State to state dispute resolution in the UK Government’s White Paper: arbitration with a potential role for the CJEU

The White Paper published yesterday, “The Future Relationship between the United Kingdom and the European Union”, includes the UK Government’s proposal for the resolution of disputes between the UK and the EU under what the UK Government views as an “Association Agreement”. This Association Agreement would form the institutional framework for the relationship, with a number of separate agreements (the majority falling within this institutional framework), each covering different elements of economic, security and cross-cutting cooperation.

Under the institutional framework there would be a UK-EU Governing Body, and under that Governing Body and answerable to it, a Joint Committee which would be responsible for the effective and efficient administration of the agreements. The Joint Committee, “through regular and structured dialogue”, would seek to prevent disputes arising, or otherwise play a role in resolving them.

The White Paper emphasises the potential for resolution of disputes through dialogue and non-formal means. However, it also outlines a potential dispute resolution process to ensure that the obligations contained in the institutional framework and agreements can be enforced if needed.

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Filed under Brexit, EU, EU Law, Europe, Trade Agreements

Absence of a bilateral or multilateral treaty for enforcement of judgments between UK and Lebanon leads to English Court issuing anti-suit injunction in favour of arbitration

In the case of Perkins Engines Company Limited v Mohammed Samih Hussein Ghaddar & Ghaddar Machinery Co. S.A.L [2018] EWHC 1500 (Comm) the English Court was asked to issue an anti-suit injunction against court proceedings brought in Lebanon. The relevant dispute resolution clause between the parties provided for English court jurisdiction to the extent that “reciprocal enforcement procedures” exist between the United Kingdom and Lebanon, failing which, disputes were to be submitted to arbitration. The Court found that the ordinary and natural meaning of the words required the existence of a multilateral/ bilateral treaty facilitating reciprocal enforcement of judgments in the United Kingdom and Lebanon. Since no such treaty existed, an anti-suit injunction should be granted against the Respondents in respect of proceedings they had brought in Lebanon.

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Filed under Arbitration clauses, Interim relief

Herbert Smith Freehills expands New York offering with top disputes hire

Herbert Smith Freehills has further strengthened its New York offering with the hire of Partner Peter Behmke, a leading litigator in the market.

Peter joins the firm from Curtis, Mallet-Prevost, Colt & Mosle, where he was a partner.

Lauded by the legal directories as a “rising star,” Peter has carved out a successful career as a commercial litigator, representing clients across a range of sectors in their most complex disputed matters, including in the areas of financial services, commercial contracts, commodities, securities, bankruptcy litigation, energy, fraud, breach of fiduciary duty and other business torts.

He has successfully represented clients in state and federal courts at the trial and appellate levels throughout the United States, as well as in domestic and international arbitrations under the auspices of the AAA, ICDR, ICC and CPR.

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Filed under News, The Americas

English Court dismisses attempt to set aside LCIA award on grounds of serious irregularity

In the recent case of X v Y [2018] EWHC 741 (Comm), the English High Court dismissed an application to set aside an arbitral award under s68 of the English Arbitration Act 1996 (the Act) on the basis that the claimant should have first exhausted all remedies available to it by applying to the tribunal for correction or clarification of the award under s57(3) of the Act.  The Court found that a tribunal had power under Article 27.1 of the LCIA Rules 1998 to clarify ambiguity in the award, and that Article 27.1 did not, in any case,  oust the tribunal’s equivalent power under s57(3) of the Act. The wording of Article 27.1 in the LCIA Rules 2014 now expressly refers to correcting any ambiguity.

The case is a useful reminder to unsuccessful parties to analyse quickly and thoroughly an award and to ensure that any available process under s57 is exhausted before an application is made under s68. In particular, those who consider that the tribunal’s award is deficient for failing to deal with all issues put to it should assess whether such a complaint may be dealt with under s57(3) as a failure to give (adequate) reasons.

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Filed under Arbitration Act 1996, Awards, Challenges to awards, Europe, Procedures in arbitration

HONG KONG COURT OF APPEAL: COMMON LAW ACTIONS AVAILABLE TO ENFORCE ARBITRAL AWARDS

Two key developments emerge from the long-running proceedings in Xiamen Xinjingdi Group Co Ltd v Eton Properties Ltd [2016] 2 HKLRD 1106 and Xiamen Xinjingdi Group Co Ltd v Eton Properties [2018] HKCFI 910. The Hong Kong Court of Appeal (CA) has held that, when parties enter into an arbitration agreement, they make an implied promise that they will honour the terms of any subsequent arbitral award. If one party fails to honour the award, this may give rise to a separate cause of action at common law, for which the Hong Kong courts have jurisdiction to grant a full range of remedies, including damages. These proceedings also confirm that the Hong Kong Court of First Instance (CFI) has statutory powers to stay proceedings before it, pending the determination of an application for leave to appeal to the higher courts. Continue reading

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Filed under Arbitration laws, Arbitration proceedings, Arbitration rules, Asia, Awards, Enforcement, Hong Kong & China, Jurisdiction

Win some, lose some: English court considers contractual limit on period to bring a claim in arbitration under section 12 of the Arbitration Act 1996

The English Commercial Court (the Court) has considered[1] the principles governing contractual time-bars and an application under s12 of the English Arbitration Act 1996 (the Act) to extend a contractually agreed limitation period to allow the claimant to bring claims in an arbitration.

As a matter of English law, parties are generally held to the consequences of exceeding a contractual time-bar, especially when the consequences are explicit. Parties should, therefore, be wary of agreeing such a deadline in circumstances where their ability to meet a deadline may potentially be impacted by the conduct or inaction of third parties. When such time-bar relates to the bringing of proceedings by arbitration, a court dealing with an application for extension of that time-bar under s12 will first consider whether there are exceptional circumstances which explain why the time-bar has been exceeded. Assuming that there are “exceptional circumstances”, the court will then consider whether the parties would have contemplated that the time-bar “might not” have applied. Finally, in deciding whether to exercise its discretion to grant the extension, the court will consider whether the applicant has “acted expeditiously and in a commercially appropriate fashion to commence proceedings“.

Context

Factual background

The parties to the proceedings were parties to back-to-back voyage charters and occupying the middle of the charter chain. The charters included an arbitration clause and the following time-bar at Clause 67:

Any claim other than the demurrage claim under this contract must be notified in writing to the other party and claimant’s arbitrator appointed within thirteen (13) months of the final discharge of the cargo and where this provision is not complied with, the claim shall be deemed to be waived and absolutely barred.

A dispute arose regarding the condition of the cargo. The holder of the bill of lading covering the cargo issued a Statement of Claim against the head owners at the top of the entire chain. This triggered various notices down the chain, which were alleged not to comply with the contractual time bar.

The claimant applied to the Court for:

  1. declarations that their claims against the charterers had been brought in time, notwithstanding the wording of Clause 67;
  2. in the alternative, an extension of time under s12 of the Act either to validate the notices of arbitration they had served on the defendant charterers or for such extension of time as the Court saw fit.

The Court’s decision

Time-bar wording to be given literal meaning

The Court found that Clause 67 should be given a literal reading, even though the parties’ intention was that claims for breach of contract would be passed up or down the chain, and a party may not know about the claim in time. Such clauses operate mutually and make commercial sense: at the end of the relevant period the parties know where they stand regarding any outstanding claims and the difficulties of dealing with a claim only long after the event are largely averted. The parties took the risk that it may not be possible to pass on a claim validly received within the required period.

It was, therefore, necessary to consider whether the Court should exercise its power to extend time under s12.

Section 12 application

Section 12(1) provides that where an arbitration agreement “provides that a claim shall be barred, or the claimant’s right extinguished, unless the claimant takes within a time fixed by the agreement some step (a) to begin arbitral proceedings … the court may by order extend the time for taking that step.

Any party to the arbitration agreement may apply for such an order after exhausting any arbitral process to obtain an extension of time, but the Court “shall make an order only if satisfied –

  • that the circumstances are such as were outside the reasonable contemplation of the parties when they agreed the provision in question, and that it would be just to extend the time, or
  • that the conduct of one party makes it unjust to hold the other party to the strict terms of the provision in question.

Relevant factors

The Court accepted that where parties agreed a contractual time-bar, they must be taken to have contemplated that non-compliance “in not unusual circumstances arising in the ordinary course of business” would result in a claim being time-barred, unless the other party’s conduct would make it unjust. The Court adopted Hamblen J’s factors in SOS Corporation Alimentaria SA & Anor v Inerco Trade SA [2010] EWHC 162 (Comm), viz:

  1. whether there were circumstances beyond the parties’ reasonable contemplation and, if so, had they contemplated them, whether they would also have contemplated that the time-bar might not apply;
  2. whether the circumstances significantly contributed to the non-observance of the time limit;
  3. if the circumstance was “not unlikely” or “prone to” occur, or “not unusual“, the test would probably not be satisfied, but if was “relatively exceptional” it would be outside the reasonable contemplation of the parties;
  4. as to whether the parties would also have contemplated that the time-bar might not have applied in the circumstances in question, the test is whether they would contemplate that the time limit “might not” apply rather than it “would not” apply or “must not” apply. In general, time limit clauses are addressed at steps which the party in question can reasonably be expected to take within the prescribed time.

Application: s12 triggered in principle

Following a review of the factual history, the Court found that the “direct, dominant and effective cause” of the relevant notice being served after the expiry of the contractual time-bar was the receipt of the previous claim (that was intended to be passed down the charter chain) on the last day of the stipulated period after the recipient’s business hours. These circumstances were outside the parties’ reasonable contemplation as the eventuality was “in all probability … relatively exceptional“. Further, the parties would have contemplated that the time-bar “might not” apply given the expectation that claims could be passed up or down the charter chain.

Whether just to grant the extension of time sought under s12

However, in the Court’s view, it would only be just to extend the time following a s12 application by a party in a charter chain “if the applicant has acted expeditiously and in a commercially appropriate fashion to commence proceedings” after becoming aware that a claim is being made above or below in the chain. Two of the three applicants did not act expeditiously and in a commercially appropriate fashion. Relevant factors included (i) whether a party investigated the time-bar (either through the operational staff checking the contracts, or informing the legal department or the company’s P&I club and asking for urgent advice); (ii) how soon a party appointed solicitors and nominated an arbitrator; and (iii) how soon it served a further notice down the chain and sought an extension.

Comment

This judgment serves as a reminder of what factors a court will take into account when considering (i) contractual time-bars in an arbitration context and (ii) s12 applications. The basic position on contractual time-bars in a commercial context, especially when the consequences are explicit, is that those consequences will apply. This is the price the parties pay in exchange for certainty. At the time of contracting when it is often unclear who might sue whom, this represents a mutual acceptance of risk.

An English court considering a s12 application will look for exceptional circumstances as to why the time-bar has been exceeded, but, once those have been found, the threshold is whether the parties would have contemplated that the time-bar “might not” (as opposed to “would not” or “must not“) have applied. Finally, the court’s residual discretion whether to extend the time limit (at least in a charter chain scenario) will depend on whether the applicant has “acted expeditiously and in a commercially appropriate fashion to commence proceedings“.

For more information, please contact Nicholas Peacock, partner, Maximilian Szymanski, associate, or your usual Herbert Smith Freehills contact.

 

Nicholas Peacock
Nicholas Peacock
Partner
Email | Profile
+44 20 7466 2803
Maximilian Szymanski
Maximilian Szymanski
Associate
Email
+44 20 7466 2596

 

[1] P v Q [2018] EWHC 1399 (Comm)

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Filed under Arbitration Act 1996, Arbitration clauses, Europe

Award dismissing a claim for inordinate and inexcusable delay survives challenge in the English court

In Grindrod Shipping Pte Ltd v Hyundai Merchant Marine Co. Ltd, the English High Court (“the Court“) rejected an application under s68 of the Arbitration Act 1996 (“the Act“) to challenge an Award (the “Award“). Six years after the proceedings had commenced, the tribunal (“Tribunal“) issued a final award dismissing the claim under s41(3) of the Act on the ground of inordinate and inexcusable delay. Grindod Shipping challenged the award under s68 of the Act,  arguing that the Tribunal’s decision was based on grounds not advanced by the respondent. The Court concluded that the issues had been sufficiently “in play” for all sides to have had a fair opportunity to respond. There was no breach of the tribunal’s duty to act fairly and impartially and therefore no procedural irregularity.

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Filed under Arbitration Act 1996, Arbitration proceedings, Arbitrators, Challenges to awards, Costs, Europe

West Tankers principle unaffected by Recast Brussels Regulation; mandatory foreign jurisdictional rules do not encroach on scope of widely worded arbitration clause

In Nori Holdings Limited et al v PJSC Bank Okritie Financial Corporation [2018] EWHC 1343 (Comm) the English court has applied the Recast Brussels Regulation, finding that the West Tankers principle remains applicable and, as a consequence, refused to grant an anti-suit injunction in relation to parallel EU court proceedings.

At the same time, it found alleged Russian mandatory jurisdictional rules referring an insolvency dispute to the Moscow Arbitrazh Court insufficient to displace the wide and general wording of an arbitration clause, with the result that it granted an anti-suit injunction in relation to non-EU proceedings. Continue reading

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Filed under Arbitrability, Arbitration clauses, Arbitration proceedings, Brussels Regulation, Court intervention, Europe, Jurisdiction, Russia

English Commercial Court orders stay of Lebanon-seated arbitration in ‘exceptional’ case

In the most recent decision in the Sabbagh family feud, Sabbagh v Khoury & Ors [2018] EWHC 1330 (Comm), the English Commercial Court ordered the stay of parallel Lebanon-seated arbitration proceedings. This was despite the tribunal in that case having found that it had jurisdiction to hear it. In granting the interim injunction to restrain the pursuit of the arbitration proceedings, Mr Justice Knowles was quick to acknowledge the significance of a court that is not the supervisory court granting an injunction to prevent parties prosecuting a foreign arbitration.

 

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Filed under Arbitration proceedings, Court intervention, Europe, Interim relief, Middle East

Delhi High Court refuses to grant injuction restraining Vodafone’s second BIT arbitration against India

In a decision dated 7 May 2018, the Delhi High Court dismissed the Government of India’s application to declare Vodafone’s second BIT arbitration proceedings in relation to the retrospective tax liability imposed on Vodafone’s 2007 acquisition of Hutchison Whampoa’s Indian operations an abuse of process, and in so doing declined to grant a permanent injunction restraining Vodafone from continuing those arbitration proceedings. The Court granted liberty to India to bring the issue before the Tribunal in those second proceedings (under the India-UK Bilateral Investment Protection Agreement) for that Tribunal to decide on the alleged abuse of process on its own merits.

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Filed under Arbitration proceedings, Asia, Court intervention, India, Investment Arbitration, ISDS