The recent High Court decision in The Republic of Sierra Leone v SL Mining Limited  WLR(D) 102] serves as a useful reminder of the importance of choosing the correct procedure to deal with pre-arbitration issues and ensuring that a right under a dispute resolution clause is not waived.
The claimant in the case, The Republic of Sierra Leone, had granted a 25-year mining licence to the defendant, SL Mining, in 2017. Following a change of government in 2018, the claimant suspended that licence and opened a criminal investigation into the defendant, complete with questioning and the confiscation of passports.
On 14 July 2019, the defendant served the claimant with a notice of dispute. Five weeks later, it commenced Emergency Arbitrator proceedings.
The Emergency Arbitrator issued orders against the claimant and at the same time, ordered the defendant to serve a Request for Arbitration (RFA) on the claimant by 30 August 2019, which it duly did.
The claimant challenged the RFA on the basis that the Mining Licence Agreement required the defendant to wait three months from the date it served written notice of the dispute to commence arbitral proceedings and that, as a consequence, the arbitral tribunal was without jurisdiction. The tribunal disagreed, making a partial final award on jurisdiction (the Award) accordingly. The claimant then challenged the Award under section 67 of the Arbitration Act 1998 (the Act).
In considering the application, the judge was required to determine two interesting issues:
- Whether the challenge to the alleged prematurity of the RFA was one that concerned the jurisdiction of the tribunal, and thus fell within the scope of the Court’s powers under section 67 of the Act
- Whether the claimant had “waived” its contractual right to a three-month negotiation period before arbitration could commence
1. Jurisdiction -v- Admissibility
The judge was required to determine whether a challenge under 67 of the Act related to the tribunal’s jurisdiction to determine the claim or the admissibility of the claim itself. The distinction is a subtle but important one when determining whether judicial intervention is appropriate or not.
Section 67 allows parties to an arbitration to challenge any arbitral award in the English courts on the grounds that the tribunal did not have “substantive jurisdiction” to determine the dispute. “Substantive jurisdiction” relates to the questions of whether:
- There is a valid arbitration agreement
- The tribunal is properly constituted
- Whether the matters submitted to arbitration fall within the scope and terms of a valid arbitration
If a challenge involves one of those issues, the jurisdiction of the tribunal will be open to determination by the court.
In contrast, if a party’s challenge relates to the admissibility of the claim rather than the arbitration tribunal’s ability to hear it, judicial intervention will not be appropriate and the challenge should be referred to the tribunal itself.
A challenge to admissibility will usually be a situation where the claim is said to be defective and/or procedurally inadmissible in some way, i.e. due to it being time-barred or prohibited until some precondition has been fulfilled.
The claimant argued that the defendant’s commencement of arbitration less than three months after serving a notice of dispute affected the “substantive jurisdiction” of the tribunal and thus left it open to judicial scrutiny under section 67.
There is a paucity of authority in the English courts as to whether a challenge of the type made in this case should properly be characterised as one of admissibility or of jurisdiction. However, having consulted academic articles and foreign case law, in addition to domestic precedent, the judge concluded that:
- The question of whether a claim was capable of being brought to arbitration was ordinarily one of jurisdiction, subject to judicial challenge under section 67 of the Act
- The question of whether a claim should be heard by a tribunal at all, or at least not before a certain time, was one of admissibility, to be dealt with in the arbitration by the arbitrator, rather than the court
Finding in favour of the defendant, the judge held that the question was not whether the defendant’s claim was arbitrable but whether it had been presented too early or not. Such an issue went to the admissibility of the claim rather than the jurisdiction of the tribunal and was thus for the tribunal to determine.
Having considered whether the challenge was capable of judicial consideration, the judge turned to the question of whether the claimant had waived its contractual right to a period of negotiation.
The Mining Licence Agreement provided that, if the parties were unable to settle a dispute within three months of notice of that dispute, either party could submit the dispute to arbitration. However the appointment of an Emergency Arbitrator by the defendant complicated matters. An appointment required an RFA to be received by the Secretariat within 10 days of the date that the Emergency Arbitration request was made. As the Emergency Arbitrator proceedings were commenced on 20 August 2019, the latest the RFA could be served was 30 August.
The defendant offered to extend the period for service of the RFA to 14 October 2019, being the end of the three-month period required by the Mining Licence Agreement, and the Emergency Arbitrator also suggested the possibility of staying proceedings to allow that three-month period to pass. However, the claimant rejected those proposals and insisted that the RFA be served on 30 August 2019. It was thus held to have waived its right to the three-month notice period.
The case serves as a stark warning to parties whose contractual relationship may be subject to an arbitration clause to choose their course of action carefully when deciding whether, and if so how, to contest any arbitral awards. By seeking to challenge the jurisdiction of an arbitral tribunal under the Act, an applicant risks bringing into the public domain an issue that could and sometimes should be dealt with as part of confidential arbitration proceedings. The party also risks an adverse costs order against it.
The case also highlights the dangers of waiving the benefit of any contractual dispute resolution clause. Any party wishing to ensure that they retain such a benefit must take care not to waive that right by taking a contrary stance on the commencement of arbitral proceedings.
As always, timely advice and careful consideration of the tactical position from the outset are critical to helping parties avoid placing themselves in undesirable positions.