City of London v Sancheti
| Jurisdiction | England & Wales |
| Judge | Lord Justice Lawrence Collins,Lord Justice Richards,Lord Justice Laws |
| Judgment Date | 21 November 2008 |
| Neutral Citation | [2008] EWCA Civ 1283 |
| Docket Number | Case No: B2/2008/0489 |
| Court | Court of Appeal (Civil Division) |
| Date | 21 November 2008 |
[2008] EWCA Civ 1283
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CENTRAL LONDON CIVIL JUSTICE CENTRE
HIS HONOUR JUDGE KNIGHT QC
6CL05967
Before: Lord Justice Laws
Lord Justice Richards and
Lord Justice Lawrence Collins
Case No: B2/2008/0489
Mr Sudhanshu Swaroop (instructed by Morgan Walker) for the Appellant
Mr Oliver Radley-Gardner (instructed by Comptroller & City Solicitor) for the Respondent
Hearing date: November 11, 2008
Lord Justice Lawrence Collins:
I Introduction: Bilateral investment treaties and international law
1. The number of arbitrations on the plane of public international law has greatly expanded in recent years as a result of the widespread use of bilateral investment treaties (“BITs”) under which each Contracting State agrees in advance that the nationals of the other Contracting State will have a right of recourse to international arbitration against it. The method of arbitration agreed may be arbitration under the auspices of the International Center for Settlement of Investment Disputes (“ICSID”) or it may be ad hoc arbitration, or (as in the present case) either method.
2. This application concerns the relationship between international arbitration under a BIT and national court proceedings, and, in particular, whether Roussel-Uclaf v GD Searle & Co Ltd [1978] 1 Lloyd's Rep 225 was right to give a very extensive interpretation of the stay provisions of what is now section 9 of the Arbitration Act 1996 so to apply it to persons who were not parties to the arbitration agreement.
3. Typically under a BIT the investor is given direct standing to pursue his own claim against the State of the investment in respect of any “investment dispute”. The arbitration provision in the BIT can amount to a standing offer to investors to arbitrate, and acceptance of this standing offer to arbitrate by an investor gives rise to a binding arbitration agreement between the investor on the one hand and the host state on the other. In the absence of a specific choice of law, the law to which the agreement to arbitrate between the investor and the host state is subject is international law: Republic of Ecuador v Occidental Exploration and Production Company [2005] EWCA Civ 1116, [2006] QB 432; ETI Euro Telecom International NV v Republic of Bolivia [2008] EWCA Civ 880, [2008] 2 Lloyd's Rep 421.
4. On January 6, 1995 the United Kingdom-India BIT (an Agreement dated March 14, 1994, between the United Kingdom and India for the Promotion and Protection of Investments) came into force. The recitals to the BIT state that the respective governments desire to create conditions favourable for fostering greater investment by investors of one State in the territory of the other State. Article 1 defines “investment” very widely to include immovable property (Article 1(b)(i)). By Article 3(2) investments of investors of each Contracting Party shall at all times be accorded fair and equitable treatment and shall enjoy full protection and security in the territory of the other Contracting Party. By Article 4(1) each Contracting Party shall accord to investments of investors of the other Contracting Party treatment which shall be not less favourable than that accorded either to investments of its own investors or to investments of investors of any third State. Any dispute between an investor of one Contracting Party and the other Contracting Party is, as far as possible, to be settled amicably through negotiations: Article 9(1). Failing amicable settlement or, international conciliation, the dispute may be referred to ICSID arbitration or ad hoc arbitration under the UNCITRAL Arbitration Rules: Article 9(3).
II The dispute
5. By a lease dated September 16, 1998 the Corporation of London let the 4 th Floor, 124 New Bond Street, London W1 to ALC Press Inc., a Japanese company, for a term of years expiring on March 24, 2003. By clause 4(4)(e) the lessors and the lessee “submit to the non-exclusive jurisdiction of the competent courts of England and Wales”, and the lease was to be construed in accordance with English law.
6. On April 3, 2001 Mr Sancheti, a solicitor of Indian nationality, took an assignment of the unexpired term of the lease. Mr Sancheti established a solicitor's practice at the premises.
7. The lease enjoyed the protection of Part II of the Landlord and Tenant Act 1954 and came to an end by service of a notice served pursuant to section 25 of the 1954 Act. The lease came to an end on October 15, 2004, and Mr Sancheti continued to occupy until December 24, 2004, when Mr Sancheti vacated the premises. He is now in practice in the firm of Morgan Walker at 115A Chancery Lane.
8. At that time, there was an outstanding rent review under the Lease. Clause 1(1) of the lease provided for a rent review as at March 24, 2002. In default of agreement the increase in rent was to be determined by a surveyor appointed by agreement or in default by the President of the RCIS. In July 2002 the Corporation of London had put forward proposals for an increase in rent, but no agreement was reached.
9. In due course, Mr Last FRICS was appointed by the President of the RICS in January 2005 to determine the increased rent. On March 15, 2005 Mr Last determined the amount of the full rack rental as £13,950 per annum with effect from March 25, 2002.
10. The Corporation sought to recover the balance of the revised rent from Mr Sancheti, who refused to pay.
Claim under the BIT
11. On May 4, 2005 Mr Sancheti served a notice of disputes under the BIT on the Treasury Solicitor, seeking amicable negotiation of those disputes, and notifying the Treasury Solicitor of arbitration under Article 9(3)(c) (ad hoc arbitration under UNCITRAL rules) if settlement was not possible. In paragraph 8 of this letter Mr Sancheti complained of “blatant discrimination by different organs and functions of the United Kingdom in their dealing with me in my capacity as an Inward Investor”. He complained of discrimination by the Home Office, the Law Society, and the judiciary. His complaints against the Corporation of London were of targeted harassment and racial discrimination, and misfeasance.
12. On September 16, 2006 Mr Sancheti wrote to the Treasury Solicitor giving notice of arbitration. Mr Sancheti's request for arbitration relied on Articles 3(2) and 4(1), and complained that he had been a victim of racial discrimination in relation to his application for leave to remain in the United Kingdom indefinitely and in relation to his practice as a solicitor by the Law Society. His complaints in relation to the Corporation of London were that: (1) while occupying the premises as a tenant of the Corporation he had been the subject of targeted harassment and racial discrimination to the extent that he had had to stop his legal practice to attend to their unreasonable demands, and as a result he was finally forced to move to other premises; and (2) the Corporation of London exercised influence on the local courts to have specific chosen judges to attend to his litigation.
13. Mr Sancheti has appointed Justice Umesh Chandra Banerjee, retired judge of the Supreme Court of India, as his party- appointed arbitrator. The United Kingdom Government appointed Professor Vaughan Lowe, and he was subsequently replaced by Professor Michael Reisman. The Vice-President of the International Court of Justice appointed H.E. Dr. Francisco Rezek, a former member of the International Court of Justice, as Chairman of the arbitral tribunal.
14. I should add that on November 18, 2004 Mr Sancheti had written to the Lord Mayor of London seeking to invoke the BIT procedures and alleging unfair treatment by the Corporation of London of Mr Sancheti as its tenant, and in particular racial discrimination and manipulation of rents. But this was plainly ineffective. Mr Swaroop, for Mr Sancheti, sought to argue that the request for arbitration in the proceedings against the United Kingdom should be read in the light of this document and should be interpreted to include a claim for manipulation of rents, but there is no basis for this argument.
County Court proceedings
15. On January 9, 2006 the Corporation of London demanded payment from Mr Sancheti of increased rent with effect from March 25, 2002.
16. On August 9, 2006 the Corporation of London commenced proceedings against Mr Sancheti in the Central London County Court claiming the sum of £20,144.85 allegedly due by way of rent plus interest and one-half of Mr Last's fee (subject to deducting a deposit of £9,000 plus interest).
17. Mr Sancheti acknowledged service contesting jurisdiction and on August 22, 2006 issued an application for a stay of proceedings under section 9 of the Arbitration Act 1996 or the inherent jurisdiction of the court on the grounds that he had invoked the arbitration provisions in the BIT.
18. On December 8, 2006 Mr Sancheti offered to deposit the sum claimed in the County Court proceedings with the Corporation of London pending the determination of the dispute in the BIT arbitration. The Corporation of London did not respond to that offer.
19. Mr Sancheti's application for a stay was refused by District Judge Mathias on January 5, 2007 on the ground that the BIT “is not intended in any way to affect the relationship between an...
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