Union Marine Classification Services LLC v The Government of the Union of Comoros

Factual and Procedural Background

The dispute arose from a commercial outsourcing contract (the "Agreement") dated 15 February 2007 between the Plaintiff ("UM") and the Defendant ("the Government"). Under the Agreement, the Plaintiff was authorised to perform maritime administration functions for Comoros, including vessel registration, and was obliged to pay the Government 50% of the income generated, subject to a guaranteed minimum monthly payment of US$11,000. A disagreement existed over the term and renewal provisions of the Agreement.

On 17 April 2012, the Government purported to terminate the Agreement, which the Plaintiff contested as wrongful. This dispute was referred to arbitration under the London Maritime Arbitrators Association (LMAA) rules, with Mr Harris appointed as sole arbitrator.

The arbitration addressed whether the Government validly terminated the Agreement and whether either party breached it, including disputes over payments. A substantive hearing was held in July 2014, after which the Arbitrator issued an award dated 22 July 2014 (the "original Award"). The Award dismissed both the Plaintiff’s claims and the Government’s counterclaims, concluding the Government was not entitled to terminate and that the Plaintiff had not suffered loss.

Following the Award, the Government applied for correction or clarification pursuant to LMAA terms and section 57(3) of the Arbitration Act 1996, specifically regarding the Government’s counterclaim for the US$11,000 minimum monthly payments and a claim for an account. The Arbitrator issued an Amended Award on 31 August 2014, correcting the original Award to find that the Plaintiff had breached the payment obligation but that the Government was not entitled to terminate; however, the Government was entitled to damages and an account.

The Plaintiff then applied to the court under section 67(1)(a) and/or (b) of the Arbitration Act 1996 to set aside or declare the Amended Award of no effect, contending that the Arbitrator was functus officio and had no jurisdiction to amend the Award as he did.

Legal Issues Presented

1. Whether the Arbitrator had substantive jurisdiction under section 57(3) of the Arbitration Act 1996 to issue the Amended Award correcting and adding to the original Award after becoming functus officio.
2. Whether the Plaintiff's application to set aside or declare the Amended Award of no effect under section 67(1)(a) and/or (b) of the Arbitration Act 1996 was properly brought and sustainable.
3. The scope of "claims dealt with" and "claims not dealt with" within the meaning of section 57(3)(b) of the Arbitration Act 1996 and whether the payment breach and account claims were dealt with in the original Award.
4. The availability and adequacy of remedies under sections 67 and 68 of the Arbitration Act 1996 for challenges to an arbitrator’s correction of an award.

Arguments of the Parties

Appellant's (Plaintiff's) Arguments

• Under section 58(1) of the Arbitration Act 1996, an award is final and binding, and the Arbitrator was functus officio after issuing the original Award.
• The Arbitrator lacked jurisdiction under section 57(3)(b) or otherwise to amend the Award as he did in the Amended Award, rendering it a nullity.
• The claims for US$11,000 minimum monthly payments and for an account had been dealt with in the original Award, thus section 57(3)(b) did not permit the amendments.
• The Amended Award improperly re-opened and re-litigated issues already decided, causing real injustice and risking inconsistent awards.
• Section 67 of the Arbitration Act 1996 was the proper vehicle to challenge the Amended Award as lacking substantive jurisdiction.
• Relied on authorities including Five Oceans Salvage v Wenzhou Timber, Al-Hadha v Tradigrain, Torch Offshore v Cable Shipping, and others to support the limits on arbitrator corrections post-award.

Respondent's (Defendant's) Arguments

• The Amended Award was valid and not a nullity; it remains effective unless set aside by the court.
• Section 67 applies only to challenges to substantive jurisdiction, defined narrowly as issues such as existence of valid arbitration agreement or tribunal constitution, none of which were in dispute here.
• The Arbitrator’s power to correct or clarify the Award under section 57(3)(a) and/or (b) and LMAA terms was properly exercised to address accidental omissions or errors.
• Challenges to corrections of awards are not challenges to substantive jurisdiction and are instead remediable under section 68(2)(b) or not at all.
• Authorities including CNH Global v PGN Logistics Ltd and Lesotho Highlands Development Authority v Impregilo SpA support this narrower interpretation of section 67’s scope.
• The court should interpret the Award and its corrections in a commercial and reasonable manner, considering the whole Award and the Arbitrator’s intent.

Table of Precedents Cited

Court's Reasoning and Analysis

The court first addressed a threshold objection by the Respondent that the Plaintiff’s challenge under section 67 was not properly brought, as section 67 relates only to substantive jurisdiction issues such as the existence of a valid arbitration agreement or tribunal constitution. The matters addressed in the Amended Award were conceded to have been submitted to arbitration and within the Arbitrator’s jurisdiction.

The court accepted that corrections or additions to awards under section 57(3) and the LMAA terms are permissible to address accidental slips, omissions, or errors, and that such corrections do not amount to a change of mind on decided matters but rather completion of the award in respect of claims not previously dealt with.

On examining the original Award as a whole, the court found that while paragraph 72 and the dispositive part of the original Award appeared to dismiss the Government’s counterclaims, the Arbitrator’s reasons showed he was addressing only the central repudiatory breach allegation requiring cogent evidence. The precise quantum of payment breaches and the claim for an account were not fully determined and were matters of quantum rather than liability.

The court concluded that the Arbitrator’s failure to deal with the minimum payment breach and the account claim was an accidental omission or slip, which he was entitled to correct under section 57(3)(a) or under the LMAA terms.

The court rejected the Plaintiff’s submission that the Amended Award was a nullity, noting that it remains valid unless and until set aside by the court, and that the Plaintiff’s challenge under section 67 was misplaced. The appropriate remedy for any erroneous correction lies under section 68(2)(b), which the Plaintiff did not properly pursue.

The court also found no risk of inconsistent awards arising from the Amended Award, as the Arbitrator clearly distinguished between repudiatory breaches and payment/accounting issues.

Accordingly, the court dismissed the Plaintiff’s application to set aside or declare the Amended Award of no effect.

Holding and Implications

The court’s final decision was to DISMISS the Plaintiff’s application under section 67(1)(a) and/or (b) of the Arbitration Act 1996 to set aside or declare the Amended Award of no effect.

The direct effect of this decision is that the Amended Award stands as a valid correction and addition to the original Award, confirming the Government’s entitlement to damages and an account relating to the minimum monthly payments and other sums. The court did not set any new precedent but reaffirmed established principles regarding the limits of arbitrator correction powers and the proper statutory routes for challenging such corrections.