ENGLISH HIGH COURT SETS ASIDE LMAA AWARD ON THE BASIS THAT THE ARBITRAL TRIBUNAL LACKED SUBSTANTIVE JURISDICTION

In MVV Environment Davenport Ltd v NTO Shipping GMBH & CO, MV Nortrader [2020] EWHC 1371 Comm, the High Court (the "Court") set aside an LMAA award on jurisdiction (the "Award") under s67 Arbitration Act 1996 (the "Act") on the basis that the arbitral tribunal (the "Tribunal") lacked substantive jurisdiction over the dispute.

The decision  

NTO Shipping GMBH & Co (the “Defendant”) had initiated arbitration against MVV Environment Davenport Ltd (the “Claimant”) under an alleged contract of carriage that incorporated an arbitration agreement contained in a charter party. In the arbitration proceedings, the Claimant disputed the jurisdiction of the Tribunal on the basis that it was not a party to the contract and that there was therefore no arbitration agreement between the Claimant and the Defendant. However, the Tribunal dismissed these arguments and found that it had jurisdiction.

The Claimant then challenged the Tribunal’s Award before the Court pursuant to s67 of the Act, for lack of substantive jurisdiction. The key question was whether the Claimant was party to a contract of carriage with the Defendant, as a result of having authorised its alleged agent to enter into that contract on its behalf. The Court considered three legal bases through which the agent could be said to have had such authority:

• actual authority, based on the Claimant’s express or implied agreement;
• implied actual authority, on the basis that authority inferred from the conduct of the parties and the circumstances of the case; and
• ostensible authority, because the Claimant had by its words and conduct held out to the Defendant that the alleged agent was authorised to act as its agent.

The Court ultimately rejected all of these grounds and concluded that the alleged agent lacked any authority to enter into the contract on behalf of the Claimant. The Claimant was therefore not a party to the arbitration agreement and the Tribunal had been wrong to assume jurisdiction over the Claimant. Accordingly, the Court set aside the Award.

Comment

This case is a rare example of a successful challenge to an award in the English courts under s67 of the Act and is also an important reminder of a core principle of arbitration: the parties must have agreed to oust court jurisdiction over disputes in favour of jurisdiction by an arbitral tribunal. In certain situations – especially where there is a complex factual or contractual matrix and a number of different parties involved, or where arbitration may be the prevailing industry practice – this basic principle can at times be overlooked. Even though the arbitral tribunal has the power to determine its own jurisdiction as a result of the competence-competence doctrine, s67 of the Act provides an important safeguard to ensure parties can challenge awards where the tribunal has erred in upholding jurisdiction.

The case also highlights that, while it is possible for an agent to bind a principal to arbitration, where an award is then challenged under s67 of the Act the courts will scrutinise whether the supposed agent was in fact acting as an agent and had the requisite authority to bind the (ostensible) principal. Importantly, a s67 challenge is considered by the court as a complete rehearing on jurisdiction rather than as a review of the tribunal’s decision on jurisdiction, which is deemed to have no legal or evidential value.

For more information, please contact Chris Parker, Partner, Rutger Metsch, Associate, or your usual Herbert Smith Freehills contact.