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  • THE MAERSK TANGIER – Court of Appeal dismisses carrier’s appeal - Robert Thomas QC, Benjamin CofferView More

    Tue, 17 April, 2018

    The Maersk Tangier concerns the compulsory application of the Hague-Visby Rules where no bill of lading is issued, and application of the package limitation provisions in those rules to containerised cargoes. Robert Thomas QC and Benjamin Coffer appeared for the successful claimants.

    In a judgment handed down today, the Court of Appeal has dismissed the carrier’s appeal against the judgment of Baker J and held that:

    • The Hague-Visby Rules are compulsorily applicable to any contract of carriage which expressly or impliedly provides the shipper with the right to demand the issue of a bill of lading, whether or not that right is exercised, and whether or not some other carriage document (such as a waybill) is eventually issued.
    • The English Courts will not follow the decision of the Federal Court of Australia in El Greco v. Mediterranean Shipping [2004] 2 Lloyd’s Rep 537, which requires the manner of packing to be included in the description of the cargo in the bill of lading in order to satisfy Article IV.5(c).
    • Instead, any description of the cargo which states the number of items which are in fact ‘units’ or ‘packages’ inside the container will be sufficient enumeration for the purposes of Article IV.5(c).
    • A ‘unit’ is any physical item which is not packaged up; and there is no additional requirement that the item must have been capable of shipment breakbulk.

    The appeal

    The claim arose out of damage to a cargo of large unpackaged pieces of tuna stuffed in three refrigerated containers, during carriage by the Defendant container line. Andrew Baker J was asked to determine a number of preliminary issues relating to package limitation. The carriers appealed against his findings. The appeal was dismissed by Flaux LJ and Gloster LJ, with Flaux LJ giving the leading judgment (the Court sat as a two-person tribunal, after the third member of the Court was struck down by a sudden illness part-way through the hearing).

    Were the Hague-Visby Rules compulsorily applicable?

    The Hague-Visby Rules only apply to contracts of carriage which are ‘covered by a bill of lading’ (Article I(b)). A waybill is not a bill of lading for the purposes of the Hague-Visby Rules: The Rafaela S [2005] 2 AC 423. However, there are series of English and Commonwealth cases in which the Rules have been held applicable where bills of lading were contemplated but never issued. In most of these cases, the cargo was damaged during loading and was therefore never actually shipped (e.g. Pyrene v Scindia [1954] 2 QB 402).

    In The Maersk Tangier, it was common ground that the contracts of carriage initially provided for the issue of bills of lading, but that after delays during carriage the parties agreed  for practical reasons that waybills would be issued instead. The carrier therefore argued that because waybills had been issued, the Hague-Visby Rules did not apply. The Court of Appeal upheld the decision of Baker J rejecting the carrier’s argument, and holding that the Hague-Visby Rules were applicable. The relevant question was not whether a bill of lading is actually issued, but whether the issue of a bill is contemplated under the terms of the contract. If the issue of a bill is contemplated, the Rules continue to apply even where a waybill is subsequently issued, at least in the absence of a contractual variation or some form of waiver or estoppel.

    What is a ‘unit’ for the purposes of the Hague Rules and the Hague-Visby Rules?

    Each piece was approximately 20 to 70 kg, and unpackaged. The carrier argued that the individual tuna pieces could not be said to constitute ‘units’ because they could not have been shipped breakbulk (e.g. in a reefer vessel) without further packaging. The Court rejected the carrier’s argument: the individual tuna pieces were ‘units’ whether or not they could have been shipped breakbulk without any further packaging.

    The only relevant question is therefore whether individual physical items have been packaged together. If so, the individual items are not units, but instead form part of a single package: Bekol B.V. v. Terracina Shipping Corporation (‘The Jamie’) (unreported, 13 July 1988). If not, each physical item is a ‘unit’. Containers will not constitute a ‘package’, in light of the decision of the Court of Appeal in The River Gurara [1998] 1 Lloyd’s Rep. 225. On the facts of The Maersk Tangier, the individual pieces of ‘tuna’ were therefore ‘units’.

    El Greco and enumeration of cargo under Article IV.5(c)

    Article IV.5(c) of the Hague-Visby Rules provides that “Where a container, pallet or similar article of transport is used to consolidate goods, the number of packages or units enumerated in the bill of lading as packed in such article of transport shall be deemed the number of packages or units for the purpose of this paragraph as far as these packages or units are concerned.” What is required for the number of packages or units to be sufficiently enumerated for the purposes of the rule?

    Prior to the judgment at first instance, the only available guidance on this point had been the decision of the Federal Court of Australia in El Greco v. Mediterranean Shipping. In that case, the majority held that the rule required it to be clear from the face of the bill of lading not only how many items were contained within a container, but also whether those items had been packaged together. For that reason, a bill of lading that simply referred to “1 container said to contain 200,945 pieces” was not a sufficient enumeration: it did not enumerate the number of pieces of cargo in the container “as packed”.

    Like Andrew Baker J, the Court of Appeal declined to follow the reasoning of the majority, holding that Article IV.5(c) did not require enumeration of the cargo “as packed”. It merely required that the number of packages or units inside the container be accurately stated in the bill of lading. In this case, the waybills stated that the containers contained a certain number of pieces of tuna. Each piece of tuna was in fact a ‘unit’. The waybills therefore accurately enumerated the number of units in the containers.

    Robert and Ben were instructed by Simon Culhane, Clyde & Co LLP.

    A copy of the judgment can be found here

     

    Robert Thomas QC 

    Robert's practice has moved from strength to strength since taking silk in 2011. He retains a strong presence in the traditional areas of his practice and has recently complemented this with substantial experience in commercial fraud and related relief. He is ranked as a Leading Silk in the latest editions of both directories, and has been praised in previous editions for having a "fantastically effective and intellectual style", for "consistently deliver[ing] a first-class service" and for his ability to handle "difficult cases on a tight timetable". He is a registered practitioner in the DIFC and is also receiving an increasing number of appointments as an arbitrator.

    > view Robert's profile
    robert.thomas@quadrantchambers.com  

    Benjamin Coffer

    Ben's broad international commercial practice has a particular emphasis on commodities, insurance / reinsurance and shipping. He appears as sole and junior counsel in the Court of Appeal, the Commercial Court and the London Mercantile Court, and before arbitral tribunals under the rules of many different international organisations including the LMAA, the LCIA, the ICC, the SIAC, the HKIAC, the Swiss Chambers' Arbitration Institution, FOSFA and GAFTA. 

    Ben is described by the directories as “a standout shipping and commodities junior" (Chambers & Partners, 2018), "a rising star" (Legal 500, 2017) and “a star of the future” (Chambers & Partners, 2017). He is also recognised as a leading junior in the Legal 500 Asia Pacific Guide.

    > view Ben's profile 
    benjamin.coffer@quadrantchambers.com 

  • Guy Blackwood QC and Robert-Jan Temmink QC feature in the latest Legal 500 EMEAView More

    Mon, 16 April, 2018

    Guy Blackwood QC and Robert-Jan Temmink QC feature in the 'The English Bar: Commercial' section of the latest Legal 500 EMEA edition. Guy Blackwood QC is noted for his work in the Dubai World Tribunal and DIFC on matters including insurance coverage of property damaged during the overthrow of the government of Hosni Mubarak in Egypt in 2011. Robert-Jan Temmink QC appears in DIFC cases and arbitrations ranging from civil fraud through to aviation.

    Quadrant Chambers receives over 140 recommendations across the latest Legal 500 UK, Asia-Pacific and EMEA guides in areas including aviation, banking, commercial, commodities, energy, financial services, fraud, insurance and reinsurance, international arbitration, shipping and travel. 

  • Lady M - fire, fraud and Hague-Visby exemptions - Robert Thomas QC & Benjamin CofferView More

    Fri, 06 April, 2018

    Case Note on the LADY M

    Maybe because it was handed down just before Christmas or because the subject matter, barratry, may not be common, the decision of Popplewell J in the Lady M [2017] EWHC 3348, [2018] 1 Ll RP 22 has as yet attracted little attention. It does, however, merit consideration not least because of the wider implications of the judgment for the construction of the Hague/Hague-Visby defences and because it reminds us yet again of the difficulties that can arise on the trial of preliminary issues.

    The Case

    The case concerned a fire in the engine room of Lady M whilst she carrying a cargo of 62,250MT of fuel oil from Russia to the US. The fire did not take hold but was said to have been sufficient to immobilise the vessel such that salvage services were required and cargo interests incurred a substantial liability to the salvors. In these proceedings, cargo interests sought to claim that sum (together with associated costs and expenses) from Owners, together with a declaration of non-liability for general average. Owners counterclaimed a general average contribution.

    In Owners’ defence, it was admitted that the fire had been started deliberately by a member of the crew with the intent to cause damage. Owners further contended that the culprit was the Chief Engineer and that at the time that he set the fire he was under extreme emotional stress and/or anxiety due to the illness of his mother, alternatively suffering from an unknown and undiagnosed personality order and/or mental illness.

    On the basis of this admission and a set of further facts agreed for the purposes of the preliminary issues, at the CMC the Court ordered the trial of three preliminary issues, namely:

    1. Whether the Chief Engineer’s conduct constituted barratry;
    2. If so, whether Owners were precluded from relying on the exception found in Article IV Rule 2(b) for “fire”;
    3. If so, whether Owners were precluded from relying on the exception found in Article IV Rule 2(q) for “any other cause arising without the actual fault or privity of the carrier or without the fault or neglect of the agents or servants of the carrier…”.

    On the first of these issues, having accepted at the CMC that the question posed was capable of being answered on the basis of the agreed/assumed facts, by the time of the trial, Owners contended that the Court could not in fact answer the question on the basis of their proposed definition of barratry which required an intentional fraud or crime.

    Whilst the Judge rejected Owners’ argument in this regard and held that it is not necessary for the wrongful act to amount to a crime and a “fraud” is sufficient to constitute the relevant wrongdoing, he held that there must be a knowing breach of duty owed to Owners (or at least recklessness in this regard).  He defined barratry as (i) a deliberate act or omission by the master, crew or other servant of the owners; (ii) which is a wrongful act or omission; (iii) to the prejudice of the interests of the owner of the ship or goods (whether or not prejudice is intended); (iv) without the privity of the owners.  But in order for the act or omission to qualify as wrong for the purposes of (ii), it must be (a) what is generally regarded as a crime, including the mental element necessary to make the conduct criminal; or (b) a serious breach of duty owed by the person in question to the shipowners, committed by him knowing it to be a breach of duty or reckless whether that be so.

    On this basis and given that Owners’ case had morphed into what was in effect a defence of insanity, he went on to hold that he could not decide the preliminary issue on the basis of the assumed/agreed facts and that the answer depended on further facts as to his state of mind which had not been agreed or assumed.  In so holding, the Judge observed that preliminary issues which are to be determined on the basis of agreed or assumed facts are in principle capable of being answered in three ways, namely “yes”, “no” or “it depends on further facts which are outside those which have been agreed or assumed”.

    It was in answering the two further issues, namely the scope and application of exceptions contained in Article IV Rule 2, that the Judge made some important findings as to the correct approach to construction of those exceptions.

    In this regard, cargo interests argued that the exceptions contained within Article IV Rule 2 which were based on a series of exceptions commonly used in bills of lading before the advent of the Hague Rules, should be construed against that background and thus restrictively interpreted (as they would have been at the time). Such an approach was supported by various textbooks including the current edition of Voyage Charters and discussions recorded in the travaux preparatoires which indicate that the intention was to adopt certain of the existing exceptions commonly used by, in particular, British shipowners (which would be narrowly construed at common law) but to exclude others.

    Owners argued that, based on cases such as the Limnos [2008] 2 Ll Rep 166 (which addressed provisions other than the exceptions in Article IV Rule 2), the correct approach to construction was to ascertain the ordinary meaning of the words used and to reject any reliance on the pre-existing English authorities or indeed the approach to construction which was relevant at the time that the exceptions were adopted.

    Judgment

    In his Judgment (but without much discussion), the Judge preferred Owners’ approach.  He nevertheless also found that where there are words or expressions which had received judicial interpretation as “terms of art”, the words may be presumed to have been used in the sense already judicially imputed to them. He continued that the words must, however, be given their plain meaning without concern as to whether that involved altering the previous law.

    Applying this approach, the Judge found that the word “fire” meant fire without any qualification about how the fire started, such that it covered deliberately started fires as well as those accidentally or negligently caused.   Oddly, the Judge went on to find support for his finding in (amongst other things) various English cases considering the meaning of fire as an insured peril and all of which post-dated the Hague Rules.  He also found that the fact that an express exemption for barratry had, by common consent, been removed from the list of permitted exceptions at the Hague Conference did not prevent a barratrous fire falling within Rule 2(b).

    As the reader will appreciate, the Judge’s conclusions have a wider significance and raise a number of important issues relevant to the exceptions listed in Article IV Rule 2. Is it right, for example, that, in interpreting a set of Rules which were expressly intended to restrict the power of shipowners to limit or contract out of liability altogether, the Courts should give the exceptions to liability a wider scope than they would have had at the time that the Rules were agreed?  How do you determine whether a word or expression is a “term of art”?  And is it right that subsequent English caselaw has any relevance at all?  The answers to these questions are not easy and will be the subject of further consideration in the Court of Appeal in this case and quite possibly by the Supreme Court in the upcoming hearing in Volcafe

    Finally

    The Judge considered the scope of Article IV Rule 2(q). In so doing, he expressed “an instinctive hostility” towards interpreting the terms of the exception by reference to the English principles governing vicarious liability, as Owners submitted he was compelled to do by reason of the Court of Appeal’s Judgment in The Chyebassa.  He expressed a preference for a test which focused on whether the conduct in question occurred in the course of the servant or agent performing a function that he was performing on behalf of the shipowner, deriving his authority to perform it directly or indirectly through contracts of agency or employment.  However, he was able to avoid dealing with the issue by finding (without hesitation) that, whatever the correct test, Owners could not rely on the exception.

    Robert Thomas QC 

    Robert's practice has moved from strength to strength since taking silk in 2011. He retains a strong presence in the traditional areas of his practice and has recently complemented this with substantial experience in commercial fraud and related relief. He is ranked as a Leading Silk in the latest editions of both directories, and has been praised in previous editions for having a "fantastically effective and intellectual style", for "consistently deliver[ing] a first-class service" and for his ability to handle "difficult cases on a tight timetable". He is a registered practitioner in the DIFC and is also receiving an increasing number of appointments as an arbitrator.

    > view Robert's profile
    robert.thomas@quadrantchambers.com  

    Benjamin Coffer

    Ben's broad international commercial practice has a particular emphasis on commodities, insurance / reinsurance and shipping. He appears as sole and junior counsel in the Court of Appeal, the Commercial Court and the London Mercantile Court, and before arbitral tribunals under the rules of many different international organisations including the LMAA, the LCIA, the ICC, the SIAC, the HKIAC, the Swiss Chambers' Arbitration Institution, FOSFA and GAFTA. 

    Ben is described by the directories as “a standout shipping and commodities junior" (Chambers & Partners, 2018), "a rising star" (Legal 500, 2017) and “a star of the future” (Chambers & Partners, 2017). He is also recognised as a leading junior in the Legal 500 Asia Pacific Guide.

    > view Ben's profile 
    benjamin.coffer@quadrantchambers.com 

  • Arbitration Blog: Interim court assistance in arbitral proceedings under s44 - Jonathan ChambersView More

    Wed, 04 April, 2018

    A reducing or expanding jurisdiction? 

    (This blog was first published on the Practical Law Arbitration Blog on 26 March 2018. To view the original post. please click here.)

    The English courts have traditionally followed the principle of non-intervention in arbitral proceedings. This non-interventionist stance was given statutory force under section 1(c) of the English Arbitration Act 1996 (AA 1996), which provides that “the court should not intervene except as provided by [the Arbitration Act 1996]”.

    However the AA 1996 provides for such intervention under sections 42 (enforcing of peremptory orders of the arbitral tribunal), section 43 (securing the attendance of witnesses), section 44 (interim remedies) and section 45 (determination of a preliminary point of law by the court).

    Court intervention is generally subject to the precondition that the parties have not agreed to dispense with such court powers of intervention, either in their arbitration agreement or subsequently. It is also dependent on the relief sought being shown to be “urgent” in the case of interim remedies.

    Section 44 is the most common route under which court intervention is sought. It generally takes the form of an application made as a matter of urgency for either a freezing injunction (section 44(2)(e)), an order for the inspection, photographing, preservation, custody or detention of the property (section 44(2)(c)) (sometimes known as a “Vasso Order”) or for the preservation of evidence (section 44(2)(b)).

    Additionally, in the context of carriage of goods, an order for the sale of property, “the subject of the proceedings”, may also be sought under section 44(2)(d). This latter application is generally sought where goods are deteriorating or are liable to deterioriate, or where their continued presence is likely to incur storage and other costs, or where such goods have been abandoned or discharge has not been effected.

    A section 44 application is made under CPR 62 and by way of an arbitration claim form (Form N8). It can provide a party to an arbitration agreement with a speedy and powerful weapon with which to preserve the status quo, pending the appointment of an arbitral tribunal or once it has been constituted.

    Two very recent cases demonstrate that:

    • The English courts will be willing to accede to an application for interim relief under section 44 where such relief is required urgently and where such relief is sought solely against a party to the arbitration agreement, albeit it will have an effect on others: Dainford Navigation Inc v PDVSA Petroleo SA “Moscow Stars” (order for sale of goods subject to a lien granted).
    • The English courts will not ordinarily grant relief under section 44 against third parties and in particular not against those who are based abroad: DTEK Trading SA v Mr Sergey Morozov and another “MV MBA Rosaria” (order for the preservation of evidence against a third party out of the jurisdiction refused).

    The Moscow Stars

    In Moscow Stars, Males J ordered the sale of a cargo of crude oil belonging to charterers, which was being carried on board the owners’ vessel. The owners had already exercised a contractual charterparty lien over that cargo and had commenced arbitration proceedings in respect of unpaid sums due under the charterparty.

    Males J held that, even if the arbitration was not directly “about” the cargo or its ownership, the arbitral award would determine what was to happen to that cargo, depending on whether or not the owner’s claims succeeded in arbitration. Section 44 did not give the English courts “power to make a free-standing order for sale as a form of independent relief”. The power was limited to a case where the goods were “the subject of the proceedings”. A paradigm case is where the ownership of goods is in dispute. However, the wording, “the subject of the proceedings”, was wider and required only a “sufficient nexus between the cargo and the arbitral proceedings”. Males J did not answer the question of whether the position would have been different if the cargo on board the vessel was owned by a third party, not a party to the arbitration.

    MV MBA Rosaria

    In MV MBA Rosaria some further indications were given by the English courts on the issue of whether a section 44 application might be advanced against a third party based outside the jurisdiction.

    The case involved an application, under section 44(2)(b), to preserve evidence in the hands of a non-party based outside England and Wales.

    Sara Cockerill QC held that section 44 of the AA 1996 did not permit the court to make orders against a non-party, and that CPR 62.5(1)(b) did not allow service out against third parties (following the reasoning of Males J in Cruz City 1 Mauritius Holdings v Unitech Ltd).

    Conclusion

    The decision in Moscow Stars is a welcome widening of the jurisdiction of the English courts to assist in arbitrations. However, the decision in MV MBA Rosaria is more problematic. This is because it may produce a lacuna whereby a non-party might take steps to seek to thwart the arbitration agreement, with seemingly no right to obtain injunctive relief against that non-party pursuant to section 44. However, the English court held that such a lacuna was not a good reason for extending the supervisory jurisdiction of the English courts over arbitrations to affect third parties, in particular those abroad.

    As a consequence, an arbitral party may be forced to go abroad and seek what relief it can against the third party using the legal avenues available there. This cannot be in the interests of the parties to the English arbitration, or to a proper and organised supervisory function being exercised by the English court over arbitral proceedings.

    Jonathan Chambers

    Jonathan has a broad practice covering all aspects of commercial and transport law.  

    He is consistently ranked by Chambers UK and Legal 500 as a Leading Senior Junior, with Chambers UK (2018) commenting “A tenacious advocate with an admired intellectual capacity. His redoubtable practice focuses on complex cases involving personal injury and fatality”  and “He is easy to work with and responsive. He quickly identifies the issues”  and Chambers UK (2016) commenting that he is “Noted by peers for his meticulous preparation, strong advocacy skills and easy manner with clients” and Legal 500 (2016) describing him as “Very well prepared”

    Jonathan has a strong international practice and he is qualified to practise in England & Wales, Northern Ireland (practising) and Australia (currently non-practising). He has also advised on disputes involving Australia, Canada, the Channel Islands, Hong Kong, Northern Ireland, Scotland, Singapore, and the United States of America.

    Jonathan has acted in disputes involving many of the major airlines, cruise and tour operators, UK airports and the CAA. He also acts on behalf of shipyards, ship-owners, rig owners, crewing agencies and shipping unions and the Royal Yachting Association. He is involved in a large volume of wet and dry shipping cases including cargo claims, pilotage, collisions and groundings. International ship-building, rig-construction and repair cases are also a strong feature of his practice.

    He frequently acts in inquests involving aviation and maritime incidents and the civil claims which follow.

    > click to view Jonathan's full profile

    jonathan.chambers@quadrantchambers.com

  • Counterparty Insolvency after Angove v Bailey - Jeremy RichmondView More

    Tue, 03 April, 2018

    This article was first published in Butterworth's Journal of International Banking & Financial Law. To access a copy click here

    Key Points

    • Until recently contractual payments to counterparties that had decided to cease trading by reason of their insolvency could be treated as being held on constructive trust by the payee for the benefit of the payer. This provided a degree of protection to the payer in any subsequent competition with the wider body of creditors for the paid sum. Angove’s Pty Ltd v Bailey and another has recently removed, or at least significantly reduced, that measure of protection.
    • The paying party still has a number of potential steps it may take to protect its position in such circumstances.

    Angove’s Pty Ltd v Bailey and another [2016] 1 W.L.R. 3179 held that payments made to a counterparty at a time when it had decided to cease trading as a result of its insolvency are not held on constructive trust for the paying party by that reason alone. The case alters the balance of insolvency risk that the paying counterparty must now consider in its business arrangements. In this article Jeremy considers some of the steps the paying party may take in light of the prospective insolvency of its counterparty.

    Introduction

    In Angove’s Pty Ltd v Bailey and another [2016] 1 W.L.R. 3179, the Supreme Court considered whether the receipt of money at a time when the recipient payee knew that imminent insolvency would prevent it from performing the corresponding contractual obligation, could give rise to a constructive trust in favour of the payer. The Supreme Court found that the answer to this question was no. In so doing the Supreme Court overruled the long established, if controversial case, Nest Oy v Lloyd’s Bank plc [1983] 2 Lloyd’s Rep 658.

    Angove’s Pty Ltd v Bailey and another: the facts in brief

    Angove, an Australian winemaker, had entered into an agreement with D&D Wines International Ltd entitled the Agency and Distribution Agreement (ADA). D&D, as Angove’s agent and distributor under the ADA, purchased wines from Angove in its own right. It also sold wines on Angove’s behalf to UK customers, generally retailers. The ADA was terminable by either side on six months’ notice or by notice with immediate effect on the occurrence of certain events, which included the appointment of a liquidator or administrator.

    D&D entered into administration (and shortly thereafter into creditors’ voluntary liquidation). At the commencement of the administration, it was owed around A$874,928 representing the price of wine which it had sold to two UK wine retailers (the UK retailers). Two days after the commencement of D&D’s administration, Angove gave notice terminating the ADA with immediate effect and sought to terminate any authority of D&D to collect the price from the UK retailers. The notice also declared that Angove proposed to collect the price directly from the UK retailers (under the terms of the ADA) and would account separately to D&D for their commission.

    D&D’s liquidators objected to Angove’s proposed course. They argued that they were entitled to collect the price, deduct commission due to D&D, and leave Angove to prove in the winding up for the rest of the price. They contended that the relationship between D&D and Angove was as buyer/ seller and not as agent/principal. As such, they argued, D&D’s debt to Angove at the commencement of the administration was a simple debt for goods sold and delivered.

    Angove argued that D&D would collect the outstanding amounts from the UK Winemakers as its agent under the ADA. It argued that the price should be paid over to it since D&D’s liquidators’ right to collect the money had been revoked by the termination notice. In the alternative, Angove also argued that any moneys held by D&D for its account were held on trust for Angove. After the termination of the ADA, the price was collected and placed into an escrow account pending the determination of the dispute.

    The decision at first instance

    At first instance (reported at [2013] EWHC 215 (Ch)) the judge held that the relevant relationship between Angove and D&D was as principal and agent and that D&D’s authority to collect the price from customers came to an end upon the service of Angove’s termination notice. In the circumstances, the judge held that Angove was entitled to the moneys in dispute. The judge, however, rejected Angove’s alternative argument that the moneys in dispute were held on trust for Angove.

    The decision in the Court of Appeal

    In the Court of Appeal (reported at [2014] EWCA Civ 215) D&D’s liquidators did not challenge the judge’s finding that D&D acted as agents. They argued that D&D’s authority to collect the price of the wine that it had sold on Angove’s behalf survived termination of the ADA because it needed such (irrevocable) authority in order to recover its commission. The Court of Appeal accepted this argument and allowed the appeal on that basis. In the circumstances, the Court of Appeal held that D&D was entitled to the moneys in dispute. The Court of Appeal also rejected Angove’s alternative case that the moneys in dispute were held on trust for Angove but for different reasons from those of the judge.

    The decision in the Supreme Court

    The Supreme Court (Lord Sumption delivering the unanimous decision of the court) reversed the Court of Appeal’s decision. The Supreme Court accepted that an agent’s authority to collect payment could,in principle, be irrevocable where:

    • the contract expressly or impliedly provided that such authority was irrevocable; and
    • such authority had been given to secure a “relevant interest” of an agent.

    However, the Supreme Court found on the true construction of its terms, the ADA did not provide that:

    • D&D had an irrevocable authority to collect payment on behalf of Angove; and
    • D&D’s right to collect moneys from customers existed in order to protect its interest.

    As such, the Supreme Court found in favour of Angove.

    In such circumstances, the Supreme Court did not have to consider Angove’s alternative case, namely, that D&D held the moneys in dispute on constructive trust for Angove’s benefit. However, in view of the general importance of the point raised, the Supreme Court proceeded to decide the constructive trust point in any event. Strictly speaking, therefore, this part of the decision might be considered obiter dicta and, as such, only persuasive. However, in light of the unanimous nature of the decision and the extensive legal argument on the point before the Supreme Court, it is highly likely that it will be treated as binding authority going forward.

    The constructive trust argument

    In short, the Supreme Court held that if the issue of a constructive trust had been relevant then Angove would have failed on that basis.

    In the Court of Appeal, Angove had relied on the case of Nest Oy v Lloyd’s Bank plc [1983] 2 Lloyd’s Rep 658. It submitted that D&D held the moneys in dispute on constructive trust for Angove. The Supreme Court rejected the submission and in doing so overruled Nest Oy.

    Nest Oy was concerned with a bank’s right to combine accounts of an insolvent shipping agent, PSL, which had been authorised to settle certain third party service-provider debts of its principal, a shipowner, Nest Oy. Nest Oy put PSL in funds from time to time. Sometimes it paid PSL funds in advance; sometimes the payments simply reimbursed PSL for moneys it had paid to third-party service providers on behalf of Nest Oy. PSL entered into insolvency. At this time, it held the unspent balance of six payments that Nest Oy had paid into its (PSL’s) general account. On the particular facts of the case the Judge (Bingham J) rejected Nest Oy’s argument that the first five of the six payments were held on trust by reason of a principal/agent relationship or on the basis of a special purpose (or Quistclose) trust. Bingham J did hold, however, that PSL held the sixth payment on constructive trust for Nest Oy. It was found as a matter of fact that PSL had received the sixth payment after its directors had concluded that their company was insolvent but before PSL had in fact entered into formal insolvency. Bingham J considered that equity demanded that the sixth instalment be repaid to the shipowner since “it would have seemed contrary to any ordinary notion of fairness that the general body of creditors should profit from the accident of a payment made at a time when there was bound to be a total failure of consideration:” at p 666 of the law report [emphasis supplied]. That is, there was no prospect of PSL paying the sixth payment on to the third-party service-providers. Since on the findings of fact the bank had been put “on enquiry” of the constructive trust, Bingham J held that the sixth payment was not subject to the bank’s right of combination.

    The Supreme Court held that Nest Oy was wrongly decided. In order to show a constructive trust it was a necessary, but not necessarily a sufficient, condition to show that “… where money is paid with the intention of transferring the entire beneficial interest to the payee, the least that must be shown in order to establish a constructive trust is (i) that the intention was vitiated, for example, because the money was paid as a result of a fundamental mistake or pursuant to a contract which has been rescinded, or (ii) that irrespective of the intentions of the payer, in the eyes of equity the money has come into the wrong hands, as where it represents the fruits of a fraud, theft, or breach of trust or fiduciary duty against a third party” p 3193A-C of the law report. The Supreme Court observed that neither of the necessary conditions applied in Nest Oy. Lord Sumption noted that the prospect of a total failure of consideration was not a circumstance that could be said to “vitiate” the payer’s intention so as to give rise to a constructive trust. This was a fortiori in light of the fact that an actual failure of consideration could not give rise to such a constructive trust. Moreover, Lord Sumption observed that it could not be unconscionable for a party to receive moneys to which it was contractually entitled in any event. Applying this analysis to Angove itself, Lord Sumption held that there would have been no such constructive trust in favour of Angove as contended for by Angove.

    The Supreme Court considered that a potentially better basis for the decision in Nest Oy would have been mistake; namely, that the shipowner had paid the agent in the mistaken belief that the agent was in a position to disburse the payments to the third party service-providers. Lord Sumption expressed no firm view on the point stating in respect of the matter that:

    “Whether that is correct is not a question that arises on this appeal”

    p 3193F of the law report. Lord Sumption noted that on the footing on which Angove’s alternative constructive trust case was considered by the Supreme Court (namely, that D&D had the relevant authority to collect the proceeds of the invoice) the UK retailers’ belief was not mistaken. The UK retailers had paid the moneys to D&D in the belief that D&D was authorised to collect the proceeds of the invoice.

    The commercial consequences of Angove

    Payment to a prospectively insolvent counterparty made at a time when there is bound to be a total failure of consideration by its non-performance of its obligations will no longer, in itself, give rise to a constructive trust over the paid amount. Of course, a constructive trust may arise in respect of such payment on some other basis, eg by reason of a special purpose trust or (possibly) by reason of mistake. However, assuming no other basis exists, the paying party now faces a greater insolvency risk than perhaps was hitherto thought to be the case.

    Some potential ways to address the increased risk

    While each case must be considered on its facts there are some practical and strategic measures that a party should consider taking in order to protect its position when making payments to a party that may be on the cusp of insolvency.

    Early warning-signs/first-mover advantage

    It is important that vigilance is maintained for any early warning signs of a prospective counterparty’s insolvency including the non or late payment of debt; legal proceedings or judgments against the counterparty, and the late filing of statutory accounts. Regular credit checks, via credit reference agencies, of counterparties are of course highly advisable. First-mover advantage, whether in the exercise of contractual rights or other remedies, may often minimise, or extinguish, the insolvency risk. If Angove had exercised its right to direct payment from the UK retailers under the ADA before, or immediately after, the ADA’s termination, the litigation could possibly have been avoided.

    Check the existing contract

    There may be provisions in the contractual documentation to provide that moneys are paid directly to a party down the contractual chain effectively cutting out the prospectively insolvent party. Conversely, there may be contractual provisions for a party to intervene and collect monies owed it directly from a party up the contractual chain (again cutting out the prospectively insolvent party from receiving the moneys at all). Without entering into the fierce controversy as to the true legal or equitable nature of sub-freight liens in maritime charterparties, the right of intervention of a shipowner to collect freight directly from a sub-charterer might be considered an example of such a right of intervention. In any event, in order to achieve effectiveness any such contractual remedies will likely have to be exercised promptly upon learning of the prospective insolvency of the counterparty.

    Security/quasi-security

    There is always the option of considering taking security or quasi-security to secure the repayment of sums paid to a prospectively insolvent counterparty. Security taken from a counterparty shortly before its insolvency will, however, almost certainly come under the scrutiny of the insolvent counterparty’s liquidator/ administrator under the claw back/set aside provisions of the Insolvency Act 1986 to the extent English law applies.

    Use of insolvency set-off where it is available

    Insolvency set-off provides that mutual debts are automatically set-off against each other on the commencement of liquidation or administration so that only the balance due to the solvent party is provable in the insolvency. Upon the discovery of an impending insolvency of a counterparty, the solvent counterparty should consider whether he can give or take assignments of debts from any associated or group company so as to reduce the risk of exposure on the insolvency of the counterparty. So take, as an example, an instance where A and B are associated parties and C is a prospective insolvent party who has contractual dealings with both A and B. If A is owed £100 by C; and B owes C £100, then on C going into liquidation:

    • B would have to pay C’s liquidator £100; and
    • A would have to prove in C’s liquidation (possibly for a few, if any, pennies in the pound).

    If, however, before C going into liquidation, A assigned the £100 debt to B, then B could set-off the credit against its own £100 debt to C thus extinguishing in effect its debt. Meanwhile, A would not be left as an unsecured creditor in C’s liquidation. However, in order to take advantage of insolvency set-off, any assignment must generally occur before the insolvency.[1] In the circumstances, it is even more important that vigilance is maintained for any early warning signs of a prospective counterparty insolvency.

    Conclusion

    Angove has increased the risk of parties making payments to counterparties that may be on the cusp of insolvency. Prudent commercial parties would be well advised to review and revise (as necessary):

    • their contractual documentation; and
    • their current strategy in mitigating such risks.
     

    [1] The position may be different where there is a cross-border insolvency element. If the prospectively insolvent counterparty enters into insolvency outside of Great Britain and subsequently has its insolvency recognised in Great Britain under the Cross-Border Insolvency Regulations 2006, it is an open point whether for the purposes of insolvency set-off, the relevant date is: (i) the date of the foreign insolvency; or (ii) the date of recognition in Great Britain of the foreign insolvency: Larsen v Navios [2012] Bus LR 1124 at 1130F.

    Jeremy Richmond

    Jeremy specialises in commercial and modern chancery law.  He is described in Chambers and Partners as a “superb advocate” whose “expertise in chancery, commercial and banking matters is a useful complement to his insolvency skills”. 

    Jeremy’s practice encompasses a broad range of commercial chancery and insolvency matters. He has a specialisation in cross-border insolvency issues particularly in relation to the shipping, commodities, insurance and aviation sectors. Jeremy has advised and / or appeared for key parties in OW Bunker, Hanjin Shipping, STX Pan Ocean and Arik Airlines. Jeremy's practice also encompasses company law (including directors misfeasance), shareholder and joint venture disputes, sale of goods (both international and domestic), fraud (with an emphasis on asset recovery) and all aspects of general commercial law.  He regularly appears in the Chancery Division as well as in the Commercial and Mercantile Courts.  Jeremy often works in conjunction with Counsel from other jurisdictions and with experts. 

    Many of his cases involve a cross-over between ‘modern’ chancery and commercial litigation. 

    Jeremy was admitted to the New York Bar in 1996 and has worked as a New York lawyer for blue chip law firms in Manhattan and then the City.  

    > view Jeremy's full profile

    jeremy.richmond@quadrantchambers.com 

  • Court clarifies the meaning of “always accessible” - Ben GardnerView More

    Wed, 28 March, 2018

    Seatrade Group NV v Hakan Agro DMCC, “The Aconcagua Bay”

    In a clear and concise decision on 26 March 2018 by Knowles J on an arbitration appeal, the Court determined the meaning of a well worn phrase found in voyage charterparties: berth warranted “always accesssible”.  This warranty has been in circulation for more than 30 years and a number of reported decisions have considered what it means in the context of vessels attempting to reach a berth, and in particular what sort of obstacles will put the charterer in breach of the warranty (see for example The Kyzikos).

    A less well understood aspect of the warranty is its temporal scope.  Must the berth be “always accessible” on arrival, so that it is effectively synonymous with “reachable on arrival”, or must the berth be capable of being reached and departed from?  This question had arisen once before in London Arbitration 11/97, where the tribunal gave the answer that “always accessible” meant “always reachable”.  The umpire in the present case reached the same view on the basis that “accessible” naturally means “reachable”.  This conflicted with the view of the authors of the BIMCO Laytime Definitions (2013) and the Baltic Code (2014), who considered “always accessible” to be a warranty covering both arrival at the berth and departure from the berth. 

    The facts of the case were straightforward.  The vessel was unable to leave the berth on completion of loading because a lock had broken.  The owners sued for damages for breach of the “always accessible” clause.  Knowles J held that there was a breach of contract .  He considered that “accessible” could sensibly mean “usable” and not just “reachable”.  The word “always” was an important qualifier, particularly in the context of the adjacent clause “always afloat”, which was a warranty covering the whole time that the vessel was in berth.  The decisive point for the Judge was that a commercial party looking at the subject of berthing would bear all aspects in mind and not confine itself to getting into the berth, so that the clause covered departure from the berth.

    This decision therefore resolves the tension between London Arbitration 11/97 and the BIMCO and Baltic laytime definitions.  It is now fairly clear that a charterer who warrants that a berth is “always accessible” promises that the vessel can leave the berth when cargo operations are complete.  Charterers who want to give a narrower warranty should stick to “reachable on arrival”.

    Nevil Phillips and Ben Gardner were instructed by Alex Davey and Tom Hodges of Birketts LLP for the shipowners.

    Click here for a copy of the judgment.

    Ben Gardner

    Ben practises primarily in shipping, commodities and international trade, energy, insurance and conflict of laws, within a broad commercial practice.  He is recommended as a leading junior by Chambers & Partners and the Legal 500 for his shipping and commodities work, where he is described as "Very clever and a very good advocate", "An excellent barrister, who is precise, commercial and practical in his focus and forceful and effective in his arguments", "very impressive", "A super-bright guy who is very accessible and easy to work with", "a great junior counsel and very user-friendly" and "mature beyond his years" .

    Ben often appears in the High Court and in the Court of Appeal, as sole counsel and as part of a counsel team.  He has also appeared in the Supreme Court twice and acted on a number of recent, important cases including:

    • Fulton v Globalia (The New Flamenco) [2017] 1 WLR 2581 (SC), with Simon Croall QC: Ben acted for the Respondents on the appeal to the Supreme Court an important judgment on the scope of mitigation in the law of damages, relating to whether the benefit of selling a cruise ship two years early is an act of mitigation.
    • Stemcor UK v Global Steel Holdings (Commercial Court, 2018): Ben acted for the successful claimant creditors in their claim for US$165m against the guarantors of a coke manufacturer.
    • Containerships Denizcilik v Shipowners' Mutual (The Yusuf Cepnioglu) (SC) (2017), with Chriag Karia QC: Ben acted for the insurers in an appeal to the Supreme Court which settled in October 2017 relating to the availability of anti-suit injunctions in support of an arbitration agreement against a direct action claimant.
    • Versloot Dredging v HDI Gerling (The DC Merwestone) [2017] AC 1 (SC), with Colin Edelman QC: an important insurance case in which the Supreme Court overturned settled authority and held that there is no defence of fraudulent device in an insurance policy.  Ben also acted in the trial and in the Court of Appeal. 
    • Yemgas v Superior Pescadores (The Superior Pescadores) [2016] All ER (Comm) 104 (CA), with David Goldstone QC: the leading authority on the interpretation of paramount clauses and the meaning of ‘Hague Rules as enacted’ in bills of lading and charterparties.
    • South West SHA v Bay Island Voyages (The Celtic Pioneer) [2015] Lloyd’s Rep. 652 (CA), with Simon Kverndal QC: an key recent decision by the Court of Appeal on the scope of the Athens Convention on Carriage of Passengers by Sea and the nature of the limitation defence.
    • MOL v Salgaocar [2015] 2 Lloyd's Rep. 518 (Commercial Court): Ben was successful at trial in obtaining judgment for US$14m in a claim under a guarantee that raised issues of enforceability of guarantees, the interaction between claims against a debtor and guarantor, and the calculation of damages for repudiation of a long-term time charter.

    > view Ben's full profile

    ben.gardner@quadrantchambers.com

    Nevil Phillips

    Nevil Phillips is among the most highly-regarded advocates at the Commercial Bar. He has consistently been listed for many years as a first-ranked Leading Junior in Shipping, Commodities, and Trade & Customs by The Legal 500, Legal 500 Asia Pacific, Chambers UK, Chambers Global, Who's Who Legal, and Best Lawyers where he has been variously cited as: “Absolutely top-notch”; “User-friendly, innovative, proactive, and the best advocate money can buy.”; "Excellent. Extremely approachable and very bright"; "an outstanding advocate, incredibly fast thinking and a real problem solver"; "a very polished advocate, who gets results through his preparation and through his clear and compelling presentation of the client's case".

    Nevil was the winner of the Chambers & Partners UK Bar Award for Shipping Junior of the Year 2017, was shortlisted for that award in 2016 and was shortlisted for the Legal 500 award for the Leading Shipping Junior of 2017, and was Acquisition International's "Best Shipping Barrister – UK" in their 2015 Legal Awards.

    Nevil's practice envelops all aspects of commercial and shipping advisory and advocacy work, encompassing the broadest spectrum of contractual, international trade, commodities, shipping, maritime, energy, insurance, reinsurance, banking, and jurisdictional disputes and associated areas and remedies. He appears regularly in commercial arbitration (both domestic and international, with experience before a wide variety of arbitral institutions, bodies and trade associations, including LMAA, GMAA, LCIA, ICC and associated bodies), the Commercial Court, and the appellate courts.

    Nevil has featured as successful counsel in countless high-profile commercial and shipping cases, both before the Courts and in International Arbitration.

    Examples of Nevil’s reported cases include Regulus Ship Services Pte Ltd v Lundin Services BV [2016] EWHC 2674 (Comm) (one of the most important new decisions in the field of international towage), SBT Star Bulk and Tankers (Germany) GmbH Co KG v Cosmotrade SA (The Wehr Trave) [2016] EWHC 583 (Comm) (the leading case regarding the scope of charterers' rights under a time charter trip), Spar Shipping AS v Grand China Logistics Holding (Group) Co Ltd [2015] EWHC 718 (Comm) and [2016] EWCA Civ 982 (the leading case regarding renunciation under time charters and whether payment of timely advance hire is a condition), and Libyan Navigator Ltd v Lamda Maritime Holdings Sp. z. o. O [2014] EWHC 1399 (Comm) (the leading case regarding the interpleader procedure in the context of liened sub-hires and sub-freights).

    > view Nevil's full profile

    nevil.phillips@quadrantchambers.com

  • JUDGMENT: The BALTIC STRAIT - Cargo Claims - Robert Thomas QCView More

    Tue, 27 March, 2018

    In a Judgment handed down on 23 March 2018, Andrew Baker J addressed a number of issues which will be of interest to cargo claimants and their insurers when considering whether and to what extent it is necessary to bring claims both under a charterparty and bills of lading in relation to cargo damage covered by both.

    The facts were as follows. The arbitrators had found the respondent shipowners ("Owners") liable under bills of lading for damage to 249,250 boxes of fresh bananas shipped from Guayaquil, Ecuador to Tripoli in Libya in the amount of US$4,567,351.13, this being the difference between the value of the cargo as discharged and its value on arrival in sound condition.

    Altfadul, as holders of the bills of lading, had initially sought to reject the cargo under their sale contract with their CIF sellers, Co.Ma.Co. S.p.A. (‘CoMaCo’), who had voyage chartered the carrying vessel directly from Owners.

    CoMaCo later allowed a credit of US$2,586,105.09 in subsequent cargo sales to Altfadul, spread over three shipments, with the intention of thereby giving Altfadul the benefit of the cargo insurance payment made by SIAT.The arbitrators held, however, that this credit had been by way of settlement of the dispute under the sale contract and, whilst noting that the amount of the credit was almost exactly the same as the cargo insurance proceeds, they fell short of finding it to be an insurance payment on the evidence before them.

    The arbitrators nevertheless held that Altfadul could recover CoMaCo’s loss (ie the loss suffered when CoMaCo gave credit to Altfadul) by virtue of s.2(4) of the Carriage of Goods by Sea Act 1992 ("COGSA 1992").An Award was, therefore, made in the full amount of the loss.

    On appeal under section 69 of the Arbitration Act, Owners sought to challenge the finding that Altfadul was entitled to claim the loss suffered by CoMaCo on two grounds:

    1. On the basis that s.2(4) only operates where rights of suit were previously vested in the party suffering the relevant loss but it has lost them by virtue of the operation of s.2(1) of the Act;

    2. On the alternative basis that s.2(4) does not permit the bill of lading holder to claim charterers’ losses under the bill of lading. This argument was based on the decision in The Dunelmia [1970] 1 QB 289, pursuant to which the bill of lading would normally be a mere receipt in the hands of the charterers.

    For its part, Altfadul submitted that Owners were wrong on both counts but that in any event the Award should be upheld because Altfadul were entitled to damages equal to the full value of the cargo damage as a matter of English common law, irrespective of any recovery or entitlement to recover from their seller.

    In his Judgment, Andrew Baker J dealt first with the last of these issues.Cargo interests relied on the decision of Goddard J (as he then was) in R&W Paul Ltd v National Steamship Co Ltd (1937) 59 Ll L Rep 28 (as supported by other cases and textbooks) to argue that, irrespective of the later payments by CoMaCo, they were nevertheless entitled to recover damages in full and would hold any balance on trust.Owners sought to argue that the principle in that case was circumscribed by The Sanix Ace [1987] 1 Lloyd’s Rep 465, such that, in circumstances where the loss was not directly suffered by the bill of lading holder, he could only recover loss suffered by another if he had owned or was entitled to immediate possession of the cargo at the time it was damaged (an issue which had not been directly dealt with in the Award).

    The Judge dismissed Owners’ argument and found that, far from supporting their case, the decision in The Sanix Ace supported cargo interests’ argument.In his view, the decision in R&W Paul was not confined by The Sanix Ace to a case where the claimant was the owner of the cargo (or entitled to possession) when it suffered damage.That issue had been relevant on the facts of The Sanix Ace because the voyage charterer claimed full damages under the voyage charter although (a) it was not the receiver or end purchaser of the cargo and (b) it had been paid in full by the receivers and end purchasers to whom it had sold the cargo. Hobhouse J upheld an award of full damages because even though the charterer in that case did not feel loss by receiving damaged rather than sound goods, it had owned the cargo when it suffered damage and that sufficed.The Judge held that, viewed in this way, the decision in The Sanix Ace extended rather than confined the earlier decision.

    The Judge also noted that reading the cases in this way led to what he considered to be a pleasing coherence or symmetry between R&W Paul and The Sanix Ace, whereby (if one assumes title to sue in contract), the carrier is liable for full damages if sued by:

    i) the receiver who, by reason of the carrier’s breach, receives damaged rather than sound goods (R&W Paul); or

    ii) a claimant who did not receive the damaged goods but who owned the goods when they were damaged by the carrier’s breach (The Sanix Ace).

    As he observed, recovery can be made in each case irrespective of how financial loss reflecting or resulting from the cargo damage is or comes to be distributed across the sale of goods chain. The former sues as the owner of the damaged goods since, but for the breach, he would have been the owner of undamaged goods; the latter sues as the owner whose sound goods were damaged. In either case, it is the property in the goods that carries the right to recover full damages – the R&W Paul receiver’s property in damaged goods that he should have received undamaged, the Sanix Ace claimant’s property in the undamaged goods when they were damaged.

    Having thus resolved the appeal, the Judge nevertheless went on to consider Owners’ arguments under section 2(4) of COGSA.

    With regard to Owners’ first argument, namely that in order for section 2(4) to operate at all the rights of suit vested in the bill of lading holder must have been previously vested in the party suffering loss, the Judge found that there was nothing in the statutory language to suggest that s.2(4) was indeed so narrow. As he noted, it would have solved only half the problems it was meant to address.In particular, it would not have addressed cases where the loss had been suffered by a party below the bill of lading holder in the chain of dealings.The Judge further noted that, had that been the intention, it would have been extraordinary for s.2(4) not to have been drafted in such terms, or by reference to s.2(5), which deals expressly with the loss of rights resulting from the operation of s.2(1).

    With regard to Owners’ second argument, namely that section 2(4) does not permit the bill of lading holder to claim charterers’ losses under the bill of lading, the Judge agreed with Owners.He held that the question posed by s.2(4) is to what extent the rights of suit vested by s.2(1) in the bill of lading holder could have been exercised by the party which had suffered the loss, if those rights had been vested by s.2(1) in them.Based on the authority of The Dunelmia, he concluded that the answer was “not at all”.In other words, because the bills of lading would usually constitute a receipt in charterers’ hands, they would not be entitled to recover anything under the bill of lading contracts.

    Permission to appeal was refused.

    Robert acted for the cargo interests, instructed by Richard Mabane and Alessio Sbraga at HFW. 

    Click to download the judgment.

    Robert Thomas QC

    Robert's practice has moved from strength to strength since taking silk in 2011. He retains a strong presence in the traditional areas of his practice and has recently complemented this with substantial experience in commercial fraud and related relief. He is ranked as a Leading Silk in the latest editions of both directories, and has been praised in previous editions for having a "fantastically effective and intellectual style", for "consistently deliver[ing] a first-class service" and for his ability to handle "difficult cases on a tight timetable". He is a registered practitioner in the DIFC and is also receiving an increasing number of appointments as an arbitrator.

    > view Robert's profile
    robert.thomas@quadrantchambers.com

  • Proprietary Rights & Assignments: Proposed New EU Conflict of Laws Regulation - Michael McParland QCView More

    Tue, 20 March, 2018

    On 12 March 2018, the European Commission published a proposal for a new EU regulation on the law applicable to the third-party effects of assignment of claims (COM (2018) 96 Final), which involves issues of vital importance for businesses and banks engaged in cross-border financing, especially in the fields of factoring, collateralisation and securitisation. The Commission’s proposal seeks to deal with one of the glaring omissions in the existing EU conflict-of-law rules relating to contractual assignments that are found in the Rome I Regulation (593/2008).

    Currently Article 14 of the Rome I Regulation (entitled ‘voluntary assignment and contractual subrogation’) contains uniform conflict- of-laws rules that determine the law applicable to the contractual relationships relating to a contract of assignment contract. But the proprietary elements or ‘third-party effects’ of such an assignment of claims are not covered by Rome I. Those elements include questions as to who has ownership rights over a claim and in particular to (i) what requirements must be fulfilled by the assignee in order to ensure legal title over the claim after an assignment (e.g. by providing written notice to the debtor, or registration in a public register), and (ii) how priority between several competing claimants can be resolved: including those which arise in circumstances where there have been several assignments of the same claim or the question of priority over the rights of the assignor’s creditors arises, as well as the rights of the assignee over the rights of the beneficiaries of a transfer of a contract in respect of the same claim, or the novation of contract against the debtor in respect of an equivalent claim.  

    As discussed in detail in chapter 18 of Michael McParland, The Rome I Regulation (Oxford University Press, 2015), an attempt during the negotiations for the Rome I Regulation to create such a rule failed. The new proposed Regulation seeks to cure this omission, not by an amendment to Rome I but by a parallel regulation.

    The proposed new Regulation is intended to cover, in situations involving a conflict of laws, the third-party effects of assignments of claims of civil and commercial matters. An ‘assignment’ is broadly defined as ‘… a voluntary transfer of a right to claim a debt against the debtor. It includes outright transfer of claims, contractual subrogation, transfers of claims by way of security and pledges or other security rights over claims’.

    The new general rule to determine the applicable law of such matters is to be found in draft Article 4, and is based on the law of the country of the assignor’s habitual residence. The applicable concept of habitual residence involves a modified version of that used in the Rome I Regulation, but also makes special provision made for so-called conflit mobile situation, where the assignor changes their habitual residence between two assignments of the same claim. In this respect, this general rule in draft Article 4 is similar that proposed by the Commission in their original proposal for the Rome I Regulation, which was a proposal that originally both the British and Dutch delegations to the Rome I Committee considered to be ‘the worst possible choice-of-law rules’ for proprietary effects of an assignment: see McParland, paragraph [18.82].

    However, the Commission’s new proposal contains two crucial exceptions to that general rule: exceptions where the applicable law is based instead on the law of the assigned claim rather than that of the habitual residence of the assignor. That exception applies to:

    1. the assignment of cash credited to an account in a credit institution (as defined in Article 4(1) of Regulation 575/2013) and
    2. the assignment of claims arising from financial instruments (as defined in Directive 2014/65/EU).

    It is the latter field that caused most concern to the British during the Rome I negotiations, and will clearly be of considerable importance in any post-Brexit world.  In the circumstances, in remains to be seen whether:

    1. the UK decides to opt into this proposed Regulation, on the basis of these proposed exceptions to the general rule or at all;
    2. the proposed Regulation will be enacted before the U.K. leaves the EU;
    3. a post-Brexit UK would either create or retain such rules in UK law as an adjunct to the retained provisions of the Rome I Regulation.

    However, it seems likely that the new Regulation will be adopted in some form by the remaining EU Member States (except of course, Denmark, who have opted out of this field of the Union’s activities).

    Michael McParland QC

    Michael is an international lawyer, with a wide ranging practice in commercial, civil and international advocacy and advice in the courts, arbitral and regulatory tribunals of England and Wales and overseas. He regularly appears in the Commercial Court, Chancery Division and Queen’s Bench Division for a wide variety of domestic and international clients. Michael is admitted to practice in the British Virgin Islands (since 2008) and appears in the Eastern Caribbean Supreme Court and Court of Appeal. He is also a Member of the State Bar of California (since 1990), and has appeared before the Gibraltar Courts and Financial Services Authority.

    Michael has been described by clients in the Chambers UK and the Legal 500 legal directories as “phenomenal”, “incredibly knowledgeable and a tremendous advocate who is a very powerful person to have on your side” , “a thorough, knowledgeable and intelligent advocate”, “incredibly bright and hardworking, a real team player”,  “a really powerful operator” with “complete control of the facts of a case” who “really thinks about things and then steamrollers the opposition”.  He is said to have “real commercial intelligence and an easy client manner”, his advocacy is “effective and persuasive” and his “attention to detail prepares him for all eventualities in the course of litigation”.

    Michael’s practice often includes complex and novel cross-border battles featuring jurisdiction and choice of law disputes, issues over the recognition and enforcement of foreign judgments and orders and the enforcement of English judgments abroad, forum non coveniens challenges, anti-suit and international asset freezing injunctions, as well as sovereign and other immunities from jurisdiction. His work covers a full range of activities and clients, including shipping and maritime claims, civil fraud, aviation; insurance, major cross-border injury claims, company and partnership law matters, including director’s liabilities, shareholder, partnership and joint venture actions, as well  cross-border insolvency battles both in the UK and elsewhere. He has long comparative law experience. Many of his cases involve causes of action governed by foreign laws.

    Michael is a recognised international law expert. He is the author of The Rome I Regulation on the Law Applicable to Contractual Obligations (Oxford University Press, 2015), a leading textbook on private international law that is cited with approval by the Advocate-General in the European Court of Justice and by judges in the Commercial Court. “This is a marvellous book, an absolute must for anyone who is seriously concerned with the private international law of what we once called contracts…”; Michael’s research was “truly amazing” and his book is “… a magnificent achievement, for which all serious commercial lawyers will be in the author’s debt”: Prof. Adrian Briggs QC (Hons), LMCLQ, 2015, p. 597. In Germany, Michael’s book was reviewed as being “in the best tradition of English textbooks…the praise heaped upon the work so far is well deserved… ” and it displays “a very fine and sophisticated humour”: Prof. Peter Mankowski,  Zeitschrift für das Privatrecht der Europäischen Union, GPR 5/ 2015, p. 259. In his foreword, The Hon. Mr Justice Teare describes it as ‘… a book which will be an essential addition to the library of the advisor, the advocate and the academic in their respective searches for the true meaning and effect of the Regulation...’. 

    > view Michael's full profile

    > michael.mcparland@quadrantchambers.com  

  • Clarifying / Correcting an Award …. and the Effect on the 28 days for Challenge: Clarity at lastView More

    Fri, 16 March, 2018

    Simon Rainey QC

    Daewoo Shipbuilding & Marine Engineering Company Ltd v Songa Offshore Endurance Ltd [2018] EWHC 538 (Comm)

    Overview

    Where a party seeks correction or clarification of an arbitral award as a precursor to challenging the award either under s.67 or 68 or 69 of the Arbitration Act 1996, when does the Act’s 28 day time period for the challenge start? From the date of the award? Or of the correction or clarification? And does that apply to any correction or clarification or only to certain types? If the latter, what types and why? And what happens if the tribunal declines to correct?

    The decision of Bryan J. (handed down on 16th March 2018) in Daewoo Shipbuilding & Marine Engineering Company Ltd v Songa Offshore Endurance Ltd [2018] EWHC 538 (Comm) brings welcome and definitive clarity to the position. It sets out what should now be regarded as the settled practice of the Court to these problems and to the correct construction of the 28 day time limit provisions in s.70(3). It resolves an apparent conflict in other first instance decisions once and for all.

    In summary, after a thorough analysis of the authorities, the Court held:

    • The arbitral process of correction and clarification of an award by the tribunal under s.57 of the Act is not "any arbitral process of appeal or review" under s.70(3) for the purposes of the running of the 28 days.
    • Accordingly, simply applying for a correction will not, of itself, push back the start date for the running of time: the decision in Surefire Systems Ltd v Guardian ECL Ltd [2005] EWHC 1860 (TCC) to the contrary effect was wrong.
    • But where a correction or clarification must necessarily be sought in order to be able to bring the challenge to the award itself (pursuant to section 70(2)), then time runs from the date of that type of correction or clarification being made (a ‘material’ correction).
    • To give effect to that, the "date of the award" in section 70(3) is to be read as "the date of the award as corrected" by a correction of this kind, but this kind only.
    • The submission that the decision in K v S [2015] EWHC 1945 (Comm) was wrong would be rejected.

    Leave to appeal was refused.

    Simon Rainey QC, leading Tom Bird, represented the successful applicant.

    The Background

    DSME contracted with Songa to build a series of drilling rigs. The hull design (including the front-end engineering design ("FEED") documentation) was to be provided by a third party design consultancy. Construction proved to be very protracted and DSME claimed in respect of delays and cost over-runs, alleging that the cause was defects in the FEED. It alleged that under the contracts, responsibility for design, including the FEED, was with Songa not DSME and DSME was entitled to recover all costs and expenses and was not responsible for delay. This was contested by Songa.

    The question of design responsibility under the contracts was determined as a preliminary issue in two arbitrations. The Tribunal (Sir David Steel, John Marrin QC and Stewart Boyd QC) held that Songa was correct and that DSME bore full responsibility for the design, including for the FEED.

    The Awards were published on 18th July 2017.

    Under section 70(3) of the Arbitration Act, DSME had 28 days in which to apply for permission to appeal, expiring on 15th August. Section 70(3) provides:

    "Any application or appeal must be brought within 28 days of the date of the award or, if there has been any arbitral process of appeal or review, of the date when the applicant or appellant was notified of the result of that process."

    On 4th August, DSME applied to the Tribunal for the correction of what it itself described as four "clerical errors in the Awards arising from accidental slips" such as transposing Songa for DSME, etc. The corrections were unopposed.

    The Tribunal issued a Memorandum of Corrections on 14th August (27 days after the Awards).

    On 8th September, 24 days late, DSME issued an Arbitration Claim Form seeking permission to appeal the Awards under section 69, on the basis that the Tribunal’s construction of the contract as to design responsibility was obviously wrong in law.

    Songa applied to strike the application out as being out of time.

    DSME responded that the 28 days ran from the date of the Memorandum of Corrections and so was brought in time; alternatively it sought an extension of time under s. 80(5) because its management structure and intervening holidays meant that a decision to appeal could not reasonably have been taken any sooner. (Given the 24 day delay and this ‘justification’, unsurprisingly this application was dismissed on ordinary principles.)

    The Issues Raised by Songa’s Application

    Section 70(3) contains only two express start dates for the running of the 28 days for any challenge to the award: (a) "the date of the award" and (b) the date when the parties are notified of the outcome of "any arbitral process of appeal or review".

    How does this work in the context of a request for the correction or clarification of an award? Section 70(3) is silent on the topic and there is prima facie a lacuna in the drafting of the Act.

    A connected issue is the so-called ‘Catch 22’ inherent in section 70(2) which requires a party to exhaust all available arbitral routes of recourse (including under s.57) before being entitled to challenge the award. In relation to corrections, if these are ones which have to be sought before a challenge can be made, then how can time run from the date of the original, uncorrected, award if this date is what has to be taken for s.70(3) purposes?

    Question (1): Can the correction / clarification process under s.57 be regarded as an "available process of appeal or review" under section 70(3)?

    DSME’s primary argument was that the term "any available process of appeal or review" covered a correction or clarification process carried out by a tribunal itself. It argued that the process of correction involved, in one sense, a process of ‘reviewing’ the award and accordingly this was enough. It also relied upon the definition of a different term ("available arbitral process") in s. 82(1) as one which "includes any process of appeal or review by an arbitral or other institution or person" as showing that "appeal or review" did not just mean appeal or review by some other arbitral body (such as common forms of ‘two-tier’ arbitral procedures in commodity arbitration under GAFTA or FOSFA Rules) but must be wider and therefore had to cover an ‘internal’ corrective review.

    DSME relied heavily on an unreported decision of Jackson J. in Surefire Systems Ltd v Guardian ECL Ltd [2005] EWHC 1860 (TCC), noted in the textbooks. In that case, Jackson J. baldly stated; "In my view, the arbitrator's clarification issued on 2nd May 2005 constitutes "an arbitral process of … review" for the purposes of section 70(3) of the Act".

    Bryan J rejected DSME’s argument for three reasons.

    (1) First, on the plain meaning of the statutory language.

    The construction was contrary to the plain and ordinary meaning of the term "appeal or review" as used in section 70(3) which had to be viewed in the light of s.70(2). Section 70(2) requires an applicant seeking to challenge any award to have first exhausted, as a pre-requisite to the right of challenge, all routes of recourse to the arbitral process. It distinguishes in this context between "any available arbitral process of appeal or review" (s.70(2)(a)) and "any available recourse under section 57" (s.70(2)(b)). The Judge held that this was "a clear, and indisputable, distinction" [52]. He considered that the "ordinary and natural meaning" of the reference to "appeal or review", in the context of a statutory provision that draws a delineation between an appeal or review and a correction, "is that it is a reference to a process by which an award is subject to an appeal or review by another arbitral body".

    (2) Secondly, on the better view of previous decisions

    The Judge regarded this as being as the settled approach which had been taken in the previous cases (Price v Carter [2010] EWHC 1451 (TCC); K v S [2015] EWHC 1945 (Comm) and Essar Oilfields Services Ltd v Norscot Rig Management Pvt Ltd [2016] EWHC 2361 (Comm) as well as the commentaries. He regarded the view of Jackson J. in Surefire as wrong. [53]

    (3) Thirdly, as contrary to the founding principles of the 1996 Act.

    The Judge held the questions of construction of the Act before him had to be approached in the light of the guiding principles in s.1(1)(a) of the Arbitration Act. One of these is that "the object of arbitration is to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense".

    "The principles of speed and finality of arbitration are of great importance. These would be undermined if the effect of making any application for a correction is that time for appealing runs from the date the appellant is notified of the outcome of that request. This is not simply a "concern" (nor is it one that has been over-stated as alleged by DSME) rather it is contrary to the whole ethos of the Act. It would be open to parties who have freely agreed to arbitrate their disputes to frustrate and delay that agreed mechanism of dispute resolution by relying upon completely irrelevant minor clerical errors. This cannot have been the intention of Parliament …" [55].

    Question (2): Is the term "the date of the award" in section 70(3) to be read as meaning the date of the award as and when corrected, irrespective of the nature of the correction?

    DSME argued next that an award could not be regarded as final for the purposes of time running until and unless any process of correction started in respect of the award had been fully completed; that applied as much to a material correction impinging upon a potential ground of challenge as to an immaterial textual or other clerical correction. The date when the process was completed was the "date of the award" for s.70(3) purposes.

    DSME contended that there was no warrant for treating "the date of the award" as running from a corrected award where the correction was ‘material’ (whatever that meant) but not where it was a purely typographical correction. The date was either affected by corrections for all purposes or none. The Court having previously held that it was affected for material ones, then this applied equally to all other corrections.

    Songa argued that the key to the resolution of the lacuna was to recognise the inter-relationship between section 70(3) and section 70(2). Under the latter, a party had to seek a correction or clarification of the award where this affected the challenge which it intended to make against the award as a pre-condition to challenging the award. This need to exhaust arbitral recourse to the tribunal under section 57 identified a class of corrections and clarifications which were indeed ‘material’, because if they were not sought, then the challenge would be barred. It was in relation to these and these only that the lacuna arose. Therefore the distinction between ‘material’ and non-material corrections was inherent in the Act itself and the term "date of the award" would be construed accordingly.

    The Judge accepted that argument. He stated at [63] (original emphasis):

    "The purpose is to ensure that before there is any challenge, any arbitral procedure that is relevant to that challenge has first been exhausted. Thus if there is a material ambiguity that is relevant to the application or appeal you have first to go back to the arbitrators, however if what you are doing is seeking correction to typos then that is not a bar to you pursuing your application. Materiality is inherent within section 70(2). It is only where a matter is material that you first have to exhaust the available remedies specified in section 70(2), so that it is only in those circumstances that it is necessary for time only to run after those available remedies have been exhausted. There is no reason or necessity for time not to run, or be extended, in the context of immaterial corrections – these are not matters that have to be corrected before an appeal can be brought. This illustrates that the test of materiality is inherent in the structure of section 70(2) and 70(3)."

    Again deploying the ethos of the Act and section 1(1(a), he held that it was contrary to any sensible construction of "the date of the award" to treat it as accommodating trivial or irrelevant corrections [56]. As the Judge held (and as DSME accepted) "these are classic clerical and typographical errors. They are not connected in any way, shape or form with DSME’s subsequent appeal." [10]

    Conclusions: "Materiality" and Unanswered Questions?

    The decision is to be welcomed as laying to rest the ‘Surefire argument’ once and for all.

    The Court, in refusing permission to appeal, considered the point to have no realistic prospect of success on appeal and stated in terms that it was "high time to draw a line under the debate" given the "consistent and continuing practice of this Court which has particular expertise in the construction of the act, and its application."

    Materiality? The Judge saw no difficulty with a ‘materiality’ test which is "clear and easy to apply" [65]. With the section 70(2) concept in mind, it is submitted that the Judge is plainly right: a party can usually easily tell the difference between points which it has to investigate under s.57 before it can make a challenge under s. 67, 68 or 69 at all and all other corrections or clarifications.

    If in doubt however, as the Judge said "[one] could always issue an application for an extension of time before the 28 day time period expired, and indeed seek permission to appeal to the extent that it was able to do so at that time. No doubt in many cases (based on the content of the application for a correction showing materiality) such an application for an extension of time would not even be opposed, or if opposed, would be resolved in the applicant’s favour should any point be taken." [65]

    Refusal to correct? An unanswered question (which the Judge did not have to address) is as to the position if a material correction is sought under s.57 but the tribunal refuses to make any correction. How is the "date of award as corrected" test then to be applied? In Maclean, the Judge thought it would be the date of the notification of the refusal to correct [19]. The same view was implicitly suggested in K v S where Teare J referred to the grounds of challenge being "dependent on the outcome of the application for clarification" [24]. Given Bryan J’s general endorsement of the reasoning in these cases, the same approach to this question must follow.

    This seems right. If a material correction is (and has to be) sought in the exercise by an applicant of all available recourse to satisfy the s.70(2) requirement, then the applicant’s fate cannot sensibly be dependent on the whim of the tribunal and whether it is an expansive one, happy to explain better what it has done or, as is not infrequently the case, one which is resentful of the temerity of a suggestion of the need for clarification and whose approach is the ‘nil return’.

    A copy of the judgment can be found here

    Related News

    Simon Rainey QC

    Simon Rainey QC is one of the best-known and most highly regarded practitioners at the Commercial Bar with a high reputation for his intellect, advocacy skills, commercial pragmatism and commitment to client care. He has established a broad commercial advisory and advocacy practice spanning substantial commercial contractual disputes, international trade and commodities, energy and natural resources, insurance and reinsurance and shipping and maritime law in all its aspects. He appears in the Commercial Court and Court of Appeal and also the Supreme Court (with two recent landmark victories in NYK v Cargill [2016] UKSC 20 and Bunge SA v Nidera SA [2015] UKSC 43.) He regularly handles Arbitration Act 1996 challenges.

    He has extensive experience of international arbitration, regularly appearing as advocate or co-counsel in disputes under all of the main international arbitral rules (LCIA; SIAC, UNCITRAL; ICC, Swiss Rules etc) and also sitting as arbitrator.

    Current examples of his work as counsel are in arbitration before the Permanent Court of Arbitration in a US 13billion gas supply dispute; under Nigerian Law and seat in relation to an offshore oilfield redetermination dispute between oil majors, under UNCITRAL Rules in a mining supply take or pay dispute involving one of the world’s leading mine conglomerates; an ICC arbitration concerning a new mine development in Russia and an ICC Dubai seat arbitration involving specialist offshore vessels and in associated s67 and s68 LCIA challenges in the A v B [2017] EWHC 3417 (Comm) litigation in the Commercial Court. Recent arbitral appointments include an ICC Paris seat arbitration concerning a power station failure, a French law and seat arbitration relating to an oil rig drilling contract, an offshore construction contract claim under SIAC Rules and a long-term ore supply contract claim under Swiss Rules.

    He is highly ranked by Chambers and Partners and Legal 500 as a first division international arbitration specialist ("Highly regarded for his expertise in handling high-profile international arbitrations in connection with complex oil and gas, banking and finance and trade issues. He is well known for his prowess in advising and representing clients in disputes in countries as far flung as Turkey, Russia, the USA, China and India" 2018; "Incredibly good, with a particular skill in reducing the complicated to the elegantly simple, which when you're trying to present a case to a tribunal or court is one of the more valuable things you need to have" 2018; "Clearly now one of the top commercial silks and a delight to work with." 2018; "A mixture of brilliance and brevity, his written submissions are like poetry" 2018), He was nominated for "International Arbitration Silk of the Year 2017" by Legal 500 and has also been awarded "Shipping & Commodities Silk of the Year" 2017 by both Chambers & Partners and Legal 500.

    He sits as a deputy High Court Judge in the Commercial Court and is Honorary Professor of Law, Business and Economics, University of Swansea.

    > View Simon's full profile

    simon.rainey@quadrantchambers.com

    Tom Bird

    Tom Bird has a broad commercial practice with a focus on shipping, commodities, aviation, insurance and reinsurance. Chambers UK recommends him as “a rising star ... He's responsive, accessible, bright, tenacious, and user-friendly."

    Tom has represented clients in the High Court, Court of Appeal and Supreme Court. He is equally at home in arbitration. His significant cases include appeals to the Supreme Court in The DC Merwestone – a marine insurance dispute concerning the fraudulent device doctrine – and Stott v Thomas Cook, the leading case on the exclusivity of the Montreal Convention and its relation to EU law.

    > View Tom's full profile 

    tom.bird@quadrantchambers.com

  • Time to stop trying? Attempting to sidestep the ‘rehearing’ nature of a s.67 jurisdiction challengeView More

    Wed, 14 March, 2018

    Simon Rainey QC

    GPF GP S.à.r.l. v Republic of Poland [2018] EWHC 409 (Comm)

    Overview

    The recent decision of the Commercial Court in GPF GP S.à.r.l. v Republic of Poland [2018] EWHC 409 (Comm) reinforces what should, by now, be well-known to be the unassailable position that a challenge to jurisdiction under section 67 of the Arbitration Act 1996 takes place as a full rehearing of that challenge and not as a review of the arbitral tribunal’s prior decision on the same issue of jurisdiction.

    The patent unpopularity of that position in many quarters of the arbitral community is illustrated by the most recent hard-fought attempt in this case to argue that this approach is not justified and should be restricted wherever possible. The decision demonstrates however that attempts to pick away at the position, post the Supreme Court in Dallah Real Estate v Pakistan [2010] UKSC 46, or to seek by other routes to sidestep the effect of a rehearing will be unavailing.

    The decision of Bryan J unsurprisingly but usefully confirms that:

    (a) that there is no difference between a question of jurisdiction ratione personae or ratione materiae: both are subject to a rehearing;

    (b) that the position is no different where a party fails to raise issues in the arbitration and seeks to raise wholly new points on the s.67 challenge, irrespective of the nature of the jurisdictional aspect in play; and

    (c) that resort by a party to ‘waiver’ to preclude the other party from raising such new points on the rehearing

    The decision also contains a useful analysis of the concept, in the context of a BIT, of creeping expropriation qualifying as an expropriation in aggregate effect and the application of a BIT arbitration clause in that context (not addressed in this case note).

    The Background

    In a dispute between GPF (Griffin) and Poland under a BIT between Belgium, Luxembourg and Poland, Griffin claimed that a Polish court judgment constituted an expropriation measure. Griffin financed a property group seeking to invest in the redevelopment of ex-State properties for commercial and residential use. It claimed for violation of the fair and equitable treatment standard in the BIT and for indirect or creeping expropriation, similarly in breach of the BIT, relying on a series of acts or course of conduct by authorities and the court, attributable to Poland. A distinguished tribunal (Prof. Gabrielle Kaufmann-Kohler, Prof. David Williams QC, Prof. Philippe Sands QC) held that aspects of Griffin’s claim fell outside the arbitration clause in the BIT and could not be pursued, effectively tying Griffin to reliance solely on the court judgment and not the "prior measures" on which it also relied in support of its FET / expropriation claims.

    Griffin challenged the Award under section 67 and, in so doing, supplemented in material aspects its case with new evidence as to the drafting history of the BIT and the "prior measures" and developed additional and different arguments. Poland contended that this was not permissible.

    Poland’s Two Points and Bryan J’s Decision

    Poland took two points, against the background of the general undesirability of the rehearing rule as eroding the efficacy of international arbitration, buttressed with reference to what the Judge referred to as "the spirited attack on the re-hearing approach undertaken by the editors of Arbitration Law 5th edn" (Robert Merkin and Louis Flannery QC).

    (1) A difference between identity of party and scope of dispute jurisdictional issues?

    First, Poland argued that the rehearing approach, enshrined in Dallah, was on analysis only applicable in a case which involved a question of jurisdiction ratione personae, i.e., a fundamental issue concerning a claimant who claimed not to be party to the arbitration agreement, and not where the issue arising is one of jurisdiction ratione materiae, or the scope of disputes referred to arbitration.

    It argued that the seminal decision of Rix J. in Azov Shipping Co. v Baltic Shipping Co. [1999] 1 Lloyd's Rep 68, on which Lord Mance’s speech in Dallah was said to hinge, concerned only a substantial issue of fact as to whether a party had entered into an arbitration agreement, not a scope of disputes issue. Reference was also made to a s.67 decision of Toulson J in Ranko Group v Antarctic Maritime SA [1998] ADRLN 35 (post Azov) in which, he held that it would be wrong for the courts to rely on new evidence which "could perfectly well have been put before the arbitrator, but was not placed before him, and with no adequate explanation why it was not". Toulson J based his decision, in part, on the reduced role of the courts under the Arbitration Act 1996. With that in mind, Poland argued that the Court should not seek to extend the rehearing principle any further than was strictly justified, i.e. to ratione personae issues only.

    Bryan J’s decision was an emphatic rejection of any distinction either in the cases or in principle and a vigorous endorsement of the validity of the Dallah principle [70]:"In each case, where it is said the tribunal has no jurisdiction, it is on the basis that either there is no arbitration agreement between the particular parties, or that there is no arbitration agreement that confers jurisdiction in respect of the claim made. In each case if the submission is proved, the Tribunal has no jurisdiction as no jurisdiction has been conferred upon it by the parties in an arbitration agreement. In such circumstances it is for the Court under section 67 to consider whether jurisdiction does or does not exist, unfettered by the reasoning of the arbitrators or indeed the precise manner in which arguments were advanced before the arbitrators."

    (2) Waiver by Griffin of its Right to Raise New Points / New Evidence

    Secondly, Poland argued that the doctrine of waiver applied, because Griffin could have advanced the new materials and arguments before the arbitrators but failed or chose not to do so and should therefore be taken to have waived them or to be precluded from running them, even at a rehearing. The argument is, unfortunately, only shortly summarised in the judgment.

    The difficulty with this argument, as explained by the Judge, is that once it is recognised that a rehearing is an entirely de novo determination, it is difficult to see how and where waiver will arise.

    He put it this way [72]: "it is difficult to see how a waiver could arise in circumstances where it is well established that there can be a re-hearing under section 67, a fact parties are taken to know), and in the context of no restriction being set out in section 67 itself restricting what arguments may be re-run, no question of any loss of a right to advance particular arguments on a re-hearing under section 67 can arise".

    However, while conceivably some form of formal abandonment of a point in the arbitral jurisdiction hearing on which the other relied to its prejudice and detriment and which could not be redressed at the rehearing might amount to a waiver, in the present case (as in most if not all) Poland dealt with the ‘new’ points in detail and could not point to any prejudice.

    Conclusion

    While the logical underpinning, the justifications and the demerits of a Dallah approach will doubtless and understandably continue to be discussed in the arbitral community (as illustrated by an entertaining debate between Sir David Steel and Louis Flannery QC at the recent Quadrant Chambers International Arbitration Seminar), in practical ‘practitioner’ terms it has been a wholly sterile one since 2010, and perhaps it is time to recognise that fact.

    Simon Rainey QC

    Simon Rainey QC is one of the best-known and most highly regarded practitioners at the Commercial Bar with a high reputation for his intellect, advocacy skills, commercial pragmatism and commitment to client care. He has established a broad commercial advisory and advocacy practice spanning substantial commercial contractual disputes, international trade and commodities, energy and natural resources, insurance and reinsurance shipping and maritime law in all its aspects,. He appears in the Commercial Court and Court of Appeal and also the Supreme Court (with two recent landmark victories in NYK v Cargill [2016] UKSC 20 and Bunge SA v Nidera SA [2015] UKSC 43.) He regularly handles Arbitration Act 1996 challenges.

    He has extensive experience of international arbitration, regularly appearing as advocate under all of the main international arbitral rules (LCIA; SIAC, UNCITRAL; ICC, Swiss Rules etc) and also sitting as arbitrator.

    Current examples of his work as counsel are in arbitration before the Permanent Court of Arbitration in a US 13billion gas supply dispute; under Nigerian Law and seat in relation to an offshore oilfield redetermination dispute between oil majors, under UNCITRAL Rules in a mining supply take or pay dispute involving one of the world’s leading mine conglomerates; an ICC arbitration concerning a new mine development in Russia and an ICC Dubai seat arbitration involving specialist offshore vessels and in associated s67 and s68 LCIA challenges in the A v B [2017] EWHC 3417 (Comm) litigation in the4 Commercial Court. Recent arbitral appointments include an ICC Paris seat arbitration concerning a power station failure, a French law and seat arbitration relating to an oil rig drilling contract, an offshore construction contract claim under SIAC Rules and a long-term ore supply contract claim under Swiss Rules.

    He is highly ranked by Chambers and Partners and Legal 500 as a first division international arbitration specialist (“Highly regarded for his expertise in handling high-profile international arbitrations in connection with complex oil and gas, banking and finance and trade issues. He is well known for his prowess in advising and representing clients in disputes in countries as far flung as Turkey, Russia, the USA, China and India” 2018; “Incredibly good, with a particular skill in reducing the complicated to the elegantly simple, which when you're trying to present a case to a tribunal or court is one of the more valuable things you need to have” 2018; “Clearly now one of the top commercial silks and a delight to work with.” 2018; “A mixture of brilliance and brevity, his written submissions are like poetry” 2018), He was nominated for “International Arbitration Silk of the Year 2017” by Legal 500 and has also been awarded “Shipping & Commodities Silk of the Year” 2017 by both Chambers & Partners and Legal 500.

    He sits as a deputy High Court Judge in the Commercial Court and is Honorary Professor of Law, Business and Economics, University of Swansea.

    >View Simon's full profile