Starlight Shipping v. Tai Ping Insurance
DMC Category Rating: Confirmed
The Chinese insurers, Tai Ping, commenced proceedings against Starlight, Overseas and Transfield in the Wuhan Maritime Court in China. The insurers alleged that these three parties were jointly liable for loss of the cargo, in respect of which Tai Ping had indemnified International in the sum of US$5.25 million. Starlight and Overseas had challenged the jurisdiction of the Chinese court. Security had been obtained in the Chinese proceedings in the sum of over US$4 million in respect of frozen freight payments under the head charter and sub-charter. Tai Ping and International had also commenced arbitration proceedings in London against Starlight, under reserve as to jurisdiction.
Starlight and Overseas submitted that the Chinese proceedings had been commenced in breach of the arbitration clause contained in the bill of lading and that there was no good reason why an anti-suit injunction should not be granted. The respondents maintained that the arbitration clause in the bill was ineffective as a matter of Chinese law and that the Chinese court would not recognize any award of the arbitrators or any order of the English court.
It was also clear, as a matter of English law, that the insurers were similarly bound by the arbitration clause in the bill of lading, on the authority of The "Jay Bola"  2 Lloyd’s Rep 279, a decision of the Court of Appeal. The fact that the insurers in this case said that they were not bound by the arbitration clause as a matter of Chinese law was irrelevant, because "because the cargo claim is one which gives rise to a dispute "arising under the contract" and was therefore arbitrable.
The inter-relationship between s.37 Supreme Court Act 1981 and
s.44 Arbitration Act 1996
In the first place, the arbitrators did not have power to grant an interim injunction. They could, therefore, only issue an award. Secondly, the court had power under s.44 to grant an interim injunction if the case were "one of urgency", "for the purpose of preserving assets". On the authority of the Court of Appeal decision in Cetelem SA v. Roust Holdings Limited  2 Lloyd’s Rep 494, the contractual right to have disputes referred to arbitration was an asset, as it was a chose in action.
As regards the question of urgency, the court could act under section 44(3) but only – by reason of the terms of section 44(5) - if, or to the extent that, the arbitral tribunal had no power or was unable for the time being to act effectively. The question thus arose as to whether or not the arbitral tribunal could, in the time before any decision of theWuhan Court was issued, make a final (as opposed to an interim) award against the cargo owners and the insurers, who were party to the arbitration, restraining them from pursuing the Chinese proceedings.
After comparing the time by which the arbitrators could be expected to produce such an award and that by which the Chinese Court would rule on the jurisdiction issue, the judge concluded that the case was indeed one of urgency. He held, in consequence, that the arbitral tribunal was unable for the time being to act effectively, so that the requirements of section 44(5) were also met. In these circumstances, the court would issue an injunction, to cover the position up to such time when the arbitration tribunal could itself determine this matter and make a final award in relation to the restraining orders sought – provided always that the discretionary requirements of s.37 were satisfied.
The judge concluded that these requirements were satisfied – "I find every reason for making [the order sought by the owners] and no strong reason against it", subject to the condition that the owners provided the respondents with the same security as was available to them in China, as and when that security was released.
The position of the Managers
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