A. Ltd v B. Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Andrew Smith |
| Judgment Date | 11 June 2014 |
| Neutral Citation | [2014] EWHC 1870 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2013-712 |
| Date | 11 June 2014 |
[2014] EWHC 1870 (COMM)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Andrew Smith
Case No: 2013-712
Christopher Harris (instructed by Baker & McKenzie) for the Claimants
Philippa Hopkins (instructed by Stitt & Co) for the Defendants
Hearing dates: 23 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 case raises a question about the claimants' right to bring proceedings under sections 67 and 68 of the Arbitration Act 1996 (the "1996 Act"). The facts are not in dispute and straightforward. In order to preserve their anonymity, I shall refer to the claimants as "A" and the defendants as "B", and say that they both are overseas trading companies. B claim that A made two contracts to buy cotton from them and have not made payment under them. They contend that the contracts provided for "ICA rules and arbitration" (ICA referring, of course, to the International Cotton Association Limited), and on 8 February 2012 they brought a reference under the Bylaws of the ICA claiming nearly seven and a half million dollars. A deny making the contracts, and so deny having agreed to ICA (or any) arbitration. They participated in the arbitration proceedings and disputed the Tribunal's jurisdiction.
In an award dated 26 February 2013 (the "Award") the Tribunal concluded that it had jurisdiction to decide the reference and upheld the claim. Under the relevant ICA rules, the 2011 edition, parties have a right to appeal to a so-called Technical Appeal Committee ("TAC"). Bylaw 312(9) provides under the heading "Technical Appeal Committee" as follows:
"An appeal involves a new hearing of the dispute and the appeal committee can allow new evidence to be put forward. It may confirm, vary, amend or set aside the award of the first tribunal and make a new award covering all of the matters in dispute."
Bylaw 311 is headed "Appeals" and provides as follows:
"1. If either party disagrees with the tribunal's Award, it can appeal to us within the period specified in the Award. It must send Notice of Appeal to us.
2. Upon receipt of the Notice of Appeal we may demand that sums of money be deposited with us by the Appellant, by way of deposit against any fees, costs or expenses in connection with or arising out of the Appeal. Failure to pay within the specified period will result in the Appeal being dismissed.
3. The Directors, or appeal committee if appointed, can extend the time limits in Paragraph 2 above, but only if the firm concerned can show that substantial injustice would otherwise be done and the request for an extension is reasonable in all the circumstances. An extension will only be granted if it can be shown that substantial injustice may result of a request for an extension of time is refused …"
The period specified in the Award was stated as follows:
"Notice of appeal against this award must be sent to the Secretary of The International Cotton Association Limited in line with Bylaw 311, to arrive on or before 26 March 2013."
On 22 March 2013 A sent the ICA a notice of appeal. On 26 March 2013 the ICA required of A payment of fees, a deposit and outstanding costs. Without paying the sums required, on 18 April 2013 A sent the ICA their grounds of appeal. On 22 April 2013 the ICA chased A for payment by (as I infer) 23 April 201On 24 April 2013 the ICA sent A notice that their appeal had been dismissed, "as a result of your failure to pay the Application Fee, Deposit and outstanding arbitration costs by the deadline of Tuesday 23 April 2013". On 3 May 2013 A sent the ICA payment of the sums requested, and sought an extension of time for paying, explaining and seeking to excuse late payment on the basis of oversight and local public holidays. The ICA refused the application for an extension, having, apparently, asked B whether they consented to it and after B had declined to do so. As a result no TAC was ever appointed to determine A's appeal.
On 22 May 2013, A brought these proceedings, for an order that the Award "be set aside and/or declared to be of no effect on the grounds of lack of jurisdiction and/or serious irregularity which has or will cause substantial injustice to" A. The parties sought and the court ordered determination of this preliminary issue:
"Whether the Claimant's challenge to the First Tier Award dated 26 February 2013 pursuant to sections 67 and/or 68 of the Arbitration Act 1996 is precluded by the terms of section 70(2) and/or section 73(2) of the Arbitration Act 1996."
Section 70(1), (2) and (3) of the Arbitration Act 1996 provide:
"(1) The following provisions apply to an application or appeal under section 67, 68 or 69.
(2) An application or appeal may not be brought if the applicant or appellant has not first exhausted –
(a) any available arbitral process of appeal or review, and
(b) any available recourse under section 57 (correction of award or additional award).
(3) Any application or appeal must be brought within 28 days of the date of the award or, if there has been any arbitral process of appeal or review, of the date when the applicant or appellant was notified of the result of that process."
Section 73(2) provides:
"Where the arbitral tribunal rules that it has substantive jurisdiction and a party to arbitral proceedings who could have questioned that ruling—
(a) by any available arbitral process of appeal or review; or
(b) by challenging the award
does not do so, or does not do so within the time allowed by the arbitration agreement or any provisions of this Part he may not object later to the tribunal's substantive jurisdiction on any ground which was the subject of that ruling."
The expression "available arbitral process" is defined in section 82(1) as follows:
"'available arbitral process', in relation to any matter, includes any process of appeal to or review by an arbitral or other institution or person vested by the parties with powers in relation to that matter; …"
The 1996 Act does not prevent a party against whom a reference has been brought from challenging the Tribunal's jurisdiction without exhausting the processes specified in section 70(2). He can take no part in the arbitral proceedings and make an application under section 67 or 68, and then section 70(2) does not apply to his case: see section 72. Section 70(2) applies when, as here, a person has taken some part in the arbitral proceedings.
Two questions arise with regard to whether section 70(2) precludes A's challenge in these proceedings:
i) Was there an "available arbitral process of appeal or review"?
ii) Have A exhausted it?
There has been some debate about whether, where arbitral rules allow for an appeal to a second-tier tribunal as the ICA rules provide for an appeal to the TAC, this constitutes an "available arbitral process of appeal or review" within the meaning of section 70. In UR Power GmbH v Kuok Oils and Grains Pte Ltd, [2009] EWHC 1940 (Comm) Gross J said at para 60:
"For completeness, I express no concluded view as to the true ambit of the words in section 70(3), '… if there has been any arbitral process of appeal or review …'. I am tentatively attracted to the view that they refer to such arbitration schemes which have some particular internal process for reconsideration of the award or appeal award. However that may be, I do not believe that this wording has any application to FOSFA or, for that matter, GAFTA appeal arbitrations. In such cases, it is the date of the award, or appeal award, as the case may be, which starts time counting."
On the other hand, in PEC Ltd v Asia Golden Rice Pte Ltd, [2012] EWHC 846 (Comm) Hamblen J said at para 18:
"It is not necessary to decide this issue in the present case. However, I consider that this is very much an open question, notwithstanding the obiter comments made by Gross J. In particular, it is difficult to see how the GAFTA appeal procedure is not an 'arbitral process of appeal' and, moreover, neither party was able to identify any 'arbitral process of appeal' other than those provided under Rules such as those of GAFTA or FOSFA. …"
In the UR Power case the challenges in relation to which the section 70 arose were under section 68 and section 69. The PEC case concerned a challenge under section 67. For my part, I do not see an argument that, as a matter of ordinary language, the procedure whereby there may be an appeal to the TAC would not be covered by section 70 if there is no argument about whether the parties made an arbitration agreement that covers the dispute, the challenge being only under section 68 or 69 (or both). This is the view of Merkin, Arbitration Act, 1996 5 th Ed notes on 70(2) and 73(2), where (at p.362 fn 29) it is observed that section 70(2)(a) "is only likely to be relevant to commodities arbitrations". If I understand paragraph 40 of his judgment in Atkins Ltd v Sec of State for Transport, [2013] EWHC 139 correctly, it is also Akenhead J's interpretation of section 70.
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