Marc Rich and Company AG v Societa Italiana Impianti PA ; Case C-190/89
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE LLOYD,SIR ROGER ORMROD,LORD JUSTICE NEILL,LORD JUSTICE WOOLF,LORD JUSTICE SCOTT |
| Judgment Date | 19 December 1991 |
| Neutral Citation | [1989] EWCA Civ J0126-4 |
| Judgment citation (vLex) | [1991] EWCA Civ J1219-2 |
| Docket Number | 91/1181,89/0060 |
| Court | Court of Appeal (Civil Division) |
| Date | 19 December 1991 |
[1989] EWCA Civ J0126-4
Lord Justice Lloyd
and
Sir Roger Ormrod
89/0060
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
(Mr. Justice Hirst)
Royal Courts of Justice
MR. P. GROSS (instructed by Messrs Ince & Co.) appeared on behalf of the Appellants/Defendants.
MR. I. MILLIGAN (instructed by Messrs Clyde & Co.) appeared on behalf of the Respondents/Plaintiffs.
By a telex sent on 23rd January 1987, the plaintiffs, Marc Rich & Co., A.G. offered to buy a quantity of Iranian crude oil from the defendants, Societa Italiana Impianti PA. Delivery was to be f.o.b. Valfajr Terminal. On 25th January the defendants accepted the plaintiffs' offer, subject to certain further conditions. On 26th January the plaintiffs confirmed their acceptance of the further conditions and added that they were pleased to have concluded the business. The defendants say that a completed contract was thereby concluded by 26th January at the latest.
On 28th January the plaintiffs telexed again, setting out the terms in greater detail, and including for the first time a clause as follows:
"Law and Arbitration
Construction validity and performance of this contract shall be construed in accordance with English Law. Should any dispute arise between buyer and seller the matter in dispute shall be referred to three persons in London. One to be appointed by each of the parties hereto and the third by the two so chosen, their decision or that of any two of them should be final and binding on both parties."
There was no reply to that telex.
Very shortly afterwards the plaintiffs nominated the "Atlantic Emperor" to load under the contract. The vessel completed loading by 6th February. The same day the plaintiffs complained that the cargo was seriously contaminated. Their claim is said to exceed $7,000,000. The defendants deny liability.
Almost a year later, on 18th February 1988, the defendants issued a writ in Italy claiming a declaration that they are not liable to the plaintiffs. The writ was served on 29th February 1988. Later on the same day the plaintiffs commenced arbitration in London. They appointed Mr. Donald Davies as their arbitrator. The defendants failed to appoint an arbitrator. Accordingly on 20th May 1988 the plaintiffs issued an originating summons asking the court to appoint an arbitrator on the defendants' behalf pursuant to section 10(3) of the Arbitration Act 1950. The court gave leave to serve the originating summons on the defendants in Italy.
On 8th July 1988 the defendants issued a summons seeking to set aside the order giving leave to serve the originating summons out of the jurisdiction. The grounds of the defendants' application are succinctly set out in their summons. They say that the real dispute between the parties relates to the underlying contract, namely, whether it contains an arbitration clause or not. If so, then that dispute must, they say, be resolved in Italy, on the grounds that it falls within the scope of the Convention scheduled to the Civil Jurisdiction and Judgments Act 1982. The plaintiffs reply that the dispute is excluded from the Convention by virtue of Article 1, which provides that the Convention shall not apply to arbitration.
On 4th October 1988 the plaintiffs served a defence and counterclaim in the Italian proceedings in which they rely on the arbitration clause by way of defence, asserting that the Italian court has no jurisdiction.
The defendants' summons came on before Hirst J. on 5th November 1988. He held:
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(i) that the Convention did not apply;
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(ii) that the putative proper law of the contract was English, and that the case therefore falls within R.S.C. Order 11 rule 1(1) (f); and
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(iii) that it was a proper case to give leave to serve out of the jurisdiction.
I can deal at once with the second and third points which arise, and arise only, if the judge is right on the first point. The judge held that he was bound by the decision of the Court of Appeal in the Parouth [1982] 2 Ll.R. 351 to decide the second point in favour of the plaintiffs. The facts of the Parouth were similar to those of the present case, the question being whether there was a binding contract between the parties. The court held that that question would be decided by an English court in accordance with putative proper law which, since there was an English arbitration clause, would in all probability be held to be English law. Accordingly the case fell within R.S.C. Order 11, rule 1(1) (f).
Mr. Gross sought to distinguish the Parouth on the ground that in that case the question was whether there was a contract at all, whereas in the present case it is common ground that there was a contract; the question here is whether the contract contained an arbitration clause. I accept that this is a distinction on the facts. But it makes no difference to the principle stated and applied by the court in the Parouth, by which we are of course bound, as was the judge. Mr. Gross reserved the right to argue that the Parouth was wrongly decided. We are not required to express any view on that question. It is sufficient to say that in my judgment it cannot be distinguished.
As for the third question, Mr. Gross argued that the judge gave insufficient weight to certain factors and too much weight to other factors. But they were all matters within the discretion of the judge. I can see no way in which we could or should, consistently with the decision of the House of Lords in the Spiliada [1987] 1 Ll.R. 1, disturb the judge's conclusion that this was a proper case to give leave.
So if the judge was right on the first question, I would be content to dismiss the appeal without further ado.
But the first question is not so easy, since it involves a question of interpretation of Article 1 of the Convention. Article 1 provides:
"This Convention shall apply in civil and commercial matters whatever the nature of the Court or Tribunal. It shall not extend, in particular to revenue, customs or administrative matters. The Convention shall not apply to:
(1) the status or legal capacity of natural persons…..
(ii) bankruptcy…..
(iii) social security;
(iv) arbitration."
The plaintiffs say that a wide meaning should be given to the exception "arbitration". The defendants say that it should be given a very narrow meaning. The judge favoured the former view. He attached considerable importance, as he says, to the views of Professor Schlosser, set out in his report on the Accession Convention. The judge was entitled to have regard to that report, as also to the report of Mr. Jenard, under section 3(3) of the Civil Jurisdiction and Judgments Act 1982. But, unlike us, the judge could not refer the question of interpretation to the European Court. By Article 2(2) of the 1971 Protocol, which is contained in Schedule 2 of the Act, the Court of Appeal, as an appellate court, has a discretion to refer questions of interpretation to the European Court. No such discretion is granted to courts of first instance. This is in contrast to the procedure under Article 177 of the Treaty.
That the case raises a question of interpretation of Article 1 of the Convention is common ground. That a decision on the question of interpretation is necessary to enable us to give judgment is clear. It follows that we have a discretion to refer the question. But it is said that we should not exercise that discretion, but decide the question ourselves; by the plaintiffs on the ground that the plaintiffs are clearly right and that a reference to Europe would cause much delay; by the defendants on the ground that the defendants are clearly right.
It is unnecessary to rehearse the arguments on either side, since both sides fell far short of persuading me that they were so clearly right as to leave no room for reasonable doubt. This is not therefore a case of acte claire. The construction of Article 1 of the Convention, and the scope of the arbitration exclusion, raise difficult questions. They are also questions of the first importance. We were not referred to any decisions of, or expressions of opinion by, the European Court on the point. Counsel did not suggest that, if there is to be a reference, it would be better made by the House of Lords. I can understand the plaintiffs' concern at the inevitable delay. But this is an ordinary commercial claim. There is no exceptional urgency. Accordingly it is a case where we ought to exercise the discretion conferred on us to refer the case ourselves.
We have invited counsel to formulate the question for reference. We are grateful for their help. If the effect of the court's answer is that the Convention applies, then certain consequential questions will arise on the interpretation of Articles 5, 17, 21 and 22. A decision on these questions will be necessary to enable us to give our judgment.
Mr. Gross argued that the defendants are bound to succeed under Article 21 of the Convention, if it applies, since the Italian court was the court first seized of the matter. He relied on the very recent decision of the European Court in Gubisch Maschien Fabrik A.G. v. Palumbo reported in The Times on 12th January 1988. Mr. Gross may well be right about that. But since it is in any event necessary to refer the meaning of Article 1, it seems desirable that the other points necessary for our decision should be referred at the same time.
The questions agreed by counsel are as follows:
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1. Does the exception in...
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