DHL Project & Chartering Ltd v Gemini Ocean Shipping Company Ltd

JurisdictionEngland & Wales
JudgeLord Justice Males,Lord Justice Birss,Lord Justice Snowden
Judgment Date24 November 2022
Neutral Citation[2022] EWCA Civ 1555
Docket NumberCase No: CA-2022-000247
CourtCourt of Appeal (Civil Division)
Between:
DHL Project & Chartering Limited
Respondent/Claimant
and
Gemini Ocean Shipping Co Limited
“Newcastle Express”
Appellant/Defendant

[2022] EWCA Civ 1555

Before:

Lord Justice Males

Lord Justice Birss

and

Lord Justice Snowden

Case No: CA-2022-000247

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

BUSINESS & PROPERTY COURTS OF ENGLAND & WALES

QUEENS BENCH DIVISION

COMMERCIAL COURT

Mr Justice Jacobs

[2022] EWHC 181 (Comm)

Royal Courts of Justice

Strand, London, WC2A 2LL

Timothy Young KC (instructed by Holman Fenwick Willan LLP) for the Appellant

Charles Holroyd (instructed by Reed Smith LLP) for the Respondent

Hearing date: 1 November 2022

Approved Judgment

This judgment was handed down remotely at 10.30am on Thursday 24 November 2022 by circulation to the parties or their representatives by e-mail and by release to the National Archives.

Lord Justice Males
1

The issue on this appeal is whether a proposed charterparty which was expressly stated to be “subject shipper/receivers approval” contained a binding arbitration agreement conferring jurisdiction on an arbitrator to determine whether the charterparty contract had been concluded.

2

It is therefore necessary for us to consider the principle of “separability”, whereby an arbitration agreement may have a life independent of the main contract (sometimes called the “matrix contract”) of which it forms part. Thus an arbitration agreement may have a governing law which is different from the governing law of the main contract ( Enka Insaat ve Sanayi AS v OOO Insurance Company Chubb [2020] UKSC 38, [2020] 1 WLR 4117); it may survive the termination of the main contract ( Heyman v Darwins Ltd [1942] AC 356); it may be enforced by the grant of an anti-suit injunction ( The Angelic Grace [1995] 1 Lloyds Rep 87); and its breach may sound in damages just like any other breach of a contractual term ( Mantovani v Carapelli SpA [1980] 1 Lloyd's Rep 375). More recently, it has come to be recognised that an arbitration agreement may also confer jurisdiction on an arbitral tribunal to determine the initial validity of the main contract ( Harbour Assurance Co (UK) Ltd v Kansa General International Insurance Co Ltd [1993] QB 701 and Fiona Trust & Holding Corporation v Privalov [2007] UKHL 40, [2007] 4 All ER 951). The principle has received statutory recognition in section 7 of the Arbitration Act 1996.

3

In the present case it is submitted on behalf of the Owner (I shall refer to the parties as “Owner” and “Charterer” for convenience, even though the dispute between them is whether a binding charterparty was ever concluded) that a fixture recap expressly stated to be “subject shipper/receivers approval” contained a binding arbitration agreement; that the principle of separability applied to that agreement, so that an arbitral tribunal had jurisdiction to determine whether the effect of the “subject” meant that no binding charterparty was concluded; and that the only means of challenging the tribunal's decision on that issue was by an appeal on a question of law under section 69 of the Arbitration Act 1996.

4

In the event an arbitrator was appointed by the Owner, but the Charterer took no part in the arbitration. The arbitrator decided that a binding charterparty had been concluded, of which the Charterer was in repudiation. He awarded damages to the Owner. The Charterer challenged the award under section 67 of the 1996 Act, contending that the arbitrator had no jurisdiction. In case it was wrong about that, the Charterer also sought leave to appeal under section 69.

5

Mr Justice Jacobs held that the arbitrator had no jurisdiction, but granted leave to appeal to this Court. In addition he granted leave to appeal to the Commercial Court under section 69 and indicated that, if it had been necessary, he would have allowed the appeal.

6

As a result, as Mr Timothy Young KC for the Owner insisted, the only matter now before us is the section 67 appeal. We must therefore decide the interesting issues about the separability principle which have been argued before us. However, for the reasons which I shall explain, if the section 67 appeal were to be allowed, the case would have to be remitted to the judge to determine the section 69 appeal. The judge explained why he considered that that appeal would have to be allowed and, for what it is worth, I agree with him. So success on this appeal would not ultimately avail the Owner.

The recap

7

In August 2020 the parties were negotiating the terms of a proposed voyage charter for a voyage from Newcastle in Australia to Zhoushan in China with a cargo of 130,000 metric tons of coal in bulk. The vessel concerned was the “Newcastle Express”, a gearless bulk carrier built in 2002 which had only recently been purchased by the Owner. The negotiations were carried on through a broker.

8

On 25 th August 2020 the broker circulated what was described as a “M'Term recap”. (M'Term stands for “Main Terms”). It is common ground that the recap accurately reflected the state of the negotiations thus far. It began (with the bold text in the original):

“AS PER YOUR AUTHORITY/INSTRUCTIONS, IN LINE WITH NEGOTIATIONS/EXCHANGES, PLEASED TO CONFIRM HAVING – FIXED M'TERM AS FOLLOWS:

SUB SHIPPER/RECEIVERS APPROVAL WITHIN ONE WORKING DAY AFMT 1 & RECEIPT OF ALL REQUIRED/CORRECTED CERTS/DOCS

⇒ RIGHTSHIP INSPECTION WILL BE CONDUCTED ON 3RD/SEPT. OWNERS WILL PROVIDE REQUIRED CERTS LATEST BEFORE VESSEL SELLING [sc. SAILING] (INT. 5/SEP). OWNERS WILL ENDEAVOR TO PROVIDE ALL REQUIRED CERTS/DOCS EARLIEST POSSIBLE.”

9

There followed 20 terms, which were the kinds of terms one would expect to see negotiated for a voyage charter.

10

Clause 2, which contained details of the vessel, provided among other things that “prior to charterers lifting their subjects” the Owner would provide speed and bunker consumption figures and a detailed itinerary for the proposed voyage.

11

Clause 17 was a law and arbitration clause as follows:

“CONTRACT LAW AND ARBITRATION FORUM:

GA/ARBITRATION TO BE IN LONDON, ENGLISH [sc. LAW] TO BE APPLIED, SMALL CLAIMS PROCEDURE TO APPLY FOR CLAIMS USD 50,000 OR LESS.”

12

Clause 20 provided as follows:

“CHARTER PARTY:

OTHERWISE AS PER ATTACHED CHARTERER'S PROFORMA C/P WITH LOGICAL ALTERATION.”

13

The attached proforma was a charterparty form, dated 2017, for a vessel to be nominated. It included clause 20, headed “Nomination”, which provided detailed terms for the nomination of the performing vessel. These included, in clause 20.1.2, a provision that the vessel to be nominated should be acceptable to the charterer, but that acceptance in accordance with detailed provisions set out in clause 20.1.4 “shall not be unreasonably withheld”.

Section 67 and section 69 – the framework

14

Before summarising the facts, it is necessary to say something about the different regimes applicable to a challenge to jurisdiction under section 67 of the Arbitration Act 1996 and an appeal on a question of law under section 69. In the latter case, the court is confined to the facts found by the arbitral tribunal and contained in the award; extraneous evidence is inadmissible ( The Barenbels [1985] 1 Lloyd's Rep 528, a case decided under the 1979 Act which is equally applicable to the 1996 Act).

15

In contrast, a section 67 challenge involves a rehearing (and not merely a review) of the issue of jurisdiction, so that the court must decide that issue for itself. It is not confined to a review of the arbitrators' reasoning, but effectively starts again. That approach was confirmed by the Supreme Court in Dallah Real Estate & Tourism Holding Company v Ministry of Religious Affairs of the Government of Pakistan [2010] UKSC 46, [2011] 1 AC 763, which also makes clear that the decision and reasoning of the arbitral tribunal is not entitled to any particular status or weight, although (depending on its cogency) it will inform and be of interest to the court. See in particular Lord Mance at [26] and Lord Collins at [96].

16

This has led some commentators to suggest that the present approach is unsatisfactory. To the extent that it results in two fully contested hearings on the question of jurisdiction, the first before the arbitrators and the second before the court, there is some force in that suggestion. In general, a party who takes part in a challenge to jurisdiction before the arbitrators can reasonably be expected to deploy its full case and, if it loses after a fair procedure, has no inherent right to a second bite at the cherry. Even under the present law, however, the court is not without case management powers in such a case to control the evidence adduced on any section 67 challenge (see The Kalisti [2014] EWHC 2397 (Comm)). The position is different where, as in this case, the party challenging jurisdiction takes no part in the arbitration, as it is entitled to do (see section 72 of the Act). Such a party is entitled to say that it never agreed to the jurisdiction of the arbitral tribunal; that it took no part in the arbitral proceedings; that it is not bound in any way by whatever view was taken by an arbitral tribunal to which it never agreed of the evidence adduced before it; and that it is entitled to fresh consideration of the issue by the court.

17

In the present case there was evidence before the judge which was more extensive than the evidence before the arbitrator, and the judge made more extensive findings of fact. It is these which form the factual basis on which we must decide this appeal. However, although the judge's findings are more extensive than the arbitrator's, there is so far as I can see only one important difference between them, which is that the arbitrator found that the Charterer's decision to release the vessel (see [20] to [22] below) was unreasonable. The judge made no such finding. However,...

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