This shipping case is now the most cited English authority on how arbitration clauses are construed. The owners claimed their charterparties had been procured by bribery, rescinded them, and argued that the arbitration clause fell with them. The House of Lords disagreed.
Case details
- Case: Fiona Trust & Holding Corporation v Privalov [2007] UKHL 40 (also reported as Premium Nafta Products Ltd v Fili Shipping Co Ltd)
- Court: House of Lords
- Date: 17 October 2007
- Earlier stage: Court of Appeal, 24 January 2007 ([2007] EWCA Civ 20)
- Contracts: eight charterparties on the Shelltime 4 form
- Statute: Arbitration Act 1996 s.7 (separability)
The ruling in one sentence: an arbitration clause is construed broadly to cover all disputes arising out of the parties’ relationship unless the wording clearly excludes some, and an allegation that the main contract was procured by bribery does not take the dispute away from the arbitrators unless it is directed at the arbitration agreement itself.
What was the dispute?
Companies in a shipping group chartered eight tankers on the Shelltime 4 form. The owners later alleged that the charters had been procured by bribery, purported to rescind them and asked the court to decide the dispute. The charterers argued that the dispute, including the validity of the rescission, belonged in arbitration. The clause referred to disputes “arising under this charter”.
Key passages
“In my opinion, the construction of an arbitration clause should start from the assumption that the parties, as rational businessmen, are likely to have intended any dispute arising out of the relationship into which they have entered or purported to enter to be decided by the same tribunal. The clause should be construed in accordance with this presumption unless the language makes it clear that certain questions were intended to be excluded from the arbitrator’s jurisdiction.”
Lord Hoffmann, para. 13
“The principle of separability enacted in section 7 means that the invalidity or rescission of the main contract does not necessarily entail the invalidity or rescission of the arbitration agreement. The arbitration agreement must be treated as a ‘distinct agreement’ and can be void or voidable only on grounds which relate directly to the arbitration agreement.”
Lord Hoffmann, para. 17
Lord Hope added: “if the parties have confidence in their chosen jurisdiction for one purpose, why should they not have confidence in it for the other?” (para. 28). The fine distinctions earlier cases drew between wordings such as “arising under” and “arising out of” were no longer decisive.
Why it matters
- The one-stop presumption: English courts read arbitration and jurisdiction clauses so as to avoid fragmenting disputes. Tort, pre-contractual and competition claims often fall within them.
- Allegations of fraud or bribery are not enough: a party wishing to avoid arbitration must show a defect affecting the arbitration agreement itself, such as never having agreed to it or a forged signature.
- Careful drafting: parties who want to carve out certain disputes must say so clearly. Projects built on several contracts with different dispute clauses raise their own questions.
The view from Türkiye
Turkish law states the separability principle expressly. Under the last paragraph of Article 4 of Türkiye’s International Arbitration Law (Law No. 4686), no objection may be raised against an arbitration agreement on the ground that the main contract is invalid or that the arbitration agreement concerns a dispute that has not yet arisen. This matches the separability approach in Fiona Trust. On scope, the wording of the clause and the contract as a whole decide; in charterparties, freight and shipbuilding contracts involving parties from Türkiye, spelling out the scope reduces later argument.
Frequently asked questions
I say the contract was procured by fraud. Must I still arbitrate? Under Fiona Trust, if the allegation is directed at the main contract, the arbitrators decide it. To stay out of arbitration the allegation must impeach the arbitration agreement itself.
The clause says “arising under this contract”. Does it cover a tort claim? In English law after Fiona Trust, generally yes, because courts read the scope broadly. The result can still depend on the exact wording and the law governing the clause.
For general information only; not legal advice. Sources: Fiona Trust & Holding Corporation v Privalov [2007] UKHL 40, paragraphs 13, 17 and 28 as set out in later English judgments ([2015] EWCA Civ 437, [2022] EWCA Civ 1555, [2020] EWHC 772 (Comm); caselaw.nationalarchives.gov.uk); [2007] EWCA Civ 20; Arbitration Act 1996 s.7; Law No. 4686 on International Arbitration, Art. 4; case summaries in published legal commentary.