GA-Hyun Chung v Silver Dry Bulk Co Ltd

A challenge under section 67 of the Arbitration Act 1996 may concern the proper constitution of the tribunal where one contractual party had ceased to exist before arbitration was commenced. It may also concern whether the arbitration agreement continued to operate. The court conducts a rehearing and is not confined to reviewing the arbitrator’s reasoning.

Under section 105 of the Marshall Islands Business Corporations Act, a dissolved company continues for three years for winding-up purposes. The directors’ statutory trusteeship supplies powers to carry out that winding-up. It does not create an indefinite corporate existence for future claims. A fraud claim is not exempt from the statutory three-year period merely because the alleged liability concerns fraud.

The claimant, acting as the former statutory trustee of Homer Hulbert Maritime Co Ltd, applied under section 67 of the Arbitration Act 1996 to challenge an award arising from the sale of a ship. The arbitration notice was issued after the company had filed articles of dissolution in the Marshall Islands.

The issues were whether the challenge concerned substantive jurisdiction, whether the company continued to exist under section 105 of the Marshall Islands Business Corporations Act through the trusteeship of its former director, and whether any objection had been waived. The central question was whether the company still existed when the arbitration was commenced.

1. Application allowed. The challenge was within section 67 of the Arbitration Act 1996. The court rejected the argument that the issue was merely a question of foreign law or fact already determined by the arbitrator.
2. A section 67 challenge proceeds by way of rehearing. The court makes its own determination on the evidence, although the tribunal’s reasoning may assist where cogent. If the company had ceased to exist, it could not appoint an arbitrator, receive a valid notice of arbitration or respond to that notice. The tribunal would therefore not have been properly constituted within section 30(1)(b). Alternatively, the arbitration agreement could not continue once one of its parties ceased to exist, engaging section 30(1)(a).
3. There was no waiver under section 73. The dissolved company had made no representation accepting the arbitrator’s jurisdiction, and the related company’s participation had been expressly limited to contesting jurisdiction.
4. Section 105(1) of the Marshall Islands Business Corporations Act continued the company for three years after dissolution, subject to the express extension for proceedings begun within that period. Section 105(2) made the directors trustees immediately upon dissolution and gave them powers to conduct the statutory winding-up. It did not independently extend the company’s life beyond the three-year period.
5. The statutory language was the correct starting point. The Delaware provisions were materially dissimilar and could not override the language of section 105 through the statutory uniformity principle. The Delaware decision in Krafft-Murphy v Kok was consistent with that conclusion because it concerned a different statutory mechanism involving court-appointed trustees or receivers.
6. Section 105 contained no exception for fraud claims. No court order restoring or continuing the company had been obtained. Homer Hulbert had therefore ceased to exist by October 2014, and the arbitration commenced in October 2014 was invalid.

First-instance decision. No prior appellate decision is stated in the judgment.