Fiona Trust v Yuri Privalov

The case of Fiona Trust v Yuri Privalov is part of a wider dispute between the Russian Sovcomflot group of companies and Mr Nikitin who is alleged to have successfully bribed one or more directors or employees of Sovcomflot and their associated companies.
As part of its judgment, the Court of Appeal needed to consider the separability of arbitration clauses.
The Court of Appeal first noted that section 7 of the 1996 Arbitration Act codified the principle that an allegation of invalidity of a contract does not prevent the invalidity question being determined by an arbitration tribunal pursuant to the (separate) arbitration agreement. It is only if the arbitration agreement is itself directly impeached for some specific reason that the tribunal will be prevented from deciding the disputes that relate to the main contact.

In the Fiona Trust v Yuri Privalov case, the Court of Appeal considered that if arbitrators can decide whether a contract is void for initial illegality, there is no reason why they should not decide whether a contract has been procured by bribery, just as much as they can decide whether a contract has been procured by misrepresentation or non-disclosure. It is not enough to say that the bribery impeaches the whole contract unless there is some special reason for saying that the bribery impeaches the arbitration clause in particular.
Conclusion
The judgment in the Fiona Trust v Yuri Privalov case is a further important affirmation that an arbitration clause is a separate contract which survives the termination of the main contract. The Court of Appeal ruled that if a contract is said to be invalid for reasons such as bribery, unless that bribery relates specifically to the arbitration clause, the arbitration clause survives and the validity of the contract as a whole is to be determined by an arbitrator and not by the court


Source: http://www.alway-associates.co.uk/legal-update/article.asp?id=132