Difference between revisions of "ARI v WXJ"

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Revision as of 10:45, 15 July 2022

DMC/Arbn/22/03

England

ARI v WXJ

English Commercial Court: Foxton J: [2022] EWHC 1543 (Comm): 20 June 2022

Judgment Available on BAILII @ https://www.bailii.org/ew/cases/EWHC/Comm/2022/1543.html

James Leabeater QC and Gideon Shirazi (instructed by Ince Gordon Dadds LLP) for ARI

Paul Key QC and Mark Tushingham (instructed by Addleshaw Goddard LLP) for WXJ

ARBITRATION: LMAA TERMS: ARBITRATION COMMENCED BY FIRST PARTY GIVING NOTICE NAMING ITS APPOINTED ARBITRATOR (“GGG”): NOTICE GAVE SECOND PARTY 14 DAYS TO APPOINT AND GIVE NOTICE OF ITS ARBITRATOR FAILING WHICH GGG WOULD BE APPOINTED AS SOLE ARBITRATOR: SECOND PARTY RECEIVED CONFIRMATION OF WILLINGNESS OF ARBITRATOR (“JJJ”) TO ACCEPT APPOINTMENT, WITHOUT AGREEMENT ON TERMS OR REMUNERATION, AND GAVE NOTICE TO FIRST PARTY, WITH COPIES TO GGG AND JJJ, STATING JJJ HAD BEEN APPOINTED AS ITS ARBITRATOR: WHETHER APPOINTMENT OF JJJ AND NOTICE THEREOF WAS VALID TO CONSTITUTE TRIBUNAL WITHIN 14-DAY TIME LIMIT

Summary

The High Court, in dismissing ARI’s application for summary judgment, held that WXJ had validly appointed its own arbitrator, JJJ, within the 14 days’ deadline required by the BARECON form arbitration agreement clause and given notice thereof. The High Court held that it was sufficient, as was satisfied on the facts of the case, that there had been a clear and unconditional communication of acceptance of the appointment by the arbitrator which was then notified to the other party, or otherwise communication of an unconditional willingness by the arbitrator to accept the appointment, which the appointing party then acted upon by communicating the appointment to that arbitrator and the other party.


Case note contributed by Jim Leighton, LLM (Maritime Law), LLB (Hons), BSc (Hons), Solicitor Advocate of England & Wales, IMI Qualified Mediator, LMAA Supporting Member and International Contributor to DMC’s Case Notes

Background

The Claimant (ARI) and the Respondent (WXJ) had entered into a number of BARECON charterparties for various vessels, which included at clause 30(a) an arbitration agreement (fn.1).

A dispute having arisen between the parties, on 22 December 2021, ARI sent WXJ a notice stating that it had appointed GGG as an arbitrator and further stating that if WXJ did not appoint its own arbitrator and give notice that it had done so within 14 days, it would appoint GGG as sole arbitrator.

Following exchanges on 3 to 5 January 2022 between WXJ and JJJ, on 5 January 2022 (the last day of the 14-day period triggered by ARI's notice of 22 December 2021), WXJ sent ARI a notice, with copies to GGG and JJJ, giving notice that it had appointed JJJ as arbitrator in connection with the arbitration commenced by ARI’s notice of 22 December 2021.

It later transpired, in correspondence between JJJ and GGG provided to the parties, once the dispute about JJJ's appointment had emerged, that JJJ had referred to the need to agree the terms of JJJ’s appointment and remuneration with WXJ's legal representatives. On 1 February 2022, JJJ said that JJJ would not be able to participate in the arbitration because the maximum rate of compensation fell significantly below the level of JJJ’s firm’s charge-out rates.

WXJ then sought to appoint a replacement arbitrator, and ARI sought to appoint GGG as sole arbitrator. This crystallised the dispute as to whether JJJ had in fact been appointed when WXJ sent its notice of 5 January 2022 to ARI. If JJJ had not been appointed by 5 January 2022, WXJ did not suggest the position had changed later. As a result, the issue between the parties turned on the interpretation of a few emails exchanged between WXJ and JJJ between 3 and 5 January 2022.

Judgment

The Judge outlined the facts (above), the arbitration agreement in the BARECON form charterparty (above), the context of the commencement of arbitration, appointment of arbitrators and the giving of notice thereof, and considered the submissions of the parties. He then turned to address the legal and the factual substance of ARI’s summary judgment application.

As to the legal requirements for a valid appointment of an arbitrator, the judge concluded that the better view was that the question for the court, when determining whether the arbitrator has accepted the appointment for the purposes of an arbitration agreement, such as clause 30 of the BARECON form, was whether there had been a clear and unconditional communication of acceptance of the appointment by the arbitrator which was then notified to the other party, or communication of an unconditional willingness by the arbitrator to accept the appointment, which the appointing party then acted upon by communicating the appointment to that arbitrator and the other party. He was not persuaded that any wider contractual analysis was necessary.

Turning to an analysis of the correspondence between WXJ and JJJ, the judge noted that, on 3 January 2022, WXJ’s legal representatives had enquired with JJJ about a possible appointment, to which JJJ responded to indicate JJJ was available for appointment subject to clearing conflicts. On 4 January 2022, WXJ’s legal representatives wrote back to JJJ indicating their intention to give JJJ’s contact details to ARI’s legal representatives, once JJJ confirmed conflicts were cleared. JJJ later confirmed that conflicts had been cleared, thereby removing the only condition ever imposed by JJJ to accepting an appointment. On 5 January 2022, WXJ’s legal representatives then wrote to ARI’s legal representatives, copying in JJJ and GGG, giving notice of JJJ’s appointment.

The judge further noted that subsequent communications indicated JJJ may have been proceeding, subjectively, on the basis that his/her appointment would not become effective unless and until terms of engagement were agreed and signed with WXJ. However, the judge held that neither JJJ’s subjective understanding, nor those subsequent communications, were of any relevance in circumstances where all of the requirements of a valid appointment for clause 30 purposes had been satisfied by 5 January 2022. Accordingly, the judge dismissed ARI’s application for summary judgment.

Comment

This judgment highlights that the English courts are disinclined to take an overly legalistic approach, by applying a strict contractual analysis, when determining whether an arbitrator has been validly appointed. The judge recognised that the arbitrator appointment process is often dealt with by commercial parties acting without the benefit of legal advice, which is a consideration to be kept in mind, and the courts should seek to facilitate, not thwart, such parties’ intentions.

Even when lawyers are involved in appointing an arbitrator for commercial parties, the judge noted the process frequently involves no more than the exchange of a small number of very brief communications, which essentially involve the party asking the arbitrator if he/she is willing to accept the appointment, the arbitrator confirming his/her willingness to do so, and the appointment then being notified to the other party, with the arbitrator copied in.

That is particularly the case in maritime arbitrations, such as those conducted under the rules of the LMAA. That rapid and informal process suits the needs of both parties to the arbitration. The judge also appreciated that the appointing party may well be under time pressures, and be unable to engage in any lengthy interactions with potential arbitrators prior to appointment. Equally, arbitrators would generally be keen to accept appointments, rather than risk them going elsewhere while they deliberate whether or not to accept and to negotiate terms.

As such, the judge considered that, unless the acceptance of an appointment is made subject to further terms to be agreed, such as the arbitrator’s fees, the fact that an appointer and an appointee had not so agreed beforehand, would not be sufficient to invalidate an appointment on the grounds that all essential terms had not been agreed. In any event, where fees are not expressly agreed at the time of appointment, the parties are free to agree them thereafter. Further, in conventional contractual terms, there would be an implied term that such fees would be reasonable, should the appointer and the appointee be unable to agree later, as reflected by section 28(1) of the Arbitration Act 1996.


Footnote 1: BARECON form charter clause 30(a) stated (judge’s emphasis added):-

“This Contract shall be governed by and construed in accordance with English law and any dispute arising out of or in connection with this Contract shall be referred to arbitration in London in accordance with the Arbitration Act 1996 …

The arbitration shall be conducted in accordance with the London Maritime Arbitrators Association (LMAA) Terms current at the time when the arbitration proceedings are commenced.

The reference shall be to three arbitrators. A party wishing to refer a dispute shall appoint its arbitrator and send notice of such appointment in writing to the other party requiring the other party to appoint in its own arbitrator within 14 calendar days of that notice and stating that it will appoint its arbitrator as sole arbitrator unless the other party appoints its own arbitrator and gives notice that it has done so within the 14 days specified. If the other party does not appoint its own arbitrator and give notice that it has done so within the 14 days specified, the party referring a dispute to arbitration may, without the requirement of any further prior notice to the other party, appoint its arbitrator as sole arbitrator and shall advise the other party accordingly. The award of a sole arbitrator shall be binding on both parties as if he had been appointed by agreement.”