Sea Master Special Maritime Enterprise v Arab Bank (Switzerland) Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Picken |
| Judgment Date | 25 July 2022 |
| Neutral Citation | [2022] EWHC 1953 (Comm) |
| Docket Number | Case No: CL-2021-000667 |
| Court | Queen's Bench Division (Commercial Court) |
[2022] EWHC 1953 (Comm)
Mr Justice Picken
Case No: CL-2021-000667
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
IN THE MATTER OF THE ARBITRATION ACT 1996
Royal Courts of Justice
Strand, London, WC2A 2LL
Michael Collett QC (instructed by Jackson Parton) for the Claimants.
John Russell QC (instructed by Holman Fenwick & Willan) for the Defendant.
Hearing dates: 30 June 2022.
Judgment provided in draft: 14 July 2022.
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.
Introduction
This is an odd case. That is because it sees the Claimants (together ‘Sea Master’) contend before the Court for the purposes of their application under s. 67 of the Arbitration Act 1996 that certain claims which they themselves brought in arbitration are not claims which come within the ambit of the relevant arbitration agreement at all. They do so, moreover, arguing that it has previously been determined by the arbitrators appointed to hear the arbitration (the ‘Tribunal’) that the claims are not arbitrable because they fall outside the ambit of the relevant arbitration agreement despite the fact that neither the Claimants nor the Defendant (‘Arab Bank’) ever addressed the Tribunal on this issue.
The s. 67 application follows a determination by the Tribunal, in its Fifth Partial Final Award dated 1 November 2021 (the ‘Fifth Award’), that the claims (strictly speaking, Sea Master's counterclaims for reasonable remuneration and quantum meruit) with which it is concerned are arbitrable or, as the Tribunal put it, are “counterclaims in this reference that arise out of and in connection with” bill of lading no.12 issued on 8 November 2016. As will become apparent, that is a conclusion with which I agree. First, however, I should set out some background, as to which there is no dispute. In the circumstances, what I have to say is largely taken from the skeleton argument which Mr Collett QC prepared on behalf of Sea Master.
The underlying dispute
Underlying the application is a long-running dispute relating to the voyage of the ‘Sea Master’ (the ‘Vessel’) from Argentina to the Mediterranean between April 2016 and February 2017. That dispute gave rise to two London arbitrations (one between Sea Master and Arab Bank and the other between Sea Master and cargo receivers Freiha) and to court proceedings in the US District Court, Connecticut.
The First Claimant, Sea Master Special Maritime Enterprise (‘Sea Master Special’) was the registered owner of the Vessel until 26 January 2017. On 26 January 2017, the Second Claimant, Sea Master Shipping Inc (‘Sea Master Inc’) became the registered owner of the Vessel, and Sea Master Special assigned to Sea Master all its “rights, claims and obligations” arising under or in any way related to the relevant charterparty and bills of lading issued pursuant to it, “howsoever arising from the commercial operation of the vessel during the period of [Sea Master Special's] ownership of the vessel”.
Sea Master Special chartered the Vessel to Agribusiness United DMCC (‘Agribusiness’) by a charterparty on the Norgrain 1989 form dated 25 April 2016 (the ‘Charterparty’) for a voyage carrying grains from one or two Argentina upriver ports to 1–3 safe ports in Morocco.
Arab Bank is a bank with offices in Zurich, which provided finance to Agribusiness for the purchase of the cargoes shipped on to the Vessel.
In June 2016 three parcels of cargo were loaded on to the Vessel in Argentina for carriage to Morocco: 26,696.515 mt of corn at Rosario, and 7,000 mt of soya bean meal and 7,000 mt of soya bean hulls at San Lorenzo. 30 bills of lading were issued, all providing for discharge in Morocco and all on the Congenbill 2007 form and incorporating the law and arbitration clause in the Charterparty.
This present application concerns the soya bean meal cargo, which was initially carried under bill nos. 12–18. On or about 20 September 2016, a single switch bill no.12 was issued for carriage to Algeria (instead of Morocco) (the ‘First Switch Bill’). On 8 November 2016, a further single switch bill no.12 was issued for carriage to Lebanon (the ‘Second Switch Bill’ or the ‘Switch Bill’). More specifically still, the present application concerns the scope of the arbitration agreement incorporated into the Switch Bill issued on 8 November 2016. There is no issue that this arbitration agreement provided, in part:
“any dispute arising out of or in connection with this Contract shall be referred to arbitration in London in accordance with the Arbitration Act 1996 …”
The corn and soya hull pellets were discharged in Morocco in August 2016, without production of the bills of lading. This led to a claim by Arab Bank for misdelivery in respect of some of the corn bills of lading.
As for the soya bean meal, the original sale fell through, and the cargo was not discharged until February 2017, in Tripoli, Lebanon. The cargo, therefore, remained on board for longer than anticipated.
On 22 March 2017, Arab Bank commenced London arbitration against Sea Master Special, Sea Master Inc and the Vessel's managers (Mega Shipping Line Corporation) under the majority of the corn bills (bill nos. 2, 3, 4, 6, 7, 9, 10, 11, 29 and 30). Arab Bank claimed damages for misdelivery as holder and pledgee of those bills. Mr Timothy Marshall was appointed as arbitrator. This claim was ultimately dismissed by the Tribunal, in a fourth award, on the basis that, although there was a breach, Arab Bank had failed to prove that it had suffered any loss because it had not adduced sufficient evidence as to the realisable value of the cargo.
On the same day, Arab Bank commenced the Connecticut proceedings to obtain security for its misdelivery claim and arrested the Vessel in Connecticut.
On 27 March 2017, Sea Master appointed Mr Robert Bright QC as arbitrator in respect of Arab Bank's misdelivery claim and also under bill nos.1–30 in respect of Sea Master Inc's claims against Arab Bank as assignees for demurrage and damages for detention. The appointment was notified to Arab Bank on 28 March 2017, referring also to the Switch Bill issued on 8 November 2016 (mistakenly referred to as 7 November).
Whilst, on the face of it, Sea Master should have had a good claim against Agribusiness for demurrage or damages for detention, this was not a claim which was viable because Agribusiness was insolvent. So it was that Sea Master, instead, brought certain counterclaims against Arab Bank.
Arab Bank challenged the Tribunal's jurisdiction over Sea Master's counterclaims and sought the determination of that challenge as a preliminary issue. Arab Bank's challenge was raised by email on 30 March 2017, which was followed by an application for a preliminary award on jurisdiction on 28 April 2017.
It is common ground that, by the close of submissions on the jurisdiction application, specifically as a result of certain submissions served by Sea Master on 26 May 2017, Sea Master's counterclaims for reasonable remuneration and quantum meruit had been referred to the Tribunal.
The Tribunal (at this time comprising only Mr Marshall and Mr Bright QC) made its Final Award on Jurisdiction (the ‘First Award’) on 18 August 2017. The Tribunal decided that Arab Bank's challenges to its jurisdiction succeeded. Specifically, the dipositive part of the First Award stated:
“1. WE FIND AND HOLD THAT the Claimants' challenge to our jurisdiction succeeds.
2. WE THEREFORE GRANT A DECLARATION THAT pursuant to section 30 of the Arbitration Act 1996, we do not have jurisdiction to determine the Respondents' counterclaims under the additional bills of lading.”
For the reasons given at paragraphs 99 to 101 of the Fifth Award, this was a determination that the Tribunal did not have jurisdiction over Sea Master's counterclaims for reasonable remuneration and quantum meruit (as well as Sea Master's counterclaims for demurrage and damages for detention).
Specifically, the Tribunal decided that it did not have jurisdiction over the counterclaims for demurrage and damages for detention because the Tribunal rejected Sea Master's submission that Arab Bank was an original party to the Switch Bill (see paragraph 103 of the First Award) and also rejected Sea Master's submission that Arab Bank was a holder of the soya bean meal bills from September 2016 which demanded delivery and made a claim under the contract of carriage so as to become liable under the contract pursuant to s.3(1) of the Carriage of Goods by Sea Act 1992 (see paragraphs 104–112).
The Tribunal did not, however, make any decision on Sea Master's further argument that, as an admitted holder of the soya bean meal and soya bean hulls bills of lading, Arab Bank was bound by the arbitration agreement whether or not it took the necessary steps to become liable under the contract pursuant to s.3(1) of the 1992 Act and regardless of whether it transferred the bills to a third party. At paragraph 112 the Tribunal said that, having decided that Arab Bank “were not party to the additional bills” it did not need to “consider the effect, if any, of section 2 (5) and the transfer of rights and liabilities and whether or not the arbitration clause, being severable, would have survived the transfer”.
Otherwise, at paragraphs 113–115 of the First Award, the Tribunal specifically addressed Sea Master's counterclaims for reasonable remuneration and quantum meruit: paragraphs 113–114 stating that the claims must fail on their merits and paragraph 115 dealing...
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