[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]
	England and Wales High Court (Commercial Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Commercial Court) Decisions >> Glencore International AG v PT Tera Logistic Indonesia & Anor [2016] EWHC 82 (Comm) (29 January 2016) URL: http://www.bailii.org/ew/cases/EWHC/Comm/2016/82.html Cite as: [2016] EWHC 82 (Comm), [2016] Bus LR 408, [2016] WLR(D) 51

[New search] [Printable RTF version] [Buy ICLR report: [2016] Bus LR 408] [View ICLR summary: [2016] WLR(D) 51] [Help]

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
In the matter of the Arbitration Act 1996
And
In the matter of two Arbitrations

		Royal Courts of Justice Strand, London, WC2A 2LL
		29/01/2016

Mr Justice Knowles:

1. The question of law on this appeal has been framed in these terms:

"In circumstances where a claim and a counterclaim arise from a single set of facts giving rise to a balance of accounts or netting-off, does a reference to "claims" or, alternatively, to "all disputes arising under the contract", in a notice of appointment of an arbitrator, suffice to interrupt the running of time in respect of a counterclaim for the purposes of s14(4) Arbitration Act 1996?"

2. The arbitrators themselves were divided on the issue. Permission to appeal was given to the Appellant by a Judge of the Commercial Court under section 69 of the Arbitration Act 1996 ("the 1996 Act"). The Judge considered the issue to be of general public importance. The Appellant, through Mr Charles Kimmins QC and Ms Leonora Sagan, described the issue as one of market interest. The majority arbitrators on the other hand had regarded the case as unusual; a view adopted by the Respondents to the Appeal (the "Owners"), appearing by Mr Jern-Fei Ng.
3. Section 14 of the 1996 Act provides:

"Commencement of arbitral proceedings

(1) The parties are free to agree when arbitral proceedings are to be regarded as commenced for the purposes of this Part and for the purposes of the Limitation Acts.

(2) If there is no such agreement the following provisions apply.

(3) …

(4) Where the arbitrator or arbitrators are to be appointed by the parties, arbitral proceedings are commenced in respect of a matter when one party serves on the other party or parties notice in writing requiring him or them to appoint an arbitrator or to agree to the appointment of an arbitrator in respect of that matter.

(5) …"

4. The parties had entered into four contracts for the charter of floating cranes to enable the Appellant to load coal on vessels at anchorages. The contract provided for what was termed "MV Demurrage" to be paid by the Owners or for what was termed "FC Detention" to be paid by the Appellant depending on the cause of any delay beyond an agreed minimum loading-rate.
5. In the event the issue has arisen in two arbitrations between the parties. In the first, the Owners gave notice in writing that they commenced "arbitration proceedings against you in respect of their claims under this Contract", appointed an arbitrator and required the Appellant to appoint an arbitrator. The Appellant responded by appointing a second arbitrator "in relation to all disputes arising under the [contract]". In the second, the Owners gave notice in writing that they commenced "arbitration proceedings against you in respect of claims under this Contract" (this time, the word "their" was not used), appointed an arbitrator, and required the Appellant to appoint an arbitrator. The Appellant responded by appointing a second arbitrator "in relation to all disputes arising under the [contract]". In due course in each arbitration the two appointees then appointed a third arbitrator.
6. By the time the Appellant had served defence and counterclaim submissions in the arbitrations, the limitation period for claims under the contracts had expired. This fact caused two members of the tribunal to find that the counterclaims were time-barred. The third member of the tribunal dissented, taking the view that the notices commencing the arbitrations included both claims and counterclaims.
7. The issue is ultimately one of the jurisdiction of the arbitral tribunal: Interbulk Ltd v Ponte Dei Sospiri Shipping Co ("The Standard Ardour") [1988] 2 Lloyd's Rep 159 at 162 (per Saville J.). To decide that issue it is "necessary to look objectively at what has passed between the parties to the reference": The Standard Ardour at 162; Bulk & Metal Transport (UK) LLP v VOC Bulk Ultra Handymax Pool LLC ("The VOC Gallant") [2009] 1 Lloyd's Rep 418; [2009] EWHC 288 (Comm) at [12] (per HH Judge Mackie QC sitting as a High Court Judge). This involves construing "words in the context in which they were used" (Harper Versicherungs AG and Others v River Thames Insurance Company Ltd and Others [2006] EWHC 1500 (QB) at [53] (per Tomlinson J); The VOC Gallant at [20]). "Courts (and indeed adjudicators) should not adopt an over legalistic analysis of what the dispute between the parties is": Cantillon Limited v Urvasco Limited [2008] EWHC 282 (TCC) at 55 (per Akenhead J).
8. In my judgment the reference in the notices to "claims" and to "all disputes arising under the contract" had the effect of referring counterclaims for MV Demurrage, and not just claims for FC Detention, to the arbitrations. The context is one of a contract under which delay was capable of giving rise to money obligations on either side of an account, with a net sum falling for payment. The party commencing the arbitration is in effect asking for an account and asserting that the balance is in its favour. It is further commercially unlikely that the parties would contemplate that MV Demurrage and FC Detention Claims would be separate for the purposes of reference to arbitration, so that only one and not the other would be within a reference unless the parties were more explicit that both were within the reference. The attendant possibility that there could otherwise be separate tribunals reinforces the unlikelihood.
9. Mr Ng, for the Owners, points out that the tribunal explained that there had been no indication of a counterclaim at the time when the notices were served. On one approach that explanation suffered the weakness of assuming the answer to the issue that was to be decided. That approach aside (for I see the practical point being made by the arbitrators), it is valuable to bear in mind that if the notices had referred to "all claims and counterclaims" and no counterclaim had by that point been indicated, the arbitrators would, generally speaking, have had jurisdiction over a counterclaim when one was later indicated. I do not consider notices that refer to "all disputes arising under the contract" are any more affected by the absence of indication of a counterclaim at the time when the notices were served.
10. Mr Ng points out that it would not necessarily be the case that, in the events that could happen, there would be MV Demurrage payable by the Owners, and any set-off as a result. The point is of course correct, but I do not consider that it disturbs the context as one of a contract under which delay was capable of giving rise to money obligations on either side of an account. And as Akenhead J said in Cantillon v Urvasco (above) at [55]-[56]:

"… One cannot say that the disputed claim or assertion is necessarily defined or limited by the evidence or arguments submitted by either party to each other before the referral to adjudication or arbitration. … In my view, one should look at the essential claim which has been made and the fact that it has been challenged as opposed to the precise grounds upon which … it has been rejected or not accepted. …"

11. Mr Ng criticises the dissenting arbitrator for describing the words "all disputes" as "the usual formula", on the ground that a formulaic or legalistic approach is not appropriate. For my part I consider the arbitrator was not using the description "the usual formula" literally. Rather he was using the description to suggest ordinary commerciality. Understood in that way his description is not open to Mr Ng's criticism. The dissenting arbitrator's meaning was clear in this further passage from his reasons: "[a] party receiving a notice of arbitration will routinely respond by making an appointment in relation to "all disputes" – in the expectation that even if it is not clear at that time whether it will have a counterclaim, its position will nevertheless be protected".
12. The majority of the tribunal said that they "found it more helpful to have regard to" The VOC Gallant than The Standard Ardour. Mr Ng argues that these authorities are consistent with each other. As regards the principles, and in particular that the assessment is an objective one to be undertaken with regard to the context, I here agree with Mr Ng. This does not affect the outcome in the present case.
13. On the facts, at the same time as the Owners sent a letter of claim to the Appellant under the contracts the subject of the arbitrations it transpires that the Owners had also sent a letter of claim to the Appellant under a different (later) contract. Mr Ng points out that this attached calculations for FC Detention as well as MV Demurrage and included a netting-off figure. He submits that the contrast is relevant when looking "objectively at what passed between the parties to the reference". In my view, two points answer this submission. First, the more important things that "passed between the parties to the reference" are the notices. Second, the letter of claim and calculations under the later contract in fact illustrate the context - delay was capable of giving rise to money obligations on either side of an account, with a net sum falling for payment.
14. Accordingly I would answer the question as follows:

"In circumstances where a claim and a counterclaim arise from a single set of facts giving rise to a balance of accounts or netting-off under a contract, a reference to "claims" and to "all disputes arising under the contract" in notices of appointment of an arbitrator will ordinarily suffice to interrupt the running of time in respect of the counterclaim for the purposes of s14(4) Arbitration Act 1996, and does so in this case."

15. In truth that is an answer in law but on the facts of the case. The foundations of the answer are nonetheless those that would firmly indicate the same answer in a great many contract cases of what might be termed a "balance of account" nature. Hence whether or not the issue has ultimately proved to be of general public importance (as the Judge granting permission to appeal considered it would), it is unsurprising that the Appellant should describe it as one of market interest. In the present case the arbitrator who took a different view from the majority, said of the majority view: "That is simply not the way in which such matters are dealt with routinely in a commercial context". That is an observation that gives emphasis to the reason why in a great many cases the answer to the question would be the one I have given in this case.
16. In each of the two arbitrations in the present case there was a notice of appointment referring to "all disputes arising under the contract". The present case therefore does not depend solely on a reference to "claims". The question of law as drafted includes a further invitation to provide an answer to the question whether a mere reference to "claims" would be enough. Although the Commercial Court would wish to be of assistance to users wherever appropriate, I do not consider I should accept this further invitation in the present case as it is an invitation to provide an answer that is not necessary to the determination of the appeal.