Nanjing Tianshun Shipbuilding Company Ltd (First Claimant) Jiangsu Skyrun International Group Company Ltd (Second Claimant) Orchard Tankers Pte Ltd (Defendant)
| Jurisdiction | England & Wales |
| Judge | The Honourable Mr Justice David Steel |
| Judgment Date | 11 February 2011 |
| Neutral Citation | [2011] EWHC 164 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case Nos: 2010 FOLIOS 1281 & 1496 |
| Date | 11 February 2011 |
[2011] EWHC 164 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
COMMERCIAL COURT
The Honourable Mr Justice David Steel
Case Nos: 2010 FOLIOS 1281 & 1496
Mr Graham Charkham (instructed by B. J. Macfarlane & Co.) for the Claimants
Mr Duncan Matthews QC and Ms Susannah Jones (instructed by Stephenson Harwood) for the Defendant
Hearing dates: 12 January 2011
The Honourable Mr Justice David Steel :
This is an application by the Claimant sellers by which they challenge the jurisdiction of an arbitral tribunal under section 67 of the Arbitration Act 1996. In the alternative, the sellers seek permission to appeal against awards made by that tribunal under section 69 of the Arbitration Act. The issues in both applications are entwined and it has been agreed that the issue of jurisdiction be determined first.
The proceedings arise out of a shipbuilding contract dated 8 November 2006 between the sellers and the Respondent buyers relating inter alia to a vessel with hull number TS 0608. The contract was in relatively conventional form:
i) The contract price was payable by way of instalments: Art. II 3.
ii) These payments were in the nature of advances to the seller: in the event of cancellation of the contract, the instalments were repayable with interest: Art. II 6.
iii) As security for such repayment, the sellers were to provide a bank guarantee: Art II 6A.
iv) The agreed delivery date was to be extended in the event of force majeure events and/or permissible delays as defined: Art VIII
v) In the event of delay in delivery beyond the permitted contractual limits, the buyers were entitled to terminate the contract in accordance with Art X: Art III 1.
The buyers duly paid the first four instalments under the contract against the background of a refund guarantee issued by a Chinese bank in the form prescribed by the contract. However, the buyers notified the sellers on 2 February 2010 that they were exercising what they asserted was their right to terminate or cancel the contract under Article X of the contract by reason of delay in delivery.
Article X reads in part as follows:
"The Seller shall have the right to dispute the Buyer's cancellation and/or rescission by instituting arbitration in accordance with Article XIII, if such institution of arbitration is made within thirty (30) days of the Buyer's cancellation and/or rescission.
If Buyer's cancellation and/or rescission of this Contract is disputed by the seller as aforesaid, then the Seller may not refund the Buyer until an arbitration award is handed down"
Although the sellers have sought to dispute the buyers' entitlement to cancel, they failed to institute arbitration proceedings until shortly after the prescribed 30 day period. As a result, the buyers contended that the sellers' claim was time barred. The response of the sellers was that any failure to institute arbitration proceedings timeously did not bar the right to dispute the cancellation but merely barred the remedy to be obtained by way of an arbitral award.
The present state of play is accordingly somewhat remarkable:
i) The sellers (and the bank) have refused to repay the instalments.
ii) This stance is said to be justified because of the institution of the arbitration.
iii) Yet, the sellers maintain that the tribunal, whose appointment they instigated, lacks jurisdiction to determine the legitimacy of the buyers' cancellation given their own failure to commence the arbitration within the 30 day window.
In my judgment, this stance is unsustainable. It is based on a misconception as to the clear meaning and effect of the contractual provisions relating to termination and dispute resolution arising from it.
It is necessary to start by quoting in full the principal provisions at issue:
"ARTICLE II
6. REFUND GUARANTEE
All payments made by the BUYER prior to the delivery of the VESSEL shall be in the nature of advance to the SELLER, and in the event this Contract is cancelled by the BUYER, all in accordance with the specific terms of this Contract permitting such cancellation, the SELLER shall refund to the BUYER in United States Dollars the full amount of all sums already paid by the BUYER to the SELLER under this contract, if applicable, together with interest (at the rate set out in the respective provisions hereof) from the respective payment date(s) to the date of remittance by telegraphic transfer of such refund to the account specified by the BUYER. All transfer and other bank charges shall be for the SELLER'S account.
A) As security to the BUYER, the SELLER shall deliver to the BUYER before payment of the Instalments under this Contract a Refund Guarantee to be issued by authenticated SWIFT from a Chinese bank acceptable to the BUYER (or by such other international bank as may be acceptable to the BUYER) substantially in the form as attached in (it being agreed and understood that the format of the Refund Guarantee shall be substantially as attached, and/or as may be mutually agreed between the BUYER and the SELLER and their respective banks together with a swift message from the Head office of the issuing bank confirming the authority of the Issuing bank to issue the Refundment Guarantee).
ARTICLE VII
1. TIME AND PLACE
a) Delivery Date and Place
Upon the completion and acceptance of the successful sea trials as outlined in Article VI and the acceptance of such trials by the BUYER, the SELLER shall tender Notice for Delivery of the VESSEL; the VESSEL shall be tendered to be delivered by the SELLER to the BUYER at a safe anchorage at Nanjing or Shanghai, on or before 31 st July 2008. Within fourteen (14) days thereafter from the date on which the SELLER tender Notice for Delivery, the BUYER shall physically take over the VESSEL and accept transfer of title and risk thereto, except that in the event of permissible delays as defined in Paragraph 3 of Article VIII, the aforementioned date of delivery of the VESSEL shall be postponed accordingly (which date, or the date as so postponed, is herein called the "Delivery Date").
…..
ARTICLE X
1. NOTICE
The payments made by the BUYER to the SELLER prior to the delivery of the VESSEL shall be in the nature of advances to the SELLER.
In the event the BUYER shall exercise its rights of termination of this CONTRACT under and pursuant to any of the provisions of this CONTRACT specifically permitting the BUYER to do so, then the BUYER shall so notify the SELLER in writing, or by telex or fax, and such termination shall become effective as of the date the notice thereof is received by the SELLER.
2. REFUND BY SELLER
If the SELLER shall become voluntarily or involuntarily dissolved bankrupt or insolvent by any cause or if any receiver, administrator, liquidator or similar officer whether provisional or otherwise is appointed in respect of the SELLER or all or any of its assets or if the SELLER makes any special arrangement or composition with its creditors or any moratorium is applied for, ordered or declared in respect of the SELLER or the SELLER in any other way seeks protection from its creditors the BUYER may by notice in writing or by fax or telex terminate this CONTRACT in accordance with this Article.
If this CONTRACT is terminated by the BUYER the SELLER shall on the BUYER'S demand refund to the BUYER the full amount of all sums paid by the BUYER to the SELLER on account of the VESSEL together with interest thereon as herein provided and liquidated damages (if applicable) as herein provided and the BUYER shall be entitled to make demand under the Refundment Guarantee referred to in Paragraph 6 of Article II if such refund is not so made.
The SELLER shall have the right to dispute the BUYER'S cancellation and/or rescission by instituting arbitration in accordance with Article XIII, if such institution of arbitration is made within thirty (30) days of the BUYER'S cancellation and/or rescission.
If BUYER'S cancellation and/or rescission of this CONTRACT is disputed by the SELLER as aforesaid, then the SELLER may not refund the BUYER until an arbitration award is handed down between the BUYER and the SELLER or, in case of appeal (if applicable) of the arbitration award, a final court order is made in favour of the BUYER by such arbitrators and/or court, where after the SELLER shall promptly refund the BUYER in accordance with such arbitration award and/or court order.
The transfer of such amounts and any other bank charges in respect of such refund shall be for the SELLER'S account and the interest rate of the refund as above provided shall be five percent (5%) per annum from the day following the date of receipt by the SELLER of the pre-delivery instalments of the date of remittance by telegraphic transfer of such refund provided however that if the termination of this CONTRACT by the BUYER is based on force majeure delays or permissible delays then in such event no interest components as provided in this Paragraph shall apply.
3. DISCHARGE OF OBLIGATION
Upon the refund of the...
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