Bremer Vulkan Schiffbau Und Maschinenfabrik v South India Shipping Corpn

Factual and Procedural Background

This opinion addresses two appeals arising from arbitration proceedings involving claims of inordinate and inexcusable delay that prejudiced the opposing parties, leading to applications to dismiss for want of prosecution. The arbitrations concerned disputes over bulk carrier shipbuilding and a share sale transaction, both of which experienced lengthy delays spanning several years. The courts below struck out the claims for want of prosecution, and the appeals challenge those decisions. The opinion also references a third related case concerning a similar issue of delay in arbitration proceedings.

Legal Issues Presented

1. Whether an arbitrator has the power to dismiss a claim for want of prosecution and make an award to that effect.
2. Whether the court has inherent jurisdiction or power to intervene in arbitration proceedings to restrain a party from continuing arbitration due to inordinate and inexcusable delay.
3. Whether delay of such a nature frustrates the arbitration agreement and amounts to repudiatory conduct enabling the innocent party to rescind the arbitration agreement.
4. The applicability and scope of the International Chamber of Commerce (ICC) arbitration rules and the role of the ICC Court of Arbitration in supervising procedural matters including delay.
5. The nature and extent of implied terms in arbitration agreements regarding the parties’ obligations to proceed without undue delay.
6. The availability of damages for wasted expenditure caused by repudiatory delay in arbitration proceedings.

Arguments of the Parties

Appellants' Arguments

• Arbitrators possess inherent powers and, therefore, have the jurisdiction to dismiss claims for want of prosecution.
• In institutional arbitrations, such as those under ICC rules, procedural supervision and remedies for delay lie with the institutional body (the ICC Court of Arbitration) rather than the courts of the seat of arbitration.
• The courts should not intervene by injunction to restrain arbitration proceedings absent misconduct or jurisdictional disputes.
• The Arbitration Act 1950 and its predecessors provide a complete code governing arbitration powers and remedies, excluding implied terms imposing strict obligations on parties to avoid delay.
• If delay occurs, the respondent has a duty to take steps to progress the arbitration, including making applications to the court under statutory provisions such as s 12(6) of the Arbitration Act 1950.
• The respondents had acquiesced in delay, and therefore delay should not be treated as a bar to continuing arbitration.
• Any rescission of the arbitration agreement requires leave of the court under s 1 of the Arbitration Act 1950.
• Damages for wasted expenditure should not be awarded unless it is shown that the innocent party had a good prospect of success in the arbitration.
• A procedural point was raised regarding the non-joinder of a necessary party, but this was not accepted by the court.
• New evidence on foreign law (German law) was sought to be introduced but was refused.

Respondents' Arguments

• Arbitrators do not have power to dismiss claims for want of prosecution; such powers rest with the courts.
• Delay in the arbitration proceedings was inordinate and inexcusable, causing serious prejudice and rendering a fair trial impossible.
• The courts have inherent jurisdiction to restrain arbitration proceedings where delay frustrates the arbitration agreement, amounting to repudiatory conduct by the dilatory party.
• Implied terms exist in arbitration agreements obliging parties to proceed with reasonable despatch and not to cause frustrating delay.
• The ICC Court of Arbitration does not have power to impose sanctions or dismiss claims for delay under the ICC rules.
• Damages should be awarded for wasted expenditure caused by repudiatory delay, without requiring proof of the likelihood of success on the merits.
• The respondents had not acquiesced in delay to the extent that it barred their application.

Table of Precedents Cited

Court's Reasoning and Analysis

The court began by acknowledging the long-standing problem of delay in arbitration proceedings and the limited powers of arbitrators to control such delay, as they lack sanctioning authority comparable to courts. It rejected the contention that arbitrators possess inherent power to dismiss claims for want of prosecution, emphasizing that such powers derive from the parties' agreement and relevant statutes, which do not confer such authority on arbitrators.

The court analyzed the statutory framework, particularly the Arbitration Acts of 1934 and 1950, which empower courts to make orders in aid of arbitration but limit arbitrators' sanctioning powers. It highlighted the binding precedent that arbitrators cannot impose sanctions that effectively stay proceedings.

Regarding the ICC rules, the court found no contractual basis for the ICC Court of Arbitration to dismiss claims or impose sanctions for delay, viewing the ICC Court as having administrative rather than judicial authority.

Turning to the court's own powers, the judges recognized an inherent jurisdiction to restrain arbitration proceedings where delay amounts to repudiatory conduct that frustrates the arbitration agreement, thus entitling the innocent party to rescind. They reasoned that an implied term exists in arbitration agreements obliging parties to proceed with reasonable despatch, and that inordinate and inexcusable delay breaching this duty justifies the court's intervention.

The court rejected arguments that the Arbitration Act 1950 constitutes a complete code excluding equitable remedies and emphasized that arbitration agreements are contracts subject to general principles of contract law, including the doctrine of repudiation for frustrating delay.

It held that injunctions restraining arbitration proceedings are appropriate to protect the innocent party's right to a fair hearing and to prevent unfair advantage by dilatory claimants. The court also recognized the entitlement to damages for wasted expenditure resulting from repudiatory delay without requiring proof of success on the merits.

Finally, the court dismissed procedural objections regarding non-joinder of parties and refused to entertain new foreign law evidence, emphasizing the need for proper procedural handling at earlier stages.

Holding and Implications

The appeals are dismissed.

The court upheld the decisions below striking out the claims for want of prosecution due to inordinate and inexcusable delay that frustrated the arbitration agreements. It held that arbitrators do not have power to dismiss claims for want of prosecution, but the courts possess inherent jurisdiction to intervene by injunction where delay repudiates the arbitration agreement. The court confirmed that arbitration agreements contain implied terms requiring parties to proceed without frustrating delay and that repudiatory delay entitles the innocent party to rescind the agreement and claim damages for wasted costs.

The decision establishes that courts will not allow arbitration claimants to evade procedural discipline through dilatory conduct and that equitable remedies are available to protect the integrity of arbitration proceedings. No new precedent was set beyond confirming and extending existing principles to arbitration contexts, and the ruling does not distinguish between institutional and non-institutional arbitrations for these purposes.