Naviera Amazonica Peruana S.A. v Compania International de Seguros del Peru
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE KERR,LORD JUSTICE RUSSELL,SIR DENYS BUCKLEY |
| Judgment Date | 10 November 1987 |
| Judgment citation (vLex) | [1987] EWCA Civ J1110-6 |
| Docket Number | 87/1112 |
| Court | Court of Appeal (Civil Division) |
| Date | 10 November 1987 |
[1987] EWCA Civ J1110-6
Lord Justice Kerr
Lord Justice Russell
and
Sir Denys Buckley
87/1112
1985 N No. 2260
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. A.E. DIAMOND, Q.C., SITTING AS A DEPUTY JUDGE OF THE QUEEN'S BENCH DIVISION)
Royal Courts of Justice
MR. PETER GROSS (instructed by Messrs. Ince & Co., Solicitors, London EC3R 5EN) appeared on behalf of the Plaintiffs (Appellants).
MR. IAIN MILLIGAN (instructed by Messrs. Hill Dickinson & Co., Solicitors, London EC3A 7LP) appeared on behalf of the Defendants (Respondents).
This is an appeal from a judgment of Mr. A.E. Diamond, Q.C., sitting as a deputy judge of the Queen's Bench Division, delivered on 4th August 1986. The case arises out of a dispute between a Peruvian insurance company (the insurers) and a Peruvian shipowning company (the shipowners) under a hull policy covering four vessels classed with different Classification Societies in America, Europe and Japan. The policy was dated 20th September 1982 and insured the vessels against marine risks under various American and other Institute Clauses and certain printed General Conditions. The premiums were stated in US dollars. The terms of the cover were varied by an indorsement dated 18th October 1982. This contained an arbitration clause which has given rise to these proceedings. When the policy expired on 31st August 1983 a disagreement arose as to what the renewal premiums should be. The shipowners considered the quoted rates too high, but the insurers said that they were reasonable and in any event governed by the rates obtainable from their reinsurers. It was then agreed that the vessels should be held covered on a monthly basis on the same terms save as to premium, and this arrangement remained in force until the end of February 1984. The substantive dispute between the parties is simply: what was a reasonable rate of premium for each of these four vessels during this period of six months?
The present proceedings are however solely concerned with a procedural dispute arising out of the arbitration clause in the indorsement. The issue is whether its effect, in the context of the policy as a whole, is to provide for disputes under the policy—including the present substantive dispute—to be resolved by arbitration in London or Lima. Or, to put the same point in forensic jargon, does this policy contain a London or a Lima arbitration clause? Or, to state the issue as formally as the present appeal requires: was the agreed "seat" or "forum" or "locus arbitri" (to use the main terms commonly found in the literature on this topic) of any arbitration under this policy to be London or Lima? However, the problem about all these formulations, including the third, is that they elide the distinction between the legal localisation of an arbitration on the one hand and the appropriate or convenient geographical locality for hearings of the arbitration on the other hand. In the present case it is clear that the failure to draw this distinction caused confusion below, and it must be stressed at the outset that the submissions on this appeal were different. That is apparent from the fact that this highly experienced deputy judge rightly held that this was a London arbitration clause, in the sense that any arbitration under the policy was to be governed by English law in every respect, but nevertheless concluded that any arbitration under the policy was to be held in Lima.
Such a situation appears to have no precedent in any reported case. The possible consequences of an agreement to arbitrate in country X subject to the laws and procedures in force in country Y have been discussed by a number of writers, and some of the relevant material is mentioned below. But the judge was evidently not referred to the implications of this conclusion. In the result, while rightly holding that the parties had agreed that any arbitration under the policy was to be governed by English law, he refused an application for the appointment of an arbitrator pursuant to the Arbitration Act 1950, because in his view the parties had also agreed that any arbitration under the policy was to be held in Lima. In effect, he held that Lima was the agreed forum, but that the agreed lex fori was English. This conclusion was challenged as untenable by Mr. Gross on behalf of the appellant shipowners, who had not appeared below. On behalf of the insurers Mr. Milligan valiantly sought to support it, although he obviously had great difficulty in explaining how a Lima arbitration governed by English law would work out in practice. We reserved judgment because the implications of a possible split between the procedural or "curial" law of an arbitration on the one hand, and its "seat" on the other, are of general interest and have been much discussed in the literature.
I then turn to the facts and issues.
The policy, the General Conditions incorporated in it and the subsequent typed indorsement were all in Spanish. But both parties and the court sensibly worked on the basis of agreed rough translations of the few provisions which matter. These are no doubt imperfect and in one instance uncertain, but they cannot affect the conclusion.
There is no need to refer to the terms of the policy. Apart from identifying and describing the four ships and stating the original premiums, the policy merely incorporated the text of the American and other Institute clauses by reference. Of the printed "General Conditions" it is only necessary to refer to the following. First, Article 1 provided that in the event of any conflict between the printed and typed stipulations, the latter were to prevail. Secondly, Article 31 provided:
"Whatever the domicile of the Insured, in the event of judicial dispute he accepts, from now on, the jurisdiction and competence of the City of Lima, without any reservation of any nature."
One then comes to the terms of the typed indorsement. Paragraph 1(1) provided that "the English clauses shall prevail over the General Conditions printed in the policy". This must have been a reference to the English text of the American and other Institute clauses incorporated in the cover and is of no direct relevance for present purposes. Paragraph 2 provided that certain parts of the General Conditions (which did not include Articles 1 and 31) should be without effect and is equally irrelevant. The Spanish wording of paragraph 3 was: "Las Liquidaciones de Averia se realizaran en Londres". The judge thought that this meant that general average settlements were to take place in London. I think that it may refer to the settlement of claims under the policy. However, for present purposes the correct translation is again irrelevant. One then comes to the crucial words:
"Arbitraje bajo las Condiciones y Leyes de Londres".
The working translation was "Arbitration under the conditions and laws of London".
"Conditions" is obviously not an idiomatic translation. But in the context of "laws" it must have been intended to refer to the procedural rules in force in London. Indeed, as explained hereafter, there is a sound legal distinction between substance and procedure even in this context. The judge interpreted this provision as follows:
"The clause, in my view, provides that the obligation to arbitrate shall be governed by English law; also, probably, that the procedural law of any arbitration shall be English law."
Subject to omitting the word "probably" I entirely agree. This was plainly, and perhaps unusually explicitly, a London arbitration clause. Mr. Milligan challenged this on behalf of the insurers by the ingenious submission that the clause did not apply to the law and procedure governing the arbitration, but that it was directed to English insurance law and practice. He read it as though it had stated, in effect: "Any dispute is to be settled by arbitration on the basis of English insurance law and practice". This was rightly rejected by the judge and does not appear to be a construction which had occurred to either of the parties.
When it became clear that their disagreement about the appropriate rates of premium during the period in question would have to be resolved by arbitration, it also emerged that the parties were in dispute as to whether—in the lay sense—the arbitration should be held in London or Lima and—in the legal sense—whether the courts in London or Lima were the competent courts in relation to the arbitration. So both parties instituted legal proceedings. On 11th September 1985 the shipowners issued an originating summons claiming (i) a declaration that the insurance policy provided for disputes to be referred to arbitration in London, and (ii) an order for the appointment of an arbitrator pursuant to section 10 of the Arbitration Act 1950. The judge refused to grant the declaration under (i) and therefore concluded that (ii) did not arise. The shipowners now appeal against both these conclusions. In the interim, however, the insurers had issued proceedings in the court of first instance in Lima on 13th December 1985 for an order seeking to compel the shipowners to submit the substantive dispute to arbitration in Lima. We have not seen any documents relating to these proceedings and they have not so far led to any decision.
Before coming to the crux of the issues which arise on this appeal I must digress for a moment to mention a further procedural dispute which logically precedes...
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