NB Three Shipping Ltd v Harebell Shipping Ltd [QBD (Comm)]
| Jurisdiction | England & Wales |
| Judge | Morison J |
| Judgment Date | 13 October 2004 |
| Date | 13 October 2004 |
| Court | Queen's Bench Division (Commercial Court) |
Queen's Bench Division (Commercial Court).
Morison J.
D Allen (instructed by Stephenson Harwood) for the claimant.
C Hancock QC and S O'Sullivan (instructed by Watson, Farley & Williams) for the defendant.
The following cases were referred to in the judgment:
Lobb Partnership Ltd v Aintree Racecourse Co Ltd [2000] CLC 431.
Navigazione Alta Italia SpA v Concordia Maritime Chartering AB (The Stena Pacifica)UNK [1990] 2 Ll Rep 234.
Westfal-Larsen & Co A/S v Ikerigi Compania Naviera SA (The Messiniaki Bergen)UNK [1983] 1 Ll Rep 424.
Arbitration — Stay of proceedings — Charterparty on amended Barecon 89 Form — Law, jurisdiction and arbitration clause required charterers to litigate but gave owners the option to arbitrate — Charterers' proceedings properly brought initially stayed after owners exercised option to refer disputes to arbitration — Arbitration Act 1996, s. 9.
These were applications by the defendant owners under s. 9 of the Arbitration Act 1996 to stay the claimant charterers' proceedings pending arbitration and by the charterers under s. 44 of the Act for the production of documents.
By two bareboat charterparties on the Barecon 89 Form the owners agreed to charter two vessels which the claimants' predecessors agreed to hire on the terms of the charterparties as amended. The hire payable was calculated on the basis of a “principal” element and an “interest” element. The interest element was at a specified interest rate increased by a specified margin. A dispute arose between the parties about increases in the interest rate. As a result owners declared that there were events of default and charterers served notices to enable them to pay off the indebtedness and acquire the vessels.
Charterers believed that they had been overcharged in respect of interest in breach of contract and that the owners had been making a secret profit and charterers issued proceedings.
The law, jurisdiction and arbitration clause in the charterparty (clause 47) provided in clause 47.02 that: “The courts of England shall have jurisdiction to settle any disputes which may arise out of or in connection with this Charterparty but the Owner shall have the option of bringing any dispute hereunder to arbitration.”
Owners purported to exercise their right to refer the dispute to arbitration, appointed an arbitrator and applied to the court to stay the proceedings.
Held, staying the proceedings under s. 9 and declining to make an order under s. 44:
1. Clause 47 was designed to give better rights to owners than to charterers. Thus, although charterers were limited to action in the English court, owners were given the right to bring proceedings in any court which had jurisdiction by virtue of a Convention and charterers waived objections on grounds of forum non conveniens; charterers were required to provide a place for service within this jurisdiction whereas owners are not; charterers were constrained not to challenge enforcement of any judgment “which is given or would be enforced by an English court” whereas owners were not. Clause 47.02 gave owners a right to stop or stay a court action brought against them, at their option. The option was not lost if charterers started proceedings first. It would cease to be available if owners took a step in the action or otherwise led charterers to believe on reasonable grounds that the option to stay would not be exercised.
2. Clause 47 had two streams running through it: the litigation stream and the arbitration stream. The arbitration stream satisfied the requirements of an arbitration agreement since a one sided choice of arbitration was sufficient. The words of s. 9(1) “in respect of a matter which under the agreement is to be referred to arbitration” were to be applied when the application for a stay was applied for. The disputes under the agreement were to be referred to arbitration once owners' option had been exercised. Neither the fact that charterers' proceedings were initially properly brought nor that the terms of s. 9(1) only applied after the option was exercised affected that conclusion. Once owners had exercised their option the parties had agreed that the disputes should be arbitrated, s. 9(1) applied and the proceedings had to be stayed pending arbitration.
3. The claim for s. 44 relief was a matter for the arbitrators.
Morison J:
1. The principal issue on these applications is whether, on a proper construction of Charterparties on an amended Barecon 89 Form and on a proper interpretation of section 9 of the Arbitration Act 1996, the defendant Owners are entitled to stay an action commenced against them by the claimant Charterers.
2. By two bareboat charterparties on the Barecon 89 Form dated 17 January 1994, the Owners agreed to charter two vessels, ARCTIC TRADER and ARCTIC VOYAGER, which the Claimants' predecessors agreed to hire on the terms of the charterparties as amended. The hire payable was calculated on the basis of a “principal” element and an “interest” element. The interest element was at a specified interest rate increased by a specified margin. The interest rate was defined as “the cost of funds to [the Owners] of obtaining the amount in dollars equal to the Principal Balance [the principal element]” prior to the relevant payment date. There was provision for the certification in writing of the rate of interest at which the fund providers were providing funds to the Owners in connection with the financing of each of the two, newly built, vessels.
3. In early July 2003 there was a dispute between the parties about increases in the interest rate and an explanation was sought by Charterers for them. This led to exchanges in correspondence, and Owners declared that there were events of default. For their part, Charterers served notices to enable them to pay off the indebtedness and acquire the vessels.
4. Charterers believe, rightly or wrongly, that they have been overcharged and that the Owners have been making a secret profit. On 22 June 2004 Charterers issued a claim form in this jurisdiction claiming against...
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