Emirates Trading Agency LLC v Prime Mineral Exports Private Ltd
| Jurisdiction | England & Wales |
| Judge | The Honourable Mr. Justice Teare,Mr. Justice Teare |
| Judgment Date | 01 July 2014 |
| Neutral Citation | [2014] EWHC 2104 (Comm) |
| Docket Number | Case No: 2013 Folio 1559 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 01 July 2014 |
[2014] EWHC 2104 (Comm)
Mr. Justice Teare
Case No: 2013 Folio 1559
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Rolls Building, 7 Rolls Buildings
Fetter Lane, London EC4A 1NL
Miss V. Selvaratnam QC (instructed by Clyde & Co. LLP) for the Claimant
Mr D. Brynmor Thomas (instructed by Addleshaw Goddard LLP) for the Defendant
Hearing dates: 19 & 20 May 2014
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.
This is an application pursuant to section 67 of the Arbitration Act 1996 for an order that the arbitral tribunal, Dr. Gavan Griffith QC, Sir Gordon Langley and Mr. Ali Al Aidarous, lacks jurisdiction to hear and determine a claim brought by Prime Mineral Exports Private Limited ("PMEPL") against Emirates Trading Agency LLC ("ETA").
The applicant, ETA, agreed to purchase iron ore from the respondent, PMEPL, pursuant to the terms of Long Term Contract dated 20 October 2007 (LTC). However, ETA failed to lift all of the iron ore expected to be taken up during the first shipment year and accordingly PMEPL raised a debit note in the sum of US$1,472,800 in respect of liquidated damages pursuant to the terms of the LTC. During the next shipment year ETA failed to lift any iron ore and so, on 1 December 2009, PMEPL served notice of termination of the LTC claiming the sum of US$45,472,800 in respect of liquidated damages pursuant to the terms of the LTC and stated that if the claim were not paid within 14 days they reserved the right to refer the claim to arbitration in accordance with clause 11.2 of the LTC forthwith and without further notice to ETA. The claim was referred to arbitration in June 2010.
Clause 11 of the LTC provided as follows:
11. Dispute Resolution and Arbitration
11.1 In case of any dispute or claim arising out of or in connection with or under this LTC including on account of a breaches/defaults mentioned in 9.2, 9.3, Clauses 10.1(d) and/or 10.1(e) above, the Parties shall first seek to resolve the dispute or claim by friendly discussion. Any party may notify the other Party of its desire to enter into consuLTCtion to resolve a dispute or claim. If no solution can be arrived at in between the Parties for a continuous period of 4 (four) weeks then the non-defaulting party can invoke the arbitration clause and refer the disputes to arbitration.
11.2 All disputes arsing out of or in connection with this LTC shall be finally resolved by arbitration in accordance with the Rules of Arbitration of the International Chamber of Commerce ("ICC"). The place of arbitration shall be in London ("UK"). The arbitration shall be conducted in the English language.
11.3 The arbitration shall be referred to a tribunal of three (3) arbitrators, each Party shall appoint one arbitrator and the third shall be appointed by the ICC. Any award of a majority of the arbitrators shall be final and binding upon the parties thereto, and may be entered for enforcement in any court having jurisdiction.
Miss Selvaratnam QC submitted on behalf of ETA that clause 11 required a condition precedent to be satisfied before the arbitrators would have jurisdiction to hear and determine the claim and that such condition precedent was not satisfied with the result that the tribunal lacked jurisdiction. The condition precedent was "a requirement to engage in time limited negotiations". That requirement was not fulfilled because there had not been "a continuous period of 4 weeks of consuLTCtions to resolve the claims" which were the subject of the notice of termination.
Mr. Thomas submitted in response on behalf of PMEPL that the suggested condition precedent was unenforceable, because it was a mere agreement to negotiate, but that if it were enforceable then it had been satisfied and therefore the arbitrators had jurisdiction.
The arbitrators held that clause 11.1 does not contain an enforceable obligation but that if it did it had been complied with and therefore they had jurisdiction. However, it is common ground that the application before the court is a re-hearing of the jurisdiction challenge. I have accordingly heard evidence from the parties as to the course of such discussions as took place between the parties prior to the commencement of the arbitration.
I shall summarise those discussions before dealing with the construction and enforceability of clause 11.1.
Discussions between the parties
After PMEPL served their first debit note in December 2008 but before PMEPL served their notice of termination and demand for US$45m. in December 2009 there were several meetings between ETA and PMEPL. The first was in January 2009 in Dubai when ETA said they had failed to find buyers for the iron ore and requested more time to find buyers and to make payment of the liquidated damages which were due. Mr. Hussain, the executive director of the cement and raw materials department of ETA, gave evidence, which I accept, that at the meeting he had suggested that the liquidated damages could be "adjusted" (by which I think he meant paid) by shipments in the future. The second meeting was in March 2009 in Goa. ETA sought price concessions on future shipments. The request was discussed but not agreed. The third and fourth meetings were in April 2009 and also in Goa. At these meetings ETA's request was again discussed but no agreement reached. Also discussed was the possibility of shipping ore to other Chinese buyers but no acceptable terms were agreed upon. PMEPL would not accept alternative buyers unless a substantial down payment was made. ETA was unable to accept that condition. The fifth meeting was in June 2009 in Dubai. ETA said that some Chinese buyers had expressed interest in resuming supplies but PMEPL stressed that that was an internal issue between ETA and their buyers and that PMEPL was seeking a concrete proposal from ETA to resolve the past defaults. A further meeting was suggested once a concrete proposal from ETA emerged. By this time ETA had failed to lift any iron ore in 2009 and therefore its liability to pay liquidated damages had increased considerably. ETA wanted a further meeting in Goa to "formulate workable systems for the continuation of the existing contracts". Mr. Hussain accepted that PMEPL had a right to cancel the LTC (though not before 30 November 2009) but he said ETA hoped that PMEPL would appreciate their efforts to bring in new buyers to carry on with the contract. Those efforts had apparently been made for almost a year but with no success.
By letter dated 24 November 2009 PMEPL addressed the subject of ETA's non-performance in both the first and second shipment years. PMEPL recounted the history of non-performance and noted that ETA had "failed to evidence its willingness and readiness to perform the Contract as per its terms". PMEPL further noted that the second shipment year would end on 30 November 2009 and reserved all their rights with respect to the short lifting.
By letter dated 1 December 2009 PMEPL terminated the LTC pursuant to clause 9.3 of the LTC.
On 1 and 2 December 2009 a further meeting took place in Goa. It was attended by, amongst others, Mr. Timblo (a shareholder in PMEPL) and Mr. Sawkar (a director of PMEPL who attended on 1 December only) on behalf of PMEPL and, amongst others, Mr. Hussain on behalf of ETA. The meeting had been requested by ETA to discuss the unlifted quantities, new buyers from China and an extended period of shipments. Mr. Hussain gave evidence that he was informed that PMEPL had served a notice of termination after the start of the meeting. Mr. Sawkar gave evidence that when he shook hands with Mr. Hussain he said he had received the letter. Precisely when Mr. Hussain learnt of the letter does not matter. It was sent on the morning of the meeting and Mr. Hussain was aware of it during the morning at the latest.
Mr. Hussain said that the letter of termination was a surprise. It was perhaps a disappointment (because ETA had proposed the meeting for the purpose of discussing how to continue their relationship with PMEPL) but I am unable to accept that it was a surprise. Mr. Hussain knew that PMEPL had a right to terminate and in circumstances where ETA had not taken up any ore in 2009 he must have realised that there was a real risk that the right would be exercised. PMEPL's sister company SFI (who had also entered into a contract for the supply of iron ore to ETA) had served notice of termination of their LTC on 7 November 2009.
The meetings on 1 and 2 December were the subject of correspondence between the parties shortly afterwards.
ETA sent a minute of the meeting to PMEPL on 6 December. The meeting was said to have started at 11 am on 1 December and to have ended at 12.45 on 2 December. The matters discussed were noted over 13 paragraphs. Reference was made to PMEPL's notice of termination and to ways in which the "penalties" for the unlifted quantities could be paid and how the contracts might be continued. It was recorded that PMEPL would wait for ETA's proposal and in the meantime the matter "will be kept pending". ETA was recorded as appreciating the positive attitude shown by PMEPL "in resolving this issue in an amicable manner rather than seeking legal opinion."
By letter dated 9 December PMEPL strongly objected to the minute as an attempt to "create a false record". They made clear that PMEPL had met "at ETA's request …..only to explore possibilities by friendly discussions" of ETA paying the claims raised by PMEPL in their termination notice dated 1 December....
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