In Bulk & Metal Transport (UK) LLP v VOC Bulk Ultra Handymax Pool LLC – Butterworths Law Direct 23.2.09 the Commercial Court considered what is necessary to satisfy the requirements of s 14 (4) Arbitration Act 1996, which provides: '(4) Where the arbitrator or arbitrators are to be appointed by the parties, arbitral proceedings are commenced in respect of a matter when one party serves on the other party or parties notice in writing requiring him or them to appoint an arbitrator or to agree to the appointment of an arbitrator in respect of that matter.'
In this case, when a dispute arose between the parties, the solicitors for the Owners sent the Charterers a message dated 2 November 2006 which stated that, unless the Charterers made a certain payment within seven days, they were instructed to commence arbitration pursuant to cl 45 of the charterparty. The message invited the Charterers, in the absence of a settlement, to agree on the appointment of a sole arbitrator, failing which, the Owners would appoint their own arbitrator.
The Owners' solicitors sent another message on 13 November which stated that as the requested payment had not been made, and as the Charterers had not agreed to the appointment of a sole arbitrator, the Owners would appoint an arbitrator.
The dispute went to the arbitration tribunal which held, inter alia, that the message from the Owners' solicitors had not commenced arbitration proceedings for the purposes of s 14(4) of the Arbitration Act 1996 with the effect that the Charterers were time-barred from advancing claims. The Charterers appealed on the time bar point.
The Commercial Court held that s. 14(4) of the Act had to be interpreted broadly and flexibly, concentrating on the substance not the form of the notice. The issue was not whether a message commenced an arbitration in some broad sense but whether one party had served a notice which required the other to appoint an arbitrator or to agree to the appointment of an arbitrator in respect of the matter.
In this case, the message of 2 November made it clear that, if payment was not received within seven days, the solicitors would commence an arbitration. It gave the opportunity explicitly envisaged by cl 45(b) of the charterparty for the parties to agree upon a single arbitrator and that, if that invitation was not accepted, then the Owners would appoint an arbitrator. The subsequent message of 13 November, which gave explicit notice of an arbitrator being appointed, had not prevented the earlier communication complying with s 14(4) of the Act. The appeal was therefore allowed.