English High Court Ruling Marks Rare Successful Jurisdiction Challenge Under Section 67, Arbitration Act 1996

The English High Court recently delivered its judgment in the case of A1 & Ors v P [2025] EWHC 3372 in respect of a claim made under Section 67 of the Arbitration Act 1996, where the claimants (A1, A2, and A3) sought an order from the court setting aside a London Court of International Arbitration award on the basis that the tribunal lacked jurisdiction to decide the dispute. This significant judgment explores whether a solicitor has the usual (or implied) authority to bind its clients to contracts with third parties and why it is important for parties to consider the merits of any potential jurisdictional challenges at the outset of a dispute.

In a rare example of a successful challenge under Section 67 of the Arbitration Act 1996 (the Act), the English High Court has demonstrated that it will step in when required despite its general deference to arbitration and desire to promote finality.

BACKGROUND

A3 entered into a concession agreement to build and operate a container terminal. The project was not a success, and the claimants suspected deliberate obstruction by the counterparty. As a result, A3 commenced arbitration proceedings against the counterparty (the Container Terminal Dispute). A1 is the parent company and a major shareholder in A2. A2 is the manager and partial owner of A3.

A1 engaged external legal counsel (Counsel) to represent A3 in the Container Terminal Dispute. Counsel’s engagement letter was addressed to A1 as the owner and majority shareholder of A3. Counsel then contracted with an intelligence services provider (the PI) to gather intelligence and investigate the suspected obstructive behaviour and failure of the project (the PI Contract). The PI Contract was signed by representatives of Counsel and the PI.

Under the PI Contract, the PI would receive a success fee if any of the evidence it obtained was used in the Container Terminal Dispute. The PI Contract mandated LCIA arbitration in case of a dispute arising from that contract.

The Container Terminal Dispute settled, and two settlement agreements were executed. One of these agreements related to A1 and A3, while the other related to A2. The PI demanded payment in relation to both settlement agreements. A2 accepted liability and paid, A1 and A3 did not. The PI then commenced arbitration proceedings against A1, A2, and A3 to recover the unpaid success fee (the PI Dispute).

TRIBUNAL’S DECISION IN THE PI DISPUTE

The Tribunal in the PI Dispute made the following findings:

• The evidence obtained by the PI was used in the way that triggered the PI’s entitlement to the success fee
• On the correct construction of the PI Contract, A1, A2, and A3 were all parties to it
• Counsel had the apparent authority to bind A1
• Counsel had implied actual and apparent authority to bind A3

As a result, A1, A2, and A3 were held jointly and severally liable to pay the PI the unpaid success fee plus interest and costs.

THE CHALLENGE

A1, A2, and A3 each challenged the jurisdiction of the Tribunal to decide the dispute under Section 67 of the Act (albeit there was some difference between the arguments advanced by the different claimants).

A1 and A3 argued that Counsel had lacked the authority to bind them by entering into the PI Contract, or alternatively the arbitration agreement contained within the PI Contract. In raising the latter argument, A1 and A3 relied on the doctrine of severability, pursuant to which arbitration agreements within contracts are treated as an independent standalone agreement from the main contract, ensuring that they survive even if the main contract is deemed to be invalid, void, or terminated.

A1 and A3 had raised this lack of authority argument before the Tribunal, who had rejected it.

A1 and A2 also argued that a provision of local law meant that a “special mandate”/power of attorney was required in order to, amongst other things, enter into an arbitration agreement or instruct a lawyer to represent them in proceedings. As Counsel were not given a special mandate by either A1 or A2, it was contended that Counsel could not bind them by entering the contract with the PI. Importantly, this argument had not been put before the Tribunal.

The arbitral proceedings commenced before the effective date of the Arbitration Act 2025 (see our March and July updates). Consequently, under Section 67 of the Act the English Court conducted an effective de novo review. 

THE DECISION OF THE ENGLISH HIGH COURT

Mr Justice Henshaw allowed the jurisdiction challenge under Section 67 in respect of A1 and A3, but refused the challenge brought by A2.

Findings on Agency

The identity of the parties to a contract is generally a factual question that does not give rise to any questions of legal principle. However, an exception to that is in circumstances where an agent is acting (or purporting to act) on behalf of a principal.

Authority to act can be through:

• Actual Authority: Where an agent has been expressly or impliedly authorised to act on behalf of a principal
• Apparent or Ostensible Authority: Where a principal has not authorised the agent to act but a third party is entitled to assume that the principal has given its authorisation, normally as a result of a representation made by the principal
• Usual Authority: Covers the authority of a person (the agent) to enter into transactions of a type that are ordinarily undertaken by a person appointed to a particular position

Mr Justice Henshaw accepted that Counsel entered into the agreement with the PI on behalf of A3 and that A1 was the “owner” of A3. However, the judge determined that the general position is that a solicitor does not have the usual authority to place their clients into a direct contractual relationship with a third-party service provider.

Further, Mr Justice Henshaw found that the PI had failed to show that any representation had been made by the claimants to authorise Counsel and concluded there was no sufficient evidence of later ratification by A1 or A3. As a result, the judge held that the arbitration clause in the PI Contract could not bind A1 or A3. Accordingly, the Tribunal had no jurisdiction over A1 and A3.

Section 73(1) of the Act

It was accepted that A2 had not challenged the Tribunal’s jurisdiction at all, and accordingly the jurisdictional point taken by A2 was new. As a result, A2 had to overcome the restriction imposed by Section 73(1) of the Act.

Section 73(1) of the Act prevents a party from challenging an arbitral award on jurisdictional grounds if it participated in the arbitration without promptly raising an objection. As such, A2 had to show that it did not know, and could not with reasonable diligence have discovered, the grounds for its claims.

The Court rejected these submissions on three grounds:

• First, A2 had access to an in-house legal department and had changed its articles of association in 2014 to enable its directors to instruct lawyers in arbitration proceedings. Therefore, it appeared that A2 was well aware of the relevant local law.
• Second, local law was not relevant to a question of ratification; the law governing the contract was English law.
• Third, judgments in the local jurisdiction in relation to the relevant legal provisions had been inconsistent, and this inconsistency meant that A2 should have been aware that there was scope for argument that the arbitration agreement did not apply. Accordingly, the grounds of a claim could (and should) have been made at an earlier stage.

As a result, A2 failed to overcome Section 73(1) and the original award—in respect of A2 only—was upheld.

COMMENTARY

This judgment provides a rare example of a successful jurisdictional claim under Section 67. It provides a helpful restatement of the principles of agency governing solicitors and their clients, and the necessity for tribunals to fully consider the bases for their jurisdiction. Accordingly, it shows the willingness of the English Court to intervene where it is necessary for it to do so.

However, it is also a cautionary tale for those hoping to raise late jurisdictional arguments. If a jurisdictional argument may exist, a party should carefully consider the merits of doing so with their legal advisors at an early stage. A failure to deploy such an argument promptly means facing an uphill battle to overcome the stringent test set out within Section 73(1). By refusing A2’s appeal, the English Court affirmed the position that procedural safeguards in the Act (such as in Section 73) are specifically designed to ensure finality in arbitrations and prevent tactical delays.

Trainee solicitor Jack Manton contributed to this LawFlash.