The Marine, Energy and Trade team publish a regular newsletter, the Marine, Energy and Trade notes, in which recent legal developments are reviewed: new case law, changing legislation, and new areas of potential liability. The notes cover both UK and overseas news. In this issue, MET notes examines the following:
Court rules on the meaning of a 100 per cent notation in an energy reinsurance policy
By Emily Harwood
Two different views on the meaning of the term "100 per cent" in an energy facultative reinsurance policy were examined by the Commercial Court.
The judge confirmed the traditional view held in the energy insurance market according to which the term "100 per cent" (whether contained in the original insurance or reinsurance policy) referred to the total insured value of the original asset where the original insured held only a partial interest in that asset.
What does "100 per cent" mean? The Commercial Court was asked to consider this question in the context of a notation on an energy facultative reinsurance policy. The answer, it turns out, is that 100 per cent has a specific and generally accepted meaning in the energy insurance market.
In Gard Marine v Lloyd Tunnicliffe (on his behalf & on behalf of all other members of Lloyd's Syndicate 780 for the 2005 year) & Others (2011), the claimant, Gard had subscribed a 12.5 per cent line on an energy package policy taken out by Devon Energy Corporation, which was subject to a limit on cover for named windstorm in the Gulf of Mexico of US$400 million (for interest) any one accident or occurrence, reflecting the fact that Devon had interests of varying percentages in a number of Gulf of Mexico wells and platforms.
Gard reinsured its exposure under the Devon package policy with various Lloyd's syndicates, including Advent, the defendants in this case. The reinsurance policy expressed the sum insured in the following terms: "To pay up to the Original Package Policy limits/amounts/sums insured excess of USD250m (100 per cent) any one occurrence of losses to the original placement."
Gard settled certain losses under the original policy and made an onwards claim under the reinsurance. When the reinsurance claim came to be adjusted, a dispute arose as to the meaning of the reference to 100 per cent in the reinsurance wording. Gard contended that it meant that the excess point is based on the total insured value of the original lost asset and not just Devon's interest in the original lost asset, so that each indemnity paid by Gard to Devon has to be grossed up or scaled proportionately to Devon's interest in the asset.
Advent took a different view, arguing that the reference to 100 per cent was to be construed as referring to losses of US$250 million to the full market of insurers on the Original Policy, not just Gard's 12.5 per cent participation.
The Commercial Court (Steel J) accepted Gard's contention that, in the market for insurance of offshore energy risks, the notation 100 per cent has a specialised and recognised meaning when used to qualify limits or deductibles, irrespective whether used in an original policy or policy of reinsurance: it denotes that the limit, deductible or excess point scales for interest, so that the excess point in the Sum Insured clause in this reinsurance policy was based on the total insured value of the original lost asset and not Devon's interest in that original lost asset.
Set-off right applied in separate financial transactions
By Patric McGonigal
This case addressed, amongst other things, the question of whether a right of set-off in respect of sums owed under an ISDA agreement could be exercised against sums due under an unrelated letter of credit.
The defendant, Calyon1 issued an English law governed letter of credit (L/C) in connection with a derivatives trading contract in favour of LBCS which, when drawn upon, was for the sum of €50 million. One year prior to issue of the L/C, LBCS and Calyon entered into a wholly separate contractual relationship governed by a distinct ISDA Master Agreement (IMA) which was subject to New York law.
Section 6(f) of the IMA provided that in the event of a default, there would be a right to set-off "any obligation" of Calyon owed to [LBCS] against "any obligation" of [LBCS] owed to Calyon whether or not arising under the IMA.
An event of default under the IMA arose upon the filing by an LBCS group holding company under Chapter 11 of the US Bankruptcy Code. This in turn gave rise to a debt on the part of LBCS of US$15,030,239 under the IMA. Consequently, once LBCS sought to draw down on the L/C, Calyon set-off an equivalent sum to that owed under the IMA and paid a balance to LBCS of only €38,377,190.69 under the L/C.
A number of preliminary issues were ordered to be tried most of which turned upon questions of US law and the impact, if any, of the applicable bankruptcy law in New York. These were readily disposed of leaving, as the key issue, the question of whether on a proper construction of the IMA, Calyon was entitled to set-off sums owed to it under the IMA against the amount payable to LBCS under the L/C.
There is little authority on this area, primarily because in most cases it is relatively unusual for there to be a pre-existing contractual relationship between the paying bank and a beneficiary under a letter of credit such as to enable the bank to raise a claim for set-off. Of the authorities where there has been an underlying commercial relationship, set-off has usually been possible because the letter of credit arose from the same underlying transactions in respect of which there was a liquidated debt2. In a leading judgment on this point, which arose out of a summary judgment application, the Court of Appeal took the view that it would be unjust for a bank to have to pay under a letter of credit where it had a real prospect of succeeding on a claim on the underlying transaction, particularly in the case of a liquidated claim3.
In LBCS and Calyon, expert evidence on New York law was adduced to the effect that the words "any obligation" in section 6(f) of the IMA were said to be broad, unambiguous and included obligations owed under an L/C. It was argued that, had the intention been otherwise, it would have been easy for the parties to have made this clear in section 6(f). However, LBCS contended amongst other things that as the L/C came after the IMA, it had curtailed any right of set-off conferred by section 6(f).
Field J in the Commercial Court found in favour of Calyon. It was noted that the right of set-off conferred under the IMA was an important right and Calyon was entitled to assume that the wording of section 6(f) meant what it said. In the same vein, the Court said it was important also to note that the L/C did not contain any express provision excluding any right of set-off. While some emphasis was placed by LBCS on the nature of Calyon's irrevocable undertaking to pay as per LBCS' instructions under the L/C (ie, arguably, without deduction), the Court refused to accept that by this alone either: (i) Calyon was in some way agreeing to give up a pre-existing and important right of set-off; or (ii) that the undertaking to comply with a beneficiary's instructions is directed at anything other than situations in which there may be multiple drawings or where particular bank accounts are identified for the purposes of payment.
In short, this decision underlines the principle4 that letters of credit must be treated as cash and are therefore, in the absence of any express provision to the contrary, subject to rights of set-off in the ordinary way.
1 Lehman Brothers Commodity Services Inc (LBCS) v Credit
Agricole Corporate and Investment Bank (formerly Calyon)
2 HSBC v Kloeckner & Co Ag (1989)
3 SAFA Ltd v Banque du Caire (2000)
4 See SAFA Ltd (supra)
NOR valid despite inclement weather
The dispute concerned the interpretation of the laytime and demurrage terms under a CIF contract. Suek AG v Glencore International AG (2011).
The Court had to determine whether, under a CIF contract of sale, the master had been entitled to give notice of readiness where firstly, the vessel had been unable to proceed with the discharge as the berth was occupied by another vessel when it reached the port and secondly, the weather was such that the vessel was prevented from reaching the berth in any event.
Clause 7.13 of the contract stipulated that "in case the berth was occupied on arrival, the vessel could tender notice of readiness at the usual waiting place ... whether in berth or not".
The buyer argued that the bad weather meant that Clause 7.13 could not be invoked and that only once the tidal conditions allowed for the vessel to berth could the master give notice of readiness, even if the berth was unavailable.
The Court disagreed with the buyer and asserted that it was the buyer's obligation to provide a berth when the vessel arrived at the discharge port.
High Court grants "anti-arbitration" injunction in support of UK court proceedings
By Sapna Garg
An unusual decision in which the High Court saw fit to grant an injunction against the continuation of arbitration proceedings in Hungary, on the ground that the circumstances were sufficiently exceptional to justify such an order. Claxton Engineering Services Ltd v TXM Ola-J-Es Gazkutato KFT (2011).
The applicant (Claxton), applied for an injunction restraining a Hungarian company (TXM), from pursuing an arbitration in Hungary.
Claxton had sold engineering equipment to TXM. When Claxton issued English court proceedings following TXM's non-payment, TXM applied for a stay of these proceedings on the basis that the parties' contract contained a Hungarian arbitration clause or that, pursuant to article 2 of the Brussels Regulation, it had to be sued in Hungary. TXM commenced arbitration proceedings in Hungary and Claxton claimed that these proceedings were brought in breach of the English exclusive jurisdiction clause in the parties' contract.
The High Court decided that it had jurisdiction to issue an "anti-arbitration" injunction restraining the pursuit of the Hungarian arbitration proceedings. It clarified that the ECJ's judgment in the West Tankers (2009) case1 which disallows anti-suit injunctions against other Member States, under the terms of the Brussels Regulation, did not apply here given that the injunction was not directed at the courts of another Member State, but at arbitration proceedings which fell outside the remit of the Brussels Regulation. However, the Court emphasised that it would not grant such injunctions lightly and the circumstances needed to be sufficiently exceptional before it would be prepared to do so, especially where the proceedings against which the injunction was directed were foreign.
In order to establish exceptional circumstances, it would usually be necessary to establish that the applicant's legal or equitable rights were infringed or threatened by a continuation of the arbitration or that its continuation would be "vexatious, oppressive or unconscionable". This test was satisfied here since there was no arbitration agreement between the parties and secondly, the parties had clearly already agreed upon the English courts having exclusive jurisdiction. The Court was supportive of the parties' agreement to have their disputes resolved in the courts of England and Wales (and not to arbitrate) and went so far as to state that even if the circumstances were not sufficiently "exceptional" a "broader approach was justified" here making it appropriate to enforce that agreement by way of injunctive relief.
1 Allianz SpA (formerly Riunione Adriatica di Sicurta SpA) v West Tankers Inc. (2009).
Anti-suit injunctions in favour of arbitration agreements reinforced
By Clare Dyson
The Court of Appeal confirms that English courts may impose anti-suit injunctions in respect of foreign proceedings to prevent a breach of an arbitration agreement even in circumstances where there is no actual or intended arbitration. AES Ust-Kamenogorsk Hydropower Plant LLP v Ust-Kamenogorsk Hydropower Plant JSC (2011)
The Court of Appeal recently upheld a ruling that the English courts had jurisdiction to grant a final anti-suit injunction preventing foreign court proceedings brought in breach of an arbitration agreement, even though there was no actual or intended arbitration.
This judgment addresses the relationship between the courts' powers under (i) section 44 Arbitration Act 1996 (AA96) and (ii) section 37 Senior Courts Act (SCA81). The approach adopted in this case preserves the courts' powers under the SCA81 to grant injunctive relief in support of an arbitration agreement in cases that fall outside the scope of section 44 AA96.
The claimant and the defendant had a concession agreement to produce hydroelectric energy in Kazakhstan. Although the agreement contained an arbitration clause specifying that disputes were to be resolved by arbitration, to be conducted in London, D brought court proceedings against C in Kazakhstan. C applied to the English High Court, seeking declaratory relief and an anti-suit injunction under section 44 AA96 and/or section 37 SCA81 to restrain the Kazakhstan proceedings. The Court held that, in the absence of actual or intended arbitration proceedings, the Court could not intervene under section 44 AA96, but that it did have jurisdiction to do so under section 37 SCA81. C was granted a final anti-suit injunction and a declaration.
D appealed, arguing (amongst other things) that section 1(c) AA96, which provides that the court "should not intervene except as provided by this Part", prevented section 37 SCA81 from being used to circumvent the limitations of section 44 AA96. The Court of Appeal accepted that where section 44 AA96 applied section 37 SCA81 should not be used in this way. However, where there was no arbitration in prospect, section 44 AA96 did not apply, and there was no objection to the court's jurisdiction under the SCA81. The words "should not intervene" were intended to prevent intervention in the conduct of an arbitration, not litigation which threatened to undermine an arbitration agreement. Furthermore, the remaining principles in section 1 (eg, avoidance of delay and expense) were considered relevant and favoured court intervention.
In clarifying that section 1(c) is a general principle intended to assist in interpreting the AA96, rather than a binding rule, the Court of Appeal has made it clear that the AA96 does not remove its jurisdiction under section 37 of the SCA81. Conversely however, section 37 SCA81 cannot be used purely to get round the limitations of section 44 AA96.
No proper paperwork, no binding contract
By Caroline Brader-Smith
The Commercial Court reverses six arbitration awards and holds that no binding contracts were formed between the parties in the absence of contracts prepared and signed in accordance with terms agreed during negotiations.
The recent decision of Mr Justice David Steel of the English Commercial Court in Pacific Inter-Link SDN BHD v EFKO Food Ingredients Ltd (2011) serves as a forceful reminder that trading parties need to ensure that agreements are properly concluded, otherwise there is a risk that no binding contract will come into existence.
The claimant, Pacific Inter-Link (PIL) was a Malaysian company trading in palm oil. The defendant, EFKO Food Ingredients (EFKO), was a Russian-based company engaged in the sale and purchase of oils and fats. PIL appealed six FOSFA arbitration awards in the English Commercial Court on the grounds that, inter alia, FOSFA had no jurisdiction to determine the disputes.
The underlying arbitrations concerned six contracts for the sale by PIL to EFKO of 1500 m.t. of palm oil per month between January and June 2008.
EFKO asserted that the contracts had been concluded orally on, 7 September 2007, between their broker and the Chief Commodity Trader at PIL, and that the contracts incorporated FOSFA arbitration clauses, either orally or via an exchange of emails on 11 September 2007.
PIL denied that any binding contracts (or indeed arbitration agreements) existed, contending that any agreement was subject to the preparation and signature of a written contract on PIL's standard terms. PIL had therefore sought to cancel the contracts on the grounds that they were not signed. EFKO alleged that this purported cancellation was a repudiatory breach of contract. EFKO commenced six separate arbitrations, one in respect of each contract, each of which resulted in appeal awards in favour of EFKO, the Boards of Appeal having found that binding contracts with arbitration clauses were concluded.
PIL challenged these awards before the Commercial Court, their
principal argument under section 67 Arbitration Act 1996 being that
no contracts had been concluded with EFKO, so FOSFA did not have
jurisdiction to determine the disputes.
The Court reversed the awards, finding that when PIL sent the contracts via the broker to EFKO, a term on which they were sent was that they had to be signed and returned. As this did not happen, the contracts had not become binding, ie, they were subject to contract. PIL was therefore entitled to cancel the transactions as they had no legal effect. Other arguments were also raised under sections 68 and 69 of the Arbitration Act but because the Court found that no contracts had been concluded, these arguments fell away. This decision has caused some controversy in the market, given that six Boards of Appeal had found in favour of EFKO, and given that all of these decisions have been effectively overturned by the Court exercising its powers under section 67 Arbitration Act 1996.
Ultimately this case turned on its own facts, but the Court's decision clearly emphasises the importance of contracting parties and their brokers paying attention to detail and ensuring that paperwork is properly dealt with, particularly when trading in a volatile market.
Calculations upon termination of ISDA Master Agreement reviewed
By Lyall Hickson
Forward Freight Agreements which still had contract months to run at the time of Automatic Early Termination under an ISDA Master Agreement were to be included in calculating the Early Termination Payment.
Pioneer1 brought a claim against Cosco for payment following an alleged early termination of 11 freight derivative contracts known as Forward Freight Agreements (FFAs).
FFAs are a means of hedging commercial risks arising from the volatility of freight rates. The FFAs in this case incorporated the provisions of the Forward Freight Agreement Brokers Association 2007 Terms (FFABA 2007 Terms) which in turn incorporated by reference the provisions of the ISDA 1992 Master Agreement (ISDA MA), which has been described as "probably the most important standard market agreement used in the financial world"2.
Pioneer went into liquidation in December 2009 which brought about Automatic Early Termination (AET) under the ISDA MA. The dispute concerned whether the closing out or "wash out" calculations which had to be performed (ie, section 6 – Early Termination Payment) following AET should or should not include those FFAs where the last contract month under each such FFA had passed prior to AET event in December 2009.
Mr Justice Flaux held that only the three FFAs which still had Contract Months to run as at AET in December 2009 were to be included in calculating the Early Termination Payment. The remaining eight FFAs were not to be taken into account.
In reaching this conclusion, Mr Justice Flaux followed the analysis of Briggs J in Lomas3 who held that where a particular transaction (ie, FFA) had terminated at the end of its natural term, any contingent obligation which might have revived, if the condition precedent in section 2(a)(iii) had been fulfilled before the transaction terminated, did not survive the termination of the transaction at the end of its natural term. It was a logical consequence of that analysis that none of those transactions that terminated at the end of their natural term was a "terminated transaction" within the meaning of the ISDA MA.
The freight futures market has been greatly affected by the recent financial crisis and as a result there have been a significant number of cases4 before the English courts recently concerning a variety of issues arising out of the incorporation of the ISDA MA in those freight derivative contracts. However, these decisions have a much wider implication for those involved in hedging of financial risks and financial markets generally. This space should continue to be watched.
1 Pioneer Freight Futures Company Limited (in
liquidation) v Cosco Bulk Carrier Company Limited (2011)
2 Lomas & Ors v JFB Firth Rixon Inc & Ors (2010), Briggs J
4 Britannia Bulk (In Liquidation) v Pioneer Navigation Ltd and Another Britannia Bulk Plc (In Liquidation) v Bulk Trading SA (2011); Pioneer Freight Futures Co Ltd (In Liquidation v TMT Asia Ltd (2011); TMT Asia Ltd v Marine Trade SA (2011); Lehman Brothers Special Financing Inc v Carlton Communications Ltd (2011) EWHC 718 (Ch); Lomas v JFB Firth Rixson Inc (2010); Marine Trade SA v Pioneer Freight Futures Co Ltd BVI and Another (2009); AS Klaveness Chartering v (1) Pioneer Freight Futures Co Ltd (2) Pioneer Metals Co Ltd (2009.)
Parties' performance brings contract to life
By Francesca Morley
TTMI challenged the decision of an arbitrator to strike out its claim against Statoil ASA (Statoil) on the ground that there was no contract between the two parties and therefore no arbitration agreement. TTMI Sarl v Statoil ASA (2011)
The claim had been brought under a charterparty on the Shellvoy 5 form, clause 43(c) which provided for London arbitration; however no charterparty was drawn up, nor signed.
TTMI relied upon a fixture recap email, which mistakenly recorded Sempra Energy, TTMI's ultimate parent company, as the vessel's time-charterer.
TTMI's case was that, notwithstanding the mistake, there was a binding charterparty or alternatively that a contract was formed by performance and payment of freight. Statoil denied that there was a contract between it and TTMI as it believed that the contract was with Sempra Energy and that the charterparty was performed by them.
It was held that a recapping email is not a contractual document naming the parties but is instead a recapitulation of what had previously been agreed orally. There was no evidence that a contract was made prior to the recap. The recap was the only document evidencing the parties' agreement and therefore could for material purposes be regarded as the charterparty.
The Court found that the contract was formed between Statoil and TTMI by performance. Statoil dealt with TTMI throughout, based on the fact that TTMI instructed the vessel to take on Statoil's cargo, the Notice of Readiness identified TTMI as the time charter, there was full performance of the voyage, and there was payment due to TTMI into TTMI's bank account. The contract was deemed to have been formed when the freight was paid, if not when the first Notice of Readiness identified TTMI as the time charter was accepted by Statoil's managing agents.
The award was set aside and the matter remitted to the arbitrator.
Exclusion clause prevails in demurrage claim
By Judith Pastrana
The term "strike" contained in an exclusion clause within a berth charterparty extended to include the congestion period which followed the "strike" itself. Carboex SA v Louis Dreyfus Commodities Suisse SA (2011)
These proceedings were an appeal by the charterers against an arbitration award in favour of the owners.
The charterers had unsuccessfully attempted to defeat a demurrage claim which had arisen from a delay in discharge caused by a two-week congestion which followed a strike at the port of El Ferrol, in Spain.
Charterers had attempted to rely on Clause 9 of the amended AmWelsh voyage charterparty which stated: "In case of strikes, lockouts, civil commotions or any other causes ... which prevent or delay the discharging, such time is not to count unless the vessel is already on demurrage."
Clause 40 stated that if a berth was not available when the vessel tendered Notice of Readiness (subject to the owners not being at fault) laytime would start to run 12 hours after the first permissible tide, whether the vessel was in berth or not (WIBON). The owners argued that, the effect of Clauses 9 and 40 combined, meant the charterers had accepted the risk of delay caused by the congestion. Owners further argued that the strike exclusion under Clause 9 applied only once the vessels had berthed, and as the strike was over when the vessels eventually berthed, no time stood to be deducted from laytime.
In setting aside the arbitral tribunal's award for error in law, the Court relied on the decision in the "AMSTELMOLEN" (1961)1 where it was held that the effect of WIBON was no more than to start the laytime clock ticking and that the exceptions clause (in this case, Clause 9) was to be construed as a free standing provision. There was no cross-contamination between the provisions. The Court held that on their ordinary meaning, the words of the exclusion clause covered delay in discharging caused by congestion due to the after effects of a strike that had ended, as well as congestion due to a strike where the vessel arrived after a strike had ended.
1 Reederj Amsterdam NV v President of India, the "AMSTELMOLEN" (1961)
Advance Payment Guarantees survive novation of shipbuilding contracts
By Judith Pastrana
The Court of Appeal rejects a guarantor's attempts to deny its liability under Advance Payment Guarantees following the novation of shipbuilding contracts under Korean law. Meritz Fire & Marine Insurance Co. Ltd v Jan de Nul N.V. & Anr (2011)
Jan de Nul N.V. and another company were buyers of dredgers from Korean shipyard HWS under three shipbuilding contracts.
The appellant insurers, Meritz, had agreed with the shipyard to provide "Advance Payment Guarantees" (APGs) to the buyers for the advance payments in the event of premature termination of the building contracts. The guarantees incorporated the ICC's Uniform Rules for Demand Guarantees. The question that faced the Court of Appeal was whether Meritz were liable to pay in the unusual circumstances that arose in this case.
The shipbuilding contracts were transferred first to a company named Buyoung, then to a newly formed company, Asia Heavy. HWS was dissolved and, under Korean law, the rights and obligations under the shipbuilding contracts were transferred to Buyoung and/or Asia Heavy.
At a later date, and in accordance with the terms of the contracts, the buyers terminated the agreements and demanded that Asia Heavy repay the instalments already paid under the contracts. When the latter failed to do so, the buyers turned to Meritz for repayment under the APGs in accordance with the termination clause of the building contracts (Clause 17).
Meritz objected and the Court of Appeal considered Meritz's submission that they had assumed the risk of HWS' default and not that of their successors who they would not have previously assessed. However, as Meritz had not taken the opportunity, available under Korean law, of objecting to the transfer within the subsequent six months, the argument did not succeed.
The Court of Appeal also rejected Meritz's argument that the buyers had been unable to make a demand in conformity with Clause 17 of the contract, as required by paragraph 4 of the APG, as the shipyard was no longer HWS but Asia Heavy.
The Court of Appeal agreed with the buyers that, on the true construction of the APGs, these were designed to operate on the basis that the builder had failed to make the refund when it was obliged to do so. The appeal was dismissed.
Missed sea trial dates lead to rescission of contracts
By Judith Pastrana
A ship buyer succeeded in its claim to rescind two shipbuilding contracts following the shipbuilder's failure to comply with the agreed sea trial dates. Adyard Abu Dhabi v SD Marine Services (2011)
A shipbuilder was unable to establish successfully before the Commercial Court that there had been a variation of two shipbuilding contracts entitling it to claim breach of contract against the buyer SDMS, a commercial supplier which had commissioned a number of vessels for the UK Government.
Under the shipbuilding contract, the vessels were to be built in compliance with the requirements of the UK Maritime Coastguard Agency (MCA) and the relevant safety codes for special purpose ships (SPS). The shipbuilder argued that new design items imposed by the MCA or SDMS had prevented it from completing the vessels on time for the sea trials. Following the shipyard's failure to comply with the sea trial dates, SDMS purported to exercise its contractual right to rescind the agreements which led to the shipbuilder's claim for breach of contract.
The Court held that there had been no changes in the requirements as compliance with the SPS Safety Code was always expected, and further found that the construction project was already critically delayed long before the dates set for the sea trial. The contracts contained a mechanism entitling the shipbuilder to seek an extension of time by means of notice which it had not exercised. In any event, the Court found that the delay had not resulted from any of the contractual default events which would have given rise to the right to seek an extension.
The Court ruled in favour of the buyers and concluded that SDMS were entitled to rescind the contracts. SDMS also succeeded on their counterclaim for the return of the instalments previously paid under the agreements.
By Andrew Horton and Warren Ganesh
Triple whammy arising out of charterparty arbitration award. The Hong Kong Court dismisses a court action that seeks to re-litigate matters already decided in an arbitration between related parties.
During the course of the last year Parakou Shipping Pte Limited, the Singaporean arm of the shipping company, has suffered some three mishaps in its long-running charterparty dispute with the Jinhui Shipping Group.
The dispute, in which the Jinhui Shipping Group was successful, has ended with Parakou Singapore going into liquidation.
First, Parakou Singapore lost an arbitration commenced by a Jinhui Group company in London to enforce a charterparty against Parakou Singapore. The charterparty dispute arose in 2008-09 in connection with the dry bulk cargo ship the "Jin Kang". Following the crash in the dry bulk market in the second half of 2008, Parakou Singapore refused to take delivery of the vessel claiming that the charterparty was with the wrong Jinhui Group company (which subsequently commenced the arbitration). Parakou Singapore argued that the charterparty was with a related Jinhui Group company, which was the registered owner of the vessel. The arbitration panel in London concluded that, in any event, Parakou Singapore had ratified the charterparty and that it was binding on them.
Second, rather than appealing the arbitration award made in favour of the Jinhui Shipping company, Parakou Singapore commenced court proceedings in Hong Kong against four Jinhui Group companies (but not the Jinhui Shipping company privy to the charterparty). In those court proceedings, Parakou Singapore sought an indemnity for any amount it had to pay under the London arbitration award. Those court proceedings were dismissed by a judge in the latter part of 2010 on the basis that they amounted to a collateral attack on the London arbitration award between related parties and, as such on the facts, were an abuse of process. In the court proceedings in Hong Kong, Parakou Singapore was essentially asking the court to overturn findings made by the London arbitrators that the charterparty was in any event ratified by Parakou Singapore.
Parakou Singapore had intended to proceed with an appeal of the court judgment in Hong Kong but subsequently failed to pay the required security for costs of such an appeal within the stipulated time. Therefore, Parakou Singapore's court action in Hong Kong now stands dismissed.
Third, Parakou Singapore has now gone into liquidation in Singapore, leaving the Jinhui Group to consider how best to enforce its arbitration award.
In the meantime, the outcome of the court proceedings in Hong Kong (Parakou Shipping Pte Limited v Jinhui Shipping and Transportation Limited & Ors (2011)) should serve as a salutary warning that a court can dismiss court proceedings which seek to re-litigate matters already decided in an arbitration; in so doing, that court judgment further strengthens Hong Kong's credentials as a pro-arbitration jurisdiction.
This article was first published in Lloyd's List on 24 August 2011
England declared appropriate forum in crew injury case
It was held that the courts of England and Wales had jurisdiction to hear a personal injury claim brought by an Indian national who was injured while working on board a vessel registered in the Marshall Islands and anchored off the coast of Wales. There was no reason why the general rule under the Private International Law (Miscellaneous Provisions) Act 1995 should not apply, which under CPR PD 6B, Paragraph 3.1(9) required consideration of the physical location of the ship when the act, which gave rise to the damage suffered, occurred; and under the forum non conveniens principle, England was the appropriate forum.
Kennedy Paul Saldanha v Fulton Navigation Inc. (2011)
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