Sovarex SA v Romero Alvarez SA [QBD (Comm)]
| Jurisdiction | England & Wales |
| Judge | Mr Justice Hamblen |
| Judgment Date | 29 June 2011 |
| Neutral Citation | [2011] EWHC 1661 (Comm) |
| Docket Number | Case No: 2010 FOLIO 1231 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 29 June 2011 |
[2011] EWHC 1661 (Comm)
Mr Justice Hamblen
Case No: 2010 FOLIO 1231
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
David Lewis (instructed by Gateley LLP solicitors) for the Claimant
David Semark (instructed by Ashfords LLP) for the Defendant
Hearing dates: 10 June 2011
A. Introduction
This is an application by the Claimant ("Sovarex") for permission to enforce an arbitration award in the same manner as a judgment and to enter judgment in the terms of the Award pursuant to s.66 of the Arbitration Act 1996 ("the Act").
The relevant award is FOSFA arbitration award no. 4107 dated 28 January 2010 ("the Award") under which a FOSFA Tribunal ("the Tribunal") awarded Sovarex damages of €1,035,000 against the Respondent ("Alvarez") (plus interest and certain costs).
Alvarez's position is that the award is a nullity because no contract was concluded. It also relies on the fact that the Spanish courts were asked to decide on the validity of the alleged contract on 3 October 2008–months before the commencement by Sovarex of the FOSFA proceedings and contends that they remain seised of this question. It submits that:
(1) The s.66 application should be dismissed because the evidence shows that there is a real ground for doubting the validity of the award. S.66 is a summary procedure. The alternative proposed by Sovarex, a full trial in England with witnesses, is not available to resolve disputed facts in s.66 proceedings.
(2) Alternatively the court should decline jurisdiction or stay proceedings on the basis that (i) any English judgment would be an interference with the jurisdiction of the Spanish courts and/or (ii) that it is obliged to recognise the findings by the Spanish courts on 6 July and 6 October 2009, that the validity of the contract would be determined in Spain, pursuant to Article 33 (1) of the Regulation.
(3) Alternatively, the court should stay these proceedings in the exercise of its inherent discretion, on lis pendens and forum non conveniens grounds.
B. Background
B.1 The Contract
Sovarex's claim was brought under a contract which it contends was made on 3 June 2008 ("the Contract"), by which Sovarex agreed to sell to Alvarez 5,000 MT of sunflower seeds CIF Seville for shipment between 15 September and 15 October 2008. The Contract provided for English law and contained an arbitration agreement providing for London FOSFA arbitration and making it a breach of contract to start legal proceedings elsewhere. The Claimant's case was that the Contract was concluded by telephone and email through the intermediary of a broker, Mr Garrido. There is a supporting witness statement of Mr Garrido before the court.
Alvarez denies that any contract was concluded. In support of its case it has provided a witness statement from Mr Manuel Romero Alvarez.
If a contract was concluded Sovarex submits that it is beyond doubt that it was repudiated by Alvarez when it refused to acknowledge that any contract had been made when the time for performance arose. Sovarex accepted that repudiation on 17 September 2008.
B.2 The arbitration
Sovarex initiated arbitration on 16 December 2008, in ignorance of any other proceedings. FOSFA appointed an arbitrator on behalf of Alvarez on 20 February 2009. On 28 January 2010, the Award in Sovarex's favour was issued.
B.3 The Spanish proceedings
Alvarez's Spanish action was issued in early October 2008 and formally admitted by the Spanish Court on 1 December 2008, but not served until 20 April 2009.
On 22 September 2010, the Spanish Court dismissed Alvarez's action on the basis that Spanish procedural law does not recognise negative declaratory relief asserting the non-existence of a contract. Alvarez is appealing that decision.
Alvarez, however, relies upon the facts that, at an earlier stage in the Spanish proceedings, the Spanish Court had on 6 July 2009 dismissed an application made by Sovarex for a stay in favour of the FOSFA arbitration and that it thereafter subsequently re-affirmed its decision on 6 October 2009. Sovarex could appeal those decisions but that depends on the outcome of Alvarez's own appeal.
B.4 The s. 66 application
This application was brought on 19 October 2010, initially without notice, after the dismissal of the Spanish proceedings. By order dated 17 December 2010, Teare J ordered service out of the jurisdiction.
C. The Issues
C.1 (1) Whether the s. 66 application should be dismissed because the evidence shows that there is a real ground for doubting the validity of the award.
The first issue which arises under this head is whether Alvarez has lost the right to object to the enforcement of the Award under s.66 (3) of the Act by participation in the arbitration.
S.66 provides:
"66.—Enforcement of the award.
(1) An award made by the tribunal pursuant to an arbitration agreement may, by leave of the court, be enforced in the same manner as a judgment or order of the court to the same effect.
(2) Where leave is so given, judgment may be entered in terms of the award.
(3) Leave to enforce an award shall not be given where, or to the extent that, the person against whom it is sought to be enforced shows that the tribunal lacked substantive jurisdiction to make the award.
The right to raise such an objection may have been lost (see section 73).
(4) Nothing in this section affects the recognition or enforcement of an award under any other enactment or rule of law, in particular under Part II of the Arbitration Act 1950 (enforcement of awards under Geneva Convention) or the provisions of Part III of this Act relating to the recognition and enforcement of awards under the New York Convention or by an action on the award."
S.72 provides:
"72.—Saving for rights of person who takes no part in proceedings.
(1) A person alleged to be a party to arbitral proceedings but who takes no part in the proceedings may question—
(a) whether there is a valid arbitration agreement,
(b) whether the tribunal is properly constituted, or
(c) what matters have been submitted to arbitration in accordance with the arbitration agreement, by proceedings in the court for a declaration or injunction or other appropriate relief.
…."
S.73 provides:
"73.—Loss of right to object.
(1) If a party to arbitral proceedings takes part, or continues to take part, in the proceedings without making, either forthwith or within such time as is allowed by the arbitration agreement or the tribunal or by any provision of this Part, any objection—
(a) that the tribunal lacks substantive jurisdiction,
(b) that the proceedings have been improperly conducted,
(c) that there has been a failure to comply with the arbitration agreement or with any provision of this Part, or
(d) that there has been any other irregularity affecting the tribunal or the proceedings, he may not raise that objection later, before the tribunal or the court, unless he shows that, at the time he took part or continued to take part in the proceedings, he did not know and could not with reasonable diligence have discovered the grounds for the objection.
(2) Where the arbitral tribunal rules that it has substantive jurisdiction and a party to arbitral proceedings who could have questioned that ruling—
(a) by any available arbitral process of appeal or review, or
(b) by challenging the award,
does not do so, or does not do so within the time allowed by the arbitration agreement or any provision of this Part, he may not object later to the tribunal's substantive jurisdiction on any ground which was the subject of that ruling."
It was common ground between the parties that the question of whether Alvarez has lost the right to raise its objection to enforcement under s.66(3) depends on whether or not Alvarez took part in the arbitration proceedings. If it did not do so, then its rights under s72 and s66(3) will have been preserved. If it did so, then its right to rely upon s.66(3) will have been lost by reason of s.73(2).
It was also common ground that this is an issue which must be determined objectively–see, for example, Gater Assets Ltd v NAK Naftogaz Ukrainiy [2007] 2 Lloyd's Rep. 588 at 605, at [79] per Rix LJ.
I was referred to a number of authorities in which this issue has been considered. Although each case turns on its own facts they provide some assistance in determining what amounts to taking part in an arbitration.
Alvarez relied in particular upon the decisions of Clarke J in Caparo Group Ltd v. Fagor Arrasate Sociedad [2000] ADLRJ 254 and of Mann J in Law Debenture Trust v. Elektrim Finance BV [2005] 2 Lloyd's Rep. 755.
In the Caparo case Clarke J held that if a party was invoking the jurisdiction of the tribunal to consider whether it had jurisdiction then that would be taking part in the arbitration. However, merely saying that you are not party to any arbitral agreement and that the arbitration tribunal has no jurisdiction would not be.
In the Law Debenture case Mann J commented as follows on the Caparo decision [at 23]:
"It is noteworthy in that case that Clarke J was able to find that protestations as to the absence of jurisdiction, which were presumably intended to persuade, did not amount to participating in the arbitration even where the body had the additional function of deciding whether there was a prima facie case on jurisdiction."
In relation to the facts of the case before him Mann J said that making the point that you are contesting jurisdiction and saying that the jurisdiction issue should be considered by a court is not taking part in the arbitration. This is to be contrasted with "attempting to argue its case against jurisdiction so that the arbitration can...
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