In June 2006 the US owner of the vessel Amanda C entered into a time charter on an amended New York Produce Exchange 1946 form with Danish charterer Atlas Shipping A/S for a period of 12 to 15 months. The agreed rate of hire was $15,000 a day. The charterparty was subject to English law and contained the following dispute resolution clause (Clause 48):
"All disputes arising out of this contract which cannot be amicably resolved shall be referred to arbitration in London. Unless the parties of this contract agree upon a sole arbitrator the reference shall be for 2 (two) arbitrators, one to be appointed by each of the parties. The arbitrators shall be commercial men, and the umpire if appointed, in the event of disagreement between two arbitrators, shall be a legal man, and shall be members of the London Maritime Arbitrators' Association."
The vessel was not redelivered in time in accordance with the charterparty and the owner claimed damages in respect of the excess period for which the charterer retained the use of the vessel beyond the last date for redelivery, plus unpaid hire. Denying that any claim was due to the owner, Atlas alleged that it had a counterclaim that exceeded the claim raised by the owner. However, on December 18 2008, before any legal proceedings were brought, Atlas was declared bankrupt by a bankruptcy decree rendered by the Copenhagen Maritime and Commercial Court's bankruptcy division.
On April 25 2012 the owner brought arbitration proceedings against Atlas Shipping in London in accordance with Clause 48 of the charterparty. However, the receiver in bankruptcy refused to appoint an arbitrator, instead submitting to the arbitrator appointed by the owner that the bankruptcy division of the Maritime and Commercial Court had exclusive jurisdiction regarding claims filed against a bankruptcy estate domiciled in Copenhagen. The receiver further submitted that Atlas Shipping could not be made a respondent in an arbitration initiated after the commencement of bankruptcy proceedings.
One week after initiating the arbitration proceedings, the owner brought proceedings before the Danish bankruptcy court, and submitted that the arbitrator appointed was competent to decide the owner's claim and the Danish proceedings should thus recognise the arbitration proceedings. In support, the owner claimed that the dispute brought before the arbitrator was not about any issues on property law, relationships to third parties, liquidation adjustment or any other issues related to liquidation.
The bankruptcy court found in favour of the owner and confirmed that the arbitration clause in the charterparty was usual and in compliance with standard practice. Furthermore, the court reasoned that significant importance should be deemed to have been attached to the arbitration clause by Atlas and the owner when the charterparty was entered into.
The court further reasoned that the dispute that had been referred to arbitration involved only the question of whether the owner had a valid claim against Atlas on which dividend could be claimed. Consequently, the dispute was entirely unaffected by the liquidation of Atlas Shipping and the legal issues of the dispute should be settled without application of the law on liquidation.
The bankruptcy court's decision was confirmed by the High Court of Appeal.(1)
The decision clarifies the debated issue under Danish law of whether a bankruptcy estate is bound by an arbitration agreement entered into before the insolvency in circumstances where the arbitration proceedings are brought subsequent to the declaration of bankruptcy.
For further information of this topic please contact Jesper Windahl at Birch Windahl by telephone (+45 35 25 38 00), fax (+45 35 25 38 01) or email ([email protected]). The Birch Windahl website can be accessed at www.birchwindahl.dk.
(1) High Court (Eastern Division), April 25 2013, Case 16 afd B-890-13.