Global menu

Our global pages

Close

Lawbite: an arresting arbitration award goes to the Supreme Court

  • United Kingdom
  • Litigation and dispute management
  • Real estate
  • Real estate dispute resolution

01-06-2016

NYK Bulkship (Atlantic) NV v Cargill International SA [2016] UKSC 20

An appeal of an Arbitral Tribunal’s decision on a point of law pursuant to s69 of the Arbitration Act 1996 (“1996 Act”) recently travelled all the way to the Supreme Court.

The case involved the interpretation of the word “…agent…” in a charterparty between NYK as owner of the ship in question and Cargill as charterer.  An off-hire clause had the effect of relieving Cargill of the hire charges during any period the vessel was arrested provided that the arrest was not as a result of any act, omission or default of “…the charterers of their agents…”.  Cargill sub-let the vessel as permitted by the charterparty.  The vessel was subsequently arrested as a result of a dispute between the buyer and seller of cement which the vessel was carrying.  The question was whether or not the company to whom the vessel was sub-let, the buyer and/or the seller of the cement were agents of Cargill.

The Arbitral tribunal found (by majority) in Cargill’s favour and NYK appealed.  The Commercial Court and subsequently the Court of Appeal (unanimously) agreed (but for different reasons) that the arrest was caused by the buyer and/ or seller as Cargill’s agents.  The Supreme Court took a different view. 

An agent in the context of such a clause cannot be limited to the strict legal meaning often associated with the word.  It could refer to sub-contractors further down the chain ultimately carrying out the charterer’s obligation.  The fact that those sub-contractors could be agents for some purposes did not mean that the charterer could be responsible for all acts of the sub-contractor.  There had to be some nexus between the sub-contractors’ actions, in this case those resulting in the arrest and the function being carried out as “agent” of Cargill.  The Supreme Court considered that the arrest was caused by matters which were not related to a right or obligation of Cargill and as such those actions were not carried out as Cargill’s agent. The Supreme Court upheld (by majority) the Arbitral Tribunal and dismissed the appeal.


Key points

  • The case is a rare illustration of the use of s69 of the 1996 Act procedure in arbitration appeals.  It is therefore helpful for all practitioners to note including Real Estate practitioners who may find arbitration clauses in leases apply to specific matters such as rent review disputes or the parties to a lease renewal decide to appoint a surveyor to act as arbitrator in resolving a dispute using the PACT process. 

  • Both the Court at first instance and the Court of Appeal remitted the Award to the tribunal once they had made their decision on the point of law.   The Commercial Court referring to the Tribunal as “very well placed to decide it”.  This highlights the working relationship between the English arbitration system and the Courts as different forms of dispute resolution.  

  • There is however ongoing debate as to the impact arbitration may have on the development of English Law in the commercial context, the Lord Chief Justice, Lord Thomas earlier this year commenting that the nature of Arbitration awards (being private and unreported) and the rarity of appeals reduces the potential for the courts to develop and explain the law.  The onward effect being that parties lose some of the certainty which Court decisions may give them on the workings of and interpretation of certain clauses in commercial agreements.  He made some suggestions as to how the concerns might be overcome but these may not be readily accepted by those who place high value on the current system.

For more information contact

< Go back

Print Friendly and PDF
Subscribe to e-briefings