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Notice of arbitration - sender beware

11 January 2019

A review of two recent cases, Sino v Dana and The Amity

These two recent cases concern service of notices of arbitration. The outcomes of the two cases were very different: in the former, the court found that service by email on a person in a company which was not even the respondent party was effective; by contrast, in the latter, the court found that service by email on an actual employee of the respondent party was not effective.

At first blush, it may seem that the decisions are contradictory. However, on closer examination, each outcome was dictated by the specific facts in each case.

Service under the Arbitration Act 1996

Section 76 of the Arbitration Act 1996 (the "Act") sets down the rules concerning service of a notice of arbitration. The parties are free to agree on the manner of service. This is sometimes expressly dealt with in the arbitration clause or a notices provision in the underlying contract. Otherwise, pursuant to section 76(4)(b) of the Act, service on the respondent company's registered address or principal office will suffice as effective service.

In practice, notices of arbitration are often served by email, perhaps, for example, through a broking channel or on the respondent's P&I Club. Whilst it is understood that section 76 of the Act is intended to allow for more flexibility than the standard service provisions under the Civil Procedure Rules, in such circumstances, problems can arise where service does not comply with any specific contractual methods or the Act. These problems arise when the respondent party fails to engage with the proceedings.

In the context of service on a company, to ascertain whether service is effective on a third party, or even an employee of that particular company, it is necessary to look at the underlying facts and apply the law of agency.

Sino v Dana [1]

In this case, Sino Channel Asia Ltd ("Sino"), whose owner was Mr Jung, agreed with Beijing XCty ("BX"), whose owner was Mr Zhou, that Sino would provide BX with financial services, by way of letters of credit, and BX would enter into back-to-back sale and purchase contracts in the name of Sino. Mr Zhou of BX delegated the work to Mr Cai, also an employee of BX, who handled day-to-day operational matters.

By a contract of affreightment, entered into between Sino and Dana Shipping & Trading Pte Singapore ("Dana"), Dana agreed to carry around 275,000mt of iron ore. The COA contained a London arbitration clause.

Sino defaulted under the COA and Dana commenced arbitration by serving a notice of arbitration. This notice of arbitration was sent by email to Mr Cai of BX. Sino did not take part in the arbitration proceedings and Dana was able to obtain an award in its favour. This award was eventually sent to Sino with a request for payment. Sino claimed this was the first they had heard of the arbitration and commenced proceedings in the High Court for a declaration under section 72(1) of the Act that the arbitral tribunal had not been properly appointed because Mr Cai of BX had not been authorised to receive service on behalf of Sino.

At first instance, the judge granted the declaration and held that Mr Cai did not have such authority. Dana appealed.

The Court of Appeal allowed the appeal and decided that Mr Cai did have authority. In reaching this conclusion, the Court of Appeal commented that the facts of this case were particularly unusual, and made a number of observations including:

  • There were no notice provisions within the COA requiring a particular method of service.
  • With the exception of one communication, all communications after the signing of the COA were between Dana and Mr Cai of BX acting on behalf of Sino.
  • Mr Cai of BX presented himself as "Daniel [Cai] of Sino Channel Asia", and he has been held out by the chartering brokers as being the "charterers' guy".
  • Mr Cai initially responded to the notice of arbitration, firstly to suggest that the parties resolve matters amicably, secondly to ask Dana for an extension of time to appoint an arbitrator and, most alarmingly, he also sent a fax to the arbitrator which purported to be on Sino's headed notepaper bearing at signature and stamp – this appeared to be a simple "cut-and-paste job".
  • Mr Jung of Sino was aware of the arbitration and had discussed it with Mr Zhou of BX. Mr Zhou told him to "ignore it" and said that he was dealing with it.
  • Sino's broker passed the notice to BX and not Sino.
  • The court considered that on the basis of the evidence, even if Mr Jung of Sino had received the notice, his response would probably have been to leave matters for BX/Mr Zhou to resolve.

Taking all the facts together, the court held that there was a very strong inference that Mr Cai of BX had the necessary implied actual authority to receive the notice on behalf of Sino. Further, the court agreed that Mr Cai of BX also even had ostensible authority, because he had carte blanche to act on behalf of Sino and the appearance given to Dana was that BX was to be dealt with for all purposes, and this extended to receipt of the notice.

In finding that Mr Cai of BX had authority to receive service on behalf of Sino, the court commented that it was a most unusual case and that the facts were remarkable because of the arrangement between Sino and BX, whereby Sino delegated all responsibility to BX.

The Amity [2]

In this case, disputes arose under a charterparty between the owners of the Amity and Glencore as charterers regarding delays at the loadport in circumstances where Glencore had instructed owners to wait before berthing. The charterparty contained a London arbitration clause.

The instruction from Glencore was sent by a certain Mr Oosterman of Glencore. Owners served their notice of arbitration on Glencore by sending it by email to Mr Ooseterman at his personal company address (i.e. not to a generic chartering or operations email). All further correspondence pertaining to the arbitration was sent to the same email address. Mr Oosterman never responded, including to emails serving claim submissions and the eventual application for a final and peremptory order for service of defence submissions.

Mr Ooseterman subsequently left Glencore and, in the absence of any defence from Glencore, the arbitrator published his award ordering Glencore to pay owners approximately USD 44,000 and costs. Glencore applied under section 72 of the Act to set the award aside. It said that it was unaware of the proceedings and submitted that service on Mr Oosterman was not valid because he had no authority to receive service of legal documents on Glencore's behalf. Owners contended that the service was effective because it was sent to a valid Glencore email address.

The court held that Mr Oosterman did not have authority to accept the notice of arbitration. In considering the point, much depended on Mr Oosterman's role within the company. On the evidence:

  • The court concluded that Mr Oosterman was a junior employee within the "Back Office World Department" - this was evident both from his salary and job description in his employment contracts.
  • He had an operational role at a relatively low level in the managerial structure.
  • The sending of an email to an individual employee's email account is different from sending it to an email address which is generic, such as the standard chartering addresses.

The court held that there was no express authority conferred on Mr Oosterman by Glencore to accept service of arbitral proceedings, either in his contract of employment or any other documents in this personal file. The court also held that there was nothing in the facts to support a finding of implied actual authority and that he had no ostensible authority because he was not being held out as having anything more than a limited operational role in relation to the voyage.

Conclusion

It is only in very rare cases that the court would find that an employee of a company other than the respondent would have the necessary authority to accept service. However, each case will turn on the facts. As a matter of good practice, the best way to avoid a dispute is to ensure service by a registered method on the respondent company's registered address. This is also important from the perspective of enforcement under the New York Convention, which also allows a respondent the right to defend enforcement of an arbitral award on the basis that they did not receive notice of the proceedings.

Checklist

  • Serve the notice on the registered address of the respondent company.
  • In potentially high-risk cases, when service is happening out of the jurisdiction, it may be prudent to obtain local legal advice to ensure that service is effective.
  • Ensure that the notice is sent to all relevant email addresses and preferably to a company's generic addresses such as "Ops" or "chartering" and not just to an individual employee.

[1] Sino Channel Asia Limited -v- Dana Shipping and Trading PTE Singapore and another [2017] EWCA CIV 1703

[2] Glencore Agriculture B.V. (formerly Glencore Grain B.V.) -v- Conqueror Holdings Limited [2017] EWHC 2893 (Comm)