The Channel Tunnel Group Ltd and Another v Balfour Beatty Construction Ltd and Others
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE STAUGHTON,LORD JUSTICE WOOLF,LORD JUSTICE NEILL |
| Judgment Date | 22 January 1992 |
| Judgment citation (vLex) | [1992] EWCA Civ J0122-3 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | 92/0023 |
| Date | 22 January 1992 |
[1992] EWCA Civ J0122-3
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
(MR JUSTICE EVANS)
Royal Courts of Justice,
Lord Justice Neill
Lord Justice Woolf
Lord Justice Staughton
92/0023
1991 Folio No. 2250
and
MR BERNARD RIX Q.C. and MR A. WHITE (instructed by Masons) appeared on behalf of the Appellants.
MR JOHN DYSON Q.C. and MR M. HOWARD and MR V. RAMSEY (instructed by Freshfields) appeared on behalf of the Respondents.
Revised
The plaintiff companies are the employers under a contract to build a tunnel under the Channel between England and France; together they have been referred to as "Eurotunnel". The defendants are English and French concerns which together form a consortium known as "Trans Manche Link" or "TML", and are the contractors.
On 3rd October 1991 the contractors wrote to Eurotunnel stating that unless certain conditions were met by 7th October, the contractors would be obliged to suspend all work relating to the cooling system of the tunnel. In consequence, on 14th October, Eurotunnel issued a writ against the contractors claiming:
"(a) An injunction restraining the Defendants and each of them, by themselves, their servants or agents in breach of their obligations under an agreement in writing dated 13th August 1986 between the Plaintiffs and the Defendants ('the Contract') from suspending work relating to the cooling system;
"(b) Costs;
"(c) Such further or other relief as to the Court seems just".
An order of Evans J. made on 4th December in the Commercial Court provided that:
"On the Defendants by their Counsel undertaking that they will not suspend work in respect of the Cooling System without giving the Plaintiffs 14 days notice, there be no order, with liberty to apply".
The contractors now appeal against that order, by leave of the Judge. At first sight this seems odd, since no order was made against them. What they really complain about is that the Judge was prepared to grant a mandatory injunction requiring them to continue work on the cooling system, and only refrained from doing so because an undertaking was offered. I do not consider that this presents any technical obstacle to the hearing of the appeal.
The Judge had also to consider a summons by the contractors that the action be stayed in favour of arbitration under Section 1 of the Arbitration Act, 1975, which provides for a mandatory stay where there is an agreement for arbitration in a State other than the United Kingdom. That application was dismissed by Evans J., and the contractors also appeal against that part of his order.
On 12th December this Court had to consider whether the hearing of the appeal should be adjourned for some time until Eurotunnel's Counsel should prove to be available, or until other Counsel could be found and afforded a substantial period in which to familiarise themselves with the facts and the relevant law. The Court ruled that either the appeal would start on 18th December, or else the contractors would be permitted to withdraw their undertaking. Counsel then appearing for Eurotunnel chose the first alternative.
The Contract
This is a massive document, as one would expect. But for present purposes it is sufficient to refer in detail to two clauses only.
Clause 67 is headed "Settlement of Disputes". Paragraph (1) provides that any dispute or difference, with certain exceptions:
"…shall,.…in the first place be referred in writing to and be settled by a Panel of three persons (acting as independent experts but not as arbitrators) who shall unless otherwise agreed by both the Employer and the Contractor within a period of 90 days after being requested in writing by either party to do so….. state their decision in writing.…"
It has not been suggested that this paragraph provides in law for an arbitration, despite the term that the Panel members shall act as experts and not as arbitrators. So we'need express no opinion on that point.
By paragraph (2) it is provided:
"The Contractor shall in every case continue to proceed with the works with all due diligence and the Contractor and the Employer shall both give effect forth-with to every such decision of the Panel (provided that such decision shall have been made unanimously) unless and until the same shall be revised by arbitration as hereinafter provided. Such unanimous decision shall be final and binding upon the Contractor and the Employer unless the dispute or difference has been referred to arbitration as hereinafter provided".
Paragraph (4) of Clause 67 provides that, subject to certain provisions as to notice:
"all disputes or differences.…shall be finally settled under the Rules of Conciliation and Arbitration of the International Chamber of Commerce by three arbitrators appointed under such Rules.………The seat of such arbitration shall be Brussels".
The Rules of the International Chamber of Commerce (which I have taken from the 1987 version, printed in Mustill & Boyd on Commercial Arbitration (2nd Edn, p. 743) provide:
"8(5) Before the file is transmitted to the arbitrator, and in exceptional circumstances even thereafter, the parties shall be at liberty to apply to any competent judicial authority for interim or conservatory measures, and they shall not by so doing be held to infringe the agreement to arbitrate or to affect the relevant powers reserved to the arbitrator.…"
"11. The rules governing the proceedings before the arbitrator shall be those resulting from these Rules and, where these Rules are silent, any rules which the parties (or, failing them the arbitrator) may settle, and whether or not reference is thereby made to a municipal procedural law to be applied to the arbitration."
"13(3) The parties shall be free to determine the law to be applied by the arbitrator to the merits of the dispute. In the absence of any indication by the parties as to the applicable law, the arbitrator shall apply the law designated as the proper law by the rule of conflict which he deems appropriate".
In this case the proper law of the contract is determined by Clause 68:
"The construction, validity and performance of the Contract shall in all respects be governed by and interpreted in accordance with the principles common to both English law and French law, and in the absence of such common principles by such general principles of international trade law as have been applied by national and international tribunals. Subject in all cases, with respect to the Works to be respectively performed in the French and in the English part of the Site, to the respective French or English public policy (ordre public) provisions".
Since both Eurotunnel and the contractors were partly French and partly English, I wonder why they did not choose either English law or French law exclusively—and for that matter why they chose Brussels as the seat of any arbitration. The hybrid system of law which they did choose has a superficial attraction, but I suspect that it will lead to lengthy and expensive dispute. However, ours is not to reason why. There are before us affidavits of two Professors of French law, and the affidavit of a person qualified both in French law and in the law prevailing in the United States.
The facts
It was not originally contemplated that the tunnel would require a cooling system. This was later considered necessary and on 29th April 1988 a variation order was issued for the construction of such a system. Clause 51(1) of the contract entitled Eurotunnel to order, and obliged the contractors to carry out, if ordered".…additional work of any kind necessary for the completion of the works".
It is accepted that the contractors were obliged to proceed with the construction of a cooling system.
Clause 52 deals with the valuation of variations. By paragraph (l)(b), the valuation is (in brief) to be based on rates and prices set out in the contract; if there are none, suitable rates or prices are to be agreed, and in the event of disagreement, Eurotunnel are to fix such rates or prices as shall, in their opinion, be reasonable and proper. By paragraph (5) if the contractors do not accept any rate or price fixed by Eurotunnel as reasonable and proper, the dispute is to be referred to the Panel under Clause 67.
The parties were and are some distance apart in calculating the appropriate figure. The contractors, on 6th December 1989, proposed £120 million. The figure later rose to £133.84 million, and we were told that this did not include the additional cost of delay and disruption. Eurotunnel, on 26th November 1990, proposed a figure of £86.93 million, which is said to have been inclusive of delay and disruption. (All three figures were, by a convention which the parties adopted, in the money of September 1985, presumably to be adjusted later).
The contractors pressed for an agreement by Eurotunnel to fund work on the cooling system pending final determination of the price to be paid for it. It is said that agreement was reached, first, that Eurotunnel would pay the cost to the contractors of the work plus 15 per cent, and later the cost plus 20 per cent. Payments were made on that basis from time to time until Eurotunnel wrote to the contractors on 19th March 1991. They recorded that there had been agreement "…to fund the procurement of pipework by TML under this Variation Order on a cost plus basis as an interim measure...
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