“Ad hoc arbitration and an institutional arbitration under the ICC Rules are fundamentally different beasts, and indeed have fundamentally different contractual consequences.”, according to English courts.
Facts: The dispute arose under a subcontract relating to a major petrochemical project in Saudi Arabia. The contract documentation was layered, consisting of a top-level Purchase Order, a Deviation List, and a set of General Conditions. The Purchase Order, which ranked highest under an order-of-precedence clause, provided for ad hoc arbitration in London under English law. The General Conditions, by contrast, contained an ICC arbitration clause with a seat in Riyadh.
Petroleum Chemicals and Mining Co Ltd (PCMC) commenced arbitration against Tecnicas Reunidas Saudia for Services & Contracting Co Ltd(Tecnicas) under the ICC Rules, seated in London. Tecnicas, in turn, appointed an arbitrator but expressly reserved its jurisdictional objection, arguing that the ICC clause contained in the General Conditions had been overridden by the Purchase Order. The tribunal upheld jurisdiction and issued a partial award. Tecnicas challenged the award in the High Court under section 67 of the Arbitration Act 1996.
Held: Mr Justice Bryan upheld the challenge and set aside the tribunal’s award in full. He held that the contractual hierarchy was decisive: “On the proper construction of the contract, the arbitration clause in the Purchase Order prevails. The agreement was for ad hoc arbitration in London. The parties never consented to arbitration under the ICC Rules. It follows that the Tribunal had, and has, no jurisdiction.”
The judge rejected PCMC’s contention that Tecnicas had waived its right to object by participating in the arbitration. He emphasised that nominating an arbitrator did not extinguish a party’s statutory right to challenge jurisdiction: “It would be contrary to the ethos of the Arbitration Act to hold that a party loses its jurisdictional objection merely by appointing an arbitrator. Section 31(1) expressly preserves the right to object, provided it is raised in a timely manner, as Tecnicas did here.”
What the parties agreed in the Purchase Order, in terms of governing law was English law (not Saudi Arabian law); what the parties agreed in the Purchase Order in terms of seat was London (not Riyadh); and what the parties agreed in the Purchase Order was an ad hoc arbitration not an institutional arbitration under ICC Rules. The provision as to an institutional arbitration administered by the ICC in accordance with the ICC Rules is simply inconsistent with the provision of an ad hoc nature of the arbitration agreed in the Purchase Order. According to the judge, “the reality is that ad hoc arbitration and an institutional arbitration under the ICC Rules are fundamentally different beasts, and indeed have fundamentally different contractual consequences.”
It was thus found that the arbitration agreement “is that as agreed, and agreed only, in the Purchase Order.” Accordingly, the court set aside the ICC tribunal’s award. The judgment underscores the English courts’ readiness to intervene in exceptional circumstances where tribunals exceed their jurisdiction, while reaffirming that participation in proceedings does not bar jurisdictional objections when properly reserved.
Tecnicas Reunidas Saudia for Services & Contracting Co Ltd v Petroleum Chemicals and Mining Co Ltd [2025] EWHC 1785 (Comm)
