ARBITRATION CLAUSES.

THE history of the law on the subject of agreements to refer future disputes to arbitration, is interesting both to the special student and also, as viewed in a broader light, to the general scholar. For not only does the former find in it ample scope for ingenious research, and that acute speculation which minute distinctions necessitate, but it affords also a remarkable instance of the manner in which the common law, having at one time adopted an apparently inflexible rule, fitted to the needs or the prejudices of a special period, succeeds in moulding the rigidity of its canon, to meet the requirements of new times and different conditions. In the year 1746, the Court of King's Bench decided the case of Kill v. Hollister, of which the report is as follows:

"This is an action upon a policy of insurance, wherein a clause was inserted, that, in case of any loss or dispute about the policy, it should be referred to arbitration; and the plaintiff avers in his declaration that there has been no reference. Upon the trial at Guildhall, the point was reserved for the consideration of the court, whether this action was well laid, before a reference had been; and by the whole court if there had been a reference depending, or made and determined, it might have been a bar; but the agreement of the parties cannot oust this court, and as no reference has been, nor any is depending, the action is well brought, and the plaintiff must have judgment."

Yet in the year 1867, the Court of Exchequer 2 decided, that to a declaration on a policy of insurance under seal, the company might well plead an article of the policy according to which it was agreed that"in case any difference should arise touching any loss or damage, such difference should be submitted to the judgment and determination of arbitrators indifferently chosen, whose award in writing should be conclusive and binding on all parties; but if there should appear any fraud or false swearing, the claim

11 Wils. 129.

2 Elliott v. Royal Exchange Assurance Co., Law Rep. 2 Ex. 237.

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ant shall forfeit the benefit of all claim; " that a difference had arisen touching the alleged loss, which the defendants had always been willing to refer in the manner mentioned in the articles, whereof the plaintiff had notice; but that the plaintiff refused, and that the difference had never been submitted. These seemingly conflicting decisions are both said to be law in England, today.

It is quite common to insert in articles of copartnership and policies of insurance, clauses like that quoted above, by which the parties bind themselves, that any future differences arising under the articles or policy shall be referred to arbitrators. Various questions have suggested themselves, touching these agreements, three of which we propose to discuss in this article. In the first place, how far such an agreement can be pleaded in bar to a suit at law or in equity; second, whether an action of damages for breach of such an agreement can be maintained; and, third, whether equity will enforce specific performance. It is necessary to observe that the true key to the solution of most of the difficulties connected with this subject, is to be found in the altered temper of the tribunals. In the last century, the domestic forum was regarded by courts, both of law and equity, with a feeling akin to disgust, and it was felt to be undignified in courts to allow themselves to be made subsidiary to its jurisdiction. Thus Lord Eldon, in deciding Street v. Rigby, said, "I recollect passages in which courts of justice, however full of eulogia upon these domestic forums, have recollected their own dignity sufficiently to say, they would not be ancillary to those forums." And it is not too much to say, that until lately, a feeling existed that any attempt to remit questions to arbitrators was an attempt to divest the properly constituted tribunals of justice of their rightful authority. This feeling has entirely passed away. Whether this is because the parental theory of law - the theory that law is a governmental agency organized for the purpose of regulating and methodizing the naturally irregular and unmethodical actions of men; a theory which would inevitably lead judges to frown upon any effort to withdraw the decision of cases from their supervision - has given way before a theory which regards law as the servant of the people, to be used by them or no, as their needs may seem to

16 Ves. 814.

require; or because the rush of business has induced overcrowded courts to look with favor on any means of relieving themselves from the pressure, or from both these causes, it is certain that arbitration is to-day regarded by the courts of England and this country as a legitimate and useful means of settling disputes. The great convenience of removing from the consideration of juries, questions under policies of insurance, or railway contracts, which such bodies are peculiarly unfit to decide, and the great advantage which partners must in almost all cases derive from an adjustment of differences out of court, are now fully recognized. And it is the recognition of these advantages which explains the present state of the law much better than mere comparison of authorities.

All the earlier cases are unanimous in holding that no agreement of parties can "oust the jurisdiction of the courts." It is curious to trace the origin of the principle of these decisions. In Scott v. Avery,2 a case in which the opinion of the judges was taken, Mr. Justice Cresswell said,

"The whole of the doctrine as to ousting the jurisdiction of the courts appears to have been based upon the passage quoted by Mr. Baron Parke, from Coke Littleton: If a man make a lease for life, and by deed grant that if any waste or destruction be done, that it shall be redressed by neighbors, and not by suit or plea, notwithstanding, an action of waste shall lie; for the place wasted cannot be recovered without plea.' The case is not to be found in the Year Book, 3 Edw. III. referred to, but is in Fitzherbert's Abridgment "Waste," Placitum 5, and the whole of it is given in Coke Littleton. It seems that this decision proceeded on the ground that the neighbors could not redress the wrong done; that it could only be done by plea; therefore, notwithstanding the deed, an action of waste would lie. There is not a word leading to the supposition that an action would have been maintainable, if neighbors could have given the appropriate redress; or that it might not have been granted by deed, that if a dispute arose about waste, neighbors should say whether there had been waste or not."

However this may have been, it is certain that the general principle is well established. And without endeavoring to deduce it

1 Wellington v. Mackintosh, 2 Atk. 569; Kill v. Hollister, 1 Wils. 129; Mitchell v. Harris, 2 Ves. 129; Thompson v. Charnock, 8 T. R. 139; Street v. Rigby, 6 Ves. 814.

25 H. L. Cas. 811.

from the above cited passage in Coke, it would seem to flow necessarily from the long settled doctrine that a submission to arbitrators may be revoked at any time before the award.1

The case of Halfhide v. Fenning 2 was the first which threw doubt upon the principle of the cases cited above. That was a bill in equity, decided by the Master of the Rolls in 1788. The bill stated that the plaintiff and defendant were copartners, and prayed a discovery of partnership transactions and relief. To this bill the defendant pleaded, that by the articles it had been agreed that if any of the parties should commence or prosecute any bill in equity, &c., such clause of reference to arbitration might be pleaded in bar, and that no suit at law or in equity should be commenced, &c., until after such arbitrament should be made. The plea was allowed. The case has been much doubted,3 and the only ground on which it can be reconciled with those previously decided is, that the agreement which was set up contained a covenant not to sue. And this distinction was taken by Lord Loughborough in a subsequent case. But it is difficult to see how this ground can be maintained, for if a covenant not to sue had such an effect, the whole law of arbitration clauses would long ago have been reduced to simplicity, by the introduction of this covenant into every agreement where the parties desired to refer future differences. It is true, that a covenant not to sue has been held equivalent to a release in order to avoid circuity; but this principle could hardly be used where it came in conflict with another so potent as that which demands that courts shall not be ousted of jurisdiction by agreements of parties to arbitrate. If it is necessary that Halfhide v. Fenning should stand upon the covenant, the case must be considered wrong. Indeed, so far as this covenant is concerned, there is a direct authority the other way, in Mexborough v. Bower, in which case a covenant not to sue was set up in aid of a plea of agreement to arbitrate. The plea was held bad.

The case of Street v. Rigby, though often cited in connection with this subject, did not decide the point we are now dis

1 Allen v. Watson, 16 Johns. 205; Milne v. Gratrix, 7 East, 608; Cooke v. Cooke, Law Rep. 4. Eq. 77.

2 2 Bro. C.C. 336.

3 Waters v. Taylor, 15 Ves. 10-17. Scott v. Avery, 5 H.L. Cas. 811. By Ld. Ch. Cranworth.

Mitchell v. Harris, 2 Ves. 129.

5 7 Bea. 127.