LLC Agronefteprodukt v Ameropa AG
| Jurisdiction | England & Wales |
| Judge | Sir William Blair |
| Judgment Date | 21 December 2021 |
| Neutral Citation | [2021] EWHC 3474 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2020-000842 |
[2021] EWHC 3474 (Comm)
Sir William Blair
Sitting As A Judge Of The High Court
Case No: CL-2020-000842
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
IN THE MATTER OF THE ARBITRATION ACT 1996
IN THE MATTER OF A GAFTA ARBITRATION
Royal Courts of Justice
Strand, London, WC2A 2LL
Lydia Myers (instructed by Jackson Parton)) for the Claimant
Chris Smith QC (instructed by AACNI (UK) LTD) for the Defendant
Hearing dates: 8 and 9 December 2021
Approved Judgment
I direct that no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Sir William Blair SITTING AS A JUDGE OF THE HIGH COURT
This is a challenge by the Claimant on grounds of lack of jurisdiction to an Award made by a GAFTA Board of Appeal on 23 November 2020. The Claimant is LLC Agronefteprodukt (“Sellers”), a Russian company which was the seller of the goods concerned and the respondent in the arbitration. The Defendant, Ameropa AG (“Buyers”), is a Swiss company which was the buyer of the goods and the claimant in the arbitration. The challenge extends on the same jurisdictional grounds to the Award of the GAFTA First Tier Tribunal made on 13 March 2020. It is brought under s. 67 Arbitration Act 1996. The goods in question were Russian Milling Wheat.
The basis of the challenge is that the Notice of Arbitration purported to commence a single arbitration whereas there were two contracts and a Notice of Arbitration was required to be given under each of them. It is pleaded as follows: “Neither the First Tier Tribunal, nor the Board of Appeal, had jurisdiction because the Defendant failed to commence the … arbitration in a valid and effective manner, instead illegitimately purporting to commence a single arbitration in respect of 2 claims under 2 separate and independent contracts, each containing a separate arbitration agreement.”
The Respondent's case is that the Notice of Arbitration was on its face intended to commence two separate arbitrations under each contract, and hence was valid.
The evidence at the hearing consisted of agreed documents and witness statements from both sides. The witness statements were not agreed, but sensibly the parties agreed to dispense with cross-examination. It is not in dispute that challenges under s. 67 Arbitration Act 1996 take the form of a rehearing and not a review, and that the parties are permitted to adduce arguments which were not advanced before the arbitrators ( GPF GP S.à.r.l. v Republic of Poland [2018] Bus L.R. 1203 at [70], Bryan J). In this case both the First Tier Tribunal and the Board of Appeal decided that they did have jurisdiction.
The Sellers seek an order that both the Award and the determination by the Board of Appeal are of no effect because neither the First Tier Tribunal nor the Board of Appeal had substantive jurisdiction.
The facts
As the Awards show, there was a considerable factual dispute before the arbitrators as to liability and damages, but this challenge relates solely to the facts of the jurisdictional issue where the factual disputes are within a much narrower compass.
By a contract of sale dated 21 June 2018, the Sellers agreed to sell, and the Buyers agreed to buy, 40,000MT of Russian Milling Wheat on FOB Novorossiysk terms. By a separate contract of sale dated 10 July 2018, the Sellers agreed to sell, and the Buyers agreed to buy, a further 25,000MT of Russian Milling Wheat on the same terms.
The contracts each contained an arbitration clause referring any dispute arising out of or under the contract to arbitration in London in accordance with the GAFTA Rules No.125:
“Arbitration Clause
Any dispute arising out or under this contract shall be settled by arbitration in accordance with the Arbitration Rules no.125 of the Grain and Feed Trade Association, in the edition current at the date of this contract, such rules forming part of this contract and of which both parties hereto shall be deemed to be cognizant. Arbitration to take place in London/England.”
Disputes arose between the parties under each of the contracts and the Buyers sent a Notice of Arbitration to the Sellers on 30 August 2018 which stated as follows:
“Dear Sirs,
Subject: Contract 180833 dated 21st June 2018 and Contract 181013 dated 10th July 2018.
We have been appointed by Ameropa AG through its branch office Ameropa SA in Lausanne.
Pursuant to the terms of the “Arbitration Clause” of the above-referenced contracts, we hereby declare arbitration in London in accordance with Gafta Arbitration Rules No. 125.
We appoint Mr Ben Leach (copied) as our client's arbitrator for the disputes related to the two Contracts.
Not later than the 9th consecutive day after today, you shall appoint a second arbitrator and serve a notice of the name of the arbitrator so appointed.
On a separate note, we wonder if, for efficiency and economy, you would accept the two contracts/disputes be adjudicated under a single arbitration and by the same Tribunal.”
The Sellers did not respond to the Notice of Arbitration. On 11 September 2018, the Buyers applied to GAFTA for the appointment of an arbitrator on behalf of the Sellers, which GAFTA did on 14 September 2018.
On 21 September 2018, the Sellers emailed the Buyers referring to the dispute between the parties and saying that “ we are open for discussion about variants of settlements to avoid arbitrations”. The parties thereupon entered into negotiations, and on 16 November 2018 concluded a “ Washout Agreement” which like the contracts of sale was subject to English law and GAFTA arbitration. This referred to the contracts and stated that:
“WHEREAS:
A. Sellers and Buyers concluded two contracts, one no. VCH-180833 dated 21 June 2018 for 40,000mt of Russian Milling Wheat to be delivered FOB Novorossiysk at USD 198 per mt between 25th and 31st August 2018 and the other no. VCH-181013 dated 10 July 2018 for 25,000mt of Russian Milling Wheat to be delivered FOB Novorossiysk at USD 213 per mt between 1st and 15th October 2018 (“the Contracts”).
B. Sellers now desire to settle the Claim in the following terms.
IT IS HEREBY AGREED AS FOLLOWS:
1. Buyers hereby agree to reduce the amount of the Claim to USD 1,100,000 (“the Settlement Sum”) for the sake of this Agreement and on the condition that this sum is strictly and punctually paid as agreed below.
[dates of payments]
3. Upon Receipt of the Settlement Sum within the periods stated above, Buyers will discontinue and withdraw the Claim, with no costs for the Sellers.
4. In the event that the Settlement Sum is not fully paid within the agreed periods, Buyers will be entitled to terminate this Agreement and to continue the Claim in arbitration for the full value of their loss…”
The Sellers did not make payment under the Washout Agreement, and on 20 February 2019 the Buyers' lawyer wrote to the Sellers stating that the Buyers had terminated the Washout Agreement and would “ continue the arbitration to the full value of our client's loss”.
On 24 May 2019, the Sellers wrote to GAFTA objecting that the Tribunal had no jurisdiction over the claim on the grounds that the Buyers had failed to commence arbitration under each contract properly, instead wrongfully purporting to commence a single consolidated arbitration in respect of the disputes under the two separate contracts without the Sellers' consent to such consolidation. By s. 31(1) Arbitration Act 1996, an “ objection that the arbitral tribunal lacks substantive jurisdiction at the outset of the proceedings must be raised by a party not later than the time he takes the first step in the proceedings to contest the merits of any matter in relation to which he challenges the tribunal's jurisdiction”. It is not in dispute that the Sellers' objection to jurisdiction was raised before it contested the merits.
The First Tier GAFTA Tribunal rejected the Sellers' objection on the grounds that the right to object had been waived by their silence as regards the Buyers' suggestion that the two contracts/disputes be adjudicated under a single arbitration and by the same Tribunal. The Board of Appeal upheld the decision based on the terms of the Washout Agreement, further holding that by the time of the objection the Buyers appointed arbitrators and GAFTA had relied on the Sellers' acceptance in the Washout Agreement that there was a single arbitration and the Sellers had waived the right to object.
The parties' contentions
In short, the Sellers maintain that the Notice of Arbitration is ineffective. The reason for this contention is that the Notice illegitimately purported to commence a single arbitration in respect of two claims. Consolidation was of course possible, and indeed likely since the contracts were for the same product on the same terms and close together in time. It is not suggested that there is anything inherent in the facts that made consolidation unsuitable, but it is common ground that it required the consent of both parties (s1.1 and s7.1 GAFTA Arbitration Rules No.125). Such consent has never been given (though the Sellers did fully participate in the proceedings). It is not suggested that there is any substantive defect in the Notice. Issues of rectification and estoppel also arise between the parties, each maintaining that the other is estopped from contesting the others' case. The parties' contentions and the court's conclusions are set out below.
Interpretation...
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