MRI Trading AG v Erdenet Mining Corporation LLC [2012] EWHC 1988 (Comm)

Case No 2012 Folio 320[2012] EWHC 1988 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
IN THE MATTER OF THE ARBITRATION ACT 1996
AND IN THE MATTER OF AN ARBITRATION AWARD DATED 3 FEBRUARY 2012
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 20/07/2012
Before
MR JUSTICE EDER
Between
MRI Trading AGAppellantErdenet Mining Corporation LLCRespondent
Alain Choo-Choy QC and Matthew Cook(instructed by Watson, Farley & Williams ) for ClaimantsStephen Moriarty QC and Clare Ambrose(instructed by Clyde & Co.) for RespondentsHearing Hearing date: 29 June 2012
JudgmentMr Justice Eder :Introduction
[1]This is an appeal by MRI Trading AG (“MRI”) pursuant to s.69 of the Arbitration Act 1996 (the “1996 Act”) on questions of law arising out of an arbitration award dated 3 February 2012 (the “Award”). Leave to appeal was given by Christopher Clarke J on 23 April 2012.

The Original Contract

[2]As appears from the Award, MRI is a Swiss company. Erdenet Mining Corporation LLC (“EMC”) is a Mongolian mining company. On 28 June 2005, MRI and EMC entered into a contract for the sale by EMC to MRI of copper concentrates (the “Original Contract”). The detail of the Original Contract was not relevant to the dispute before the Tribunal. However, in summary, disputes arose between the parties about the performance of that contract and such disputes were referred to arbitration at the London Metal Exchange (“LME”) in 2008. That arbitration was resolved by way of a settlement agreement dated 30 January 2009 and signed by the parties shortly thereafter (the “Settlement Agreement”).

The Settlement Agreement

[3]Clause 1 of the Settlement Agreement provided as follows:
“Deliveries of Erdenet Copper Concentrates and Molybdenum Concentrates – EMC shall sell MRI Trading 40,000 WMT of EMC Copper Concentrates in each of 2009 and 2010 and 200 WMT of EMC Molybdenum Concentrates in 2009, all pursuant to new, separate contracts between EMC and MRI Trading in the forms agreed at Schedules 1, 2 and 3 of this Settlement Agreement.”
[4]Clause 2 of the Settlement Agreement provided in effect that following signature by MRI and EMC of these new contracts, the Original Contract and all rights, obligations, claims and counterclaims of EMC and MRI under or in connection with the Original Contract were “terminated” and each waived all their accrued rights and obligations arising in connection with the Original Contract. Those three draft contracts referred to in Clause 1 were duly signed on the same date or shortly after the Settlement Agreement.[5]The contract for the sale of copper concentrates for 2009 (the “2009 Contract”) and the contract for the sale of molybdenum concentrates for 2009 (the “2009 Molybdenum Contract”) were performed without problems. It was the third contract – namely the contract for the sale of copper concentrates in 2010 (the “2010 Contract”) which gave rise to the present dispute, since EMC refused to make any deliveries under this contract.

The 2010 Contract

[6]The 2010 Contract consisted of 9 typewritten pages signed by both parties. In particular, it provided in material part as follows:
“WHEREAS [MRI] agrees to buy and [EMC] agrees to sell a copper flotation concentrate production of Erdenet Mining Corporation (“Concentrate”) on the terms and conditions hereinafter contained: 2. Duration – This Contract shall enter into force from the date of the last signature and shall remain in force until completion of the Parties’ obligations herein. 3. Quantity - The quantity of Concentrate to be delivered shall be 40,000 WMT plus or minus 10% at [EMC’s] option. 6. Dispatch 6.1 Shipping schedule shall be agreed during the negotiations of terms for 2010. 9. Deductions 9.1 Treatment Charge shall be agreed between [MRI] and [EMC] during the negotiation of terms for 2010. 9.2 Refining charge shall be agreed between [MRI] and [EMC] during the negotiation of terms for 2010. 25. Prior Agreements - This Contract shall constitute the entire agreement between the Parties hereto and supersedes all prior agreements and understandings, whether oral or written, in relation to the subject matter hereof. Except the terms of the Settlement Agreement between Parties dated 30 January 2009.”
[7]In addition, the 2010 Contract contained detailed provisions with regard to the quality and description of the material to be supplied [clause 4], how the concentrate would be delivered [clause 5], when railway bill instructions would be provided [clause 6.3], how the purchase price would be calculated [see below], Quotational Period [clause 10], Payment [clause 11], Title and Risk [clause 12], Insurance [clause 13], Weighing, Sampling and Determination of Moisture [clauses 14 and 15]. It also expressly provided that it was governed by English law [clause 23] and subject to arbitration under the LME arbitration rules [clause 22]. In relation to purchase price, pursuant to clauses 7, 8 and 9 of the 2010 Contract, the price that MRI would pay for the concentrates was to be calculated by reference to the copper and silver content of the concentrates:a. For copper, pursuant to clause 8, there would be a 1.1 unit deduction from the agreed copper content and MRI would pay for the balance at the daily LME US$ Copper Grade A Settlement quotation taken from the London Metal Bulletin, averaged over the quotational period. In addition, pursuant to clause 9, a treatment charge and a refining charge would be deducted.b. For silver, if the silver content was over 30 grams per DMT, MRI would pay for 90% of the silver content at the daily LME US$ London Spot quotation for Silver taken from the London Metal Bulletin, averaged over the quotational period. In addition, pursuant to clause 9, a specified silver refining charge would be deducted. A further specified deduction would also be made if the arsenic level in the concentrates exceeded a certain level.

The dispute

[8]In the event, no concentrates were shipped by EMC under the 2010 Contract. According to the Award, this was because “..no agreement was reached on either the [Treatment Charge/Refining Charge] or the shipping schedule.” This is a reference to clauses 6.1 (shipping schedule),9.1 (“TC”) and9.2 (“RC”). On this basis, MRI claimed that EMC was in breach of contract and claimed damages for non-delivery in the sum of US$9,096,885.52 plus interest and costs. The dispute was referred to arbitration under the LME Arbitration Rules in accordance with the arbitration clause in the 2010 Contract.[9]The tribunal concluded that it should deal with the issue of liability first and therefore (as set out in paragraph 5 of the Award) the hearing which led to the Award was designed to address three issues:a. Was there an enforceable obligation on EMC to deliver the copper concentrates ?b. What is the reasonable price at which the copper concentrates should have been sold?c. When should the copper concentrates have been delivered? In the event, the tribunal concluded that the delivery obligation was “non-existent” and that MRI’s claim failed. Although all three issues were fully argued at the hearing, having answered the first question in the negative, the tribunal did not consider it necessary to answer the second and third questions and did not do so.

The tribunal’s reasons and conclusions

[10]At paragraph 13 of the Award, the tribunal considered how it should approach the issue of construction/implication on which the issue of enforceability depended and in particular what material it should take into account, specifically whether it should take account of the Settlement Agreement and the fact that the 2010 Contract (along with the other two contracts) were only entered into as part of that settlement, with the other two contracts having already been fully performed. In particular, the tribunal stated:
“The tribunal has considered to what extent if any the three contracts signed as a result of the Settlement Agreement are linked, and has concluded that in this issue it must rely simply on the construction of the contract under dispute.”
The tribunal then quoted certain parts of the Settlement Agreement and the two 2009 Contracts and, at the end of paragraph 13, stated: “In ….the absence of any reference to the Settlement Agreement in the contract under dispute, the tribunal concludes that the dispute is only as to proper construction of the contract under dispute”.[11]The tribunal then quoted certain passages from three authorities and, in paragraph 15, stated:
“15. The tribunal has considered whether or not clause 6.1 and 9.1 and 9.2 (shipping schedule and TC/RC) are a matter of detail, or a significant part of the pricing of the goods. While clearly aware that the largest part of the price was purely dependant upon the underlying LME copper price, the Tribunal is also aware, as was confirmed by the experts, that the negotiation of the TC/RC plays a significant role in the conclusion of concentrates contracts. Although the monetary value is considerably smaller than that of the underlying, it is still an amount of around $200,000 - $300,000. The tribunal concludes that the TC/RC is an integral part of the contract negotiation, and is not to be dismissed as a matter of detail. Likewise, the shipping schedule is not a matter of detail, as it needs to conform to the ultimate requirements of the final end-user. It is worth noting the following (Lewison, The Interpretation of Contracts) “The effect of uncertainty may be that no contract comes into existence; or it may be that one provision in an otherwise binding contract is unenforceable. Which of these two possibilities is likelier depends on the importance of the term which is uncertain. The more important the term, the more likely it is that the contract as a while is unenforceable.””
[12]The tribunal then quoted a long passage from the judgment of Rix LJ in Mamidoil-Jetoil Greek Petroleum Co SA v Okta Crude Oil Refinery AD [2001] 2 Lloyd’s Rep 76 and, at paragraphs 17 and 18 of the Award, concluded as follows:
“17. Clauses 6.1 and 9.1 and 9.2 constitute an agreement to agree. In Foley vs Classique Coaches, the court found that it could imply a term into the contract; however, in this case there had already been some lengthy period when the contract had been performed. In the case before the tribunal, as noted above, the contract in question is to be construed in the light of its own wording, and it is clear that there had been no part performance. Relevantly, in May and Butcher Ltd vs the King (1943), Viscount Dunedin observed “The simple answer in this case is that the Sale if Goods Act provides for silence on the point and here there is no silence, because there is a provision that the two parties are to agree.” “18. In the light of the above, the tribunal finds that the answer to the question “Was there an enforceable obligation on Erdenet to deliver the copper concentrates?” is no. The contract had left material terms as ‘agreements to agree’, and the tribunal has no option but to conclude that the delivery obligation was therefore non-existent.”
[13]On this basis, the tribunal held that MRI’s claim failed.

The questions of law

[14]The questions of law in respect of which leave to appeal was granted by Christopher Clarke J are as follows:a. Question 1: As a matter of law, should construction/implication in relation to the 2010 Contract be based solely on the wording of that contract without taking any account of the Settlement Agreement pursuant to which it was entered into and the other contracts which were entered into alongside the 2010 Contract?b. Question 2: In the light of the answer to question 1, was EMC’s obligation to deliver under the 2010 Contract unenforceable because it left the TC/RC and shipping schedule to be agreed subsequently or was the 2010 Contract to be performed on the basis of a reasonable TC/RC and reasonable shipping schedule if no express agreement was reached as to those aspects?

The proper approach

[15]On behalf of EMC, Mr Moriarty QC submitted that when approaching the question of whether an arbitration award reveals an error of law which calls for the award to be set aside, varied or remitted, there are four principles which a court needs to keep carefully in mind.a. First, as a matter of general approach, the courts strive to uphold awards. This means that, when looking at an award, it has to be read in a reasonable and commercial way, rather than with a view to picking holes, or finding inconsistencies or faults, in a tribunal’s reasoning: see, for example, General Feeds Imc. Panama v. Slobodna Plovidba Yugoslavia [1999] 1 Lloyd’s Rep. 688, at 695; Kershaw Mechanical Services Ltd. v. Kendrick Construction Ltd. [2006] 4 All ER 79, at [57]. This is particularly so when the tribunal comprises market men, since one is not entitled to expect from trade arbitrators the accuracy of wording, or cogency of expression, which is required of a judge: General Feeds Imc. Panama v. Slobodna Plovidba Yugoslavia [1999] 1 Lloyd’s Rep. 688, at 695.b. Secondly, where a tribunal’s experience assists it in determining a question of law, such as the interpretation of contractual documents, the court will accord some deference to the tribunal’s decision on that question. It will reverse the decision only if satisfied that, despite the benefit of that experience, the tribunal has still come to the wrong answer: Kershaw Mechanical Services Ltd. v. Kendrick Construction Ltd. [2006] 4 All ER 79, at [57].c. Thirdly, it is for the tribunal to make the findings of fact in relation to any dispute and any question of law arising from an Award must be decided on the basis of a full and unqualified acceptance of the findings of fact of the arbitrators: see The “Baleares” [1993] 1 Lloyd’s Rep. 215 at 228 which makes clear this is so regardless of whether the court thinks a finding of fact was right or wrong.d. Fourthly, when a tribunal has reached a conclusion of mixed fact and law, the court cannot interfere with that conclusion just because it would not have reached the same conclusion itself. It can interfere only when convinced that no reasonable person, applying the correct legal test, could have reached the conclusion which the tribunal did: or, to put it another way, it has to be shown that the tribunal’s conclusion was necessarily inconsistent with the application of the right test: The “Sylvia” [2010] 2 Lloyd’s Rep 81 at [54]-[55]. The same extremely circumscribed power of intervention applies when it is complained that a tribunal has incorrectly applied the law to the facts. It is only if the correct application of the law leads inevitably to one answer, and the tribunal has given another, that the court can interfere. Once a court has concluded that a tribunal which correctly understood the law could have arrived at the same answer as the one reached by the arbitrator, the fact that the individual judge himself would have come to a different conclusion is no ground for disturbing the Award: The Chrysalis [1983] 1 Lloyd’s Rep 503 at 507.[16]As to these submissions, Mr Choo-Choy QC disagreed strongly with the particular points made by Mr Moriarty QC in relation to the Award itself and the appropriate remedy. However, in broad terms, he did not disagree with the general principles as stated above although there was some debate as to the precise formulation of what is summarised in sub-paragraphs c. and d. and also the extent to which what is there stated applies in a case such as the present, where the issue is one of the proper construction of a contract. Traditionally, such a question has generally been regarded as a pure question of law. However, Mr Moriarity QC submitted that this is not so here because clauses 6.1,9.1 and9.2 must be construed in the context of the “factual matrix” which involves matters of fact and the tribunal’s conclusions were based upon the market experience of the tribunal’s members as well as the expert evidence which the tribunal heard. That submission raises some difficult issues which are potentially far-ranging but which are, in my view, unnecessary to resolve. For present purposes, I am content to proceed on the assumption that the correct legal test is as submitted by Mr Moriarty QC.[17]Before turning to consider the specific questions of law which arise for consideration, it is important to note two points. First, EMC’s case is not merely that any particular obligation under the 2010 Contract is not enforceable but that the entirety of what is referred to as the 2010 Contract is not legally binding (apart from the arbitration clause which constituted an independent contract). Second, Mr Moriarty QC submitted that the reason why the 2010 Contract was not legally binding was not because the parties did not objectively intend that there would be such a contract but rather that, as a matter of law, it was too uncertain and therefore, as a matter of law, incomplete. In that context, he submitted that, as a matter of English law, it is not sufficient that parties objectively intend to enter legal relations; and that, however much parties may objectively intend a contract to be legally binding, they may fail to achieve that result if it is too uncertain. The essential question on this appeal is whether that is the result here.[18]Against that background, I turn to consider the two questions of law on this appeal. Question 1: As a matter of law, should construction/implication in relation to the 2010 Contract be based solely on the wording of that contract without taking any account of the Settlement Agreement pursuant to which it was entered into and the other contracts which were entered into alongside the 2010 Contract ?[19]In my view, the answer to this question is plainly: “No”. Despite the case advanced by way of Respondent’s Notice, Mr Moriarty QC accepted, unsurprisingly perhaps, that that was indeed the correct answer. Thus, this question became academic.[20]However, the argument then shifted. In particular, it was an important part of Mr Choo-Choy QC’s case that the tribunal failed to take any account of the Settlement Agreement and the two other contracts as it ought to have done. In truth this argument is relevant to Question 2 rather than Question 1 but it is convenient to consider it at this stage. In particular, Mr Choo-Choy QC emphasised that although the tribunal expressly stated (at the end of paragraph 13 of the Award) that the Settlement Agreement was not referred to in the 2010 Contract, this was not in fact the case: see clause 25 quoted above. Further, with regard to MRI’s submission that there had been “part performance” in this case because the 2010 Contract had been entered into pursuant to the Settlement Agreement and that MRI had thus already given up its claims under the Original Contract in return (in part) for the 2010 Contract, the tribunal stated:
“In the case before the tribunal, as noted above, the contract in question is to be construed in the light of its own wording, and it is clear that there had been no part performance.”
Thus, Mr Choo-Choy QC submitted that the tribunal did, in effect, expressly refuse to look at the Settlement Agreement and that this is the only way to read the words used. Moreover, Mr Choo-Choy QC further submitted that although the tribunal referred to the Settlement Agreement as part of the factual background in paragraph 11 of the Award, it then goes on, as is clear from paragraph 13 and also paragraph 17 (as quoted above), to conclude that the construction of the 2010 Contract should take no account of that factual background (or an essential part of it), but be based on the wording of the 2010 Contract only; and that that was wrong as a matter of law.[21]Mr Moriarty QC took issue with at least some of these points. In broad terms, he submitted that Mr Choo-Choy QC’s approach was flawed because it fell foul of the first principle stated above; that it was wrong to “pick holes” in the Award; and that the court should instead adopt a more benevolent approach particularly since the tribunal members were “market men” not lawyers. Moreover, Mr Moriarty QC submitted that it was wrong to suggest that the tribunal did not take “any account” of the Settlement Agreement and the other two contracts when deciding on the effect of the 2010 Contract and it is not what the Award says. In particular, Mr Moriarity QC submitted that it would be most surprising if the tribunal did just ignore these matters as part of the admissible background to the 2010 Contract when it was common ground between the parties at the hearing that they were part of the factual matrix and submissions were made to the tribunal on that basis; and that the Settlement Agreement and the two other 2009 contracts are also specifically referred to in the Award as part of the factual background, where it is expressly recorded that a previous dispute between the parties had been resolved by the Settlement Agreement, which provided for the signature of three individual contracts as settlement of the previous dispute.[22]I have no doubt that Mr Moriarty QC is right as to the proper approach of the court. However, in my view, reading the Award fairly and with all possible benevolence, it seems to me relatively plain from the Award itself that the tribunal does indeed appear to have approached the question of construction without taking any proper account of the Settlement Agreement and the other two contracts. Certainly, there is nothing on the face of the Award to indicate otherwise. In any event, this aspect of the dispute is somewhat arid: given that it is now common ground that these matters should not be ignored, it is sufficient to say that I should proceed to consider Question 2 on the basis that I should take them into account. Question 2: In the light of the answer to question 1, was EMC’s obligation to deliver under the 2010 Contract unenforceable because it left the Treatment and Refining Charges for copper (“TC/RC”) and shipping schedule to be agreed subsequently or was the 2010 Contract to be performed on the basis of a reasonable TC/RC and reasonable shipping schedule if no express agreement was reached as to those aspects?[23]The parties were agreed that the law setting out whether an agreement is not legally binding because it is too uncertain was accurately summarised by the Court of Appeal in Mamidoil-Jetoil Greek Petroleum Company SA v Okta Crude Oil Refinery AD [2001] 2 Lloyd’s Rep 76 (per Rix LJ) and in BJ Aviation Ltd v Pool Aviation Ltd [2002] 2 P & CR 25 (per Chadwick LJ). As to the former ie Mamidoil, the relevant principles were stated by Rix LJ in paragraph 69 of his judgment as set out below – with added paragraph numbering inserted for ease of reference. “69. In my judgment the following principles relevant to the present case can be deduced from these authorities, but this is intended to be in no way an exhaustive list: i) Each case must be decided on its own facts and on the construction of its own agreement. Subject to that, ii) Where no contract exists, the use of an expression such as “to be agreed” in relation to an essential term is likely to prevent any contract coming into existence, on the ground of uncertainty. This may be summed up by the principle that “you cannot agree to agree”. iii) Similarly, where no contract exists, the absence of agreement on essential terms of the agreement may prevent any contract coming into existence, again on the ground of uncertainty. iv) However, particularly in commercial dealings between parties who are familiar with the trade in question, and particularly where the parties have acted in the belief that they had a binding contract, the courts are willing to imply terms, where that is possible, to enable the contract to be carried out. v) Where a contract has once come into existence, even the expression “to be agreed” in relation to future executory obligations is not necessarily fatal to its continued existence. vi) Particularly in the case of contracts for future performance over a period, where the parties may desire or need to leave matters to be adjusted in the working out of their contract, the courts will assist the parties to do so, so as to preserve rather than destroy bargains, on the basis that what can be made certain is itself certain. Certum est quod certum reddi potest. vii) This is particularly the case where one party has either already had the advantage of some performance which reflects the parties' agreement on a long term relationship, or has had to make an investment premised on that agreement. viii) For these purposes, an express stipulation for a reasonable or fair measure or price will be a sufficient criterion for the courts to act on. But even in the absence of express language, the courts are prepared to imply an obligation in terms of what is reasonable. ix) Such implications are reflected but not exhausted by the statutory provision for the implication of a reasonable price now to be found in section 8(2) of the Sale of Goods Act 1979 (and, in the case of services, in section 15(1) of the Supply of Goods and Services Act 1982 ). x) The presence of an arbitration clause may assist the courts to hold a contract to be sufficiently certain or to be capable of being rendered so, presumably as indicating a commercial and contractual mechanism, which can be operated with the assistance of experts in the field, by which the parties, in the absence of agreement, may resolve their dispute.” As to the latter ie BJ Aviation, the relevant principles were stated by Chadwick LJ as follows:
“19. It is unnecessary, and would be superfluous, to review those authorities again in this judgment. It is I think sufficient to identify five propositions which, as it seems to me, are not capable of dispute. 20. First, each case must be decided on its own facts and on the construction of the words used in the particular agreement. Decisions on other words, in other agreements, construed against the background of other facts, are not determinative and may not be of any real assistance. 21. Second, if on the true construction of the words which they have used in the circumstances in which they have used them, the parties must be taken to have intended to leave some essential matter, such as price or rent, to be agreed between them in the future—on the basis that either will remain free to agree or disagree about that matter—there is no bargain which the courts can enforce. 22. Third, in such a case, there is no obligation on the parties to negotiate in good faith about the matter which remains to be agreed between them—see Walford v. Miles [1992] A.C. 128 , at page 138G. 23. Fourth, where the court is satisfied that the parties intended that their bargain should be enforceable, it will strive to give effect to that intention by construing the words which they have used in a way which does not leave the matter to be agreed in the future incapable of being determined in the absence of future agreement. In order to achieve that result the court may feel able to imply a term in the original bargain that the price or rent, or other matter to be agreed, shall be a “fair” price, or a “market” price, or a “reasonable” price; or by quantifying whatever matter it is that has to be agreed by some equivalent epithet. In a contract for sale of goods such a term may be implied by section 8 of the Sale of Goods Act 1979 . But the court cannot imply a term which is inconsistent with what the parties have actually agreed. So if, on the true construction of the words which they have used, the court is driven to the conclusion that they must be taken to have intended that the matter should be left to their future agreement on the basis that either is to remain free to agree or disagree about that matter as his own perceived interest dictates there is no place for an implied term that, in the absence of agreement, the matter shall be determined by some objective criteria of fairness or reasonableness. 24. Fifth, if the court concludes that the true intention of the parties was that the matter to be agreed in the future is capable of being determined, in the absence of future agreement, by some objective criteria of fairness or reasonableness, then the bargain does not fail because the parties have provided no machinery for such determination, or because the machinery which they have provided breaks down. In those circumstances the court will provide its own machinery for determining what needs to be determined—where appropriate by ordering an inquiry (see Sudbrook Trading Estate Ltd v. Eggleton [1983] A.C. 444).”
[24]In seeking to support the tribunal’s conclusion and, in particular, with regard to the principles referred to in these authorities, Mr Moriarty QC submitted, in summary, as follows:a. It is not enough for MRI just to reprise its legal arguments with a view to the court then deciding for itself whether it considers that the 2010 Contract gave rise to an enforceable obligation to deliver. Having identified the correct legal principles, the tribunal has already determined that it did not. For the court to intervene under s. 69 the 1996 Act, on the basis that the tribunal did not correctly apply those principles, the Court has to be satisfied that no reasonable tribunal correctly applying the relevant legal principles could have reached such a conclusion. The tribunal’s conclusion has to be necessarily inconsistent with the application of the right test. That is a high hurdle, and one which MRI does not begin to surmount for two main reasons. First, MRI ignores the strict constraints which exist for implying terms into a contract, because it is not for the courts or a tribunal to make the parties’ bargain for them. Any question of implying a term into a contract only arises when a contract does not provide for what is to happen on some event, and the default position is that nothing is to be implied: see, e.g., the summary of the relevant principles stated by Lord Hoffman in Attorney General of Belize v. Belize Telecom Ltd [2009] 1 WLR 1988 in Crema v. Cenkos Securities plc [2011] 1 WLR 2066, at [38] and, also, The “Reborn” [2009] 2 Lloyds Rep. 639, at [8] – [18]. As can be seen from paragraph 14 of the Award, the principles for implying a term were plainly in the minds of the tribunal in reaching its conclusion. Second, it is impermissible to imply a term into a contract if it is inconsistent with what the parties agreed. Once again, as can be seen from paragraph 16 of the Award, this was also very much a principle which the tribunal had in mind.b. It is wrong to approach the principles in Mamidoil and BJ Aviation as a set of strict rules to be applied mechanistically to the facts. This is not right. Applying the principles involves a judgmental balance between (on the one hand) trying to give effect to a contract if it was the parties’ intention to create enforceable obligations, and (on the other) respecting the parties’ intention to leave some important matter for future negotiation and agreement between themselves, even if that renders the contract incomplete and so unenforceable. In this case, the tribunal reached the conclusion – on the basis of its own market experience, as well as the expert evidence – that agreeing a TC and RC plays a significant role in the conclusion of concentrates contracts and is an integral part of the contract negotiation. Given that finding (which is not open to challenge) the tribunal was more than entitled to conclude that, on the facts of this particular case, the parties had contracted on the basis of the TC and RC (as well as the delivery schedule) being negotiated and agreed; and that it was impermissible to imply a term providing for a reasonable TC, RC and delivery schedule, because this would be inconsistent with that agreement.c. It is not accepted that this is a case which is taken outside principles (ii) and (iii) merely because there were some respects in which the 2010 contract was binding (such as in the case of the arbitration clause). This is nothing like the kind of case where (as in Mamidoil itself) an agreement has already been fully in force, and performed, over a period of time already. Principle (ii) therefore is entirely applicable, so that “the use of an expression such as “to be agreed” in relation to an essential term is likely to prevent any contract coming into existence, on the grounds of uncertainty. This may be summed up by the principle that “you cannot agree to agree”.d. The mere fact that parties may objectively believe that a contract is binding is one factor in favour of implying a term to make it so, but it will not, in itself, justify the implication, especially where the parties have expressly shown an intention to leave some important term to be negotiated and agreed in the future (where the implication of a term would be inconsistent with what they have agreed). In any event, there is no specific finding of fact as to the parties’ intentions or objective belief to support MRI’s contention.e. Nor is the fact that a contract is for future performance a reason, in itself, for implying a term of reasonableness; a fortiori if such a term would conflict with what the parties have agreed. It is certainly right that, particularly in the case of long-term contracts where the parties have had to leave something like price to be determined in the future, a court may incline, if it can, to find sufficient certainty by implying a “reasonableness” term. However, as is clear from the passage from Sudbrook quoted by Rix LJ in Mamidoil, at the end of the day “[t]he true distinction is between those cases where the mode of ascertaining the price is an essential term of the contract, and those cases where the mode of ascertainment, though indicated in the contract, is subsidiary and non-essential.” If the parties are to be regarded as having intended the matter left over to be resolved by negotiation and agreement, there is no room for an implied term which conflicts with that intention.f. As regards the suggestion that the case falls within principle (vii) because EMC has already had the advantage of some performance under the 2010 contract, this at best would be only one factor, amongst the others, to go into the mix. However, it is not accepted to be relevant here at all. There had been no performance of the 2010 Contract by either party; and one cannot artificially conjure it up merely because signing the contract (along with the 2 other 2009 contracts) was part of the consideration for MRI and EMC settling its earlier dispute. The Settlement Agreement expressly provided for the parties to sign 3 separate agreements, 2 of which plainly were binding (and have been performed). Moreover, the Court has no way whatsoever of knowing to what extent it was critical to the settlement of the earlier dispute that the 2010 contract should itself also give rise to a binding legal obligation (as opposed to a commercial expectation) that delivery would be made notwithstanding the need for further negotiation and agreement. Either way, however, the settlement of the earlier dispute was plainly not part performance of the 2010 contract itself. It is not right either to say that the tribunal regarded partial performance as a necessary condition for the 2010 contract to be enforceable. It just rejected the argument that there was part performance.g. As regards principles (viii) and (ix), it is certainly right that a court may, in an appropriate case, imply a “reasonableness” term even in the absence of criteria laying down what the standard is; and it is also right that the power to do so not confined to the specific circumstances contemplated by Sale of Goods Act 1979, s. 8(2), or Supply of Goods and Services Act 1982, s. 15(1). However, once again the fundamental point remains that the default position is that nothing is to be implied into a contract, and the question of implication can only arise when the contract does not itself provide for what is to happen. If the parties have contracted on the basis that certain important matters are subject to further negotiation and agreement, the implication of a term without that agreement flies in the face of what the contract provides.h. Nor, finally, is it accepted that an arbitration clause is the magic bullet which makes all the difference, and Mamidoil does not say that it is. Unless the arbitration clause is specifically directed at mandating a third party to determine the matter which cannot be agreed, it is not a compelling consideration, and it certainly cannot override the parties’ express agreement that the matter is one for them to negotiate and agree.i. As to the principles summarised by Chadwick LJ in BJ Aviation Ltd., the position is just the same. Indeed, they support the tribunal’s conclusion even more strongly. Contrary to the argument advanced by MRI, the absolutely critical distinction drawn by Chadwick LJ is between:(i) the situation where “the parties must be taken to have intended to leave some essential matter, such as price or rent, to be agreed in the future – on the basis that either will remain free to agree or disagree about the matter ...” In this situation there is no obligation which a court can enforce and that is so even if the parties thought it was binding; and(ii) The situation where the parties intend their bargain to be enforceable, and there is nothing in the way of implying a “reasonableness” term because the parties have not left over some essential term to agree themselves. In this situation, a court will strive to give effect to that intention by construction or implication. However – and this is critical – the latter proposition is subject to being satisfied that the true intention of the parties was not that the relevant matter should be left over for further negotiation and agreement between the parties themselves. As Chadwick LJ expressly went on, by way of qualification to his 4th principle:
“But the court cannot imply a term which is inconsistent with what the parties have actually agreed. So, if on the true construction of the words which they have used, the court is driven to the conclusion that they must be taken to have intended that the matter should be left to their future agreement on the basis that either is to remain free to agree or disagree about the matter as his own perceived interest dictates there is no place for an implied term that, in the absence of agreement, the matter should be determined by some objective criteria of fairness or reasonableness.” j. In this case, the tribunal expressly referred to what Chadwick LJ said in the BJ Aviation case, and it quoted in full the passages referred to above. It is to be inferred, therefore, that these passages were considered to be particularly germane to its reasoning. As already noted on a number of occasions, the tribunal also brought to bear its own market experience on the role played by TCs and RCs in the conclusion of concentrates contracts, as well as hearing expert evidence on the matter – and it was in the light of this that the tribunal concluded that the negotiation of a TC and RC plays a significant role in the conclusion of concentrates, and indeed is an integral part of the contract negotiation. The shipping schedule was also regarded as being more than a matter of mere detail. k. Against that background, it is clear that the tribunal’s findings as to the general importance of agreeing a TC and RC as part of the contract negotiation are decisive, because to imply a term into the contract would be inconsistent with the parties remaining free to agree or disagree, as part of the negotiation of terms for 2010. Likewise, too, in relation to delivery. As the tribunal succinctly summed the matter up at the end of its Award “[t]he contract had left material terms as “agreements to agree”
. That makes perfect sense and, even if expressed briefly, a tribunal is entitled to have its Award read in a reasonable and commercial way, rather than crawled over for faults.[25]These are forceful submissions and were advanced by Mr Moriarty QC with great skill. However, I am unable to accept at least some of the points made above nor the ultimate conclusion urged by him for the following reasons.[26]First, as stated above, I am content to proceed on the basis that, in order to intervene in the circumstances of the present case, the Court has to be satisfied that no reasonable tribunal correctly applying the relevant legal principles could have reached such a conclusion. I should emphasise that I do not necessarily accept that that is the correct test but I am content to proceed on that basis in favour of EMC.[27]Second, I also accept that the principles in Mamidoil and BJ Aviation should not be approached as a set of strict rules to be applied mechanistically to the facts. On the contrary, as stated by Rix LJ:
“Each case must be decided on its own facts and on the construction of its own agreement”
. Here, it seems to me that the facts are somewhat unusual, if not unique viz the 2010 Contract was entered into pursuant to and, in effect, formed part of the Settlement Agreement. Although I am prepared to accept that even in such circumstances, the argument that the 2010 Contract was not legally binding is theoretically possible, it is one which is, in my judgment, somewhat surprising if not bizarre. Of course, as submitted by Mr Moriarty QC, it is not sufficient that parties objectively intend to enter legal relations; and that, however much parties may objectively intend a contract to be legally binding, they may fail to achieve that result if it is too uncertain. However, the particular circumstances in which the 2010 Contract came to be signed are, in my view, a very powerful factor for the court to bear in mind to strive to uphold the parties’ agreement – a factor which, as I have stated, the tribunal did not properly take into account.[28]Third, with regard to “part performance”, as Mr Choo-Choy QC submitted, the relevant test, as laid down in Mamidoil is whether “one party has … already had the advantage of some performance which reflects the parties' agreement on a long term relationship.” As demonstrated by Foley v. Classique Coaches Limited [1934] KB 1, it seems to me that this does not mean just looking at the particular contract in question, but also the overall “deal” when that contract is part of a wider arrangement between the parties. In Foley, the sellers sold to the buyers a piece of land to use for the latter's business as coach proprietors, and also contracted with them to supply all the petrol required for that business "at a price to be agreed by the parties in writing and from time to time". There were, therefore, two contracts – a contract for sale of land (which had been fully performed) and a contract for sale of petrol. The Court of Appeal decided that a term was to be implied into the petrol contract that in default of agreement the price of the petrol was to be a reasonable price: if that could not be agreed, it could be settled by arbitration. The fact that the contract was part of an overall transaction which had been partly performed – the sale of the land had already taken place – was one of the key factors in the court's decision. As Mr Choo-Choy QC submitted, that is similar to the situation here. The overall transaction involved the settlement of the existing dispute with three contracts (one of which was the 2010 Contract) being entered into as part of that settlement. The settlement of the existing dispute pursuant to the Settlement Agreement (along with performance of the 2009 Copper Contract and 2009 Moly Contract) was, therefore, partial performance of the overall transaction. Indeed, EMC got the full benefit of that performance in that MRI’s claim against it was fully and finally settled upon execution of the Settlement Agreement and signature of the 3 contracts, including the 2010 Contract.[29]Even if that analysis is wrong and even if one were to accept that Mr Moriarty QC was right in his submission that there has been no “part performance” of the 2010 Contract, it seems to me that this misses the point which is the one stated above ie the 2010 Contract was entered into pursuant to and, in effect, formed part of the Settlement Agreement and that therefore the latter is part of the relevant factual matrix. I agree that this particular feature of the present case (ie an agreement entered into pursuant to an anterior settlement agreement) does not fit squarely into principle (vii) of the list set out by Rix LJ in Mamidoil nor, indeed, into any of the other principles. However, in my view, it is analogous to principle (vii) and, in any event, that list is not exhaustive.[30]Third, the language of both the Settlement Agreement and the 2010 Contract plainly shows that the parties certainly intended the 2010 Contract to be legally binding. That this is so is clear from, in particular, Clause 1 of the Settlement Agreement (“EMC shall sell MRI … 40,000 WMT of EMC Copper Concentrates in each of 2009 and 2010 … all pursuant to new, separate contracts between EMC and MRI … in the forms agreed at Schedules 1, 2 and 3 to this Settlement Agreement” (emphasis added)); and the express wording of the 2010 Contract including the recital (“WHEREAS[MRI] agrees to buy and [EMC] agrees to sell copper flotation concentrate of Erdenet Mining Corporation on the terms and conditions hereinafter contained” (emphasis added)), Clause 2 (“This Contract shall enter into full force from the date of the last signatureand shall remain in force until completion of the Parties’ obligations herein” (emphasis added)), Clause 3 (“The quantity of Concentrate to be delivered shall be 40.000 WMT plus or minus 10% at Seller’s option” (emphasis added)), Clause 4 (“The Concentrate to be delivered”) and Clause 5 (“The Concentrate shall be delivered…”). Each of these obligations was unqualified and wholly inconsistent with EMC having no obligation to deliver anything at all unless and until it actually agreed the TC/RC and detailed shipping schedule with MRI (in circumstances in which it had no legal obligation even to try to agree such matters with MRI). Moreover, in my judgment, these provisions go further than just indicate that the parties objectively intended that they were entering an agreement which was legally binding: they are important terms of the contract which inform the proper construction of the other terms of the 2010 Contract in particular Clause 6.1, 9.1 and 9.2.[31]Fourth, the fact that certain terms are expressed in a form which requires certain matters “to be agreed” is not of itself fatal to the existence of a binding contract.. That appears from Foley. Similarly, as Lord Denning stated in F&G Sykes (Wessex) Ltd v Fine Fare Ltd [1967] 1 Lloyd’s Rep 53 at p58 with regard to the contract in that case:
“The provision that figures were “to be agreed” does not nullify the contract”
. Here, the fulfillments of the agreements contemplated by Clauses 6.1, 9.1 and 9.2 are not expressed as conditions precedent as to the existence of a legally binding contract. The relevant provisions state that the parties “shall agree” the TC/RC and shipping schedule. They do not state that the parties “may” agree or “if the parties are able to agree”. Instead, the language is expressed in terms that the parties “shall agree”. In the context of the 2010 Contract read as a whole, such language is a strong indicator that the parties did not intend a failure to agree, still less a refusal to negotiate or seek to agree, as being fatal to their bargain or as entitling either party to walk away from the contract. On the contrary, such mandatory language is strongly indicative of the parties’ intention that there should be performance under the 2010 Contract and that as a matter of construction, a failure to agree should not detract from that. In this context, it is important to note that the 2010 Contract was entered in early 2009 ie almost a year before the earliest date for the deliveries stipulated under the 2010 contract. For that reason, the decision to leave open for the future, agreement between the parties as to the shipping schedule, TC and RC is unsurprising.[32]Fifth, as to the principles in Mamidoil and at the risk of repetition:a. This was clearly a situation in which a binding agreement had been intended to be entered into, given the terms of the Settlement Agreement and the other terms of the 2010 Agreement. From an objective standpoint, it can hardly be supposed that the quid pro quo for the settlement of MRI’s claim under the Original Contract, in so far as it consisted of the 2010 Contract, was, in effect, illusory because EMC was under no enforceable obligation to make any delivery to MRI; there is every reason why, objectively speaking, the entirety of the settlement package, including the 2010 Contract and all of the delivery and payment obligations described therein, should have been intended to be legally binding.b. Therefore, principles (ii) and (iii) (as summarised at para. 69 of Mamidoil) do not apply and instead principle (iv) applies i.e. since this was a commercial dealing between parties who were familiar with the trade and who had acted in the manner (as objectively demonstrated by clause 2 of the 2010 Contract) that they had a binding contract, the contract should be construed, where possible, to enable the contract to be carried out.c. While the parties had used the term “to be agreed”, in accordance with principle (vi), since the 2010 Contract (which was signed in early 2009) involved performance in the future with the result that it made sense to leave the TC/RC and shipping schedule to be determined subsequently, the tribunal should have approached the construction of the 2010 Contract so as to preserve rather than destroy the parties’ bargain. At the risk of repetition, this was particularly the case (in accordance with principle (vii)) where EMC had already received the benefit of some advantage from entry into the Settlement Agreement and 2010 Contract (which constituted the relevant agreements in relation to the 2010 deliveries).d. As stated in principle (ix), such a construction or implication is reflected but not exhausted by the Sale of Goods Act 1979 and so the observation of Viscount Dunedin from May and Butcher in relation to the Sale of Goods Act (as quoted in paragraph 17 of the Award) does not exclude a term being implied. On the contrary, the normal basis for the implication of terms where a term is “to be agreed” is outside the Sale of Goods Act for just this reason.e. Pursuant to principle (x), the presence of an arbitration clause should have supported the conclusion that the agreement was sufficiently certain or capable of being rendered so, since it provided a commercial and contractual mechanism, which could be operated with the assistance of experts in the field, by which the parties, in the absence of agreement, could resolve a dispute about a reasonable TC/RC or shipping schedule.[33]Similarly, in relation to BJ Aviation, the distinction drawn between the second and fourth principles is whether the court is satisfied that the parties intended their bargain to be enforceable. If the court is satisfied that the parties intended their bargain to be enforceable, then under the fourth principle it will “strive to give effect to that intention by construing the words which they have used in a way which does not leave the matter to be agreed in the future incapable of being determined in the absence of future agreement”.[34]I accept that if the position were that the contract was truly “unworkable”, the court might, however reluctantly, be driven to the conclusion that the 2010 Contract was void for uncertainty. In that context, I recognise that the arguments advanced by Mr Moriarty QC with regard to the conclusions expressed by the tribunal in paragraph 15 of the Award which I have quoted in full above are particularly forceful. As submitted by Mr Moriarty QC and accepted by Mr Choo-Choy QC, it is right that the court should accord proper deference to the tribunal’s conclusions as stated in that part of the Award. However, in so doing, I do not read that paragraph as saying that it was impossible to identify a “reasonable” TC, RC or shipping schedule nor that the 2010 Contract is “unworkable”.[35]Nor do I consider that the tribunal’s conclusions as stated in paragraph 15 in particular that the negotiation of the TC/RC “…plays a significant role in the conclusion of concentrates contracts..” or that the TC/RC is “..an integral part of the contract negotiation and is not to be dismissed as a matter of detail” are determinative. In particular, it seems to me that this is so for reasons similar to those expressed by Lloyd LJ in Pagnan v Feed Products [1987] 2 Lloyd’s Rep 601 at p619:
“(6) It is sometimes said that the parties must agree on the essential terms and that it is only matters of detail which can be left over. This may be misleading, since the word “essential” in that context is ambiguous. If by “essential” one means a term without which the contract cannot be enforced then the statement is true: the law cannot enforce an incomplete contract. If by “essential” one means a term which the parties have agreed to be essential for the formation of a binding contract, then the statement is tautologous. If by “essential” one means only a term which the Court regards as important as opposed to a term which the Court regards as less important or a matter of detail, the statement is untrue. It is for the parties to decide whether they wish to be bound and, if so, by what terms, whether important or unimportant. It is the parties who are, in the memorable phrase coined by the Judge, “the masters of their contractual fate”
. Of course the more important the term is the less likely it is that the parties will have left it for future decision. But there is no legal obstacle which stands in the way of the parties agreeing to be bound now while deferring important matters to be agreed later. It happens every day when parties enter into so-called “heads of agreement”. Mr. Rokison submits that that is a special case, but I do not think it is.”[36]For all these reasons, it is my conclusion that the tribunal was wrong in law and, insofar as may be necessary, that no reasonable tribunal correctly applying the relevant legal principles could have reached such a conclusion.[37]On the basis that I reached that conclusion, there was considerable debate before me as to the appropriate relief. In particular, Mr Moriarty QC submitted that I should not, indeed must not, set aside the Award but rather should remit the Award back to the tribunal in accordance with the last paragraph of s.69(7) of the 1996 Act which provides as follows:
“The court shall not exercise its power to set aside an award, in whole or in part, unless it is satisfied that it would be inappropriate to remit the matters in question to the tribunal for reconsideration”
. In particular, Mr Moriarty QC submitted that by virtue of that paragraph, remission was, in effect, the default position; that the burden was on MRI to show that remission was “inappropriate”; that MRI had failed to discharge that burden; and that therefore the court cannot or should not set aside the Award. Further, Mr Moriarty QC submitted, in effect, that it would be wrong in principle for the court to set aside the Award rather than remit it to the arbitrators in circumstances where the tribunal had had the benefit of considerable factual and expert evidence which Mr Moriarty QC asserted was relevant to the question to be decided of which this court is, of necessity, wholly ignorant[38]Again, Mr Moriarty QC advanced those submissions with great skill. Of course, I accept the approach as set out in the last paragraph of s.69(7) of the 1996 Act. However, I am persuaded that it would be inappropriate to remit the Award to the tribunal in the present circumstances. In reaching that conclusion, I bear in mind the observations of Moore-Bick J. in Icon Navigation Corporation v Sinochem International Petroleum (Bahamas) Co Ltd [2003] 1 All ER (Comm) 405:
“22………..Section 69(7) of the Act forms part of the statutory code providing for appeals on questions of law and as such it sets out the remedies available to the court following the hearing of an appeal. No doubt the court has a measure of discretion when it comes to deciding what order is most appropriate to give effect to its decision. For example, following a successful appeal the court might decide to vary the award itself or remit it to the tribunal for reconsideration. However, s 69(7) must be read in the context of s 69 as a whole. The intention of the legislation is that the powers of the court under this subsection should be exercised in a manner that will best give effect to its conclusions on the issues of law that arise on the appeal, including any issues of law raised by the defendant under para 6.12.(3) of the practice direction seeking to uphold the award. It does not, in my view, give the court a wider discretion or allow it to take into account matters outside the scope of the appeal itself……”
Further, it seems to me that the question whether or not it is “inappropriate” to remit should generally be considered by reference to what is stated in the Award itself including the reasons contained therein and not by reference to matters which are entirely speculative. Such an approach is, in my view, supported by the observations of Hobhouse J in The Tzelepi [1991] 2 Lloyd’s Rep 265 at pp269-270:
“It is said on behalf of the owners that there ought to be a remission to the arbitrator. I have done my best to probe the basis upon which such remission might be granted and what the arbitrator would have to consider if the matter was remitted to him as asked. There is no doubt that I do have a power to remit to the arbitrator and I must therefore consider whether I should exercise my discretion in that regard. But there is no basis for remitting a matter to the arbitrator unless there is something further for the arbitrator to consider and upon which he should exercise his own judgment afresh. The owners have failed to make out any basis of additional material or material upon which the arbitrator ought to reconsider the matter. This arbitration was held, as I have said, long after the material events. The parties, in an admittedly somewhat informal and protracted arbitration hearing placed before him the contentions and the evidence which they wished to rely upon. None of that evidence nor any of those contentions raised a case on behalf of owners that charterers had only paid the premium at a time after the mistake had been discovered. It is a fairly improbable hypothesis on the dates that are given in the award but it appears that no argument to that effect was advanced at the arbitration and that no evidence was placed before the arbitrator which might justify that conclusion of fact. On that basis, unless one is to order a remission purely as a speculation so that one party might seek an opportunity to collect fresh evidence and advance new contentions before the arbitrator, then a remission should not be ordered, and to order a remission on that basis would be improper and it is not something that I am prepared to do.”
[39]I accept that the position here is slightly different to the extent that Mr Moriarty QC is not suggesting that he would wish the matter to be remitted in order to put before the tribunal any fresh evidence or to advance new contentions before the tribunal. However, it does not seem to me that such difference is significant. Moreover, in my judgment, the approach urged by Mr Moriarty QC is not consistent with the scheme of the 1996 Act and the CPR in relation to arbitration appeals. In truth, the main thrust of Mr Moriarty QC’s submission is that the Award should be remitted because the conclusion reached by the tribunal is (or at least may be) justified for reasons not set out in the Award. However, a party who wishes to contend that an award should be upheld for reasons not expressed (or not fully expressed) in such award is required to file a respondent’s notice at the stage of the application for permission to appeal in accordance with CPR PD 62 Para 12.6. In my view, it would be wrong in principle and certainly “inappropriate” now to order remission on the basis of entirely speculative matters in respect of which the court has no material before it and which, if such matters were to be relied upon to seek to uphold the Award, should have been included in a respondent’s notice served in accordance with the rules and within the appropriate time limits in opposition to the original application for leave to appeal. Of course, the court has a power under s.70(4) of the 1996 Act on this appeal in effect to order the tribunal to state further reasons. However, I did not understand Mr Moriarty QC to invite me to make any such order; and, in any event, I would not be prepared to do so in the circumstances of the present case – in particular where the reasons which might supposedly justify the Award have not been properly identified and are, indeed, entirely speculative.[40]For all these reasons and subject to any further specific submissions with regard to precise formulation, it is my conclusion that the Award must be set aside and that I should answer question 1:
“No”; and question 2: “The 2010 Contract is a legally binding contract. It follows that EMC’s obligation to deliver under the 2010 Contract was and is enforceable and was to be performed on the basis of a reasonable TC/RC and reasonable shipping schedule if no agreement was reached on those aspects.”
Accordingly, Counsel are requested to seek to agree a draft order for my approval. Failing agreement, I will deal with any outstanding issues.

Cited in 11 later judgments

and 2 more of the most senior