Abu Dhabi Gas Liquefaction Company Ltd v Eastern Bechtel Corporation
| Jurisdiction | England & Wales |
| Judge | THE MASTER OF THE ROLLS,LORD JUSTICE WATKINS,LORD JUSTICE FOX |
| Judgment Date | 23 June 1982 |
| Judgment citation (vLex) | [1982] EWCA Civ J0623-1 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | 82/0283 |
| Date | 23 June 1982 |
[1982] EWCA Civ J0623-1
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
(MR. JUSTICE BINGHAM)
Royal Courts of Justice.
The Master of the Rolls
(Lord Denning)
Lord Justice Watkins
and
Lord Justice Fox
82/0283
1981. A. No. 4268
and
MR. IAN HUNTER, Q.C. (instructed by Messrs. Freshfields) appeared on behalf of the Respondents.
MR. HUMPHREY LLOYD, Q.C. and MR. ROBERT AIKENHEAD (instructed by Messrs. Kenneth Brown Baker Baker) appeared on behalf of the Appellants.
MR. HUMPHREY LLOYD, Q.C. and MR. ROBERT AIKENHEAD (instructed by Messrs. Kenneth Brown Baker Baker) appeared on behalf of the Appellants.
MR. JOHN ROCH, Q.C. and MR. RICHARD SIBERRY (instructed by Messrs. Lovell White & King) appeared on behalf of the Respondents.
REVISED JUDGMENT
This case raises an important point in the conduct of arbitrations. There is a small island in the Persian Gulf called Das Island. Huge tanks hare been erected on Das Island for the purpose of liquifying the gas which comes from oil. It is liquified by being reduced to an exceedingly low temperature in these huge tanks. They are about 100 yards in diameter and 100 feet high.
Contracts were made in 1973 for the erection of the plants. The employers were the Abu Dhabi Gas Liquefaction Company Limited. The main contractors were two companies, the Eastern Bechtel Corporation and the Chiyoda Chemical Engineering and Construction Company Limited. They were joint contractors. A Japanese company called Ishikawajima-Harima Heavy Industries Company Limited (I.H.I.) were the sub-contractors. The main feature of the contract was that the Eastern Bechtel Corporation were the contractors in respect of all the work of erecting the tanks and installations.
The Eastern Bechtel Corporation sub-contracted the work in two portions. There was a contract for supplying the materials. They came from Japan. There was another contract for installing and erecting them on the island. So there were two sub-contracts.
All the earlier contracts were governed by English law and provided for arbitration in London. But the contract for supplying materials from Japan was governed by Japanese law and provided for arbitration in Japan. There was also the question of the design of certain parts of the erection which would come within one or other of the contracts.
The tanks were built and installed between 1973 and 1975. Unfortunately, after a time cracks appeared in one of them. There was brittleness in the structure. The costs of repairing the tank ran into millions and millions of pounds. The question arose as to who was responsible for the cost of the repairs. The employers (the owners) claimed against the main contractors. The main contractors claimed against the sub-contractors. It was said that the cracks were not caused by any faulty design or installation: but because of settlement caused by the sandy nature of the island.
Very big issues arise in these proceedings. The most important is what was the cause of the cracks. But many other points arise on the construction of the contracts: how far the main contractors are liable or are exempt by clauses in the contract: or, as between the contractors and the sub-contractors, whether there was a contract of indemnity and as to the meaning of various clauses. Many points of construction and law arise. As one can see, there are many points on the facts as to causation: and many of the points of law. may depend eventually on the facts.
That being the general outline of the case, it is quite plain that this matter cannot be dealt with by the courts. Under section 1 of the Arbitration Act 1975 these disputes are bound to go to arbitration.
The issue which came before Mr. Justice Bingham was whether there should be separate arbitrations for the two contracts—the main contract and the sub-contract—or whether there should be one arbitrator only for both proceedings. Mr. Justice Bingham held that there should be separate arbitrations, for this reason: The sub-contractors, for instance, might say that the arbitrator's decision in the first arbitration might affect his decision in the second arbitration. If he had already formed his view in the first arbitration, they would be prejudiced. It would be most unfair to them: because he would be inclined to hold the same view in the second arbitration.
On the other hand, as we have often pointed out, there is a danger in having two separate arbitrations in a case like this. You might get inconsistgent findings if there were two separate arbitrators. That has been said in many cases, see Taunton-Collins v. Cromie & ors. (1964) 1 Weekly Law Reports 633. It is most undesirable that there should be inconsistent findings by two separate arbitrators on virtually the self-same question, such as causation. It is very desirable that everything should be done to avoid such a circumstance. Mr. Justice Bingham thought he could not do it. That is why he ordered two separate arbitrators for the two arbitrations.
But, after full discussion before us, it seems to me that a way can be found to resolve the problem. I would agree with the submission that has been made that, on the appointment of an arbitrator, this court cannot impose conditions. The case of Bjornstad & anr. v. The Ouse Shipping Company Limited (1924) 2 King's Bench 673 was a special decision relating to security for costs. Otherwise the powers of the court are simply contained in section 10 of the...
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