The question of whether a party’s failure to comply with a mandatory step in a multi-tiered dispute resolution clause is an issue of “admissibility” or “jurisdiction” was a hot topic in the international arbitration sphere for many years. However, a series of recent decisions in several common law jurisdictions have brought such academic debate to an end. Those cases make clear that a failure to comply with an enforceable precondition to arbitration is a matter of admissibility, which cannot form the basis of a jurisdictional challenge.

This article briefly summarises those recent developments, and concludes with some practical tips for parties to consider – particularly in the context of claims arising under construction contracts.

Admissibility or Jurisdiction – What’s the Difference, and Why does it Matter?

It appears to be settled law that – at least in common law jurisdictions – an arbitral tribunal lacks jurisdiction if it does not have the power to hear a particular claim (for example, because the claim falls outside the scope of the parties’ arbitration agreement), whereas the question of admissibility arises when the tribunal has the power to hear the claim but does not consider it appropriate to do so (for example, because the claim has been referred to arbitration prematurely).¹

The distinction between these concepts is important because they lead to very different consequences. Generally, in jurisdictions that have adopted the UNCITRAL Model Law (which includes the United Kingdom, Hong Kong, Singapore, Australia, and many others) a tribunal’s determination of a claim over which it has no substantive jurisdiction would open that arbitral award up to challenge before the courts – for example, under section 67 of the Arbitration Act 1996 for arbitral proceedings seated in London. But where an issue pertains to admissibility, the question of whether (or when) a tribunal will determine the claim is a procedural matter left entirely to the tribunal to decide.

Recent Case Law on the Admissibility of Premature Claims

A number of recent cases in England and Hong Kong have confirmed that a party’s failure to comply with mandatory preconditions to arbitration before referring a dispute to a tribunal is an issue of admissibility of the claim, and not jurisdiction.

England and Wales

• In the 2021 case of Republic of Sierra Leone v SL Mining Ltd² the English High Court rejected a challenge to an arbitral award under section 67 of the Arbitration Act 1996 premised on the ground that the three-month negotiation period specified in the dispute resolution clause had not expired when the request for arbitration was served, and that the dispute had thus not been submitted to arbitration in accordance with the parties’ arbitration agreement. The Court held that the issue of whether a claim has been brought prematurely is one of admissibility, and one that is best decided by the arbitrators. In doing so, it distinguished two previous (non-binding) decisions of the High Court,³ on the basis that those cases pre-dated subsequent international jurisprudence that considered and clarified the distinction between jurisdiction and admissibility.
• A few months later, the English High Court in NWA v NVF⁴ declined to set aside an award on the basis that a party failed to mediate a dispute before commencing arbitration. The Court agreed with the reasoning in SL Mining Ltd, and concluded that pre-arbitration procedural requirements are not a matter of jurisdiction because non-compliance with them does not affect whether it was the type of dispute that the parties had agreed to submit to arbitration, nor does it invalidate the arbitration agreement. In any event, in this case the requirement in the parties’ dispute resolution clause to mediate the dispute was not sufficiently clear and certain to make it an enforceable condition precedent.

Hong Kong

• The distinction between admissibility and jurisdiction was also addressed in a series of cases in Hong Kong beginning with C v D⁵ in 2021. In the case, the Hong Kong Court of First Instance rejected a challenge to an arbitral award under section 81 of the Arbitration Ordinance premised on the ground that a request for negotiation had not been made prior to the reference to arbitration and, therefore, the arbitral award was made without jurisdiction and should be set aside. After considering extensive commentary and international cases, including SL Mining, the Court held that disputes arising in respect of pre-arbitration procedural requirements (as opposed to the existence, scope or validity of the arbitration agreement) are a matter of admissibility to be determined by the arbitral tribunal. Interestingly, the Court commented on the ways in which a tribunal may deal with an inadmissible claim: “If [the tribunal] comes to the view that the earlier stages in a multi‑tier dispute resolution clause have not been fulfilled, it can give effect to the contractual requirement by, for example, ordering a stay of the arbitral proceedings in whole or in part pending compliance with the clause, imposing costs sanctions, or even dismissing the claim outright as inadmissible”.⁶
• The C v D judgmentwas followed a few months later by the decisions of the Hong Kong Court of First Instance in (i) Kinli Civil Engineering Ltd v Geotech Engineering Ltd;⁷ and (ii) T v B.⁸ In both cases, the Court held that non-compliance with pre-arbitration requirements goes to admissibility of the claim and a tribunal’s decision in this regard is not reviewable by the Court. Recently, the judgment in C v D was upheld by the Hong Kong Court of Appeal,⁹ confirming that the distinction between admissibility and jurisdiction in the context of pre-arbitration procedural requirements is now well-established in law.

Practical Implications

These cases should not be taken by parties as an invitation to ignore the multi-tiered dispute resolution clause in their contract and refer claims directly to arbitration. Although a premature claim may not be grounds for a jurisdictional challenge to set aside the award, there is still a risk that a tribunal will refuse to hear and determine a claim on the basis that it is inadmissible. Even if the tribunal does allow the claim, it may stay the proceedings to allow the parties time to comply with their pre-arbitration requirements – thereby adding to the duration of the arbitration. Either way, controversy over whether a claim is inadmissible is likely to result in (potentially costly) procedural skirmishes.

More generally, multi-tiered dispute resolution clauses provide an important opportunity for parties to settle their dispute before incurring the costs and time commitment of arbitration. Particularly in the context of construction disputes, where parties are often faced with a large number of individual time and cost claims, there can be a tendency to approach the multi-tiered dispute resolution process as merely a “tick box” exercise. However, even if a complete resolution of all claims seems impossible, a partial resolution that narrows the issues in dispute can save significant cost in any arbitration that follows. For example, a commercial resolution of some lower-value variation claims could significantly reduce the costs and duration of a subsequent arbitration.

¹ In 2020, the Singaporean appellate court clarified the distinction between jurisdiction and admissibility (although not in the context of multi-tiered dispute resolution clauses), and confirmed that issues of admissibility do not entitle the courts to undertake a de novo review of an arbitral award in setting aside applications: see, BBA v BAZ [2020] SGCA 53 and BTN v BTP [2020] SGCA 105.

² [2021] EWHC 286 (Comm).

³ Emirates Trading Agency LLC v Prime Mineral Exports Pte Ltd [2015] 1 WLR 1145, and Tang v Grant Thornton International Limited [2013] 1 AER (Comm) 1226.

⁴ [2021] EWHC 2666.

⁵ [2021] HKCFI 1474.

⁶ [2021] HKCFI 1474, [49].

⁷ [2021] HKCFI 2503.

⁸ [2021] HKCFI 3645.

⁹ C v D [2022] HKCA 729.