Win Some, Lose Some: English Court Considers Contractual Limit On Period To Bring A Claim In Arbitration Under Section 12 Of The Arbitration Act 1996

The English Commercial Court (the Court) has considered1 the principles governing contractual time-bars and an application under s12 of the English Arbitration Act 1996 (the Act) to extend a contractually agreed limitation period to allow the claimant to bring claims in an arbitration.

As a matter of English law, parties are generally held to the consequences of exceeding a contractual time-bar, especially when the consequences are explicit. Parties should, therefore, be wary of agreeing such a deadline in circumstances where their ability to meet a deadline may potentially be impacted by the conduct or inaction of third parties. When such time-bar relates to the bringing of proceedings by arbitration, a court dealing with an application for extension of that time-bar under s12 will first consider whether there are exceptional circumstances which explain why the time-bar has been exceeded. Assuming that there are "exceptional circumstances", the court will then consider whether the parties would have contemplated that the time-bar "might not" have applied. Finally, in deciding whether to exercise its discretion to grant the extension, the court will consider whether the applicant has "acted expeditiously and in a commercially appropriate fashion to commence proceedings".

Context

Factual background

The parties to the proceedings were parties to back-to-back voyage charters and occupying the middle of the charter chain. The charters included an arbitration clause and the following time-bar at Clause 67:

"Any claim other than the demurrage claim under this contract must be notified in writing to the other party and claimant's arbitrator appointed within thirteen (13) months of the final discharge of the cargo and where this provision is not complied with, the claim shall be deemed to be waived and absolutely barred."

A dispute arose regarding the condition of the cargo. The holder of the bill of lading covering the cargo issued a Statement of Claim against the head owners at the top of the entire chain. This triggered various notices down the chain, which were alleged not to comply with the contractual time bar.

The claimant applied to the Court for:

declarations that their claims against the charterers had been brought in time, notwithstanding the wording of Clause 67; in the alternative, an extension of time under s12 of the Act either to validate the notices of arbitration they had served on the defendant charterers or for such extension of...