Micoperi SrL (Micoperi) v. The Shipowners' Mutual Protection & Indemnity Association (Luxembourg) (the Club) concerned an appeal by Micoperi under section 69 of the Arbitration Act 1996 (AA) that the arbitrators in their Partial Final Award in an arbitration between Micoperi and the Club had made an error of law.
Following an incident in October 2005 in the Black Sea, a third party, Toreador Turkey Ltd (Toreador), brought a claim against Micoperi. The Club, of which Micoperi was a member, confirmed in July 2006 that Micoperi was covered by the Club for Toreador's claim, such that the Club would, in accordance with the Club Rules, provide security (in the form of a Letter of Credit (LOC)) for Micoperi in respect of Toreador's claim. However, in August 2006, the Club concluded that the claim was not in fact covered. Despite the Club reversing its position, it agreed to continue providing the LOC under a reservation of rights. Micoperi and Toreador subsequently entered into mediation as a result of which Micoperi agreed to pay Toreador $5.8m in settlement of Toreador's claim. Pursuant to the LOC provided by the Club, that amount was paid by the Club to Toreador. The Club then sought repayment of the settlement funds from Micoperi.
In an arbitration between the parties, Micoperi argued that the Club had waived its right to contend or the Club was estopped from (a) denying that Toreador's claim against Micoperi was covered and (b) claiming reimbursement from Micoperi of the $5.8m the Club paid to Toreador under the LOC. The arbitrators found that the relevant questions were: (i) whether the Club had made an unequivocal representation that it did not intend to enforce its legal rights; and (ii) whether Micoperi acted in reliance on that representation with the effect that it would be inequitable for the Club to enforce its rights. The arbitrators found that there had been an unequivocal representation by the Club's confirmation of cover in July 2006. However, they found that Micoperi had not relied at all on that representation and therefore found that there was no waiver or estoppel.
The Court noted that these questions were the correct legal principles to be applied. However, Micoperi argued, under section 69 AA, that the arbitrators had made an error of law in requiring Micoperi to rely entirely on the representation by the Club, rather than merely in part, and in requiring that it act to its detriment. The Court disagreed with Micoperi. The arbitrators had not made these errors as they had found that there had been no reliance at all by Micoperi, let alone in part, and the arbitrators had placed no requirement on Micoperi that it show that it acted to its detriment. These alleged errors were not apparent from the Award and Micoperi's appeal was dismissed.
This case is yet another example of the difficulties parties face in appealing arbitration awards on the grounds of an error of law.