522. Exmek Pharmaceuticals SAC v Alkem Laboratories Ltd [2015] EWHC 3158 (Comm)

Arbitration – reference in clause to “UK Law” interpreted to mean law of England and Wales

The Facts                               

A distribution agreement between companies based in Peru (Exmek) and India (Alkem) respectively contained the following clauses:

Article 13: Proper Law

The proper law of this agreement is the law of the UK, and the parties submit to the exclusive jurisdiction of the Courts of the UK and of all Courts having jurisdiction in Appeal from the Courts of the UK.

Article 14: Arbitration

All disputes and differences whatsoever which will at any time hereafter arise between the parties in relation to this agreement which the parties using their best endeavours in good faith cannot resolve shall be referred to arbitration before any legal proceedings are initiated. The arbitration shall be conducted in the UK in accordance with the provisions of the Law in the UK in effect at the time of the arbitration and shall be conducted by one or more Arbitrators appointed thereunder.”

Exmek terminated the agreement and requested arbitration. A series of exchanges followed in which Alkem indicated that they were willing to submit to arbitration.

Although the terms of their agreement suggested an ad hoc arbitration, Exmek approached the London Court of International Arbitration who required a modification of the arbitration clauses in order to conduct the arbitration under their auspices.

Alkem provided a torpid response to Exmek’s efforts to get the arbitration going, and almost three years after termination, Exmek commenced litigation in the courts of Peru.

Once again, Alkem reacted sluggishly to service, but appointed Peruvian lawyers in time to object to jurisdiction. They were advised, incorrectly, that the time period to object to jurisdiction had lapsed. They were advised to continue with the process while fighting a rear guard action to assert their contention that the Peruvian courts had no jurisdiction because of the “UK” arbitration clause.

By reason of the incorrect advice, they missed the immutable deadline laid down by Peruvian law to object to jurisdiction.

Just over three years later, after exhausting the legal processes of Peru, Alkem was faced with a judgment against them of $6 million. Alkem commenced arbitration in London.

Exmek filed a letter objecting to the jurisdiction of the single arbitrator appointed by Alkem but did not participate in the arbitration.

In a preliminary finding the arbitrator determined that he had jurisdiction. Exmek challenged his finding pursuant to section 67 of the Arbitration Act 1996.

There were two prominent features in the proceedings in Peru: firstly, the system had no procedure to obtain condonation for a late challenge to jurisdiction, and secondly, the courts were of the view that the arbitration clause was incurably vague in its reference to “UK Law” which could conceivably have referred to three different systems: England and Wales, Scotland and Northern Ireland.

Findings

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