In a prime example of pro-arbitration pragmatism, the High Court has granted(1) an application under Section 78 of the Arbitration Act 1996 to extend the time limit within which a party can apply to the tribunal to correct an ambiguity regarding the identity of a claimant, pursuant to Article 27 of the LCIA Rules 1998.
The defendant agreed to buy a large amount of coking coal. The four sellers acted in a joint venture, consisting of the three claimants and another company. The other company was either the fourth claimant or another.
The agreement between the buyer and the sellers was known as the 'Oaky contract' and was signed "for and on behalf of the Seller" by Xstrata Queensland Pty Limited and dated August 15 2008. The Oaky contract described the seller as:
"Xstrata Coal Queensland Pty Limited (ABN 69098156702) as agent for the Oaky Creek Joint Venturers (being Sumisho Coal Australia Pty Limited, Xstrata Coal Queensland Pty Ltd, Itochu Coal Resources Australia Pty Limited and ICRA NCA Pty Limited)."
A dispute arose under the Oaky contract and was referred to arbitration in London. The tribunal issued an award requiring the buyer to pay to the claimants $27,846,000 as well as interest and costs. Paragraph 109 of the award stated: "The Oaky Contract defines the 'Seller' XCQ 'as agent for the Oaky Creek Joint Venturers', which jointly comprises all four individual claimants."
However, a problem arose as a result of a separate agreement dated December 31 1997 (and restated as at March 1 2005), referred to as the 'Oaky Creek joint venture agreement'. Four companies confirmed that they had by the agreement "associated themselves in an unincorporated joint venture, known as the 'Oaky Creek Joint Venture'".
The fourth company identified in the Oaky Creek joint venture agreement was ICRA OC Pty Limited, not ICRA NCA Pty Limited (the company named as an Oaky Creek joint venturer under the Oaky contract).
The award incorrectly named ICRA OC Pty Limited as one of the joint claimants, rather than ICRA NCA Pty Limited. No reasons were provided by the tribunal as to why it treated ICRA OC Pty Ltd as a party to the arbitration, rather than ICRA NCA Pty Limited.
The buyer did not pay the award ordered by the tribunal.
All of the claimants applied to the Shenyang Intermediate People's Court in China (the buyer was incorporated in China and conducted trade there) for recognition and enforcement of the award under the 1958 New York Convention. The buyer successfully argued that the application for recognition and enforcement of the whole award should be refused on the basis that ICRA OC Pty Limited (the fourth claimant named in the award) was not a party to the Oaky contract and could not be entitled to any award in the arbitration.
The Shenyang Intermediate People's Court issued a decision on April 25 2014, stating that it:
"found that there is no contractual relationship between ICRA OC and the Respondent [the buyer], therefore, the arbitration agreement does not exist. Therefore, ICRA OC shall not be deemed as one of the claimants under the arbitration request submitted to LCIA (the tribunal)."
The claimants, including ICRA OC, sought to address the issue by requesting the tribunal to use its authority under Article 27 of the applicable LCIA Rules. Under Article 27, any application for a correction of the award must be made within 30 days of publication of the award. The claimants approached the tribunal on May 30 2014, having awaited the Shenyang ruling, but were informed by the LCIA that "while sympathetic to the claimants' position… absent agreement of the parties or an order from a competent court extending time for the application", the tribunal was "functus officio".
The Commercial Court was therefore presented with a request that it extend the deadline using its powers under Section 79 of the Arbitration Act. Section 79(1) of the act provides that "[u]nless the parties otherwise agree, the court may by order extend any time limit agreed by them in relation to any matter relating to the arbitral proceedings".
Section 79(4) explains that such extension may be made even after the time limit has expired. The court observed that, in practice, in almost all cases the time limit under Article 27 of the LCIA Rules would "expire before the outcome was known of a contested attempt under the New York Convention to obtain recognition and enforcement of an award in another country".
The court also considered Section 57 of the Arbitration Act, as this permits the arbitral tribunal to correct an award to remove any error arising from an accidental slip or omission or to clarify or remove any ambiguity. Section 57 was previously considered in Torch Offshore LLC v Cable Shipping Inc,(2) in which the court held that the act permitted a party to request reasons from the tribunal where none had previously been given.
The court in the present case considered that the "errors of a similar nature" described in Article 27(1) addressed materially the same issues as the "ambiguity" described in Section 57. It would therefore be appropriate for the tribunal to correct the error contained in the award. The court stated: "The absence of an explanation from the arbitral tribunal thus leaves uncertainty about the Award, and that impedes the arbitral process. Justice requires that that uncertainty be resolved."
The court also found that there had been no undue delay by the claimants in making the Section 79 application; they had acted reasonably in awaiting the outcome of the Chinese proceedings.
The decision demonstrates the court's relatively pro-arbitration stance and its willingness to work pragmatically to ensure the smooth operation of the arbitral process by ensuring that the process can correct itself wherever possible. The court has also clarified that it is not essential for parties to seek clarification before bringing enforcement proceedings to honour an award. While in some cases parties may not be equipped with sufficient information regarding the impact of an error before receiving a court's ruling on enforcement, in this case the fact that the tribunal awarded damages to a party that was not a party to the arbitration agreement perhaps was an issue that could have been addressed before enforcement.
For further information on this topic please contact Amelia Payne at RPC by telephone (+44 20 3060 6000) or email ([email protected]). The RPC website can be accessed at www.rpc.co.uk.
Endnotes
(1) Xstrata Coal Queensland Pty Ltd v Benxi Iron & Steel (Group) International Economic & Trading Co Ltd [2016] EWHC 2022 (Comm).
(2) [2004] EWHC 787.