PEC Ltd v Asia Golden Rice Co Ltd

This is an application by the Applicant (“PEC”) for an order extending PEC’s time for making any application challenging the jurisdiction of the tribunal under section 67 of the Arbitration Act 1996 (“the 1996 Act”) until 28 days after the determination of the appeal in the GAFTA arbitration between the parties.

The application arises in connection with a disputed contract for the sale by the Respondent (“AGR”) to PEC of 25,000 mt of Thai Rice which, on AGR’s case, was concluded in May 2008 but was not performed by PEC.

By an award dated 2 July 2012 (“the Award”) a GAFTA tribunal (consisting of Mr Graham Perry, Mr Charles Debattista and Mr Kevin Haylock) held that:

PEC has made an appeal to the GAFTA Appeal Board which is due to be heard between 14 and 16 January 2013. The appeal does not relate to the issue of jurisdiction since under GAFTA Rules there is no appeal from a decision that the first tier tribunal has jurisdiction.

It was PEC’s primary submission that no extension of time is required for making any application under section 67 of the 1996 Act, on the grounds that time would only run under section 70(2) of the 1996 Act from the date of the GAFTA Appeal Award.

If, contrary to its primary case, the section 70(2) time limit runs from the date of the Award (2 July 2012), PEC seeks an extension of time pursuant to section 80(5) of the 1996 Act and CPR 62.9.

AGR’s position was as follows:

It was ultimately agreed between the parties that the Court had jurisdiction to grant an extension of time and should grant such an extension, with further directions also being agreed.

However, since the Court has itself to be so satisfied and the present case indicates that there is some uncertainty as to the legal position I shall briefly set out my reasons for so concluding.

The GAFTA 125 Arbitration Rules provide so far as material as follows:

“8.

ISSUES OF SUBSTANTIVE JURISDICTION, PROVISIONAL ORDERS AND AWARDS ON DIFFERENT ASPECTS

8.1

Issues of Substantive Jurisdiction

(a)

The tribunal may rule on its own jurisdiction, that is, as to whether there is a valid arbitration agreement, whether the tribunal is properly constituted and what matters have been submitted to arbitration in accordance with the arbitration agreement.

(b)

In the event that the tribunal determines it has no jurisdiction, GAFTA will notify the parties of the tribunal’s decision. Such decision shall be final and binding upon the parties subject to any right of appeal to a board of appeal pursuant to Rule 10. … In the event that the tribunal determines that it has jurisdiction, no appeal shall lie to a board of appeal.

…

9.

AWARDS OF ARBITRATION

…

9.4

Subject to any right of appeal pursuant to Rule 10 awards of arbitration shall be conclusive and binding on the parties with respect both to the matters in dispute and as to costs.

…

10.

RIGHT OF APPEAL

10.1

Save as provided in Rules 6.4, 8.1(b), 8.2, 19 and 21, either party may appeal against an award to a board of appeal provided that the following conditions are complied with: - …

12.

APPEAL PROCEDURE

…

12.6

The award of the board of appeal … shall be final, conclusive and binding.”

The 1996 Act provides so far as material as follows:

“67.— Challenging the award: substantive jurisdiction.

(1)

A party to arbitral proceedings may (upon notice to the other parties and to the tribunal) apply to the court—

(a)

challenging any award of the arbitral tribunal as to its substantive jurisdiction; or

(b)

for an order declaring an award made by the tribunal on the merits to be of no effect, in whole or in part, because the tribunal did not have substantive jurisdiction.

A party may lose the right to object (see section 73) and the right to apply is subject to the restrictions in section 70(2) and (3).

(2)

The arbitral tribunal may continue the arbitral proceedings and make a further award while an application to the court under this section is pending in relation to an award as to jurisdiction.

…

70.— Challenge or appeal: supplementary provisions.

(1)

The following provisions apply to an application or appeal under section 67, 68 or 69.

(2)

An application or appeal may not be brought if the applicant or appellant has not first exhausted—

(a)

any available arbitral process of appeal or review, and

(b)

any available recourse under section 57 (correction of award or additional award).

(3)

Any application or appeal must be brought within 28 days of the date of the award or, if there has been any arbitral process of appeal or review, of the date when the applicant or appellant was notified of the result of that process.

…

73.— Loss of right to object.

…

(2)

Where the arbitral tribunal rules that it has substantive jurisdiction and a party to arbitral proceedings who could have questioned that ruling—

(a)

by any available arbitral process of appeal or review, or

(b)

by challenging the award,

does not do so, or does not do so within the time allowed by the arbitration agreement or any provision of this Part, he may not object later to the tribunal's substantive jurisdiction on any ground which was the subject of that ruling.”

Whether the time for making an application under section 67 of the 1996 Act has expired

PEC submitted that the statutory provisions work in the following way:

PEC submitted that it is very clear under the GAFTA 125 Rules that GAFTA appeals are an “available arbitral process of appeal or review”. They stressed that the use of the word “any” in section 70 (2) is wide and deliberate and that the mischief to which section 70 (2) of the Act is directed is to prevent applications to the Court before a party has first exhausted any available process of appeal or review. In this connection, they pointed out that the Board of Appeal’s determination may be to reverse findings of the first tier tribunal, in which case an application to the Court by PEC may be, or become, unnecessary.

I agree, however, with AGR that the effect of GAFTA 125 Rules 8.1(b) and 10.1 is that a first tier award in which the tribunal determines that it has jurisdiction is “conclusive and binding” so far as the question of jurisdiction is concerned. The only way in which such a determination that the tribunal has jurisdiction may be challenged is by way of application to the Court under section 67 of the 1996 Act. The time limit for bringing such a challenge is “within 28 days of the date of the award” pursuant to section 70(3) of the 1996 Act. The first tier award must be and is the only relevant award for this purpose.

I also agree with AGR that it is wrong to state that time is not yet running under section 70(3) because PEC “has not first exhausted … any available arbitral process of appeal or review” within the meaning of section 70(2) of the 1996 Act. In particular, so far as the question of jurisdiction is concerned, there is no “available arbitral process of appeal or review” (emphasis added). This is clear from Rule 8.1(b) of GAFTA 125. It will be noted that PEC has (correctly) not raised any question of jurisdiction in its Statement of Case in the GAFTA Appeal.

It follows that under arbitration rules such as GAFTA 125 challenges to a decision of a first tier tribunal that it has jurisdiction must be made within 28 days of that first tier award regardless of whether there is an appeal on other matters, even overlapping matters, to the Board of Appeal.

AGR further submitted that in any event, it is doubtful that the words “available arbitral process of appeal or review” refer to GAFTA appeals at all. In this connection I was referred to the judgment of Gross J in UR Power v. Kuok [2009] 2 Lloyd’s Rep. 495 at [60], in which he expressed the view (obiter) that these words (in section 70(3) of the 1996 Act) did not refer to GAFTA appeal arbitrations. This was disputed by PEC who submitted that the GAFTA appeal procedure is a paradigm example of an “arbitral process of appeal”.

It is not necessary to decide this issue in the present case. However, I consider that this is very much an open question, notwithstanding the obiter comments made by Gross J. In particular, it is difficult to see how the GAFTA appeal procedure is not an “arbitral process of appeal” and, moreover, neither party was able to identify any “arbitral process of appeal” other than those provided under Rules such as those of GAFTA or FOSFA. The forceful practical point made by Gross J. was that the time limit for challenges to an appeal award should run, and has long been recognised to run, from the date of the award rather than from the uncertain time of notification of the outcome, which itself might differ as between the parties. A possible answer would be to construe section 70(3) as imposing the different time limit of 28 days from notification of the result of the arbitral process of appeal or review as applying in cases in which the appeal or review does not culminate in an award. Where it does culminate in an award then it is from the date of that award that time runs.

Regardless of whether or not that is correct I conclude that in this case the time limit for a section 67 challenge has expired and that therefore an extension of time is required.

Whether an extension of time should be granted

PEC applies for an extension of time under section 80(5) of the 1996 Act.

The principal factors of relevance to an application for extension of time are set out in Kalmneft v Glencore [2002] 1 Lloyds Rep 128 at [59]; see also The Amer Energy [2008] 1 Lloyds Rep 293 at [13]. I am satisfied that this is an appropriate case for an extension of time given in particular that (1) the length of the delay is short – 8 days; (2) there was some uncertainty as to whether the time limit applied so that PEC’s failure to comply with it is explicable and, moreover, was fuelled by a desire to avoid any unnecessary costs; (3) no real still less irredeemable prejudice has been suffered by AGR.

I shall accordingly grant an extension of time and give directions in the terms of the draft order provided by the parties.