JOL & Anor v JPM
[2023] EWHC 2486 (Comm)
DHL Project & Chartering Limited v Gemini Ocean Shipping Co Limited
24 November 2022
[2022] EWCA Civ 1555
Court of Appeal
Two companies were negotiating a ship charter. The deal was 'subject to approval,' meaning it wasn't final until someone said yes. Before approval, one company backed out. The other tried to use a clause saying any disputes should go to arbitration. The court said the 'subject to' clause meant there was never a real agreement to begin with, so the arbitration clause didn't apply either.
Key Facts
- •DHL Project & Chartering Ltd (Respondent/Claimant) and Gemini Ocean Shipping Co Ltd (Appellant/Defendant) negotiated a voyage charter for the "Newcastle Express".
- •The "fixture recap" was expressly "subject shipper/receivers approval".
- •The recap included an arbitration clause: "GA/Arbitration to be in London, English [sc. Law] to be applied"
- •The Charterer did not participate in the arbitration initiated by the Owner.
- •The arbitrator found a binding charterparty had been concluded and awarded damages to the Owner.
- •The Charterer challenged the award under section 67 of the Arbitration Act 1996, arguing lack of jurisdiction.
- •The High Court held the arbitrator lacked jurisdiction but granted leave to appeal under section 69.
- •Rightship approval, a condition of the charter, was not obtained before the Charterer released the vessel.
Legal Principles
Separability of arbitration agreements: An arbitration agreement may have an independent life from the main contract, surviving its termination or even determining its initial validity.
Various cases including Enka Insaat ve Sanayi AS v OOO Insurance Company Chubb [2020] UKSC 38, Heyman v Darwins Ltd [1942] AC 356, Harbour Assurance Co (UK) Ltd v Kansa General International Insurance Co Ltd [1993] QB 701, Fiona Trust & Holding Corporation v Privalov [2007] UKHL 40, Arbitration Act 1996, section 7.
Section 67 challenge: A rehearing of the jurisdiction issue, not merely a review. The court decides the issue afresh, not bound by the arbitrator's reasoning.
Dallah Real Estate & Tourism Holding Company v Ministry of Religious Affairs of the Government of Pakistan [2010] UKSC 46.
Section 69 appeal: Confined to facts in the award; extraneous evidence is inadmissible.
The Barenbels [1985] 1 Lloyd’s Rep 528.
"Subject to" clauses in charterparties: Such clauses create pre-conditions to a binding contract, allowing either party to withdraw until the condition is fulfilled (lifted).
The Leonidas [2020] EWHC 1986 (Comm), Carver on Charterparties, Time Charters.
Contract formation: Requires offer, acceptance, consideration, mutual assent, and intention to be bound. A "subject to" clause negates the intention to create a binding contract until the subject is lifted.
RTS Flexible Systems Ltd v Molkerei Alois Müller GmbH & Co KG [2010] UKSC 14, Pagnan SpA v Feed Products Ltd [1987] 2 Lloyd’s Rep 601.
Outcomes
Appeal dismissed.
The "subject shipper/receivers approval" clause was a pre-condition negating the intention to create a binding contract, including the arbitration agreement, until approval was given. The separability principle did not apply because no binding arbitration agreement was ever formed.