Novasen SA v Alimenta SA

An undisclosed principal may enforce, and be bound by, a contract made by an agent acting within the scope of the agent’s actual authority. In an ordinary commercial contract, the principal’s intervention is generally permissible unless the contract or surrounding circumstances show that the agent was intended to be the true and only principal, or that the third party was unwilling to contract with the principal.

An arbitration agreement is separable from the underlying contract. Where an agent was authorised to enter into an arbitration agreement, disputes about the agent’s authority, the existence of the underlying contract and the principal’s right to intervene may be referred to arbitration.

Novasen, a Senegalese seller of groundnut oil, challenged under section 67 of the Arbitration Act 1996 an award determining that Alimenta was Sogescol’s undisclosed principal and entitled to enforce a FOSFA contract. Sogescol had negotiated the transaction with Novasen while concealing Alimenta’s identity, and the documents described Sogescol as Alimenta’s buying agent.

The issues were whether Alimenta had authorised Sogescol to contract as its undisclosed agent, whether the contract prevented Alimenta from intervening, and whether an arbitration agreement existed between Novasen and Alimenta so that those issues could be determined by arbitrators.

1. Application dismissed. Novasen failed to establish that the arbitration tribunal lacked jurisdiction. The award on jurisdiction was upheld.
2. On the evidence, Alimenta and Sogescol had agreed that Sogescol would act as Alimenta’s undisclosed agent. The Alimenta contract, which twice described Sogescol as the buyer’s agent, was particularly important evidence of that arrangement.
3. Sogescol’s authority was not based solely on ratification. The later agreement to a modest price change was within the scope of the authority conferred by Alimenta. The change had no adverse effect on Alimenta and was treated as a matter which Sogescol could arrange.
4. Alimenta’s intervention was not incompatible with the contract negotiated between Novasen and Sogescol. The transaction was an ordinary commercial commodity sale on standard terms. Novasen had not proved either that it had decided not to contract with Alimenta or that such unwillingness had been communicated to Alimenta or Sogescol. The beneficial assumption described by Diplock LJ in Teheran-Europe Co. Ltd. v. S. T. Belton (Tractors) Ltd. therefore applied.
5. Alternatively, an arbitration agreement existed between Novasen and Alimenta. Section 7 of the Arbitration Act 1996 required the arbitration agreement to be treated as distinct from the underlying sale contract. Following Fiona Trust v Privalov, questions concerning authority, intervention and whether a concluded sale contract existed were capable of determination by arbitration, provided the authority to enter into the arbitration agreement itself was established.
6. The application to set aside the award under section 67 of the Arbitration Act 1996 was refused.

First instance decision. The judgment records the prior FOSFA arbitration and the umpire’s award on jurisdiction, but no appellate decision concerning that award.