Broda Agro Trade (Cyprus) Ltd v Alfred C. Toepfer International GmbH

For section 72 of the Arbitration Act 1996, a party takes part in arbitral proceedings if it participates in determining the merits after the tribunal has ruled that it has jurisdiction. It then cannot use section 72, or the preserved common-law jurisdiction, to seek a declaration that the tribunal lacked jurisdiction. Any challenge must proceed under section 67, subject to the statutory time limit and any extension under section 80(5).

An extension of time is discretionary. Relevant considerations include delay, its explanation, prejudice, continuation of the arbitration, the strength of the challenge and overall fairness. A prolonged failure by a commercial party to obtain appropriate legal advice may justify refusal, even where the challenge is arguable and the respondent suffers no irremediable prejudice.

Toepfer commenced GAFTA arbitration against Broda, claiming damages for breach of an alleged wheat-supply contract. Broda initially contested jurisdiction and pursued proceedings in Russia, where the Russian court found that no contract existed. The GAFTA tribunal nevertheless issued an interim award finding jurisdiction.

Broda later made submissions on liability, breach and damages. The tribunal issued a final award, and Broda appealed within GAFTA. Broda then applied to the High Court for relief under section 72 or, alternatively, for an extension of time to challenge the interim jurisdiction award under section 67. The issues were whether Broda had taken part in the arbitration and whether the 28-day period should be extended.

1. Section 72. Broda’s correspondence before the interim award did not amount to participation. It notified GAFTA that jurisdiction was contested but pursued the jurisdiction issue in the Russian court rather than participating in GAFTA’s exercise of its power to rule on its own jurisdiction.
2. Broda did take part after the interim award. Its later submissions addressed liability, breach and damages and sought dismissal of Toepfer’s substantive claim. The words “takes no part in the proceedings” were not confined to participation undertaken to challenge jurisdiction. Participation on the merits required any jurisdiction challenge to proceed under section 67.
3. Article 6 of the European Convention did not require section 72 to preserve a right to a public hearing of jurisdiction. Section 67 enabled a participating party to challenge substantive jurisdiction and, where the challenge concerned the existence of an arbitration agreement, the court could hear evidence and rehear matters considered by the tribunal.
4. Extension of time. The 14-month delay was substantial. Broda acted unreasonably by relying on Russian legal advice in a substantial London arbitration and failing to obtain English advice when the jurisdiction and final awards were issued. Although Toepfer would not suffer irremediable prejudice and Broda had an arguable case, refusal was not unfair in all the circumstances. The extension was refused.
5. Enforcement. Enforcement was stayed because the GAFTA appeal might reduce the quantum and enforcement appeared likely to be difficult. The stay was conditional on Broda providing security of US$4 million.

There was no appeal from a lower court described in the judgment. The applications arose during ongoing GAFTA arbitration and an internal GAFTA appeal from the final award.