Key takeaways
Arbitration clauses stand independent of main contract
Even if the main agreement is disputed, arbitration clauses remain enforceable.
Courts rarely grant anti-arbitration injunctions
Exceptional circumstances must be shown to halt arbitration proceedings.
Tribunal presumed to decide its own jurisdiction
Courts favour letting arbitrators rule on validity before intervening.
Orange Transgroup Ltd & another -v- Shein Distribution UK Ltd [2025] EWHC 2966 (KB)
This case provides a useful reminder that an arbitration agreement is separate to, and independent of, the underlying contract. In circumstances where it is alleged the main agreement is invalid or ineffective, there remains the presumption that the parties will be presumed to have intended the question of whether there was a concluded main agreement to be decided in arbitration.
Where one party alleges that it never agreed or entered into the arbitration agreement, then the Court may consider whether it should determine the validity of the arbitration agreement itself or refer it to the arbitral tribunal for a ruling on its own jurisdiction. This is an acutely fact-sensitive evaluation and depends on factors such as the state of the evidence and the progress of proceedings in the respective fora.
The background facts
The two claimants are Orange Transgroup Ltd (Orange) and IT Way Transgroup Clearance LLP (IT Way). Orange provides customs clearance, warehousing and forwarding services for retailers importing goods into the UK. IT Way has the same registered office as Orange and performs customs clearance on behalf of Orange. The defendant, Shein Distribution UK Ltd (Shein), is a Chinese life brand and e-retailer.
Shein contended that, in October 2021, it entered into a written services agreement (SA) with Orange for the performance of customs clearance, warehousing and forwarding services for Shein goods imported into the UK. The SA contained an arbitration clause providing for ICC arbitration. The SA appeared to be signed by an individual, referred to in the proceedings as Bill, who Shein alleged was Orange’s authorised representative, Shein further contended that, in August 2022, it entered into a supplemental agreement with Orange, which made more detailed provision for the pre-payment of import tax and duty.
Orange denied it had entered into the SA or any other written contract with Shein, additionally that Bill had no authority to enter into the SA on Orange’s behalf. Instead, Orange alleged that it had performed services for Shein on the basis of a contract concluded by conduct.
At the end of January 2025, Shein contended that it had been informed by an email from Bill that Orange would cease providing services to Shein from February 2025 due to internal problems. Shein treated this as repudiatory breach of the SA by Orange, which Shein accepted. Shein sought the reimbursement of over £1.5 million that Orange had received as prepayments for tax and duty.
Orange refused to refund the money and alleged that Shein was guilty of tax evasion and customs fraud. Orange and IT Way commenced English court proceedings seeking damages for, among other things, fraudulent misrepresentation, breach of contract by conduct, customs and VAT fraud, secret misappropriation and unlawful interference with business relations. Their claim was for £5.75 million.
In brief, matters then progressed as follows:
Shein sought to challenge the English Court’s jurisdiction by ticking the relevant box in their acknowledgement of service.
Shein applied to have the court proceedings struck out.
Shein also issued a request to the ICC Secretariat for ICC arbitration. A sole arbitrator was appointed.
Orange indicated to the ICC that it denied there was any arbitration agreement with Shein and sought a stay of the arbitration pending the decision of the High Court.
The claimants issued an application, seeking an interim anti-arbitration injunction under s.37(1) Senior Courts Act 1981 and also under the Court’s general case management powers under CPR 3.1(2)(f) to stay or restrain proceedings in the interests of the proper administration of justice.
Shein applied under s.9 of the Arbitration Act 1996 (1996 Act) for a stay of the court proceedings in favour of arbitration.
The High Court decision
Submission to jurisdiction
The Court dismissed the claimants’ argument that by failing to make an application under CPR 11 contesting the Court’s jurisdiction, Shein had submitted to the Court’s jurisdiction.
The Court confirmed that there was no need to make a CPR 11 application in circumstances where Shein had made a s.9 stay application and had fully complied with the procedural requirements for the s.9 application, including providing the supporting evidence. It was unnecessarily duplicative to be obliged to also make an application under CPR 11.
Interim anti-arbitration injunction
The Court highlighted the exceptional nature of anti-arbitration injunctions. It relied on the decision in Claxton Engineering Services Ltd -v- TXM Olaj-Es Gazkutato Kft [2011] 2 All ER (Comm) 128, which indicated that in order to establish exceptional circumstances, it will usually be necessary, as a minimum, to establish that the applicant’s legal or equitable rights have been infringed or threatened by a continuation of the arbitration, or that its continuation will be vexatious, oppressive or unconscionable.
In this case, there was no vexatious or oppressive behaviour on Shein’s part. No court had ruled on the issue of whether there was a valid arbitration agreement. That was the precise issue that needed to be resolved and Shein was seeking to have it resolved in arbitration pursuant to what it alleged was a valid and effective arbitration clause. The argument that Shein had submitted to the Court’s jurisdiction had failed. Therefore, in the Court’s view, the most appropriate course was for the ICC arbitrator to determine the validity of the arbitration clause and, therefore, whether her jurisdiction was established.
S.9 stay application
It was well-established that an arbitration agreement was separable to, and independent of, the substantive contract.
An allegation that an agent exceeded his authority by entering into the main agreement did not necessarily invalidate the arbitration provision in the main contract. It would have to be shown that the agent had no authority to enter into the arbitration agreement.
Under s.30 1996 Act, the tribunal could rule on its own jurisdiction. Where there was a challenge to the validity of the arbitration agreement, and thus a challenge to the jurisdiction of arbitral proceedings, the Court might take one of several courses. These included:
determining the validity of the arbitration contract itself on the written evidence;
staying the proceedings under its inherent jurisdiction to allow the tribunal to determine the issue of the existence of the arbitration agreement pursuant to s.30 1996 Act;
directing an issue to be tried;
deciding there was no arbitration agreement and dismissing the stay application.
On the evidence, the Court was unable to decide whether Bill had ostensible authority, as Shein alleged, to enter into the SA on behalf of Orange. The Court concluded that the most expeditious way forward was for the sole arbitrator to decide the issue of Bill’s authority. The tribunal had already convened a case management conference and a forthcoming hearing had already been scheduled. There was a presumption that the tribunal should decide on its own jurisdiction in the first instance, if at all possible. The claimants could engage with the arbitral proceedings and, if they succeeded, could pursue their claims in court.
The Court further found that Shein’s overpayment claim likely fell within the scope of the arbitration agreement. Therefore, to avoid duplication, Orange’s claim should be stayed pending the determination of the arbitral dispute.
While Shein contended that it had no contract with IT Way, it nonetheless agreed that IT Way could bring any claims it allegedly had against Shein in the arbitration proceedings. On that basis, the Court thought it was sensible for IT Way’s claim also to be stayed pending determination of the arbitration proceedings. It was, however, premature to strike out IT Way’s claim.
Comment
The decision highlights the English Court’s reluctance to interfere in arbitration proceedings unless necessary. Anti-arbitration injunctions are rarely granted and will require the applicant to demonstrate exceptional circumstances.
