High Court allows rare appeal of an arbitration award on a point of law

High Court allows rare appeal of an arbitration award on a point of law

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The High Court has allowed a party to appeal a tribunal’s award on a point of law under section 69 of the Arbitration Act 1996 (the “Act”).[1]  Section 69(1) of the Act provides that unless otherwise agreed by the parties, a party to arbitral proceedings has a right to appeal an award made in the proceedings on a question of law.

Successful appeals of this nature are rare, owing to the fact that parties to an arbitration agreement often expressly exclude this right of appeal, and the bar to apply for the Court’s leave is high.  Moreover, the widely-adopted UNCITRAL model law on commercial arbitration also excludes such appeals.

Background

In 2017, Tricon Energy Ltd (the “Claimant”) chartered a vessel owned by MTM Trading LLC (the “Owners”) under a charterparty agreement (“the Agreement”).  The Owners brought arbitration proceedings for demurrage against the Claimant, owing to delays at both the load port and discharge ports.  Demurrage is a charge payable to the owner of a chartered ship on failure to load or discharge the ship within an agreed time period.

The Claimant disputed the demurrage claim on the basis of the specific wording of the Agreement.  Clause 38 of the Agreement provided that the Claimant would be free of any liability in respect of any claim or invoice from the Owners, unless “a claim/invoice in writing and all supporting documents have been received by the [Claimant]” within 90 days of completion of the cargo or termination of the voyage (emphasis added).

The Claimant therefore argued that, as the Owners’ claim had not attached all of the necessary documentation, namely, the bills of lading, and as the 90-day period to submit these had elapsed, the entire claim was time-barred.

Appeal

The arbitration tribunal decided that the Owners’ claim should succeed, and that the Owners’ failure to provide the bills of lading were irrelevant given that:

  1. their written submissions contained the relevant details to the case; and
  2. there were “very real doubts” over whether the bills of lading containing a third party’s confidential information could be shared without permission.

The tribunal awarded the Owners the full amount claimed, being $56,049.36.

The Claimant were granted leave to appeal the decision of the tribunal based on the following point of law:

Where a charterparty requires demurrage to be calculated by reference to bill of lading quantities, and contains a demurrage time bar which requires provision of all supporting documents, will a claim for demurrage be time-barred if the vessel owner fails to provide copies of the bills of lading?

Judgment

The Court allowed the Claimant’s appeal based on the interpretation of clause 38 of the Agreement.  Demurrage had to be calculated by reference to “Bill of Lading quantities”, and it was held that the provision of “all supporting documentation” (in contrast to merely “supporting documentation”) should have meant providing the bills of lading themselves.

The Court also disagreed with the tribunal’s argument over the bills of ladings’ confidentiality, arguing that sensitive elements “could very easily be redacted”.  As such, the Court held that the Owners’ failure to produce bills of lading in support of their demurrage claim barred their entire claim.

Comment

This case provides an interesting example of when a section 69 appeal has succeeded. Obtaining leave of the Court to appeal is notoriously difficult under section 69(3), the Court having to be satisfied that:

  1. the determination of the question will substantially affect the rights of one or more of the parties;
  2. the decision of the tribunal on the question is obviously wrong, or the question is one of general public importance and the tribunal’s decision is at least open to serious doubt; and
  3. it is just and proper in all circumstances for the Court to determine the question.

Indeed, this is further illustrated by the fact that there were only two successful section 69 appeals in 2019.[2]  Such cases are invariably decided on their specific facts, and with all three cases referred to involving the shipping sector, it is perhaps only of relevance to businesses operating in this sector.

However, this case serves as a useful reminder to parties involved in arbitration to consider the inherent difficulties in successfully appealing the decision of a tribunal on a point of law, and indeed, whether or not to explicitly exclude such a right in the first instance.  Finally, it is perhaps testament to the expertise of tribunals, and the acceptance of the arbitrating parties in such expertise, that successful appeals are so infrequent. 

 

[2] Nobiskrug Gmbh v Valla Yachts Limited [2019] EWHC 1219 (Comm) where the tribunal wrongly determined that the applicant was obliged to make payments to the buyer under a sale contract, and Silverburn Shipping (IoM) Ltd v Ark Shipping Company LLC [2019] EWHC 376 (Comm) where the tribunal erred on the classification of an obligation in a shipping contract.

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