Agora: Thoughts on Fiona Trust: Separability and Construing Arbitration Clauses: the House of Lords' decision in Premium Nafta and the Fiona Trust

Abstract

In October 2007, the House of Lords removed the last major obstacle to the creation of a separability doctrine in England, the suggestion that an arbitration clause is not wide enough to include issues of the main contract’s validity and enforceability. In so doing, it eliminated an entire source of arguments about the interpretation of arbitration agreements in a way which seems likely to find acceptance on a broader international scale. As with most judgments on separability, there are other forces at work. The House of Lords is applying a change in the way English law interprets contracts generally to the construction of the arbitration clause. The emphasis is now on the context of the transaction and the search for what a reasonable person in the position of the contracting parties would have intended, rather than the words used. Lord Hoffman, who delivered the leading judgment, has also become something of a separability purist, going further than the French Cour de cassation and Swiss Tribunal fédéral in asserting that the question of whether the main contract was ever concluded is irrelevant. He is clearly bent on bringing to an end 398 years of English case law discussion on the nature of arbitration clauses, a debate similarly reflected in other countries.