A recent High Court judgment rejected shipowners JOL and JWL’s attempt to circumvent an arbitration tribunal by filing an injunction for urgent relief. Alex Hudson, Director, and William Reed, Trainee Solicitor, summarise JOL & Anor v JPM [2023] EWHC 2486 (Comm).
Facts
In December 2017, two vessels (“ALPHA” and “BETA”, together “the Vessels”) were chartered by JOL and JWL (“Owners”) to JPM (“Charterers”), who subsequently subchartered them. These first Charterparties were supported by another company, SRS (“the Guarantor”), which owned the majority of Charterers. A key aspect in this case was one of the “Termination Events” listed in the Charterparty, which stated that Owners were entitled to terminate the Charterparty with immediate effect if the Guarantor’s shareholding in Charterer’s parent company, GHH, ever fell below a given threshold.
By 2 September 2023, GHH had suffered financial difficulties and a restructuring of the company resulted in the Guarantor’s shareholding falling below the threshold stated by the Termination Event. Owners therefore terminated the Charterparty, insisted that Charterers redeliver the Vessels immediately, then commenced arbitration against Charterers seeking an interim order forcing Charterers to redeliver the Vessels at once. The Tribunal did not feel it had the power to grant such an injunction. Thus, Owners applied to the Court for urgent injunctive relief under s.44 of the Arbitration Act 1996 (“the Act”) without the consent of other parties or the Tribunal.
The key question for the presiding judge to decide in this case was whether or not there was a level of urgency here for the purpose of preserving evidence or assets. S.44(3) of the Arbitration Act provides that:
“If the case is one of urgency, the court may, on the application of a party or proposed party to the arbitral proceedings, make such orders as it thinks necessary for the purpose of preserving evidence or assets.”
While this may seem a somewhat dubious pretext for ordering the redelivery of Vessels, it was established in Cetelem SA v Roust Holdings Ltd [2005] 1 WLR 355 that performance can be compelled for this purpose – and indeed that the order only had to be for the purpose of preserving evidence or assets, not that the order directly did this. Charterers, naturally, objected to Claimant’s application on several grounds, including that an interim order would effectively be final and would therefore take the overall matter out of the jurisdiction of the Arbitration Tribunal.
Judgment
The Court considered at length the requirement under s.44(3) of the Act for urgency. It was not swayed by the Owners’ argument that obtaining relief through arbitration would take an unacceptably long time. Whilst some risk to the Vessels might be suffered as a result of delay (for instance deterioration of the Vessels or loss of opportunity), this was not deemed significant enough to qualify as “urgency” under s.44(3) of the Act. The Court viewed that the realistic timeline of between six and eight weeks for the Tribunal to rule was certainly not long enough for Owners’ need for redelivery to be seen as urgent. The Court also accepted Charterers’ argument that granting an interim order would result in an end to the sub-charter chains and would “inevitably” involve Owners deploying the Vessels for their own purposes; this would clearly not be a reversable state of affairs and as such would be tantamount to a final decision.
The Court also considered the possibility that the Arbitration Tribunal may decide of its own accord that it could not fairly bring the case to a final determination within a reasonable time period. If that were to occur then, in the Court’s view, it would be open to the Tribunal to grant Owners permission to bring another application under s.44(5). The Court’s intervention in the arbitration process at this time could be more easily reconciled with the Arbitration Act’s section 1 general principle that “parties should be free to agree how their disputes are resolved” if a Tribunal had sanctioned the intervention, and the Court would likely consider the Tribunal’s views when reaching a final decision.
As such, the Court was not satisfied that there was sufficient urgency to grant the requested order and Owners’ application was refused.
Comment
This case provides valuable insights into both the “urgency” requirement of s.44(3) of the Arbitration Act, as well as a reaffirmation of the Court’s commitment to only intervening in the arbitration process where absolutely necessary. All possible measures were taken in this case to preserve parties’ right to resolve a dispute in whichever manner they see fit, as laid out in s.1 of the Arbitration Act.
This case also serves to highlight the wide range of situations in which an interim order can be useful if the Court sees fit to grant one – though it did not happen here, the Court did not categorically discount the possibility of ordering redelivery of a vessel for the purpose of preserving an asset in other circumstances.
For further information, contact:
Alex Hudson
Director
Alex@cjclaw.com