In a London arbitration a situation where two clauses in the agreement used different terms on a topic treating the same issue led to a dispute between two parties, reports London-based legal firm Campbell Johnston Clark in CJC Quarterly Case Update, June 2017
London Arbitration 12/17 (2017) 974 LMLN 4 concerned a conflict between two clauses in a charterparty. The subject vessel was chartered for a period of about 210 day, but disputes arose between the parties, and the owners claimed US$1,186,727.70 for hire, meals and accommodation. Two clauses appeared to cover aspect of the dispute;clause 31 (law and arbitration) and clause 21 (applicable law).
Clause 31 had a “sole arbitrator” provision, but, each party appointed its own arbitrator anyway. The charterers then said that they needed a third arbitrator to be appointed before they served defence submissions. This was agreed by the owners, and the President of the LMAA appointed a third arbitrator.
After this, the tribunal sent an email setting the charterers a deadline for the serving of defence submissions. The charterers said in reply that they would “…provide all the requests (sic) of defence, documents and the memorandums of Defence…” at the first “…actual procedural session of the tribunal which must be held at the tribunal in front of all parties, not at internet …”.
The Tribunal observed in response that in accordance with the LMAA Terms 2012 they did not have to have a “first procedural session”, and further pointed out that the LMAA Terms gave the Tribunal wide ranging power to conduct the proceedings.
The Tribunal email also set out that failure to comply might risk that the Respondent would, under section 41(7) of the Arbitration Act 1996, be prohibited from putting forward a defence or counterclaim.
The charterers responded, saying that they would provide their submissions at the “first actual hearing”. The Tribunal wrote back stating that the arbitration would be conducted “…in what is the absolutely normal way, which is to say that communications between the parties and the tribunal will be conducted in writing, and in practice that will almost always mean by email”.
The charterers then wrote to the Tribunal in a manner purporting to be submissions, stating that the contract was actually subject to Egyptian law and jurisdiction and not London arbitration.
The Tribunal said that clause 31 clearly provided arbitration in London in accordance with English law. It also expressly excluded the laws of other jurisdictions from
applying. The Tribunal, under its own jurisdiction, had to look at the conflict between clause 21 and 31 and it was a matter of construction as to which was applicable.
1. Clause 21, headed “Applicable law”, made no reference in the heading to “Jurisdiction”.
2. Clause 31’s heading Law and Arbitration” was more “all-embracing”
3. The Tribunal also decided that is was difficult to imagine that where attempts to settle were provided for in clause 31 as a precursor to arbitration, that the parties intended for jurisdiction to be subject to the Egyptian Courts.
4. As such, the parties must have intended for the application of English law.
5. Since the charterers also appointed an arbitrator and demanded the appointment of a third arbitrator, the charterers had waived their right to challenge the Tribunal’s jurisdiction.
6. The charterers had not argued that attempts to settle had not taken place pursuant to clause 31.
7. The Tribunal took that view that attempts to settle must have taken place, and if they had not, then the parties were content to proceed to arbitration (presumably because they both appointed arbitrators).
8. The only other matter put forward by the charterers related to Egyptian tax laws. They had not put in any further evidence regarding this. On the assumption that Egyptian law was the same as English law, the failure to produce any evidence meant that it had to fail.
9. Finally, the charterers had made an application in the Egyptian Courts and asked that there be a suspension to the arbitration proceedings. The Tribunal decided that there would be no suspension and that the proceedings had been brought properly and that there was jurisdiction under the Charterparty.
CJC commented that this was a clear example of the parties and/or their brokers not taking enough care at the negotiating stage of the Charterparty. Clauses which have different terms regarding the same issue are a real problem and can give one party the chance to try and disrupt legal proceedings.
The lawyers also noted that this showed the importance of obtaining early legal advice from a Club or solicitor regarding the importance of challenging jurisdiction or risking that a party may waive its right to mount a challenge. The initial steps taken by the charterers meant that challenging jurisdiction was not possible later on. http://www.cjclaw.com/cms/documents/June_2017.pdf