Chapter 7: Stays of English court proceedings brought in breach of an agreement to arbitrate

7.1 This chapter is about the English court’s jurisdiction under section 9 of the 1996 Act to grant stays of English court proceedings and also its inherent jurisdiction to stay such proceedings under powers arising outside statutory rules. A stay is the legal term for a suspension or halt of proceedings. Injunctions stopping foreign proceedings and arbitral proceedings are dealt with in chapter 8. Arbitrators can grant stays of their own arbitral proceedings in part or whole, for instance on the parties’ request pending settlement negotiations. Stays granted by arbitrators arise under their powers over procedure and must be justified as within their duty to decide cases justly and efficiently. For this reason an arbitrator’s stay of arbitral proceedings should not usually be for an indefinite period. By contrast a court’s stay of its proceedings will usually be a final remedy.

7.2 The court’s jurisdiction to stay proceedings usually arises where a party has commenced proceedings in breach of an arbitration agreement. The fact that parties have agreed to refer their disputes to arbitration does not mean that the English court lacks jurisdiction to resolve those disputes or that a judgment given on that dispute is unenforceable. The defendant can choose to allow the proceedings in court to continue (and will thereby usually waive its right to arbitrate the dispute raised) or it can apply for a stay of the proceedings. A stay granted by the court is the most effective remedy for this type of breach of an arbitration agreement since a court will not make an order requiring the parties to perform the arbitration agreement. 1 Damages are unlikely to be an effective remedy since they may be nominal unless a party’s costs have been increased by reason of the disputes going to court.

7.3 The practical effect of a stay of proceedings is to force the claimant to refer the dispute to arbitration and the courts have firmly rejected any suggestion that this would contravene the claimant’s right of access to court under Article 6 of the European Convention on Human Rights. 2

7.4 The court’s primary jurisdiction to grant a stay arises by statute under section 9 of the 1996 Act. This statutory jurisdiction is mandatory in two senses. First, the parties cannot contract out of it. 3 Secondly, if an applicant for a stay can bring himself within section 9 then the court is required to grant the stay; it has no discretion to decline to stay the proceedings or to make the stay subject to conditions. The court retains an inherent non-statutory jurisdiction to stay proceedings but this would only apply in cases where there is no statutory power.

7.5 Section 9 of the 1996 Act is intended to give effect to international obligations under the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. The mandatory power to stay proceedings under section 9 applies to all written arbitration agreements regardless of the nationality of the parties. 4

7.6 Section 9 has removed the court’s jurisdiction to grant summary judgment where a claim falls within an arbitration clause but there is no arguable defence to it. 5 Previously summary judgment was often used as a speedy way of recovering indisputable claims for freight or demurrage or the price of goods, notwithstanding the existence of an arbitration agreement. Now the parties must arbitrate to recover such claims.

7.7 Section 10 of the 1996 Act also requires a stay of proceedings where one party brings interpleader proceedings because he is faced by conflicting claims from other parties and does not know who to account to. For example a voyage charterer may be faced by competing claims for freight from a shipowner and time charterer. If the issue between the competing claimants (e.g. the shipowner and time charterer) is subject to an arbitration clause then the court will direct that the issue between them is determined by arbitration unless there are reasons why the court would not have granted a stay of proceedings brought by the competing claimants.