Introduction

A disappointed party to arbitration will always wish to appeal to the Court.  In UK, according to sections 69(1) and 69(2) of the Arbitration Act 1996 (the “Act”), appeal to the Court is allowed only if there is an agreement of all the other parties to the proceedings or if there is permission of the Court.  Therefore, before a party may raise arguments on the tribunal’s finding of facts, one will need to first consider whether permission would be given by the Court to appeal if there was no agreement reached between the parties.  The recent UK case of ST Shipping and Transport Pte Ltd v Space Shipping Ltd (the “CV Stealth”) [2016] EWHC 880 (Comm) illustrates the importance of doing so.

Background of the case

The claimant charterers entered into a time charter with the defendant owner of the vessel “CV Stealth” (the “Charterparty”).  Later, the charterers sub-chartered the vessel to another company, AS Capital, for carriage of crude oil to Venezuela.  The charterers’ operator received an authorization document giving details of the cargo to be loaded on the vessel but it was soon discovered that the authorization document was not genuine.  A third party, Mr. Barbosa, was charged with several criminal offences including forgery of the authorization document and attempt to export cargo without authorization from the state oil company.  Notwithstanding that no allegation of improper activity was raised against the owners, the vessel, the crew or the charterers, the Venezuelan Court prevented the vessel from sailing as a precautionary measure to assist the investigation into Mr. Barbosa’s alleged crimes.  The vessel was detained ever since.

The owner, as the claimant in the arbitration, claimed compensation against the charterers for the continued detention of the vessel based on (a) express indemnity clauses of the Charterparty and (b) as damages for the charterers’ breach of clause 28 of the Charterparty.  Clause 28 of the Charterparty provides that no voyage can be undertaken and no goods can be loaded if it would expose the vessel to capture by government / rulers.  The arbitrators held that the owners were entitled to the indemnity and the charterers were in breach of clause 28.

Issue before the Court

The charterers sought to appeal before the present court. The issues are:

1.       whether there was a breach of clause 28; and

2.       whether the charterers require permission to appeal;

The findings of the Court

1. Clause 28 of the Charterparty

The Court held that there was a breach of clause 28 of the Charterparty by the charterers.  The Court said that if the vessel is ordered by the charterers to a port and a risk of capture or seizure arises while she is en route, clause 28 would entitle the owner to refuse to continue to comply with the charterers’ order, if they were aware of it.  In the event that the owner was not aware of such risk and continued to comply with the charterers’ order, the charterers would be in breach of clause 28, provided that the risk arose before it became impossible for them to give fresh orders which could be complied within time to avoid the risk.

In this case, given that the charterers ordered the master to proceed to a load port for the purpose of loading the cargo of AS Capital, which was not authorised for sale by the state oil company, the charterers were in breach of the warranty under clause 28, and the owner is not required to show that the charterers have knowledge of such risk of capture or seizure.

2. Permission to appeal

Pursuant to clause 41 of the Charterparty, it is to be governed by English law and dispute would be resolved by arbitration in accordance with the BIMCO Dispute Resolution and clause 111 of the Charterparty which provides for the Act to apply.  Clause 41 also provides that parties may appeal to the High Court on any question of law arising out of an award.

The Court found that clause 41 is capable of fulfilling section 69(1) of the Act, which allows appeals on a question of law to be brought with an agreement of all parties to the proceedings.  However, the argument on whether there is a breach of clause 28 above involves no question of law.  It is concluded based on purely finding of facts.  According to section 69(2)(a) of the Act, appeal on the tribunal’s finding of facts cannot be brought unless with the agreement of all the other parties.  Therefore, the Court held that it does not fall within the scope of clause 41 and section 69(2)(a) of the Act.

Given that section 69(2)(a) of the Act is not satisfied, permission to appeal is required under section 69(2)(b).  However, the Court refuses to grant the permission to appeal.  The Court said that the rationale of the Act is that parties should be bound by the findings of fact of their chosen tribunal, they cannot challenge them in court even if they were unsupported by the evidence or that there are internal inconsistencies.  Further, it is for the charterers who argue that they do not require the permission of the Court under the Act to establish that they have an agreement satisfying section 69 of the Act.  As the charterers failed to establish such, permission to appeal is refused.

Conclusion

The case of ST Shipping and Transport Pte Ltd illustrates the importance of distinguishing a question of law and a question of fact when asking for the permission to appeal under section 69 of the Act.  A party trying to dress up an appeal against findings of fact as one which turns on questions of law, like the charterers in the case, will not succeed.

For enquiries, please contact our Litigation & Dispute Resolution Department:

E: shipping@onc.hk

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Important: The law and procedure on this subject are very specialised and complicated. This article is just a very general outline for reference and cannot be relied upon as legal advice in any individual case. If any advice or assistance is needed, please contact our solicitors.