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	England and Wales High Court (Commercial Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Dubai Islamic Bank Pjsc v Paymentech Merchant Services Incorporated [2000] EWHC 228 (Comm) (27 October 2000) URL: http://www.bailii.org/ew/cases/EWHC/Comm/2000/228.html Cite as: [2000] EWHC 228 (Comm), [2001] 1 LLR 65

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IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT

		27 October 2000

1. This case raises two new and interesting points concerning the application of the Arbitration Act 1996 ("the Act"). The first question is: how should the court apply section 3 when determining what is the "juridical seat of the arbitration", if neither the parties to the arbitration agreement nor any arbitral or other institutions have designated the "seat" of the arbitration? In particular the question arises: is there a particular point in time during the arbitral process at which the court should consider "all the relevant circumstances" in order to determine the "juridical seat of the arbitration"? If I conclude that the "seat" of the arbitration is England, then the second question is: how should the court approach an application for an extension of time in which to make an application for permission to appeal an arbitration award, under section 80(5)?
2. In form these questions arise upon the application of the Respondent dated 3 May 2000, made pursuant to the CPR Part 11, to set aside orders made by Rix J (as he then was) on 31 January 2000. Rix J had granted permission to the Applicant to serve an Arbitration Claim form out of the jurisdiction on the Respondent in the USA. The Arbitration Claim form, which was issued on 24 January 2000, had sought the following relief:

(1) an order for an extension of time, under section 80(5) of the Act, in which to make applications concerning an Arbitration Award made in about November 1999 by the VISA Board of Directors and notified to the Applicant on 29 November 1999;

(2) an order setting aside the Award under section 67 of the Act;

(3) an order under section 68 of the Act setting aside the Award alternatively remitting it for reconsideration;

(4) permission to appeal the Award under section 69 of the Act;

(5) an order under section 69 of the Act setting aside the Award alternatively remitting the Award to reconsideration; alternatively varying the Award.

3. The grounds for the Respondent's application are:

(1) that the Court does not have or should not exercise jurisdiction to hear or determine the Applicant's Arbitration Application; alternatively

(2) if the Court determines that it has jurisdiction and should exercise it then no extension of time should be granted to enable the Application to bring its Applications as the Applicant has given no good reason for its delay and the Respondent would be prejudiced if the extension of time were to be granted.

The Factual Background

4. The Applicant ("the Bank") is a Public Joint Stock Company whose business is and was that of Islamic banking. Its business is conducted from premises in Dubai and in the United Arab Emirates ("the UAE"). It is licensed to conduct banking in accordance with the banking laws of the UAE. The Bank operated a payment card scheme pursuant to a written agreement between Visa International Service Association ("VISA") and the Bank which was concluded in England on 13 December 1990. That agreement incorporated by reference the by-laws and operating regulations of VISA which were then in force or might come into force from time to time.
5. The Respondent ("Paymentech") is also a member of VISA. Paymentech's business is that of credit card payment processing, which includes payments made pursuant to the VISA credit card system. Paymentech is based in Texas, USA. It is an "Acquirer", which means that it can "sign" a merchant and process a merchant's VISA card transaction through the VISA system.
6. The way in which VISA credit card transactions are processed is as follows. The merchant (who is selling the goods or services which the customer wants to pay for by VISA card) seeks authority to complete the transaction from the Card Issuer. In this case the Card Issuer was the Bank. This permission has to be sought by the merchant through an Acquirer. In this case the Acquirer was Paymentech. The Acquirer has to seek authority from the VISA authorisation centre for the region in which the Acquirer is located. In the case of Paymentech, which is located in Texas, the relevant VISA authorisation centre is in California, USA. Once the Acquirer has obtained authority from the VISA authorisation centre (in this case in California), the authorisation centre has to seek approval from the corresponding VISA authorisation centre in the area in which the Card Issuer (in this case the Bank) is based. For the Bank the relevant region is Central Europe, Africa and the Middle East. The VISA centre for this region is in Basingstoke, Hampshire, UK. The last stage of the process is that the VISA authorisation centre for the Card Issuer's region (in this case Basingstoke) has to obtain authority from the Card Issuer itself, i.e. in this case the Bank.
7. Once a payment by VISA card has been authorised then the Card Issuer's account with VISA is debited with the sum for the transaction. Then the sum is credited to the merchant through the chain I have described.
8. If there is a dispute about a particular transaction then a process called "Chargeback and Representment" is instigated. Thus if a Card Issuer challenges a transaction after it has had its account with VISA debited by the Acquirer, then the Card Issuer charges the relevant transaction back to the Acquirer through the VISA electronic processing system. If the Acquirer does not accept the Chargeback, then it makes a "Representment". If that is not accepted by the Card Issuer, then the Issuer will make a second Chargeback to the Acquirer. If the Acquirer is still not satisfied then it may initiate an arbitration procedure to resolve the dispute.
9. The VISA International Regulations set out the system for resolving disputes between Card Issuers and Acquirers at Chapter 7.7 of Volume 1. The arbitration procedure may be requested if a dispute between Members of the Visa International Service Association as to a Chargeback or Representment cannot be resolved by other means provided by the Regulations.^_ There are two tiers of arbitration. At the first tier arbitrations are conducted by the VISA International Arbitration Committee. At the second tier, which is an appellate level that only operates in limited circumstances, the arbitrations are conducted by VISA's International Board of Directors.
10. Chapter 7 Part 7 of the VISA Regulations sets out the arbitration procedure to be applied if there is a disputed Chargeback or Representment. There are no provisions indicating (expressly or impliedly) what law governs the arbitration provisions in the Regulations or the arbitral procedure itself. Indeed there is no proper law provision in the Regulations at all. There is no specific reference to either the "seat" or the place of any arbitration under the Regulations.
11. The Regulations provide for three stages to any arbitration process.

(1) Stage One is a "Pre – Arbitration" process.^_ At this point the two Members of VISA who have a dispute should attempt to resolve it between themselves by correspondence. Only if this procedure fails can the Member who seeks to challenge the Chargeback or Representment move on to the Arbitration stage.

(2) Stage Two is the Arbitration Process.^3_ The Regulation sets out what are "allowable reasons for arbitration". It also details "Filing Procedures". In a case such as this which involves two VISA members that are of different Regions, the "Requesting Member" must file its Arbitration Request with the Filing Authority.⁴ In this case that Authority will be VISA in California. Arbitration documentation has to be sent to the VISA International Arbitration/Compliance Committee in California.⁵ If the Request is held to be valid, then VISA will notify both the Requesting Member and the opposing Member and will forward a copy of the case to the opposing Member.⁶ The opposing Member is entitled to forward any additional information or substantiating documentation to VISA and the Requesting Member.⁷ The Arbitration Committee will use all available information in making its decision. It will notify the Members of its decision.⁸

(3) Stage Three is the Appeal process. This is available in respect of disputed amounts of over US$ 100,000, but only if the Member wishing to appeal can provide new evidence. Then the matter will be deal with by the VISA International Board, acting as the Appeal Authority.^_ The changes to the VISA Regulations made on 15 May 1998 state that all appeals must be accompanied by new evidence. Further, it provides that International Board appeals will be submitted to the Arbitration/Compliance Committee for consideration prior to Board review.

12. In 1997/8 a large scale fraud was perpetrated on the Bank by its chief executive officer with the assistance of other personnel in the Bank. One of the people allegedly involved in the fraud (but not a Bank employee) was Mr Foutanga Babadi Sissoko. He held a VISA card that had been issued by the Bank.
13. Between November 1997 and January 1998 Sissoko's VISA card was used for 18 purchases of jewellery at Mayor's Fine Jewellers in Miami, Florida, USA. The total involved in the 18 transactions was US$1,064,000. The Banks says that the misuse of the VISA credit card was such that Mayor's accounts department and/or its vice president at the time (Mr Leon Benzrihem) must have colluded with Mr Sissoko to misuse the VISA card. The Bank says that ultimately this meant that the Bank was defrauded because Dubai's account with VISA was debited with the amount of the transactions.
14. The Bank challenged its liability to pay the sum of US$1,064,000, using the Chargeback and Representment procedure laid down in the VISA Regulation. The matter was not resolved by correspondence between the Bank and Paymentech. The Bank insisted on making Chargebacks, but Paymentech would not accept them. Therefore two disputes (together comprising all the 18 transactions) were referred by Paymentech to the VISA arbitration process in August/September 1998.
15. The arbitration procedure before the VISA International Arbitration Committee ("the VIAC") was conducted entirely on paper. The Bank answered various questions put to it by the VIAC. On 16 and 17 March 1999 the VIAC issued two awards that were in Paymentech's favour. The VIAC held that there was no evidence of any collusion between Mayor's employees and Mr Sissoko to defraud the Bank. It also held that one of the Bank's reasons for denying liability for the credit card debts, was an invalid reason for refusing to honour the debit of the Bank's VISA account because the Bank had failed to support the Chargeback with the required documentation. Accordingly Paymentech's account was credited with the sum in dispute.^_
16. In May 1999 the Bank appealed to the VISA International Board of Directors. The Bank submitted a series of lengthy written submissions through its lawyers. For the present there is no need to consider those. There was no oral hearing before the International Board of Directors. It is agreed that the matter was heard at an International Board meeting that took place in London on 8 November 1999. The appeals were Item No 11 on the agenda.
17. No formal Awards were produced by the Board. Instead, after the Board meeting the Assistant Secretary to the Board advised Miss Kris Misfeldt, the Director of VISA International Arbitration and Compliance, of the Board's unanimous decision. The Board decided to dismiss the appeals and upheld the VIAC's Awards.
18. On 15 November 1999 Miss Misfeldt wrote to the Bank (from an office in San Francisco, California, USA), informing it of the International Board's decision. The letter first sets out the reasons why the VIAC had reached its decision against the Bank. The letter then states that (in accordance with the appeal procedure) the Arbitration Committee had considered further information that had been submitted by the Bank at the appeal stage, before the matter was reviewed by the Board. The Arbitration Committee had concluded that this further information did not conclusively demonstrate:

"a purposeful attempt by the merchant to defraud the Issuer and did not meet Visa's traditional view of merchant collusion, such as counterfeit card schemes intended to defraud the broader Visa payment system".

The letter then stated that the International Board of Directors had agreed with this view. The letter continued:

"As all permissible actions with the Visa Arbitration process have been exhausted, Visa International now considers the matter closed. The Issuer will retain responsibility for all transactions and case processing fees associated with the above referenced cases".

19. This letter was received by Jonathan Rosenn of Fine & Associates, the Florida lawyers acting for the Bank, on 29 November 1999. The parties agreed that this constitutes the date when the Bank was notified of the result of the "arbitral process of appeal or review" for the purposes of section 70(3) of the Act. Therefore the Bank had 28 days from 29 November 1999 in which to make any applications to the Court under the 1996 Act, assuming that the Court has jurisdiction to entertain those applications. The 28 day period would thus expire on 27 December 1999.
20. The Bank received a copy of Miss Misfeldt's letter on 6 December 1999. On 2 December 1999 Mr A R Ellison, a banker and consultant to the Bank, had requested Mr Rosenn (by telephone) to inquire of VISA where the International Board of VISA sat when it made its decision. Mr Rosenn was told by Miss Misfeldt that it was in London.
21. Mr Ellison was in the USA on the Bank's business between 14 and 24 December 1999. On 17 December he instructed Mr Rosenn to send the relevant papers to Clyde & Co in Dubai. The documents arrived at Clyde's offices in Dubai on 19 December 1999. Further documents, including the five volumes of VISA's Regulations, arrived at Clyde's Dubai office on 27 December. Mr Ellison's travel and business commitments prevented him from giving any comprehensive instructions to Clyde until his return to Dubai on 29 December 1999.
22. Thereafter Clyde & Co faxed instructions to Counsel on 30 December 1999. Counsel gave preliminary advice the following day by fax. Three lever arch files of documents were sent to Counsel on 4 January 2000, but they only arrived on the afternoon of 6 January 2000. Thereafter final drafts of the application and supporting evidence were delivered to Clyde & Co Dubai on 15 January. The papers were then delivered by Clyde & Co Dubai to Clyde & Co London on 19 January for issue of the Arbitration Applications, with supporting evidence in draft. Mr Ellison's witness statement in support of the application was signed in Dubai on 22 January and the Application was issued on 24 January 2000.
23. The Bank alleges that the appeal arbitration was defective in a number of respects. It says there were serious irregularities within the terms of section 68 of the Act. The Bank also alleges that the appeal decision was seriously flawed as a mater of law so that it should have permission to appeal under section 69 of the Act. The Bank also says that the arbitrators misconstrued their jurisdiction, so it wishes to challenge the appeal "award" under section 67 of the Act.
24. Whether the Bank can pursue these applications depends on the first question for consideration. That is: for the purposes of sections 2 and 3 of the 1996 Act, is the "seat of the arbitration" in England and Wales?

Question One: Jurisdiction – where is the "seat" of these arbitrations?^_

25. As noted above, the Bank wishes to make applications under sections 67, 68 and 69 of the Act. Those sections appear in Part One of the Act. They concern, respectively, challenges to the substantive jurisdiction of the arbitral tribunal (section 67); challenges to an award on the grounds of serious irregularity (section 68); and appeals from an award on a point of law (section 69). But section 2(1) of the Act states that the provisions of Part One of the Act apply to an arbitration where "the seat of arbitration is in England and Wales or Northern Ireland". Both parties agree that the Court has no jurisdiction to hear or determine the Bank's applications under sections 67 to 69 unless the Court is satisfied that the seat of the arbitrations is in England and Wales.
26. That conclusion is reached this way:

(1) under paragraph 8.1 of the Arbitration Practice Direction, if the arbitration claim form seeks to challenge or appeal an award (as the Bank wishes to do in this case), the Court may only give permission to serve an arbitration claim form out of the jurisdiction if the award was made in England and Wales.

(2) By section 53 of the Act:

"Unless otherwise agreed by the parties, where the seat of the arbitration is in England and Wales…any award in the proceedings shall be treated as made there, regardless of where it was signed, despatched or delivered to any of the parties".

In this case it is agreed that there was no particular agreement by the parties as to the place where the relevant awards were made.

(3) Therefore the English court can only consider the Bank's application if the Bank establishes that the seat of the arbitrations was in England, so that (under section 53) the awards will be treated as having been made in England.

27. Section 3 of the Act provides:

"In this Part "the seat of the arbitration" means the juridical seat of the arbitration designated-

(a) by the parties to the arbitration agreement, or

(b) by an arbitral or other institution or person vested by the parties with powers in that regard, or

(c) by the arbitral tribunal if so authorised by the parties,

or determined, in the absence of any such designation, having regard to the parties' agreement and all the relevant circumstances".

28. It is accepted that none of the circumstances set out in (a), (b) or (c) of section 3 apply in this case. In particular it is agreed that there is nothing in the arbitration provisions of the VISA Regulations that identifies the seat of any arbitration conducted under the Regulations. Indeed, as I have noted already, there is nothing to indicate what might be the procedural law of any arbitration conducted under the Regulations. Therefore it is for the Court to determine the seat of the arbitration "having regard to the parties' agreement and all the relevant circumstances". It is agreed that there is no direct authority on the meaning or application of this particular wording in section 3.

The Submissions of the parties on Question One

29. Paymentech's submissions

Mr Newick for Paymentech submitted as follows:

(1) The "seat" of the arbitration is its "juridical seat" as opposed to the physical place where the proceedings generally or particular hearings occur. The "seat" is the central point of the arbitration or its centre of gravity, viewed overall.

(2) The Court is entitled to look at the arbitration agreement of the parties and the conduct of the reference from the beginning to the end as part of "all the relevant circumstances" within section 3.

(3) The Court must reach an objective view of where the "seat" of the particular arbitration is located. There is no question of exercising a "discretion". It was accepted that once the "seat" of an arbitration has been identified with a particular place, then it cannot move thereafter.

(4) Although the VISA Regulations make no specific reference to a "seat", place or governing law of arbitrations under Chapter 7.7, the centre of gravity of any arbitrations under those provisions is clearly at the VISA headquarters in California. That is where the Request for Arbitration must be filed and the arbitration documentation must be sent in accordance with the VISA Regulations, Chapter 7.7. VISA headquarters will notify the Members of the process and the Arbitration Committee's decision.

(5) The conduct of this reference, which concerned an "inter-regional" dispute between a Card Issuer in one of VISA's global regions and an Acquirer in another, makes it clear that the "seat" of the arbitration is California, not England. In particular in relation to the appeal procedure:

(a) the notification of appeal was sent by the Bank to VISA in California;

(b) the lengthy submissions of the Bank were sent by its lawyers, Fine & Associates, to VISA in California;

(c) Paymentech's responses were sent to VISA in California;

(d) the procedure on appeal is dealt with by VISA's Director of Arbitration and Compliance, Miss Misfeldt, who is based in California;

(e) the appeal has to be dealt with by the International Board as part of the agenda for one of its four – monthly meetings. The location of the Board meeting at which the appeal is heard will be adventitious. In fact it was London;

(f) the decision of the International Board on the appeal was notified to the parties from VISA in California.

(6) There are only three factors pointing to England as the "seat" of the arbitration. The first is that the Bank's membership agreement with VISA was concluded in England. The second is that the Bank dealt operationally with VISA in England (through the centre at Basingstoke). The third is that the decision of the International Board was made in London. But the first two are irrelevant because they do not concern the arbitration process at all. The last is overborne by all the other connections with California.

30. The Bank's Submissions

Mr Veeder QC for the Bank submitted:

(1) The task of the Court under section 3 is to make an objective determination of the "seat". The parties' intention (in the absence of an express choice of "seat") is irrelevant.

(2) The Court can take all factors into account in deciding the location of the seat.

(3) In a case involving transnational trade and services such as this one, the location of the seat of the arbitration can (and frequently will) be different from the country whose law governs either the substantive contract or the law governing the parties' arbitration agreement. The distinction is well established in English law: Naviera Amazonica Peruana SA v Compania Internacional de Seguros del Peru ("the Peru case") [1988] 1 Lloyd's Rep 116.^_

(4) The relevant arbitration is the appeal process.

(5) The key factor here that makes England the seat of the appeal arbitration is that the appeal was held, heard and determined by the appellate tribunal (the International Board of VISA) in London. There are no countervailing factors that make California the seat.

(6) Other factors point to England being the seat. In particular:

(a) the contract between the Bank and VISA was concluded by correspondence between Dubai and London;

(b) the Bank's contact points for VISA was London or Basingstoke, Hampshire;

(c) VISA's business registration in Dubai is consistent with the view that the Bank was dealing with a UK entity.^_

(7) The fact that all correspondence concerning the arbitration was routed through the administrative centre of VISA in California is not a strong factor. All ICC arbitrations are organised through Paris; it does not make France the seat of all ICC arbitrations in the absence of any other choice of seat.

Question One: Analysis

31. Although English courts were familiar with the concept of the "seat" of an arbitration before the 1996 Act was passed,^_ the use of the concept in an English statute concerning arbitration is new. It is clear from section 2(1) of the Act that the concept is used in order to define which arbitrations will be subject to the statutory regime in Part One of the 1996 Act.^_ Part One of the Act gives the English Court important powers in relation to arbitration proceedings which will be exercisable at different stages of an arbitration. Therefore, in general, only those arbitrations that have their "seat" in England and Wales should be subject to the exercise of the Court's powers in Part One of the Act. The Act uses the concept of the "seat" as the test for the exercise of Part One powers rather than the choice of procedural law made by the parties in their arbitration agreement. This seems clear from the wording of section 4(4) and (5) of the Act. Section 4(1) and (2) stipulate that there will be "mandatory" and "non-mandatory" provisions in Part One. The Part One regime applies "whether or not the law applicable to the parties' agreement is the law of England and Wales or, as the case may be, Northern Ireland".^_ But if the parties have chosen another procedural law for the arbitration or particular aspects of it, then, in relation to non-mandatory provisions in Part One, the effect will be as if the parties had made a specific agreement dealing with those matters.^_
32. Section 3 states that "the seat of the arbitration means the juridical seat of the arbitration". It is clear that "seat" is intended to refer to some state or territory; hence the reference to "the seat of the arbitration [being] in England and Wales" in section 2(1) of the Act. I think that the location contemplated is a particular state or territory which is associated with a recognisable and distinct system of law. So the "juridical seat of the arbitration" means the state or territory where, for legal purposes, "the arbitration" is to be regarded as situated.
33. In this regard it should be recalled that, on an English law analysis, there are two sets of contractual relations which govern the arbitration of disputes under a substantive contract.^_ First there is the contract to submit future disputes to arbitration. That contract will arise at the same time as the substantive contract itself. Secondly there will be:

"one or more individual sets of bilateral contractual obligations that are called into existence as and when one party asserts against the other a claim falling within the scope of the initial promise to arbitrate, which [the parties] have not been able to settle".^_

34. The powers of the English Court which are set out in Part One of the 1996 Act concern both these sets of contractual relations. Thus for example the power to stay proceedings under section 9 must relate to the contract to submit future disputes to arbitration. This is because (of necessity) one party has not followed the contractually agreed dispute resolution procedure and has failed to enter into the further bilateral contractual obligations that the parties intended should arise when a claim is asserted and disputed. By contrast the power of the Court to remove an arbitrator under section 24 must operate in relation to the individual bilateral contractual obligations that are created in the circumstances quoted above.
35. Furthermore the powers conferred on the Court by Part One in relation to individual agreements to arbitrate are exercisable at different stages in the arbitral process. The power to appoint an arbitrator (section 18) will arise usually at the start of the process. The power to remove an arbitrator (section 24) could be exercised at any stage up to and even after an Award. Self evidently the powers of the Court in relation to Awards (sections 66-70) will only be exercisable at the end of the arbitration process.
36. I draw attention to these factors only to emphasise the point that the issue of whether an English Court can exercise these various powers depends (with exceptions)^_ on the answer to the threshold question of whether, in accordance with sections 2 and 3, the "seat" of "the arbitration" is England and Wales?
37. To my mind that question begs three more questions in this case. First: what arbitration is being referred to in section 3? Secondly, at what stage in the relevant arbitral process does the Court have to examine "the parties' agreement and all the relevant circumstances" in order to determine the "seat of the arbitration" for the purposes of section 3? Thirdly, whether or not the "seat" has to be established as at an early stage in the arbitral process, is the Court entitled to take into account circumstances at a later stage in the arbitral process in determining the location of the "seat" of the arbitration?
38. These questions are all directly relevant in the present case. The key circumstance that the Bank relies on is that the actual appeal hearing by the International Board took place at the Board meeting in London on 8 November 1999. The only other "English connections" that the Bank can rely on really have nothing to do with the individual appeal arbitration at all. First, there is the English connection concerning the original agreement between the Bank and VISA. Secondly, there is the fact that the point of contact generally between the Bank and VISA was the VISA centre at Basingstoke. Thirdly, there is the point that, at the start of the payment procedure, the Bank as Issuer would have received a request for authorisation from Basingstoke and (if it had been given) it would have gone to Basingstoke.
39. In my view the answer to the first of the three "sub-questions": "which arbitration is being referred to" must be: the individual arbitration with which the case is particularly concerned. (It might even be a putative arbitration reference, if the parties have got no further than the continuous agreement to arbitrate future disputes). In this case the relevant arbitration is clearly the appeal arbitration. Mr Newick did not challenge the submission of Mr Veeder that the two arbitral processes were separate.^_ So I am concerned with discovering the "seat" of that individual appeal "arbitration".
40. The next question is: at what stage of the relevant arbitration does the Court have to examine "the parties' agreement and all the relevant circumstances" in order to determine the "seat of the arbitration". As I have already pointed out, the issue of the jurisdiction of the Court to exercise one of its Part One powers might arise at either an early or a late stage of the arbitral process. Thus if the issue arose when the Court was being invited to appoint an arbitrator under section 18, then there might be very much fewer "relevant circumstances" for the court to consider compared with a case when the issue arose after an award had been made.
41. Mr Newick accepted that once the "seat" has been determined for section 3 purposes, then it cannot move, unless the parties agree that it should or one of the mechanisms set out in section 3 is operated. I think that Mr Veeder's position was that a Court might come to a different view on the location of the "seat" of an arbitration, depending upon the point in the particular arbitral process at which the Court had to consider the matter.
42. In Union of India v McDonnel Douglas Corporatoin [1993] 2 Lloyd's Rep 48 at 50, which was a case before the 1996 Act, Saville J took the view that once the "seat" of the arbitration was fixed it could not move unless the parties agreed to change it. In a case under the 1996 Act, ABB Lummus Global Ltd v Keppel Fels Ltd [1999] 2 Lloyd's Rep 24 at 33, Clarke J said that he agreed with Saville J's view. He also said that this accorded with the thinking of the Report of the Departmental Committee on arbitration which produced the Arbitration Bill.^_ I respectfully agree with both judges.
43. However both sides submitted that I could take the whole history of the arbitral process into account as "relevant circumstances" when determining "the seat". They pointed to the speeches of the House of Lords in James Miller & Partners Ltd v Whitworth Street Estates (Manchester) Ltd [1970] AC 583.
44. The House had to decide whether a Scottish arbiter was obliged to state his Award in the now extinct form of a "Special Case" under section 21 of the Arbitration Act 1950. He would not be obliged to do so if the parties to the building contract had agreed that the procedural law of an individual reference of disputes to arbitration was Scots law, which did not provide for "Special Cases" to be stated. In reaching their decision their Lordships all considered the facts of the whole arbitral process from the appointment of the Scottish architect as arbiter until the moment when, towards the end of an 11 day arbitration hearing in Scotland, employing Scottish lawyers and procedure, one party suddenly asked for the Award to be stated in the English form of a "Special Case".
45. However there are two points to be made about the Whitworth Street Estates case. First, the House of Lords was not dealing with the issue of determination of the "seat" of the arbitration in the absence of agreement by the parties. In my view that is different from the issue of what the parties had agreed as the procedural law of an individual arbitration reference. Their Lordships considered the choice of law question by asking first: what proper law had been agreed for the substantive contract? Then they considered whether the same or a different law had been agreed for the arbitration procedure. The majority concluded that the substantive law of the contract was English law. All concluded that the procedural law chosen was Scots law.
46. Secondly, although as Megaw LJ pointed out in Armar Shipping Co Ltd v Caisse Algerienne D'Assurance et de Reassurance [1981] 1 WLR 207 at 215D-F,^_ "there must be a proper law – a governing law – at the time of the making of that contract", the House of Lords could obviously examine the parties' conduct after the individual agreement to arbitrate was concluded to see if the parties' presumed initial intention continued. The House of Lords had to deal with an argument that even if Scots law had been the procedural law first agreed, the parties, by their conduct, had changed it to English law. The House concluded that the parties' conduct throughout the reference indicated a continued choice of Scots law as the procedural law of the reference.
47. Therefore I think that the Whitworth Estates case does not help me very much on this issue.
48. My conclusion to the second sub-question is that if the Court has to determine the "juridical seat of the arbitration" in the circumstances set out in section 3, then it must do so at the point at which the relevant arbitration begins. In this case that point would be when the Bank invoked the appeal process in May 1999 and Paymentech submitted to it.
49. My reasons for this conclusion (which is effectively a point of statutory interpretation) are:

(1) Under English law an arbitration must always have a "seat". As the Departmental Advisory Committee on Arbitration Law Report on the Arbitration Bill commented:^_

"English law does not at present recognise the concept of an arbitration which has no seat and we do not recommend that it should do so".

This means that an arbitration must have a seat when the arbitration starts. In this case that must mean that a "seat" must exist when the appeal process started in May 1999.

(2) Once an arbitration starts and it has a "seat" then I cannot see how it can be changed, unless it is by one of the mechanisms envisaged in section 3. I agree with the analysis of Saville J in the Union of India case.^_ It would be contrary to the whole idea of a "juridical seat" that its location should somehow be peripatetic. The purpose of locating a "seat" of an arbitration under the 1996 Act is to identify a state or territory whose laws will (subject to exceptions) govern the arbitral process. If the "seat" could change from one point in the arbitral process to the next then the parties would never know whether the English Court could exercise its Part One powers.

(3) The procedural law regime of an arbitration surely cannot change capriciously from one point in the arbitral process to the next. The need for certainty, so as to be able to identify the applicable procedural law, is demonstrated by cases prior to the 1996 Act which emphasised that the juridical seat (and hence the procedural law applicable) was not necessarily equivalent to the place where the arbitrators met or hearings took place or the Award was signed.^_ Therefore I think that Mr Newick was correct to submit that, if the particular mechanisms identified in section 3 are not used, then once a "seat" ahs been identified, it cannot move.

50. If this conclusion is correct, then I have to examine the "agreement of the parties and all the relevant circumstances" as at May 1999. The reference to the "parties' agreement" means, I think, the agreement that contains the original contract to submit disputes to arbitration. That would be consistent with the definition of "the arbitration agreement" and "the agreement" in section 5. The phrase "the parties' agreement" cannot mean "what the parties have agreed in relation to the seat of the arbitration" because that is the very point dealt with in section 3(a).
51. If this is correct, then "the parties' agreement" here must mean the VISA Regulations. They contain the agreement to submit disputes to the VISA arbitration process and the arbitration appeal process.
52. I take the phrase "all the relevant circumstances" to mean just that. The phrase must mean that a Court has to have regard to any connections with one or more particular countries that can be identified in relation to (i) the parties; (ii) the dispute which will be the subject of the arbitration; (iii) the proposed procedures in the arbitration, including (if known) the place of interlocutory and final hearings; (iv) the issue of the Award or Awards.
53. If I consider those matters then it is clear that the "seat" of the appeal arbitration process is not in England, but is probably located in California. Thus:

(1) Paymentech is based in Texas. The Bank is based in Dubai. VISA is based in California.

(2) The VISA Regulations have no express proper law provisions either as to the substantive Regulations or as to the appeal arbitration process between Members.

(3) The VISA worldwide payment card scheme has its headquarters in California.

(4) The dispute arose out of transactions in Florida. Although the Bank had to grant authorisation for those transactions (as Issuer) through Basingstoke, Paymentech had to deal with its authorisation (as Acquirer) through California.

(5) The Regulations appear to contemplate that the appeal arbitral process will be handled through the VISA offices in California. Thus it is contemplated that notifications will be sent there; the process will be handled by the Arbitration and Compliance department in California. The merits will be considered by the Arbitration Committee which is based at VISA headquarters in California before being considered by the Board. It is contemplated that the Board will consider the merits of the appeal at a Board meeting which could be anywhere in the world.

(6) The Regulations appear to contemplate that notification of the result of the appeal process will be handled by VISA headquarters in California.

54. Is this conclusion on the "seat of the arbitration" altered if I am wrong on this analysis and I have to consider the third sub-question I have posed in paragraph 37 above? That is: what if the court should consider circumstances relating to all the subsequent stages in the arbitral process in order to determine the "seat" of the arbitration? In my view this cannot alter my conclusion that the "seat" of the appeal arbitration is not in England and is probably in California. The reasons for this conclusion are:

(1) the only additional factor pointing to England as the "seat" is that the International Board meeting at which the appeal of the Bank was heard took place in London. But the location of the Board meeting was adventitious. It was not contemplated by anyone, in the Bank, VISA or Paymentech, that the appeal would necessarily be heard in London.

(2) Nor was the fact that the hearing was in London of any particular significance. The preparatory administrative work for the appeal and the consideration by the Arbitration Committee were not done in London. They were done in California. After the decision of the International Board the parties were informed by Miss Misfeldt of the result by letter from the VISA office in California.

Question One: Conclusion

55. Therefore, on either approach, I have concluded that "the seat" of the appeal arbitration in this case was not in England and Wales. Accordingly the Court has no jurisdiction in this case to exercise the powers set out in sections 67 to 69 of Part One of the 1996 Act. Mr Veeder accepted that if he lost on this first question then it must follow that the Order of Rix J, permitting service out of the jurisdiction of the Arbitration Application Notice on Paymentech, must be set aside.

Question Two: extension of time for bringing Arbitration Applications

56. My conclusion on Question One makes this point academic. But I will indicate briefly why, if it had been relevant, I would have permitted an extension of time to the Bank.
57. By section 70(3) of the Act any application or appeal has to be brought within 28 days of the date when the applicant was notified of the result of the appeal process. It is agreed that the Bank's 28 days ran out on 27 December 1999. The Arbitration Applications were actually issued on 24 January 2000, i.e. Four weeks later.
58. Section 80(5) of the Act provides that:

"Where any provision of this Part requires an application or appeal to be made to the court within a specified time, the rules of court relating to the reckoning of periods, the extending or abridging of periods and the consequences of not taking a step within the period prescribed by the rules, apply in relation to that requirement".

Rules of Court have been made. The practicalities of seeking permission to make applications or appeal are now set out in the CPR Practice Directions – Arbitrations, Paragraph 22.3.

59. Paragraph 22.3 provides that if an applicant wishes to challenge an award under sections 67, 68 or 69, then:

"(1) The applicant must state in his arbitration claim form the grounds why an order extending time should be made and his affidavit or witness statement in support shall set out the evidence on which he relies".

60. The Bank's Arbitration Claim form sets out the grounds why an extension of time should be granted at paragraph 3. The important dates that I have referred to above are mentioned in the grounds.
61. It is agreed that the Court has to consider the same types of factors that would be relevant to an application to extend time under the CPR part 3.1. However the parties place different emphasis on particular factors.
62. Mr Veeder submits that the key question is whether the procedural default of the party needing the extension of time has resulted in such prejudice to the other party that cannot be met by costs or other orders. Mr Newick says that a party who applies for an extension of time must show three things: (i) a good reason for the delay; (ii) a good arguable case on the applications it wishes to make; and (iii) a lack of significant prejudice to the other party. He submits that none of those three tests is passed by the Bank in this case.
63. In my view the issue of whether there should be an extension of time is one for the Court's discretion in which it considers all factors, including the question of why there was a failure to comply with the time limits and the issue of prejudice. Even if I examine the application on the basis proposed by Mr Newick, I would be satisfied that the three tests were passed.
64. There were logistical difficulties facing the Bank and its advisers in December 1999. It is clear that the issue of a possible application to court was being considered before the 28 day period expired. Instructions were given to pass the papers to Clyde & Co in Dubai on 17 December. That was the most difficult time of the year. The reason why the application was not issued until 24 January 2000 is, in my view, adequately explained by the Bank's evidence.
65. Although Mr Newick asserted that the Bank would have "an uphill task" making good its applications challenging the Awards, he did not push that point hard. It seems to me that the challenges are arguable and that is enough for present purposes.
66. Mr Newick was not able to point to any prejudice that his clients might have suffered as a result of the delay in the Bank's applications. Paymentech has been credited with the amount of the transactions so it is not out of pocket. No other form of prejudice was suggested.

Conclusions

67. The "seat" of the two appeal arbitrations is not in England and Wales for the purposes of sections 2 and 3 of the Act. Accordingly the Court has no jurisdiction to exercise its powers under sections 67 to 69 of Part One of the Act in relation to those two appeal awards. Therefore I must set aside the permission of Rix J (made on 31 January 2000) granting the Bank permission to serve the Arbitration Applications on Paymentech.
68. If, contrary to this conclusion, I had found that the "seat" of the two appeal arbitrations was in England and Wales, I would have permitted an extension of time to the Bank to allow it to make the Arbitration Applications set out in the Application form dated 24 January 2000.
69. I am very grateful to Mr Newick and Mr Veeder for their helpful and succinct written and oral arguments in this case.

Note 1   Provision 7.7.A    [Back]

Note 2   This is dealt with by Chapter 7.7.B.    [Back]

Note 3   Dealt with by Chapter 7.7.C.    [Back]

Note 4   See Table 7 – 25: “Arbitration Appeal Rights”.    [Back]

Note 5   There may be an issue as to the precise amount credited, but it is not relevant to the present applications.    [Back]

Note 6   As I have noted, there were technically two disputes and so two arbitration processes. But both parties treated them as one for the purposes of argument. There was a different issue, which was whether the Court should be considering the process before the VIAC or only the International Board of Directors of VISA. I will deal with this below.    [Back]

Note 7   Mr Veeder relied particularly on the well-known passage of Kerr LJ’s judgment at page 119: “All contracts which provide for arbitration and contain a foreign element may involve three potentially relevant systems of law. (1) The law governing the substantive contract. (2) The law governing the agreement to arbitrate and the performance of that agreement. (3) The law governing the conduct of the arbitration. In the majority of cases all three will be the same. But (1) will often be different from (2) and (3). And occasionally, but rarely (2) may also differ from (3)”. This analysis followed that of Mustill J in Black Clawson International Ltd v Papierwerke Waldhord – Aschaffenburg AG [1981] 2 Lloyd’s Rep 446. The same analysis was used by Lord Mustill in Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] AC 334 at 357F.    [Back]

Note 8   See para 4 of Mr Ellison’s second witness statement: B 1/Tab 8 page 74    [Back]

Note 9   See, eg: The Peru case [1988] 1 Lloyd’s Rep 116; Union of India v McDonnel Douglas Corporation [1993] 2 Lloyd’s Rep 48; Sumitomo Heavy Industries v Oil & Natural Gas Commission [1994] 1 Lloyd’s Rep 45.    [Back]

Note 10   There are some refinements to this, which are unnecessary to consider for present purposes.    [Back]

Note 11   Section 4(4) of the Act.    [Back]

Note 12   Section 4(5) of the Act.    [Back]

Note 13   The analysis is made by Mustill J (as he then was) in the Black Clawson case [1981] 2 Lloyd’s Rep 446 at 455, following the speech of Lord Diplock in the House of Lords’ decision in Bremer Vulkan Schiffbau und Maschinenfabrik v South India Shipping Corporation Ltd [1981] AC 909 at 981 –2.    [Back]

Note 14   The Black Clawson case at page 455 per Mustill J.    [Back]

Note 15   The exceptions are dealt with in section 2(2), (3) and (4) of the Act.    [Back]

Note 16   Mr Newick was right not to do so. See eg: Getreide – Import Gesellschaft mbH v Contimar SA [1953] 1 Lloyd’s Rep 572 at 585 per Jenkins LJ.    [Back]

Note 17   See para 26 of the February 1996 Report commenting on what became section 3 of the Act.    [Back]

Note 18   Eveleigh and Oliver LJJ agreed: page 216.    [Back]

Note 19   See para 27, commenting on Clause 3, which became section 3.    [Back]

Note 20   [1993] 2 Lloyd’s Rep 48 at 50: see above.    [Back]

Note 21   See eg: the Peru case [1988] 1 Lloyd’s Rep 116 at 120 – 1; Hiscox v Outhwaite [1992] AC562 at 594A-C.    [Back]