Central Trading & Exports Ltd v. Fioralba Shipping Company (Kalisti S) [2014] EWHC 2397 (Comm)

When an arbitration award is appealed to the Court on the grounds that the Tribunal had no substantive jurisdiction, there is a complete rehearing of the issue of jurisdiction by the Court and not just a review of the arbitrators’ decision. This means that the Court effectively starts again and decides the jurisdictional issue for itself and does not have to give any particular weight to the arbitrators’ reasoning.

In general, a party is also entitled to put new evidence before the Court that was not put to the arbitrators. As this recent appeal decision in a shipping dispute demonstrates, however, this is not an unqualified right and the Court may, as part of its case management powers, refuse to allow a party to produce documents selectively where to do so would prejudice the other party or where the result would be a breach of the Court’s rules requiring evidence to be presented in a fair manner. Parties arbitrating their disputes should, therefore, keep in mind the importance of complying with the Tribunal’s orders for disclosure and presenting all relevant evidence to the Tribunal at the appropriate time. A failure to do so may result in such evidence being shut out in the event of a subsequent challenge to the Tribunal’s jurisdiction.

The background facts

The underlying claim was for loss and damage to a cargo of bagged rice shipped from Thailand to Nigeria. The Defendant ship-owners disputed the Claimant cargo interests’ title to sue under the bills of lading (which provided for English law and London arbitration). A LMAA tribunal decided as a preliminary issue that the cargo interests had not become holders of the bills of lading and so did not have title to sue. The cargo interests appealed this award to the Court on jurisdictional grounds. A hearing to consider the substantive issue of title to sue is scheduled for October 2014. In the meantime, the Court was asked to consider whether the cargo interests are entitled to submit new evidence in support of their title to sue claim which was not put to the Tribunal.

The Commercial Court decision

The Court stated that, in a challenge to the arbitrators’ jurisdiction, a party can in general present new evidence that was not before the arbitrators and that the Court will not normally exclude evidence that is relevant and admissible simply because it may cause prejudice to the other party. The Court would, however, as part of its case management powers, exercise control over the disclosure of documents and the service of evidence and would do so in accordance with the interests of justice and fairness.

In this case, the new evidence on which the Claimant sought to rely was available to it in the arbitration. Furthermore, the Tribunal had made an order for full disclosure with which the Claimant had deliberately failed to comply. The Claimant had apparently taken the view that it had presented sufficient evidence to satisfy its burden of proof in the arbitration and considered that the Defendant had been pressing the Tribunal to order it to produce evidence on irrelevant matters. Or, as the Court put it, “it thought it had done enough to win and was confident of victory” – a mis-judgment, as it turned out. Furthermore, the new evidence the Claimant now sought to present still did not represent full disclosure on title to sue and basic documents (such as the sale contract for the cargo and documents relating to the letter of credit to pay for the goods) remained outstanding.

The Court concluded that it would be unjust to allow the Claimant to rely on a selection of documents without giving full disclosure, which it had been ordered to give in the arbitration. This did not mean the Court was simply following the arbitrators’ decision that full disclosure should be given; rather, it had decided for itself that this was not a case where selective disclosure was appropriate. While the new and selected documents might make all the difference to the outcome on the title to sue issue, the Defendant could suffer an irremediable prejudice as a result of allowing them in. The Claimant was not therefore allowed to present the new evidence and the hearing of the title to sue issue would be limited to the material that was before the arbitrators.

Comment

This is a clear case of the Court refusing an appealing party “two bites at the cherry”. Arbitrating parties who think they may subsequently wish to challenge the tribunal’s jurisdiction should consider carefully the risks of giving limited or selected disclosure in the arbitration, where this is not done by mutual consent and with the blessing of the tribunal.