The Commercial Court has upheld a challenge under section 67 of the Arbitration Act 1996 (“AA 1996“) to an arbitral award in which the Tribunal ruled that it lacked jurisdiction over the dispute. The Tribunal’s decision was based upon its interpretation of the arbitration clause in a Russian language contract governed by English law, the meaning of which was ambiguous in translation.
The case of A v B [2018] EWHC 1370 (Comm) underscores the care that must be taken to ensure that English language terms such as the “London Court of International Arbitration” are properly referred to and translated in arbitration clauses drafted in foreign languages.
Factual Background
A (the “Claimant“) chartered a vessel to B (the “Defendant“) on the terms of a charterparty on the Asbatankvoy standard form (with amendments). The charterparty was written in Russian and governed by English law (the “Charterparty“). The Charterparty was separated into two distinct parts and provided that, in the event of a conflict between them, Part I was to take precedence over Part II.
Both parts contained arbitration clauses – Clause J (in Part I) and Clause 24 (in Part II) (the “Arbitration Clause(s)“). The appropriate translation of Clause J in Part I of the Charterparty was disputed, but it was common ground that the literal translation was:
“Arbitration proceedings – London international arbitration court, in accordance with the laws of Great Britain…“
It was common ground that Clause 24 in Part II of the Charterparty read, in translation, as follows:
“Arbitration. Any disagreements and disputes…arising out of the [Charterparty] are to be resolved by arbitration in New York or London, according to which of these places is provided for in Part 1…by a tribunal of three people, one appointed by the owners, one by the charterers, and one appointed by the two arbitrators elected in such a way.“
The words “New York or” were struck out.
The Claimant commenced proceedings in London by appointing Mr. Alan Oakley as its arbitrator. The Defendant followed suit, appointing their own arbitrator, Mr. Bruce Harris. Both arbitrators accepted their appointment under the London Maritime Arbitrators Association Terms (the “LMAA Terms“). At the time, the Defendant raised no objection to the arbitrators’ jurisdiction to hear the dispute or as to the application of the LMAA Terms.
Subsequently, the Defendant challenged the Tribunal’s jurisdiction pursuant to section 31 of the AA 1996. The Defendant’s case was that Clause J’s reference to “London international arbitration court” was “pathological” as there was no such body. The Claimant’s position was that Clause J simply provided for arbitration in London before an arbitral body and, therefore, the original arbitrators did have jurisdiction.
The Tribunal obtained the view of Russian speaking solicitors on the English translation of Clause J. They were persuaded by the fact that if the well known institution – the “London Court of International Arbitration” or LCIA – was translated into Russian, the result would be the Russian formulation used in Clause J or something very similar. It further found that there was a direct conflict between Clause J and Clause 24 as the LCIA Rules provide that the LCIA appoint arbitrators whereas Clause 24 provided for appointment by the parties themselves. The Tribunal therefore found that in light of the conflict, Clause J would prevail and so the Tribunal did not have jurisdiction over the dispute.
The Claimant challenged the Tribunal’s award under section 67 of the AA 1996.
Construing Arbitration Causes
Phillips J determined that the arbitrators, having not satisfactorily overcome the ambiguity of Clause J, were wrong to rule that they lacked jurisdiction to hear the dispute. While the matter was “by no means beyond doubt“[1], on the balance of probabilities, the parties’ intention was to refer to ad hoc arbitration in London by a tribunal appointed in accordance with the mechanism in Clause 24.
Phillips J considered that when construing provisions drafted in a foreign language, in particular where there is doubt as to the proper translation of that provision, the Court must reach its final determination by assessing evidence related to its translation together with the “usual tools of construction“.[2] These tools of construction included consideration of the contract as a whole. Whilst the conflict provision could not be ignored, the Judge found that it only became effective if a conflict actually arose. In determining whether there was a conflict, it is necessary to construe Clause J and Clause 24, which requires considering them together. Due to the ambiguity in Clause J, Clause 24 could not be ignored in determining the meaning of the arbitration agreement.
On the facts, Phillips J made three observations in support of his conclusions:
- The parties’ agreement for a mechanism for the appointment of arbitrators in Clause 24 would be inappropriate if the agreement in Clause J was to proceed with LCIA arbitration. As outlined in Article 5 of the LCIA Rules 2014, members of an LCIA tribunal are appointed by the LCIA and not the parties.
- Referral of maritime disputes to the LCIA is, according to Phillips J, unusual practice.
- Were it the intention of the parties to arbitrate before the LCIA, the parties should have taken greater care to identify that body.
The LMAA Terms
In the alternative, the Defendant further argued that the arbitrators could not exercise jurisdiction, had they wished to do so, on the basis that they accepted their appoint on LMAA Terms. The Defendant averred that, in the absence of agreement as to the operation of the LMAA Terms, no valid appoint had been made.
Phillips J distinguished the issues. Having determined the jurisdiction point, he also concluded that the LMAA Terms did apply to the arbitrators’ appointment. Citing the case of Fal Bunkering of Sharjah v Grecale Inc. of Panama[3], and its “reasoning which was entirely unobjectionable“[4], Phillips J concluded that since the arbitrators were clear in accepting their appointment that they did so on the LMAA Terms, both parties had agreed that their arbitrator would be appointed under those terms and therefore agreed with each other through their respective arbitrators that the LMAA Terms would apply.
Comment
Commercial parties and lawyers should take care when drafting arbitration agreements and ensure clarity of meaning in both the agreement’s native language, but also any language which is likely to matter following translation. Where relevant, parties should consider the incorporation of useful English acronyms or designations.
The judgment is available here.
[1] [2018] EWHC 1370 (Comm) [19].
[2] [2018] EWHC 1370 (Comm) [12]
[3] [1990] 1 Lloyd’s Rep 369.
[4] [2018] EWHC 1370 (Comm) [21].
