## Facts

- Eight time-charterparties (Shelltime 4 form) were entered between shipowning companies in the Sovcomflot group and charterer companies associated with Mr. Nikolai Nikitin.
- Each charterparty contained a “Law and Litigation” clause selecting English law and providing for arbitration (LMAA rules) as the dispute forum.
- The owners alleged the charterparties and related transactions were procured by bribery of senior Sovcomflot officers and purported to rescind the charters.
- The owners sued in the English courts seeking, among other relief, declarations that rescission for bribery was valid and pursuing related tort and restitutionary claims.
- The charterers applied to stay the court proceedings under § 9 of the Arbitration Act 1996 in favor of arbitration.
- The High Court refused a stay, accepting an arguable case that rescission for bribery impeached the entire contracts, including the arbitration clauses; the Court of Appeal reversed and granted a stay.
- The House of Lords heard the owners’ appeal from the Court of Appeal’s stay order.

## Issues

1. Whether a broadly worded arbitration clause covering disputes “arising out of” a charterparty includes a dispute alleging the charterparty was procured by bribery and rescinded.
2. Whether, under the separability principle in § 7 of the Arbitration Act 1996, an arbitration agreement remains effective when the main contract is alleged to be voidable or rescinded for bribery absent a direct challenge to the arbitration clause itself.
3. Whether the court proceedings should be stayed under § 9 so the arbitral tribunal decides the bribery/validity dispute.

## Decision

- The House of Lords unanimously dismissed the owners’ appeal and upheld the stay of court proceedings in favor of arbitration.
- The arbitration clauses were construed to encompass the bribery and rescission dispute as a dispute arising out of the parties’ contractual relationship.
- By separability under § 7, the arbitration agreements were treated as distinct from the main contracts and were not invalidated merely because the charterparties were alleged to have been procured by bribery or rescinded.
- Because a prima facie arbitration agreement covered the dispute, § 9 required a stay and the validity/rescission issues were to be determined in arbitration.

## Legal Principles

- Broad arbitration wording (e.g., disputes “arising out of” the contract) is presumed to capture disputes connected to the parties’ relationship, including allegations that the contract is voidable for bribery or has been rescinded.
- The separability doctrine means the arbitration agreement is a distinct agreement; invalidity or rescission of the main contract does not, without more, terminate the arbitration agreement.
- A challenge to arbitral jurisdiction based on contract invalidity generally belongs in arbitration unless the alleged vitiating conduct is directed specifically at the arbitration agreement itself.
- Where there is a prima facie arbitration agreement covering the dispute, the court should stay litigation in favor of arbitration under the statutory stay mechanism.

## Conclusion

The House of Lords required arbitration of the bribery and rescission dispute, holding that broad arbitration clauses presumptively allocate all disputes arising from the parties’ relationship to a single arbitral forum and that separability preserves the arbitration agreement despite allegations that the main contract is voidable or rescinded.


Premium Nafta Prods. Ltd. v. Fili Shipping Co. Ltd., [2007] UKHL 40 (UK 2007)