Union Marine Classification Services LLC v The Government of the Union of Comoros
| Jurisdiction | England & Wales |
| Judge | Mr Justice Eder |
| Judgment Date | 06 March 2015 |
| Neutral Citation | [2015] EWHC 508 (Comm) |
| Docket Number | Case No: 2014 Folio 1163 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 06 March 2015 |
[2015] EWHC 508 (Comm)
Mr Justice Eder
Case No: 2014 Folio 1163
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Mr James Cutress and Mr Varun Zaiwalla (instructed by Zaiwalla & Co) for the Applicant
Mr Richard Jacobs QC and Mr John Robb (instructed by Clyde & Co) for the Defendant
Hearing dates: 26 February 2015
Approved Judgment
Introduction
On 25 February 2015, I heard an application by the claimant ("UM") under s67(1)(a) and/or (b) of the Arbitration Act 1996 (the "1996 Act") for an order setting aside and/or declaring to be of no effect a "Correction and Addition to Award" of Mr Bruce Harris as sole arbitrator (the "Arbitrator") dated 31 August 2014 (the "Amended Award"). Following that hearing, I informed the parties of my decision dismissing the application. These are my reasons for that decision.
The arbitration proceedings concerned disputes arising under a commercial outsourcing contract (the "Agreement") between UM and the defendant (the "Government") dated 15 February 2007, under which UM was authorised to act and accomplish on the Government's behalf all acts and functions relating to the maritime administration of Comoros (Article 1), including the registration of vessels under the Comoros flag. By Articles 4 and 5, UM agreed monthly to pay Comoros 50% of the taxes and other income generated by registration of each vessel, subject to a guaranteed minimum of $11,000 per month. Article 6 specified the term of the Agreement. However, there was apparently a dispute as to the effect of Article 6. In summary, UM's case was that the Agreement was for a fixed 25-year term, with a guaranteed minimum of 10 years. The Government's case was that the effect of Article 6 was that, after 25 years, the Agreement would renew automatically unless it had previously been "denounced" by either party; and that denunciation could only take place 10 years after the commencement of the Agreement. This dispute remains unresolved and is irrelevant for present purposes.
On 17 April 2012, the Government purported to terminate the Agreement. UM contended that it was not entitled to do so. That dispute was referred to arbitration and, after certain procedural wrangling, Mr Harris was appointed as sole arbitrator. It is common ground that the arbitration was subject to and conducted on the terms of the London Maritime Arbitrators Association (the "LMAA").
By the arbitration proceedings, UM sought a declaration that the termination notice was invalid and damages. The Government alleged that it was entitled to terminate for various breaches by UM, including in particular alleged breaches of UM's payment obligations. It counterclaimed for damages for those breaches, including for breach of UM's payment obligations. It also claimed (i) what it said was the minimum monthly payment of US$11,000 per month for a certain period; (ii) an order for an account; and (iii) damages for the sums found to be due on the taking of the account.
During the course of the arbitration proceedings, it was ordered and/or agreed that liability on the counterclaim was to be determined at the substantive hearing on 2–4 July 2014, " leaving over (if it be relevant) quantum". This three day hearing duly took place during which there were extensive submissions (by way of opening, closing and post hearing submissions) and extensive cross examination.
The (original) Award
Following the hearing, the Arbitrator published his award dated 22 July 2014 (the "original Award" or, for short, the "Award"). The Award (including Reasons) extends to 35 pages. In order to understand it properly, it needs to be read in full. However, for present purposes, it is sufficient to note the following:
i) Paragraphs 1–34 contain certain introductory material and set out the background.
ii) Under the heading "The issues", paragraphs 34–35 state as follows:
" 34. Counsel for Union Marine said that (leaving on one side the question of the validity of the arbitration agreement) the following issues arose, and it seems to me that the summary is a fair one:
1. Did the Government validly terminate the Agreement on 17 th April 2012?
2. Did the government breach the Agreement? If the termination notice was invalid, the Government plainly did so, but there was a separate question whether it had also done so by its conduct from January 2011.
3. If the government breached the Agreement, what damages is Union Marine entitled to as a result? If Union Marine breached the agreement, what damages is the Government entitled to as a result?
35. I directed that the quantum of the Government's counterclaim should be deferred until after the question of liability had been determined. The claim by Union Marine, for some $3.9 million by way of alleged losses over the life of the agreement, was however for determination at the hearing."
iii) Following certain general comments which are not directly relevant and under the heading "The claims and counterclaims", paragraphs 52–53 state as follows:
" 52. Union Marine claimed damages for what they said was the wrongful termination by the government in April 2012 of the Agreement. They also claimed damages for breach by the government of the arbitration clause in relation to the commencement and pursuit of the proceedings in Ajman. They further claimed damages on the basis that the government was in breach by appointing Mr Fahim and setting up the NTA, the argument being that by so doing the Government appointed someone else to perform the acts and functions of the Maritime Administration which were granted exclusively to Union Marine under the Agreement, and that there was an implied term that the Government would not interfere with or prevent them from exercising their powers or performing their obligations under the Agreement.
53. For its part, the government denied liability and counterclaimed damages for what it said were repudiatory breaches of contract by Union Marine."
iv) Following two further paragraphs dealing with matters which are not directly relevant, there is a long section in the Award under the heading "Was termination justified?" This starts with paragraph 58 which states:
" 58. I examine here the grounds on which the Government said it was entitled to terminate the Agreement."
This is then followed by a number of sub-sections, the first of which is headed " Shortfall in payments". At the beginning of this sub-section, paragraph 59 states:
" 59. The essence of the Government's case in this respect was, as Counsel for Union Marine pointed out, the question whether the latter had fraudulently declared its income from the Registry business. I accept very cogent evidence to support the Government's case would be needed if I were to be satisfied as to this, given the seriousness of the allegation."
After a number of paragraphs where the Arbitrator considers the facts and makes certain findings, his overall conclusion in this sub-section is set out in paragraph 72 as follows:
" 72. Against this background, and particularly bearing in mind again that very cogent evidence would be required to justify me in accepting a serious allegation such as was made against [UM], I am unable to find that, on the balance of probabilities, [UM] did not meet their payment obligations under the Agreement. This does not mean that my conclusion is that they did fulfil those obligations: as the parties' lawyers at least will appreciate, I would have had to be persuaded that it was more likely than not that [UM] were in breach ("the balance of probabilities"), and the evidence is not sufficiently weighty to enable me to come to that conclusion. Moreover, I am far from persuaded that there was here any case of bribery."
v) Following further sub-sections which are not directly relevant for present purposes, there is a section under the heading "Conclusion on breaches by Union Marine" which states in material part as follows:
" 92. For the above reasons I have come to the conclusion that the Government has failed to show a sufficiently serious breach or breaches by Union Marine of the Agreement to justify it in terminating as it did in April 2010 …
94 … In the result … my conclusion is clearly that the Government was not entitled to terminate the Agreement, and accordingly that it was in fact the Government which was in repudiatory breach itself …"
vi) There is then a section under the heading " Damages" which is not directly relevant save that I note in passing the following comments and conclusion of the Arbitrator in paragraphs 97 and 99:
" 97 … Further, just as there was no sufficiently solid evidence to shown that [UM] had not paid all that was due to the Government (see paragraphs 60–68 above), there was no adequate evidence to show what they had in fact earned …
99 … All in all, and always on a balance of probabilities, I am not able safely to conclude that [UM] suffered any loss as a result of the Government's wrongful termination of the Agreement. Accordingly, their claim has to fail."
vii) The Award concludes as follows:
" I THEREFORE AWARD, DECLARE AND ADJUDGE that Union Marine's claims and the Government's counterclaims referred to me all fail and I reserve to myself jurisdiction to determine liability for the costs of the reference, including the costs of this award as separately notified to the parties, and to make a further award or award in respect thereof."
Subsequent events
Following publication of the Award, the Government then applied to the Arbitrator by letter dated 20 August 2014 for correction or clarification of two matters.
That application was made pursuant to paragraph 25(a) of...
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