The First Hall of the Civil Court, presided over by Mr Justice Joseph Zammit McKeon on March 14, 2013, in the case ‘Go plc vs Waldonet Ltd’ held, among other things, that it should proceed to decide the case between the parties even in the face of a mandatory arbitration clause in one of the agreements. The court concluded that piecemeal litigation was not favourable to the parties and nor for the proper administration of justice.

The facts in this case were as follows.

The First Hall of the Civil Court gave judgment by affirming its competence to hear this dispute and ordered that the case be continued

Go plc provided Waldonet Ltd several services of electronic communication nature under a number of contracts.

Amounts were due to Go plc under five agreements: an agreement for ATM services, dated March 5, 2004, an agreement relating to Gigabit Ethernet Services dated January 1, 2006, and an agreement relating to IP Transit Services dated March 7, 2008. On December 30, 2008, Waldonet Ltd entered an agreement with Go plc whereby it constituted itself as its debtor in respect of the amounts due by Go plc for various services granted prior to the date of this agreement.

It was stated that Waldonet Ltd defaulted on its contractual obligations.

Waldonet Ltd failed to pay the amounts due to Go plc and despite several intimations, it still did not perform its commitments. On November 12, 2010, Go plc terminated its services with immediate effect.

Faced with this situation Go plc proceeded to file legal proceedings against Waldonet Ltd to recover the outstanding amount of €605,833 under the agreement of December 30, 2008. €334,110 was due under reselling of services; €204,958 for IP Transit and Routing Facilities, ATM services and Gigabit Ethernet Services; €2,856 for ADSL and €48,908 under the agreement dated December 30, 2008.

Waldonet Ltd, in reply submitted that this court had no jurisdiction in face of a mandatory arbitration clause in one of the agreements. As regards the merits, Waldonet Ltd contested Go’s legal action. It said that it had reported Go plc to the Office of Fair Competition to investigate certain abusive practices by Go, in terms of Chapter 379. In case, it resulted that its claims were justified, the agreements with Go plc would be deemed to be null and further, Go plc would be obliged to pay it substantial damages in compensation.

Allegedly, Go plc had abused its dominant position in Malta in the field of electronic communication, in particular in the provision of internet services on wholesale or other related services, and also discriminated between various internet service providers which operated in Malta, at considerable damage to Waldonet Ltd.

Waldonet Ltd complained that there were clear violations of chapter 379 provisions and in this respect, the court should order the suspension of these legal proceedings until the Commission of Fair Trading completed its investigation. Waldonet Ltd said that Go plc’s lawsuit was premature as it was well aware of its complaints, and that this lawsuit should not be heard before the commission finalised its investigation.

Waldonet Ltd, in addition, said that over the years, it paid Go plc in excess of €9 million, and that as a result of Go plc’s abusive practices, it was unable to continue its operations.

That was pending before the Malta Arbitration Centre proceedings, whereby Waldonet Ltd requested that Go plc be condemned to pay it €22,514 as compensation under the Services Availability Contract dated March 7, 2008.

The court noted that three agreements included specifically an arbitration clause. Clause 12 of the contract dated March 5, 2004 provides:

1. Any dispute, controversy or claim arising out of relating to this contract, or the breach, termination or invalidity thereof, shall be settled by arbitration in accordance with the rules of the Malta Arbitration Centre as at present in force.

2. The administrator shall be the Malta Arbitration Centre.

3. Arbitration proceedings shall be commenced as soon as a notice of arbitration is filed at the Malta Arbitration Centre by any one of the parties.

Clause 12.14 of the agreement dated January 1, 2006 and Clause 22.3 of the agreement dated December 30, 2008 reads:

“In the event that the parties fail to resolve the dispute within fifteen (15) days from the date that either party notifies the other in writing that the dispute has arisen, then wither party has the right to refer the dispute for arbitration in accordance with the rules of the Malta Arbitration Centre as at present in force.

“In the event that the parties fail to resolve the dispute within fifteen (15) days from the date that either party notifies the other in writing that the dispute has arisen, then either party has the right to refer the dispute for arbitration in accordance with the rules of the Malta Arbitration Centre as at present in force, except for disputes that fall under the jurisdiction of a relevant authority.”

Article 742 (2) and (3) of chapter 12 provides:

(2) The jurisdiction of the courts of civil jurisdiction is not excluded by the fact that a foreign court is seized with the same cause or with a cause connected with it. Where a foreign court has a concurrent jurisdiction, the courts may in their discretion, declare defendant to be non-suited or stay proceedings on the ground that if an action were to continue in Malta, it would be vexatious, oppressive or unjust to the defendant.

(3) The jurisdiction of the courts of civil jurisdiction is not excluded by the fact that there exists among the parties any arbitration agreement, whether the arbitration proceedings have commenced or not, in which case the court, saving the provisions of any law governing arbitration, shall stay proceedings without prejudice to the provisions of sub-article (4) and to the right of the court to give any order of direction.

In Camilleri vs Zammit dated May 4, 1998 the Court of Appeal said that an arbitration clause did not divest the court of its jurisdiction. The court still had the authority to review the validity of an arbitration agreement, as well as the arbitration proceedings and to assist in the enforcement of arbitral awards, by the issuance of precautionary and or executive warrants. This meant that article 742 (3) chapter 12 was not intended to neutralise the application of an arbitration clause, and to ensure that the court had authority to regulate the application of an arbitration clause. The court had authority to provide and give directive in case there were difficulties in the way an arbitration clause was to be applied.

As a general rule, our courts considered as valid, clauses in contracts which excluded their jurisdiction. It respected arbitration clauses, re: (CA(COM)) Vella vs Mamo noe dated October 13, 1994, and Grech vs Cutajar et dated December 1, 2008 (PA). Although our court considered arbitration clauses to be valid, it took the view that it had concurrent jurisdiction to review the enforcement of an arbitration clause: re (CA) Xuereb vs Accountant General dated February 28, 1997, and Cefai noe vs Valletta Freight Services Ltd. In this case, a mandatory arbitration clause was inserted only in one agreement, under which Go plc claimed €8,053.

In respect of the balance (€605,833), there was either no arbitration clause or an option to refer any dispute to arbitration. Go plc by this lawsuit sued for the total balance.

This court had to consider whether Waldonet Ltd could invoke the mandatory arbitration clause in one agreement to exclude the jurisdiction of this court for the whole case. The claims under the agreement containing a mandatory arbitration clause represented just 1.33 per cent of the total claim of Go plc.

The court considered that Waldonet Ltd’s pleas were not acceptable: it was necessary to avoid a multiplicity of proceedings, hearing of witnesses, production of evidence, issues affecting the same parties, even if arising under different contracts which had the same common factors, and which should not be fragmented and heard by different tribunals. The First Hall of the Civil Court had jurisdiction generally to hear and decide any dispute between the parties and insofar as its jurisdiction was not excluded by ad hoc legislation or by a clear and precise agreement, the First Hall of the Civil Court should hear any issue brought before it.

For these reasons, on March 14, 2013, the First Hall of the Civil Court gave judgment by affirming its competence to hear this dispute and ordered that the case be continued. It said that article 742 (3) of chapter 12 confirmed its decision that the First Hall of the Civil Court should proceed to decide the case

Between the parties, even in the face of a mandatory arbitration clause in one of the agreements.

The court concluded that piecemeal litigation was not favourable to the parties and nor for the proper administration of justice.

Dr Karl Grech Orr is a partner at Ganado Adovates.

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