Silver Dry Bulk Company Ltd v Homer Hulbert Maritime Company Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Males |
| Judgment Date | 18 January 2017 |
| Neutral Citation | [2017] EWHC 44 (Comm) |
| Docket Number | Case No: CL-2016-000626 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 18 January 2017 |
[2017] EWHC 44 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Males
Case No: CL-2016-000626
Mr Thomas Sprange QC & Ms Ruth Byrne (of King & Spalding LLP) for the Claimant
The Defendant did not appear and was not represented
Hearing date: 13 January 2017
Approved Judgment
Introduction
It takes two to arbitrate, just as it does to tango. There cannot be a valid arbitration when one of the two parties has ceased to exist: Baytur S.A. v Finagro Holding S.A. [1992] 1 QB 610. Typically such points arise when it is the claimant in the arbitration which ceases to exist after arbitration has been validly commenced and the respondent contends that the arbitration has been or should be brought to an end. There may then be an issue whether, even though the claimant no longer continues in existence, its claim in arbitration can survive, for example by means of a principle of universal succession ( Eurosteel Ltd v Stinnes AG [2000] CLC 470) or some broadly equivalent principle ( A v B [2016] EWHC 3003 (Comm)).
In the present case, however, it is the respondent in the arbitration which has been dissolved and which was dissolved before the arbitration was commenced. The claimant contends that despite this dissolution, the respondent company survived and continues to survive sufficiently at any rate for the purpose of being the defendant to a claim in arbitration. But it recognises that there is some uncertainty about this. It accepts that this is an issue which needs to be decided, but wants it to be decided by the arbitrator which it has appointed, applying the principle of kompetenz-kompetenz.
It might be wondered why anybody should want to arbitrate against a company which no longer exists. Leaving that question aside for the moment, however, a complication of this situation (unlike the typical situation when it is the claimant whose status is uncertain) is that there is nobody available to put the case for the respondent's non-existence. The respondent cannot do so if it has been dissolved and, ex hypothesi, there is nobody who has (or who accepts that he has) standing to represent a company which he maintains no longer exists. That is why nobody appeared before me to oppose the claimant's applications on behalf of the respondent.
In a case such as the present where there are clearly arguments to be made that the respondent has ceased to exist, it would be unfortunate if a court or tribunal determining the respondent's existence or otherwise did not have the benefit of evidence and adversarial argument which could be properly tested. Moreover, it would be a pity to incur the trouble and expense of an arbitration if at the end of the day, perhaps in the course of proceedings for recognition or enforcement of an award, it were to turn out that the whole arbitration had been a nullity from the start. The claimant's proposed solution, which it contends will remove any uncertainty, is that the court should make an order under section 18 of the Arbitration Act 1996 directing that the arbitral tribunal has been validly constituted. This, it suggests, will encourage the respondent's parent company (which is the real albeit indirect target of the arbitration proceedings) to participate in the determination of the continuing existence of the respondent by the arbitrator.
This application under section 18 is the principal application before me. In addition the claimant seeks orders for production of documents against various third parties both within and outside the jurisdiction under sections 43 and 44 of the 1996 Act.
Background
The claimant in the arbitration and in this court is Silver Dry Bulk Company Ltd, a Maltese company and a 100% subsidiary of General National Maritime Transportation Company ("GNMTC"), the Libyan national maritime company. It is Silver Dry's case that until the overthrow of Colonel Gadaffi, GNMTC was under the control and direction of the Colonel's fifth son, Hannibal, during which time GNMTC and its subsidiaries acquired close to US $1 billion worth of vessels.
One of these vessels was a newbuilding Capesize bulk carrier then named "Homer Hulbert" but also referred to by its shipyard number as "Vessel 1045" which Silver Dry purchased from the defendant (the respondent in the arbitration) Homer Hulbert Maritime Company Ltd pursuant to a Memorandum of Agreement dated 1 February 2011 for a price of US $66.5 million. Homer Hulbert was a special purpose vehicle incorporated in the Marshall Islands on 13 December 2010 for the purpose of owning the vessel and selling it to Silver Dry. Its sole director was Mr Ga-Hyun Chung and it was a 100% subsidiary within the Sinokor group of companies, a Korean ship owner and operator.
It is Silver Dry's case that the purchase price of US $66.5 million paid by Silver Dry to Homer Hulbert included the payment of a secret commission of between US $5 million and US $7 million to Hannibal Gadaffi. It relies in particular on (1) documentary evidence of a payment by Homer Hulbert of US $5 million to a company called Babel Shipping Company which is said to be a nominee company of Hannibal Gadaffi, (2) an admission made in an interview in Libya by a Captain Belhag, said to be a close associate of Hannibal Gadaffi, that secret commissions were paid in connection with such vessel transactions and that such payments were made to Babel, and (3) evidence given by a broker, Nikolas Gkatzionis, in proceedings in Malta to the effect that a secret commission had been required in connection with the Vessel 1045 transaction and that the price stated in the MOA had been artificially inflated by US $5 million to enable this to be paid. Effectively, therefore, Silver Dry says that it paid US $5 million more than it need have done to purchase the vessel, and that this money was corruptly diverted to Hannibal Gadaffi's company. According to Silver Dry, in this respect the transaction followed a common pattern. Indeed, I was told that an arbitral tribunal concerned with a similar transaction at about the same time for the purchase of Vessel 1046 has found that a corrupt payment was made to Babel, although that transaction had nothing to do with Sinokor.
Although Silver Dry's case remains to be proved, so far at any rate nobody from Homer Hulbert or its parent Sinokor has denied these allegations or given an account of what the payment of US $5 million represented.
Dissolution of Homer Hulbert and commencement of arbitration.
Once the sale of Vessel 1045 to Silver Dry was completed, Homer Hulbert was dissolved. On 28 February 2011 it filed Articles of Dissolution with the Registrar of Corporations of the Republic of the Marshall Islands.
Section 105 of the Marshall Islands Business Corporations Act ("the BCA") provides:
" Winding up affairs of corporation after dissolution."
(1) Continuation of corporation for winding up. All corporations, whether they expire by their own limitations or are otherwise dissolved, shall nevertheless be continued for the term of three (3) years from such expiration or dissolution as bodies corporate for the purpose of prosecuting and defending suits by or against them, and of enabling them gradually to settle and close their business, to dispose of and convey their property, to discharge their liabilities, and to distribute to the shareholders any remaining assets, but not for the purpose of continuing the business for which the corporation was organized. With respect to any action, suit, or proceeding begun by or against the corporation either prior to or within three (3) years after the date of its expiration or dissolution, and not concluded within such period, the corporation shall be continued as a body corporate beyond that period for the purpose of concluding such action, suit or proceeding and until any judgment, order, or decree therein shall be fully executed.
(2) Trustees. Upon the dissolution of any corporation, or upon the expiration of the period of its corporate existence, the directors shall be trustees thereof, with full power to settle the affairs, collect the outstanding debts, sell and convey the property, real and personal, as may be required by the laws of the country where situated, prosecute and defend all such suits as may be necessary or proper for the purposes aforesaid, distribute the money and other property among the shareholders after paying or adequately providing for payment of its liabilities and obligations, and do all other acts which might be done by the corporation, before dissolution, that may be necessary for the final settlement of the unfinished business of the corporation.
(3) Supervision by court of liquidation. At any time within three (3) years after the filing of the articles of dissolution, the High Court of the Republic, in a special proceeding instituted under this subsection, upon the petition of the corporation, or of a creditor, claimant, director, officer, shareholder, subscriber for shares, incorporator or the Attorney-General on behalf of the Government of the Republic, may continue the liquidation of the corporation under the supervision of the court in the Republic and may make all such orders as it may deem proper in all matters in connection with the dissolution or in winding up the affairs of the corporation, including the appointment or removal of a receiver, who may be a director, officer or shareholder of the corporation."
Accordingly Silver Dry had a period of three years from 28 February 2011 within which to commence proceedings against Homer Hulbert. If it did so within that period, Homer Hulbert would continue in existence...
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