Important considerations when commencing arbitration

Toziwepi Ropa -v- Kharis Solutions Ltd [2026] EWHC 259 (Comm)

This decision highlights the importance within arbitration of ensuring that:

1. contractual dispute resolution provisions are unambiguous;

2. multi-tiered dispute resolution regimes are sufficiently certain such that they are enforceable;

3. any notice of commencement of arbitration complies with contractual and statutory requirements for validity;

4. a notice of arbitration is validly served pursuant to contractual and/or statutory requirements and that there is sufficient evidence of service; and

5. an arbitration claim form complies with procedural requirements.

The background facts

The parties entered into two joint venture agreements dated 17 October 2017 and 1 January 2018, pursuant to which the claimant would provide working capital for, and the defendant would operate, a domiciliary care and nursing home business with the profits to be shared in specified proportions (JV Agreements).

A dispute arose between the parties as to whether the claimant had been:

• paid sums due to him under the JV Agreements; and

• provided with information that the JV Agreements entitled him to receive.

The claimant argued that, pursuant to the JV Agreements, the dispute had to be resolved in arbitration, and purported to serve a Notice to Arbitrate, dated 18 February 2025. The claimant maintained that the Notice to Arbitrate was valid and therefore the defendant was bound to join in the submission of the dispute to arbitration and the appointment of an arbitrator.

The defendant contended:

• there was no binding arbitration clause that applied in the circumstances of the dispute; and

• the Notice to Arbitrate was invalid due to defects in its form and its service.

The claimant issued an Arbitration Claim Form. Thereafter, the parties entered into mediation, which was unsuccessful.

The defendant contended:

1. the arbitration claim form was defective because it did not comply with the CPR;

2. the purported Notice to Arbitrate was not validly served;

3. the dispute resolution provisions in the JV Agreements did not amount to a compulsory arbitration clause as a matter of their true construction;

4. in the circumstances, the defendant was not obliged to arbitrate the dispute; and

5. in any event, the Notice to Arbitrate was defective.

The relevant contractual provisions

The JV Agreements contained the following provisions:

'55. In the event a dispute arises out of or in connection with this Joint Venture Agreement, the Members will attempt to resolve the dispute through friendly consultation.

56. If the dispute is not resolved within a reasonable period, then any or all outstanding issues may be submitted to mediation in accordance with any statutory rules of mediation. If mediation is not successful in resolving the entire dispute or is unavailable, any outstanding issues will be submitted to final and binding arbitration in accordance with the laws of the Country of England. The arbitrator's award will be final, and judgment may be entered upon it by any court having jurisdiction within the Country of England.'

The Commercial Court decision

Whether Arbitration Claim Form defective

This was a Part 8 claim using an Arbitration Claim Form to which CPR 62 applied.

The defects were that the Claim Form:

1. nether stated the enactment of the section of the 1996 Act upon which the claimant relied (CPR8.2(1)(c) and CPR62.4(1)(d));

2. nor showed that any statutory requirements had been met (CPR62.4(1)(c); and

3. failed to set out the question on which the claimant sought the decision of the Court (CPR8.2(1)(b)(i) and CPR62.4(1)(a)(ii)) – albeit that the question was obvious from the statement of relief sought.

These were errors of procedure that were not insignificant and there had been no application to amend the Claim Form to make it compliant, which was a significant omission.

However, applying the overriding objective, the Court decided it would not be in the interests of justice to refuse to consider the substance of the claim due to the procedural errors. It would, therefore, hear the claim but take the errors into account when deciding costs.

Whether purported Notice to Arbitrate validly served

The Court found on the balance of probabilities that service of the Notice to Arbitrate had taken place in accordance with the relevant provision in the Agreements and service was, therefore, valid.

Whether the JV Agreements contained a compulsory arbitration clause

The JV Agreements generally and the dispute resolution provisions in particular were badly drafted. The parties disagreed on which disputes were caught by clause 56: the claimant said all disputes, the defendant said only disputes that had been referred to mediation.

The Court decided it was unlikely that parties who chose to include an arbitration provision in their agreement intended for arbitration to be optional and conditional on whether a party wished or was willing to attempt mediation before moving to determination of the dispute.

The Court highlighted that when the JV Agreements were made in 2017 and 2018, the current approach of the courts to compel mediation in suitable cases was not present. Agreements that provided for some disputes to be resolved by arbitration and others by litigation usually did so by distinguishing between different types of dispute – commonly disputes with significant specialist technical features being determined by an arbitrator with relevant technical expertise.

The subject matter of the JV Agreements was not technical. The disputes that might arise under them were always very likely to be financial and the reason for including an arbitration provision was very likely confidentiality.

Accordingly, the arbitration provision only made sense if it enabled a party to a dispute to compel the submission of that dispute to arbitration.

As to whether mediation was a condition precedent, the mediation provision did not set out a process that was sufficiently certain, such that there was no need for further agreement for a mediation to proceed. Among other things, the administrative process for selecting the mediator and paying them was not defined. Therefore, the mediation provision was not sufficiently certain to be capable of enforcement.

The Court added that the reference to mediation being 'unavailable' in clause 56 could simply cover the situation where one party proposed mediation and the other declined.

Whether the Notice to Arbitrate was valid and effective

The Notice to Arbitrate was badly drafted. Clause 56 did not specify who would appoint the arbitrator. Therefore, s.14 of the 1996 Act applied. S.14(4) provides:

'Where the arbitrator or arbitrators are to be appointed by the parties, arbitral proceedings are commenced in respect of a matter when one party serves on the other party or parties notice in writing requiring him or them to appoint an arbitrator or agree to the appointment of an arbitrator in respect of that matter.'

The Court considered whether the Notice to Arbitrate identified the dispute with sufficient precision and whether it called on the defendant to agree the appointment of an arbitrator.

Taking a broad and flexible approach to its reading of the Notice to Arbitrate, the Court found it satisfied both requirements. It was not necessary for the Notice to Arbitrate to define the dispute with the level of precision and particularity that would be required by a statement of case. It was also permissible and appropriate to consider the prior correspondence between the parties about the nature of the dispute.

Looking objectively at what had passed between the parties, including both the Notice to Arbitrate itself and the correspondence which preceded it, the dispute that the Notice to Arbitrate sought to refer to arbitration was identified with sufficient particularity to commence the arbitral proceedings as provided for in s.14 of the 1996 Act.

The claimant was therefore granted a declaration that the dispute be referred to arbitration and an order that an arbitrator be appointed.

Comment

It is important to ensure that a notice of commencement of arbitration contains all the required information and that any contractual and / or statutory requirements for a valid notice be complied with.

While the Court will look at substance not form, it is important to make clear that an arbitration provision is being invoked and the other party is being called upon to take steps consequential upon that.

The dispute also highlights the potential pitfalls of having a multi-tiered dispute resolution provision.