Broda Agro Trade (Cyprus) Ltd v Alfred C Topefer International GmbH
| Jurisdiction | England & Wales |
| Judge | MR. JUSTICE TEARE,Mr. Justice Teare |
| Judgment Date | 17 December 2009 |
| Neutral Citation | [2009] EWHC 3318 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | 2009 Claim No. Folio 1287 |
| Date | 17 December 2009 |
[2009] EWHC 3318 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London
Mr. Justice Teare
2009 Claim No. Folio 1287
WC2A 2LL
Vernon Flynn QC and Niamh O'Reilly (instructed by Elborne Mitchell) for the Claimant
Sara Masters (instructed by Reed Smith LLP) for the Defendant
Approved Judgment
Hearing dates: 30 November and 1 December 2009
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 Teare:
This is the determination of two issues which arise for determination on the Claimant's claim for a declaration under section 72 of the Arbitration Act 1996 or at common law that a GAFTA arbitration tribunal lacked jurisdiction to determine a claim brought by the Defendant to this application or, in the alternative, for an order under section 67 of the Arbitration Act 1996 setting aside an Interim Award by the tribunal ruling that it had jurisdiction. The two issues which are now to be decided are:
i) whether the Claimant “took part” in the arbitration thereby disabling them from making an application under section 72 or at common law; and
ii) whether the period of 28 days allowed for making an application under section 67 should be extended.
The facts
On 31 October 2007 the Defendant (“Toepfer”) commenced GAFTA arbitration proceedings against the Claimant (“Broda”). Toepfer claimed damages from Broda for breach of a contract said to have been concluded in February 2007 and varied in July 2007 for the supply by Broda to Toepfer of a quantity of milling wheat.
Broda maintains that no concluded contract was made. On 19 December 2007 Broda issued proceedings in the Arbitration Court of the Krasnodar Territory, Russia, for a declaration that there was no contract.
On 3 January 2007 Toepfer filed its first submission with GAFTA claiming damages against Broda in the sum of US$5,462,668.35.
On 31 January 2008 Argyrou & Co, a firm of lawyers in Cyprus wrote to GAFTA disputing jurisdiction on behalf of Broda. It is necessary to summarise what they said.
The letter was headed “without prejudice and with full reservation of rights”. Broda referred to Toepfer's claim and said “we are herewith contesting the jurisdiction of GAFTA to hear this dispute on the grounds that a valid contract was never entered into and therefore that the arbitration clause therein is not binding on the parties.” Broda then said that it was not appropriate “to advance herein the detailed reasons for our view that a binding contract was never formed” but then noted three points which, it seems, were mentioned as support for their view. That was all done in paragraph 1. The remainder of the letter, paragraphs 2–8, purports to explain why Broda had brought proceedings in the Russian Federation seeking a declaration that a binding contract was never formed and requesting that the GAFTA proceedings be stayed until the proceedings in the Russian Federation had been concluded. A copy of the Particulars of Claim issued in the Russian Federation was enclosed “for your convenience.”
On 15 February 2008 GAFTA wrote to both parties stating that jurisdiction would be decided first and as a separate issue. GAFTA referred to Broda's letter dated 31 January 2008 as “submissions”.
On 3 March 2008 Toepfer provided their “reply submissions”. Having set out their detailed submissions over 28 paragraphs as to why there was a binding contract and arbitration clause Toepfer requested GAFTA to reject the request for a stay and to proceed with the arbitration on the merits.
On 14 March 2008 GAFTA gave Broda the opportunity to submit “rejoinder submissions”.
On 23 March 2008 Argyrou & Co., on behalf of Broda, wrote to GAFTA again. They began by saying that they wished only to address the issues “that pertain to GAFTA's jurisdiction to hear this dispute” (paragraph 1). But they emphasised that their letter was not intended to be a reply to Toepfer's reply submissions (paragraph 2). They said that the issue as to jurisdiction should be considered by a court of law (paragraphs 3–5). The most appropriate court was the Russian court (paragraphs 6–9) where service had been accepted (paragraph 10). The letter ended by saying:
“For all of the aforementioned reasons we hereby strongly contest GAFTA's jurisdiction to hear the present dispute and we thus request that it does not accept jurisdiction to hear the case.”
On 28 May 2008 the Russian Court decided that there was no contract.
On 7 June 2008 Argyrou & Co. on behalf of Broda informed GAFTA of the decision. They said that since there was no contract GAFTA had no jurisdiction. They said that a translated copy of the decision would be provided to GAFTA. The letter concluded by saying:
“We are of the view that the reasoning of the said Court should play an integral part in a decision by GAFTA to decline jurisdiction in this case.”
On 3 July 2008 GAFTA issued an Interim Award on Jurisdiction. The award referred to Broda's “challenge to jurisdiction” and referred to Broda's submissions. But the award also noted that Broda had not addressed the detailed evidence placed before the Tribunal by Toepfer. “The tribunal has therefore not had any assistance from [Broda] upon the emails produced by Mr. Schmidt, upon the negotiations relating to the setting up of the contract and the amendment to it nor on any statement which challenges the contents of the Statutory Declaration of Mr. Schmidt.” The tribunal concluded that there was a binding contract. It noted the decision of the Russian court but disagreed with it. The tribunal therefore ruled that it had jurisdiction to determine the substantive dispute and gave directions for submissions by both parties on the substantive dispute.
On 3 September 2008 Argyrou & Co., on behalf of Broda, provided a “set of submissions” to GAFTA in response to Toepfer's submissions dated 3 January 2008 and 3 March 2008. These submissions were divided into 7 chapters. Chapters 1–5 dealt with issues of liability and damages. Chapter 6 dealt with “the arbitration issue”. Broda summarised its reasons for continuing to contend that the GAFTA tribunal lacked jurisdiction. In chapter 7 Broda asked the tribunal to dismiss the claim and order Toepfer to indemnify Broda in respect of its legal costs.
Toepfer responded on 23 September 2008.
On 29 October 2008 Broda wrote to GAFTA seeking removal of the tribunal on the grounds that since the tribunal had determined in the interim award that there was a contract “it renders any attempt of Broda to defend the substantive claim futile.” Doubts were also expressed as to the impartiality and competence of the tribunal.
GAFTA replied on 31 October 2008 to the effect that the request for removal was denied.
On 7 November 2008 Broda reiterated its request for the tribunal to be removed and threatened an application to the English Court pursuant to section 24 of the Arbitration Act 1996 for removal but said that if the tribunal were not removed it would serve its Rejoinder on 10 November 2008. Those submissions were provided on 10 November 2008. They reiterated the argument that there was no contract and that there should be no award of damages.
On 19 February 2009 the tribunal delivered its Final Award. The tribunal reviewed its procedure and findings as to jurisdiction in view of the criticisms that been made of it. The tribunal then addressed the substantive dispute and found that Broda had acted in breach of contract. Damages in the sum of US$5,462,668.25 were awarded together with interest and costs.
Thereafter, on 30 July 2009, Broda appealed the Final Award to a GAFTA appeal tribunal.
On 31 July 2009 I gave permission to Toepfer to enforce the Final Award subject to an application by Broda to set aside my order within 28 days of service. On 12 August 2009 Broda served its appeal submissions and on 2 September 2009 Toepfer did so.
On 7 September 2009 Broda applied to this court to set aside my order giving permission to enforce the award and wrote to GAFTA requesting a stay of the appeal pending the application to this court. On 17 September 2009 a stay was refused. On 8 and 10 November 2009 Broda and Toepfer served further submissions in the GAFTA appeal. On 30 November 2009 Broda's application to this court was heard.
Section 72
Section 72 of the Arbitration Act 1996 provides:
(1) A person alleged to be a party to arbitral proceedings but who takes no part in the proceedings may question
a) whether there is a valid arbitration agreement
b) ……………
c) ……………
by proceedings in the court for a declaration or injunction or other appropriate relief
(2) …………..
Section 72 preserves the common law entitlement to seek a declaration that an arbitration tribunal lacks jurisdiction but limits its application to circumstances where the applicant has taken no part in the arbitration proceedings. It follows that if an applicant has taken part in the arbitration proceedings he has no additional right at common law to seek a declaration that the arbitration tribunal lacks jurisdiction.
The apparently simple question which arises for decision is whether it can properly be said that Broda took no part in the GAFTA arbitration. However, before seeking to answer that question it is necessary to refer to two previous cases which have considered section 72 of the Arbitration Act 1996 and to a submission made on behalf of Broda as to the true construction of s.72.
The first case is Caparo Group Limited v Fagor Arrasat Sociedad Cooperative 2000...
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