In NWA v NVF  EWHC 2666 (Comm), the Commercial Court was asked to consider whether a party's failure to comply with a pre-arbitration mediation requirement challenged the jurisdiction of the arbitral tribunal, or the admissibility of the dispute.
Section 67 of the Arbitration Act 1996 provides a mechanism under which arbitral awards can be challenged on the basis that the tribunal lacked "substantive jurisdiction" when the award was made.
A successful challenge permits the court to declare the award to have no effect or to be set aside.
Challenges based on admissibility will not fall within the scope of section 67, resulting in the tribunal's decision being final.
In NWA v NVF, Calver J upheld that a failure to comply with such an obligation was a question of admissibility, rather than of jurisdiction. As a result, the arbitral award did not fall within the scope of section 67 of the Arbitration Act 1996 and could not be challenged on the basis of jurisdiction.
Rather, it was a breach of a procedural requirement, for which the arbitrator could make determinations as to consequences on the grounds of admissibility and such determinations would be final.
In this case, the parties had entered into a written agreement in 2007 for the purpose of re-organising patents and pending patent applications for the display of life size 3D video holograms.
The agreement contained a dispute resolution clause requiring the parties to seek to settle disputes arising under the contract by mediation with London Court of International Arbitration (LCIA). The clause provided that, should the dispute not be settled by mediation within 30 days, the parties could refer the matter to arbitration.
Clause 10.2 of the Agreement was as follows:
(a) In the event of a dispute arising out of or in connection with this Agreement, including any question regarding its existence, validity, termination, interpretation or effect, the relevant parties to the dispute shall first seek settlement of that dispute by mediation in accordance with the London Court of International Arbitration ("LCIA") Mediation Procedure, which Procedure is deemed to be incorporated by reference into this clause insofar as they do not conflict with its express provisions. Any mediation shall take place in London.
(b) If the dispute is not settled by mediation within 30 days of the commencement of the mediation or such further period as the relevant parties to the dispute shall agree in writing, the dispute shall be referred to and finally resolved by arbitration under the LCIA Rules from time to time in force ("the Rules"), which Rules are deemed to be incorporated by reference into this Agreement insofar as they do not conflict with its express provisions.
When a dispute arose in 2019, the claimants did not engage with the defendants' attempts to proceed with mediation and the stayed arbitration proceedings progressed, resulting in a partial award for the defendants.
The claimants sought to challenge this arbitral award on the basis that the arbitrator did not have jurisdiction as the correct procedural steps had not been followed and such conduct rendered the dispute resolution clause in the contract invalid.
The Commercial Court refused the claimants' challenge. Calver J stated:
"…the objective intention of the parties was clearly to obtain a swift and final determination of their dispute, if it could not be settled by LCIA Mediation, by way of an expedited LCIA arbitration. In those circumstances, clause 10.2 should be construed in the light of that intention. A construction which allows one or other party to frustrate that intention should be avoided. This favours an "admissibility" construction rather than a 'jurisdiction' construction so far as the requirement to submit to mediation is concerned".
Interestingly, Calver J chose not to follow the approach taken previously in Emirates Trading Agency LLC v Prime Mineral Exports Pte Ltd  1 WLR 1145 and Tang v Grant Thornton International Limited  1 All ER (Comm) 1226 regarding contractual conditions precedent to arbitration.
In these cases, a failure to comply with the dispute resolution clause was held to be a matter of jurisdiction.
Calver J noted that the Emirates decision in particular had attracted considerable academic criticism and, as such, would not be followed in this instance. Instead, Calver J chose to follow Sierra Leone v SL Mining Limited  EWHC 286 (Comm), another Commercial Court decision this year.
This judgment provides an important clarification that a failure of a party to comply with a pre-arbitration mediation requirement will not result in the arbitral tribunal losing jurisdiction to hear the dispute. A full copy of the judgment can be found on BAILII.
This article was authored by Eilish Beeby, trainee solicitor at Fieldfisher.
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