Arbitration Act under scrutiny

The effect and meaning of section 12 of the Arbitration Act 1996 has been scrutinised by the High Court. Harbour & General Works Ltd (HGWL), which was employed by the Environment Agency to carry out flood-defence work at Harwich, applied for an extension of time under the section for commencement of arbitration under the ICE conditions of contract. The company also sought a declaration that even if time were not extended, five claims could still be referred to arbitration because they were necessary for determination of the correct final valuation of the works. Colman J rejected both claims. He maintained that an engineer had already decided the issues in dispute and that such decisions were final and binding under clause 66(4) of the contract, unless HGWL referred them to conciliation or arbitration in accordance with the specified time limits. Having allowed the time for reference to arbitration to expire, HGWL was not entitled to an extension to refer the matter to arbitration. The judge said that, under section 12 of the Arbitration Act, an applicant must establish that the circumstances were outside the reasonable contemplation of the parties when they agreed to the time-bar provision, and that it would be just to extend the time. Alternatively, he had to establish that the conduct of one of the parties rendered it unjust not to grant an extension. After examining the section 12 criteria, the judge said he was satisfied that the requirements had not been met in this case. The company had argued that r 5.2 of the ICE arbitration procedure justified reopening the matter in arbitration proceedings. The rule stipulates: “Once his appointment is completed the arbitrator shall have jurisdiction over any issue connected with and necessary to the determination of any dispute or difference already referred to him whether or not any condition precedent to referring the matter to arbitration had been complied with.” Colman J considered that, on its proper construction, r 5.2 did not go further than to give an arbitrator jurisdiction over connected and necessary issues that had not yet become permanent, final and binding. He added that he was unable to accept HGWL’s submissions that r 5.2 justified the re-opening of further arbitration. Harbour & General Works Ltd v Environment Agency QB (chambers) (Colman J), 22 February 1999 Martin Bowdery (instructed by Beale & Co) appeared for the plaintiffs; Timothy Elliott QC (instructed by Mills & Reeve) appeared for the defendant. PLS News 24/2/99