(1) MS “V1” GmbH & Company KG v SY Company, Ltd

Hearing dates: 10 December 2025

APPROVED JUDGMENT

This judgment was handed down remotely at 10.30am on 20 January 2026 by circulation to the parties or their representatives by e-mail and by release to the National Archives.

HIS HONOUR JUDGE Pelling KC SITTING AS A JUDGE OF THE HIGH COURT

HH Judge Pelling KC:

Introduction

This is the claimants' challenge under section 67 of the Arbitration Act 1996 (“AA96”) to two final declaratory awards each dated 11 June 2024 in materially the same terms to the effect that the arbitral tribunal had “… jurisdiction to hear and determine the question whether as a matter of English law (as the express governing law of the shipbuilding contracts) the exclusion in Article 9 of the shipbuilding contract excludes actions in tort (or equivalent non-contractual civil liability under foreign law)”.

The dispute between each of the claimants and the defendant is identical. It was for that reason that the same arbitrators were appointed in each reference. The dispute concerns the alleged concealed presence of asbestos in two ships built by the defendant. The claimants purchased the ships in 2010 from the entities that had had ordered them from the defendant. They took ownership on delivery of the ships by the defendant, and at the same time took an assignment of time-limited post-delivery warranty guarantees given by the defendant in Article 9 of each of the shipbuilding contracts. Article 9 been held to be a “ complete code for dealing with defects discovered after delivery of the vessel”—see The Seta Maru [2000] 1 Lloyd's Rep. 367 per Thomas J (as he then was) at 372. Article 9 of these contracts contains an arbitration agreement in the terms set out below. Following delivery, guarantee claims were made and dealt with. Residual unresolved claims that each claimant had under the guarantees were then settled by commercial negotiation with no proceedings being commenced whether under the arbitration clauses in the warranty guarantees or otherwise. The guarantees had by then expired by effluxion of time.

Many years later, the claimants say that they discovered asbestos had been incorporated into the fabric of the ships in the course of their construction, which had to be removed at a cost of between US$4.361–5.015m per ship. Each claimant sought to recover the cost of this work in tort and product liability claims commenced by them before the Chinese courts. The defendant maintains that those claims were excluded by various provisions within Article 9 and that since that was not conceded by the claimants, there was a dispute as to the true scope and effect of those exclusions, which had to be resolved by arbitration in accordance with the arbitration clause contained in Article 9. It challenged the jurisdiction of the Chinese courts and ultimately, the Chinese courts declined jurisdiction, acceding to the defendant's submission that the dispute had to be referred to arbitration in London. The Chinese courts' rulings are the subject of appeal in China.

The claimants had initiated arbitral proceedings after commencing the Chinese court proceedings but no steps were taken in the proceedings apart from each appointing an arbitrator (in the case of the defendant, under protest) until the claimant suggested that they be discontinued by consent. The defendants objected and there was a hearing held by the tribunals to determine jurisdiction following which the tribunals held that they had jurisdiction.

In essence therefore the issue that arises is whether an arbitral tribunal has jurisdiction over a dispute relating to non-contractual tortious claims governed by the laws of a foreign state brought in the courts of that state by a party who was not a party to a relevant arbitration agreement. The claimants maintain that the tribunal had no jurisdiction because the claimants were never party to or of otherwise bound by the arbitration agreements on which the defendant relies and / or because the claims they wish to make are independent statutory claims available to them in their capacity as owners of the ships that accrued to them in that capacity and irrespective of their assigned rights under the post-delivery warranty guarantees. The defendant invites me to reject those submissions and dismiss this claim on the basis that it was the claimants who chose to initiate the references, that it is common ground the references were validly made and that there is in any event a dispute between the parties within the scope of the arbitration agreements to which the claimants became bound in equity as a result of the assignment of the post-delivery warranty guarantees and which the defendant is entitled to require to be resolved by arbitration in accordance with that agreement.

The Primary Facts

The ship building contracts were entered into on 10 November 2006 between “ One Company Nominated by XY Marine GmbH” as “ Buyer” and the defendant who was referred to variously as “ Seller” or “ Builder”. By clause 1 of each agreement “ Parties” were defined to mean the Seller and the Buyer.

Article 9 of each agreement was entitled “ WARRANTY OF QUALITY” and in so far is material provided:

“ (a) Guarantee of Design, Material and Workmanship

The Builder guarantees the Vessel in her entirety and each and every part thereof and without prejudice to the generality of the foregoing, her design, hull and all machinery, engines, engine auxiliaries, equipment, fittings, appurtenances and materials manufactured, furnished, installed or incorporated in the Vessel by the Builder and/or its subcontractors under this Contract against all defects, omissions, shortages and non-conformity, faulty design, defective or unsuitable materials or construction, miscalculation and/or poor workmanship, whether or not such defects affect seaworthiness or class, provided such defects have arisen within a period of twelve (12) calendar months as from the date the Vessel was delivered to and accepted by the Buyer …

…

(d) Extent of the Builder's Liability

The Builder shall have no obligation and/or liabilities with respect to defects discovered after the expiration of the period of guarantee specified above. The Builder shall be liable to the Buyer for defects and damages caused by any of the defects specified in Paragraph (a) of this Article provided that such liability of the SELLER shall be limited to damage occasioned within the guarantee period specified in Paragraph (a) above.

The Builder shall not be obligated to repair, or to be liable for, damages to the Vessel, or to any part of the equipment thereof, … caused by the defects other than those specified in Paragraph (a) above, …

(e) Upon delivery of the Vessel to the Buyer, in accordance with the terms of the Contract, the Builder shall thereby and thereupon be released of all responsibility and liability whatsoever and howsoever arising under or by virtue of this Contract (save in respect of those obligations to the Buyer expressly provided for in this Article 9) including without limitation, any responsibility or liability for defective workmanship, materials or equipment, design or in respect of any other defects whatsoever and any loss or damage resulting from any act, omission or default of the Builder. The Seller shall in no circumstance be liable for any consequential loss or special loss, or expenses arising from any cause whatsoever including, without limitation, loss of time, loss of profit or earnings or demurrage directly from any commitments of the Buyer in connection with the Vessel.

(f) The Guarantee provided in this Article and the obligations and the liabilities of the Builder hereunder are exclusive and in lieu of and the Buyer hereby waives all other remedies, warranties, guarantees or liabilities, express or implied, arising by Law or otherwise (including without limitation any obligations of the Builder with respect to fitness, merchantability and consequential damages) or whether or not occasioned by the Builder's negligence. This Guarantee shall not be extended, altered or varied except by a written instrument signed by the duly authorized representatives of the Builder, and the Buyer.

(g) Any dispute under this Article shall be referred to arbitration in accordance with the provisions of Article 13 hereof.” [Emphasis supplied]

Article 13 provided for arbitration of any dispute or difference in accordance with the Rules of the LMAA and that the contract was to be governed by and construed in accordance with the laws of England with any dispute arising out of or in connection with the contract to be referred to arbitration in accordance with Article 13. I accept the defendant's submission that Article 9 was intended to be a complete code by which the parties agreed to apportion the risks involved in defects to the vessels that first became apparent after delivery by the defendant providing the guarantees in Article 9 (a) on the basis of the exclusions and limitations that appear in Articles 9(d)-(f). The ship building contracts were amended by six addenda, at dates between January 2007 and August 2010. The terms of those addenda are not relevant to the issues that arise on this claim.

On 9 January 2007, each of the ship building contracts was novated so that XY Carriers GmbH & Co...