Court rules on ship repair contract dispute

Introduction

The High Court has recently delivered a judgment in the case of Mare Nova Incorporated versus Zhangjiagang Jiushun Ship Engineering Co., Ltd, addressing issues arising from an arbitration award concerning a ship repair contract. The judgment, handed down by His Honour Judge Keyser KC, involved challenges under sections 68 and 69 of the Arbitration Act 1996.

Background

The dispute arose from a contract for ship repairs between Mare Nova Incorporated, the owner of the vessel M/V "???S?", and Zhangjiagang Jiushun Ship Engineering Co., Ltd, a ship repairer based in China. The vessel underwent scheduled drydocking and repairs at the defendant's shipyard in March 2021. However, shortly after leaving the shipyard, the vessel experienced issues with its intermediate shaft bearing, leading to significant costs for the claimant.

Arbitration Proceedings

The claimant initiated arbitration proceedings, claiming damages for breach of contract, negligence, and under a guarantee clause. The defendant did not participate in the arbitration, disputing the applicability of English arbitration. The tribunal, led by Mr Ian Gaunt, ultimately rejected the claimant's damages claim, citing a discharge of liability under the contract's clauses.

High Court Challenge

Mare Nova Incorporated challenged the arbitration award under section 68, alleging serious irregularity due to the tribunal's reliance on a discharge of liability argument that had not been raised during proceedings. The claimant also appealed under section 69, arguing that the tribunal's legal interpretation was incorrect.

Judgment

Judge Keyser KC allowed the section 68 challenge, finding that the tribunal's decision constituted a serious irregularity, as the discharge of liability issue was not addressed during arbitration. The judge concluded that this irregularity caused substantial injustice to the claimant, who was deprived of the opportunity to argue against the discharge of liability.

Legal Analysis

The judgment highlighted the importance of adhering to the general duty of fairness in arbitration proceedings, as outlined in section 33 of the Arbitration Act 1996. The court emphasised that parties must be given a reasonable opportunity to present their case on all issues.

Section 69 Appeal

While the section 68 challenge was successful, the section 69 appeal was dismissed. The court noted that the discharge of liability question was not properly raised during arbitration, and thus, the appeal could not proceed. However, the court addressed the legal question, concluding that the tribunal's interpretation of the contract was clearly wrong.

Conclusion

The High Court's decision to remit the award for reconsideration underscores the necessity for tribunals to ensure that all relevant issues are addressed during arbitration. The judgment serves as a reminder of the courts' role in safeguarding procedural fairness in arbitration.

Learn More

For more information on contractor law, see BeCivil's guide to Contractor Law.

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