Shagang South-Asia (Hong Kong) Trading Company Ltd v Daewoo Logistics
| Jurisdiction | England & Wales |
| Judge | Mr Justice Hamblen |
| Judgment Date | 05 February 2015 |
| Neutral Citation | [2015] EWHC 194 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 05 February 2015 |
| Docket Number | Case No: 2014-943 |
[2015] EWHC 194 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Rolls Building,
Fetter Lane,
London, EC4A 1NL
Mr Justice Hamblen
Case No: 2014-943
Robert Bright QC (instructed by Reed Smith LLP) for the Claimant
Nigel Jacobs QC (instructed by Lax & Co. LLP) for the Defendant
Hearing dates: 23 January 2015
Introduction
The Claimant ("Shagang") applies under s.67 of the Arbitration Act 1996 (1) to set aside the First Final Arbitration Award dated 8 July 2014 ("the Award") made by Mr Timothy Rayment as sole arbitrator and (2) for a declaration that the Tribunal was not properly constituted.
Background
By a Fixture Note dated 17 April 2008 the Respondent ("Daewoo") agreed to charter a vessel ("DAEWOO TBN") to Shagang to perform various shipments for the period 1 May – 31 December 2008. The Fixture Note provided ( inter alia) as follows:
"23. ARBITRATION: ARBITRATION TO BE HELD IN HONGKONG. ENGLISH LAW TO BE APPLIED.
24. OTHER TERMS/CONDITIONS AND CHARTER PARTY DETAILS BASE ON GENCON 1994 CHARTER PARTY."
25. THIS CHARTERPARTY TO APPLY ENGLISH VERSION."
Part I of the Gencon 1994 Form ("the Gencon form") consists of numbered boxes that are to be filled in. Box 25 of the Gencon form Part I is to be filled in according to the following instructions:
"Law and Arbitration (state 19(a), 19(b) or 19 (c) of Cl. 19; if 19(c) agreed also state Place of Arbitration) (if not filled in 19(a) shall apply (Cl 19)."
Clause 19 of the Gencon form Part II provides as follows:
" 19. Law and Arbitration
* (a) This Charter Party shall be governed by and construed in accordance with English law and any dispute arising out of this Charter Party shall be referred to arbitration in London in accordance with the Arbitration Acts 1950 and 1979 or any statutory modification or re-enactment thereof for the time being in force. Unless the parties agree upon a sole arbitrator, one arbitrator shall be appointed by each party and the arbitrators so appointed shall appoint a third arbitrator; the decision of the three-man tribunal thus constituted or any two of them shall be final. On the receipt by one party of the nomination in writing of the other party's arbitrator, that party shall appoint their arbitrator within fourteen days, failing which the decision of the single arbitrator appointed shall be final.
For disputes where the total amount claimed by either party does not exceed the amount stated in Box 25 ** the arbitration shall be conducted in accordance with the Small Claims Procedure of the London Maritime Arbitrators Association.
* (b) This Charter Party shall be governed by and construed in accordance with Title 9 of the United States Code and the Maritime Law of the United States and should any dispute arise out of this Charter Party, the matter in dispute shall be referred to three persons at New York, one to be appointed by each of the parties hereto, and the third by the two so chosen; their decision or that of any two of them shall be final, and for purpose of enforcing any award, this agreement may be made a rule of the Court. The proceedings shall be conducted in accordance with the rules of the Society of Maritime Arbitrators, Inc.
For disputes where the total amount claimed by either party does not exceed the amount stated in Box 25 ** the arbitration shall be conducted in accordance with the Shortened Arbitration Procedure of the Society of Maritime Arbitrators, Inc.
* (c) Any dispute arising out of this Charter Party shall be referred to arbitration at the place indicated in Box 25, subject to the procedures applicable there. The laws of the place indicated in Box 25 shall govern this Charter Party.
(d) If Box 25 in Part I is not filled in, sub-clause (a) of this Clause shall apply.
* (a) (b) and (c) are alternatives; indicate alternative agreed in Box 25.
The underlying dispute between the parties arises from the carriage (and alleged shortlanding) of a cargo of steel products carried on the "NICOLAOS A" from China to Jebel Ali in May/June 2008. The vessel completed discharge and sailed from Jebel Ali on or about 6 July 2008. However shortly after sailing, it was apparently discovered that cargo destined for Jebel Ali had not been discharged. This led to a claim being brought by the cargo receivers against the Head Owners which was eventually settled for approximately US $1 million. The Head Owners have brought London arbitration proceedings against the Head Charterers (SK Shipping) and that claim has been passed down the charter chain (Probulk — STX Pan Ocean – Daewoo — Shagang).
Arbitration proceedings were purportedly commenced by Daewoo against Shagang in February 2014. Daewoo's solicitors purported to give notice of Mr Rayment's appointment by emails of 4 February and 26 February and by a letter of 27 February 2014. Shagang did not respond and Daewoo purportedly appointed Mr Rayment as sole arbitrator. Mr Rayment wrote to Shagang giving notice that he had accepted the appointment as sole arbitrator by a letter of 18 March 2014.
Reed Smith were appointed on behalf of Shagang on 7 May 2014, and immediately queried Mr Rayment's appointment as sole arbitrator and thus his jurisdiction. They suggested that the seat of the arbitration was Hong Kong, and that the law applicable to the arbitration was not English law but Hong Kong law, with the result that the arbitration was subject to the Hong Kong Arbitration Ordinance ("the HK Ordinance").
There ensued written submissions from both parties on the issue of jurisdiction, followed by the Award. The Award addressed a number of questions but the principal issues upon which it focussed were whether the arbitration was subject to the English Arbitration Act 1996 ("the English Act") or the HK Ordinance, and whether clause 19(a) of the Gencon form applied. Mr Rayment's conclusion was that the arbitration was subject to the English Act (see paragraphs 33 and 34) and that Gencon clause 19(a) was indeed applicable (see paragraphs 40 and 41). In the light of these conclusions, he concluded that he had been properly constituted as sole arbitrator (paragraph 45).
The Issues
The dispute between the parties on this application centres on the proper construction of clause 23 and its relationship with clause 19 of Part II of the Gencon form.
Shagang's case is that clause 23 provides for arbitration in Hong Kong subject to the procedural or curial law there applicable, being the HK Ordinance. Clause 19 of the Gencon form is inconsistent with clause 23 and is not incorporated or otherwise applicable. It follows that the Arbitrator had no jurisdiction pursuant to either clause 19 or the English Act.
Daewoo's case is that clause 23 when read together with clause 19 provides for Hong Kong to be the geographical location for the arbitration but for the arbitration to be subject to the English Act and English curial law. Alternatively the same conclusion follows on the proper construction of clause 23 even if clause 19 is not incorporated or otherwise applicable. It follows that the Award was rightly decided and Mr Rayment had and has jurisdiction.
If clause 19 is not incorporated or otherwise applicable but clause 23 does make the arbitration subject to English curial law then Shagang has an alternative case that Mr Rayment's appointment as sole arbitrator was not validly made since it was made on the basis of clause 19 rather than by reference to the applicable requirements of the English Act.
The essential issues are therefore:
(1) Whether arbitration under the contract is subject to English or Hong Kong curial law.
(2) If the arbitration is subject to English curial law, whether the appointment of Mr Rayment as sole arbitrator was validly made.
In considering these issues, it is necessary to bear in mind a number of separate concepts, all distinct (albeit related in many cases for practical purposes):
(1) The venue/place of the arbitration, i.e. the geographical location where the arbitration hearings are to be held.
(2) The "seat" of the arbitration, i.e. the country which is intended to provide the curial law.
(3) The law governing the arbitration agreement.
(4) The law governing the substantive contract, i.e. the substantive proper law.
Issue (1): Whether arbitration under the contract is subject to English or Hong Kong curial law.
I propose to address this issue by first considering (1) the wording of clause 23; (2) the commercial background and (3) the relevant authorities.
(1) The wording of clause 23
Whilst I appreciate that clause 23 has to be read in context and that the charterparty was agreed to be based on the Gencon form, it is convenient to start with a consideration of the wording of clause 23 itself.
The clause is headed "Arbitration" and has two limbs: (1) where arbitration is "to be held" and (2) what law is "to be applied".
It is clearly a dispute resolution clause and I consider that the most natural and obvious meaning of its two limbs is that it is intending to address (1) where and how disputes are to be determined (arbitration in Hong Kong) and (2) the law governing determination of such disputes (English law).
It is logical and sensible for a dispute resolution clause to address both the issue of where and how disputes are to be resolved and the law governing such resolution and such clauses commonly do so.
Agreeing that an arbitration is "to be held" in a particular country suggests that all aspects of the arbitration process are to take place there. That would include any supervisory court proceedings which might be required in relation to that process.
Agreeing that a law is "to be applied"...
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