A contract of sale of 15,000 metric tonnes of steel was agreed between Habas and VSC and contained an arbitration clause for arbitration in London. Negotiations took place between two agents on behalf of the Seller and the Buyer. It was envisaged that one of the agents would sign the contract on the Seller’s behalf. Discussions had taken place about a different arbitration seat. Finally the agent on behalf of the Seller signed a draft that provided for arbitration in Paris but with no choice of law. And the Buyer signed a copy of that draft that had been amended by hand to provide for London arbitration. A dispute arose when the Seller failed to make delivery of steel and the Buyer commenced arbitration proceedings for damages in London.
The Seller challenged the arbitrator’s decision that the contract of steel had contained a binding agreement for London arbitration. The English arbitrator, Professor Charles Debattista, issued an Award concluding that he had substantive jurisdiction and that the agents had had ostensible authority to conclude the contract, which had included a binding London arbitration agreement.
At the Commercial Court the Seller challenged the tribunal’s jurisdiction and its award pursuant to Section 67 of the Arbitration Act 1996. The Court rejected the claimant’s argument and concluded:
“For the reasons set out above, I conclude that a valid and binding arbitration agreement was made as between Habas and VSC. There was a binding consensus to that agreement and there was ostensible authority to enter into it. In any event it has not been shown, if relevant, that there was no actual authority to do so. The section 67application must accordingly be dismissed.”
This case reaffirms the principle that in the absence of an express choice by the parties as to the law governing an arbitration agreement, the law of the seat of the arbitration agreement is likely to govern the agreement. It also reaffirms the English Law principle that ostensible authority is sufficient to bind a party.