Habas Sinai Ve Tibbi Gazlar Istihsal Endustrisi AS v VSC Steel Company Ltd

Factual and Procedural Background

The dispute arises from an alleged contract for the sale of steel reinforcing bars between Company A, a Turkish manufacturer, and Company B, a Hong Kong-based steel distributor. Company B claimed damages for non-delivery of steel under an arbitration clause purportedly agreed in the contract. Company A denied the existence of any arbitration agreement. Following arbitration before a sole arbitrator, the tribunal concluded it had jurisdiction, found that Company A's agents had authority to conclude the contract and arbitration agreement, and awarded damages to Company B. Company A challenged the tribunal's jurisdiction and award under sections 67 and 69 of the Arbitration Act 1996, disputing the authority of its agents to conclude the arbitration agreement and contesting the date for assessment of damages.

The arbitration and subsequent proceedings involved extensive documentary and witness evidence, including expert testimony on Turkish law. The court heard submissions and considered the parties' arguments regarding the formation, authority, applicable law, and enforceability of the arbitration agreement.

Legal Issues Presented

1. Whether Company A has lost the right to object to the tribunal's jurisdiction.
2. Whether there was a binding consensus to a London arbitration agreement.
3. The applicable law governing the arbitration agreement and related issues.
4. Whether Company A's agents had actual or ostensible authority, and issues of ratification.
5. Conclusion on the application under section 67 of the Arbitration Act 1996.
6. Application under section 69 of the Arbitration Act 1996 concerning the date for assessment of damages.

Arguments of the Parties

Appellant's (Company A) Arguments

• Denied that its agents had actual or ostensible authority to conclude the arbitration agreement.
• Argued there was no binding consensus on the London arbitration agreement, as the contract was not formally signed by Company A or its authorized agents.
• Contended that formal requirements under Turkish law for arbitration agreements were not met, affecting the validity of the agreement.
• Asserted that the applicable law governing authority and formal validity should be Turkish law, particularly under the Overseas Companies (Execution of Documents) Regulations 2009.
• Challenged the tribunal's decision on the date for assessing damages, submitting that damages should be assessed at the date of breach rather than termination.

Respondent's (Company B) Arguments

• Maintained that Company A's agents had ostensible authority to enter into the arbitration agreement pursuant to an agency letter.
• Argued there was a binding contract including a London arbitration clause, formed by conduct and countersignature of the contract.
• Contended that objections to jurisdiction based on Turkish law formalities were new grounds not raised at arbitration and thus barred under section 73 of the Arbitration Act 1996.
• Asserted that English law governs the arbitration agreement, including issues of authority and ratification.
• Submitted that the tribunal's decision on the date for damages assessment was not a question of law and was not obviously wrong.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Primetrade AG v Ythan Ltd [2006] 1 Lloyd's Rep 457	Interpretation of section 73 of the Arbitration Act 1996 regarding loss of right to object to jurisdiction.	Supported the view that "any objection" means any ground of objection, requiring objections to jurisdiction to be raised promptly during arbitration.
JSC Zestafoni G Nikoladze Ferroalloy Plant v Ronly Holding Ltd [2004] 2 Lloyd's Rep 335	Clarification of the scope of objections under section 73.	Reinforced the principle of openness and fair dealing requiring early raising of jurisdictional objections.
Okura & Co Ltd v Navara Shipping Corp SA [1982] 2 Lloyd's Rep 537	Requirement of mutual signature for contract formation.	Considered in distinguishing whether mutual signature was necessary in the present case.
Cheverny Consulting Ltd v Whitehead Mann Ltd [2007] 1 All ER (Comm) 124	Contract formation and intention to be bound.	Referenced regarding the requirement of formal contract for binding agreement.
Investec Bank (UK) Ltd v Zulman [2010] EWCA Civ 536	Contract formation and signature requirements.	Used to illustrate that factual context determines whether signature is required for binding contract.
Sea Emerald v Prominvest (2008) EWHC 1979 (Comm)	Authority and validity of arbitration agreements under English law.	Supported the application of English law to ostensible authority and arbitration agreement validity.
Merrill Lynch Capital Services Inc. v Municipality of Piraeus [1997] CLC 1214	Authority and arbitration agreement validity.	Confirmed English law principles on ostensible authority.
Rimpacific Navigation Inc v Daehan Shipbuilding Co Ltd [2010] 2 All ER (Comm) 814	Application of Overseas Companies (Execution of Documents) Regulations 2009 and authority issues.	Clarified that ostensible authority is unaffected by the Regulations.
Azov v Baltic Shipping Co [1999] 2 Lloyd's Rep 159	Effect of Overseas Companies Regulations on formal validity and authority.	Held Regulations govern formal execution but not ostensible authority.
Sul América Cia Nacional De Seguros S.A. v Enesa Engenharia S.A. [2012] 1 Lloyd's Rep 671	Determination of law applicable to arbitration agreements.	Applied the three-stage test for applicable law, holding that arbitration agreements are governed by law of seat absent express choice.
Arsanovia Ltd v Cruz City 1 Mauritius Holdings [2013] 2 All ER 1	Applicable law to arbitration agreements and matrix contracts.	Distinguished and considered in relation to Sul América decision.
The Parouth [1982] 2 Lloyd's Rep 351	Applicable law and formation of contract including arbitration clauses.	Rejected argument that arbitration clause should be treated neutrally where formation was disputed.
The Atlantic Emperor [1989] 1 Lloyd's Rep 548	Incorporation of arbitration clauses and applicable law.	Confirmed The Parouth principle applies even where issue is incorporation of arbitration clause.

Court's Reasoning and Analysis

The court first examined whether Company A had lost the right to object to the tribunal's jurisdiction under section 73 of the Arbitration Act 1996. It held that objections must be raised promptly and that new grounds of objection not raised at arbitration are generally barred. Company A's argument based on Turkish law formalities was a new ground and thus inadmissible.

On consensus, the court applied the English objective approach and found that a binding contract including the London arbitration clause existed. Although the parties contemplated a signed contract, the conduct of the parties, including countersignature of a hard copy contract presented as an original, demonstrated consensus. The court rejected the argument that mutual signature was an absolute prerequisite.

Regarding applicable law, the court applied the three-stage test from Sul América and related authorities, concluding that the arbitration agreement is governed by English law as the law of the seat of arbitration, regardless of the matrix contract being governed by Turkish law. The court rejected Company A’s novel argument that the law governing authority should affect the applicable law of the arbitration agreement.

On authority, the court found that Company A’s agents had ostensible authority to conclude the arbitration agreement pursuant to the agency letter, which was not revoked. The court did not need to decide actual authority but found Company A had not discharged the burden to prove lack of actual authority. The court also rejected the argument that Turkish law formalities under the Overseas Companies Regulations invalidated the agreement, holding these regulations govern formal execution but do not affect ostensible authority.

On ratification, the court held the issue did not arise given the findings on authority.

Finally, on the section 69 application concerning the date for assessing damages, the court held that the tribunal’s decision was not a question of law and that permission to appeal must be refused. The tribunal’s approach to damages was not obviously wrong and was consistent with the contract terms.

Holding and Implications

The court DISMISSED Company A's applications under sections 67 and 69 of the Arbitration Act 1996, upholding the tribunal’s jurisdiction and the award. The court confirmed that a valid arbitration agreement existed, that Company A’s agents had ostensible authority to bind it, and that English law governs the arbitration agreement. The decision affirms the importance of promptly raising jurisdictional objections and the application of English law principles on authority and contract formation in international arbitration contexts.

The ruling directly affects the parties by affirming the enforceability of the arbitration award against Company A but does not establish new precedent beyond applying established principles to the facts.