Meaning of a provision that parties “may” submit disputes to arbitration

Anzen Limited and others (Appellants) v Hermes One Limited (Respondent) (British Virgin Islands) [2016] UKPC 1

The United Kingdom Privy Council considered the meaning and effect of an arbitration clause, which provided that, in the event of an unresolved dispute, «any party may submit the dispute to binding arbitration». At first instance, and in the BVI Court of Appeal, it had been held that this clause conferred on all the parties an option to require disputes to be submitted to arbitration. However, in order to exercise this right, a party had to commence arbitration proceedings. As the party seeking to rely on the arbitration agreement had not done this, it was not entitled to a stay. The Privy Council granted an appeal against this decision. It held that submitting a dispute to arbitration need not be inextricably linked to commencing arbitration proceedings. It might be difficult for a defendant in court proceedings to commence arbitration proceedings in which it sought positive relief. Therefore, it made more commercial sense for a party to be able to insist upon arbitration either by making an unequivocal request that the party that had commenced litigation refer the dispute to arbitration or by applying for a stay of the court proceedings. Accordingly, the appellant was entitled to a stay.

This article was published in the Italian law Review “Diritto del Commercio Internazionale” in September 2016.