Jiangsu Shagang Group Co Ltd v Loki Owning Company Ltd

A challenge under section 67 of the Arbitration Act 1996 proceeds by way of a rehearing. The court determines jurisdiction afresh on the evidence before it, without presuming that the tribunal was correct.

Where an arbitration agreement depends on a guarantee allegedly authorised by a principal, the party asserting jurisdiction must prove the authority on the balance of probabilities. Express actual authority requires the principal’s consent. Implied authority cannot ordinarily circumvent an established procedure requiring express approval.

The claimant challenged under section 67 of the Arbitration Act 1996 an arbitral tribunal’s award on substantive jurisdiction. The defendant, as owners of the vessel Pounda, claimed against the claimant as alleged guarantor of a charterparty made with the claimant’s subsidiary.

The charterparty contained a London arbitration clause and stated that the subsidiary’s obligations were to be guaranteed by the claimant. The tribunal found that the claimant had authorised the guarantee through an alleged oral approval and, alternatively, that the subsidiary had implied authority. The central issue was whether the claimant had authorised the guarantee.

1. Section 67 challenge. The challenge was by way of rehearing under section 67 of the Arbitration Act 1996. The court was entitled to determine jurisdiction afresh on the evidence then available, including evidence not before the arbitrators. The tribunal’s reasoning carried no presumptive status or particular weight, although cogent reasoning could assist the court (paras [13]–[14]).
2. Burden and issue. The owners bore the burden of positively establishing the existence of an agreement to arbitrate by proving that the guarantee had been authorised. The issue was one of fact to be determined on the balance of probabilities (paras [56]–[58]).
3. Express actual authority. An established practice required the claimant’s authorised representative to approve guarantees. The court found that this procedure was not followed for the Pounda charter. The relevant witness’s evidence was accepted, and the need for authority had probably been overlooked (paras [63], [70]–[79]).
4. The absence of contemporaneous documents did not justify an adverse finding. The evidence was assessed in the round, allowing for the passage of time, linguistic and cultural differences, and undocumented working practices (paras [68]–[69], [80]–[86]).
5. Implied actual authority. Implied authority is ordinarily ancillary to existing express authority and extends to acts necessary or ordinarily incidental to its exercise. The alleged authority was inconsistent with the established requirement for express approval. The owners abandoned this part of their case (paras [88]–[90]).
6. The owners failed to establish that the guarantee had been authorised. There was therefore no valid arbitration agreement conferring substantive jurisdiction on the arbitrators. The section 67 challenge was allowed, with consequential matters including costs left for agreement or further order (paras [91]–[93]).

First-instance challenge to an arbitral tribunal’s award on substantive jurisdiction. No prior court decision in the same matter is stated.