High Court rules that arbitration clause is sufficiently certain

03/04/17

Mrs Justice Rose today handed down judgment in Associated British Ports v Tata Steel UK Limited [2017] EWHC 694 (Ch), granting Tata Steel UK Ltd’s application for a stay of proceedings pursuant to section 9 of the Arbitration Act 1996.

The proceedings concerned a 25 year licence between Associated British Ports (ABP) and Tata Steel UK Limited (Tata Steel) for use of the jetty at Port Talbot Tidal Harbour in Wales.  The licence contained a clause which provided for the renegotiation of the licence terms in the event of a major physical or financial change in circumstances affecting operations at the port or steelworks in the latter half of its term.  The clause permitted either party to serve notice on the other requiring amendment of the licence terms to reflect the change in circumstances.  In the event that no agreement was reached, the matter was to be referred to an arbitrator.

In February 2016, Tata Steel gave notice of a major financial change in circumstances.  ABP argued that the relevant clause was too uncertain to be enforceable and commenced proceedings in the Chancery Division seeking various declarations.

Having reviewed the relevant English authorities, Mrs Justice Rose noted that each case in which a clause is challenged as being void for uncertainty is to be decided on its own facts.  However, the courts should strive to give some meaning to contractual clauses agreed by the parties if it is at all possible to do so: as recently expressed by Mr Justice Leggatt in Astor Management AG & ors v Atalaya Mining plc & others [2017] EWHC 425 (Comm), the “role of the court in a commercial dispute is to give legal effect to what the parties have agreed, not to throw its hands in the air and refuse to do so because the parties have not made its task easy”.  This is particularly so where the clause forms part of a contract which has already been performed by one or both parties over a period of time.

Mrs Justice Rose concluded that the inclusion of the arbitration obligation indicated that the parties had not intended to retain the freedom to agree or disagree as to the amendments required according to their perceived interests.  The clause was a binding obligation to refer the dispute to arbitration.  Accordingly, the proceedings were stayed.

The judgment can be found here.