Stellar Shiipping Company LLP v Cosco (Dalian) Shipyard Company Ltd

Urgency is a jurisdictional threshold for interim relief under Arbitration Act 1996, section 44. Where there is sufficient time to constitute the arbitral tribunal and seek its permission, the court should not grant injunctive relief.

At the inter partes hearing, the court must determine whether the injunction should continue. It cannot defer essential questions, such as the adequacy of damages or the overall appropriateness of relief, to the tribunal. Damages will generally be adequate where the defendant can meet an award and the claimant can obtain the vessel, a substitute vessel, or other practical means of continuing its trade.

The buyers sought to restrain the sellers from selling a bulk carrier to a third party pending arbitration concerning the sellers’ cancellation of a shipbuilding contract. An injunction was granted without notice by Burton J on 29 March 2011.

The sellers applied to discharge it, arguing that the case was not sufficiently urgent for the court to act under section 44 of the Arbitration Act 1996, that damages were adequate, and that the balance of convenience favoured them. The central issues were whether the court had jurisdiction to grant the injunction and, if so, whether injunctive relief was appropriate.

1. Disposition. The injunction was set aside. The buyers had not established sufficient urgency to invoke section 44 of the Arbitration Act 1996. The buyers were ordered to pay the sellers’ costs, save for costs thrown away by two adjourned hearings, with £50,000 paid on account. Leave to appeal was refused.
2. Urgency and jurisdiction. The alleged threats to sell the vessel immediately to a connected third party were unsupported and materially inconsistent with the contemporaneous correspondence. The contractual sale machinery was clear and required notice to the buyers and an opportunity to bid. There was sufficient time to constitute the tribunal and seek permission to apply to the court. The absence of notice was also unjustified, although the decisive issue was the lack of urgency.
3. Role of the court at the return hearing. On the premise that section 44 applied, the court had to review the validity of the ex parte order at the inter partes hearing. Section 44(6) did not permit the court to decide some issues while leaving adequacy of damages or the overall appropriateness of an injunction to the tribunal.
4. Adequacy of damages. Applying the general approach identified in Sabmiller Africa v East African Breweries [2010] 1 Lloyd’s Reports 392, the sellers were a well-funded state enterprise capable of meeting a legitimate award. The buyers’ trading losses were quantifiable. Following Societe des Industries v Bronx [1973] 1 Lloyd’s Reports 465, a vessel was not rendered unique merely because it was urgently required or difficult to replace.
5. The buyers had an effective opportunity to purchase the vessel if the contractual sale clause were invoked. In any event, other geared Kamsarmax vessels, smaller geared bulkers, chartering, or installing cranes on another vessel provided practical alternatives. Damages were therefore an adequate remedy, and injunctive relief would have been refused even if urgency had been established.

First-instance decision. The court discharged the injunction granted without notice by Burton J on 29 March 2011 and refused leave to appeal.