Soprim Construction SARL v Republic of Djibouti

Under section 67 of the Arbitration Act 1996, a jurisdictional challenge is determined by rehearing the jurisdiction question. The court gives the arbitrator’s decision no independent weight.

Contractual provisions must be interpreted objectively and in their contractual and commercial context. Where parties have intentionally conferred enforceable third-party rights, an amendment will not be construed as removing them by implication or by a side wind. Clear and unequivocal language is required. A clause excluding the operation of the Contracts (Rights of Third Parties) Act 1999 must be read as a whole and in context. Article 1.2.5(a) did not extinguish the third-party rights previously conferred by Article 12.1.3.

Soprim Construction SARL challenged an interim arbitration award under section 67 of the Arbitration Act 1996. The arbitration concerned measures taken by the Republic of Djibouti against Soprim’s equipment and business.

The arbitrator decided that Soprim was a subcontractor entitled to enforce exemptions and benefits in Article 12.1.3 of a concession agreement under section 1 of the 1999 Act. He nevertheless held that Article 1.2.5(a) of a later addendum excluded the operation of the Third Parties Act and extinguished those rights. Soprim challenged that conclusion. The issue was whether the addendum had removed Soprim’s right to enforce Article 12.1.3 and, consequently, whether the tribunal had substantive jurisdiction.

1. Section 67 challenge. The court reheard the jurisdiction question and did not defer to the arbitrator’s decision. The authorities cited on this point were Azov Shipping Co v Baltic Shipping Co (No 1) [1999] 1 Lloyd’s Rep 68 and Dallah Real Estate v The Ministry of Religious Affairs [2011] 1 AC 763.
2. Existing third-party rights. Before the addendum, Article 12.1.3 purported to confer benefits on expressly identified third parties. In the absence of any contrary indication, those parties had rights to enforce the provision under section 1(1)(b) of the 1999 Act. That conclusion was not challenged.
3. Construction of Article 1.2.5(a). The substantive wording of the clause naturally excluded third-party enforcement rights arising under the 1999 Act. The opening saving words had to be considered in the contractual context, however. The Republic’s construction would leave the saving provision empty because the agreements contained no express provision engaging section 1(1)(a). Soprim’s construction would largely deprive the exclusion of effect, but was nevertheless a possible meaning.
4. The court rejected the Republic’s submission that the clause preserved benefits for third parties while removing their right to enforce them. The clause concerned enforcement and enjoyment of the terms, and was not directed to preventing benefits being conferred. Nor could boilerplate wording determine the construction of the particular agreement.
5. Objectively construed, rational parties who had recently granted enforceable rights would not be taken to have removed them without a clear reason or clear language. The addendum expanded Article 12.1.3 for the benefit of financiers, which was inconsistent with an intention to remove enforcement rights. The court also rejected the suggested distinction between enforceable benefits and incidental benefits. The discussion of Prudential Assurance Company Ltd v Ayres [2007] 3 All ER 946 did not alter that conclusion.
6. The court preferred the interpretation that Article 1.2.5(a) did not vary the concession agreement so as to extinguish Soprim’s right to enforce Article 12.1.3. The addendum issue was therefore decided in Soprim’s favour, and the arbitrator had substantive jurisdiction, subject to any remaining issues.

• Arbitration: On 12 March 2015, Sir Gordon Langley issued an interim award. He found for Soprim on the subcontractor issue but for the Republic on the addendum issue.
• High Court (Commercial Court): The court reheard the jurisdiction question under section 67 of the Arbitration Act 1996, disagreed with the arbitrator on the addendum issue, and held that the tribunal had substantive jurisdiction.