Exmek Pharmaceuticals SAC v Alkem Laboratories Ltd [2015] EWHC 3158 (Comm)

Case No 2014 FOLIO 1038[2015] EWHC 3158 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 03/11/2015
Before
MR JUSTICE BURTON
Between
Exmek Pharmaceuticals SACClaimantAlkem Laboratories LimitedDefendant
Ravi Aswani (instructed by Weil Gotshal & Manges) for ClaimantAndrew Green QC and Andrew Scott (instructed by Taylor Wessing LLP) for DefendantHearing Hearing date: 22 October 2015
JudgmentMr Justice Burton :
[1]This is an application under s.67 of the Arbitration Act 1996 (“the Act”) by the Claimant, Exmek Pharmaceuticals SAC, against an award on jurisdiction dated 3 August 2014 by Mr Natarajan as sole Arbitrator, in which he concluded that he had jurisdiction in an arbitration between the Defendant, Alkem Laboratories Limited, as Claimant and the Claimant as Respondent, pursuant to an arbitration provision, whose validity is disputed by the Claimant, contained in a Distribution Agreement dated 6 May 2005. The Claimant, while reserving its position as to jurisdiction, supplied written submissions to the Arbitrator, but did not appear. It is common ground that I must resolve the issue of jurisdiction for myself ab initio, although I am entitled to look at the award: see Dallah Co v Ministry of Religious Affairs of Pakistan [2011] 1 AC 763 at 813 per Lord Mance, where he approved the proposition that “In making its determination, the court may have regard to the reasoning and findings of the alleged arbitral tribunal, if they are helpful, but it is neither bound nor restricted by them”.

The history

[2]The Distribution Agreement contained the following clauses relevant to the dispute before me:
“Article 13: PROPER LAW The proper law of this Agreement is the law of the UK, and the Parties submit to the exclusive jurisdiction of the Courts of the UK and of all Courts having jurisdiction in appeal from the Courts of the UK. Article 14: ARBITRATION All disputes and differences whatsoever which will at any time hereafter arise between the parties in relation to this Agreement which the Parties using their best endeavors in good faith cannot resolve shall be referred to arbitration before any legal proceedings are initiated. The arbitration shall be conducted in the UK in accordance with the provisions of the law in the UK in effect at the time of the arbitration and shall be conducted by one or more arbitrators appointed there under.”
There were also the following clauses to which the parties make some reference:
“Article 22: VARIATION OF AGREEMENT A variation of this Agreement is of no force and effect unless it is in writing and signed by the authorized signatory on behalf of each of the Parties. Article 23: WAIVER No omission or delay on the part of the Party in requiring due and punctual fulfilment by the other Party of its obligations hereunder shall be deemed to constitute a waiver by the omitting or delaying Party of any of its rights to require such due and punctual fulfilment and, in any event, shall not constitute or be construed as a continuing waiver or as waiver of other or subsequent breaches of the same or other (similar or otherwise) obligations hereunder, or as a waiver of any remedy it might have. Article 24: SEVERANCE 24.1 In the event that any term or provision of this Agreement can sustain two or more interpretations, one of which results in the term or provision being valid, legal or enforceable, that term or provision will be given that interpretation rather than an interpretation which would or be likely to result in the term or provision being invalid, illegal or unenforceable.”
Article 14: ARBITRATION Article 23: WAIVER

Article 24: SEVERANCE

[3]By notice dated 18 March 2008 the Claimant terminated the Distribution Agreement on grounds alleging breach by the Defendant, and “formally request[ed]” that the dispute “be referred to arbitration in the United Kingdom, to be decided by an arbitration tribunal composed by three arbitrators, in keeping with the provisions set forth in clause 14 of the agreement signed between the parties”. By letter dated 27 March 2008 the Defendant acknowledged the termination and “with reference to [the Claimant] invoking the provisions of clause 14 of the said Distribution Agreement . . . hereby signifies its willingness to submit its dispute with [the Claimant] to arbitration, to be conducted in the . . . United Kingdom”.[4]After a chaser by the Defendant dated 11 April 2008, the Claimant wrote on 15 April 2008 concluding that “both parties will be formally notified within a reasonable length of time to proceed to the designation of the arbitrators who will resolve our dispute, according to the rules and regulations of the United Kingdom”.[5]According to the witness statement of Mr Zubiria Remy of the Claimant, he travelled to London in April/May 2008 and spoke to a Mr Clanchy, a member of the Secretariat of the London Court of International Arbitration (“LCIA”), who indicated, as seems clear, that Articles 13 and 14 would not comply with the requirements of the LCIA; and by letter dated 12 May 2008 the Claimant requested the Defendant to “sign an addendum to the Distribution Agreement . . . which will enable us to refine the contract terms of clauses 13 and 14”. Article 13 was proposed to be amended simply to provide that the agreement would be construed and enforced in accordance with the laws of the United Kingdom and Northern Ireland and Article 14 was to be amended so that the dispute would be “decided by arbitration in accordance with the rules of LCIA . . . considered to be incorporated into this clause”. It was also to provide that the “arbitral tribunal shall consist of . . . 3 arbitrators . . . appointed according to the rules of LCIA” and that the place of arbitration would be London, and the arbitration award be final and unappealable.[6]By letter dated 30 May 2008 the Defendant’s general legal counsel said that he would be responding to the 12 May letter once they had had the opportunity to take a comprehensive view of the situation but said that “it prima facie appears that an arbitration proceeding, in the UK, is inevitable . . . accordingly I am arranging to take the next steps in the matter. This may take some time, since we are in the process of appointing a law firm in London to represent [the Defendant’s] interest in arbitration”. Mr Zubiria sent an email on 24 June 2008 pressing for a “reply regarding the clarifications needed in the arbitration clause of our contract” and requested them to “expedite the pendings at your end to start as soon as possible the Arbitration process in the UK (London)”. After email exchanges between the parties in July and August 2008 Mr Zubiria sent a letter dated 21 August 2008 to “reiterate our request of May 12 2008 for you to agree to sign an addendum to the Distribution Agreement . . . in order to modify and refine contract terms of clauses 13 and 14 about the applicable law and arbitration process”.[7]A further letter was sent dated 10 November 2008 by Mr Zubiria in similar terms, and after receipt of a fax dated 19 November 2008 from the Defendant, which is not in my papers, he wrote again dated 21 November 2008 reiterating his request, again in similar terms. In response to a fax from the Defendant dated 18 February 2009, which again I have not seen, the Claimant stated in a fax dated 3 March 2009 that “if it is not possible to reach an agreement satisfactory to both parties, the dispute will have to be referred to arbitration as stated in the Distribution Agreement”. It seems there were some further discussions in December 2009, and there are emails from the Claimant in December 2009 and August 2010, to which it seems there was no response.[8]On 7 January 2011 the Claimant presented to the Peruvian Courts its claim against the Defendant dated 17 November 2010, claiming substantial damages for breach of the Distribution Agreement; and an order was issued by the Peruvian Court dated 24 January 2011, which the parties agree should be treated as the date of issue. There was then service on the Defendant in India authorised by the Peruvian Court, which it is common ground was deemed effective on 2 May 2011. This gave an opportunity for the Defendant to challenge the jurisdiction with an absolute deadline, i.e. one which in Peruvian law cannot be extended, of 2 June 2011. I have read and accept the evidence of the Peruvian lawyer instructed by the Defendant at the time, Sr Jorge Vega Soyer, in a letter dated 7 October 2015, as to what he advised the Defendant: Mr Andrew Green QC for the Defendant told me on instructions, and Mr Ravi Aswani for the Claimant did not challenge, that the Defendant instructed such lawyer on 20 May, arranging for translations of documents to be carried out, and received the advice from him on 25 May. Sr Soyer advised the Defendant (wrongly, as both sides accept) that there was a 10 day deadline from the Defendant being notified of the claim for it to make a “plea in bar” on jurisdictional grounds, and that this deadline had expired, and he advised, rightly if it had expired, that “if a relevant plea in bar on the basis of an arbitration agreement is not raised within the 10 day deadline then the Peruvian Courts consider the party to have “tacitly waived” the arbitration agreement at least as a basis for challenging jurisdiction of the Peruvian Courts in respect of the matters raised in the claim: this is an “automatic” consequence, in the sense that the Peruvian Courts do not consider why the deadline was missed, and no applications to challenge jurisdiction can be raised once this deadline has passed” (a proposition with which the Claimant agrees); so that on the (mistaken) basis that the 10 day period had already expired (whereas in fact had the correct advice been given, it was not to expire for a further week) the Defendant was out of time, and it indeed became so by 2 June 2011.[9]Sr Soyer’s letter continues as follows:
“As the deadline had passed by the time I was properly instructed by [the Defendant], I advised [the Defendant] that the consequences of this was that the Peruvian Court would conclude that a procedural relationship existed i.e. that the Peruvian Court could take jurisdiction of the dispute between [the Claimant] and [the Defendant]. I went on to advise that [the Defendant] should therefore raise objections to the jurisdiction of the Peruvian courts at the earliest opportunity it could in the circumstances, which was in its Reply and Objections to [the Claimant’s] claim, which [the Defendant] filed on 10 June 2011. On my advice, [the Defendant] raised two arguments at first instance before the 16th Civil Court of Lima as to why it did not have jurisdiction, namely the fact that the parties had expressly agreed to submit disputes to arbitration in the Agreement and the fact that the law applicable to that contract was UK law. I advised [the Defendant] that both were valid grounds to object to the jurisdiction of the Peruvian courts under Peruvian law, notwithstanding the procedural deadline for objecting had passed. The first instance court in Peru did not render a decision on these arguments on jurisdiction, merely noting that the deadline had passed under Article 478 of the PCPC and instead the judge only gave an opinion on jurisdiction. I advised [the Defendant] that given this was just an opinion (as opposed to a decision) it could not be appealed. Accordingly, the first instance court never reached a decision on the merits of whether the arbitration agreement was valid and binding. I advised [the Defendant] that if it challenged jurisdiction based on the arbitration agreement in the Distribution Agreement in the appeal before the Superior Court, this would not be addressed by the Superior Court because (i) the deadline under Article 478 of the PCPC for challenging jurisdiction based on the arbitration agreement had been missed and (ii) the first instance court had not given a decision on jurisdiction but only an opinion. I advised [the Defendant] that such an appeal would also not be considered by the Supreme Court in Peru. Instead, in order to preserve its jurisdiction challenge as best it could in the circumstances, I advised [the Defendant] that it should instead appeal only on the applicability of UK law to the Agreement. I explained that that was because if the Peruvian courts decided that the applicable law was English law (as [the Defendant] was arguing) then [the Claimant] would have to bring its claim based on English law rather than (as it had claimed) Peruvian law. If that was the case, then [the Defendant] would be able to argue that whether or not the arbitration agreement was binding was a matter of English law and that under English law it should be entitled to re-assert its challenge to the jurisdiction of the Peruvian courts on the basis of that arbitration agreement (with English law not recognising the Article 478 PCPC deadline for example). In those circumstances, I advised [the Defendant] that it would then also be able to raise its objections to jurisdiction based on the arbitration agreement before the courts in Peru within a new 10 day deadline under Article 478 of the PCPC. Hence the only possible route for [the Defendant] was to appeal on the question of the applicability of English law and I advised [the Defendant] to proceed accordingly. To be clear, the “tacit waiver” in respect of the arbitration agreement under Article 18 of the PAL as a result of not objecting to jurisdiction within the deadline provided under Article 478 of the PCPC only relates to those matters which are raised before the Peruvian court in the claim. Therefore, to the extent that [the Defendant] could be taken to have tacitly waived the arbitration agreement (as an automatic consequence of the deadline in Peruvian law expiring rather than through any conduct on the part of [the Defendant]), that tacit [waiver] would only apply strictly to the matters [the Claimant] raised in its claim and not any other matters which were not encompassed in [the Claimant’s] claim. . .”
The Defendant followed this advice.[10]By an opinion dated 15 October 2015 Mr Enrique Rojas, the Peruvian lawyer instructed by the Claimant addresses the content of the letter. He rightly points out that the deadline expired not after 10 days but after 30 days i.e. on 2 June 2011, so that it had not in fact expired by the time Sr Soyer’s firm was instructed. He also takes issue with(i) the advice of Sr Soyer that the conclusion of the first instance Peruvian Court as to the effect of the arbitration agreement (at paragraph 15 of its judgment) was an opinion rather than a decision and could not be appealed, rather asserting that it could have been appealed and(ii) he took a broader view than Sr Soyer as to what amounts to “matters claimed in court” (by reference to Article 18 of Legislative Decree No. 1071), to which the tacit waiver would apply, so that he takes issue with the last paragraph of Sr Soyer’s advice. He does not however take issue with Sr Soyer’s advice that if the Claimant were successfully to appeal in respect of the applicability of UK law to the Agreement, then the Defendant would be able to argue that under English law it should be entitled to reassert its challenge to the jurisdiction of the Peruvian Courts on the basis of the arbitration agreement, and would “be able to raise the objections to jurisdiction based on the arbitration agreement before the courts in Peru within a new 10 day deadline”.[11]Accordingly, the Defendant filed on 10 June 2011 its petition of Reply to the Claimant’s claim in which, albeit out of time to challenge jurisdiction, it objected to the jurisdiction by reference to the arbitration clause, and asserted the reliance on UK law provided for by the Distribution Agreement. On 23 May 2012 the Corte Superior de Justicia de Lima (16th Civil Commercial Court) delivered its decision. It addressed the issue of the arbitration clause and stated in paragraph 15 that “the Defendant . . . has waived tacitly to arbitration, by failing to deducing the exception of arbitration agreement within the deadlines mandated by law . . . which makes it unnecessary for the Court’s pronouncement over the null and void an arbitration agreement is based on the demand” (this is the passage which Sr Soyer describes as an unappealable opinion). In paragraph 16 it dealt with the challenge so far as the law is concerned, and concluded that Peruvian law, under Article 2 and Article 5 of the Civil Code, applied because “it is a contractual claim on which compliance must be verified in Peru”, rejecting reliance on Article 13 of the Distribution Agreement, because “the application of this agreement is legally and physically impossible, because the defendant has not offered any probative half to prove the existence of the UK law applicable to the case and also because there are three different legal systems in the United Kingdom. In this regard la Wikipedia on its website . . . said the following . . .” and it referred to the United Kingdom consisting of 4 constituent countries and having no single legal system, but 3 different legal systems, “the law of England, the right of Northern Ireland and the Scottish law”.[12]The Defendant appealed paragraph 16 but, in the light of the advice of Sr Soyer, set out in paragraph 9 above, did not appeal in respect of paragraph 15, the “tacit waiver”, in the light of the expiry of the deadline. This appeal was dismissed on 18 September 2012. The Claimant’s final appeal to the Supreme Court of Peru was dismissed on 18 November 2013. The Supreme Court noted that “with respect to the submission of any dispute to arbitration . . . the Defendant . . . has tacitly agreed waived arbitration by failing to deduct the exception of arbitration agreement within law”: it rejected the Defendant’s case on law, upholding the decision of the Appeal Court that it was “legally and physically impossible to apply the law in the UK”, and, applying Peruvian law, rejected the Defendant’s arguments on the merits, although the Defendant, it is common ground, did not advert to or rely upon any counterclaim. As a result, the judgment of the Peruvian Court, in the sum of approximately US$6 million, was upheld.[13]The Defendant gave notice of arbitration in London on 6 February 2014, stating that it proposes “in accordance with the Agreement . . . that the arbitration should be conducted by 3 arbitrators”. It proposed the appointment of Mr Natarajan as one of the arbitrators, and gave notice that unless an arbitrator was appointed by the Claimant the Defendant would exercise its right under s.17 of the Act to appoint that arbitrator as the sole arbitrator. By letter dated 5 March 2014 the Claimant objected to the Arbitrator, effectively on all the grounds now argued before me and did not appoint an arbitrator, with the effect that, as indicated, the Defendant appointed Mr Natarajan as sole Arbitrator by notice dated 26 March 2014. Mr Natarajan, having accepted appointment, issued directions, and, although the Claimant filed written submissions on the issue of jurisdiction, including objection to him as sole Arbitrator, it did not appear either at the case management hearings or before the Arbitrator at all. His award was issued, as set out above, on 3 August 2014 upholding his jurisdiction, and these proceedings to challenge the award, followed, by a Claim Form dated 29 August 2014. The challenge before me was by reference to s.67 of the Act only (a prior challenge under s.68 not having been pursued), i.e. on the basis of alleged lack of jurisdiction of the Arbitrator, and not by reference to any alleged serious irregularity.[14]There were effectively 4 issues before me: i) Is there a valid arbitration agreement? The fact that the Peruvian Court considered it to be invalid (applying Peruvian law) is of no relevance, certainly not, as Mr Aswani submitted, constituting estoppel per rem judicatam, unless the Defendant submitted to the jurisdiction of the Peruvian Courts (and possibly – as per the Court of Appeal in AES Ust-Kamenogorsk-Hydropower Plant LLP v Ust-Kamenogorsk Hydropower Plant JSC [2012] 1 WLR 920 (CA) (“AES”) at paragraphs 150(v) and 151(vii)-(viii) (at 971-2) – not even then). ii) Was reliance on the arbitration provision abandoned by the Defendant by its response (or lack of it) to the Claimant prior to the Claimant issuing its Peruvian proceedings? iii) Did the Defendant submit to the jurisdiction of the Peruvian Courts (or should the English Court recognise the judgments of the Peruvian Courts)? iv) Was the Arbitrator precluded by reason of either of the Claimant’s contentions: a) that he was not properly appointed pursuant to s.17 of the Act, because there was no agreement for 3 arbitrators? b) that he was of the same nationality as the Claimant company? The parties are agreed that if the Defendant only fails on one or other of these latter contentions, the arbitration provision is still valid and there is jurisdiction in this Court, and no time need be wasted, because the Arbitrator only resolved jurisdiction, which it is common ground has had to be reconsidered by this Court (see paragraph 1 above): but there would now need to be appointment of another arbitrator or, if he is not otherwise precluded, the Arbitrator, or another arbitrator, would need to be appointed by the Court pursuant to s.15(3) and s.18 of the Act (in the absence of agreement between the parties).

Issue 1: is there a valid arbitration provision?

[15]The Claimant contends that Articles 13 and 14 of the Distribution Agreement result in there not being a valid arbitration provision. This appears to stem from the reaction of Mr Clanchy of the LCIA. But the fact that Mr Clanchy advised Mr Zubiria that (without more) there would not be a sufficient arbitration provision to render an LCIA arbitration effective is plainly irrelevant, as it is common ground that the provision was not, and not intended to be, an LCIA arbitration provision, but on any basis there was to be an ad hoc arbitration; and in any event, even assuming Mr Clanchy was a lawyer and was authorised to speak on behalf of the LCIA, I am obviously not bound by any off the cuff advice by him.[16]The arguments which the Claimant musters in support of its case that the arbitration provision is not valid are as follows: i) The two Articles are inconsistent and cannot be read in such a way as to reconcile them. ii) There is no such thing as UK law or UK courts, which flummoxed the Peruvian Courts. iii) There is no express provision for a venue for the arbitration. iv) The arbitration provision is not expressed to be final and binding.[17]As to (i), which I shall address without prejudice to the argument in (ii), referring therefore only to ‘UK law’ and the ‘UK Courts’, Mr Aswani submits that Article 13 provides for the proper law, and also provides for the exclusive jurisdiction of the Courts of the UK, and thus that there is no room for any arbitration provision in Article 14, which must be inconsistent with it. He further submits that Article 13 cannot be referring to the curial law, because to refer to “all Courts having jurisdiction in appeal from the Courts of the UK” would be inapt, given the restriction on appeals in matters of arbitration. So far as that is concerned, that can be no answer where in fact, at least since the Woolf reforms, all cases (save for exceptional cases such as contempt) require permission to appeal to the Court of Appeal, and the clause would obviously be read as including “if permission be granted”.[18]But he submits that the provision for “exclusive jurisdiction” of the courts is inconsistent with the provision for arbitration, and he relies upon the decision of Webster J in Indian Oil Corporation v Van Oil Inc [1991] 2 Lloyd’s Rep 634, in which he concluded that terms in an incorporated document (from the plaintiff’s general terms and conditions), providing for arbitration, were inconsistent with a provision in the main contract providing for exclusive jurisdiction of the English Courts. Webster J concluded that the latter provision overrode the former. In any event he concluded (at 635) that:
“where an incorporated document contains provisions which conflict with provisions of the written document . . . the terms of the written document in the ordinary way prevail over the terms incorporated by reference”
. He did not attempt to reconcile them and/or concluded that they were irreconcilable.[19]Mr Green however relies upon three other decisions of this court, Paul Smith Ltd v H & S International Holdings Inc [1991] 2 Lloyd's Rep 127 (per Steyn J), Shell International Petroleum Co Ltd v Coral Oil Co Ltd [1999] 1 Lloyd's Rep 72 (per Moore-Bick J) and most recently AXA Re v Ace Global Markets Ltd [2006] Lloyd’s Rep IR 683 (per Gloster J), in all of which there were similarly apparently inconsistent or contradictory provisions in respect of the English Courts having jurisdiction and the existence of arbitration, and in each case the learned Judges construed them together so as to read both sets of provisions consistently.[20]He relied upon the following: i) the maxim, (though he did not refer to it in Latin, but it is still useful to do so, particularly in these days when The Times Latin crossword is encouraging the rebirth of Latin), ut res magis valeat quam pereat. This concept, which encourages the courts to construe a contractual provision or set of provisions in favour of validity rather than invalidity, is particularly relevant in the arbitration field, as is made clear in Fiona Trust & Holding Corp v Privalov [2007] Bus LR 1719; ii) the approach to construction enshrined by Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900, providing for the application of commercial common sense in resolving the question as to what a reasonable person would have understood the parties to have meant; and iii) the fact that “there is no presumption against surplusage in a commercial contract” (per Gloster J in AXA Re at paragraph 32), such as not to discourage or rule out a ‘belt and braces’ approach.[21]He pointed out that whereas in Indian Oil the result of the Judge’s conclusion was that one provision survived and overrode the other, the effect in this case, if Mr Aswani’s submissions and the conclusions of the Peruvian Courts be correct, is that both Articles 13 and 14 would fall away and be of no effect, whereas the adoption of the purposive construction of the other three decisions would lead to consistency and enforcement of both provisions. Gloster J, in relation to two clauses not dissimilar from the present, and in one of which, as here, the provision in respect of the Courts of England was prescribed to be “exclusive jurisdiction”, accepted, as had Steyn J and Moore-Bick J, that the provisions were not inconsistent, by reference to the submission made to her that (paragraph 19) “it is clear that, in appropriate circumstances, and in the context of particular agreements, an agreement that the English Courts will have jurisdiction and an arbitration clause in the same contract are not necessarily irreconcilable”.[22]In reliance upon those submissions and upon the decisions of the three Commercial Judges to whom I have referred, I am entirely satisfied that the two provisions are not irreconcilable and can be read together: i) Article 13 provides for ‘UK law’ to be the proper law of the contract and Article 14 provides for the law of the arbitration. ii) Articles 13 and 14 together provide that: a) the curial law is ‘UK law’; and b) the courts supervising the arbitration will be the ‘UK’ Courts, which will apply ‘UK law’, and such Courts are to have exclusive jurisdiction. iii) In the event of the arbitration provision being or becoming in some manner ineffective, the ‘UK court’ is to have exclusive jurisdiction, applying ‘UK law’.[23]As to (ii) Mr Aswani submits that there is no reason to differ from the conclusion of the Peruvian Courts, drawn from Wikipedia, that the provision for ‘UK law’ is ambiguous and ineffective as not specifying any one of the three potential laws (or courts) involved. Mr Green again relies upon the maxim ut res magis valeat quam pereat, and the construction in favour of sensible commercial interpretation. This is a contract relating to international trade, and the jurisdiction of England and Wales (and its law) is regularly resorted to for resolving such international legal disputes. Mr Green pointed out that there are many cases which have resolved similar issues in favour of the Courts and Law of England and Wales (for example Downing v Al Tameer Establishment [2002] EWCA Civ 721, cited to the Arbitrator); but Mr Aswani emphasised that in many of those cases there have been factors indicating a connection with England or London, and that is not the case here. He also emphasises that it is not permissible to look at the post-contractual conduct of the parties which, as can be seen from the correspondence referred to in paragraphs 5 to 7 above, made regular reference to London (including Mr Zubiria’s visit), nor, he submits, at the statement of the Claimant’s solicitor in the witness statement in support of service out of the jurisdiction of these proceedings on 26 September 2014 that the claim “concerns a contract governed by English law . . . as set out in Article 13 . . . and . . . contains a term to the effect that the Courts of England and Wales shall have jurisdiction to determine claims in respect of it”, referring to the relevant subparagraphs of the Practice Direction dealing with service out: this is now said to have been a mistake, but is perhaps indicative of what an uninstructed commercial person would conclude to be the case. He also submits that there are able arbitrators in Scotland, by reference to a newly published book.[24]I am however persuaded by the words of Bingham LJ in The Komninos S [1991] 1 Lloyd’s Rep 370 at 374, when dealing with a reference to “British Courts”, where he said as follows:
“I intend no disrespect at all to the highly distinguished judges who sit in Scotland and Northern Ireland when I say, further, that it is scarcely less far-fetched to suppose that the parties can have meant or intended to embrace those courts. It is widely known that the Commercial Court and the Admiralty Court, both parts of the High Court, deal on a daily basis with a wide range of international maritime business, much if not most of it referred by agreement to English law or jurisdiction. No doubt for historical and geographical reasons, no other court in the United Kingdom enjoys that reputation or dispatches that business. It would, in this class of contract between foreigners, be as unusual to find an express choice of a Scots or Northern Irish forum as it would to find agreement for general average adjustment in Edinburgh or Belfast rather than (as expressly agreed here) London. I feel as little doubt on this point as the cargo-owners' solicitors can have felt when they sought and abtained leave to serve out on the basis of a contract which provided that the High Court should have jurisdiction. While I respect the judge's view that the reference in these bills was equivocal, I cannot share it.”
Bingham LJ’s reference to the solicitors’ statement on service out in that case is similar to my own in this case in paragraph 23 above. I conclude that Mr Green is right, for the reasons he gives.[25]I turn to (iii), which was not argued at length. I am entirely satisfied that, once Articles 13 and 14 are construed in accordance with my conclusions at (i) and (ii) above, the venue was, and was intended to be, London, and so far as necessary Mr Green helpfully pointed to the approach of Hamblen J in Shagang South-Asia (Hong Kong) Trading Co. Ltd v Daewoo Logistics [2015] 1 Lloyd’s Law Rep 504 at paragraph 29 to 38. The procedural law is that of England and Wales, the supervising courts are the Courts of England and Wales and there is no need for any separate express provision for the seat or venue to be in London.[26]Article 14 requires that disputes “be referred to arbitration” before any legal proceedings are initiated. There is no express provision for such arbitration to be final and binding. Both counsel referred to England and Wales Cricket Board Ltd v Kaneria [2013] EWHC 1074 (Comm) where at paragraph 28 Cooke J incorporated a dictum of Hirst LJ in O’Callaghan v Coral Racing Ltd [1998] Times 26 November (transcript p7) to the effect that:
“To my mind the hallmark of the arbitration process is that it is a procedure to determine the legal rights and obligations of the parties judicially, with binding effect, which is enforceable in law, thus reflecting in private proceedings the role of a civil court of law.”
As in Kaneria and in O’Callaghan, and the decision of Thomas J in Walkinshaw v Diniz [2000] 2 All ER (Comm) 237, in which Hirst LJ’s dictum was cited, the need to arrive at a conclusion that one of the important elements of the “hallmark of the arbitration process” is present does not need to be by reference to express wording. I am satisfied that the parties intended that the arbitration for which they were providing was final and binding (as would have been spelt out in the Addendum which the Claimant wished signed), and in any event, so far as necessary, Mr Green relied, in my view rightly, on s.58(1) of the Act, relating to all arbitrations governed by English law, of which I am satisfied this is one, namely:
“Unless otherwise agreed by the parties, an award made by the tribunal pursuant to an arbitration agreement is final and binding both on the parties and any persons claiming through or under them.”

Issue 2: Was there abandonment of the arbitration prior to the Peruvian proceedings?

[27]This relates to what Mr Aswani referred to as the ‘radio silence’, and he referred to what he called six failures by the Defendant to respond to the Claimant’s formal request for the Defendant to sign the addendum. I am not entirely persuaded that this is a fair description of the correspondence, which I have set out in paragraphs 3 to 7 above: to the first such request of 12 May 2008 there was a temporising response: to that of 24 June 2008 there was a reply which made no reference to the request: to the third request of 21 August 2008 there was no response: to the fourth request of 10 November there was a fax reply of 19 November which I have not seen: to the fifth request of 21 November there was seemingly another reply by a fax of 18 February which I have not seen: and finally the sixth request of 3 March 2009 did not seemingly receive a response.[28]Mr Aswani submits that the Claimant was driven to issue proceedings in Peru; but the Claimant did not attempt to issue arbitration proceedings otherwise than by reference to the LCIA and the proposed addendum; and there was no refusal of arbitration by the Defendant – indeed the contrary, in its letter of 30 May 2008 “it prima facie appears that an arbitration proceedings, in the UK, is inevitable”. The Claimant did not at any time state(i) that an ad hoc arbitration, i.e. one not by reference to the LCIA (which was not provided for in the Agreement), would be unworkable unless the Claimant agreed, as requested, to “modify and refine” Articles 13 and 14 or(ii) that unless the Defendant responded the Claimant would regard arbitration as abandoned or would start Peruvian proceedings (indeed the Claimant’s last words on the subject (apart from a subsequent attempt to negotiate in December) was in its letter of 3 March 2009 “the dispute will have to be referred to arbitration as stated in the Distribution Agreement”.[29]Radio silence is of course not enough, nor is the fact that the Defendant did not itself commence arbitration. Mr Aswani referred in this context to ‘waiver’ (insofar as necessary Mr Green said the Defendant would rely on Article 23 set out in paragraph 2 above) but in any event what is required in order to terminate provisions for arbitration is abandonment, as Mr Aswani accepted. He referred to the Hannah Blumenthal [1983] 1 AC 854, where, at 914, Lord Brandon referred to the concept of the “implied abandonment of a contract as a result of the conduct of the parties” as being “well established in law”, and he described how this can arise either by reference to the conduct of each party, leading necessarily to the inference of an implied agreement between them to abandon the contract, or by the conduct of B, as evinced towards A, being such as to lead A reasonably to believe that he has abandoned the contract. Lord Brightman at 924 refers to tacit abandonment by both parties, such that it “ought to be inferred that the contract to arbitrate the particular dispute was rescinded by the mutual agreement of the parties”, although it is clear that such tacit abandonment can be inferred from one party so conducting itself as to entitle the other to assume that the contract was agreed to be abandoned sub silentio. This was however considered by the Court of Appeal in Allied Marine Transport v Vale do Rio Doce Navegacao SA [1985] 1 WLR 925, where Robert Goff LJ, giving the judgment of the court, rejected (at 937ff) the suggestion that in the absence of any special circumstances an offer to abandon the reference to arbitration and the acceptance of such an offer could be inferred from the silence and inactivity of the parties.[30]I am quite satisfied that there was neither an agreed abandonment of arbitration nor a tacit abandonment to be inferred from the conduct, or the lack of conduct, of the Defendant. Issue 3: Did the Defendant submit to the jurisdiction of the Peruvian Court or should the English Court recognise the Peruvian Court’s jurisdiction?[31]Mr Aswani’s detailed skeleton argument did not mention nor deal with either the significant decision of the Court of Appeal in AES, which has very close similarities to this case such that the judgment of the Court of Appeal is particularly significant, or the relevant passage in Dicey Morris & Collins: The Conflict of Laws (15th Ed) Vol 1 at 14-073, which reads as follows:
“The general thrust of the authorities, which were all examined in AES . . . is that for so long as the defendant asserted, and is obviously still asserting, as his primary defence that the court has no jurisdiction over him in relation to the merits of the claim, then even if he also takes steps which are purposeful in relation to the merits of the claim, his doing so should not be taken to mean that he has submitted to the jurisdiction for the purposes of the common law of submission, and has abandoned his challenge for the purpose of s.33. The real question for the English court should not be whether the defendant has taken a step in proceedings which prepared for the trial of the merits, but whether he has chosen to abandon his challenge to the jurisdiction. In answering this, the English court is not bound to follow the law of the foreign court on whether a defendant has succumbed to its jurisdiction; and if the defendant had “no real option but to act as it did”, as it was put in AES the court may be reluctant to find that it has submitted to the jurisdiction.”
[32]Mr Aswani placed his reliance on the earlier decision of Marc Rich and Co. AG v Società Italiana Impianti [1992] 1 Lloyd’s Rep 624 CA, which was a case (described in Dicey & Morris in the same paragraph), in which, after the Italian Court had ruled that the parties had not agreed to arbitrate in London, and that it therefore had jurisdiction over the merits of the dispute, the defendant in the Italian proceedings lodged a defence on the merits, with the result that the English Court concluded that it had thereby submitted to the jurisdiction of the Italian Courts. Marc Rich is expressly distinguished, and hence its result not followed, in paragraph 186 of AES.[33]As referred to in paragraph 14(i) above, if the English Court is bound by the decision of the foreign Court, the findings of the foreign Court as between the parties could constitute estoppel per rem judicatam. However, this is plainly not so if the English Court does not recognise the foreign Court’s judgment, and this is governed by the provisions, as interpreted inter alia in AES, of s.32 and s.33 of the Civil Jurisdiction and Judgments Act 1982 (“the 1982 Act”), which reads in material part as follows:
“32. Overseas judgments given in proceedings brought in breach of agreement for settlement of disputes. (1) Subject to the following provisions of this section, a judgment given by a court of an overseas country in any proceedings shall not be recognised or enforced in the United Kingdom if— (a) the bringing of those proceedings in that court was contrary to an agreement under which the dispute in question was to be settled otherwise than by proceedings in the courts of that country; and (b) those proceedings were not brought in that court by, or with the agreement of, the person against whom the judgment was given; and (c) that person did not counterclaim in the proceedings or otherwise submit to the jurisdiction of that court. (2) Subsection (1) does not apply where the agreement referred to in paragraph (a) of that subsection was illegal, void or unenforceable or was incapable of being performed for reasons not attributable to the fault of the party bringing the proceedings in which the judgment was given. (3) In determining whether a judgment given by a court of an overseas country should be recognised or enforced in the United Kingdom, a court in the United Kingdom shall not be bound by any decision of the overseas court relating to any of the matters mentioned in subsection (1) or (2). . . . 33. Certain steps not to amount to submission to jurisdiction of overseas court. (1) For the purposes of determining whether a judgment given by a court of an overseas country should be recognised or enforced in England and Wales or Northern Ireland, the person against whom the judgment was given shall not be regarded as having submitted to the jurisdiction of the court by reason only of the fact that he appeared (conditionally or otherwise) in the proceedings for all or any one or more of the following purposes, namely— (a)to contest the jurisdiction of the court; (b)to ask the court to dismiss or stay the proceedings on the ground that the dispute in question should be submitted to arbitration or to the determination of the courts of another country; (c)to protect, or obtain the release of, property seized or threatened with seizure in the proceedings. . . .”
Though Mr Green referred in his skeleton to cases on waiver within English procedure by reference to the taking of steps in the proceedings (e.g. Eagle Star Insurance v Yuval Insurance [1978] 1 Lloyd's Rep 357), it was common ground at the hearing before me that the question to be decided is by reference to AES and the applicability of s.32 and s.33 of the 1982 Act above, and it also became common ground, by virtue of Mr Aswani’s concession in argument, that (by reference to AES at paragraph 163), this Court is not bound by the Peruvian Courts’ construction of the English law Arbitration Agreement (subject to any question of submission). (a) the bringing of those proceedings in that court was contrary to an agreement under which the dispute in question was to be settled otherwise than by proceedings in the courts of that country; and (b) those proceedings were not brought in that court by, or with the agreement of, the person against whom the judgment was given; and (c) that person did not counterclaim in the proceedings or otherwise submit to the jurisdiction of that court. (a)to contest the jurisdiction of the court; (b)to ask the court to dismiss or stay the proceedings on the ground that the dispute in question should be submitted to arbitration or to the determination of the courts of another country; (c)to protect, or obtain the release of, property seized or threatened with seizure in the proceedings.[34]Mr Aswani submits that the Defendant consented to the jurisdiction of the Peruvian Courts and waived the right to apply for arbitration. He relies upon the following: i) the finding of tacit waiver by the Peruvian Court of first instance at paragraph 15, also referred to in the Peruvian Supreme Court’s judgment as referred to in paragraph 12 above, which was based upon the Defendant’s failure to comply with the 30 day time limit, rendering a challenge out of time; ii) the failure by the Defendant to appeal paragraph 15 of the first instance judgment; iii) what he submits to have been the submission by the Defendant to the jurisdiction of the Peruvian Courts by taking an appeal to the two higher courts, by reference to the case as to application of UK Law and the UK Courts in Articles 13 and 14 as well as by reference to the merits. It does not appear that the Peruvian Courts relied upon this as a submission but, as has been seen, they founded their conclusion upon the basis of the lack of challenge to the jurisdiction by virtue of the Defendant having been out of time vis-à-vis the 30 day deadline; iv) that this waiver extended to all matters in dispute in the arbitration now commenced, because, although the Defendant did not include a counterclaim in the Peruvian proceedings (no doubt cognisant of s.32(1)(c) of the 1982 Act set out in paragraph 33 above), the matters constituting such counterclaim as well as any defences on the merits were, by reference to the advice of Sr Rojas, referred to in paragraph 10 above, nevertheless “matters claimed in court”; and v) that the Defendant issued no proceedings in this Court for an anti-suit injunction.[35]As referred to in 33 above, Mr Aswani raised submissions by reference to estoppel, and to Henderson v Henderson (1844) 6 QB 288 abuse of process, to contend that the Defendant cannot now rely on matters which were or could have been raised in Peru, notwithstanding that the Peruvian Courts applied Peruvian law to the construction of the Distribution Agreement and to the Defendant’s defences on the merits, though he accepts that this is subject to the issue of whether there was submission to the Peruvian Courts. His contention is that this Court should be astute not to allow a party to make a tactical decision in relation to the challenge to and/or defence of foreign proceedings and then avoid the consequences of such tactical decisions, if such it was.[36]It is important however to consider, in the context of whether there was a submission by the Defendant, the following factors: i) I have already set out in paragraph 9 above the advice which I accept that Sr Soyer gave to the Defendant as to what to do, given that (as he thought, and as in the event eventuated because of his negligent advice) the Defendant was out of time to issue a straightforward challenge to the jurisdiction under Article 478 of the PCPC, namely that they should challenge the applicability of Peruvian law and assert the applicability of English law, and that if such case were in the event successful, that would enable the Defendant to succeed in a renewed jurisdictional challenge. Although Sr Rojas takes issue with some matters in Sr Soyer’s advice, as I said in paragraph 10 above, he does not challenge that important proposition, which I am therefore entitled to accept. ii) It is noteworthy that Mr Aswani’s case, as set out in paragraph 47(a) of his skeleton, is that after failing to put in its challenge within the relevant deadline, the Defendant “went on to defend [the Claimant’s] claims on the merits and purportedly maintain a jurisdictional defence, but out of time”. Whether or not this was intended to be a reference to the advice of Sr Soyer set out in (i) above, that is, I am satisfied what, on advice, the Defendant was doing, i.e. reserving and preserving (in the hope of its subsequent resurrection in the Peruvian Courts) its jurisdictional challenge.[37]In AES, the Court of Appeal concluded (see per Rix LJ at paragraphs 168, 183 and 186) that even though the defendant in Kazakhstan ran a defence on the merits, it was doing so while reserving its jurisdictional challenge. I conclude that the same applies here. As to the five points raised by Mr Aswani, set out in paragraph 34 above, the fact that the Defendant did not at that stage issue an anti-suit injunction application in this Court, but chose, with the benefit of Peruvian advice, to challenge the Peruvian proceedings and seek to set aside the substantial judgment obtained against it is not, in my judgment, even arguably a waiver of arbitration or an argument in favour of submission. Similarly the question whether in running a defence on the merits its counterclaims were “encompassed” as a matter of Peruvian law is plainly in dispute between the two lawyers, and I cannot resolve it, but it does not matter if I conclude that there was no submission in any event.[38]I am satisfied that on the facts of this case there was no submission: i) Insofar as the Peruvian Courts found that at Peruvian law, where there is no basis for an extension of time of the 30 day deadline, the Defendant made a tacit waiver, this Court is not bound by that decision, by reference to s.32(3) of the 1982 Act, given that, as I have concluded, the bringing of proceedings in the Peruvian Court was contrary to the provisions of Articles 13 and 14, and thus within s.32(1)(a). ii) As a matter of fact I am satisfied that there was no tactical decision here, but that the Defendant was 8 days out of time (a matter which would undoubtedly have been the subject of an extension had the English Court procedures applied, but for which no extension was available under Peruvian law) and this was the result of negligent advice by Sr Soyer: and it then acted diligently by putting in its challenge on 10 June. iii) There is an issue between Sr Soyer and Sr Rojas as to whether the Defendant was in a position to appeal against paragraph 15 of the first instance decision (see paragraphs 9 and 10, and 11 and 12 above), although, given the fact that the Defendant was out of time and that there was no power to grant an extension, I do not see in fact what purpose an appeal could have had. iv) However, conclusively, I am satisfied, accepting Sr Soyer’s unchallenged advice, that in fact by taking the course it did, on advice, the Claimant was preserving its jurisdiction argument by taking its argument on UK law to the Supreme Court in accordance with that advice, and thereby was not submitting to the jurisdiction.[39]Mr Green did have a fall-back argument that, even if there was submission to the Peruvian Courts, the English Courts had a discretion not to recognise a judgment obtained in a foreign court in breach of an arbitration or jurisdiction clause, and he relied on the Court of Appeal judgment in AES in the paragraphs to which I have made reference in paragraph 14(i) above. Mr Aswani effectively submitted that the conclusion of Rix LJ, with which Wilson LJ and Stanley Burnton LJ agreed, was per incuriam, because of a critical footnote (383 to paragraph 14-098) in Dicey & Morris and he points out that the existence of such residual discretion was rejected by Carr J in Spliethoff's Bevrachtingskantoor BV v Bank of China Ltd [2015] 2 Lloyd's Rep. 123 at paragraphs 127-128, though accepted and followed by Knowles J in Ecobank Transnational Inc v Tanoh [2015] EWHC 1874 (Comm) at paragraph 27. In the light of my conclusions on the facts of this case that there was no submission to the Peruvian Courts, I do not need to resolve this question.

Was the Arbitrator precluded?

[40]As set out in paragraph 14(iv) above, there are two bases for this argument by Mr Aswani, the s.17 objection and the nationality objection.

The s.17 objection

[41]This arises from the common ground that if an arbitration provision provides for an unspecified number of arbitrators, the procedure followed by the Defendant of appointing a sole arbitrator under s.17 was not applicable. S.17 provides that “unless the parties otherwise agree, where each of two parties to an arbitration agreement is to appoint an arbitrator and one party (“the party in default”) refuses to do so, or fails to do so within the time specified, the other party, having duly appointed his arbitrator may give notice in writing to the party in default that he proposes to appoint his arbitrator to act as sole arbitrator”, with consequential provisions. If however the arbitration provision does not provide for three arbitrators, then s.15(3) of the Act applies, whereby “if there is no agreement as to the number of arbitrators, the tribunal shall consist of a sole arbitrator”: and in that event, in the absence of agreement to the appointment of a sole arbitrator, s.18 of the Act applies, requiring the appointment of such sole arbitrator by the Court. This would mean that if, as I have concluded, there is a valid arbitration provision, governed by English law and under the supervision of the English Courts, there would now, in the absence of agreement between the parties, be the need for an application by the Defendant to the Court for the appointment of an arbitrator to hear the outstanding disputes.[42]Mr Aswani points to the provision of Article 14 that the arbitration “shall be conducted by one or more arbitrators”,such that there was no provision for three arbitrators and s.17 was inapplicable.[43]The Defendant relies upon the agreement of the parties, by reference to the correspondence summarised above, and in particular the Claimant’s letter of 18 March 2008: “arbitration . . . to be decided by an arbitration tribunal composed of three arbitrators, in keeping with the provisions set forth in clause 14”: agreed to by the Defendant in its letter of 27 March 2008: itself responded to by the Claimant’s letter of 15 April “a reasonable length of time to proceed to the designation of the arbitrators [plural] who will resolve our dispute”, followed by the Addendum, which at all times provides for three arbitrators, as drafted by the Claimant.[44]Mr Aswani submits that the Defendant’s case in this regard amounts to the assertion of a variation of the contract, which would not comply with the provisions of Article 22, set out in paragraph 2 above. Mr Green submits that if it were a variation there would have been sufficient compliance with Article 22. But his primary case is that this does not amount to a variation but to a clarification. It is no alteration (variation) of an agreement providing for “one or more arbitrators” for the parties to agree that there would be three, and that is what they did. I agree.

The nationality objection

[45]Mr Aswani points out that the Arbitrator is Indian, and hence of the same nationality as the Claimant company. Mr Aswani points out that a number of rules of various bodies (including the LCIA and the ICC) provide that a chairman or a sole arbitrator should not be of the same nationality as one of the parties. He describes this in his Skeleton as a “well-accepted norm” in international commercial arbitrations, and points to the German Civil Code, which states “In the case of appointment of a sole or third arbitrator, the court shall take into account . . . the advisability of appointing an arbitrator of a nationality other than those of the parties”. He submits that if there were an application to this Court under s.18 of the Act for the appointment of a sole arbitrator, the Court would not sanction the appointment of a sole arbitrator with the same nationality as one of the parties; but no authority or example to that effect has been produced to me, and I have not experienced it.[46]Apart from this background, Mr Aswani points to the fact that in his case management directions of 9 April 2014 in the arbitration the Arbitrator ruled at paragraph 7 that:
“These proceedings are not governed by any arbitral institutional rules. However I will treat the arbitral rules of the [LCIA] . . . as a procedural guideline for conducting these proceedings (modified as appropriate).”
Plainly as Mr Aswani accepts, the arbitrator could not simply say that the LCIA Rules would apply to govern the reference, because the Rules themselves envisage that the LCIA is administering the reference, and there are very few of the LCIA Rules which make no reference to the LCIA court, such that at best he accepts, in paragraph 87 of his Skeleton, that “the Arbitrator could only have sought to be guided by the LCIA Rules rather than unilaterally declare that they applied to an ad hoc arbitration”. Indeed if the LCIA Rules had applied, the Arbitrator could not have been in post at all because of the nationality ban, so it can only be that the Rules would apply to conduct of the proceedings; and plainly Articles 14 and 15 of the LCIA Rules are likely to have been in the Arbitrator’s mind, namely those relating to the conduct of the proceedings and the submission of written statements and documents, together with Article 18 (party representation), Article 19 (hearings) and Article 20 (witnesses).[47]Mr Green’s “short answer” is that the Claimant’s complaint simply does not go to jurisdiction. Neither the Act nor English law more generally impose any nationality restrictions. It seems to me that paragraph 89 of Mr Aswani’s Skeleton really reveals the position here, and supports Mr Green’s submission: “It would be inimical to the s33 duty of fairness to both parties to suggest it was . . . up to the Arbitrator to select which of the LCIA Rules he would and which he would not be guided by”, suggestive of an alleged irregularity under s.68 of the Act. Mr Green’s “short answer” is plainly right. There was a s.68 application, but it was not pursued before me. There is no basis for a s.67 challenge.

Conclusion

[48]In the circumstances the Claimant’s application fails.

Cited in 1 later judgment