BEA Hotels NV v Bellway LLC
| Jurisdiction | England & Wales |
| Judge | THE HONOURABLE MR JUSTICE COOKE,Mr Justice Cooke |
| Judgment Date | 12 June 2007 |
| Neutral Citation | [2007] EWHC 1363 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2006 Folio 1103 |
| Date | 12 June 2007 |
[2007] EWHC 1363 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN's BENCH DIVISION
COMMERCIAL COURT
The Honourable Mr Justice Cooke
Case No: 2006 Folio 1103
Mr P McGrath (instructed by Berwin Leighton Paisner) for the Claimant
Mr J Lockey QC (instructed by Kennedys) for the Defendant
Hearing dates: 5–6 June 2007
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.
Mr Justice Cooke:
Introduction
The claimant (BEA) challenges the substantive jurisdiction of Mr Peter Leaver QC as arbitrator under section 67 of the Arbitration Act 1996. Whilst it is accepted that there was a valid arbitration agreement and a valid appointment of the arbitrator, BEA alleges that the relevant arbitration agreement was repudiated by the defendant (Bellway) when the latter brought proceedings in Israel on 11 April 2006 and that this repudiation was accepted by a letter from BEA dated 26 April 2006.
The factual basis of the events said to constitute repudiation and acceptance are essentially undisputed and the issues turn on the significance of the Israeli proceedings to which I have just referred. This was the second set of proceedings in Tel Aviv (to which I shall refer as Tel Aviv 2), the first being brought by BEA and others some 4 years before (to which I shall refer as Tel Aviv 1). It is accepted by both parties that English law is the governing law of the arbitration agreement but expert evidence from Israeli lawyers in the form of written reports was put before the court to assist it in interpreting the statements of case in the Israeli court proceedings and the terminology referred to therein. It was agreed between the parties that neither expert would be called to give oral evidence but that each party would be free to make whatever submissions it considered appropriate in relation to the reports.
The background to the dispute arises out of a privatisation process of state shareholdings in Romania. A company, to which I shall refer as Bucaresti, which owned the largest residential and hotel complex in Bucharest, was state owned until, by a series of transactions, the right to purchase 66.18% of the shares in Bucaresti vested in a company to which I shall refer as Domino.
Mr Razin is a major figure in Bellway and had, through Domino, acquired the right to purchase the shares in Bucaresti, originally as part of a joint venture with a Mr Shreyer who pulled out of the arrangement some 7–10 days prior to the deadline set by the Romanian authorities for payment of the relevant purchase price. At that point Mr Razin was introduced to Mr Zisser and various meetings took place leading to a Joint Venture Term Sheet dated 7 December 2000 (the Term Sheet), which was executed by BEA, Bellway, Desca Investments Ltd (Desca) and Kitedown Investments & Holdings Ltd. Mr Razin also signed as guarantor of 3 specific obligations of Bellway. The purchase was duly completed but disputes arose between the parties to the Term Sheet and others in relation to alleged representations inducing its execution, alleged collateral or antecedent agreements with individuals and alleged non performance.
In proceedings commenced by BEA and BEA Eastern Europe BV (BEA Eastern) on 10 July 2002 in Tel Aviv 1, those claimants sued Mr Razin and Monilen Enterprises Limited, but not Bellway. In the statement of claim and the amended statement of claim allegations were made that Mr Razin was personally liable for the obligations undertaken by Bellway in the Term Sheet. The allegation was made that Mr Razin, prior to the signing of the Term Sheet repeatedly stated to BEA that he and he alone was making a commitment and assuming responsibility towards it and that the use of various companies which were parties to the Term Sheet derived solely from tax considerations. Allegations were also made of false representations inducing BEA to enter into the Term Sheet. The defence to those claims denied any liability on the part of Mr Razin save in relation to the obligations of Bellway under the three particular clauses of the Term Sheet where he was specifically a guarantor. These proceedings in Tel Aviv 1 have progressed to the extent that cross-examination of witnesses has partly taken place and it is thought that judgment might be handed down before the end of 2007.
The central scheme provided by the Term Sheet was for BEA to hold 80% and Bellway to hold 20% of a holding company, Desca, which was to be and did become the 100% owner of Domino. Under the Term Sheet, Desca was to have five directors appointed by the parties pro rata to their shareholdings. It is alleged that the BEA appointed directors held a directors' meeting of Desca, without notice or reference to the Bellway appointed director and resolved to transfer and then transferred all the shares in Domino to BEA Eastern, which was a subsidiary of BEA. In Tel Aviv 1, this was said to have been done by way of mitigation of the loss and damage sustained from the misrepresentations and breaches of agreement allegedly effected by Mr Razin and Monilen. It is also alleged that the Bellway appointed director and Bellway itself were thereafter excluded from any involvement in the management of the Bucaresti Hotel Apartments, the China Restaurant and other Bucaresti assets, which were matters provided for under the Term Sheet.
The Arbitration Agreement
Paragraph 11 of the Term Sheet included the following:—
“11.1 Any dispute between the BEA and Bellway pertaining to and/or connected with the agreements for the management of the Hotel and the Apartment Hotel, shall be referred to arbitration before Mr Ami Federman.
11.2 Any dispute between the BEA and Bellway pertaining to any other matter arising out of and/or connected with this Term Sheet shall be referred to arbitration before Mr Eli Landau.
11.3 In the event that either or both of the above arbitrators are unwilling or unable to act for any reason, then and in such event an alternative arbitrator shall be appointed by mutual consent between BEA and Bellway, failing which such alternative arbitrator shall be appointed by the President for the time being of the London Court of International Arbitration upon the application of either party.
11.4 This Paragraph 11 constitutes a separate agreement to arbitrate which shall survive the termination of this Term Sheet for any reason.”
Bellway's attempts to arbitrate
In February 2003 Bellway sent a Statement of Claim to the nominated arbitrator Mr Landau. The focus of that claim against BEA was the alleged illegitimate and invalid transfer of the shares in Domino to BEA's associated company, BEA Eastern. Mr Landau was not willing to accept the appointment and Bellway then applied to the Tel Aviv courts, asking for the appointment of an Israeli arbitrator. After initial success (the court appointed Prof Hadari as arbitrator on 19 February 2004 and reappointed, following further argument in 2005), Bellway failed on appeal and the Tel Aviv District Court, on 17 January 2006, ordered the parties to apply to the LCIA to appoint an arbitrator, holding that there was no reason for the agreed procedure set out in clause 11 not to be adopted.
Bellway then sent a request for arbitration to the LCIA on 5 February and despite objections from BEA, the LCIA Court appointed Mr Leaver as sole arbitrator on 20 March 2006, after prolonged exchanges between the parties and the LCIA in which Bellway sought the appointment of an arbitrator (with an expressed preference for an Israeli) whilst BEA attempted to stall the appointment of an arbitrator or to stay the arbitration pending the conclusion of Tel Aviv 1. As the parties agreed LCIA Rules, the LCIA determined that the seat of the Arbitration was London but without prejudice to any decision of the arbitrator as to the location at which evidence might be heard. Questions of lis alibi pendens were left to him to decide, although, in the event he had to determine the challenge to his jurisdiction first (the matter which is now before this Court). Evidence in the arbitration is due to be heard in Tel Aviv later in the year.
The Second Israeli Proceedings (Tel Aviv 2)
On 11 April 2006 Mr Razin, Bellway and Monilen commenced proceedings in Tel Aviv against Mr Zisser, a major figure in BEA, Elscint Limited, a company controlled by Mr Zisser and the parent company of BEA, Mrs Levin (President of Elscint and a Director of Desca), Mr Levin (Vice-President of the group which controls BEA and a Director of Desca), Mr Ronsmans (Chief Executive Officer of BEA, BEA Eastern and a Director of Desca), Mr Pap (a Director of Desca), BEA and BEA Eastern (which now ultimately owned the Bucaresti shares through Domino). These proceedings include a number of different claims which were the subject of some analysis before me in the context of the alleged repudiation of the arbitration agreement. Bellway sought to have Tel Aviv 2 consolidated with Tel Aviv 1 but the court refused to allow this. Tel Aviv 2 has not proceeded very far beyond the statement of case (Particulars of Claim) served on 11 April 2006.
Repudiation of the Arbitration
The only issue which I have to decide (and which the arbitrator has already decided) is whether or not the commencement and service of the Tel Aviv 2 proceedings amounts to a repudiation of the arbitration agreement rendering the arbitrator devoid of jurisdiction. It is accepted that if this constituted a repudiation, the letter from BEA's solicitors was apt to accept it. The proceedings before this court, as is common ground, take place by way of a...
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