Habas Sinai Ve Tibbi Gazlar Istihsal Endustrisi AS v VSC Steel Company Ltd

A party challenging an arbitral tribunal’s jurisdiction under Arbitration Act 1996 section 67 must normally raise each ground of objection during the arbitration. The objection may be examined broadly, but a wholly distinct statutory or formal-validity point is a new ground barred by section 73.

The law governing an arbitration agreement is determined by the three-stage inquiry of express choice, implied choice and closest and most real connection. Where there is no express choice in the matrix contract, the law of the arbitral seat will usually have overwhelming significance. An agent with ostensible authority may bind a principal to an arbitration agreement, and the Overseas Companies (Execution of Documents) Regulations 2009 do not abolish or regulate ostensible authority.

Habas, a Turkish steel manufacturer, challenged an arbitral award made in favour of VSC, a Hong Kong company, following the alleged sale of reinforcing steel. The tribunal held that Habas’s agents had ostensible authority to conclude the contract and its London arbitration clause, and awarded VSC US$3,142,500 plus interest and costs.

Habas applied under sections 67 and 69 of the Arbitration Act 1996. It argued that no binding consensus existed as to London arbitration, that the agents lacked authority, that Turkish formalities had not been satisfied, and that damages had been assessed by reference to the wrong date. The central issues were whether the jurisdictional objections were preserved, whether a binding London arbitration agreement existed, and whether the section 69 question was properly before the court.

1. Section 73. The words “any objection” in section 73 of the Arbitration Act 1996 mean any ground of objection. Grounds should be examined broadly, rather than as if they were pleadings. Habas’s arguments on authority under Turkish law fell within the previously raised lack-of-authority objection. Its separate argument based on Turkish statutory formalities did not, and was barred as a new ground.
2. Consensus. The parties contemplated a signed contract, but had not agreed that mutual signature was the exclusive means by which they could become bound. The urgency of the negotiations, the absence of a “subject to contract” qualification, and the opening of the letter of credit before signature supported that conclusion. In any event, VSC obtained objective consensus when it countersigned the hard-copy contract presented as the signed original.
3. Applicable law. The law of the arbitration agreement was determined under English common law by considering express choice, implied choice, and closest and most real connection. In the absence of an express choice in the matrix contract, the London seat pointed decisively to English law. The proposed qualification based on the agent’s alleged lack of actual authority was rejected.
4. Authority. The Agency Letter represented that Steel Park and Charter Alpha had authority to sell Habas’s products and was not revoked. They therefore had ostensible authority to agree the London arbitration clause. The Overseas Companies (Execution of Documents) Regulations 2009 concerned formalities of execution and did not affect ostensible authority. Even if Turkish signature requirements were relevant, the written signed contract satisfied them. It was unnecessary to decide actual authority, but its absence was not proved.
5. Section 69. Permission to appeal was refused because the proposed question had not been argued before the tribunal, contrary to section 69(3)(b). In any event, the tribunal’s construction of the one-off non-delivery clause was not obviously wrong.
6. The section 67 and section 69 applications were dismissed.