Exfin Shipping v. Tolani Shipping

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Exfin Shipping (India) Ltd Mumbai v Tolani Shipping Co Ltd Mumbai
English Commercial Court: Langley J: [2006] EWHC (Comm): 17 May 2006

Ravi Aswani (instructed by DLA Piper Rudnick Gray Cary) for the Applicant/Respondent in Arbitration
Tom Whitehead (instructed by Rayfield Mills) for the Respondent/Claimant in Arbitration

For the purpose of establishing jurisdiction to hear a claim in arbitration – pursuant to an arbitration clause reading "Any dispute under this charterparty to be referred to arbitration in London" – there is a "dispute" where one party refuses to pay a claim in accordance with the terms of the contract, even though the party refusing to pay admits its liability.

The "Halki" [1998] 1 Lloyd’s Rep 465 (CA), applied. Wealands v CLC Contractors [1999] 2 Lloyd’s Rep 739 (CA), distinguished

DMC Category Rating: Confirmed

This case note was prepared by Jim Leighton, BSc (Hons) (University of Plymouth), LLM (Maritime Law) (University of Southampton) and Claims Consultant

Under section 67(1) of the Arbitration Act 1996,1 the applicant-charterers ("Exfin") sought an order setting aside an arbitration award made in favour of the respondent-shipowners ("Tolani"). The London arbitration award held that the claim of Tolani for US$130,000 demurrage succeeded and adjudged that Exfin should immediately pay that sum, plus interest until payment.

The essential facts were not in issue. Following discharge of the cargo Tolani sent Exfin a debit note for the demurrage. The charterparty provided that demurrage was to be "settled latest within 30 days completion of discharge". When Exfin failed to pay by the due date, Tolani threatened action if payment was not made. Exfin admitted that Tolani was entitled to the sum due and proposed to pay the sum in seven to nine months. Tolani rejected the payment proposal and gave Exfin notice of the appointment of an arbitrator.

The only issue before the arbitrator (and now the court) was whether there was "any dispute" between the parties sufficient to give jurisdiction to an arbitrator to decide it pursuant to the arbitration clause in the charterparty. This clause provided: "This contract is governed by English law … Any dispute under this charterparty to be referred to arbitration in London…"

Exfin submitted that there was no dispute because it had admitted its liability. Tolani submitted that, although Exfin had admitted its liability, its refusal to pay nevertheless amounted to a "dispute".

According to the judge, the proper construction of references in arbitration clauses to expressions such as "any dispute" had been a fruitful source of debate over the years. However, it was now clear, following the enactment of the Arbitration Act 1996, and the majority decision of the Court of Appeal in The "Halki" [1998] 1 Lloyd’s Rep 465, that the issue was to be approached simply as one of construction of the relevant arbitration clause in its context and in the context of the facts of the particular case.

"Commercial considerations", said the judge, "which these parties must be taken to have had in mind, point to only one answer." If a valid award were not available in the present circumstances, it must follow that a court judgment would be required to assist enforcement. The parties here differed on whether the English or Indian courts would be the proper forum in which to seek such a judgment. On Exfin’s approach, admitted but unsatisfied claims, on the one hand, and defended claims on the other, under the same contract, would be dealt with by different tribunals. In the case of any doubt this would force claimants to take both routes and would compound the risks of limitation periods expiring. There would also be questions as to whether a later admission would deprive the arbitrator of jurisdiction and whether any admission would be binding in court proceedings. The judge also noted that it was said to be easier to enforce an award rather than a judgment against an incorporated company in India, which might have been a reason for the parties choosing arbitration.

As a consequence, the judge agreed with the arbitrator, who had held that under the circumstances there was a dispute under the terms of the charterparty. The judge stated: "If one party says you must pay now and the other party refuses to do so they are in dispute". The judge believed that no deeper analysis was required. There was sufficient authority (if needed) to support the conclusion: The "Halki" [1998] 1 Lloyd’s Rep 49, affirmed [1998] 1 Lloyd’s Rep 465 (CA), pp. 478 and 484, and Glencore v Argos [1999] 2 Lloyd’s Rep 410 (CA), paras. [33]-[39]; Wealands v CLC Contractors [1999] 2 Lloyd’s Rep 739 (CA), p. 745, was distinguishable; payment or non-payment was not in issue in that case.

The judge therefore held that the application failed. He described it as "wholly unmeritorious" and awarded Tolani its costs on an indemnity basis.

"67. - (1) A party to arbitral proceedings may (upon notice to the other parties and to the tribunal) apply to the court
(a) challenging any award of the arbitral tribunal as to its substantive jurisdiction; or
(b) for an order declaring an award made by the tribunal on the merits to be of no effect, in whole or in part, because the tribunal did not have substantive jurisdiction.
A party may lose the right to object (see section 73) and the right to apply is subject to the restrictions in section 70(2) and (3)."

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