COSCO BULK CARRIER Company Ltd v ARMADA SHIPPING SA and Another

JurisdictionEngland & Wales
JudgeMR JUSTICE BRIGGS,Mr Justice Briggs
Judgment Date11 February 2011
Neutral Citation[2011] EWHC 216 (Ch)
Docket NumberCase No: 3933 of 2010
CourtChancery Division
Date11 February 2011

In The Matter Of Armada Shipping Sa

And In The Matter Of The Cross-border

Insolvency Regulations 2006

Between
COSCO BULK CARRIER CO LTD
Applicant
and
(1) ARMADA SHIPPING SA
(2) STX PAN OCEAN CO LTD
Respondents

[2011] EWHC 216 (Ch)

Before :mr Justice Briggs

Case No: 3933 of 2010

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

COMPANIES COURT

Mr Stephen Robins (instructed by Holman Fenwick Willan LLP, Friary Court, 65 Crutched Friars, London EC3N 2AL) for Cosco Bulk Carrier

Mr Timothy Young QC & Mr Christopher Boardman (instructed by Squire Sanders & Dempsey (UK) LLP, Tower 42, International Finance Centre, 25 Old Broad Street, London EC2N 1HQ) for Armada Shipping

Mr David Allison (instructed by Clyde & Co, 51 Eastcheap, London EC3M 1JP) for STX Pan Ocean

Hearing date: 4th February 2011

Approved Judgment

I direct that pursuant to CPR PD 39A paragraph 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 BRIGGS Mr Justice Briggs

INTRODUCTION

1

There are before the court cross-applications under the Cross-Border Insolvency Regulations 2006 ("the Regulations") arising from a Recognition order made under article 17 of the UNCITRAL Model Law on Cross-Border Insolvency ("the Model Law") on 19th May 2010 whereby the bankruptcy order pronounced by the Civil Court of the District of La Sarine, Switzerland, in respect of Armada Shipping SA ("Armada") on 11th January 2010 was recognised as a foreign main proceeding.

2

Armada was, at the time of the bankruptcy order, the charterer of a vessel called the Spar Sirius ("the Vessel") from Cosco Bulk Carrier Co Ltd ("Cosco") as disponent owner under a time charter on substantially the NYPE 93 Form ("the time charter"). Armada had sub-chartered the Vessel to STX Pan Ocean Co Ltd ("STX"), also on NYPE 93 terms ("the sub-charter"). Both the time charter and the sub-charter contained London arbitration clauses, and provided that any dispute arising thereunder should be governed by English law.

3

The time charter contained an owner's lien upon sub-freights and/or sub-hire for any amounts due under the time charter. Armada defaulted in hire payments due to Cosco, and Cosco exercised its lien over sub-hire due by STX to Armada under the sub-charter.

4

A dispute has arisen, in substance (albeit not in form) between Cosco and Armada, as to entitlement to the sub-hire due from STX under the sub-charter. Cosco has sought to pursue its claim by commencing a London arbitration against STX. Although in substance neutral, STX has in order to avoid double jeopardy commenced a separate London arbitration against Armada and, in the meantime, has deposited an amount representing the sub-charter hire which it acknowledges is due either to Cosco or to Armada into an escrow account.

5

The effect of the cross-applications under the Model Law is to enable the court to decide whether (as Cosco claims) its dispute with Armada should be resolved by London arbitration, or whether (as Armada's Swiss office-holder claims) the dispute should be resolved in Switzerland, before the Swiss court having bankruptcy jurisdiction in relation to Armada. Certain intermediate solutions between those two were, in addition, canvassed during the hearing.

THE FACTS

6

The primary facts, which are not significantly disputed, may be summarised as follows. Having itself chartered the Vessel from Spar Shipping, Cosco chartered her to Armada on 3rd September 2009 on NYPE 93 Form at a daily hire rate of US$20,000 (including overtime) less commissions from delivery until 15th January/26th February 2010 (at Armada's option). Hire was payable every fifteen days in advance in the net amount of US$288,750.

7

By clauses 7 and 9, the time charter required Armada to provide and pay for all bunkers. Clause 18 permitted Armada to sublet the Vessel. Clause 23 provided for a lien on sub-freights and/or sub-hire in the following terms:

"The Owners shall have a lien upon all cargoes and all sub-freights and/or sub-hire for any amounts due under this Charter Party, including general average contributions, and the Charterers shall have a lien on the Vessel for all money paid in advance and not earned, and any overpaid hire or excess deposit to be returned at once…."

Clause 45 provided for London arbitration in the following terms:

"(b) LONDON

All disputes arising out of this contract shall be arbitrated at London and, unless the parties agree forthwith on a single Arbitrator, be referred to the final arbitrament of two Arbitrators carrying on business in London who shall be members of the Baltic Mercantile & Shipping Exchange and engaged in Shipping. One to be appointed by each of the parties, with power to such Arbitrators to appoint an Umpire. No award shall be questioned or invalidated on the ground that any of the Arbitrators is not qualified as above, unless objection to his action be taken before the award is made. Any dispute arising hereunder shall be governed by English Law."

8

Armada sub-chartered the Vessel on 4th December 2009, again in NYPE 93 Form, for a 60 day Without Guarantee trip at a gross daily hire of US$28,750 (including overtime) less commissions. Hire was, as under the time charter, payable every fifteen days in advance, but at the higher net rate of $US415,078.12.

9

Clause 96 of the sub-charter provided as follows:

"Neither Owners nor Charterers may assign the benefit of this contract or the benefit of any rights arising out of this contract in whole or in part without the prior consent in writing of the other party. The party who is named as Owner and the party who is named as Charterers in this contract shall always remain fully responsible for the due fulfilment of all the terms of this contract."

The sub-charter contained a London arbitration clause in identical terms to those in the time charter.

10

On 28th December 2009 Armada made a voluntarily filing for liquidation with the court of Fribourg in Switzerland. By then, the Vessel had taken on bunkers at Gibraltar and was on passage to Suez where, in due course, either she or the bunkers (the evidence does not make clear which) were arrested for non-payment of bunkers at Gibraltar. Cosco obtained the release of the Vessel by paying for the bunkers itself.

11

On 30th December 2009 solicitors for Cosco sought to exercise its lien over sub-hire by fax to STX, referring to the time charter and clause 23 in particular, the sub-charter, and to a sum then alleged to be owing by Armada to Cosco of US$285,000 odd. The fax (which was copied to Armada) continued:

"Kindly take this message as notice, in exercise of Owners' rights under the said clause 23 of the Time Charter, that all and any sub-hire which is or will become payable by you pursuant to the Sub-Charter must not be paid to or as directed by Armada, or its agent or nominee, but to Owners.

This means that Armada or any such other person cannot give you a good receipt for any payment of hire."

12

On 11th January 2010 a bankruptcy order was made by the Civil Court of the district of La Sarine in Switzerland. It had broadly the same effect in relation to Armada as an English winding-up order. The Cantonal Bankruptcy Office in Fribourg was thereby appointed as Armada's office-holder, with powers broadly comparable to those of an English liquidator.

13

By further notices faxed to STX and copied to Armada on the 15th, 19th, and 28th January 2010 Cosco sought to exercise its lien in relation to increased amounts alleged to be due from Armada. In particular, the notice on 19th January included, as a claim against Armada, the amount which Cosco had paid to release the Vessel from arrest at Suez. The final amount claimed by the notice dated 28th January was US$1,204,514.89.

14

On 4th February Cosco and STX made a written escrow agreement providing for US$915,119.27 to be placed in an escrow account. The agreement, expressed to be governed by English law, provided at clause 2 that:

"The sums held in the Escrow Account will be held pending the final resolution of the Liened Sum Dispute between Cosbulk and STX Pan Ocean (and as the case may be Armada Shipping if applicable), either by written agreement or by arbitration in London pursuant to the terms of the STX Pan Ocean Charter or by judgment of the English High Court of Justice on appeal therefrom."

The Escrow Agreement contained its own London arbitration clause.

15

It is apparent from the Escrow Agreement (and elsewhere) that it was from the outset common ground as between Cosco and STX that any dispute between them as to Cosco's claim to the sub-hire due under the sub-charter fell to be resolved by arbitration under the arbitration clause in the sub-charter. Cosco's case was that the lien on sub-hire operated as an equitable charge, so that it could enforce as security assignee Armada's right to sub-hire under the sub-charter. To that end Cosco appointed its arbitrator Mr Baker-Harber on 10th February 2010. For its part STX appointed its own arbitrator Mr Tim Marshall in the Cosco v. STX arbitration, and then commenced a separate arbitration against Armada, pursuant to which on 3rd March it appointed the same Mr Baker-Harber as its arbitrator in the STX v. Armada arbitration. I shall refer to them as the first and second arbitrations respectively.

16

As appears from its Statement of Case dated 15th March, Cosco's claim against STX was for US$1,178,216.21 plus interest. STX's claim against Armada in the second arbitration was for a declaration of non-liability. Nonetheless STX defended Cosco's claim in the first arbitration by advancing for its own protection all those arguments which it conceived that Armada might assert in the second arbitration.

17

Also on 15th March Cosco invited Armada's office-holder...

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