A US Court of Appeal ruling that parties to a maritime dispute must arbitrate in London not Florida has highlighted the confusion that can result from an ambiguous clause on forum.
The Eleventh Circuit judge overruled a lower court ruling requiring arbitration in Florida under US law, relocating the dispute to London, in Internaves de Mexico SA v Andromeda Steamship Corp. The contract specified arbitration as the preferred dispute mechanism but contained conflicting arbitration forum selection clauses.
In the contract, a London seat was referred to in the specific terms and a New York seat in the standard terms, said Shantanu Majumdar, barrister at Radcliffe Chambers. Adding confusion, some of the standard dispute resolution terms were struck through but not the New York clause. The District Court could not choose and decreed in default that arbitration should take place in Florida.
‘It is a maxim of English law that the particular prevails over the general; US law takes the same view,’ he said.
‘In holding that the London clause applied, the 11th Circuit Court of Appeals applied the (themselves ambiguous) hierarchy provisions of the contract but also gave precedence to the specific over the boilerplate. Sometimes, parties can’t agree and either don’t say or provide for a non-exclusive jurisdiction or even specify two different jurisdictions in the same clause, but two different arbitration clauses in different parts of the contract is the result, surely, of carelessness?’
Khawar Qureshi QC, of Serle Court, said: ‘The outcome serves to illustrate the perils of not paying attention to the contract before it is concluded’.
Peter Stewart, associate at Cooke Young & Keidan, said arbitration practitioners are regularly faced with contracts ‘which either fail to select or provide conflicting or unclear provisions as to the arbitral forum.
‘This is a further reminder of the importance of clarity when drafting clauses into commercial contracts.’
Charles Pugh, commercial litigator at Oury Clark, said the decision highlighted the importance of focusing on the jurisdiction and applicable law clauses in any contract. While parties may not be focused on these issues when entering into a contract, ‘it will usually prove impossible to negotiate such terms once a dispute has arisen’.
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