What’s the ‘matter’?  UK Supreme Court’s first ruling on s.9 stays under the Arbitration Act

20/09/23

On 20 September 2023, the Supreme Court (Lords Hodge, Lloyd-Jones, Hamblen, Leggatt and Richards) handed down judgment in Republic of Mozambique v Privinvest Shipbuilding SAL (Holding) & Ors [2023] UKSC 32. This is the first time the Supreme Court has considered stays under s.9 of the Arbitration Act 1996.

The appeal arises in long-running and complex litigation of an alleged ~US$2 billion fraud which has become known as the “tuna bonds” or “hidden debts” scandal. Certain of the underlying claims in the litigation are set for a 3-month Commercial Court trial beginning in October 2023, alongside jurisdiction challenges under the State Immunity Act 1978 and the Arbitration Act 1996.  

The appeal to the Supreme Court concerned a preliminary issue in jurisdiction applications brought by a group of defendants – the Privinvest Defendants – for a stay of the Republic’s claims against them, including in the torts of bribery and unlawful means conspiracy, under s.9 of the 1996 Act. Section 9(4) mandates the Court upon a duly made application to stay proceedings brought by claim or counterclaim “in respect of a matter which…is to be referred to arbitration” under an arbitration agreement between the parties, unless it is null and void, inoperative or incapable of being performed. The Privinvest Defendants argued that all of the Republic’s claims were “matters” falling within the scope of various Swiss-law arbitration agreements in Supply Contracts allegedly binding on the Republic.

The Republic succeeded at first instance before Waksman J in its position that none of its claims were “matters” that were within the scope of the arbitration agreements in the Supply Contracts. The Court of Appeal unanimously disagreed with Waksman J and found that the entirety of the Republic’s claims were within scope (see here).

The Supreme Court unanimously overturned the Court of Appeal.  The UKSC held the none of the Republic’s claims in issue on appeal were “matters” in respect of which the proceedings were brought, which fell within the scope of the arbitration agreements.

The judgment makes for important reading for litigation and arbitration practitioners. Section 9 had formerly been the subject of conflicting (and unclear) decisions in the lower courts, with Popplewell J (as he then was) providing the most comprehensive English law analysis in Ruhan [2018] 2 Lloyd’s Rep 280. The Supreme Court gives much-needed clarity on the meaning of s.9, setting out its finding of a “general international consensus among the leading jurisdictions…on the determination of “matters” which must be referred to arbitration” ([71]-[80]), and which can thus be stayed under the 1996 Act. This consensus included (at [73]) that “a “matter” is a substantial issue that is legally relevant to a claim or a defence, or foreseeable defence, in the legal proceedings, and is susceptible to be determined by an arbitrator as a discrete dispute”.

Applying this to the claims at hand, the UKSC concluded that issues as to the validity etc. of the Supply Contracts did not constitute defences to the Republic’s claims and that in consequence the Republic’s claims were not matters in respect of which proceedings were brought and did not fall within the scope of the arbitration agreements.

The judgment also provides a reminder that the Fiona Trust principle (and its counterparts in other jurisdictions, such as the in favorem arbitri principle in Swiss law) does not negate the need to undertake a close and careful analysis of the meaning of an arbitration agreement in accordance with its applicable law.

The judgment is here.