Peoples' Insurance Company of China and Another v Vysanthi Shipping Company Ltd
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE THOMAS:,Mr Justice Thomas |
| Judgment Date | 10 July 2003 |
| Neutral Citation | [2003] EWHC 1655 (Comm) |
| Docket Number | Case No 2002 Folio 344 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 10 July 2003 |
[2003] EWHC 1655 (Comm)
The Honourable Mr Justice Thomas
Case No 2002 Folio 344
Case No 2002 Folio 661
IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Michael McParland (instructed by Shaw & Croft) for the Claimants in action 2002 Folio 344
Timothy Saloman QC (instructed by Hill Taylor Dickinson) for the Defendants in action 2002 Folio 344
Hearing date: 10 April 2003
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.
ORIGINS OF THE DISPUTE
Vysanthi Shipping Co Limited, a company incorporated in Cyprus, the Defendants in Claim No 2002 Folio 344 and the Claimants in Claim No 2002 Folio No 661, were the owners of the bulk carrier Joanna V; I shall refer to them as the owners. On 28 June 1996, they issued two bills of lading for 29,900 MT Argentine yellow soya bean pellets in bulk loaded aboard the vessel in San Lorenzo, Argentina for carriage to and delivery at Chinese ports. The bills of lading (which were on the Norgrain Charterparty 1973 form) were consigned to Order and claused on their face:
"London Arbitration/English law to apply to all disputes arising out of this bill of lading in accordance with Clause 8 on the back of this bill.
Clause 8: All disputes arising out of the Bill of Lading shall be arbitrated at London and unless the parties agree forthwith on a single arbitrator, be referred to the final arbitrument of two arbitrators carrying on business in London who shall be members of Baltic Mercantile & Shipping Exchange and engaged in the Shipping and/or Grain Trades, one to be appointed by each of the parties with power to such Arbitrators to appoint an Umpire. No award shall be questioned or invalidated on the ground that any of the Arbitrators is not qualified as above, unless objection to his action be taken before the Award is made. Any dispute arising under the Bill of Lading should be governed by English Law.
When attempting to leave San Lorenzo, the first load port, the vessel grounded and was only re-floated after the intervention of salvors who provided their services on LOF 1995 terms. The owners declared general average. The vessel was re-floated, but salvors requested security and the vessel was delayed until cargo interests provided such security.
The bill of lading was negotiated and China National Feeding Stuff Import/Export Corporation (the Second Claimants in claim No 2002 Folio 344 and the Respondents in action 2002 Folio 661) became the receivers. I shall refer to them as the receivers. They have their principal place of business in Beijing, China. On 19 July 1996 People's Insurance Company of China, the First Claimants in Claim No 2002 Folio 344 (to whom I shall refer as PICC) provided salvage guarantees.
THE COMMENCEMENT OF THE ARBITRATION IN LONDON
On 23 August 1996, the owners commenced an arbitration against Chinese National Native Produce & Animal By-Products Import & Export Corporation, the company that they believed were the relevant cargo interests; they were in fact mistaken and on 19 October 1999, the owners commenced a further arbitration, this time against the receivers. In each of the arbitrations they appointed Mr Donald Davies, a distinguished London Maritime arbitrator, as the arbitrator. As no arbitrator was appointed by either the Respondents to the first arbitration or the receivers, he became the sole arbitrator by virtue of the provisions of section 17(2) of the Arbitration Act 1996.
THE COMMENCEMENT OF PROCEEDINGS IN CHINA
The vessel arrived in Ningbo, China in September 1996. She was immediately arrested; she was released after the provision of a guarantee for $1.3m issued by PICC against counter security provided by the owners' P& I Club.
On 24 October 1996, the receivers commenced proceedings before the Ningbo Maritime Court, seeking to recover the amount for which they were liable for salvage, together with costs and expenses. The owners at once objected to the jurisdiction of the Ningbo Maritime Court. On 23 January 1998 the Ningbo Maritime Court held that it had jurisdiction; it will be necessary to refer to the terms of that judgment —see paragraph 31 below. The owners appealed to the Zhejiang Provincial Higher People's Court which, on 21 May 1998, dismissed the appeal; it will again be necessary to refer to that decision —see paragraph 32 below. The owners then appealed to the Supreme Court of China to review the decision of the two lower courts on the grounds that they were perverse; the Supreme Court declined to rule on the matter, but asked the Zhejiang Provincial Higher People's Court to reconsider its position. The Zhejiang Provincial Higher Peoples Court ruled that its earlier decision was correct.
Proceedings on the merits then followed with a series of hearings, the first of which took place on the 18 January 1999; witnesses were called including the Master of the vessel.
Either in May 1998 or February 2001, PICC were substituted as Claimants as they had indemnified the receivers.
On 28 September 2001, the Ningbo Maritime Court gave judgment on the merits, holding that the owners were at fault and ordering them to pay damages to PICC; it will be necessary to refer to that judgment in a little more detail —see paragraph 33.
THE COURSE OF THE ARBITRATION AND THE ARBITRATION AWARD
Whilst the proceedings before the courts in China had been taking place, the arbitration before Mr Donald Davies was proceeding in London. The receivers objected at once to the jurisdiction of the arbitrator, but they appeared and defended the claim under that reservation. Between 12 and 15 February 2001, a four day hearing took place before Mr Donald Davies at which witnesses were called and submissions made by counsel for each party.
On 14 March 2001, Mr Donald Davies published his award. Various minor corrections were made to that award under s.57 of the Arbitration Act on 4 April 2001. In summary, he held that he had jurisdiction under the arbitration clause contained in the bill of lading and that there had been no submission of the claim advanced in the arbitration to the courts of China. He held that the receivers were liable to pay general average in the sum of $367,138.86 and damages for detention in the sum of $28,500.
On 20 June 2001, Mr Donald Davies made a further award dealing with issues of interest and costs and on 13 February 2002 (after a hearing at which the receivers appeared through their costs consultant), he made a third award on which he assessed the costs payable by the receivers.
THE PROCEEDINGS BEFORE THIS COURT
No proceedings were brought before this court until 28 March 2002. PICC and the receiver were the first to bring proceedings; these were brought against the owners on 28 March 2002 (following permission granted by David Steel J on 19 March 2002 to issue proceedings out of the jurisdiction) in Claim No 2002 Folio 344. PICC and the receivers sought a declaration that the judgment of the Ningbo Maritime Court for payment to PICC of cargo's proportion of liability to salvors' salvage charges and to salvors for fees together with interest and costs be declared enforceable and capable of recognition in England and Wales. They also sought an injunction against the enforcement of the award of Mr Donald Davies.
In July 2001, the owners commenced an arbitration application (Claim No 2002 Folio 661) against the receivers, seeking to enforce the award of Mr Donald Davies. An Order was made by Aikens J on 12 July 2002 in those proceedings ordering the enforcement of those awards, subject to the right of the receivers to apply to set aside that Order.
THE APPLICATION TO SET ASIDE THE AWARD
It is convenient and necessary first to consider the question as to whether the award made by Mr Donald Davies on 21 March 2001 can be challenged and whether this Court should grant an injunction against its enforcement.
Under the scheme of the Arbitration Act 1996, the arbitral tribunal has power under s.30(1) to rule on its own substantive jurisdiction, subject to challenge before the courts in accordance with the provisions of the Act.
As I have set out at paragraph 10, the receivers, in accordance with the provisions of s.31 of the Act, objected to the substantive jurisdiction of the arbitral tribunal, but under that reservation continued to participate in the arbitration. Neither party sought an award on jurisdiction or made any application to this Court in respect of the arbitrator's jurisdiction during the pendency of the arbitration. The arbitrator, in such a case, would therefore be expected to deal with the question of jurisdiction in his substantive award on the merits.
This was the course followed by Mr Donald Davies. In a characteristically clear section in his award, Mr Donald Davies set out the objection of the receivers and then, at paragraphs 38–45 of his award, set out his conclusions. He referred to the fact that the receivers had not led any evidence of their own regarding the proceedings in China, although they had had ample opportunity for doing so. He pointed out that they had relied upon the evidence of Mr Ansley (a partner in a Shanghai firm of Bull Husser and Tupper who had had conduct of the case in the Courts of China on behalf of the owners). His summary of that evidence was that:
i) The object of the steps taken on behalf of the owners in the Courts of China was to emphasise that the disputes relating to the...
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