Vale do Rio doce Navegaçao S.A. v Shanghai Bao Steel Ocean Shipping Company Ltd (t/a Bao Steel Ocean Shipping Company )
| Jurisdiction | England & Wales |
| Judge | The Hon. Mr Justice Thomas |
| Judgment Date | 14 April 2000 |
| Judgment citation (vLex) | [2000] EWHC J0414-13 |
| Court | Queen's Bench Division (Administrative Court) |
| Docket Number | Case No: 1999 Folio 1281 |
| Date | 14 April 2000 |
[2000] EWHC J0414-13
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
The Hon. Mr Justice Thomas
Case No: 1999 Folio 1281
Mr Duncan Matthews (instructed by Messrs Holman Fenwick & Willan for the Claimants
Mr Christopher Butcher (instructed by Messrs Sinclair Roche & Temperley for the second Defendants) The first defendants did not attend and were not represented.
I certify that the attached text records my judgment and direct that no further note or transcript need be made
COPIES OF THIS JUDGMENT ARE AVAILABLE IN WORD 6 FOR WINDOWS 3.1 ON PROVISION OF A CLEAN DISC. APPLY TO THE CLERK TO THE HONOURABLE MR JUSTICE THOMAS Telephone 0171–936–6399
Mr Justice Thomas:
There is before the court an application to set aside an arbitration claim form which has been issued by the Claimants (the Owners). In the arbitration claim, the Owners make an arbitration application for a declaration that the first Defendants (Bao Steel) were parties to a contract of affreightment made on 3 September 1997 between Bao Steel and the Owners. Bao Steel had, prior to the issue of the arbitration claim form, disputed that they were parties to the contract on the basis that the second Defendants (the Brokers) who are said to have concluded that contract on their behalf had no authority to do so. In the application before the court, the Brokers seek to set aside the arbitration claim form as against them on the grounds that this court has no jurisdiction over them in respect of the subject matter of the claim in the arbitration claim form.
Background
The Owners are both companies within the same group; the first Claimant is Brazilian and the second Claimant is Liberian. In 1997 through their Belgian office they entered into negotiations with the Brokers, a company domiciled in Norway, for a contract of affreightment for shipments of iron ore from Brazil to China.
On 3 September 1997 the Brokers sent to the Owners a telex in which the Brokers stated that a company called Baosteel Ocean Shipping Co. had agreed to the terms of the contract of affreightment which they then set out in summary. One of those terms was that the seat of arbitration was to be London with English law to apply. They subsequently sent to the Owners a full copy of the full contract of affreightment. Clause 27 of that document stated:
"Any disputes arising under the contract shall be settled amicably. In case no such settlement can be reached, the matter in dispute shall be referred to three persons at London and according to English law. One chosen by each of the parties hereto and the third by the two so chosen; their decision or that of two of them shall be final, and for the purpose of enforcing any award, this agreement may be made a rule of the court, the arbitrators shall be commercial men."
The contract of affreightment was never signed.
In November 1997 the Owners performed a voyage which they claim was made under the contract of affreightment for a company called Bao Hercules Inc. and in May 1998 a second voyage was performed for a company called Eastern Rich Operations Inc. It is the Owners' case that each of these companies performed the contract as agents for Bao Steel.
No further voyages were performed. Subsequently Bao Steel asserted that they had never authorised the Brokers to conclude the contract of affreightment and therefore deny that they are parties to the contract of affreightment.
The Owners decided that instead of commencing an arbitration against Bao Steel by appointing their arbitrator, the better course for them would be to obtain a declaration from this court that Bao Steel were a party to the arbitration agreement; if they were successful in obtaining that declaration, they would then proceed with the arbitration. They also decided that they would join the Brokers into that application to the court, even though the Brokers maintained they had authority to conclude the contract of affreightment, on the basis that there would inevitably be an enquiry as to whether the Brokers had authority to negotiate and conclude the contract of affreightment on behalf of Bao Steel; they wanted to ensure that the Brokers explained how they had obtained that authority and that any finding as to the validity or otherwise of the arbitration agreement was binding on the Brokers. However, as I explain below, they accept that, if the Brokers can be sued for this purpose, the court would have no jurisdiction, in the event that the court concluded that the Brokers had not had authority to make the contract on behalf of Bao Steel, to consider a claim for damages. Such a claim would have to be brought in Norway.
On 7 October 1999 David Steel J gave permission to the Owners to serve the arbitration claim form on Bao Steel in China and on the Brokers in Norway. The Brokers appointed solicitors in London who have issued this application to set aside the arbitration claim form; the arbitration claim form had not at the time of the hearing been served on Bao Steel, though attempts were being made to do so.
The Brokers advanced five separate grounds upon which they contended the arbitration claim form should be set aside:
(1) The claim was not within the arbitration exception in the Lugano Convention and therefore there was no jurisdiction to seek a declaration as against them in this court.
(2) CPR PD49G (Practice Direction —Arbitrations) did not in any event permit service of the arbitration claim form on them in Norway.
(3) The Arbitration Act 1996 did not permit the Owners to make an application for a declaration against Bao Steel that there was an arbitration agreement.
(4) The Court had no jurisdiction to grant declaratory relief against the Brokers.
(5) The Court should in any event exercise its discretion against exercising jurisdiction over the Brokers.
It is convenient to consider each of these grounds in turn.
Issue 1: Is the claim within the arbitration exception in the Lugano Convention?
Article 1 of the Lugano Convention provides:
The Convention shall not apply to:
…4. Arbitration
It is common ground for the purposes of this application that, unless the Owners can bring the application before the court within the arbitration exception in Article 1 which I have set out, then in accordance with Article 2 they must bring any claim in the courts of Norway where the Brokers are domiciled. It is also common ground that if the Owners want to bring a substantive claim for damages against the Brokers, in the event that it is found that they had no authority to make the contract of affreightment on behalf of Bao Steel, then that claim would have to be made in Norway; furthermore it would be determined by principles that might be different from the law of England and Wales.
In Marc Rich and Co. AG v. Societa Italiana Impianti (The Atlantic Emperor) [1991] 1 ECR 3855, [1992] 1 Lloyd's Rep 342 the European Court of Justice set out its view on the purpose of the exception of arbitration from the scope of the convention at page 3900:
"17. With respect to the exclusion of arbitration from the scope of the Convention, the report by the group of experts set up in connection with the drafting of the Convention ( Official Journal 1979 C 59, p. 1) explains that
"There are already many international agreements on arbitration. Arbitration is, of course, referred to in Article 220 of the Treaty of Rome. Moreover, the Council of Europe has prepared a European Convention providing a uniform law on arbitration, and this will probably be accompanied by a Protocol which will facilitate the recognition and enforcement of arbitral awards to an even greater extent than the New York Convention. This is why is seemed preferable to exclude arbitration".
The international agreements, and in particular the above mentioned New York Convention on the recognition and enforcement of foreign arbitral awards (New York, 10 June 1958, United Nations Treaty Series, Vol. 330, p. 3), lay down rules which must be respected not by the arbitrators themselves but by the courts of the Contracting States. Those rules relate, for example, to agreements whereby parties refer a dispute to arbitration and the recognition and enforcement of arbitral awards. It follows that, by excluding arbitration from the scope of the Convention on the ground that it was already covered by international conventions, the Contracting Parties intended to exclude arbitration in its entirety, including proceedings brought before national courts."
It is apparent from this passage in the judgment that in determining what is excluded by the arbitration exception reference must be made to international conventions on arbitration and in particular to the New York Convention. It is clear from the terms of that Convention that it is dealing with arbitration between parties to an arbitration agreement (see in particular Article II); it does not deal with anything more than that. Thus although there may be room for dispute as to whether particular proceedings between the parties to an arbitration agreement are within the term "arbitration" as used in the Lugano Convention, it seems to me clear that the term arbitration cannot refer to anything other than the arbitration itself and proceedings brought before national courts between the parties to the arbitration or arbitration agreement in relation to that arbitration. There is, in my view, no warrant for reading the words in any wider sense and being applicable to proceedings against persons not parties to the arbitration agreement; none of the cases in which...
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