Lavender Shipmanagement Inc v Ibrahima Sory Affretement Trading S.A. & Ors

On a section 67 challenge under the Arbitration Act 1996, the court must determine jurisdiction afresh by construing the arbitration agreement for itself. A letter of undertaking may, in its context, consolidate claims under several bills of lading and govern the constitution of the tribunal by incorporating an existing arbitration clause. A notice commencing arbitration is not invalid because it is inelegant or preserves alternative arguments, provided it objectively invokes the arbitration agreement and submits the dispute to arbitration. An extension of time is construed objectively and commercially, including by reference to the arbitration arrangement previously agreed. Permission to appeal under section 69 requires the tribunal’s legal ruling to be obviously wrong.

The claimant shipowner challenged a London arbitral tribunal’s preliminary award. The tribunal had held by majority that it possessed substantive jurisdiction and that a letter of undertaking consolidated claims arising under five bills of lading into one arbitration. The claimant also sought permission under section 69 of the Arbitration Act 1996 to appeal the tribunal’s construction of an extension of time.

The central issues were whether the letter of undertaking created or incorporated a consolidated arbitration arrangement, whether the notice of arbitration was effective, and whether the time extension applied to the consolidated arbitration.

1. Jurisdiction. A section 67 application is a rehearing. The court must decide for itself whether substantive jurisdiction exists, including whether there is a valid arbitration agreement, whether the tribunal was properly constituted, and what matters were submitted to arbitration under section 30 of the Arbitration Act 1996.
2. Construction of the letter of undertaking. Construed objectively against the contractual and commercial background, the letter of undertaking consolidated all claims concerning the single cargo into one London arbitration. The reference to a properly constituted tribunal referred back to clause 69 of the charterparty, which supplied the appointment machinery. The small claims procedure did not apply because the consolidated claim exceeded USD$100,000. The shipowners retained substantive defences under the individual bills of lading, but not an entitlement to require separate small-claims arbitrations.
3. Notice of arbitration. The notice was valid. Although inelegantly drafted and framed to preserve alternative constructions, it appointed an arbitrator under the letter of undertaking as its primary case and objectively submitted the cargo claims to the consolidated arbitration. Arbitration notices should be approached broadly and sensibly rather than formulaically.
4. Extension of time. The extension agreed by the owners’ authorised agent applied to the consolidated arbitration. The reference to proceedings “as per the above Bills of Lading” was properly construed in context as covering disputes under those bills which the parties had agreed to resolve in one arbitration.
5. The tribunal’s decision on the extension of time was not obviously wrong. Permission to appeal under section 69 was therefore refused. Both the section 67 challenge and the section 69 application were dismissed.