Trader Who 'Took Part' In Arbitration Proceedings Loses Right To Challenge Arbitrators' Jurisdiction

Broda Agro Trade (Cyprus) Ltd v Alfred C Toepfer International GmbH [2009] EWHC 3318 (Comm)

Background to dispute

The parties in this case were in dispute as to whether there was a validly concluded contract between them for the supply of milling wheat. Toepfer had commenced GAFTA arbitration against Broda pursuant to the GAFTA arbitration clause in that contract, claiming damages for breach of contract. Broda maintained that no valid contract had been entered into and therefore that the arbitration clause in the contract was not binding on them.

The GAFTA arbitration tribunal dealt with the question of their own jurisdiction as a preliminary issue. Broda's foreign lawyers disputed GAFTA's jurisdiction in writing but that correspondence was stated to be "without prejudice and with full reservation of rights".

Broda also sought and obtained a declaration from the Russian court that there was no validly concluded contract between the parties. Nonetheless and with knowledge of the Russian court decision, GAFTA issued an Interim Award on Jurisdiction, concluding that there was a binding contract.

Both parties subsequently served submissions in the substantive dispute. Broda's submissions dealt with issues of liability and damages, as well as summarising their reasons for continuing to contend that the GAFTA tribunal lacked jurisdiction. The Tribunal eventually delivered its Final Award, finding that Broda were in breach of contract and awarding Toepfer damages of over US$5 million plus interest and costs. Broda appealed the Final Award to the GAFTA appeal tribunal. However, it also sought to challenge the Tribunal's jurisdiction in the Commercial Court by seeking relief under sections 72 and 67 of the Arbitration Act 1996.

Section 72 of the Arbitration Act 1996 preserves the common law entitlement which allows a person to seek a declaration that an arbitral tribunal lacks jurisdiction, but its application is limited to circumstances where the applicant has taken no part in the arbitration proceedings. Section 67 of the Arbitration Act 1996 allows a person to seek to set aside an arbitration award on the grounds of the tribunal's lack of substantive jurisdiction. However, pursuant to section 70(3) of the Arbitration Act 1996, such an application must be made within 28 days from the date of the award. Broda's application to set aside the Interim Award on Jurisdiction under section 67 was 14 months late so they sought an extension of time under...