Dual Arbitration Clauses and Jurisdiction

The parties to the arbitral proceedings were in dispute over, among other things, the jurisdiction of the arbitral tribunal of the Hamburg Chamber of Commerce as the purchase agreement in question contained two separate and independent arbitration clauses referring to different arbitration institutions. The arbitral tribunal held that:

• both arbitration clauses were valid, unambiguous and alternatively applicable;
• it had jurisdiction over the dispute under the second arbitration clause, including over the question of its own jurisdiction;
• it could apply its own procedural rules under the second arbitration clause instead of the arbitration rules expressly provided for in the first arbitration clause; and
• it could render its decision regarding jurisdiction in the final award on the merits without the need for an interim award.

Facts

The first arbitration clause in the purchase agreement read as follows: "Disputes and arbitration: Any dispute arising out of this contract which cannot be resolved by negotiation shall be settled by arbitration under the Minor Metals Trade Association Rules & Regulations."

The second read as follows: "Disputes and arbitration: Any dispute arising out of this contract which cannot be resolved by negotiation shall be settled by arbitration at the Hamburg Chamber of Commerce in Hamburg, Germany." A further provision of the contract read: "All other terms and conditions as per Minor Metals Trade Association Rules & Regulations."

It was undisputed that the parties had been unable to resolve the dispute by negotiations and that the purchase agreement contained two independent arbitration clauses.

Decision

On this basis, and on the basis of an interpretation of the agreement, the arbitral tribunal argued that it was the arbitral body provided for in the second arbitration clause, which had been validly agreed between the parties.

The tribunal further argued that it was also competent to decide on the question of whether it had jurisdiction pursuant to Section 1040 of the German Code of Civil Procedure, which the arbitral tribunal deemed applicable pursuant to Section 1025 of the German Code of Civil Procedure, because - according to the second arbitration clause - the place of arbitration was Germany.

The arbitral tribunal also held that the fact that the purchase agreement contained two different arbitration clauses did not render them invalid. Rather, an arbitration-friendly interpretation of both clauses showed that the parties wanted to resolve any dispute arising from the agreement by arbitration. The intentional inclusion of two different arbitration clauses pointing to two different arbitral tribunals could thus mean only that the respective claimant was to have the right to choose between the stipulated arbitral tribunals, even though the clauses were not expressly linked by an 'or' to clarify their alternative nature. Also, in the opinion of the arbitral tribunal, international arbitration practice already confirmed that a twofold arbitration clause can be valid.

Further, the arbitral tribunal held that the clauses were not ambiguous, even though the second did not expressly provide that the arbitral tribunal of the Hamburg Chamber of Commerce should apply its own arbitration rules. As the second clause stated that any dispute should be decided by the arbitral tribunal of the Hamburg Chamber of Commerce, it was clear that the tribunal would apply its own arbitration rules. While the parties could have agreed on a different choice of arbitration rules for the arbitral proceedings before the arbitral tribunal of the Hamburg Chamber of Commerce, such an agreement would have had to be made expressly; this did not occur here.

The arbitral tribunal also held that - contrary to the submissions of the respondent - no established trade practice exists according to which commercial agreements with Chinese parties provide for arbitration clauses referring only to Chinese arbitral institutions.

Finally, the arbitral tribunal held that it could render its decision on its jurisdiction directly in the award on the merits without any need for a prior interim award on jurisdiction. The arbitral tribunal acknowledged that Section 1040 of the German Code of Civil Procedure provides that decisions on jurisdiction should be made by interim award "as a rule". However, the arbitral tribunal held that exceptions to this rule are permissible and accepted in certain cases, especially where the respondent - as in the case at hand - does not limit its submissions to the issue of jurisdiction, but rather makes exhaustive submissions regarding the merits of the case. According to German Federal High Court precedent, this procedure does not constitute a violation of the public order, which could preclude the recognition and enforcement of the arbitral award by the German courts.

"International Law Office"