Sheltam Rail Company (Proprietary) Ltd v Mirambo Holdings Ltd and another

JurisdictionEngland & Wales
JudgeTHE HONOURABLE MR JUSTICE AIKENS,Mr Justice Aikens
Judgment Date21 April 2008
Neutral Citation[2008] EWHC 829 (Comm)
Docket NumberCase No: 2007/1668
CourtQueen's Bench Division (Commercial Court)
Date21 April 2008
Between :
Sheltam Rail Company (Proprietary) Limited
Claimant
and
(1) Mirambo Holdings Limited
(2) Primefuels (Kenya) Limited
Defendants

[2008] EWHC 829 (Comm)

Before :

The Honourable Mr Justice Aikens

Case No: 2007/1668

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Royal Courts of Justice

Strand, London, WC2A 2LL

Mr Michael Hales (Solicitor advocate of Nabarro LLP, Solicitors, London) for the Claimant

Mr David Mildon QC and Mr David Davies (instructed by Stephenson Harwood, Solicitors, London) for the Defendants

Approved Judgment

Hearing date: 14 th April 2008

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.

THE HONOURABLE MR JUSTICE AIKENS Mr Justice Aikens

Mr Justice Aikens

1

The parties to these proceedings have been engaged in long running arguments which arise out of a Consortium Agreement dated 20 th September 2005, to which all are parties. Disputes were referred to three arbitrators, in accordance with the provisions of Article 14 of the Consortium Agreement. That provided that all disputes, whether arising out of the interpretation or execution of the Consortium Agreement or in connection with it, should be settled by three arbitrators under the Rules of the London Court of International Arbitration (“LCIA”). It also provides that the arbitration is to take place in London.

2

On 29 th November 2007, the arbitrators published their Third Partial Final Award. The claimant (“Sheltam”) challenged this Award under sections 67 and 68 of the Arbitration Act 1996 (“the Act”). These applications were due to be heard on Monday, 14 th April and Tuesday 15 April 2008. However, at about 1pm on Thursday, 10 th April 2008, Nabarro LLP, the Solicitors for Sheltam, issued a Notice of Discontinuance of Sheltam's arbitration claim. The defendants to the arbitration claim (“Mirambo” and “Primefuels”), being confident that they could successfully defeat the applications under sections 67 and 68 of the Act, have retorted by asking the court to set aside the notice of discontinuance and to make orders under sections 67(3) and 68(3) of the Act, to confirm the arbitrators' Third Partial Final Award.

3

On Monday 14 April 2008 I heard argument from Mr Mildon QC on behalf of the defendants and Mr Hales on behalf of Sheltam. Upon Mr Hales' giving undertakings to the court on behalf of Sheltam (on which I will elaborate below), I decided not to set aside the Notice of Discontinuance. The further application of Mr Mildon did not, therefore, arise. Mr Mildon and Mr Hales stated that, so far as they were aware, the issue of when a Notice of Discontinuance could be set aside in arbitration proceedings was a novel point on which there was no authority. So I decided to give the reasons for my decision in writing. These are my reasons.

The background

4

Sheltam is a South African company. Mirambo is a Tanzanian company and Primefuels is a Kenyan company. The other parties to the Consortium Agreement are Comazar (Proprietary) Limited, a South African private company (“Comazar”) and CDIO Institute for Africa Development Trust, which is a South African Trust (“CDIO”). Comazar and CDIO have not taken any part in the arbitration proceedings.

5

The Consortium Agreement provides that all the parties would jointly bid for 25 year concessions to run the railways of Kenya and Uganda. If the consortium were to be successful then all four parties would become shareholders in a new company, to be called “Rift Valley Railway Company”. The Consortium Agreement provided that the interests of the parties in the consortium would be: Sheltam – 61%; Primefuels – 15%; Mirambo – 10%; Comazar – 10% and CDIO – 4%.

6

Article 12 of the Consortium Agreement sets out the principles that will govern if the consortium were successful in obtaining the concessions to run the railways. It provided that Sheltam, as “the Leader” of the consortium would arrange for the drafting of a proposed Shareholders Agreement as soon as possible after the consortium was nominated as the preferred bidder to run the railways. The draft could be considered and would then be signed by the parties. The present dispute centres on the obligations of Sheltam, as Leader, under Article 12 of the Consortium Agreement. Article 18 of the Consortium Agreement provides that the applicable law of the Agreement will be Kenyan law.

7

The consortium was successful in winning the railway concessions in late 2005. A holding company (“RVR”) was formed in Mauritius in order to hold (on behalf of the parties to the Consortium Agreement) the shares in the railway operating companies in Kenya and Uganda respectively.

8

In January 2006, Sheltam purported to exclude Mirambo and Primefuels from the consortium and from participation in the RVR on the grounds that they had failed to sign a Shareholders' Agreement when asked to do so. Mirambo and Primefuels contested this. They argued that the document they had been asked to sign did not comply with the terms of the Consortium Agreement.

9

That dispute was referred to arbitration before three LCIA arbitrators. The three arbitrators, (Professor Dr Fidelis Oditah QC, Professor Dr Philippe Leboulanger and Mr Michael Lee, Chairman), issued their First Partial Final Award on 15 th December 2006. The arbitrators found that Mirambo and Primefuels had not been validly excluded from the consortium and that they remained entitled to participate as shareholders in RVR.

10

The arbitrators also held that Sheltam had failed to serve a “contractually compliant” Shareholders' Agreement for execution by Mirambo and Primefuels in accordance with Article 12.2 of the Consortium Agreement. Therefore, in early 2007 Mirambo and Primefuels sought orders for Specific Performance and Injunctive Relief against Sheltam from the LCIA arbitrators. In particular, they sought an order for Specific Performance of Sheltam's obligations to circulate for comment and signature a Shareholders' Agreement which complied with the Consortium Agreement's terms. Mirambo and Primefuels also sought injunctions concerning the shares in RVR.

11

The arbitrators issued their Third Partial Final Award on 30 th November 2007. In it they declared that Sheltam was in breach of its obligations under Article 12.2 of the Consortium Agreement to tender to Mirambo and Primefuels, for comments, a contractually compliant draft Shareholders' Agreement. It ordered that such a draft Shareholders' Agreement be circulated within 28 days of the date of the Award. The arbitrators also declared that Sheltam was not entitled to issue, allocate, sell, charge or transfer or otherwise deal with or vote the relevant shares in RVR in a manner which would prevent Mirambo and Primefuels from ultimately participating as a shareholder in RVR in accordance with the terms of the Consortium Agreement.

12

The Award also provided that if Sheltam did serve a draft Shareholders' Agreement, but a dispute arose as to whether or not it was contractually compliant, then Sheltam would not be held to be in breach of the orders made under the Award until the tribunal had first determined whether or not the document complied with the orders of the arbitrators. If the arbitrators identified any deficiencies, then Sheltam would be given a reasonable opportunity to rectify them.

13

On 21 st December 2007, Sheltam launched its arbitration claims under sections 67 and 68 of the Act. Under section 67 of the Act, Sheltam challenged the Third Partial Final Award on the ground that the tribunal lacked substantive jurisdiction to grant equitable and declaratory relief in the terms set out in the Award. Sheltam challenged the Award under six paragraphs of sections 68(2) of the Act. The most important allegation was that the tribunal had exceeded its powers and that this serious irregularity had caused or would cause substantial injustice to Sheltam: section 68(2)(b).

14

Sheltam took no steps to conform with the order of the arbitrators to produce a contractually compliant draft shareholders agreement, either before or after the arbitration claim form was issued.

The statutory provisions and the CPR

15

Under sections 67 and 68 of the Arbitration Act 1996, a party can challenge an arbitration award on grounds of lack of jurisdiction or serious irregularity without first obtaining the leave of the court. This contrasts with section 69, which provides that a party can only appeal an arbitration award on a point of law with the leave of the court, unless it has the agreement of all the other parties to the proceedings. Leave to appeal on a point of law is only given if stringent conditions, laid down in section 69(3), are satisfied. It is now well established that if a party challenges an Award under section 67, on the ground that the tribunal lacked substantive jurisdiction to make the award, then the court will re-hear the jurisdiction issue and the parties can adduce evidence and can re-argue entirely the issue of jurisdiction. This exercise can involve both sides in considerable effort and expense. The same is true for mounting or defending a challenge to an award under one or more paragraphs of section 68 of the Act.

16

The aim of a respondent to an arbitration claim under sections 67 and 68 of the Act must always be to maintain the award. Ultimately it may have to be enforced through the courts, either in the country where the award was made or in another country, usually a state that is party to the New York Convention (1958) on the Recognition and Enforcement of Foreign Arbitral Awards.

17

CPR Part 38 deals with discontinuance of claims. CPR Part 38.2(1) and (3) provide as follows:

“(2) A claimant may discontinue all or part of a claim at any time…

…….

(3) Where there is more than one...

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