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Maritime arbitration: care in commencement!

Easybiz Investments v Sinograin and another (The “Biz”) [2010] EWHC 2565 (Comm)

Easybiz Investments v Sinograin and another (The “Biz”) [2010] EWHC 2565 (Comm)

This decision of Mr Justice Hamblen in the Commercial Court shows care is needed when commencing arbitration proceedings, particularly if acting for a number of different claimants.

S.14(4) of the Arbitration Act 1996 provides:

Where the arbitrator or arbitrators are to be appointed by the parties, arbitral proceedings are commenced in respect of a matter when one party serves on the other party or parties notice in writing requiring him or them to appoint an arbitrator in respect of that matter.

The tanker “Biz” lost her rudder while on passage with a soya bean oil cargo and was towed to Cape Town. The vessel did not resume the voyage and the cargo interests had to tranship the cargo to destination. Recovery agents, W K Webster, were appointed to recover their losses.

The cargo was carried under 10 bills of lading for a number of different Chinese receivers and insurers. The bills incorporated the terms of a charterparty which included a London arbitration clause. There were therefore 10 separate claims under each contract of carriage.

The agents purported to commence arbitration proceedings for the claims by sending a single notice of appointment of arbitrator to the shipowners referring to the different bills of lading. The shipowners contended the notice was ineffective as it purported to commence a single composite arbitration for all the claims. The arbitrators ruled the notice was effective to start arbitration proceedings for the 10 different claims. The shipowners appealed to the court under s.67 of the Arbitration Act.

The Judge ruled that the arbitration notice was effective. S.14 was to be interpreted broadly and flexibly, without a strict or technical approach, especially where a notice was drafted by non-lawyers. It was important to look at the “substance” rather than the “form” and consider how a reasonable person would understand the terms of the notice. Here, the notice did identify each of the 10 different bills of lading and different claims. The Judge considered that a commercial party would appreciate that what was intended was a separate appointment of the arbitrator for each of the different claims.

Importantly, the Judge held that the notice did not by its terms state that the appointment was for the bills of lading collectively rather than individually, or suggest there was a single consolidated reference for all claims. The shipowners would naturally understand they should appoint one arbitrator to deal with all of the different claims.  

A rather generous interpretation of the notice perhaps and a quite different outcome may have occurred if slightly different wording had been used which suggested a composite or consolidated appointment.

Terry Donaghy
Partner, Weightmans LLP
0151 242 6528