Scott v Avery
A clause making an arbitration award a condition precedent to any action on the contract is valid, and does not oust the jurisdiction of the courts.
Facts
Mr Scott, a shipowner, insured his ship with a mutual insurance association, whose rules provided that the amount of any loss should be settled by arbitrators, and that no action could be brought until the arbitrators had decided the dispute. When a dispute arose about a claim, Mr Scott sued in the courts without first going to arbitration. He argued that the clause was void, because it ousted the jurisdiction of the courts.
Legal principle
The House of Lords held that the clause was valid, and that Mr Scott could not sue until an award had been made. The House said that, while parties cannot by contract oust the jurisdiction of the courts altogether, they may agree that no right of action shall accrue until an arbitrator has determined the amount payable, because such a clause does not deprive the courts of jurisdiction but defines the conditions on which the cause of action arises. Such clauses, known as Scott v Avery clauses, remain valid, and the decision was an important step in the courts' acceptance of arbitration.
Related cases on the arbitration agreement: validity, scope and governing law
- Channel Tunnel Group Ltd v Balfour Beatty Construction Ltd [1993] AC 334
- Enka Insaat ve Sanayi AS v OOO Insurance Co Chubb [2020] UKSC 38, [2020] 1 WLR 4117
- Fiona Trust & Holding Corp v Privalov [2007] UKHL 40, [2007] Bus LR 1719
- Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576, [2004] 1 WLR 3002
- Heyman v Darwins Ltd [1942] AC 356
- Jivraj v Hashwani [2011] UKSC 40, [2011] 1 WLR 1872
- Kabab-Ji SAL v Kout Food Group [2021] UKSC 48
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This summary is for study and revision and is not legal advice. Although our case summaries are checked for accuracy, we do not guarantee that they are free from errors or omissions. Always read the full judgment for the court's reasoning.
