulation of
international commerce, that having promised to take their
com paints to the experts and if necessary to the arbitrators, that
is where the appellants should go.
The fact that the appellants
now f ind their chosen method too slow to suit their purpose, is to
my way of th ink ing quite bes ide the point.
_ 1~ _

~i
1\
Since this conclusion is sufficient to uphold the decision of
the Court of Appeal to stay the action it would be possible now
to pass to the next issue. Since, however, pr~lVisions in the sa~e
general shape as clause 67 are common lJl the constructIon
industry, and since the meaning of section 1(1) of the 1975 Act
has been the subject of elaborate argument, it is right to make
some observations on the question whether (as the Court of Appeal
has held) the court has, independently of any inherent power, both
the right and the duty to stay the action under section 1. The
subject is not easy, but limitations of space forbid a full
discussion.
I first recall the words of the subsection:
If any party to an arbitration agreement • . .
commences any legal proceedings in respect of any matter .
agreed to be referred • • • the court . • • shall make an
order staying the proceedings."
"1(1)
Most of the argument on this subsection was confined to the
words "an arbitration agreement". These words are not clear, and
there is substantial force in the submission that clause 67 is not
(in the words of section 7 of the 1975 Act) "an agreement ••. to
submit to arbitration present or future differences", but an
agreement to subm it such differences to resolution by a panel of ~
experts, the arbitrators providing no more than a contingent form '
of appeal - such as, the Commercial Court would provide in a .
reference falling within the Arbitration Act, 1979.
Whilst
acknowledging the force of this argument, if the words of the
section were the only source of uncertainty I would have been
prepared without undue difficulty to hold that clause 67 is "an
arbitration agreement". What has given me much more reason to
hesitate is the nature of the relief which the court is empowered
and bound to accord, when an action is brought which falls within
section 1(1):
namely, "an order staying the proceedings".
The
problem can best be illustrated by reference to the words of the
New York Convention on the Recognition and Enforcement of
Foreign Arbitral Awards, 10 June 1958, which was the impetus for ~
the enactment of the English legislation. Article 11.3 provides as
follows:
"The court of a contracting state, when seized of an action
in a matter in respect of which the parties have made an
agreement within the meaning of this article shall, at the
request of one of the parties, refer the parties to
arbitration, unless it finds that the said agreement is null
and void, inoperative, or incapable of being performed."
What springs to mind at once is that the application of this
formula to clause 67 requires the court to do the impossible,
namely to refer the dispute to the arbitrators, whereas it is to the
panel of experts that the matter must first be sent if it is to be
sent anywhere at all. If the English legislation had followed the
Convention, as st-rktly speaking it should have done, it would have
been hard to resist the conclusion that the duty to stay does not
apply to a situation where the reference to the arbitrators is to
take place, if at all, only after the matter has been referred to
someone else.
I'

II
In the end I have come to the c onclusion that the different
wording of the Act does not compel this conclusion.
The
Convention envisages a procedure, somewhat similar to the former
English practice, now largely in disuse where the order of the
court called into being a reference to arbitration to which both
parties were at once compulsorily remitted.
Instead, the Act
requires and empowers the court to do no more than stay the
action, thereby cutting off the plaintiff's agreed method of
enforcing his claim. It is then up to the plaintiff whether he sets
an arbitration in motion, but if he chooses not to do so he loses
his claim.
-::or
My Lords, this is a real, not simply a verbal, distinction and
I have come to believe that it results from a deliberate choice by
the legislature between the two different ways of giving effect to
an arbitration agreement. The idea of a compulsory reference was
mooted before the great reforms of the 1850s, but was rejected in
favour of the discretionary stay embodied in section 11 of the
Common Law Proced;.:re Act 185 1, (17 &. 18 Vict. c . 125).
This
choice was perpetuated, not only in the Arbitration Act, 1889 but Ir
also in the Arbitration Clause (Protocol) Act, 1924, the purpose of Ar
which was to give effect to the League of Nations Protocol of 4 I'I(
September, 1923, notwithstanding that the latter (like ·its successor ,
II
of 1958) required the courts of the member state, not simply to , I
stay the action, but to refer the matter to arbitration. Later, .we I
see the same contrast between the New York Convention and the
1975 Act.
In the light of the history which I have sketched I
believe that this was not an accident of drafting, which might
require the 1975 Act to be interpreted in the same sense as the
underlying Convention, but the outcome of a deliberate choice. If
~
so, there is no reason to read section I( I) as meaning anything
other than what it says, and since it is perfectly possible to stay
the action without referring the matter to arbitration, my principal
difficulty in applying section 1(1) to clause 67 is resolved.
Thus, I would be willing to hold, in company with the Court
of Appeal, that the respondents are entitled to a stay under the
1975 Act, but prefer to reach the same practical result by what
seems to me the simpler and more natural route by way of the
inherent jurisdiction.
I must add by way of footnote that the House was much
pressed during argument by examples of various forms of claims,
against which one or other conclusion was to be tested. Valuab Ie
though these were as a means of focusing attention, I shall not
explore them here, partly because it could be impossible to do
justice to them within a reasonable compc:ss, but more importantly
because it is inappropriate to rule on issues which are not now for
decision. I will however state that I have found nothing in them
which raises doubts as to the conclusion just expressed, and that
all of them seem capable of a practical solution by the
deployment of either the power under section 1(0, as thus
understood;
or the inherent power to ta;
or both powers
successively; or the admittedly rathe delehic. words"
•• null
and void, inoperative or incapable of eing- performed
" in
section I( 1).
V
I

III
THE EXISTENCE OF A DISPUTE
The appellants submit that even if section 1 of the 1975
Act applies to clause 67, a stay should nevertheless be refused
because "there is not in fact any dispute between the parties with
regard to the matter agreed to be referred". In summary, they
say that there is only one ground upon which the respondents could
even attempt to justify their stance in threatening to stop work
whilst at the same time purporting to keep the contract in
existence, namely that the matter falls within the civilian doctrine
of "l'exception d'inexecution"; that it is common ground that this
doctrine is capable of exclusion by express prov ision in the
contract; and that such an express exclusion is to be found in the
words of clause 67(2), which provide that "the contractor shall in
every case continue to proceed with the works with all due (
diligence . • . " Thus, according to the appellants, the respondents
really have no case at all, and since they have no case there
cannot be any "dispute between the parties with regard to the
matter agreed to be referred".
It will be recalled that this qualification on the right of the \\
defendant to a mandatory stay had its origin in the MacKinnon
committee report [Report of Committee on the Law of Arbitration
(I 927) (Cmnd. 2&17), under the chairmanship of Mackinnon J.],
paragraph 43 of which read:
- "Our attention has been called to a point that arises under
the Arbitration Clauses (Protocol) Act 1924. Section I of
that Act in relation to a submission to which the Protocol
applies deprives the English Court of any discretion as
regards granting the stay of an action. It is said that cases
have already not infrequently arisen, where (e.g.) a writ has
been issued claiming the price of goods sold and delivered.
The defendant has applied to stay the action on the ground
that the contract of sale contains an arbitration clause, but
without being able, or condescending, to indicate any reason
why he should not pay for the goods, or the existence of
any dispute to be decided by arbitration. It seems absurd
that in such a case the English court must stay the action,
and we suggest that the Act might at any rate provide that
the court shall stay the action if satisfied that there IS a
real dispute to be determined by arbitration•••• "
------
In recent times, this exception to the mandatory stay has
been regarded as the opposite side of the coin to the jurisdiction
of the court under R.S.C., Ord. 14, to give summary judgment in
favour of the plaintiff where the defendant has no arguable
defence.
If the plaintiff to an action which the defendant has
applied to stay can show that there is no defence to the claim,
the court is enabled at one and the same time to refuse the
defendant a stay and to give final judgment for the plaintiff. This
jurisdiction, unique so far as I am aware to the law of England,
has proved to be very useful in practice, especially in times when
interest rates are high, for protecting creditors with valid claims
from being forced into an unfavourable settlement by the prospect
that they will have to wait until the end of an arbitration in order
to collect their money.
I believe however that care should be
taken not to confuse a situation in which the defendant disputes
the claim on grounds which the plaintiff is very likely indeed to
overcome, with the situation in which the defendant is not really
UnitedtoKingdom
raising a dispute at all. It is unnece ssa ry for prese nt purposes
, 0
j
Approaching the matter in this SPlrlt I must ask whether the
only matter embraced in the writ, namely the question whether
the respondents should return to work, is the subject of a dispute.
The fact that there are numerous areas of dispute on the event~
leading up to the respondents' threat to leave the site does not oj
course mean in itself that there is a dispute about the central
issue, namely whether the doctrine of "l'exception d'inexecution"
has been ousted and if so whether the facts justified its
application. That the doctrine is a part of the international trade
law which is made applicable to the contract by clause 68 is
common ground, and it is also common ground (at least fOr '"the
purposes of these proceedings) that the doctrine is capable of
being excluded by consent. Beyond this, however, the parties are
sharply at odds, and so also are their experts on foreign law. It
is suggested that the court has sufficient material, in the shape of
the experts' affidavits, to decide the matter here and now for
itself.
I am quite unable to agree.
Whether the panel and the
arbitrators wul need help from expert witnesses, or whether they
will feel able to use their own knowledge and experience to decide
the point on their own, I do not know. What does seem to me
absolutely clear on this is that an English court could not properly
conclude in the light of affidavit evidence alone that the
appellants' claim is so unanswerable that there is nothing to
arbitrate.
There would have to be cross-examination of the
experts, and once one reaches this point it is perfectly obvious
that the qualifying words in section I do not apply, and that there
is no reason to withhold a stay .
I
explore the question in depth, since in my opinion the posItIon 0
the facts of the present case is quite clear, but I would endorse
the powerful warnings against encroachment on the parties '
agreement to have their commercial differences decided by their
chosen tribunals, and on the international policy exemplified in the
English legislation that this consent should be honoured by the
courts, given by Parker L.J. in Home and Overseas Insurance Co.
Ltd. v. Mentor Insurance Co. (U.K.) Ltd. U990] I W.L.R. 153, at
pp. 158- 159 and Saville J. in Hayter v. Nelson [1990] 2 L1oyd'~
Rep. 265.
INTERIM RELIEF UNDER SECTION 12(6) OF THE 1950 ACT
Thus far, the question has been whether the appellant' s
claim for a final injunction should be allowed to proceed to trial
in the High Court. If it should, the exercise of the discretion to
grant an interlocutory injunction pending trial will be governed by
well-established rules, and no questions of principle will a rise. If,
however, as I believe to be the case the action should not in the
absence of some unforeseen future difficulty in the operation of
clause 67 be permitted to go forward, a difficult and important
question will arise concerning the power of the court to order the
respondents back to work pending the decision of the panel or, as
the case may be, the a rbitrators. The appellants base their claim
for a n injunction first on the special powers conferred by section
12(6)(h) of the 1950 Act and secondly on the general power of the
court to grant an injunction under section 37(1) of the Supreme
Court Act 1981.
These different foundations for the claim raise
entirely different issues, which call for separate consideration.

The main problem with the claim based on section 12(6)(~)
is to decide whether this provision has any application at all to an
arbitration agreement of the type contained in clause 67 of the
construction contract.
The respondents say that it has none,
because the clause contemplates a foreign arbitration which is
outside the scope of this particular part or the 1950 Act.
The
Court of Appeal accepted this contention. If the respondents are
wrong on this point it will be necessary to consider whether the
discretion created by section 12(6) should be exercised in a special
way in relation to arbitrations conducted abroad.
It is by now firmly established that more than one national
system of law may bear upon an international arbitration. Thus,
there is the proper law which regulates the substantive rights and
duties of the parties to the contract from which the dispute has
arisen.
Exceptionally, this may differ from the national law
governing the interpretation of the agreement to submit the
dispute to arbitration. Less exceptionally it may also differ from
the national law which the parties have expressly or by implication
selected to govern the relationship between themselves and the
arbitrator in the conduct of the arbitration: the "curial law" of
the arbitration, as it is often called.
The construction contract
provides an example. The proper substantive law of this contract
is the law, if such it can be called, chosen in clause 68. But the
curial law must I believe be the law of Belgium. Certainly there
may sometimes be an express choice of a curial law which is not
the law of the place where the arbitration is to be held: but in
the absence of an explicit choice of this kind, or at least some
very strong pointer in the agreement to show that such a choice ;
was intended, the inference that the parties when contracting to i
arbitrate in a particular place consented to having the arbitral
process governed by the law of that place is irresistible.
\
\
\
ff
I
)
(
"'-9...
If
It
~~) ,
In all these instances one or more national laws may be
relevant because they are expressly or impliedly chosen by the
parties to govern the various aspects of their relationship.
As
such, they govern the arbitral process from within. But national
laws may also apply ab extra, when the jurisdiction of the national
court is invoked independent
of any prior consent by the parties.
An obvious case exists were the claimant, in face of an
arbitration agreement, brings an action before a national court
which must apply its own local law to decide whether the action
should be stayed, or otherwise interfered with. Equally obvious is
the case of the national court which becomes involved when the
successful party applies to it for enforcement of the arbitrator's
award.
But a national court may also be invited, as in the
present case, to play a seco(l~. role, not in the direct
enforcement of the contract to arbitrate, but in the taking of
measures to make the work of the chosen tribunal more effective.
Here, the matter is before the court solely because the court
happens to have under its own procedural rules the power to assert
a personal jurisdiction over the parties, and to enforce protective
measures against them. Any court satisfying this requirement will
serve the purpose, whether or not it has any prior connection with
the arbitral agreement or the arbitration process. In the present
case, the English court has been drawn into this dispute only
because it happens to have territorial jurisdiction over the
respondents, and the means to enforce its orders against them.
The French court would have served just as well, and if
theKingdom
United
~
/

present application had been made in Paris we should have found
the French court considering the same questions as have been
canvassed on this appeal, but from a different perspective.
t
The distinction between the internal and external application
of national arbitration laws is important.
In my opinion, when
deciding whether a statutory or other power is capable of being
exercised by the English court in relation to clause 67, and if it is
so capable whether it should in fact be exercised, the court should
bear constantly in mind that English law, like French law, is a
stranger to this Belgian arbitration, and that the respondents are
not before the English court by choice.
In such a situation the ~
court should be very cautious in its approach both to the existence I
and to the exercise of supervisory and supportive measures, lest it \
cut across the grain of the chosen curial law.
Thus, In the present instance I believe that we should
approach section 12 of the Act of 1950 by asking
Can
Parliament have intended that the power to grant an interim
injunction should be exercised in respect of an arbitration
conducted abroad under a law which is not the law of England?
For an answer to this question one must look to the origins of
section 12, which lie in section 2 of the Arbitration Act 1889 (52
&. 53 Vict. C. 49). This provided that:
"2.
A submission, unless a c ontrary intention is expressed
therein, shall be deemed to include the provisions set forth
in the First Schedule to this Act
"
The Schedule comprised a list of nine statutory implied
terms.
Two of these (paragraphs (~) and (~» related to the
constitution of the arbitral tribunal. Those imposed by paragraphs
(S), (9.) and (!:.) were concerned with the time for making the
award. Paragraph (.!.l dealt compendiously with the examination of
the parties on oath, with produc tion o f documents, a nd with the
general duty to "do all other things which during the proceedings
on the reference the arbitrator or umpire may require". Paragraph
(g) empowered the arbitrators to e xamine on oath witnesses other
than the parties. Paragraph (h) stipulated that the award was to
be final and binding, and paragraph ill empowered the arbitrators
to make orders for costs, and to tax or settle the amount of
costs.
\
//1--1.). ;.(\
-r-eJ-h.--
I .
It seems to me absolutely plain for two reasons that
Parliament cannot have intended these provisions to apply to a
.fpreigo arbitration. The first reason is that the chosen mechanism
was to make these provis ions into im~ terms of the arbitration
agreement, and such terms could not sensibly be incorporated into
an agreement governed by a foreign domestic arbitration law to
whose provisions they might well be antithetical:
see, for
example, the provisions concerning the administration of oaths,
discovery and orders for costs.
Secondly, section 2 of the Act of 1889, unlike section 12 of
the 1950 Act, was concerned exclusively with the internal condu~
of the arbitration, and not at all with any external powers of the
court.
I can see no reason why Pa rliament should have had the
least concern to regulate the conduct o f an arbitration carried on
Kingdom it was
abroad pursua nt to a forei gn a rbitra l law.United
Furthermore,
_ 71 _
fI

{
r
.!
expressly stipulated in section 28 that the 1889 Act should not \r
extend to Scotland or Ireland.
It is absurd to suppose that ~
Parliament should have intended that the same French arbitration
should at the same time be subject to implied terms under English
law but not under the law of Scotland. I do not believe that in
such a situation either law was intended to apply.
When we turn to the Act of 1934, which introduced a
miscellaneous series of amendments, we find that the list of
statutory implied terms relating to the powers of the arbitrators,
contained in the Schedule to the 1889 Act, was enlarged by the
addition of powers to order specific performance and make an
interim award. In addition, section 8 provided that in relation to
the matters se t out in this Schedule to the 1934 Act:
The court shall have, for the purpose of and in
relation to a reference the same power of making orders . .
• as it has for the purpose of and in relation to an action
or matter in the court" •
"(1)
~
I
The powers listed in the Schedule were the same as those
now set out in section 12(6) of the 1950 Act. Quite plainly the
reference to "the court" was to the English court, and when one
looks a t the items in the list (such as the ordering of discovery
and interrogatories) it is easy to see that they were concerned
with powers which the English court would never a t that time
even have thought of exercising in relation to actions in a foreign
court.
This being so, I can see no reason why the legislature
should have wished to make the powers available to the court in
respect of a foreign arbitrations. Indeed it appears paragraphs 30
and 31 of the MacKinnon committee's report that notwithstanding
the width of its terms of reference the committee chose not to
deal with foreign arbitrations.
In these circumstances, if the present case had arisen in
1949 the court would I believe have held without difficulty that
the relevant Parts of the Acts of 1889 and 1934 did not apply to
foreign arbitrations. The Act of 1950 was a consolidating statute
which merely rearranged and in some instances re-worded the
existing legislation, and it cannot have had the effect of enlarging
the categories of arbitration to which the former legislation
applied. In these circumstances I consider that none of the term s
of the Act of 1950, of which the provisions cited from the 1889
and 1934 Acts were the precursors, apply to foreign arbitrations
and that since these include section 12(6) the power conferred by
section 12(6)(h) to grant an interim injunction is not available to
the court in respect of foreign arbitrations such as the present.
V.
AN INJUNCTION UNDER S. 37 OF THE SUPREME COURT
ACT, 1981
I turn to the claim for an interlocutory Injunction under
section 37(1) of the Supreme Court Act 1981. The focus of the
enquiry now shifts from the numerous types of remedy under
section 12 of the Act of 1950 which are specially designed for the
narrow purpose of promoting the efficacy of the arbitral process,
to a single remedy which is not so designed and which is capable
of employment in a wide variety of situations, many far removed
from the present.
By definition, the making of an order
under
United
1.
section 12 cannot be inconsistent with the spirit of the arbiration
agreement or with the policy of the court to enforce such
agreements, although in making use of its powers under the section
the court must be careful not to meddle unduly in matters which
properly belong to the arbitrator. Under section 37(1) by contrast
the arbitration clause is not the source of the power to grant an
injunction but is merely a part of the facts in the light of which
the court decides whether or not to exercise a power which exists
independently of it. Accordingly it does not follow that even in a
situation where, if section 12(6) applied to the arbitration in
question, the court would be justified in making an interim order
under section 12(6)(!:!), the court would be equally justified, or
would even have the power, to do so under section 37(1). In the
present case the respondents contend that in a situation where the
interlocutory injunction claimed is ancillary to an action which the
court has stayed it has no power to grant an injunction even if it
considers that to do so would be in the interests of justice.
Alternatively, the respondents contend that even if such a power
does exist it should Le exercised with great caution, and that the
conditions for its exercise do not exist in the present case. The
Court of Appeal sustained the first of these grounds of objection,
to which I now turn.
The power to grant an injunction
(1)
The respondents begin with an argument of general principle.
Although the words of section 37(1) and its forebears are very
wide it is firmly established by a long history of judicial selfdenial that they are not to be taken at their face value and that
their application is subject to severe constraints. This process has
c ulminated in a chain of decisions in your Lordships' House:
Siskina (Owners of car 0 latel laden on board) v. Distos Com ania
Naviera S.A. 1979 A.C. 210; Castanho v. Brown &. Root (U.K.)
Ltd. [J 981] A.C. 557; British Airways Board v. Laker Airways Ltd.
[r 985] A.C. 58; and South Carolina Insurance Co. v. Assurantie
Maatschappij "de Zeven Provincien" N. V. U987] I A.C. 24. These
a re too well known to need rehearsal, and it is sufficient for
present purposes to quote from the speech of Lord Brandon of
Oakbrook in the South Carolina case, at pp. 39-40:
"The first basic principle is that the power of the High
Court to grant injunctions is a statutory power conferred on
it by section 37(1) of the Supreme Cour t Act 1981, which
provides that 'the High Court may by order (whether
interlocutory or finail grant an injunction in all cases in
which it appears to the court to be just a nd convenient to
do so. '
That provision is similar to earlier provisions of
which it is the successor, namely, section 45(1) of the
Supreme Court of Judicature (Consolidation) Act 1925 and
section 25(8) of .the Supreme Court of Judicature Act 1873.
The second basic principle is that, although the terms of
section 37(1) of the Act of 1981 and its predecessors are
very wide, the power conferred by them has been
circumscribed by judicial authority dating back many years.
The nature of the limitations to which the power is subject
has been considered in a number of recent cases in your
Lordships' House: Siskina (Owners of cargo latelv laden on
board) v. Distos Com ania Naviera S.A. [r979] A.C. 210;
Castanho v. Brown &. Root (U . K.) Ltd.
1981]
A.C. 557; and
United
• 23 -
r
British Airways Board v. Laker Airways Ltd. [1985] A.C. 58.
The effect of these authorities, so far as material to the
present case, can be summarised by saying that the power
of the High Court to grant injunctions is, subject to two
exceptions to which I shall refer shortly, limited to two
situations. Situation (1) is when one party to an action can
show that the other party has either invaded, or threatens
to invade, a legal or equitable right of the former for the
enforcement of which the latter is amenable to the
jurisdiction of the court.
Situation (2) is where one party
to an action has behaved, or threatens to behave, in a
manner which is unconscionable. The third basic principle is
that, among the forms of injunction which the High Court
has power to grant, is an injunction granted to one party to
an action to restrain the other pary to it from beginning, or
if he had begun from continuing, proceedings against the
former in foreign court. Such jurisdiction is, however, to be
exercised with
caution 1;>ecause
it involves indirect
interference with the
process of the ,foreign court
concerned."
In reliance on this line of authority the respondents maintain
that the English court can never grant an injunction in support of
a cause of action which the parties have agreed shall be the
subject of an arbitration abroad, and a fortiori where the court
has itself halted the proceedings in England, in furtherance of its
duty under section 1 of the Act of 1975, so that the agreed
method of ad judica tion shall take place.
In support, the ~
respondents call up the tentative expression of opinion by Bingham
L.J. in Nissan (U.K.) Ltd. v. Nissan Motor Co. Ltd. (unreported) 31
July 1991; Court of Appeal (Civil Division) Transcript No. 81+8 of \'
1991, to the effect that interim relief in the shape of an
interlocutory injunction cannot be granted in a case such as the
present since the defendant is not properly before the court.
My Lords, I cannot accept this argument. I prefer not to
engage the question whether the law is now firmly established in
terms of Lord Brandon's statement, or whether it will call ,for
further elaboration to deal with new practical situations at present
unforeseen.
For present purposes it is sufficient to say that the
doctrine of the Siskina, put at its highest, is that the right to an
interlocutory injunction cannot exist in isolation, but is always
incidental to and dependant on the enforcement of a substantive
right, which usually although not invariably takes the shape of a
cause of action.
If the underlying right itself is not subject to
the juriSdiction of the English court, then that court should never
exercise its power under section 37(1) by way of interim relief. If
this is a correct appreciation of the doctrine, it does not ' apply to
the present case. Let us take the matter by stages.
First, there is the situa tion where a contract entirely
English in all its aspects is subject to an agreement for arbitration
in London.
This agreement, being a "domestic" a rbitration
agreement, may be enforced by a discretionary stay under section
4(1) of the Act of 1950. Here, it is quite clear that the presence
of the clause does not deprive the court of juriSdiction over a
dispute arising under the contract.
If an action is brought to
enforce the contract, a nd either the defendant does not apply for
one, the
a stay, or the COU rt decides in its discretion not to grant United
action proceeds in exactly the same way as if the arbitration
clause did not exist. Moreover even if the court does choose to
grant a stay the court retains its jurisdiction over the dispute. If
all goes well this jurisdiction will never be exercised, but if the
arbitration breaks down the court is entitled to resume seizin of
the dispute and carry it forward to judgment. (Authority for these
propositions is scarcely necessary, but mention may be made of
Doleman &. Sons v. Ossett Cor oration [1912] 3 K.B. 257 and
Hamlyn &. Co. v. Talisker Distillery 1894] A.C. 202). It follows
that the conditions for the grant of an interlocutory injunction are
satisfied, since the purpose of the injunction is to support a cause
of action which is justiciable before the English court.
The example may now be changed a little, so as to
postulate that one of the parties is a national of a state other
than the United Kingdom. The arbitration agreement now ceases
to be "domestic", and the stay is no longer discretionary under the
Act of 1950 but mandatory under the Act of 1975.
Does this
make any difference? _ None, in my opinion, for the cause of action
is still potentially justiciable by the English court, and will in fact
be adjudicated upon if the defendant does not apply for a stay, or
if the circumstances are such as to bring into play the exceptions
in section 1 of the Act of 1975, or if something happens at a
later stage which demands the lifting of any stay which has been
granted and the resumption of the action before the court. Here
again the restrictions on the grant of an interlocutory injunction
do not apply .
Let us now make a further change, and postulate on
arbitration agreement which calls for arbitration abroad. This may
indeed have an indirect effect on the availability of injunctive
relief.
Very often it happens that where there is an arbitration
agreement between foreign
parties
the English court has
jurisdiction only because the agreement stipulates that the
arbitration shall be held in London, thereby justifying the inference
of English law as the substantive proper law of the contract, and
hence giv ing the court jurisdiction over the cause of action under
Ord. II, r . l(1)(Q.)(iii). If the seat of the arbitration is abroad this
source of jurisdiction is cut off, and the inhibitions created by the
Siskina authorities will preclude the grant of an injunction.
Nevertheless, if the facts are such that the court has jurisdiction
in some way o ther than the one just described 1 can see no reason
why the add it ional foreign element should make any difference to
the residual jurisdiction of the court over the dispute, and hence
to the existence of the power to grant an injunction in support.
So also in the present case. If the respondents had really wanted
to find out a s a matter of urgency whether they were entitled to
carry out the ir threat t o s top work they might perhaps have
decided that it was better to press for a speedy trial in the
Commercial Court, rather than wind up the cumbersome method of
clause 67, and hence abstained from asking for a stay. In such a
case there could be no doubt about the power of the court to
grant an injunction.
Similarly if clause 67 had for some reason
broken down and the parties had been forced to resume the action.
I am unable to see why the fact that the action is temporarily,
and it may very well be permanently, in abeyance should adversely
affect the powers of the court, although of course it may make
a ll t he d iffe rence to t he way in which those powers shou ld be
ex erc ised.
For
these
reasons
consider
that
although
the
commencement of the action was a breach of the arbitration
agreement, and that in this sense the respondents were not
"properly" before the court, this does not bring into play the
limitations on the powers of the court established by the Siskina
line of cases.
I should add that the same result must have
followed if the appellants had done what they promised to do, and
submitted their disputes to the panel and the arbitrators, rather
than to the court.
The power exists either in both cases or in
neither and the appellants' breach of the arbitration agreement in
bringing an action destined to be stayed cannot have conferred on
the court a power to grant an injunction which it would not
otherwise possess.
The existence of a pending suit is thus an
irrelevance.
(2)
This mention of section 25 of the 19&2 Act brings me to
the respondents' next argument, that since Parliament has created
the opportunity to confer powers on the court to grant interim
relief including interlocutory injunct;ons in support of arbitrations,
and has not yet brought such powers into effect, the court should
never in the absence of such legislation presume to exercise
whatever powers in this respect may already be conferred by the
general law. I cannot agree. We are concerned here with powers
which the court already possesses under section 37 of the 19&1
Act.
The only question is whether the court ought permanently
and unconditionally to renounce the possibility of exercising such
powers in a case like the present. I am unable to see why the
fact that Parliament is contemplating the specific grant of interim
powers, not limited to interlocutory injunctions, in support of
arbitrations but has not yet chosen to do so should shed any light
on the powers of the court under existing law. It may be that if
and when section 25 is made applicable to arbitrations, the court
will have to be very cautious in the exercise of its general powers
under section 37 so as not to conflict with any restraint which the
legislature may have imposed on the exercise of the new and
specialised powers. Meanwhile, however, although the existence of
these new powers in reserve may well be one of the factors which
lead the court to be very cautious about granting relief in the
cases of the present kind, it is another matter to hold that the
court should cut itself altogether off from the possibility of a
remedy, and I would not be prepared to go so far.
(3)
would return a similar answer to the argument which
assumes that (as I have already suggested) section 12(6)(tl) of the
1950 Act does not apply to foreign arbitrations, and reasons from
this to the conclusion that the general powers of the court to
grant injunction are equally inapplicable in such a case. At the
time many years ago when the forebears of section 12(6) were
conceived the world of international arbitration was very different
from what it is today, and the possibility that national courts of
one country might have a useful albeit subordinate role to play in
an arbitration conducted in another country might well have
appeared too implausible to call for a specific provision. The fact
that the specialist powers conferred by the Arbitration Acts are
not available in a case such as the present does not entail that
the general powers of the court can never be deployed: although,
again, this is undoubtedly a powerful reason why the courts should
approach their use with great caution.
(4)
Next, the respondents call in aid the long-establ ished
principle, endorsed by Lord Diploel< in Bremer Vulkan Schiffbau und
Maschinenfabrik v . South India Shipping Corporation Ltd. [198!J ~
A.C . 909, 979 that the English court has no general supervisory
power over t he conduct of arbitrations more extensive than the
powers confer red by the powers of the Arbitration Acts.
My
Lords, this princip le is an essential element in the balance of the
partnership which exists under English law between the arbitral
process and the courts, and I say nothing to shed any doubt
whatever upon it. In my judgment however it does not bear upon
the present appeal.
In the first place, the attempt in Bremer Vulkan to enJoin
the fu r ther conduct of the arbitration, on the ground of excessive
delay, foundered on the absence of any legal or equitable right of
the plaintiffs to be enforced or protected, and was thus a nother
case in the Siskina line of authority; whereas in the present case,
for the reasons already st ated, the appellants do assert a cause of
action under the co:-:struction contract justiciable under English
./
courts .
- _.
Secondly, the injunction claimed In Bremer Vulkan would
have involved a d irect interference by the court in the arbitral
process, and thus an infringement of the parties' agreement that
the conduct of the dispute should be entrusted to the a rb itrators
alone, subject only to the limited degree of judicial control
implicit in the choice of English law, and hence of English statute
law, as part of the cu r ial law of the contract. The purpose of
interim measures of protection, by contrast, is not to encroach on
the procedural powers of the arbitrators but to reinforce them,
and to render more effective the decision at which the arbitrators
will ultimately a rrive on the substance of the dispute . Provided
that this and no more is what such measures aim to do, there is
nothing in them contrary to the spirit of international arbitration.
For similar reasons
am unable to agree with those
decisions in the United States (there has been no citation of
authority on this point from any other foreign source) which form
one side of a division of a uthority as yet unresolved by the
Supreme Court.
These decisions are to the effect that inter im
measures must necessarily be in conflict with the ob ligations
c r eated assumed by the subscribing nations to the New York
Convention, because they "bypass the agreed upon method of
settling disputes" :
see McCrearv Tires &. Rubber Co. v. CEAT
p.A. (1974) 501 F . 2nd 1032, 1038. I prefer the view that when
properly used such measures se rve to reinforce the agreed method,
not to by-pass it.
-
2.
A Procedural Difficultv
Finally, I must refer to a problem of procedural mechanics,
quite unconnected with the ideals of international arbitration. It
is this.
If the court stays an action brought in breach of an
arbitration clause, how can it grant an injunction in an actIon
which is no longer before it? No difficulty arises where the stay
is discretionary, under section 41 of the Act of 1950 or under the
inherent powers of the court, since the court can grant the
Injunction first before electing to impose a stay.
This is what
happened in Foster &. Dicksee v. HastingsUnited
Corporation
Kingdom(I903) 87

L. T. 736, a case very similar to the present on the facts. This
expedient seems however less defensible where the court is obliged
by statute to render up its control of the dispute as soon as the
defendant so requires.
I thus see no difficulty in principle in an order which
combines a mandatory stay with an interlocutory injunction by way
of interim relief.
Puzzling as this question undoubtedly seems at first
acquaintance, I believe on reflection that the answer is straight
forward.
Once again, it is helpful to approach the matter by
stages. Let us take first the case where the English court, before
which no proceedings have been brought except for interim relief,
makes an order under section 25 of the 1982 Act in support of an
action brought in the courts of a foreign state.
Here, it is
obvious that the court is not making an order in an English action.
By grant ing the order, the court does not engage itself at all in
the resolution of the dispute, but merely seeks to make the
resolution of the dispute by the foreign court more effective. It
is a free-standing item of ancilla~y relief.
Next, let it be
assumed that the foreign proceedings take the shape of an
arbitration, rather than litigation. O'1ce again, if the English court
grants an interlocutory injunction by way of interim protection
under section 37 of the Act of 1981 it is not playing any part in
the decision of the dispute, but is simply doing its best to ensure
that the resolution by the arbitrators is fruitful. Common sense
and logic suggest that the analysis must be the same where the
application for the interlocutory injunction is associated with the
commencement of an action which the court is obliged to stay.
Common sense, because it cannot be right that by starting the
action the plaintiff automatically forfeits any right to ancillary
relief to which he would otherwise be entitled. Logic, because the
purpose of the stay is to remove f rom the court the task of
deciding the substantive dispute, so that it can be entrusted to the
chosen tribunal. This is what the court is bound to do, by virtue
of the New York Convention.
But neither the arbitration
agreement nor the Convention contemplate that by transferring to
the arbitrators the substance of the dispute, the court also divests
itself of the right to use the sanctions of municipal law, which are
not available to the a rbitrators, in order to ensure that the
arbitration is carried forward to the best advantage .
For these various reasons I consider, here differing from the
Court of Appeal, that the court does have power in the present
case to grant the injunction for which the appellants contend,
notwi thstanding that their action has been stayed. Whether this is
a power which the court ought to exercise in the circumstances of
the present case is an entirely different matter.
3.
The exercise of the discretion
On the assumption that the court does have power to grant
the appellants an injunction, a decision on whether the power
should be exercised requires the making of ce rtain assumptions.
The first assumption must hold good whatever course your
Lordships' House decides to follow .
Since the action is
nowKingdom
United
stayed, the appellants' only justification for claiming interim relief
is that it is needed to render more efficacious the clause 67
procedures, and any decision favourable to the appellants which
may emerge from them .
We must therefore assume that the
appellants' next step will be to set about at once pursuing the
same remedy, or type of remedy, through the medium of clause 67
as they sought in the action. Only one item of substantive relief
was claimed by the writ, and although this was cast in negative
form it was in substance a claim for a final mandatory injunction:
or, what seems to me the same thing, an order for specific
performance of the respondents' obligation to work continuously on ~
the contract. Absent any evid~~f-Be.lgian law, we must also
assume that this is' an order which the paner-amrarbitrators would
have power to make, if minded to do so.
How long the
proceedings will take is impossible to predict, apart from saying
that if the appellants had gone straight to the panel in October
1991 rather than starting an action, the clause 67 proceedings
would no doubt have been comfortably finished by now.
At all
events, we should in . my opinion assume that if the panel rilles in
favour of the appellants the respondents will appeal to the
arbitrators, and that a final ruling on the claim is not likely to
emerge for some considerable time.
We must also make assumptions about what will happen on
the alternative hypotheses that the injunction is and is not
granted.
As to the latter, since the respondents have never
qualified their threat to withdraw from work unless their financial
demands are met, we must assume that 15 months after the threat
was first made, at a time when the entire tunnel project is 15
months nearer to completion, the respondents will at once stop
work and thereby imperil even further the financial viability of a
troubled enterprise, risking an immense liability in damages if they
are subsequently found to have asserted a right which they did not
possess. Some scepticism on this score is inevitable, but since the
parties are still at odds about the availability of interim relief to
prevent the respondents from carrying out their threat, I can see
no choice but to assume that the threat is not just empty bluster,
but is one which the respondents will carry out if free to do so .
If, on the other hand, an injunction is granted pending a
final resolution of the dispute the completion of the clause 67
procedures is bound to take a considerable time; during which, we
must assume, the work under the construction contract will be
approaching a conclusion.
Amidst all these assumptions, there is one hard fact which I
bel ieve to be conclusive, namely that the injunction claimed from
the English court is the same as the injunction to be claimed from
the panel and the arbitrators, except that the former is described
as interlocutory or interim.
In reality its interim character is
largely illusory, for as it seems to me an injunction granted in
November 1991, and a fortiori an injunction granted today, would
largely pre-empt the very decision of the panel and arbitrators
whose supporr"forms the raison d'etre of the injunction. By the
time that the award of the panel or arbitrators is ultimately
made, with the respondents having continued to work meanwhile it
will be of very modest practical value, except as the basis for a
claim in damages by the respondents:
al though exactly how
modest, it is impossible on the pre sent evidence
say.
UnitedtoKingdom
In these circumstances, I do~. consider that the English
court would be justified in granting the very far-reaching relief
which the appellants claim.
It is true that mandatory
interlocutory relief may be granted even where it substantially
overlaps the final relief claimed in the action; and I also accept
that it is possible for the court at the pre-trial stage of a dispute
arising under a construction contract to order the defendant to
continue with a performance of the works. But the court should ~
approach the making of such an order with the utmost caution,
and should be prepared to act only when the balance of advantage
plainly favours the grant of relief.
In the combination of
circumstances which we find in the present case I would have
hesitated long before proposing that such an order should be made,
even if the action had been destined to remain in the High Court.
These hesitations are multiplied by the presence of clause 67.
There is always a tension when the court is asked to order, by
way of interim relief in support of an arbitration, a remedy of the
same kind as will ultimately be sought from the arbitrators:
between, on the one hand, the ne'!d for the court to make a
tentative assessment of the merits in order to decide whether the
plaintiff's claim is strong enough to merit protection, and on the
other the duty of the court to respect the choice of tribunal
which both parties have made, and not to take out of the hands of
the arbitrators (or other decision-makers) a power of decision
which the parties have entrusted to them a lone.
In the present
instance I consider that the latter consideration must prevail. The
court has stayed the action so that the panel and the arbitrators
can decide whether to order a final mandatory injunction. If the
court now itself orders an interlocutory mandatory injunction, there
will be very little left for the arbitrators to decide.
Any doubts on this score are to my mind resolved by the
choice of the En}I~~ rather than the Belgian courts as the source
of interim relie .
Whatever exactly is meant by the words
"competent judicial authority" in article &.5 of the ICC Rules, the
Belgian court must surely be the natural court for the source of
interim relief. If the appellants wi5h the English court to prefer
itself to this natural forum it is for them to show the reason why,
in the same way as a plaintiff who wishes to pursue a substantive
claim otherwise than in a more convenient foreign court: Spiliada
~:riti~e Corpor~tion v. C~nsulex ~td. [1987] A.C. 460, 476E.,..
ey ave not one so.
pparent y no application for interim
relief has been made to the court in Brussels. I t is perhaps just
permissible to take notice that the contemporary Belgian law of
arbitration differs from the law of other European countries, but
beyond this I would certainly not be willing to go since, ~
C,!;.markably, no evidence of Belgian law is before the court. Ift11e
appellants had wished to say that the Belgian court would have
been unable or unwilling to grant relief, and that the English court
is the only avenue of recourse, it was for them to prove it, and
they have noj done so. Moreover, even if evidence to this effect
had been aOduced I doubt whether it would have altered my
opinion. This is not a case where a party to a standard form of
conTract finds himself burdened with an inappropriate arbitration
clause to which he had not previously given his a ttention. I have
no doubt that the dispute-resolution mechanisms of clause 67 were
the subject of careful thought and negotiation. The parties chose
an indeterminate "law" to govern their substantive rights;
an
elaborate process for ascertaining those rights; and a location
- )0 -
tha t process outside the territorie s of the participants.
This
conspicuously neutral, "anational" and extra- judicial structure may
well have been the right choice for the special needs of the
Channel Tunnel venture. But whether it was right or wrong, it is
the choice which the parties have made.
The appellants now
regret that choice.
To push their claim for mandatory relief
through the mechanisms of clause 67 is too slow and cumbersome
to suit their purpose, and they now wish to obtain far reaching
relief through the judicial means which they have been so
scrupulous to exclude.
Notwithstanding that the court can and
should in the right case provide reinforcement for the arbitral
process by granting interim relief I am quite satisfied that this is
not such a case, and that to order an injunction here would be to
act contrary both to the general tenor of the construction contract
and to the spirit of internat ional arbitration .