DHL Project & Chartering Limited v Gemini Ocean Shipping Co Limited

This appeal concerned whether a fixture recap expressly stated to be "subject shipper/receivers approval" contained a binding arbitration agreement and whether the separability principle allowed an arbitral tribunal to decide whether a binding charterparty had been concluded. The court held that the phrase "subject shipper/receivers approval" operated as a pre-condition (a "subject") which negatived any intention to create a binding contract until the subject was lifted. Consequently there was no concluded arbitration agreement for the separability principle (section 7 Arbitration Act 1996) to protect, because separability applies to issues of contract validity rather than contract formation. The judge's approach to the proper standard of review under section 67 (a rehearing of jurisdiction) and the interaction with leave to appeal under section 69 was applied.

The parties negotiated a voyage charter in August 2020 for the named vessel "Newcastle Express". A broker circulated a "M'Term recap" recording agreed main terms but expressly stating "SUB SHIPPER/RECEIVERS APPROVAL" as a subject. The recap included a London arbitration clause and an attached proforma charterparty.

Procedural posture: The owner commenced arbitration after the charterer released the vessel when RightShip approval had not been obtained. The charterer did not participate in the arbitration. The sole arbitrator found that a binding charterparty had been concluded and awarded damages. The charterer challenged the award under section 67 of the Arbitration Act 1996 (lack of substantive jurisdiction); alternatively it sought leave to appeal under section 69.

Issues for determination:

• Whether the recital "subject shipper/receivers approval" was a pre-condition preventing formation of a binding charterparty (including an arbitration agreement).
• Whether the separability principle meant that an arbitration agreement could exist independently so as to vest jurisdiction in the arbitrator to decide whether the main contract had been concluded.
• Appropriate standard of review under section 67 and relationship to any section 69 appeal.

Court's reasoning: The court reviewed authorities on separability (including Harbour v Kansa, Fiona Trust, and statutory section 7) and on the distinction between issues of contract formation and contract validity. It accepted established commercial practice that "subjects" in chartering commonly operate as pre-conditions to formation, leaving parties free to withdraw until subjects are lifted. The separability principle and section 7 protect arbitration agreements from attacks directed at the validity of the main contract, but do not transform a non-existent arbitration agreement into a binding separate agreement where the parties did not intend to be bound at the relevant time. Applying ordinary contract formation principles (objective intention), the court concluded the subject negatived formation of a binding charterparty and therefore of any arbitration agreement. The judge's findings on rehearing under section 67 were endorsed; if section 67 had been decided differently, the court noted the s.69 appeal would have required determination below and possible further appeal.

Relief sought: The appellant sought to uphold the arbitrator's award by arguing separability; the respondent sought to set the award aside under section 67 and, alternatively, leave to appeal under section 69. The Court of Appeal dismissed the appeal.

The appeal is dismissed. The court held that the recital "subject shipper/receivers approval" was a pre-condition that negated any intention to create a binding charterparty (and thus a binding arbitration agreement) until the subject was lifted. The separability principle in section 7 Arbitration Act 1996 does not apply to issues of contract formation; it protects arbitration agreements from attacks on contract validity but cannot conjure a separate, binding arbitration agreement where none was formed.

Appeal from High Court (Commercial Court) Mr Justice Jacobs, [2022] EWHC 181 (Comm). The judge held the arbitrator lacked substantive jurisdiction under section 67 Arbitration Act 1996, granted leave to appeal under section 69 (and indicated he would have allowed that appeal), and the matter proceeded to the Court of Appeal, which dismissed the appellant's appeal (this judgment [2022] EWCA Civ 1555).