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Steel Manufacturer’s Bid to Oust London Arbitration Fails

A Turkish manufacturer which failed to deliver a consignment of high-tensile steel to Hong Kong is facing a multi-million-dollar bill after failing to convince the High Court that it had never agreed to a London arbitration clause being incorporated into the contract.

The company was found in breach of contract by an arbitrator and was directed to pay more than $3 million, plus interest, to the Hong Kong-based buyer of the undelivered goods. However, the company refused to submit to the award on the basis that the arbitrator lacked jurisdiction and was wrong to find that there was a binding arbitration agreement reached between the parties.

In dismissing the company’s claim, however, the Court rejected arguments that its commercial agents, who negotiated the contract on its behalf, had neither actual nor ostensible authority to enter into the London arbitration agreement. There had, the Court ruled, been a ‘binding consensus’ between the parties as to the terms of the agreement which was thus both valid and enforceable.