An interesting case on the interpretation of “matter” in Section 9 of the Arbitration Act 1996.
The brief facts
The factual background relates to the widening of the Panama Canal, a major engineering project over 9 years until 26 June 2016 with the opening of a third set of locks. The new locks allow passage through the canal of all but the largest vessels, thereby making an important contribution to global trade
C, the Panama Canal Authority, was the beneficiary under six advance payment guarantees (“APGs”), each subject to English law/exclusive jurisdiction, entered into by D and a number of disputes arose between the parties which were the subject of ICC arbitration. C issued proceedings, concerning its advance payments and applied for summary judgment under the APGs on the basis that they were first demand instruments. D also applied for a stay of the proceedings under the Arbitration Act 1996 s 9 and, alternatively, on case management grounds pending the resolution of the issue by arbitration. The applications were dismissed.
The Court considered the applications:
- Whether C was entitled to summary judgment against D as guarantors under the English jurisdiction APGs depended on whether the APGs were unconditional demand bonds/guarantees or whether they were guarantees under which the guarantors’ liability was coextensive with the liability of the principal debtor. D was not liable to make repayment of the advance payments upon demand and C was not entitled to conclusively determine what amounts of principal and interest were due. The APGs did not entitle the claimant to conclusively determine the guarantee amount, payment of which D guaranteed. The English jurisdiction APGs were not first demand instruments and C’s application was refused.
- D’s application for a stay under s. 9(1) Arbitration Act 1996 was on the basis that the provisions of s.9 of the Arbitration Act 1996 were satisfied and that a stay of the proceedings had to be imposed because the proceedings were in respect of a matter which under at least one of the arbitration agreements between the parties was to be referred to arbitration.
Section 9 (1) provides that: “A party to an arbitration agreement against whom legal proceedings are brought (whether by way of claim or counterclaim) in respect of a matter which under the agreement is to be referred to arbitration may (upon notice to the other parties to the proceedings) apply to the court in which the proceedings have been brought to stay the proceedings so far as they concern that matter.”
The Court referred to Tomolugen Holdings Ltd v Silica Investors Ltd  SGCA where it was said that “… when the court considers whether any “matter” is covered by an arbitration clause, it should undertake a practical and common-sense inquiry in relation to any reasonably substantial issue that is not merely peripherally or tangentially connected to the dispute in the court proceedings. The court should not characterise the matter(s) in either an overly broad or an unduly narrow and pedantic manner.
The Court also considered Tanning Research Laboratories Inc v O’Brien (1990) 91 ALR 180, in which the High Court of Australia considered the meaning of the word “matter”. The issue in Tanning was approached by reference to what was the “substance of the controversy”. In PT Thiess Contractors Indonesia v PT Kaltim Prima Coal, Standard Chartered Bank, Singapore Branch  Arb LR 26, Blair J approached matters in the same way and emphasised :
“… the importance of identifying the “substance of the controversy”, rather than the formal nature of the proceedings … [T]he court must consider the substance of the controversy as it appears from the circumstances in the evidence on the application (and not just the particular terms in which the Claimant has sought to formulate its claim in court). …”
On this approach the Court held that C was correct that the matter in respect of which the proceedings had been brought was whether the defendants were liable to it under the English jurisdiction APGs. That was within the exclusive jurisdiction clause and was not a matter which the parties had agreed to refer to arbitration, nor was the most substantial, possibly the only, issue arising under the APGs a matter which the parties had agreed to refer to arbitration. Accordingly, s 9(1) did not apply and D’s application for a stay would be refused
(3) A compelling case for a case management stay was not made out by D at the present time, but that the door was not closed on an application being made in the future. This was based on the following factors: (i) given the way that arbitration proceedings had come about, (ii) the progress of the respective sets of proceedings and (iii) what the court or arbitral tribunal was going to be asked to decide.