Fiona Trust - Lords dismiss appeal

In Fiona Trust v Privalov [2006] EWHC 2583 (Comm), the claimant shipowners alleged that charterparties had been procured by bribery, and commenced proceedings in the commercial court seeking a declaration that the charterparties had been validly rescinded. The charterparties contained arbitration clauses, and the defendant charterers accordingly applied for a stay of proceedings pursuant to section 9 of the Arbitration Act 1996. The Court of Appeal, overturning the first instance decision of Morison J, granted a stay. (For our report of the Court of Appeal decision, see Bribery and arbitration agreements: new Court of Appeal guidance.)

The House of Lords has unanimously dismissed the shipowners' appeal from the Court of Appeal decision. (The judgment is reported as Premium Nafta Products Ltd v Fili Shipping Company Ltd [2007] UKHL 40). Delivering the leading opinion, Lord Hoffman held that, as a matter of construction, the owners' claims fell within the terms of the charterparty arbitration clauses. Furthermore, the allegation of bribery did not directly impeach the arbitration clause (as opposed to the underlying charterparty), which was to be regarded as separate as required by section 7 of the Arbitration Act 1996.

The Lords' reasoning is substantially the same as that of the Court of Appeal. In particular, the Lords endorsed the Court of Appeal's view that English courts should make a "fresh start" with regard to issues of construction. Older English authorities on the meaning and significance of particular phrases are of limited value: instead, the starting point is a strong presumption that the parties intended all their disputes to be resolved in a single forum.

For a full analysis of the House of Lords' decision, click here.