Pacific Inter-Link Sdn Bhd v Efko Food Ingredients Ltd.

An arbitration agreement cannot be established independently where the alleged underlying contract remained subject to signature and stamping. Where contractual documents are issued on that basis, they must be accepted as a whole or treated as a counter-offer; a party cannot accept only the arbitration clause while negotiating other terms. A waiver of the statutory right to challenge an arbitral tribunal’s jurisdiction requires a clear and unequivocal submission. In assessing historic telephone negotiations, the court should test witness recollection against contemporary documents, objective facts, motives and the overall probabilities. The court set aside the awards for lack of substantive jurisdiction under the Arbitration Act 1996.

The claimant, a Malaysian palm-oil trader, challenged six FOSFA arbitration awards arising from alleged oral contracts to sell palm oil to the defendant. The challenges were brought under sections 67, 68 and 69 of the Arbitration Act 1996.

The claimant contended that no binding contracts or arbitration agreements had been made, that the alleged agent lacked authority, and that it had not waived its statutory right to challenge jurisdiction. The defendant relied on telephone discussions, subsequent emails and alleged ratification. The central issues were whether binding contracts and arbitration agreements had been concluded, and whether the tribunal had substantive jurisdiction.

1. Section 67 challenge allowed. The claimant had not clearly and unequivocally waived its statutory right to challenge jurisdiction. Its correspondence expressly reserved its rights and was consistent with participation in the arbitration without submission to the tribunal’s jurisdiction.
2. No binding sale contract was concluded on 7 September 2007. The parties had agreed principal commercial terms, but the claimant’s evidence and the contemporary documents showed that signature and stamping by an authorised representative were conditions of contractual effectiveness. The sales contracts sent on 11 September confirmed that requirement. They were not returned signed and stamped before cancellation.
3. The court assessed the disputed telephone evidence by reference to the contemporary documents, objective facts, motives and overall probabilities. The guidance in Grace Shipping v Sharp & Co [1987] 1 Lloyd's Law Rep. 207, including the passage referring to Armagas Ltd v Mundogas S.A. (The Ocean Frost) [1985] 1 Lloyd's Rep. 1, was applied.
4. No separate arbitration agreement was made on 11 September. The defendant’s proposals concerning quality, signature timing and a collateral non-double-commitment agreement amounted to a counter-offer. The original documents therefore had to be accepted or rejected as a whole. The reasoning in UK Power v Kuok Oils [2009] 2 Lloyds Rep 495 did not assist because that case concerned agreement of all other contractual terms and a different issue concerning a letter of credit.
5. The tribunal lacked substantive jurisdiction. The six awards were set aside under section 67. The applications under sections 68 and 69 consequently became redundant.

The judgment describes six FOSFA first-instance awards and six subsequent Appeal Board awards, all of which found that binding contracts containing arbitration clauses existed. The claimant then brought challenges in the Commercial Court under sections 67, 68 and 69 of the Arbitration Act 1996.