Armada Ship Management (S) PTE Ltd v Schiste Oil And Gas Nigeria Ltd

An application under Arbitration Act 1996, section 32, is unlikely to be appropriate where section 72 protects an alleged party who has taken no part in the arbitration. A court determination may otherwise create an estoppel against a non-participant and undermine the statutory right to challenge the existence, scope or constitution of the arbitral process. The tribunal’s permission and the potential for substantial costs savings do not overcome that difficulty. Where section 72 is not engaged, the statutory requirements may be satisfied where the jurisdiction issue is substantial, the application is made promptly, and court determination offers efficiency, finality and legal certainty.

The claimant sought declarations concerning the jurisdiction of a sole arbitrator appointed by the President of the London Maritime Arbitrators Association under a charterparty. The charterparty contained conflicting amendments concerning whether one or three arbitrators were required and uncertainty about the interaction between the LMAA Terms and the UNCITRAL Arbitration Rules.

The defendant had not participated in the arbitration or the court proceedings. The application was made under section 32 of the Arbitration Act 1996, with the tribunal’s permission. The central issue was whether section 32 could properly be used where the defendant retained the protection afforded by section 72.

1. Application refused. The court declined to determine the arbitrator’s substantive jurisdiction because the defendant had taken no part in the arbitration and was therefore within section 72 of the Arbitration Act 1996.
2. Section 72 gives an alleged party who does not participate a substantial protection. It may challenge whether there is a valid arbitration agreement, whether the tribunal is properly constituted, and what matters have been submitted to arbitration. The provision should be construed with at least a degree of generosity.
3. A section 32 determination made in the defendant’s absence could prima facie bind it or create an estoppel. Section 72 does not provide an effective route to challenge such a prior court determination. A qualification in the order stating that section 72 rights remained unaffected would not cure the problem, since the determination would still have been made without the defendant’s participation.
4. The court should not assume that the defendant would later participate. Nor was the tribunal’s permission, the importance of the issue or the desirability of court assistance determinative. Since the determination could not properly bind the defendant, there was no good reason for the matter to be decided by the court.
5. Had section 72 not applied, the section 32 conditions would have been met. The issue was capable of producing substantial savings in costs, the application was made without undue delay, and the tribunal’s permission supplied a cogent reason for court determination. The declarations also concerned substantive jurisdiction.
6. On the merits, the court considered that the amendments showed an intention to provide for a sole arbitrator. The appointment mechanism was otherwise substantially unworkable. Read coherently, the LMAA Terms and UNCITRAL Arbitration Rules permitted the President of the LMAA to act as appointing authority, with the LMAA Terms providing the practical mechanism for avoiding deadlock.
7. The claimant’s costs were treated as costs in the arbitration. Had the application been determined, the claimant would have received its costs.