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China – Limited Scope For Challenging English Maritime Arbitration Awards.

22 January, 2014

 

 
Primera Maritime (Hellas) Ltd and others v. Jiangsu Heavy Industry Co. Ltd [2013] EWHC 3066 (Comm)

 

In this case, the Commercial Court reminded unsuccessful arbitration parties that appeals under s.68 Arbitration Act 1996 are only for extreme cases where the Tribunal has gone so wrong in its conduct of the arbitration that justice calls out for it to be corrected. The Court will not assist an appellant if the Tribunal reaches a conclusion on facts that the appellant does not like.

 

The Background Facts

 

The dispute arose out of the Claimant Buyers’ termination of the contracts for two bulk carriers to be built at the Defendant’s yard in China. The Claimants claimed that the Builder was in anticipatory repudiatory breach of the shipbuilding contract by refusing to deliver the ships by the contractual delivery date. Following nearly three weeks of an arbitration hearing, the Tribunal issued its Award supported by 84 pages of Reasons. The Tribunal dismissed the claims; it found that the Builder renounced the contracts in an email and at a meeting, but that the Claimants subsequently affirmed the contracts.

 

The Claimants applied to set aside the Award under s.68(2)(d) Arbitration Act 1996, which allows a party to challenge an Award for serious irregularity. The Claimants claimed that the Tribunal had failed to deal with two issues named by the Claimants as follows:

 

I. That the Builder’s renunciation was a continuing renunciation; and

II. That if the Builder had not renounced the contracts, the Claimants would have “flipped” the shipbuilding contracts, or sold them to a third party at a profit.

 

The Commercial Court Decision

 

Mr Justice Flaux rejected these arguments. He approved the authorities directing him to read the Award in a reasonable and commercial way and not by nitpicking and looking for inconsistencies; in Pace Shipping v. Churchgate Nigeria Ltd, Mr Justice Teare had specifically deprecated a minute textual analysis.

 

In dealing with the Claimants’ appeal, there were four questions for the Court:

 

I. Whether the relevant point or argument was an “issue” within the meaning of the sub-section;

II. If so, whether the issue was “put” to the Tribunal;

III. If so, whether the Tribunal failed to deal with it; and

IV. If so, whether that failure has caused substantial injustice.

V. The Court was not persuaded that the Tribunal had failed to deal with either of the Claimants’ issues.

 

First, the Judge dismissed the claim that the Tribunal did not deal with the continuing repudiation issue as frankly hopeless. The Court reviewed several passages in the Reasons that dealt with the renunciation and, whilst conceding that the conclusion was not as clearly spelt out by the Tribunal as it might be, a perfectly reasonable and explicable conclusion emerged. A tribunal does not have to set out each step by which they reach their conclusion, nor does a tribunal fail to deal with any issues that it decides merely because it does not give reasons or adequate reasons. The Judge rejected the submission made by the Claimants’ counsel that the Tribunal’s conclusion was so perverse that the Tribunal cannot have dealt with the issue. Once it is recorded that the Tribunal has dealt with an issue, s.68 does not involve a qualitative assessment of how the Tribunal has dealt with it. The Judge considered that the Claimants’ real complaint was that the Tribunal had rejected the Claimants’ argument on the facts. That finding of fact by the Tribunal was not susceptible to review by the Court.

 

The claim that the Tribunal failed to deal with the Claimant’s alleged plan to flip the contracts was also dismissed as an impermissible attempt to go behind the Tribunal’s findings of fact. The Judge referred to four paragraphs in the Reasons where the Tribunal considered the issue and pointed to the Tribunal’s conclusion on the facts that this head of claim failed. The Judge criticised this part of the application as a scarcely veiled attempt to challenge the findings of fact, which was not an appropriate use of s.68.

 

Comment

 

If the right of appeal under s.68 has not been expressly excluded, it will generally remain open to disappointed parties to challenge arbitration awards on the basis that the  tribunal has erred at law. That said, this case is a clear statement from the Commercial Court that matters of fact and evaluation of the evidence are for arbitrators and the courts should not intervene. S.68 is concerned with due process, not the correctness of a tribunal’s decision. This judgment will provide some comfort to successful parties to an arbitration of the certainty of London arbitration and the robust approach of the English Court to appeals.

 

Clyde & Co

 

For further information, please contact:

 

Wai Yue Loh, Partner, Ince & Co

[email protected]

 

Kirsty Cattanach, Ince & Co

[email protected]

 
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