Situation

If a party to an arbitration agreement commences proceedings in court, contrary to his undertaking to submit to arbitrations, the court, on the application of the other party, may either order a stay of court proceedings, thus allowing the arbitration to continue, or refuse an application for a stay, thus breaking the arbitration agreement (Section 4 of the 1950 Act). If the only point in issue is a point of law, the court may be inclined to refuse a stay of proceedings. In other situations, however, the court will usually grant the stay thus giving effect to the arbitration clause. It is important to distinguish here between the ‘domestic arbitration agreement’ and the ‘non-domestic arbitration agreement’. Where the arbitration agreement is a domestic arbitration agreement, the discretion of the court to order or refuse a stay of court proceedings is wide (Section 4 (1) of the 1950 Act), but if it is a non-domestic arbitration agreement its discretion is limited – Arbitration Act 1975, Section 1. An arbitration agreement is ‘domestic’ if at the time the proceedings are commenced: It does not provide, expressly or by implication, for an arbitration in a state other than the United Kingdom, and, all the parties to it are: United Kingdom citizens or natural persons habitually resident in the United Kingdom; or, corporations incorporated in the United Kingdom or having their central management and control exercised in the United Kingdom [1975 Act, Section 1 (4)]. Both these conditions must be satisfied for an arbitration agreement to be classified as domestic. As referred to earlier, the 1996 Act’s main task was to ‘tidy up’ the 1979 Act and some of the effects of the 1979 Act are worthy of study.