Peoples' Insurance Company of China & Anor v Vysanthi Shipping Co Ltd

Under the Arbitration Act 1996, a party challenging an arbitral tribunal’s substantive jurisdiction must act within the statutory time limit. Failure to challenge within 28 days may cause the right to object to be lost. An extension of time requires consideration of the delay, the reasonableness of the conduct, prejudice, the strength of the challenge, the progress of the arbitration and overall fairness. Irredeemable prejudice and a deliberate or legally unjustifiable failure to act weigh decisively against an extension. A valid earlier arbitral award may create an issue estoppel and, where conflicting final decisions exist, the earlier decision should generally be recognised and enforced. A later action seeking recognition of the inconsistent decision may be summarily determined where it cannot possibly succeed.

The dispute arose from bills of lading for a cargo carried aboard the Joanna V. The bills contained a London arbitration and English law clause. After the vessel grounded, the receivers commenced proceedings in China concerning salvage liability, while the owners commenced London arbitration. The arbitrator held that he had jurisdiction and awarded sums against the receivers.

The receivers did not challenge the jurisdiction ruling within the statutory period. They later sought an extension of time, recognition of the Ningbo Maritime Court’s judgment, and an injunction against enforcement of the award. The owners sought enforcement of the award and summary judgment against the recognition claim. The central issues were whether time should be extended, whether the award could be challenged or enforced, and what effect should be given to the conflicting Chinese judgment.

1. Challenge to jurisdiction. The receivers had objected to jurisdiction during the arbitration but did not challenge the arbitrator’s ruling within 28 days as required by the statutory scheme of the Arbitration Act 1996. Subject to the court’s extension powers, they had therefore lost the right to object under sections 67, 70(3) and 73.
2. Extension of time. The principles in Kalmneft JSC v Glencore International AG [2001] 2 All ER Comm 577 were applicable, with the additional point that section 67 expressly warned that the right to object could be lost. The relevant factors included the length and explanation of the delay, responsibility for it, prejudice, the status of the arbitration, the strength of the proposed challenge and overall fairness.
3. The delay was substantial. The decision not to challenge had been deliberate, or resulted from an error which experienced advisers should not have made. The owners suffered irredeemable prejudice because an earlier challenge would have required the receivers to clarify whether the Chinese claim was contractual, tortious or both. The court would probably have reached the same jurisdictional conclusion as the arbitrator. It was inappropriate to treat a possible remedy against the receivers’ lawyers as material on these facts. The extension was refused.
4. Effect of the award. The award consequently stood as a binding determination on the merits. The arbitrator had decided that the owners were not at fault and had not breached the contract of affreightment. The award created an issue estoppel binding the receivers and, through privity and subrogation, PICC. The principles discussed in Gleeson v Wippell [1977] 1 WLR 510 and approved in Johnson v Gore Wood [2000] UKHL 65 applied.
5. Under Showlag v Mansour [1995] 1 AC 431 and the observation in Vervaeke v Smith [1983] 1 AC 145, the earlier arbitral decision was entitled to recognition in preference to the later inconsistent Chinese judgment, assuming the latter was otherwise a judgment of a court with jurisdiction.
6. Final orders. Leave was given to enforce the arbitrator’s award. Summary judgment was granted against PICC and the receivers in their action seeking recognition of the Ningbo judgment, because that action could not possibly succeed. The alternative procedural course of strike-out was unnecessary.