UK: Staying Court Proceedings In Favour Of Arbitration Where The Existence Of The Arbitration Agreement Is Disputed

Last Updated: 3 July 2013
Article by Bob Deering and Simonie Dimitrellou

Golden Ocean Group Ltd v. (1) Humpuss Intermoda Transportasi Tbk Ltd and (2) Genuine Maritime Ltd (Barito) [2013] EWHC 1240 (Comm)

The Commercial Court has granted permission to serve an arbitration claim form out of the jurisdiction, and issued an interim anti-arbitration injunction to constrain a Singapore arbitration, in circumstances where there was a dispute as to which of two defendants was party to a charterparty and as to the existence of an agreement for Singapore arbitration. In so deciding, the Judge set out the principles applicable to a stay of proceedings where the existence of an arbitration agreement is disputed.

The background facts

The proceedings arose out of a dispute as to whether Humpuss Intermoda Transportasi TbK Ltd ("HIT") or Genuine Maritime Ltd ("Genuine"), said to be related companies, was the Disponent Owner of the vessel Barito under a charterparty with the Claimant, Golden Ocean Group Ltd ("Golden Ocean"), as the Charterer. The charter was subject to English law and London arbitration. Golden Ocean redelivered the vessel early, giving rise to cross claims for overpaid hire/value of bunkers and damages for early redelivery.

Golden Ocean commenced London arbitration proceedings against Genuine but Genuine commenced Court proceedings in Indonesia. The latter were settled by an addendum dated 8 March 2010 between Golden Ocean and Genuine, which provided that all disputes were to be determined in arbitration in Singapore under English law and that the charterparty was to be amended to reflect this.

By November 2010, Golden Ocean had reached the conclusion that the original fixture was in fact with HIT and that the addendum with Genuine was of no effect and/or was void for mutual mistake. Golden Ocean therefore commenced London arbitration proceedings against HIT. In January 2012, Genuine went into liquidation. In November 2012, the London Tribunal published its award, holding that Golden Ocean had contracted with HIT and that the Tribunal had jurisdiction to determine the merits of the substantive dispute under the charterparty.

In January 2013, Genuine commenced arbitration in Singapore. In February 2013, Golden Ocean issued an English High Court claim form against both HIT and Genuine seeking inter alia: (1) a declaration that the charterparty was between Golden Ocean and HIT and that Genuine was not a party to it; and (2) an anti-arbitration injunction restraining Genuine from pursuing the Singapore arbitration. Golden Ocean sought permission to serve the claim form out of the jurisdiction on HIT and Genuine.

The Commercial Court decision

Serious issues to be tried: England the appropriate forum

Mr Justice Popplewell held that there were serious issues to be tried as to whether Genuine was a party to the charterparty and whether Golden Ocean was bound, as against HIT, by the agreement to Singapore arbitration in the addendum with Genuine. The Judge held that Golden Ocean's arguments that the addendum did not change the underlying contractual counterparties and was ineffective as an agreement with HIT had a real prospect of success. Among other things, the Judge commented that, subject to a better understanding of the factual background, it would be surprising for either party to agree to bind itself to perform charterparty terms for a second time to someone who may not be its counterparty, without having first been released from its charterparty obligations to the existing counterparty. He also queried the effectiveness of the addendum in referring all disputes to Singapore arbitration, including those between Golden Ocean and HIT, in circumstances where HIT was not a party to the addendum.

The Judge commented that it would not be appropriate for the Court to grant permission to serve out of the jurisdiction if thereafter the Court would grant Genuine a stay of the English proceedings in favour of Singapore arbitration. As a result, the Judge had to address the legal framework in which a stay application would be considered. The Judge summarised the applicable principles as follows:

  1. The Court's jurisdiction to grant a stay may arise under Section 9 of the Arbitration Act 1996 or under its inherent jurisdiction.
  2. Section 9(1) permits a stay only if there is a written arbitration agreement which refers the matters in issue to arbitration. For s.9 to take effect, it must be established that such an agreement was concluded, and that its terms apply to the underlying dispute.
  3. If s.9(1) is fulfilled, s.9(4) requires the Court to grant a stay unless satisfied that the arbitration agreement is null and void, inoperative or incapable of having effect (e.g. in cases of fraud or misrepresentation or illegality, mistake or duress).
  4. Disputes which engage s.9(1) or s.9(4) must relate to the distinct arbitration agreement, not merely the matrix contract in which it is contained. If the arbitration clause has been agreed, the parties will be presumed to have intended the question of whether there was a concluded main agreement to be decided by arbitration.
  5. The Defendant has to satisfy the Court, and not show merely an arguable case, that he comes within s.9(1), before the Court can grant relief.
  6. If s.9(1) applies in principle, such that the parties are in "stay territory", it is then for the Claimant to satisfy the Court that the arbitration agreement is null and void, inoperative or incapable of having effect under s.9(4). If the Claimant cannot satisfy the Court of this, a stay may be ordered even if the Defendant can only make out an arguable case that the arbitration agreement is valid.
  7. The Court may order a trial of the arbitrability issue under s.9(1) or s.9(4). In this regard, the following factors are likely to be significant: (a) whether the arbitrability issue is likely to be resolved by the Court in any event (e.g. in the context of enforcement of an Award); (b) whether the resolution of the arbitrability issue will involve findings of fact or law which bear on the substantive rights and obligations of the parties in relation to the underlying dispute; (c) the length and cost of the enquiry into the arbitrability issue and how quickly it will be resolved; (d) whether there have been or will be related proceedings addressing the arbitrability issue between the same or other parties; (e) the degree of connection between the arbitrability dispute and England; (f) the strength of the arguments on the arbitrability issue; and (g) the nature and quality of the arbitral tribunal and arbitral process, including the supervisory jurisdiction of the curial Court.

Applying the above principles, the Judge concluded that it would be appropriate for the English Court to decide the arbitrability issue. The decisive factor was the risk of inconsistent judgments on both the arbitrability issue and the underlying dispute, given that two sets of arbitration proceedings were already in progress. In addition, there was a strong connection between the arbitrability issue and England, including that the relevant issues arose already in the context of a London arbitration against HIT and that the addendum was governed by English law. The Judge, therefore, granted permission to serve the claim form out of the jurisdiction on both HIT and Genuine.

Anti-arbitration injunction

The Court decided on the balance of convenience to grant an interim anti-arbitration injunction against Genuine to put the Singapore arbitration on hold pending the determination of the jurisdiction issue by the English Court, thereby avoiding unnecessary duplication and expense.

Comment

This case serves as a good reminder and a good future point of reference as to whether English Court proceedings should be stayed in favour of arbitration.

It also provides an indication that the English Court, subject always to the factual background, may be persuaded to accept that an addendum to a charterparty purporting to change the contractual counterparties and the arbitration provision of the original fixture is ineffective.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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