Libero Commodities S.A. v Augustin

An arbitration is effectively commenced under contractual arbitration rules when the required written request is made, unless the rules clearly make payment of an application fee a condition of commencement. Any ambiguity should not be construed to bar a legitimate claim without clear words. Where a contract gives the buyer the right to fix the price after an ineffective seller’s fixation, the tribunal must determine whether the buyer’s purported fixation was valid before applying any default pricing rule. A rule drafted for fixation by the day before first notice day cannot directly govern a buyer’s call arising later, although its possible relevance may remain for the tribunal.

The Buyer appealed under Arbitration Act 1996 against an award of the Technical Appeal Committee of the International Cotton Association. The TAC held that the Seller had commenced arbitration in time despite not paying the application fee when sending his request, and that the applicable cotton price was the contractual limit-down price under ICA Rule 224.

Permission to appeal was granted on whether payment was required for commencement under ICA Bylaw 302 and whether the contractual fixation clause displaced Rule 224. The Court also had to determine the proper disposition of the pricing issue in light of the TAC’s failure to decide whether the Buyer had made a valid buyer’s call.

1. Commencement of arbitration. The Award was upheld on the first issue. Construing Bylaw 302 as a reasonable person in the parties’ position would understand it, the written request for arbitration under Bylaw 302(1) was distinct from the additional matters to be sent under Bylaw 302(2). The Bylaw did not clearly state that payment of the application fee was a prerequisite to effective commencement.
2. The Court rejected the analogy with Page v Hewetts Solicitors. That decision concerned the commencement of court proceedings and the transfer of risk to the court, not the construction of contractual arbitration rules. If the Rules were ambiguous, the principle stated in Bunge SA v Deutsche Conti-Handels-Gesellschaft MBH (No. 2) applied: a legitimate claim should not be barred except by clear words.
3. Pricing issue. It was common ground that clause 15.10 of the Sale Contract displaced Rule 224 at least to the extent that, following an ineffective seller’s call, fixation was at the buyer’s call. The TAC had not decided whether the Buyer’s purported synthetic fixation complied with clause 15.10. The Court could not decide that issue because the relevant communications were incomplete, the issue exceeded the formulated permission point, and the TAC’s views were important.
4. The Award was therefore remitted to the TAC under section 69(7) of the Arbitration Act 1996. If the Buyer’s fixation was valid, the Synthetic Price would apply. If it was invalid, the TAC would determine the consequences, including whether clause 3.5 of the September Agreement or Rule 224 had any relevance. Rule 224 could not directly apply where the buyer’s call arose only after the day before first notice day; its possible relevance on another contractual basis was left open.

• Technical Appeal Committee, International Cotton Association: awarded that the Seller had commenced arbitration within time and that the Limit Down Price applied under ICA Rule 224.
• High Court (Commercial Court): permission to appeal was granted by Burton J on 24 February 2015. The Court upheld the Award on commencement, but remitted the pricing issue to the TAC for reconsideration.