Shagang South -Asia (Hong Kong) Trading Co Ltd v Daewoo Logistics, England and Wales High Court (Commercial Court), Judgment, Law, casemine.com

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Attorney(S)

Robert Bright QC (instructed by Reed Smith LLP) for the Claimant
Nigel Jacobs QC (instructed by Lax & Co. LLP) for the Defendant

Judges

MR JUSTICE HAMBLEN

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Shagang South -Asia (Hong Kong) Trading Co Ltd v. Daewoo Logistics

Smart Summary

Factual and Procedural Background

The Appellee ("Company B") agreed by a Fixture Note dated 17 April 2008 to charter a vessel to the Appellant ("Company A") for shipments between May and December 2008. The Fixture Note included a clause stating arbitration was to be held in a specified location ("The City") with English law to be applied, and referenced the Gencon 1994 Charter Party form. The dispute arose from the carriage and alleged shortlanding of steel cargo on a voyage from China to a Middle Eastern port, leading to claims and a settlement involving approximately US $1 million. Arbitration proceedings were commenced by Company B against Company A in February 2014 with the appointment of a sole arbitrator. Company A challenged the arbitrator's jurisdiction, contending that the arbitration should be governed by the local arbitration law of The City rather than English law. The arbitrator issued an award concluding that English law applied and that he had been properly constituted. Company A then applied under the Arbitration Act 1996 to set aside the award and for a declaration that the tribunal was not properly constituted.

Legal Issues Presented

Whether the arbitration under the contract is subject to English or The City curial law.
If the arbitration is subject to English curial law, whether the appointment of the sole arbitrator was validly made.

Arguments of the Parties

Appellant's Arguments

Clause 23 of the Fixture Note provides for arbitration to be held in The City and subject to the procedural law applicable there, namely the local Arbitration Ordinance.
Clause 19 of the Gencon form is inconsistent with clause 23 and is not incorporated or applicable, resulting in a lack of jurisdiction for the arbitrator under English law.
Even if English curial law applies, the appointment of the sole arbitrator was invalid as it was made pursuant to clause 19 rather than the procedural requirements under the Arbitration Act 1996.

Appellee's Arguments

Clause 23, read with clause 19, establishes The City as the geographical location of arbitration but subjects the arbitration to English curial law and the English Arbitration Act.
Alternatively, clause 23 alone implies English curial law, and the arbitrator's appointment and award were valid.
The heading "Arbitration" and incorporation of the Gencon form support the application of English law and procedure.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Black Clawson International Ltd v Papierwerke Waldhof-Aschaffenburg AG [1981] 2 Lloyd's Rep 446	Recognition that bifurcation between substantive and procedural law in arbitration is "by no means uncommon".	Supported the proposition that bifurcation between substantive and procedural law is not unusual in arbitration contexts.
Naviera Amazonica Peruana SA v. Compania Internacionale de Seguros [1988] 1 Lloyd's Rep 116	Parties can agree arbitration venue and curial law differently, but this is complex and unusual.	Highlighted the complexity and rarity of parties choosing arbitration venue and curial law from different jurisdictions, underscoring the need for clear wording.
Union of India v McDonnell [1993] 2 Lloyd's Rep 48	Implied choice of procedural law from the place of arbitration if no express choice is made.	Confirmed that the place chosen for arbitration strongly indicates the procedural law governing arbitration.
Shashoua v Sharma [2009] 2 Lloyd's Rep 376	Venue of arbitration typically equates to the seat and thus determines curial law absent clear contrary indication.	Applied the principle that an express designation of venue implies the seat and governing procedural law unless otherwise indicated.
ABB Lummus Global Ltd v Keppel Fels Ltd [1999] 2 Lloyd's Rep 24	Choice of seat and curial law may differ but would give rise to difficulties.	Noted that bifurcation between seat and curial law is possible but problematic, supporting the need for clear contractual language.
Enercon GmbH v Enercon (India) Ltd [2012] 1 Lloyd's Rep 519	Strong contrary indicia needed to displace implied choice of seat and curial law from venue.	Held that even express reference to foreign arbitration law may not displace implied choice of English curial law when venue is London.
Swiss Bank Corp v Novorissiysk Shipping Co. (The 'Petr Shmidt') [1995] 1 Lloyd's Rep 202	Agreement for arbitration in a place with English law to apply can imply sole arbitrator appointment under English law.	Supported the approach that an arbitration clause can be enforced as requiring a sole arbitrator with gap-filling powers under English law.
Braes of Doune Wind Farm v Alfred McAlpine Business Services [2008] 1 Lloyd's Rep 608	Confirmed that curial law can differ from venue but this is unusual and invites jurisdictional complications.	Distinguished as a rare example of bifurcation; noted the need for clear contractual language to support such an arrangement.

Court's Reasoning and Analysis

The court undertook a detailed construction of clause 23 and its relationship with clause 19 of the Gencon form. Clause 23 provided that arbitration was "to be held" in The City and that English law "is to be applied." The court interpreted the phrase "to be held" as indicating the geographical location of arbitration hearings, implying The City as the seat of arbitration. The phrase "English law to be applied" was understood as a choice of substantive law rather than curial (procedural) law.

The court emphasized that the place of arbitration generally implies the seat and curial law unless clear words or significant contrary indicia establish otherwise. The rigid and unitary scheme of clause 19, which ties place, curial law, and substantive law together, was found inconsistent with the bifurcation in clause 23. The court found clause 23 inconsistent with clause 19 and concluded that clause 19 was not incorporated or applicable.

Relevant authorities were analyzed, including the principle that clear wording is required to select a seat different from the place of arbitration. The court found no clear wording or significant contrary indicia to displace the implied choice of The City as the seat and thus The City's curial law. The court thus held that the arbitration was subject to The City's arbitration law, not the English Arbitration Act 1996.

Regarding the appointment of the sole arbitrator, the court found that Mr. Rayment's appointment was made pursuant to clause 19(a) of the Gencon form, which was inapplicable. Clause 23 contained no agreement on the number of arbitrators, and the procedural requirements under the English Arbitration Act for appointing a sole arbitrator were not followed. Consequently, the appointment was invalid if English curial law applied.

Holding and Implications

The court held in favor of the Appellant ("Company A") on both central issues:

The arbitration under the contract is subject to The City's curial law and not the English Arbitration Act 1996.

The appointment of the sole arbitrator was invalid under the English Arbitration Act 1996, if it were applicable.

The direct effect is that the First Final Arbitration Award is set aside and the tribunal is declared not properly constituted. The court reserved the question of consequential orders for further hearing. No new precedent was established; the decision applies the established principles concerning the relationship between place, seat, curial law, and the validity of arbitrator appointments.