CH Offshore Ltd v Internaves Consorcio Naviero SA & Ors

An intermediary broker whose role is limited to transmitting communications between parties is not thereby subject to the full fiduciary duties owed by an agent. The scope of any duties depends on the nature of the relationship and the functions undertaken. Such an intermediary must communicate messages honestly, but need not disclose a party’s underlying bargaining position or the precise commercial spread where the parties know the payment structure and can enquire further. Payments are not “secret commissions” merely because their precise amount is undisclosed. For commission clauses tied to charter hire received, settlement sums attributable in whole or part to accrued hire may trigger the commission entitlement.

CH Offshore Ltd appealed under section 69 of the Arbitration Act 1996 against a majority arbitration award allowing claims for commission and consultancy fees by Internaves Consorcio Naviero SA, Maritima Altair Petromar SA and Lamat Offshore Marine Inc. The appeal concerned three questions: the duties owed by intermediary brokers; whether the agreements were unenforceable for illegality or public policy because of secret commissions; and whether sums paid under a settlement of charter-hire claims retained the character of charter hire for commission purposes.

1. The appeal was dismissed. The court found no error of law in the tribunal’s conclusions.

2. The tribunal’s findings established that Internaves and Maritima were mere intermediaries. They had no power to bind either party, CHO had its own broker, and the defendants were not agents of PDVSA. The relationship therefore did not attract the full fiduciary obligations associated with a conventional agency relationship.

3. The scope of an intermediary’s duties depends on the nature of the relationship and the functions undertaken. In the circumstances, the relevant duty was to transmit communications honestly. There was no duty to disclose PDVSA’s underlying bargaining position, the amount it might have paid disregarding commission, or the defendants’ commercial interest in maximising their commission. Imposing wider duties would deprive the intermediary of its commercial role.

4. The relationship with PDVSA was governed by Venezuelan law, and the tribunal’s conclusions on that relationship were findings of fact. The court therefore identified no appealable error concerning any duty of disclosure owed to PDVSA.

5. The agreements were not unenforceable for illegality or public policy. The fact that commissions were payable was known, the parties could have enquired about their precise amount, and there was no finding of dishonesty, corruption or fraud. Commercial opportunism did not amount to a quasi-criminal act engaging the illegality defence.

6. “Charter Hire” in the commission agreements included accrued hire paid late, recovered through proceedings, or paid as part of a settlement. The obligation to pay commission was triggered where part of the settlement sum discharged the claim for hire. It was immaterial that the settlement also released other claims or that allocation between claims required calculation.

• High Court (Commercial Court): CH Offshore’s section 69 appeal against the arbitration award was dismissed.
• Arbitration tribunal: By a majority, the defendants’ claims for commission and damages succeeded and CH Offshore’s counterclaim was dismissed.