Abu Dhabi Investment Company v H Clarkson & Company Ltd

JurisdictionEngland & Wales
JudgeTHE HON MR JUSTICE MORISON,MR. JUSTICE TOMLINSON,Mr. Justice Tomlinson
Judgment Date25 May 2007
Neutral Citation[2006] EWHC 1252 (Comm),[2007] EWHC 1267 (Comm)
Docket NumberCase No: 2004/282,Case No: 2004 FOLIO NO: 282
CourtQueen's Bench Division (Commercial Court)
Date25 May 2007

[2006] EWHC 1252 (Comm)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Before:

The Hon Mr Justice Morison

Case No: 2004/282

Between:
Abu Dhabi Investment Company And Two Others
Claimant
and
H Clarkson & Company Limited & Six Others
Defendants

Mr Richard Salter Qc And Mr Graham Chapman (instructed By Holman Fenwick) For The Claimant

Mr Andrew W Baker (instructed by Ince & Co) for H Clarkson & Company Limited

Mr Mark Hoyle (instructed by LeBooeuf, Lamb, Greene & McCrae) for ADX Shipping Limited, Mr Steiger and Mr Menzel

Mr Christopher Smith (instructed by Stephenson Harwood) for Kreditanstalt fur Wiederaufbau

Hearing dates: 1, 2 and 3 February 2006

Approved Judgment

I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.

THE HON MR JUSTICE MORISON
1

This is an application by, essentially, the third named defendant [Norasia] for a stay of these proceedings pending arbitration. The principal issue between the parties is the proper interpretation of the arbitration clause, which is governed by the law of the UAE "as applied by the Courts of Abu Dhabi". I say "essentially" because the application is supported by the two individual defendants, who managed the third defendant, namely Messrs Steiger and Menzel [the fifth and sixth defendants respectively]. The third to sixth defendants inclusive are conveniently to be referred to as the Norasia defendants. Mr Steiger was the managing director and controlling shareholder of the third and fourth defendants; Mr Menzel was the President of the fourth defendant. The fourth defendant was a subsidiary of the third defendant.

The claim

2

I start with the claim. I stress that at this time what the court is dealing with are allegations which have yet to be proved. For the purposes of this application I need not and do not make any assumptions as to their truth or falsity. The claimants say that they are the victims of a fraud perpetrated on them. The claimants are three companies registered in the United Arab Emirates [UAE]. The claim arises out of a joint venture agreement made in order to exploit special, fast vessels owned by the third defendant [Norasia]. The claimants made an investment in the joint venture company [ADCL] to the tune of some US$81.6 million; the third defendant [Norasia] contributed equity to the value of US$78.4 million and a debt facility was obtained to the extent of some US$240 million secured on the vessels. The joint venture was established by way of a Memorandum of Agreement [MOA] executed by the first claimant and Norasia [the third defendant] and dated 22 November 1999, and a Shareholders Agreement dated 3 July 2000 executed by the third claimant and Norasia [the third defendant]. These vessels were specifically designed as container vessels with a fast speed of 25 knots. The joint venture included the setting up of a joint venture shipping line company [ADCL] which would buy [for a total consideration of about US$400 million] the ten special vessels from Norasia via individual ship owning companies which in turn would charter them, long term, to a Norasia subsidiary. The initial intention was that they would be operated on an express liner service between various hub ports between Europe and North America, calling at ports in Canada, Europe and the Mediterranean [called the CEX service].

3

Mr Steiger, the fifth defendant, on behalf of Norasia together with the sixth defendant put together a Business Plan dated 1 February 1999 which formed the basis of a pitch for joint venture partners for a new container line service based in Abu Dhabi. It is alleged that at meetings to discuss the proposed new venture, the claimants were provided with the Business Plan and Mr Steiger allegedly made certain representations. On the basis of what they had read and been told, the claimants say that the parties executed a Letter of Intent on 31 May 1999.

4

In addition to claims against the Norasia defendants in tort [misrepresentation and fraud] the claimants also asserted contractual claims but such claims were not based on the MOA or Shareholders Agreements, rather for breach of the Letter of Intent and breach of a Letter of Indemnity dated 11 September 2000 under which Norasia provided an indemnity in favour of the claimants in relation to their investments in the joint venture arising from or caused by an Event of Default under the Loan Agreement with the seventh defendant.

5

The joint venture was not successful. The joint venture company has been put into liquidation [liquidators were appointed on 11 September 2001]. The claimants say that the reason for its failure is that the vessels were not up to speed and could not fulfil the requirements for the projected liner service. It is their case that they were misled into making their investment. They complain that they were misled by the first defendant [Clarkson] and the second defendant [Lucas], shipping consultants and shipping brokers, respectively, from whom the claimants took advice before making their investment. The claim is that the advice was negligent or in breach of contractual duties. They also say that during the course of the negotiations Norasia and the remaining defendants made false representations to them about the vessels and their capacity to do the job. These misrepresentations related to the specification and performance of the vessels; their revenue earning ability generally and "the ability of the vessels to earn revenue to support a guaranteed charter hire rate" of US$15,000 per day. The special vessels were also alleged to be defective in a number of respects: they could not achieve their design speed; there was constant trouble with the propellers and severe hull vibration and hull cracking. In relation to the third to sixth defendants they say that those representations were dishonest.

6

The MOA and Shareholders Agreement contain arbitration clauses and their interpretation is a matter to be decided in accordance with UAE law "as applied by the Courts of Abu Dhabi". The relevant part of the clause is as follows: [I take it from the MOA which established the joint venture and is dated 22 November 1999]:

"In the event of any dispute, controversy or claim arising from this Agreement or the matters related thereto, the same shall be referred to arbitration before three arbitrators to be chosen from the approved list/panel of arbitrators maintained by the Abu Dhabi Commercial Conciliation and Arbitration Centre ("ADCCAC") at the relevant time."

7

For present purposes there is no material difference between this and the equivalent term in the Shareholders Agreement dated 3 July 2000.

8

There are Part 20 claims brought by the first, second, and fifth to seventh defendants. The seventh defendant claims an indemnity or contribution against the first, second, third, fifth and sixth defendants. The first defendant claims an indemnity or contribution from each of the second to seventh defendants. The second defendant claims an indemnity or contribution from each of the other defendants and the fifth and sixth defendants have made part 20 claims against the first, second and seventh defendants. The third defendant has not participated in the action because of its claim that it is entitled as of right under the Arbitration Act to have the claims against it stayed pending arbitration.

UAE Law

9

In 1971 the United Arab Emirates was formed. It is an independent sovereign and Union State consisting of a number of Emirates. In the UAE the laws of the individual Emirates are subordinate to the laws of the Union which shall prevail over them. The UAE has adopted a constitution and legislative framework which includes civil and commercial codes derived mainly from the Egyptian Civil Code of 1948, which itself is based upon European Codes, principally the French Civil Code. The Egyptian Code was drafted by a widely respected jurist, Professor Al Sanhoury in 1948 who also drafted the Codes for Libya, Iraq, Syria and Kuwait. His writings and commentaries are widely respected including his "monumental" commentary on the Egyptian Civil Code, Al Wasset. The UAE's Civil Code was enacted in 1985, and is applicable throughout the whole territory. The experts do not agree on the source of the Code.

The two experts are well respected in their own fields.

For the Claimants

10

Mr Noor is a licensed advocate practising in the courts of Abu Dhabi and Dubai, where his law firm is based. He had been a judge in the Emirate of Sharjah for some 18 years before he was admitted to the legal profession in 1994. He was instructed as an expert on behalf of the claimants. In his first report he concluded that the Courts in the UAE are "very meticulous" in determining whether the wording of an arbitration clause evidences an intent to exclude the jurisdiction of the courts of law; if yes, whether it has exactly defined the "circumstances, or exact nature, of a dispute for which the parties agree to enter into arbitration …". It is his thesis that the UAE courts have adopted a very narrow interpretation of arbitration clauses. The courts would not recognise the arbitrator's authority over disputes "unless they were satisfied that the wording of the arbitration clause leaves no room for doubt that the parties thereto have sufficiently expressed an intention to refer such disputes to arbitration." It is his opinion that the words of the clause "disputes arising from other matters related thereto" are too vague and uncertain to be enforced by the courts, because the nature of the dispute is not sufficiently detailed or specific to "give jurisdiction to a hearing by an arbitrator over the courts." Further, referral to arbitrators will be limited...

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