Saturday, June 22, 2024

London Arbitration- challenge to jurisdiction failed

Owners’ claim in this arbitration related to a balance payment of USD763,427.26 based on a final freight invoice itemised: freight, demurrage, despatch and detention under a voyage charter party for the carriage of Iron ore from Puerto Cortes in Honduras to a main port in China. After completion of loading and while the freight remained unpaid, the parties entered into a contract for the sale of the cargo between buyers, sellers (as charterers) and the owner (as the carrier). The charterers provided the owners with a Letter of Guarantee (see below) that recorded the various payments to be made.

The Recap and additional clauses 46 and 49 of the charter party stated:

“- G/A ARBITRATION IN LONDON, ENGLISH LAW TO APPLY.

ARBITRATION IF ANY, THE OWNERS’ AND CHARTERERS WILL TRY TO SETTLE DISPUTES INAMICABLE WAY.

IN CASE CHARTERS’ AND OWNERS DID NOT SETTLE IN AMICABLE WAY, THEN EITHER PARTY MAYSERVE NOTICE ON THE OTHER REQUIRING ANY DISPUTE TO BE SETLED WITHIN THIRTY (30) DAYSAFTER SUCH NOTICE.

CLAUSE 46 – ARBITRATION

IN THE EVENT OF ANY DISPUTE NOT SETTLED BETWEEN THE TWO PARTIES MUTUALLY, THEMATTER TO BE REFERRED TO ARBITRATION IN LONDON UNDER ENGLISH LAW, WITH EACH PARTYAPPOINTING AN ARBITRATOR. IN CASE THE ARBITRATORS FAIL TO REACH A UNANIMOUSDECISION, THEY SHALL APPOINT AN UMPIRE, WHOSE DECISION SHALL BE FINAL AND BINDINGON BOTH PARTIES.

CLAUSE 49 – GOVERNING LAW

GENERAL AVERAGE AND ARBITRATION IN LONDON AND THIS CHARTER SHALL BE CONSTRUCTEDUNDER AND GOVERNED BY ENGLISH LAW.”.

The procedural background

On 14th November 2014, the [X] arbitrator accepted the appointment on the LMAA Terms 2012 as owners’ appointed arbitrator.

On 17th November 2014, by post and e-mail, owners’ attorneys notified the charterers of the above appointment and called upon them to either appoint its arbitrator or agree to the appointment of [X] as sole arbitrator.

On 5th December 2014 by e-mail and pre-paid post, as no reply was received, owners’ attorneys sent a second notice that gave the charterers a further 7 clear days to appoint an arbitrator. They also notified the charterers that the owners would appoint [X] as sole arbitrator if they did not appoint an arbitrator.

On 23rd December 2014, the owners’ P&I Club asked [X] to act as sole arbitrator since the charterers had made no appointment.

On 5th February 2015, by e-mail and in hard copy by pre-paid post via the owner’s attorneys, the owners’ P&I Club served claim submissions.

On 6th February 2015, the arbitrator informed the charterers by e-mail that defence submissions (and counterclaim, if any) should be served on the owners’ P&I Club (with a copy to him) no later than 28 days after service upon the charterers of the claim submissions and, allowing a reasonable time for the claim submissions to be served on the charterers, defence submissions (and counterclaim, if any) must be served no later than 12th March 2015.

On 19th March 2015, the arbitrator made an order for service of defence no later than 24th March, and on 25th March, a peremptory order followed for service no later than 27th March 2015. Charterers did not serve a defence, and on 17th April, the arbitrator informed the parties that he would proceed to an award based on the materials before him.

Challenging the arbitrator’s jurisdiction 

On 26th April 2015, the arbitrator requested the parties to make further submissions on a specific topic since the letter of guarantee that accompanied the claim submissions stated:

“…that the exclusive forum and venue for the resolution of all disputes arising out of or under this Letterof Guarantee and the Voyage Charter shall be in the United States District Court for the SouthernDistrict of Florida to the exclusion of any and all other fora and venues and…to the exclusive personaljurisdiction of said court for the resolution of any and all disputes under this letter of Guarantee and the Voyage Charter to the exclusion of any and all other jurisdictions” (emphases added).

The arbitrator added that the above references to the charter party could give rise to arguments as to the validity of the present proceedings. Neither party made any comments, but in the interests of fairness, the arbitrator considered before dealing with the merits of the claim each party should be given the opportunity to make submissions about the Letter of Guarantee on these arbitration proceedings.

On 18th May 2015, the owners’ P&I Club made submissions, and on 3rd June, the charterers’ instructed Solicitors informed the arbitrator that they would make submissions. On 6th July, after a peremptory order, the charterers’ served their submissions challenging the jurisdiction of the arbitrator. Then, the owners’ P&I Club replied on 12th August.

The arbitration claim

On or before 25th August 2015, the parties agreed that the arbitrator’s decision should be contained in a separate preliminary award as to jurisdiction as envisaged by section 31(4)(a) of the Arbitration Act1996. By a final award dated 5th October 2015 (the Jurisdiction Award), the tribunal decided that the charterer’s challenge to jurisdiction failed and dismissed it.

On or about 2nd November 2015, the charterers made a section 67 application to the Commercial Court to challenge the “Jurisdiction Award” and sought to have it set aside or varied so as the arbitrator had no jurisdiction over the disputes between the parties under the charter party.

On 16th November 2016, owners’ P&I Club informed the arbitrator that the charterers’ solicitors were removed from the record as acting for the charterers in the arbitration claim.

By e-mail on 24th July 2017, the owners’ P&I Club informed the arbitrator that by an order of Mr Justice [X] on 2nd March 2017, the charterers were ordered to provide the owners with security for its costs in the arbitration claim and the charterers had not complied with that order. By an order sealed in the High Court on 9th June, Mr Justice [Y] ordered the charterers’ arbitration claim to be stayed pending compliance with the order of 2nd March, and unless within 28 days of the service of the order by email to [….], the charterers complied with the order of 2nd March, the arbitration claim is to be struck out. The charterers failed to comply, and the arbitration claim is therefore struck out.

Arbitration proceedings

On 24th July 2017, the owners’ P&I Club pointed out to the parties and the tribunal that (i) the tribunal decided that it possessed jurisdiction and (ii) the charterers’ application to the High Court came to an end. Thus, the owners requested the arbitrator continue the arbitration on the merits and based on the materials before him, as the arbitrator has previously indicated, given the absence of any submissions by the charterers.

In circumstances where the charterers have chosen not to participate in the arbitration, the arbitrator considered carefully the proper approach to be adopted. However, it did not involve doing the charterers’ job in defending the claim.

The arbitrators’ approach was that:

(a) prima facie, it remained for the owner to satisfy the arbitrator as to the validity of the claim advanced;

(b) the arbitrator remained entitled to reject, disallow, etc., any parts of the claim or its amount in respect of which he was not so satisfied; but

(c) it was not his role to adopt the mantle of the charterer or, subject to the points above, to advance on its behalf or rely on or adopt arguments that the charterer might have included in submissions had it chosen to serve any.

Award accordingly.

Final Award, 30 August 2017

This website removes the names of the parties involved in this or other awards. The reader can find more details on Jus Mundihttps://jusmundi.com/en/.These awards mostly come into the public domain through enforcement under the NYC 1958.

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