When considering Section 9 of the Arbitration Act 1996 - What’s the “matter”?

UK Supreme Court answers the question: When considering Section 9 of the Arbitration Act 1996  – What’s the “matter”?

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, being the first time the Supreme Court considered stays under Section 9 of the Arbitration Act 1996 (‘1996 Act’).

This appeal concerned the alleged c.US$2 billion fraud coined as the “tuna bonds” or “hidden debts” scandal, in which the Supreme Court was asked to determine as a preliminary issue whether pursuant to Section 9 of the 1996 Act, claims brought in the English Court, concerning English Law guarantees, by the Republic of Mozambique (“Mozambique”) should be stayed in favour of arbitration dictated by contracts governed by Swiss law.

Section 9(4) of the 1996 Act provides that on application, unless the court is satisfied that the arbitration agreement is null and void, inoperative, or incapable of being performed, the court is mandated to stay proceedings in so far as they concern the “matter” which under an arbitration agreement is to be referred to arbitration./

It was therefore necessary for the Supreme Court to consider whether or not, for the purposes of Section 9 of the 1996 Act, Mozambique’s claims were “matters” which fell within the meaning of the arbitration agreements (which were governed by Swiss law).

The Supreme Court unanimously overturned the Court of Appeal’s decision and held that none of Mozambique’s claims in issue on appeal were “matters” in respect of which the proceedings were brought and did not fall within the scope of the arbitration agreements.

Prior to this decision, Section 9 of the 1996 Act had been subject to conflicting and somewhat unclear decisions in the lower courts. With this decision, the Supreme Court has now given much-needed clarity and guidance on the meaning of section 9 of the 1996 Act, setting out its findings that “there is now a general international consensus…on the determination of “matters” which must be referred to arbitration”. This consensus included 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. If the “matter” is not an essential element of the claim or of a relevant defence to that claim, it is not a matter in respect of which the legal proceedings are brought.” [75]

“exercise involving a judicial evaluation of the substance and relevant of the “matter” entails a question of judgment and the application of common sense rather than a mechanistic exercise” [77]

“in ascertaining the scope of an arbitration agreement, [the court] must have regard to what rational businesspeople would contemplate”[105]

With its finding of an “international consensus” on “matters” which are to be referred to arbitration, this judgment is not only significant in clarifying Section 9 of the 1996 Act under English law, but it also carries significant importance amongst other common law signatories of the New York Convention. The judgment also serves as a useful reminder for all practitioners that whilst the Fiona Trust principle (or its equivalent in other jurisdictions) has been endorsed, it is still necessary for practitioners to undertake care when considering the meaning of an international arbitration agreement in accordance with its applicable laws.

A copy of the judgment can be found here. 

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• News Author:Jonathan Chan