Mitsui & Co (USA) Inc v Asia-Potash International Investment (Guangzhou) Co Ltd

On a section 69 appeal, an arbitral tribunal must apply the orthodox contractual remoteness test. It must identify the general type or kind of loss claimed and decide whether that loss was within the parties’ reasonable or specific contemplation, when contracting, as not unlikely to result from the breach.

The existence or absence of a string of materially back-to-back contracts may be relevant, but it cannot replace that analysis. A tribunal must examine the nature of the breach, the contractual terms relevant to the claimed loss, and the extent to which differences between linked contracts matter.

A respondent’s notice cannot be used to obtain remission or other distinct relief based on a new point which the arbitral tribunal was not asked to determine.

Mitsui challenged a FOSFA Board of Appeal award under section 69 of the Arbitration Act 1996. The Board had awarded Mitsui damages for breach but rejected indemnity claims for liabilities arising elsewhere in the contractual supply chain, treating the contract as stand-alone and the losses as too remote.

Mitsui argued that the Board had applied the wrong legal test for remoteness. DGO contended that the Board had applied the correct test, or alternatively sought to raise a new argument based on clause 29 of the contract and remit that issue to the Board.

The central issues were whether the Board had properly addressed the type or kind of loss and reasonable contemplation, and whether DGO should be permitted to advance the late clause 29 case.

1. Appeal allowed. The question whether Mitsui’s indemnity claims were too remote was remitted to the Board of Appeal.
2. The orthodox rule in Hadley v Baxendale, as explained through Czarnikow v Koufos and Sylvia Shipping, remained applicable. The tribunal had to identify the type or kind of loss claimed and ask whether the parties would reasonably or specifically have contemplated it, at the time of contracting, as not unlikely to result from the breach. This was not an exceptional case requiring the broader assumption-of-responsibility analysis associated with The Achilleas.
3. The Board’s reasoning showed that it treated the absence of materially back-to-back contracts as determinative. It did not analyse whether the claimed losses were foreseeable despite contractual differences, which terms were relevant to those losses, or whether equivalent losses would have flowed under fully back-to-back contracts. The Board therefore misdirected itself on remoteness.
4. DGO’s proposed clause 29 argument was not permitted. CPR PD 62 §12.6 permits a respondent to oppose an appeal on grounds not fully expressed in the award, but does not provide a mechanism for seeking remission of a distinct issue which the tribunal was not asked to determine. Such grounds should ordinarily be raised at the permission stage, and late amendments are permitted only rarely. The application to re-amend the Respondent’s Notice was refused.

This was a section 69 appeal from a FOSFA Board of Appeal award dated 20 December 2021. The Court allowed the appeal on the remoteness issue and remitted that issue to the Board of Appeal. The judgment does not state a neutral citation for the arbitral award.