Union Marine Classification Services LLC v The Government of the Union of Comoros and Another
| Jurisdiction | England & Wales |
| Judge | His Honour Judge Waksman |
| Judgment Date | 28 September 2017 |
| Neutral Citation | [2017] EWHC 2364 (Comm) |
| Date | 28 September 2017 |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | CL-2016-000763 |
[2017] EWHC 2364 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
COMMERCIAL COURT
In the matter of the Arbitration Act 1996
His Honour Judge Waksman QC
(sitting as a Judge of the High Court)
CL-2016-000763
Michael Brindle QC and Hugo Leith (instructed by Zaiwalla & Co. LLP, Solicitors) for the Claimant
John Robb (instructed by Clyde & Co. LLP, Solicitors) for the First Defendant
The Second Defendant did not appear and was not represented
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.
Hearing date: 19 September 2017
INTRODUCTION
This is the application made by the claimant in this arbitration claim, Union Marine Classification Services LLC ("Union Marine"), for (1) an order made under s 68 of the Arbitration Act 1996 ("the Act") to set aside for serious irregularity, the Second Partial Award of Mr Bruce Harris dated 10 November 2016 ("the Second Award") and (2) an order that Mr Harris now be removed as sole arbitrator pursuant to s 24 of the Act.
BACKGROUND AND PROCEDURAL HISTORY
By a written agreement dated 15 February 2007, Union Marine agreed to provide to the Respondent to this application and the arbitration, the Government of the Union of Comoros ("Comoros") the services of registering sea-going vessels under the Comoros flag for a period of 25 years. In exchange, Union Marine was entitled to retain 50% of the revenue it obtained from such services, subject to a minimum monthly payment of US$11,000 ("the Contract").
By a notice of termination dated 17 April 2012, Comoros purported to terminate the Contract. Union Marine's core allegation in this respect was that (1) Comoros had no legal basis for so doing and was therefore in repudiatory breach and (2) the real reason for the termination was an agreement made at the time between Comoros and a Mr Fahim that he should take over "in-house" the role previously occupied by Union Marine, although subsequently, it seems that Mr Fahim fell out with Comoros which then dismissed him.
There is a somewhat complex procedural history to this matter. I set out the headline points below.
Union Marine sought to refer to arbitration its dispute with Comoros from 2011 onwards; in the event, because Comoros argued that there was no operative London arbitration clause, Mr Harris was not appointed until 11 October 2013, when Leggatt J so ordered.
On any view, the main issue between the parties in the arbitration leading to the First Partial Award dated 22 July 2014 ("the First Arbitration" and "the First Award" respectively) was whether Comoros had repudiated the Contract by its notice of termination or whether the latter was valid because of an alleged prior repudiatory breach committed by Union Marine. By the First Award, the arbitrator found that Comoros was indeed guilty of repudiatory breach because there was no legal justification for its termination of the Contract at that point. The last part of paragraph 94 of his First Award reads thus:
"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. (So far as I know, however, Union Marine have not accepted that as such.)"
In paragraphs 95–99 of the First Award, however, the arbitrator dismissed Union Marine's claim for damages, whether in respect of the period leading up to the service of the termination notice or thereafter, and therefore its damages claim failed entirely. By paragraph 100 of the First Award, he reserved for later determination the question of costs.
By a Correction and Addition to the First Award dated 31 August 2014 supported by a Statement of Reasons of the same date, ("the Correction") the arbitrator dealt in particular with and corrected paragraph 72 of the First Award. This had read:
"… I am unable to find that, on the balance of probabilities, Union Marine 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 Union Marine were in breach… 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."
By paragraphs 6 and 7 of the Correction he stated that by means of a correction to paragraph 72 of the First Award,
"Union Marine ceased making the minimum US$11,000 monthly payments under… the contract after August 2011, that this was a breach of that Article and that Union Marine continued to be in breach in this respect until 17 April 2012. I do not, however, consider that this entitled the Government to terminate the contract as it did on that date, but it is entitled to damages for this breach to be assessed."
He went on to further hold that Comoros was entitled to an account and damages as claimed in paragraph 77 of its counterclaim.
The finding that although there had been a failure to pay the instalments on the part of Union Marine, nonetheless it could not justify Comoros's termination is not the subject of challenge before me nor could it be.
Comoros subsequently sought, unsuccessfully, to challenge the First Award while Union Marine sought unsuccessfully to challenge the Correction on the basis that the findings and order therein went beyond the arbitrator's corrective powers under s 57 (3) of the Act. That challenge had originally been made before Eder J pursuant to s67 of the Act. He held that s67 did not permit such a challenge and so the application failed in limine. He also refused Union Marine's application to make, out of time, a s68 application as an alternative to the s67 claim. Importantly, however, he also held that even if Union Marine had been entitled belatedly to make a s68 claim in respect of the Correction, it would have failed.
On 12 February 2016, the Court of Appeal ( Moore-Bick and Tomlinson LJJ – [2016] EWCA Civ 239) upheld the decision of Eder J when it refused Union Marine permission to appeal. In paragraph 19 of the judgment of Moore-Bick LJ he said that what had happened here was that in the First Award, the arbitrator had "dealt with the big issue and simply overlooked what was on any view a minor claim that might properly have been regarded as essentially a matter of quantum". And in paragraph 23 of his judgment Tomlinson LJ said that it was plain that when the arbitrator had come to write the original paragraph 72 he had lost sight of the circumstance that there was also before him an accounting claim made by Comoros to the effect that Union Marine had failed to pay all the relevant fees irrespective of whether the way in which they did so gave rise to an entitlement to Comoros to terminate the agreement. This was an obvious oversight and was one towards which the corrective powers under s 57 (3) (b) of the Act were directed.
On the face of it, therefore, what was then left for the arbitrator to decide was Comoros' outstanding claim for an account and/or damages in respect of non-payment by Union Marine which had been ordered in the Correction.
In fact, and in response to the arbitrator's request to the parties by email dated 14 June 2016 as to what further steps they now wished him to take, the position became somewhat more nuanced. By a responsive email dated 20 June 2016, Union Marine's solicitors, Zaiwalla & Co. ("Zaiwalla") argued that there was a note in [paragraph 94 of] the First Award that Union Marine had not accepted Comoros' repudiatory breach of the Contract, and that Comoros had now itself started to run Union Marine's business. In the circumstances they asked that the arbitrator should make a further award for a declaration that Comoros was not entitled to cancel the Contract and therefore the Contract continued, and secondly to assess the loss suffered by Union Marine since the date of repudiation which would include the original costs of setting up the business by Union Marine.
For its part, Comoros, by an email sent by its solicitors Clyde & Co. LLP ("Clydes"), asked the arbitrator now to issue an award that (i) that the termination of 17 April 2012 was effective, (ii) in the alternative that Union Marine had accepted Comoros repudiatory breach for the reasons given in the letter from Clydes dated 20 August 2014 which had already been accepted in the Correction, or (iii) in the further alternative that the Contract had been terminated by Clydes' letter dated 10 November 2014.
The response to that by Zaiwalla on behalf of Union Marine dated 22 June 2016 is important and it reads thus:
"We refer to Clyde & Co.'s email below dated 22 June. In this email Clyde & Co. have asked for the Arbitration reference to proceed further and have asked for the tribunal to make three declarations in their further award. The Claimant by our email of 20 June have also sought two declarations. This being so, there is no question of your jurisdiction being in issue. We would be grateful if you would give appropriate directions for the purpose of proceedings with the declarations sought by both sides. No doubt you will keep in mind that you had heard extensive oral evidence from both sides over the period of two days in respect of the accounting issues.
In response to that and by his email dated 23 June 2016, the arbitrator said that the declarations sought by both parties (leaving to one side the assessment of loss which Union Marine wanted him to...
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