Sea Trade Maritime Corporation v Hellenic Mutual War Risks Association (Bermuda) Ltd (The Athena) [QBD (Comm)]
| Jurisdiction | England & Wales |
| Judge | Langley J. |
| Judgment Date | 18 October 2006 |
| Neutral Citation | [2006] EWHC 2530 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: 2005 FOLIO 617 |
| Date | 18 October 2006 |
[2006] EWHC 2530 (Comm)
IN THE HIGH COURT OF JUSTICE
COMMERCIAL COURT
QUEEN'S BENCH DIVISION
The Honourable Mr Justice Langley
Case No: 2005 FOLIO 617
Mr T. Brenton QC and Mr D. Bailey (instructed by Fox Williams LLP) for the Claimant Mr S. Moriarty QC and Mr D. Dale (instructed by Richards Butler) for the Defendants
Hearing dates: 4 th -10 th October 2006
Approved Judgment
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 HONORABLE MR JUSTICE LANGLEY
The Hon. Mr Justice Langley:
INTRODUCTION
The Claim Form
The claimant ("Sea Trade") was incorporated, in July 1992, in Liberia, and is the owner of the ATHENA. Sea Trade issued the arbitration claim form before the court on 29 July 2005. The respondent ("the Association") is a mutual insurance company incorporated in Bermuda, which provides war risks insurance for ships beneficially owned or controlled by a majority of Greek interests.
The claim form sought relief under each of sections 67, 68 and 69 of the Arbitration Act, 1996, in respect of an Interim Award ("the Award") dated 1 July 2005 by which certain preliminary issues were determined by Sir Christopher Staughton, Jonathan Hirst QC and George Henderson in an arbitration in which the Association was claimant and Sea Trade was respondent.
The relief sought in the claim form under section 67 of the 1996 Act is that the Award be set aside for want of substantive jurisdiction; the relief sought under section 68 ("serious irregularity") was the setting aside of certain paragraphs of the Award on the basis that the questions determined in those paragraphs were not within the scope of the preliminary issues ordered to be heard; the relief sought under section 69 was permission to appeal on a number of "questions of law" (some going to jurisdiction and some not) relating to the Rules of the Association and in particular the Rules relating to jurisdiction and arbitration (Rule 44) and additional premium areas (Rules 15 and 25). The questions of law, so far as material, were:
"5.1. The question of whether Rule 44 was incorporated into the insurance; in particular the question of whether general words of incorporation are sufficient to incorporate an arbitration agreement ….
5.2. The proper construction of Rule 44 … specifically whether:
(1) Rule 44.1 is a non-exclusive jurisdiction clause; and
(2) The right to elect to arbitrate under Rule 44.2 can be lost by delay and/or applies only to proceedings commenced in the English High Court, not in other competent courts.
The question of whether the Claimant is precluded from relying on a breach of Greek law ….
The question of whether Rules 15.3 and 25.3 were incorporated into the contract; in particular, the questions of whether they are terms which are properly characterised as unusual, onerous and out of conformity with market practice and whether the test in Interfoto Picture Library v Stiletto Visual Programmes [1989] 1 KB 433 applies and was satisfied …."
The November 2005 Order
The major issues to which this judgment relates are those arising and still pursued under section 67 relating to the jurisdiction of the arbitral tribunal. They are the subject of an Order made by Morison J, on 25 November 2005, for trial of certain preliminary issues as follows:
"(1) What law governs the Claimant's insurance with the Defendant?
(2) On the assumption that English law applies, was Rule 44 incorporated into the Claimant's insurance with the Defendant?
(3) On the assumption that English law applies, does Rule 44.2, on its proper construction, apply to the facts of this case?
(4) On the assumption that English law applies, as a matter of English law, would the alleged breaches of Greek law relied upon by the Claimant have the effect of rendering the Claimant's insurance, and/or the arbitration clause in it, void?
(5) On the assumption that English law applies, would the alleged breaches of New York law relied upon by the Claimant have the effect of rendering the Claimant's insurance, and/or the arbitration clause in it, void?"
By the same Order, Morison J ordered that, in effect, insofar as the application for permission to appeal under section 69 raised the same issues they should be heard at the same time. He also ordered that the remaining issues and the application under section 68 should be dealt with either on paper or at another hearing or stayed, the details of which are, as will appear, no longer material.
The parties have agreed that the present hearing should also address the only extant issue arising from Sea Trade's application under section 69. That is the question whether, if the arbitral tribunal did have jurisdiction, it was wrong in law to conclude that, on its proper construction, Rule 44 constituted an exclusive jurisdiction clause in favour of the English courts. The significance of this issue is limited. It is no longer relied upon as the basis for an argument going to jurisdiction. If the Rule does provide for exclusive jurisdiction, Sea Trade was in breach of contract in commencing proceedings (as it did) in Greece and New York. That may give rise to claims by the Association for costs otherwise not recoverable (now put forward in the total sum of about US$ 500,000). I shall refer to this issue as "the exclusive jurisdiction issue" and address it after the issues which do go to the jurisdiction of the arbitral tribunal.
Rule 44
So far as material, as from the 1 January 1997, Rule 44 provided:
"44.1 The Association and each Owner hereby submits to the jurisdiction of the High Court of Justice of England in respect of any dispute or difference between the Owner and the Association arising out of or in connection with these Rules or out of or in connection with any contract between the Owner and the Association.
44.2 Save for any claim by the Association in respect of the sums which the Association may consider to be due to it from an Owner either the Association or the Owner may, by giving written notice of the election to the other, elect to have such dispute or difference referred to arbitration in London subject to the provisions of Rules 44.2.1 to 44.2.7.
….
44.2.7 The submission to arbitration and all proceedings therein shall be subject to the English Arbitration Act 1996 and to any statutory modification thereof."
The provisions of Rule 44.2.1 are not material.
Previous versions of the Rules, applicable from 1 January in 1988 and 1994, had also contained arbitral provisions but in different terms.
Other Rules
Rule 46 provided that the Rules were subject to English law.
Rule 11 of the 1988 and 1997 Rules provided that:
"Subject as otherwise provided in these Rules the insurance by the Association of a ship entered in the Association shall commence at the time and date specified in the Certificate of Entry and shall continue until 2400 hours G.M.T. on the 31 st December next ensuing, and thereafter from Policy Year to Policy Year, unless it terminates, ceases or is cancelled in accordance with these Rules."
Rule 12 of the 1988 and 1997 Rules provided that:
"12.1 Any alteration of these Rules shall be binding upon the Owner and take effect as from the commencement of the Policy Year following that in which such alteration is adopted.
12.2 Changes in the terms and conditions of insurance (otherwise than by alteration of the Rules) may be made by the Managers by notice given to the Owner not later than 1200 hours G.M.T. on the 14 December in any Policy Year and shall take effect as from the commencement of the next following Policy Year."
The Factual Background
The management of ATHENA was delegated by Sea Trade to a Greek company, Natalca Shipping Co. S.A. ("Natalca"). Natalca appointed sub-agents, a New York corporation, Trans-Ocean Steamship Agency Inc. ("Trans-Ocean"). At all material times, the President of Trans-Ocean was Mr Theo Vatis; the Operations Manager, with responsibility for insurance, was Ms Elizabeth Mulcahy. Mr George Peters was appointed attorney-in-fact of Sea Trade. He shared office space at the same address as Trans-Ocean. Each signed a witness statement which was before the arbitral tribunal and each has signed supplementary statements for the present proceedings. Mr Peters, alone, gave oral evidence.
The Association is managed by Thomas Miller (Bermuda) Limited who delegate underwriting and claims handling to Thomas Miller (Isle of Man) Limited ("Miller IOM"). Edward Gould, the underwriting manager of Miller IOM, gave oral evidence in the arbitration and to the court.
In December 1992, Trans-Ocean applied, on behalf of Sea Trade, to enter ATHENA with the Association for the purpose of obtaining war risk insurance for the vessel. Brokers were involved. There remains an issue as to the party, if any, for which the brokers were acting, at least in respect of some of their activities, but it was Sea Trade who instructed Alexander & Alexander in New York ("A&A") to procure the insurance. A&A passed on the instruction to their associate Alexander Howden Marine & Energy (AH) in London who made the direct approach to Miller IOM. The broker at AH who placed the insurance (Michael Wright) gave evidence to the arbitral tribunal and to the court at the instance of the Association. That evidence was to the expected effect that he regarded himself as acting for A&A and the assured, Sea Trade, and not for the Association. Mr Wright was familiar with the Association's procedures and Rules. He had worked with Mr Gould for the Thomas Miller...
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