In the recent decision of A1 and Ors v P [2025] EWHC 3372 (Comm), the Court has allowed a rare challenge under s67 of the Arbitration Act 1996 (the “Act”) challenging an arbitral tribunal’s jurisdiction, and clarified the extent to which a law firm has usual authority to bind its clients to an arbitration agreement.

Background

In October 2023, the Third Claimant (“A3”) commenced an arbitration (the “Arbitration”) against the Port Authority of “Country 2” in relation to the Port Authority’s termination of a concession agreement for A3 to construct and operate a new container terminal. A3 was represented in the Arbitration by a US law firm (“C”). The fees of A3 were guaranteed by the First Claimant (“A1”).

In mid-2018, the matter partners at C approached the Defendant (“P”) in relation to providing investigative services in support of the Arbitration, in particular as to whether the Port Authority had deliberately sabotaged the project; and entered into an agreement with P (the “P Agreement”) which provided for P’s fees to include an uplift should intelligence obtained by P be used, including in a witness statement, and a further percentage of any recovery should it be used in any civil proceedings.

P’s findings, which included that the Port Authority had not wanted the project to succeed as it threatened the old terminal, were thereafter referred to in a notice of dispute, submitted by the Second Claimant (“A2”) to the government of Country 2 under a bilateral investment treaty with Country 1. That notice was also submitted into evidence by A3 in the Arbitration.

Subsequently, the disputes were both settled. A2 paid P in relation to its use of the information. However, A1 and A3 denied any liability to pay P in relation to the Arbitration.

P thereafter commenced LCIA arbitration in October 2022 asserting that it reasonably believed the Claimants were its clients, it had produced information that was deployed by the Claimants in their respective disputes and which resulted in settlements and that accordingly it was due a success fee based on a percentage of the recovered amount.

The Tribunal’s Findings

In the Award, the Tribunal found that as a matter of construction of the P Agreement, all Claimants were parties to it and that C had the authority of both A1 (apparent authority) and A3 (implied actual and apparent authority) to bind them to it. Further, it held that P was entitled to its success fee as the submission into evidence of the notice of dispute in the Arbitration constituted the requisite use of the information gathered by P.

The Claimants’ Challenge

The Claimants challenged the Tribunal’s findings under s67 of the Act on two grounds:

1. Lack of jurisdiction over A1 and A3, who were not parties to the P Agreement (or the arbitration agreement therein); and
2. Lack of jurisdiction over A1 and A2 as neither granted C authority to enter into an arbitration agreement in accordance with the Civil Code of Country 1.

The Ruling

In relation to the first ground, P’s primary case was that C had (i) implied actual authority, alternatively ostensible authority, in the case of A3 and (ii) ostensible authority in the case of A1 to bind them both to the P Agreement as C was their lawyer and so had usual authority to do all the things normally incident to acting as their lawyer. P also argued that C had apparent authority in relation to A1 on the basis that A1 had authorised C to enter into a separate similar agreement.

However, the Court held that the usual authority of solicitors does not extend to binding their clients to contracts with service providers, still less to a contract, such as the P Agreement, under which the client contingently agrees to share with that service provider a percentage of the client’s recoveries in litigation. As such, whilst it may be usual for solicitors to engage third party providers, and pass costs on by way of disbursements, it does not follow that they have usual authority to place their clients into direct contractual relationships. That would require clear evidence, of which in the present case there was none. Therefore, C was not shown to have implied actual or ostensible authority to bind A1 or A3 to the P Agreement.

Further, the Court held that the fact that C had been authorised by A1 to enter into a separate but similar agreement with P did not amount to a representation, as required for a finding of apparent authority, that it was therefore authorised to enter into the P Agreement. This was so notwithstanding that the agreements were apparently signed on the same day.

In relation to the second ground, due to the Court’s conclusions in respect of the first ground, there was no issue as regards A1. In respect of A2, it was noted that this was a new point, not taken during the arbitration itself. Accordingly, it was necessary to consider whether it was a point that could have been raised by A2 before the Tribunal, or whether A2 was now barred from doing so as a result of s73 of the Act, which provides that if a party fails to object on the grounds, amongst other things, of jurisdiction, it may not raise that objection later unless able to show that it could not with reasonable diligence have discovered the ground for objection at the time. In light of the expert and factual evidence adduced, it was apparent that A2 could have raised an objection at the relevant time and failed to do so. Therefore, A2 was barred from relying upon it.  

Discussion

S67 challenges are both rare and rarely succeed. In its latest report for 2023-2024, the Commercial Court noted there were only 24 applications filed under this provision with only one of the eight decided at that stage successful. In fact, that represents a significant increase on the prior year which saw only seven applications, none of which succeeded. That is perhaps unsurprising in view of the well-touted supportiveness of English law towards arbitration and its finality. In that context this is a welcome reminder that where appropriate, the courts will, of course, step in.

It also serves as a helpful clarification of the scope of a solicitors’ usual authority to bind its clients to third-party contracts; likely of some assistance to practitioners given a three-member tribunal comfortably came to a contrary conclusion.