Bremer Vulkan Schiffbau und Maschinenfabrik v South India Shipping Corpn (Gregg v Raytheon Ltd)

Where a claimant’s inordinate and inexcusable delay makes a fair arbitration hearing impossible, the delay may amount to repudiation of the arbitration agreement. The respondent may accept that repudiation and the court may restrain the arbitration by injunction.

An arbitrator has no power to dismiss an arbitration for want of prosecution or impose sanctions for non-compliance with procedural orders, unless the parties’ agreement confers that power. The court’s statutory powers under the Arbitration Act 1950 are not exhaustive of its inherent jurisdiction. The court may intervene where necessary to protect the respondent’s legal right to treat the arbitration agreement as ended and to prevent an unfair hearing.

Two appeals arose from orders made by Donaldson J in arbitration-related proceedings. In each case, a claimant had delayed for many years in prosecuting a commercial arbitration. The judge found the delay inordinate and inexcusable, and the resulting prejudice so serious that a fair hearing was impossible.

In the first appeal, Gregg v Raytheon Ltd, the arbitration was conducted under International Chamber of Commerce rules, with London substituted as the agreed place of arbitration. In the second, Bremer Vulkan Schiffbau und Maschinenfabrik v South India Shipping Corpn, the arbitration concerned alleged defects in ships built many years earlier.

The central issues were whether an arbitrator could dismiss for want of prosecution, whether the court could restrain the arbitration, and whether the delay had repudiated the arbitration agreements.

1. Appeals dismissed. The injunctions restraining the two arbitrations were upheld.
2. Roskill LJ, with whom Denning MR and Cumming-Bruce LJ agreed on the result and essential reasoning, held that an arbitrator has no jurisdiction merely by virtue of an agreement to arbitrate to dismiss a claim for want of prosecution or to impose sanctions for disobedience of procedural orders. The decision in Unione Stearinerie Lanza and Weiner was correctly decided and could not properly be overruled by the Court of Appeal after more than 60 years’ acceptance.
3. The court’s powers under section 12(6) of the Arbitration Act 1950 are not exhaustive. The court retains an inherent jurisdiction to intervene in arbitration proceedings where necessary to protect a legal or equitable right.
4. An agreement to arbitrate carries an implied legal obligation on the claimant to prosecute the arbitration without delay which would frustrate its purpose. Delay becomes repudiatory when it makes a fair hearing impossible. The respondent may accept the repudiation without first serving a notice making time of the essence.
5. Once the agreement has been rescinded, the court may grant an injunction restraining continuation of the arbitration. In the Raytheon appeal, wasted expenditure caused by the repudiatory conduct was recoverable as damages.
6. The International Chamber of Commerce rules did not confer on the ICC Court of Arbitration a contractual power to dismiss the claim or impose effective sanctions for delay. Institutional and non-institutional arbitrations are distinguished by the parties’ agreed terms, not by their labels.
7. Denning MR further observed, obiter, that the same principle might apply where respondents wilfully delay an arbitration, although that issue did not arise for decision.

• Court of Appeal: dismissed both appeals and upheld Donaldson J’s injunctions restraining continuation of the arbitrations. The court also upheld the damages order in the Raytheon appeal.
• High Court: Donaldson J found inordinate and inexcusable delay causing serious prejudice and granted injunctions restraining the arbitrations: [1979] 3 WLR 471.