Court of Appeal
Published December 1, 2008
City of London v Sancheti
Before Lord Justice Laws, Lord Justice Richards and Lord Justice Lawrence Collins
Judgment November 21, 2008

A stay of an arbitration could be obtained only against a party to that arbitration agreement or a person claiming through such a party; a legal or commercial connection was not sufficient.

The Court of Appeal so held in a reserved judgment in granting permission to, but dismissing the appeal of the defendant, Anchok Sancheti, an Indian solicitor practising in London, against the dismissal by Judge Knight, QC, at Central London County Court on February 12, 2008, of his appeal from the refusal by District Judge Mathias on January 5, 2007 of his application for a stay under section 9 of the Arbitration Act 1996, in proceedings brought by the claimant landlord, the City of London, concerning outstanding rent. Mr Sudhanshu Swaroop for Mr Sancheti; Mr Oliver Radley-Gardner for the City of London.

LORD JUSTICE LAWRENCE COLLINS said that the case concerned the relationship between parties under a bilateral investment treaty and national court proceedings, and, in particular, whether Roussel-Uclaf v GD Searle and Co Ltd ([1978] 1 Lloyd’s Rep 225) was correctly decided.

On January 6, 1995, the United Kingdom-India bilateral investment treaty came into force, providing for international arbitration failing amicable settlement or international conciliation.

After a landlord-tenant dispute, a surveyor appointed by the Royal Institute of Chartered Surveyors determined the rent increase. The landlord sought to recover the balance of the revised rent from Mr Sancheti, who refused to pay and served a notice of dispute under the bilateral treaty on the Treasury Solicitor.

The City of London commenced proceedings claiming £20,144.85 allegedly due. The defendant relied on Roussel-Uclaf in which a subsidiary of a party to an arbitration was held entitled to a stay because of the agreement with its parent company.

Here, the defendant sought a stay of proceedings brought against him by the claimant and thereby sought to impose upon the claimant the burden of an international arbitration to which it was not a party.

But even without such a distinction his Lordship did not consider that Roussel-Uclaf assisted the defendant. In his Lordship’s judgment, it was wrongly decided on that point and should not be followed.

A stay under section 9 could be obtained only against a party to an arbitration agreement or a person claiming through or under such a party and a mere legal or commercial connection was not sufficient.

In the present case, the claimant was not a party to the international arbitration agreement. The relevant party was the United Kingdom Government.

The fact that in certain circumstances a state might be responsible under international law for the acts of one of its local authorities, or might have to take steps to redress wrongs committed by one of them, did not make that local authority a party to the dispute.

Lord Justice Laws and Lord Justice Richards agreed. Solicitors: Morgan Walker; Mrs C. Lawson.

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