English Court Sets Aside Award On The Ground That The Arbitral Tribunal Lacked Substantive Jurisdiction

• Published date: 15 March 2022
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Contracts and Commercial Law, Arbitration & Dispute Resolution
• Law Firm: Herbert Smith Freehills
• Author: Mr David Nitek, Elizabeth Kantor and Arushie Marwah

In DHL Project & Chartering Ltd v Gemini Ocean Shipping Co., Ltd [2022] EWHC 181 (Comm), the Commercial Court has set aside an arbitral award under s67 of the Arbitration Act 1996 (the "Act") on the basis that the arbitral tribunal lacked substantive jurisdiction.

The case concerned a "subjects" provision which required "shipper/receiver's approval". The Court found that:

• the "subjects" provision was a pre-condition to the effectiveness of both the contract and the arbitration agreement contained within it;
• as "shipper/receiver's approval" was not in fact obtained, the "subjects" provision was not satisfied, and so neither the contract nor the arbitration agreement became binding on the parties; and
• the arbitrator therefore had no jurisdiction to decide the dispute, and the Award was set aside.

Background

DHL Project & Chartering Ltd (the "Charterers") and Gemini Ocean Shipping Co. Ltd (the "Owners") negotiated the terms of a fixture for a proposed voyage of the Owners' vessel MV Newcastle Express (the "Vessel") from Newcastle, Australia to Zhoushan, China in late September 2020.

After the parties concluded negotiations, a recap email was circulated reflecting the points of agreement. The recap contained 20 clauses, governed by English law, and arbitration in London as the dispute resolution mechanism. The 20 clauses were preceded by a critical "subjects" provision, which noted as follows:

"SUBJECT SHIPPER/RECEIVERS APPROVAL WITHIN ONE WORKING DAY AFTER FIXING MAIN TERMS & RECEIPT OF ALL REQUIRED CORRECTED CERTIFICATES/ DOCUMENTS

• RIGHTSHIP INSPECTION WILL BE CONDUCTED ON 3RD/SEPT. OWNERS WILL PROVIDE REQUIRED CERTIFICATES LATEST BEFORE VESSEL SAILING (INTENTION 5/SEP). OWNERS WILL ENDEAVOR TO PROVIDE ALL REQUIRED CERTIFICATES/DOCUMENTS EARLIEST POSSIBLE."

Other relevant clauses in the recap included: (i) Clause 2, which provided that the Vessel should be "Rightship approved" for the duration of the voyage, and referred to the Charterers "lifting their subjects"; (ii) Clause 20, which noted that the terms were "otherwise as per attached Charterer's proforma C/P with logical alteration"; and (iii) Clause 20.1.1 of the proforma, which stated, "[.] and the vessel name along with its particulars, for shipper's and receivers approval, which is not to be unreasonably withheld, within two working day".

At no point did the Charterers provide confirmation to the Owners that there had been approval by the shipper or the receiver i.e. the "subjects" had never...