IN THE MATTER OF THE ARBITRATION ACT 1998
AND
IN THE MATTER OF AN ARBITRATION
BETWEEN-
Claimants
(Owners)
- and -
Respondents
(Charterers)
"………………………….. " Charterparty dated 5th February 2002
INTERIM FINAL ARBITRATION AWARD
WHEREAS:
1. The Claimants are the owners (hereinafter referred to as "the Owners") of the motor vessel "……………………. " It was their case that, by a charterparty
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on the basis of the "GENCON" form evidenced by a fixture recap dated 5th February 2002, they had chartered their motor vessel "………………………… " to the Respondents as charterers (hereinafter referred to as "the Charterers") for the carriage of minimum 4,800 metric tons (up to full and complete cargo capacity of the vessel in the Charterers' option) steel products from Astrakhan (Russian Federation) to Bandar Anzali or Bandar Nowshahr (Islamic Republic of Iran) on terms and conditions more particularly set out in the said fixture recap. The Charterers denied that they had ever entered into any written agreement or any written arbitration agreement although they accepted that their cargo was loaded onto the "………………………." at Astrakhan for discharge at Bandar Anzali or Bandar Nowshahr.
The Owners said that the fixture recap message provided for arbitration in London pursuant to the L.M.A.A. Small Claims Procedure and for English law to apply. They further said that Clause 33 of the charterparty drawn up by the Owners' managers in accordance with the concluded fixture as (evidenced by the fixture recap) provided:
"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 or any statutory modification or re-enactment thereof save to the extent necessary to give effect to the provisions of this Clause.
The arbitration shall be concluded in accordance with the London Maritime Arbitrators Association (the "L.M.A.A.") Small Claims Procedure current at the time when the arbitration proceedings are commenced."
Disputes, hereinafter more particularly defined, arose between the parties for the determination of which the Owners applied to the Honorary Secretary of the London Maritime Arbitrators Association (the "L.M.A.A.") for the appointment of a sole arbitrator by the President, pursuant to Paragraph 2(b) of the L.M.A.A.
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Small Claims Procedure 2002. In response to that application the President appointed me, Patrick O'Donovan, of Churcham House, 1 Bridgeman Road, Teddington, Middlesex, TW11 9AJ, to be the sole arbitrator under the L.M.A.A. Small Claims Procedure. I am a Member of the Baltic Exchange in the City of London and a Full Member of the London Maritime Arbitrators Association.
Pursuant to the L.M.A.A. Small Claims Procedure and/or the provisions of the fixture note and charterparty referred to in Recital 2 above, the seat of the arbitration is in England.
The disputes referred to me concerned the Owners' claim for a balance of demurrage in the sum of US$6,038.13, together with various ancillary expenses in the amount of £1,350 and US$1,650 (claimed as US$3,745.54), being expenses and disbursements incurred as a result (it was said) of the Charterers' unlawful refusal to sign the charterparty. They also asked me to make an interim declaratory award confirming that the charterparty drawn up by their managers (……………………………) and presented to the Charterers for signature is the charterparty governing the contractual relations between the parties.
The Charterers denied liability for the sum claimed and denied that they were in breach of contract. They raised a preliminary point as to my jurisdiction on grounds set out more fully below. As indicated above, they denied that the fixture recap evidenced the terms of the agreement and they contested the validity of the alleged charterparty agreement dated 5th February 2002, asserting that the parties had never entered into any written agreement and that the charterparty was drawn up only after the cargo was delivered to the receivers. They said that they were at all times in full compliance with their duties to ship and deliver goods to the receiver and were at no time in breach of any contractual duties towards the Claimants "since such duties never existed", They said that they had already paid to the Owners the sum of US$26,000 in full and final settlement of the Owners' demurrage claim. They denied that they were in breach of any agreement or of any duty owed to the Owners (and thus
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denied liability for the miscellaneous expenses and disbursements claimed). They said that they were entitled to refuse to sign a back-dated charterparty agreement that they said did not conform with the original terms of the performance under the initial oral negotiations.
The reference proceeded as envisaged under the L.M.A.A. Small Claims Procedure by the exchange of written submissions between …………………………………………... in Istanbul and the Charterers' lawyers in Nicosia, ……………. Neither party requested an oral hearing. Following the exchange of submissions, I proceeded to consider the matter on the basis stated.
Preliminary objection as to jurisdiction
The Charterers contested my jurisdiction on the basis that both parties are corporate bodies duly incorporated in Cyprus. They said that the parties had never entered into any written agreement or any written arbitration agreement and had never signed any agreements or documents which included an arbitration clause. They said that they had never expressed their desire to have disputes referred to arbitration in London and that on the contrary they (the Charterers) had stated their intention to the Claimants to have any claims referred to the Cyprus courts for resolution in accordance with Cypriot law.
The first point to make is that, as a matter of English law, even if a party asserts that an arbitration tribunal has no jurisdiction, that tribunal is nevertheless competent to rule on its own jurisdiction. What is known in some jurisdictions as "kompetenz kompetenz'' is enshrined in Section 30(1) of the Arbitration Act (1996) in the following terms.
"30. - (1) Unless otherwise agreed by the parties, the arbitral tribunal may rule on its own substantive jurisdiction, that is, as to-
(a) whether there is a valid arbitration agreement,
(b) whether the tribunal is properly constituted, and
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(c) what matters have been submitted to arbitration in accordance with the arbitration agreement."
In fact, this was not disputed by the Charterers who, in instructing lawyers and providing written submissions on the matter, clearly envisaged that I would provide a binding determination as to my own jurisdiction.
10. The question of whether or not there is a valid arbitration agreement is
intimately bound up with the question of whether (as the Owners asserted and
the Charterers denied) the terms of the contract between the parties was
evidenced by the fixture recap and the charterparty drawn up by the Owners'
managers and it is to that question that I now turn.
The terms of the contract
11. It was the Owners' case that the contract was concluded through a chain of brokers consisting of …………………………… of Samara,…………………….. of Istanbul and of Vienna. The Charterers expressly denied this although elsewhere in their submissions they accepted that ……………………… were their brokers and accepted that negotiations for the carriage of the steel product were conducted between Bertling and the Owners. The precise chain of communication and the precise status of any intermediate brokers (other than the Charterers' own brokers, Bertling) is irrelevant in the context of the present dispute.
12. The Owners said that the negotiations leading to the formation of the contract were conducted through internet correspondence and that the results of the negotiation were documented in (and evidenced by) a fixture recap e-mail prepared by Caspian International on behalf of the Charterers. That recap (with some minor amendments) was (the Owners said) approved by them and the vessel was then firmly fixed for the voyage in question, as evidenced by an e-mail fixture recap from Caspian International stating:
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UPLSD TO CONFIRM HAVING FIXED CLEAN AS PER FOLLOWING RECAPITULATION OF THE TERMS AND CONDITIONS OF FIXTURE...*
13. The Owners further said that on or about 15th May 2002 the Charterers' brokers, Bertling, drafted a charterparty which the Owners found contained some small mistakes - although, with the exception of those mistakes, it did correspond to the fixture recap. There were no discrepancies in the arbitration clause. They said that on 10th March 2003 their managers sent to Bertling a draft of the charterparty which was prepared in line with the concluded fixture. The Owners said that the Charterers refused to confirm or comment on the draft but had simply replied that they were waiting for their lawyer's opinion. In fact, it duly became apparent that the Charterers did not intend to (and would not) sign the charterparty.
14. As indicated above, the Charterers denied the Owners' account of the fixture negotiations and the status of (i) the fixture recap e-mail and (ii) the charterparty drawn up by the Owners' managers. They said that they had never signed the alleged charterparty agreement dated 5th February 2002.
15. Their case was that around the beginning of February 2002 they were urgently
searching for a vessel for a voyage to Iran and that at about that time they were
orally notified by their brokers, Bertling, that a vessel was available at the port
of loading. They said that following a short oral negotiation between Bertling
and the Owners, their cargo was loaded on the "M/v…………………..". They
said that they never came into contact either in writing or orally with the Owners
and that no charterparty agreement or any other kind of agreement had ever
been presented to them. They asserted they had never received the e-mail recap
dated 5th February 2002. It was their case that the alleged charterparty was
only drafted after the cargo was delivered and the receivers had commenced
litigation proceedings against the Owners. They said that, when it was sent to
them with instructions to sign, it was not even signed by the Owners. They said
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they were justified in refusing to sign a back-dated charterparty agreement that was not in conformance with "the original terms of performance under the initial oral negotiations between the [Owners] and ...... Bertling." They did not,
however, say what those "terms of performance" were.
16. It seemed to me that the Charterers' case was quite hopeless and flew in the face of normal shipping practice. As the Owners said, it is common chartering practice that, at the end of negotiations for the charter of a vessel, a document recording the terms of the agreement is drawn up, commonly referred to either as a "fixture recapitulation" or "fixture recap", which records the terms of the agreement between the parties, often (as here) by reference to a pro forma charterparty. The Charterers' case that the negotiations were all conducted orally and the outcome never reduced to writing was simply incredible. The Charterers accepted that demurrage was due under the contract (whatever that was) and that the Owners were entitled to exercise a lien. It is inconceivable that these complex provisions were simply confirmed during a telephone conversation between Bertling and the Owners. Countless other provisions would need to be dealt with and agreed during the negotiations that were not relevant in the context of this dispute and it seemed to me quite absurd to suggest that those terms would never have been reduced to writing.
17. As I indicated above, the Charterers were not able (nor did they attempt) to say to what extent the fixture recap e-mail did not accord with the terms agreed. They did not point to any other documents evidencing the terms of the contract. Indeed, their case was wholly inconsistent since on the one hand they argued that there was no contract (the effect of their denial that they "were at no time in breach of any contractual duties towards the [Owners] since such duties never existed"); on the other hand they accepted that there was a contract (as they had to, because they shipped cargo on board the vessel) but maintained that it was concluded wholly orally.
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18. In the absence of any persuasive (or indeed any) evidence as to what other terms the vessel might have been fixed on, I had no hesitation at all in concluding that the fixture recap e-mail enclosed at Annex 1 did indeed evidence the terms of the contract concluded between the parties. I was assisted in reaching that conclusion by the fact that the Charterers throughout performed entirely in accordance with the terms of the recap: they loaded the vessel, paid the freight, ordered the exercise of a lien on the cargo and paid demurrage in accordance with its terms. They never objected at that time to the existence of a charterparty or to any of the terms asserted by the Owners.
It was not disputed that Bertling had authority to negotiate on the Owners' behalf and, as indicated above, the fact that there were a number of intermediate brokers was irrelevant. I should stress that Bertling (the Charterers' own brokers) drew up a charterparty which, whilst it contained some small mistakes, was based entirely on (and was wholly consistent with) the fixture recap of 5th February 2002.
20. Much play was made by the Charterers of the fact that the charterparty drawn up by the Owners' broker was never signed by either party and that it was drawn up some time after the event. The first point to make is that, as a matter of English law, it is not a requirement for a valid charterparty that it be signed by either or both parties. All that matters is that it reflects the agreement concluded between the parties (as Annex 2 did). Similarly, as a matter of chartering practice it is not at all uncommon for charterparties to be drawn up after the event - indeed, it would be virtually impossible for a typed-up charterparty to be brought into existence simultaneously with the conclusion of the agreement between the parties. What happened here is quite normal.