Oops! ‘UK Law’ and ‘UK Courts’ Do Not Exist!

Contract drafting is an art which should only be undertaken by specialists. The truth of that statement was underlined by a case in which an arbitration clause in a major commercial contract contained references to non-existent ‘UK law’ and ‘UK courts’ as if Britain’s three separate legal systems were one and the same.

The clause within a distribution agreement between two pharmaceutical companies provided that the UK law would be applied in any disputes arising and that the UK courts would have exclusive jurisdiction. The parties also agreed that arbitrations would take place in the UK in accordance with UK law.

A sole arbitrator agreed to consider a dispute under the contract; however, one of the companies challenged his jurisdiction to do so. The validity of the arbitration clause was attacked on a number of grounds, including that the references to the UK were, in context, nonsensical and left open the question of whether the laws of Scotland, Northern Ireland or England and Wales were contemplated.

In rejecting that argument, however, the High Court noted that the contract related to international trade and that was a field in which the law of England and Wales tended to be invoked. It was therefore a sensible commercial interpretation of the clause that the parties had intended that legal system to apply. Other grounds of challenge were also dismissed and the arbitrator’s jurisdiction was confirmed.