Niagara Maritime SA v Tianjin Iron & Steel Group Company Ltd

This is an application by the claimant owners (“the owners”) for the continuation of the order made by Burton J on 21 July 2011 for anti-suit injunctive relief against the respondents/intended defendants (“the defendants”). That application was attended by counsel and solicitors representing the defendants without prejudice to their position that there was no arbitration agreement and no foundation for the owner’s application. Since the hearing before Burton J, the defendant’s solicitors, Reed Smith, have written to the court on 27 July 2011 to inform it and the claimants that they were no longer instructed and would not be appearing on the return date of today.

By a bill of lading dated 7 July 2009, the owners agreed to carry a consignment of iron ore (“the cargo”) from Brazil to Tianjin, China, on board their vessel the MV Good Luck (“the vessel”). The bill of lading was in the Congen Bill form and was consigned to order. It stated on its reverse side that “all terms and conditions, liberties and exceptions of the charter party dated as overleaf, including the law and arbitration clause are herewith incorporated.” The front of the bill stated “freight payable as per charter party.”

The only charter party in existence at the time was the time charter between the owners and Weill International SA or its nominee. Clause 78 of that charter party provides for English law to apply. Clause 91 of the charter party contains an arbitration clause which provided for LMAA arbitration in London. The clause stated, “Any dispute or controversy relating to or arising out of or in connection with this charter party…” shall be referred to arbitration.

During the voyage, an incident occurred off Singapore in which the vessel collided with seven other vessels and grounded. General average was declared. A LOS salvage agreement was entered into. The first intended defendants, the receivers, were the holders of the bill of lading. They, or their insurers, the second intended defendant, PICC, were required to put up salvage security. The vessel and cargo were successful salved and the receivers took delivery of the cargo in October 2009. A general average adjustment was published in March 2010, which assessed cargo’s contribution as being US$ 242,155.39. This has not been paid.

In October 2010, the owners became aware that the receivers and PICC had commenced proceedings against them in the Tianjin Maritime Court in China, seeking an indemnity in respect of their salvage contribution. The claim averred that the cargo had been carried by the Good Luck by the defendant “Under number 1 bill of lading” and it averred that the owners had failed to carry it safely to its destination, indicated damages were to be claimed, the quantum of which was estimated to be in the region of US$ 6 million.

The owners submit that the claim brought in China was plainly a claim “relating to or arising out of or connection with the bill of lading, and thus within the scope of the arbitration clause incorporated into the bill of lading. In December 2010, the owners filed an application objecting to the jurisdiction of the Chinese court on that ground.

On 7 February 2011, the owners commenced arbitration in London in respect of any and all disputes under the bill of lading, including in particular the owners’ claim for general average and the owners’ claim for declarations that the vessel was seaworthy and that they have no liability to indemnify cargo owners in respect of salvage contributions.

On 21 February 2011, the receivers’ solicitors wrote denying that there was any arbitration agreement between them and the owners, but, without prejudice to that, appointing Mr Hamsher as their arbitrator. In March 2011, the owners responded to the receivers’ denial of the arbitration agreement by making an urgent application under section 30 of the Arbitration Act 1996 for the tribunal to rule on its own jurisdiction. As explained in the witness statement of Mr Hall, the section 30 procedure took some time, whilst the parties made submissions to the arbitrators and it was not in fact until 20 July 2011 that an award in which the arbitrators confirmed that they had jurisdiction was issued.

Meanwhile, on 7 June 2011, the Tianjin Maritime court (TMC) rejected the owners’ objection to jurisdiction. They stated that the terms on the back of the bill of lading did not constitute effective incorporation of the arbitration clause. The TMC decision on jurisdiction is being appealed by the owners. The current position is, therefore, as follows. There are proceedings in the Chinese court still at the jurisdiction stage. Although the TMC has made a decision accepting its jurisdiction, that decision is under appeal. The arbitration tribunal has made its award on jurisdiction and is in a position to embark on consideration of the substantive dispute.

Against that background the owners seek an interim anti-suit injunction against the receivers and PICC to restrain them from continuing the Chinese proceedings or from prosecuting any other proceedings relating to the bill of lading contract, other than by way of London arbitration.

The court has jurisdiction to issue an injunction under section 37(1) of the Senior Courts Act 1981. It has been held that, in exercising its discretion under section 37, the court should have regard to matters which arise under section 44 of the Arbitration Act 1996. Under section 44 of the Arbitration Act, the court has jurisdiction to issue an anti-suit injunction, being an order for the preservation of assets within section 44(3): see Starlight Shipping v Tai Ping [2008] 1 Lloyds Rep 230 at paragraph 21.

The court’s powers under section 44 arise in the case of urgency. This is a case of urgency because, as explained by Mr Hall, the Chinese appeal court is expected to render its decision on the owners’ jurisdiction appeal imminently. If it dismisses the appeal, the TMC will then proceed to consider the substantive merits and may do so within a short timeframe. Further, the tribunal has no power or is unable to act effectively because of its inability to issue an injunction against PICC and its inability to issue final injunctions. There is, therefore, jurisdiction under section 44 to issue an injunction against the receivers. The owners contend there is also jurisdiction to issue an injunction against PICC because an anti-suit injunction would be an order “for the purposes of and in relation to arbitral proceedings”, and also because, insofar as the owners have a right to enforce the arbitration clause against PICC, subrogated insurers, that is a chose in action which falls within section 44(3).

Even if that be wrong, it is clear that the court has jurisdiction under section 37(1) of the Senior Courts Act to issue an injunction against both the receivers and PICC.

The position of PICC, as subrogated insurers, has been addressed in a number of authorities which are conveniently summarised in the Starlight Shipping case at paragraphs 12 to 13. In that case Cooke J observed as follows:

“12.

As a matter of English law which governs the Bill of Lading and charter party contracts, the Cargo Owners are clearly bound by the arbitration clause incorporated in the Bill of Lading issued by the Owners, to which the Cargo Owners became party. In accordance with principles laid down in a number of authorities, including The Angelic Grace [1995] 1 LLR 87, where contracting parties agree to refer disputes to arbitration and a claim falling within the scope of the arbitration agreement is made in proceedings elsewhere, the English court will ordinarily exercise its discretion to restrain the prosecution of those proceedings in the non-contractual forum, unless the party suing in that forum (the burden being on him) can show strong reasons for proceeding there. No strong reason is available to the Cargo Owners here to militate against the grant of such an injunction where, as a matter of English law, the arbitration clause plainly binds. Damages would for all the reasons given in the authorities, be an inadequate remedy for breach of such a clause since its very nature requires the parties to have their disputes determined in arbitration. A party to such an agreement should not be put to the trouble of having disputes determined elsewhere in a manner contrary to the express contract between the parties.

13.

It is also clear as a matter of English law that the insurers are similarly bound by the arbitration clause in the Bill of Lading. In The Jay Bola [1997] 2 LLR 279 (CA) Hobhouse LJ said at page 286, after examining earlier authorities:-

"These authorities confirm that the rights which the insurance company has acquired are rights which are subject to the arbitration clause. The insurance company has the right to refer the claim to arbitration, obtain if it can an award in its favour from the arbitrators, and enforce the obligation of the [other party] to pay that award. Likewise an insurance company is not entitled to assert its claim inconsistently with the terms of the contract. One of the terms of the contract is that, in the event of a dispute, the claim must be referred to arbitration. The insurance company is not entitled to enforce its right without also recognizing the obligation to arbitrate."

14.

The insurers here say that they are not bound by the arbitration clause as a matter of the law of the People's Republic of China. This, however, is irrelevant so far as these courts are concerned because the cargo claim is one which gives rise to a dispute "arising under the contract" and is therefore arbitrable. This is straight forward as a matter of analysis of English private international law and is established by the decision of Colman J in The Front Comor [2005] 2 LLR 257 at paragraphs 32-33 and Aikens J in The Ivan Zagubanski [2002] 1 LLR 106 at paragraph 52(1) and paragraph 54. The only rights under the Bill of Lading contract which are capable of being transferred to the insurers by way of subrogation are those which must be enforced by arbitration. As Colman J put it, the duty to arbitrate is an inseparable component of the claim transferred to the insurers as part of the subrogated rights.”

It follows that I am satisfied that the court has jurisdiction to grant the relief sought against both the receivers and PICC.

The applicable principles, where the claimants can satisfy the court to the requisite high degree of probability that there is an arbitration or jurisdiction agreement which the court should enforce, are that the court will enforce such an agreement unless strong reason to the contrary can be shown. Those principles are clearly set out in a number of authorities and are conveniently summarised in paragraph 12 of Cooke J’s judgment in the Starlight case.

As to whether the claimants can show to the requisite high degree of probability that there is a binding arbitration agreement, I am satisfied that they can do so. In this connection they rely, first of all, on the arbitration award in which the arbitration tribunal has fully and clearly addressed the issue, addressed the various arguments raised by the respondents as to why there is no arbitration agreement, but found and held clearly that there was and that they accordingly have jurisdiction. In reaching that decision they have relied on well-established principles of English law, which, on English conflicts of law principles is clearly the governing law, and in particular the cases concerned with the incorporation of arbitration clauses into bills of lading which culminated in the Court of Appeal decision in The Nerano [1996] 1 Lloyds Rep 1.

The owners can accordingly show to the requisite standard there is an arbitration agreement which they can enforce against both the receivers and PICC as subrogated insurers, who are asserting claims under the bill of lading and they can show the requisite connection in relation to the Chinese proceedings, bearing in mind that those are proceedings which it appears are brought under the bill of lading.

I turn then to consider whether strong reason has been shown as to why the court should not grant an injunction and protect the right which the claimant has under the arbitration agreement.

At the hearing before Burton J, the only reason which was put forward by the defendants as to why it might not be an appropriate case to exercise the court’s discretion was that of delay. It was pointed out that the Chinese proceedings were commenced in October 2010, but it was not until July 2011 that the owners sought relief from the court, and it was submitted that that should tell against the grant of relief.

However, although the proceedings in China were commenced in October 2010, it was not until 21 February 2011 that the defendants first raised the issue that there was no agreement to arbitrate. Once that issue had been raised, the owners reacted promptly and, on 4 March 2011, issued an urgent application for the tribunal to rule on its own jurisdiction under section 30. I consider it was an appropriate reaction for them to resort to the section 30 procedure as the first port of call, once the issue of the existence of the arbitration agreement had been raised.

Unfortunately that procedure took longer than had been envisaged and, in the light of developments before the Chinese courts, the owners were driven to apply to this court on 21 July 2011 for the injunctive relief. It seems to me that, in the light of that chronology, no real criticism can be laid against the owners in terms of the expedition with which they brought this application on. Moreover, it is not as if the proceedings in China have gone beyond the jurisdictional stage. As matters stand, there is an appeal on jurisdiction. No proceedings on the merits have yet commenced or been fixed. I have been referred in relation to the issue of delay to Raphael onThe anti-suitinjunction in which he observed at 8.11 as follows: (1) the length of delay in itself is of less importance than the extent to which the foreign proceedings have progressed during the delay; (2) justifiable delay will not be given serious weight against the grant of an injunction; (3) waiting for a foreign jurisdictional challenge to be determined is less important than permitting foreign proceedings on the merits to unfold.

Having regard to those considerations; as to point (1), the foreign proceedings have not progressed far during the period of delay, if indeed there is any culpable delay at all; (2) the delay is, for reasons I have already given, justifiable; and (3) the waiting in this case has been for the jurisdictional challenge and there has been no embarkation on a consideration of the merits in those proceedings.

For all those reasons, I consider that delay is not a strong or good reason why as a matter of discretion the court should not grant an injunction to protect the owners’ rights.

Other factors which the owners rely upon in support of continuation of the injunction are that the refusal of relief will entrain concurrent or parallel proceedings with all the consequences often deprecated by the courts, such as the risk of inconsistent judgments, a race to judgment, duplication of costs, et cetera. They also submit that the refusal would place the owners, if its jurisdiction appeal fails, in a difficult predicament of being forced to choose between defending the Chinese proceedings on the merits, thus running the risk of having been held to have submitted to the jurisdiction, or letting them go undefended. They also point out this is a case where damages may not merely be an inadequate remedy, but unobtainable in fact. That is because any award of damages would have to be enforced against the receivers and/or the PICC in China and that it may be doubtful whether the Chinese court would recognise or enforce any award of the tribunal for damages for breaking the arbitration to agreement, given the stance which it has taken in relation to the issue of jurisdiction to date.

For all those reasons, I am satisfied this is an appropriate case for the court, in the exercise of its discretion, to continue the order granted by Burton J and I so order.