Integral Petroleum Sa v Melars Group Ltd
| Jurisdiction | England & Wales |
| Judge | Lord Justice Longmore,Lord Justice Kitchin |
| Judgment Date | 20 January 2016 |
| Neutral Citation | [2016] EWCA Civ 108 |
| Docket Number | A3/2015/2405 |
| Court | Court of Appeal (Civil Division) |
| Date | 20 January 2016 |
[2016] EWCA Civ 108
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
QUEEN'S BENCH DIVISION
(MR JUSTICE ANDREW SMITH)
Royal Courts of Justice
Strand
London, WC2A 2LL
Lord Justice Longmore
Lord Justice Kitchin
A3/2015/2405
Miss A M Parry (instructed by Gentium Law Group) appeared on behalf of the Appellant
The Respondent did not appear and was not represented
This was originally an application for permission to appeal the order of Andrew Smith J sitting in the Commercial Court dated 10 July 2015, by which he ordered that an application of Integral Petroleum SA made pursuant to section 67 of the Arbitration Act 1996 be dismissed. He refused permission to appeal.
Integral then applied for permission to appeal to the Court of Appeal. I refused permission on the papers by an order dated 9 November 2015 because I considered this court had no jurisdiction to entertain the appeal. I further directed that any oral renewal hearing be listed as an application that the court has jurisdiction to hear an appeal under section 67 of the Arbitration Act 1996 if the judge has himself refused leave to appeal. The present hearing before two Lords Justices is that application to determine whether this court has jurisdiction; this court has now had the benefit of oral argument.
Background facts
Integral Petroleum SA ("Integral") is a Swiss oil and petroleum trading company based in Geneva, Switzerland. The defendant is Melars Group Limited ("Melars"), a company incorporated in the British Virgin Islands.
By an agreement dated 14 December 2011 ("the December Agreement"), Integral agreed to sell to Melars 300 metric tons of gasoil for delivery FOB Makhachkala, Russia at US$881 per metric ton. Melars was to make, and did make, an advance payment of US$264,300. The December Agreement contained an Arbitration Clause under the heading "Law and Jurisdiction":
"This contract shall be governed by and construed in accordance with English law. The parties hereby agree to submit all disputes hereunder to the exclusive jurisdiction of the arbitration court in London."
At around the same time, Melars entered into three further agreements:
i) On 13 December 2011, Melars contracted with a third party to sell 2400–2900 metric tons of diesel oil for delivery in Turkmenistan.
ii) On 14 December 2011, Melars, as charterer, and EWL, as owner, entered into a voyage charter of the Valeri Kalachev to carry a cargo of a minimum of 2500 metric tons of oil to Turkmenistan; and
iii) On 15 December 2011, Melars contracted with Trafigura Baheer BV ("Trafigura") to buy 2200–2300 metric tons of hydro-purified gasoil.
On 17 January 2012, the 13 December sale agreement to the third party was cancelled by the third party buyer. This was due to a series of delays relating to the transport of the cargo which resulted in Integral threatening legal action against the shipowners, EWL. EWL consequently sought to find a new buyer for the cargo and introduced Melars to Dartex Trade Limited ("Dartex"). On 15 April 2012, Melars and Dartex entered into an agreement whereby Melars would sell 2420 metric tons or so of hydro-purified gasoil to Dartex ("the Dartex Agreement"). The Dartex Agreement also included a law and jurisdiction clause, which provided that disputes arising thereunder be resolved by way of arbitration under the LCIA rules by a tribunal of three arbitrators, the seat of the arbitration being Geneva.
On 16 April 2012, Integral and Melars entered into a subsequent agreement whereby the December Agreement for the sale of the 300 metric tons of gasoil was cancelled with immediate effect ("the Cancellation Agreement") since Melars no longer required the 300 metric tons of gasoil from Integral in order to fulfil the Dartex Agreement. The Cancellation Agreement recorded that Integral would return the advance payment plus interest to Melars. Pursuant to a further clause in the agreement, the parties agreed that on receipt of the said monies all claims and demands of Melars against Integral in connection with or relating from the December Agreement were to be fully and finally settled ("the Settlement Clause"). The monies due were paid in full on 2 May 2012.
Thereafter, Melars contends that it only received some US$200,000 due to it under the Dartex Agreement, leaving some US$2.1 million outstanding. A series of letters were sent by Melars to the managing director of Integral, a Mr Seitnepesov, contending that he organised or orchestrated the Dartex Agreement and that it was his intention to use Dartex as a shell company so that his company, Integral, could take possession of the cargo and resell it, without having paid for it or being legally linked to Melars. These allegations are disputed, and form the basis of a substantive claim by Melars against Integral, which could not be the subject of an arbitration under the December Agreement. On 9 August 2012, proceedings were issued by Melars against Integral and Mr Seitnepesov in Switzerland and a further criminal complaint was made to the Swiss authorities by Melars against Mr Seitnepesov.
On 30 August 2012, Integral responded by beginning the arbitration with which this claim is concerned, claiming that the Swiss proceedings were a breach of one (or more) of the agreements between them.
Arbitration
The sole arbitrator was Mr W. Laurence Craig.
At the arbitration, Melars asserted that the reference had been made under the December Agreement but there had been no allegation or proof of any dispute which related to the December Agreement. Accordingly, Mr Craig identified jurisdiction as an issue he was required to resolve.
He observed that the arbitration provision in the December Agreement related only to disputes arising thereunder, and was not affected by the fact that the buyer intended to use the gasoil in connection with other agreements. The arbitrator then considered that the scope of the obligations under the December Agreement was broadened by the Cancellation Agreement but went on to conclude that the claims brought by Melars in Switzerland were not made in connection with the purchase of 300 metric tons of gasoil, but rather in connection with the obligations arising between Melars and Dartex under the Dartex Agreement.
He stated that it was not sustainable that the claims made by Melars against Integral and Mr Seitnepesov were claims arising in connection with the December Agreement, nor that an arbitration claim between different parties under a different contract, relating to a sale of dramatically different amounts of gasoil, could be made under an arbitration clause in the December Agreement. Consequently, the arbitrator found that Integral's claims in the reference fell outside his jurisdiction and the claim and request for relief therefore failed.
The law
Section 67 of the Arbitration Act 1996 is the section which deals with challenges to an arbitral award on the grounds of substantive jurisdiction. It provides:
" Challenging the award: substantive jurisdiction.
(1) A party to arbitral proceedings may (upon notice to the...
To continue reading
Request your trial
-
Dera Commercial Estate v Derya Inc.
...and 69 is discretionary, as indicated by the permissive nature of the use of the word “ may” in s. 68(3) and s. 69(7) (see Integral Petroleum SA v Melars Group Ltd [2016] EWCA Civ 108 at [26] and [27]). The court is not required to make any order at all even if the application is well-foun......
-
Stockman Interhold S.A. v Arricano Real Estate Plc (Formerly Arricano Trading Ltd)
...first instance judgment can only be granted by the Commercial Court Judge who heard the challenge: see e.g. Integral Petroleum v Melars [2016] 1 CLC 235. (2) This rule is because the legislature has borne in mind that the parties, prior to any Court hearing, have already had a hearing befor......
-
Challenging Arbitral Awards – Who’s the Boss and What Can It Do?
...Act 1996 (the Act) may be restricted following a recent ruling by the Court of Appeal. In Integral Petroleum SA v Melars Group Limited (2016 EWCA Civ 108), the Court of Appeal confirmed the High Court’s wide discretion in relation to the way in which it chooses to deal with challenges to ar......