Rajasingam Gothandapani August 31 2022 Validity of arbitration agreement in bunkering dispute Shearn Delamore & Co | Shipping & Transport - Malaysia Rajasingam Gothandapani Shipping & Transport FactsDecisionFactsThe plaintiff was in the bunkering business. The defendant issued three purchase orders (POs) to the plaintiff for a supply of bunkers to three separate vessels. The plaintiff then issued bunker confirmations (BCs) to the defendant to confirm the purchase. Once the bunkers were delivered and a delivery order (DO) was issued by the plaintiff, the plaintiff then issued invoices to the defendant. The plaintiff issued a claim based on the unpaid invoices owed to the plaintiff by the defendant for the supplied bunkers.After entering an appearance to the action and without filing its defence, the defendant applied for stay of court proceedings pending arbitration, pursuant to an arbitration agreement that the defendant contended existed between the parties. The plaintiff claimed that there was no arbitration agreement between them for any stay to be ordered.DecisionThe defendant's application for stay was allowed.(1)Does an arbitration agreement exist?The defendant submitted that the POs contained an arbitration agreement. The POs contained a term that stated that, upon acceptance of the POs, the supplier (namely, the plaintiff) agreed to the standard terms and conditions of the defendant (the defendant's T&Cs). The arbitration clause formed part of the defendant's T&Cs.Next, the defendant pointed out that the plaintiff's BC referred to the plaintiff's general terms and conditions (the plaintiff's T&Cs), which contained a section entitled "Law and Arbitration". However, there was no express mention of arbitration proceedings in the plaintiff's T&Cs.The plaintiff submitted that the word "arbitration" was only in the heading of the plaintiff's T&Cs, and was not mentioned in the clauses of the plaintiff's T&Cs. The heading only served as a brief guide to the content of the section and for reference and identification purposes only.The court rejected the plaintiff's submission that arbitration was not a clause in the plaintiff's T&Cs. If arbitration was not an option, the heading would have just been "Law and Dispute Resolution" or just "Law". Having chosen the term "arbitration", there must have been some intent and meaning.Were the defendant's T&Cs superseded by the plaintiff's T&Cs?The defendant's stance was that, having accepted the POs by the act of delivering the bunker as ordered, the plaintiff had expressly agreed to the defendant's T&Cs.The plaintiff submitted that the bunkering was concluded upon the defendant's acceptance of the BCs, and not at the stage when the POs were issued by the defendant to the plaintiff. In short, the plaintiff claimed that the defendant's T&Cs in the POs were superseded by the plaintiff's T&Cs in the BCs.The court noted that the plaintiff had not pleaded that the bunkering was only concluded when the defendant had accepted the BCs in its statement of claim.The plaintiff also did not plead that the defendant's T&Cs were superseded. By contending that the defendant's T&Cs were superseded, it would mean that at some point in time, the plaintiff had agreed and accepted that the defendant's T&Cs were operative and binding. This was a tacit recognition by the plaintiff that it had accepted the defendant's T&Cs when it accepted each PO.Next, if the plaintiff had accepted the POs issued by the defendant, it meant that the plaintiff agreed to the defendant's T&Cs. The defendant's T&Cs formed part and parcel of each PO, as each of the defendant's T&Cs bore the related PO number. This can be contrasted with the plaintiff's T&Cs, where the plaintiff's BCs would require the defendant and other buyers to view the plaintiff's T&Cs at a given web address. This meant that the plaintiff's T&Cs were not part and parcel of each BC.Had the arbitration agreement been rendered null and void?The plaintiff submitted that as the clauses in the plaintiff's T&Cs provide that the plaintiff was entitled to commence any action (court proceedings or arbitration) against the defendant for the recovery of any outstanding bunkering payments, and the plaintiff had invoked that right by commencing this court action, the plaintiff's right to arbitrate under the plaintiff's T&Cs had been rendered null, void or inoperative under section 10(1) of the Arbitration Act 2005.The court held that, in determining whether the arbitration agreement was null and void, the relevant provisions in the Contracts Act 1950 would have to be considered, not the plaintiff's act in relation to that arbitration agreement. The plaintiff could not attempt to evade the arbitration by filing a civil suit and arguing that the arbitration agreement had thus been rendered null and void.For further information on this topic please contact Rajasingam Gothandapani at Shearn Delamore & Co by telephone (+60 3 2027 2911) or email ([email protected]). The Shearn Delamore & Co website can be accessed at www.shearndelamore.com.Endnotes(1) Cessnet Sdn Bhd v Sapura Offshore Sdn Bhd  MLJU 489.