MS “V1” GmbH & Co KG & Anor v SY Co, Ltd [2026] EWHC 52 (Comm)

[2026] EWHC 52 (Comm)Case No CL-2024-000389
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT (KBD)
AND IN THE MATTER OF THE ARBITRATION ACT 1996
AND IN THE MATTER OF TWO LMAA ARBITRATIONS
Venue Royal Courts of Justice, Rolls Building, Fetter Lane, London, EC4A 1NLDate 20/01/2026
Before
HIS HONOUR JUDGE PELLING KCSITTING AS A JUDGE OF THE HIGH COURT
Between
MS “V1” GMBH & CO KGClaimantsMV “V2” GMBH & CO KGClaimantSY CO., LTD.Defendant
Alexander Wright KC (instructed by HFW LLP) for ClaimantsJames M. Turner KC (instructed by Ontier LLP) for DefendantHearing Hearing dates: 10 December 2025
Approved JudgmentThis judgment was handed down remotely at 10.30am on 20 January 2026 by circulation to the parties or their representatives by e-mail and by release to the National Archives..............................HIS HONOUR JUDGE PELLING KC SITTING AS A JUDGE OF THE HIGH COURT

HH Judge Pelling KC :

[1]This is the claimants' challenge under section 67 of the Arbitration Act 1996 (“AA96”) to two final declaratory awards each dated 11 June 2024 in materially the same terms to the effect that the arbitral tribunal had “… jurisdiction to hear and determine the question whether as a matter of English law (as the express governing law of the shipbuilding contracts) the exclusion in Article 9 of the shipbuilding contract excludes actions in tort (or equivalent non-contractual civil liability under foreign law)”.[2]The dispute between each of the claimants and the defendant is identical. It was for that reason that the same arbitrators were appointed in each reference. The dispute concerns the alleged concealed presence of asbestos in two ships built by the defendant. The claimants purchased the ships in 2010 from the entities that had had ordered them from the defendant. They took ownership on delivery of the ships by the defendant, and at the same time took an assignment of time-limited post-delivery warranty guarantees given by the defendant in Article 9 of each of the shipbuilding contracts. Article 9 been held to be a “complete code for dealing with defects discovered after delivery of the vessel”- see The Seta Maru [2000] 1 Lloyd’s Rep. 367 per Thomas J (as he then was) at 372. Article 9 of these contracts contains an arbitration agreement in the terms set out below. Following delivery, guarantee claims were made and dealt with. Residual unresolved claims that each claimant had under the guarantees were then settled by commercial negotiation with no proceedings being commenced whether under the arbitration clauses in the warranty guarantees or otherwise. The guarantees had by then expired by effluxion of time.[3]Many years later, the claimants say that they discovered asbestos had been incorporated into the fabric of the ships in the course of their construction, which had to be removed at a cost of between US$4.361-5.015m per ship. Each claimant sought to recover the cost of this work in tort and product liability claims commenced by them before the Chinese courts. The defendant maintains that those claims were excluded by various provisions within Article 9 and that since that was not conceded by the claimants, there was a dispute as to the true scope and effect of those exclusions, which had to be resolved by arbitration in accordance with the arbitration clause contained in Article 9. It challenged the jurisdiction of the Chinese courts and ultimately, the Chinese courts declined jurisdiction, acceding to the defendant’s submission that the dispute had to be referred to arbitration in London. The Chinese courts’ rulings are the subject of appeal in China.[4]The claimants had initiated arbitral proceedings after commencing the Chinese court proceedings but no steps were taken in the proceedings apart from each appointing an arbitrator (in the case of the defendant, under protest) until the claimant suggested that they be discontinued by consent. The defendants objected and there was a hearing held by the tribunals to determine jurisdiction following which the tribunals held that they had jurisdiction.[5]In essence therefore the issue that arises is whether an arbitral tribunal has jurisdiction over a dispute relating to non-contractual tortious claims governed by the laws of a foreign state brought in the courts of that state by a party who was not a party to a relevant arbitration agreement. The claimants maintain that the tribunal had no jurisdiction because the claimants were never party to or of otherwise bound by the arbitration agreements on which the defendant relies and / or because the claims they wish to make are independent statutory claims available to them in their capacity as owners of the ships that accrued to them in that capacity and irrespective of their assigned rights under the post-delivery warranty guarantees. The defendant invites me to reject those submissions and dismiss this claim on the basis that it was the claimants who chose to initiate the references, that it is common ground the references were validly made and that there is in any event a dispute between the parties within the scope of the arbitration agreements to which the claimants became bound in equity as a result of the assignment of the post-delivery warranty guarantees and which the defendant is entitled to require to be resolved by arbitration in accordance with that agreement.

The Primary Facts

[6]The ship building contracts were entered into on 10 November 2006 between “One Company Nominated by XY Marine GmbH” as “Buyer” and the defendant who was referred to variously as “Seller” or “Builder”. By clause 1 of each agreement “Parties” were defined to mean the Seller and the Buyer.[7]Article 9 of each agreement was entitled “WARRANTY OF QUALITY” and in so far is material provided:
“(a) Guarantee of Design, Material and Workmanship The Builder guarantees the Vessel in her entirety and each and every part thereof and without prejudice to the generality of the foregoing, her design, hull and all machinery, engines, engine auxiliaries, equipment, fittings, appurtenances and materials manufactured, furnished, installed or incorporated in the Vessel by the Builder and/or its subcontractors under this Contract against all defects, omissions, shortages and non-conformity, faulty design, defective or unsuitable materials or construction, miscalculation and/or poor workmanship, whether or not such defects affect seaworthiness or class, provided such defects have arisen within a period of twelve (12) calendar months as from the date the Vessel was delivered to and accepted by the Buyer … … (d) Extent of the Builder's Liability The Builder shall have no obligation and/or liabilities with respect to defects discovered after the expiration of the period of guarantee specified above. The Builder shall be liable to the Buyer for defects and damages caused by any of the defects specified in Paragraph (a) of this Article provided that such liability of the SELLER shall be limited to damage occasioned within the guarantee period specified in Paragraph (a) above. The Builder shall not be obligated to repair, or to be liable for, damages to the Vessel, or to any part of the equipment thereof, … caused by the defects other than those specified in Paragraph (a) above, … ( e)Upon delivery of the Vessel to the Buyer, in accordance with the terms of the Contract, the Builder shall thereby and thereupon be released of all responsibility and liability whatsoever and howsoever arising under or by virtue of this Contract (save in respect of those obligations to the Buyer expressly provided for in this Article 9) including without limitation, any responsibility or liability for defective workmanship, materials or equipment, design or in respect of any other defects whatsoever and any loss or damage resulting from any act, omission or default of the Builder. The Seller shall in no circumstance be liable for any consequential loss or special loss, or expenses arising from any cause whatsoever including, without limitation, loss of time, loss of profit or earnings or demurrage directly from any commitments of the Buyer in connection with the Vessel. (f) The Guarantee provided in this Article and the obligations and the liabilities of the Builder hereunder are exclusive and in lieu of and the Buyer hereby waives all other remedies, warranties, guarantees or liabilities, express or implied, arising by Law or otherwise (including without limitation any obligations of the Builder with respect to fitness, merchantability and consequential damages) or whether or not occasioned by the Builder's negligence. This Guarantee shall not be extended, altered or varied except by a written instrument signed by the duly authorized representatives of the Builder, and the Buyer. (g) Any dispute under this Article shall be referred to arbitration in accordance with the provisions of Article 13 hereof.” [Emphasis supplied]
Article 13 provided for arbitration of any dispute or difference in accordance with the Rules of the LMAA and that the contract was to be governed by and construed in accordance with the laws of England with any dispute arising out of or in connection with the contract to be referred to arbitration in accordance with Article 13. I accept the defendant’s submission that Article 9 was intended to be a complete code by which the parties agreed to apportion the risks involved in defects to the vessels that first became apparent after delivery by the defendant providing the guarantees in Article 9 (a) on the basis of the exclusions and limitations that appear in Articles 9(d)-(f). The ship building contracts were amended by six addenda, at dates between January 2007 and August 2010. The terms of those addenda are not relevant to the issues that arise on this claim.[8]On 9 January 2007, each of the ship building contracts was novated so that XY Carriers GmbH & Co KG (“XY Carriers”) became the Buyer under each contract. That this was a true novation was confirmed by various side letters I need not take up time with because the effect of the novation is not in dispute.[9]MV V1 was delivered on 18 October 2010 and MV V2 on 12 November 2010. Simultaneously with delivery, the claimants respectively entered into a “Guarantee Agreement” to which XY Carriers was also a party. Each Guarantee Agreement described the relevant claimant as the “Second Buyer” and in so far as is material provided:
“The parties agree that the Seller shall undertake the liability under the 'Warranty of Quality" set forth in the provisions of Article 9 of the Shipbuilding Contract No. …, as amended, novated and supplemented thereafter, after the delivery of the Vessel bearing Hull No. 1234 and to be named … (hereinafter called the "Vessel"). The Seller is aware and acknowledges that the Vessel, which the Seller delivers to the Buyer is immediately passed on to the Second Buyer, who becomes the Owner of the vessel. The Seller furthermore agrees that any claims under Article 9 of the Shipbuilding Contract No. …, as amended, novated and supplemented thereafter are assigned and transferred by the Buyer to the Second Buyer.” [Emphasis supplied]
It is not in dispute, but in any event I find that the Guarantee Agreements assigned the benefit of the rights set out in Article 9 of the ship building contracts to the claimants in respect of the ship they each acquired under the arrangement summarised above. The Guarantee Agreements did not operate as a novation and did not therefore make the claimant a party to the arbitration agreement referred to in Article 9 and/or 13 of the ship building contracts.[10]Thereafter as I have said, there were guarantee claims and remedial work, culminating in commercial negotiations between the claimants on the one side and the defendant on the other concerning various unresolved defects to the vessels, which were resolved by settlement agreements arrived at without the commencement of arbitration proceedings. Each settlement agreement was in the same terms (other than the sum to be paid to each of the claimants). In so far as is material, each settlement agreement provided that:
“The following has been agreed by undersigned Parties: For all the outstanding claims of Hull no. … Builder will pay USD … to the Buyer as final guarantee Settlement of the vessel under the Shipbuilding Contract No. ... This settlement will be final and cover all the claims under the Shipbuilding Contract of Hull no. ... Builder's obligation under Article 9 of the Shipbuilding Contract No … shall be completely discharged.”
[11]In 2019, the ships were surveyed for the purpose of enabling the claimants to comply with their obligations under the EU Ship Recycling Regulations. In the course of that exercise, it is said that asbestos was found in various areas of each ship including the crew quarters, galleys and engine rooms. The work of removing the asbestos followed and in September 2020, the claimants commenced proceedings against the defendant, the insulation manufacturer and the vessel’s classification society in the Nanjing Maritime Court (“NMC”), based on Chinese domestic law causes of action (“NMC proceedings”). It is not in dispute that the claims are delictual in nature and are available to the claimants exclusively by operation of Chinese statute law.[12]Shortly after this, by notices dated 15 October 2020, the claimants each purported to initiate arbitration proceedings under Article 13 of each of the ship building contracts. Each notice was in the form of a letter from the claimants' London solicitors and in so far as is material each was in the following form:
“As you are aware, our clients have discovered the presence of asbestos on board the Vessel, which was built by SY Co. Ltd ("the Yard") pursuant to the attached shipbuilding contract ("the Contract") with XY Marine GmbH, at which time the Vessel was known as Hull No. 1234. Our clients have suffered and will suffer losses in the form of the cost of identifying the existence, location and extent of the problem, removing the asbestos and replacing the affected material, and loss of charter income for the period of the remedial works, and now seek to claim against the Yard accordingly. Our client MS "V1" GmbH & Co. KG has appointed Mr Jonathan Elvey as their arbitrator pursuant to Article 13 of the Contract in relation to any and all disputes arising out of or in connection with the Contract including, for the avoidance of doubt, any claims in tort or any product liability claims, and any disputes arising out of or in connection with the attached Non-Asbestos Material Certificate issued by the Yard at the time of delivery of the Vessel. … We hereby give notice of our client's demand for arbitration and of the above appointment, and call upon the Yard pursuant to Article 13(b) and/or Article 13(f) of the Contract to appoint their arbitrator accordingly within 20 calendar days of receipt of this notice.” [Emphasis supplied]
The defendant responded substantively to the notices on 22 January 2021 in the following terms:
“We refer to your Notice of Appointment of Arbitrator / Demand for Arbitration in relation to the Contract No. 06SY-NB-07 for Hull No. 1234 dated 15 October 2020. We're instructed that the Builder has no contractual relationship with your clients, nor any arbitration agreement or clause of similar effect was ever concluded between your clients (as the registered owners of the MV "V1") and our client. As recorded by files, the counterparty that under the shipbuilding contract dated 10th November 2006 (as amended and/or supplemented from time to time, the "Contract") for construction and delivery of one 5,000 cars PCTC vessel with the Builder's Hull No. 1234 is XY Carriers GmbH & Co. KG, rather than your clients or otherwise. In the circumstances and for the avoidance of doubt, our client reserves its rights as to (i) more specifically whether there is any arbitration agreement between your clients and our client, which our client hereby expressly deny; (ii) whether or not your clients have standing to bring the arbitration proceedings; and (iii) more generally the validity of the content of the "Notice of Appointment of Arbitrator / Demand for Arbitration" dated 15th October 2020. Further and as the clear position from our client, they disputed against all the purported allegations and claims stated in your aforesaid notice. Without prejudice to the above, and further and alternatively, please be kindly informed that our client has duly appointed Mr. Ian Gaunt as the Builder's arbitrator in respect of any and all disputes arising under or in connection with the Contract in accordance with the Laws of England and based upon the LMAA terms 2017 (if applicable).” [Emphasis supplied]
[13]In February 2021, the claimants’ solicitors proposed “… a stay of the MV V1 and MV V2 London arbitration proceedings, terminable on 28 days' notice in writing by either party…” which was rejected without qualification - see the email from the defendant’s lawyers of 8 March 2021.[14]Nothing further happened in the references until 31 August 2023, when the claimants’ solicitors wrote to all parties by email as follows:
“These proceedings have been dormant since the appointment of Mr Ian Gaunt by the solicitors for the Respondent in January 2021 (see below e-mail and attached letter). During that time, our clients have pursued their claims against the Respondent in court proceedings in China, which are now well advanced. We attach the letter received from the solicitors for the Respondent advising us of Mr Gaunt's appointment. In that letter, the Respondents' solicitors "expressly deny" that there is any arbitration agreement in place between our respective clients. Upon further consideration, we agree that to be the case. We commenced arbitration against the Respondents pursuant to the shipbuilding contract between the Respondents on the one hand and XY group company XY Marine GmbH on the other. However, we commenced arbitration in the name of the registered owner of the vessel at the time the asbestos was discovered and the cost of remediation were incurred, being MS "V1" GmbH & Co. KG. The registered owners who are the Claimant in these arbitration proceedings are not party to the shipbuilding contract and are therefore not bound by the arbitration agreement therein. Indeed, we agree that there is no arbitration agreement between the Claimant and the Respondent that disputes arising out of or in connection with the shipbuilding contract (or indeed any disputes) should be subject to London arbitration – indeed the Claimant is not a party to the shipbuilding contract. In the light of the above, we write to discontinue the above arbitration proceedings. ”
In the light of the above, we write to discontinue the above arbitration proceedings. ”[15]The defendant’s solicitors responded to the claimants’ solicitors in the following terms:
“…Firstly, we note you quoted from the letter of Yao Liang Law Offices dated 25 January 2021 stating that us “expressly deny” whether there is any arbitration agreement between your clients and us. As is apparent from Yao Liang Law Offices’ said letter, the views expressed in that letter are without prejudice to all of our rights which have been expressly reserved. Secondly, as you and your clients are clearly aware, in the Chinese court proceedings commenced by your clients against us, we have always maintained the position that Chinese courts have no jurisdiction over [your clients’] alleged claims since there is clearly arbitration agreement between you clients and us and it is your clients who have commenced the arbitration proceedings. There is no change of our position that Chinese courts have no jurisdictions over your clients’ alleged claims and matters. … ”
[16]Notwithstanding the position adopted in the correspondence referred to above, in the NMC proceedings against it, the defendant maintained that any claim had to be submitted to arbitration. On 28 September 2023, the NMC dismissed the claimants’ claims against the defendant on the basis that they had to be referred to arbitration in London and against the other defendants because they were not liable to the claimants in respect of the claims that had been made. In respect of the claim against the defendant, the NMC held that:
“The court believes that the plaintiff, V2 Company, and the defendant, SY Company, have reached a valid arbitration agreement, and their dispute shall not be resolved through litigation [because] … Article 9 of the contract stipulates that: any dispute regarding quality shall be resolved through arbitrations in accordance with Article 13 of the contract. … On 12th November, 2010, the plaintiff, XY Company, and the defendant, SY Company, signed a “Guarantee Agreement” which stipulated that: any claims shall be transferred to the plaintiff in accordance with the content of Article 9… The above agreement indicates that the right to claim for quality compensation of the ship in question has been transferred to the plaintiff by XY Company, and the three parties have confirmed in writing that any disputes regarding quality claims of the vessel shall be subject to arbitration in accordance with Article 9 of the “2345 Shipbuilding Contract” (Contract No. 06SY-NB-08). The said Article 9 of the contract explicitly states that any disputes arising from this clause (i.e. quality objections) shall be submitted to arbitrations. … The plaintiff and the defendant SY Company have already agreed in writing that any disputes regarding quality objections and claims shall be resolved through arbitration in accordance with Article 13… Furthermore, whether the plaintiff files a contract claim or a tort claim, both shall be bound by the arbitration clause. … In this case, the plaintiff and the defendant SY Company have agreed that any disputes regarding this clause shall be resolved through arbitration in accordance with Article 13 of this contract. The plaintiff’s claim for product quality infringement against SY Company, which is based on SY Company’s performance of contractual obligations, is included in the “any disputes regarding this clause” agreed upon by both parties, and the arbitration agreement does not exclude the application of lawsuits filed by both parties based on tort. Therefore, both parties shall be bound by the terms of this contract. Therefore, the court does not have jurisdiction over the plaintiff’s tort claim. Thirdly, before filing this lawsuit, the plaintiff has already initiated arbitrations in London, England against the defendant SY Company as the respondent regarding the disputes in question. SY Company has designated arbitrators in accordance with the requirements of the arbitration rules, and in their defense statement in this case, they also acknowledge the existence of a valid arbitration clause with the plaintiff and request resolution through arbitration. … although the plaintiff filed for arbitration in London and requested to terminate the arbitration, in the case where arbitration was agreed upon by both parties, the defendant SY Company refused to resolve the dispute through litigation and insisted that the case should be resolved through arbitration. Since the parties could not reach an agreement on litigation, the dispute shall still be resolved through arbitration according to their agreement, and the plaintiff’s request to terminate the arbitration cannot prevent the jurisdiction of arbitration.”
In summary, the NMC dismissed the claims against the defendant on the basis that (a) there as a valid arbitration agreement between the claimants and defendant and (b) because the claimant had initiated the arbitration proceedings the subject of this claim. It is common ground in these proceedings that there is no contractually binding arbitration agreement between the claimants or either of them and the defendant. The claimants have appealed from the orders of the NMC giving effect to these rulings[17]In light of this, on 18 January 2024, the claimants applied to the tribunals for an order declaring that they had no substantive jurisdiction in relation to the disputes which the claimants had referred to arbitration. That led ultimately to the awards the subject of these claims. The jurisdictional issue the tribunal had to determine was not whether it had jurisdiction over the claims the subject of the NMC proceedings but only “… to determine certain issues arising in connection with proceedings initiated by [the claimants] in the People’s Republic of China.” As a result, the tribunal concluded that:
“we have jurisdiction to hear and determine the question whether as a matter of English law (as the express governing law of the shipbuilding contracts) the exclusion in Article 9 of the shipbuilding contract excludes actions in tort (or equivalent non-contractual civil liability under foreign law).”

Parties’ Submissions In Summary

[18]In summary, the claimants submit that they were not at any stage parties to the ship building contract whether as original parties or by novation and so were never parties to the arbitration agreement contained in Article 9(g). That is not disputed by the defendant.[19]The claimants further contend they would have only come under an equitable derived rights obligation to comply with the arbitration agreement contained in Article 9(g) by reason of the assignment of the benefit of Article 9 to them under the Guarantee Agreement if they had sought or were seeking to enforce any of the Article 9 rights they might have had against the defendant. They point out that by the time they came to commence proceedings in China, the rights conferred by Article 9 had long since ceased to apply by effluxion of time and in any event the claims they seek to advance in China are delictual rights conferred on them by Chinese domestic law as owners of the ships and are not in any sense contractual rights. Put another way, they are rights that would have been available to them irrespective of whether the Article 9 rights had been assigned to them. In essence, since the claimants are not seeking to enforce any of the rights assigned to them under the Guarantee Agreements, they submit they are not under any derived rights obligation to commence arbitration proceedings in accordance with Article 9(g) and are not bound by contract to do so because they are not and never were parties to the ship building contracts.[20]Alternatively the claimants maintain that even if (contrary to their primary case) they were under a derived rights obligation to commence arbitration proceedings in principle, that was only so in respect of the contractual rights assigned to them by the Guarantee Agreements and was of no application to the Chinese domestic law delictual claims which arose independently of the ship building contracts or the Guarantee Agreements.[21]The defendant maintains that these submissions miss the point. Aside from the submission that the claimants became parties to the Article 9 arbitration agreement from the moment they served the notice of reference, the defendant maintains since (i) the defendant disputes the claimants' delict claims in the NMC proceedings by reference to exclusionary provisions of Article 9(e) and (f) and (ii) there is a dispute between the parties as to whether those provisions exclude liability for the Chinese statutory torts on which the claimants rely, it follows that there is a dispute that must be resolved by arbitration in accordance with clause 9(g) in order to give effect to the conditional benefit principle.

Discussion

[22]The claimants maintain that a party with derived rights (for example by way of assignment or operation of the subrogation principle) only becomes subject to a derived rights obligation to take proceedings in accordance with an arbitration or exclusive jurisdiction agreement contained in the agreement from which the claimant derives its rights when that party commences proceedings to enforce those derived rights inconsistently with the arbitration or exclusive jurisdiction agreement. Since no attempt is being made to enforce rights derived from Article 9, the claimant submits that it follows that the derived rights obligation doctrine is of no application. The defendant maintains that is wrong.[23]What the claimants characterise as the derived rights obligation doctrine is an aspect of the conditional benefits principle and is the means by which English law prevents the enforcement of rights derived from contracts by assignment or subrogation inconsistently with any constraint on enforcement imposed by the contract from which those rights are derived. In that context, there is no principled reason why an obligation to arbitrate or to commence proceedings in a defined jurisdiction should be imposed on a derived rights party other than to the extent necessary to prevent the inconsistency that would otherwise arise if a derived rights party were permitted to assert such rights free of the contractual constraints that would have applied to the assignor if counter factually the assignor has been asserting the rights being asserted in fact by the assignee – see The Jay Bola (No. 2) [1997] 2 Lloyds Rep 279, where Hobhouse LJ (as he then was) held in relation to a subrogated claim brought by an insurer that:
“… the insurance company is not entitled to assert its claim inconsistently with the terms of the contract. One of the terms of the contract is that, in the event of dispute, the claim must be referred to arbitration. The insurance company is not entitled to enforce its right without also recognizing the obligation to arbitrate.”
The “claim” in that case was a subrogated claim by the cargo insurers against the time charterer of the vessel where the bills of lading contained arbitration agreements. Thus the right being asserted was one derived from the bills of lading, which required any dispute to be resolved by arbitration in London. By commencing proceedings in Brazil, the insurers were acting inconsistently by asserting the rights to which they had been subrogated otherwise than in accordance with the arbitration agreement contained in the bills of lading. Lord Hodge JSC held in Aspen Underwriting Ltd and others v. Credit Europe Bank NV [2020] UKSC 11; [2021] AC 493 at [27] that Hobhouse LJ’s analysis was the “best encapsulation” of the derived rights obligation principle because it: “… emphasises the constraint on the assertion of a right as being the requirement to avoid inconsistency and, whether the clause is an arbitration clause, as in The Jay Bola, or an exclusive jurisdiction clause, as in Youell, it is the assertion of the right through legal proceedings which is in conflict with the contractual provision that gives rise to the inconsistency. [Emphasis supplied]

[Emphasis supplied]

[24]The claimants place some reliance on the emphasis in Aspen (ibid.) on the inconsistency arising by reason of the assertion of the derived right through legal proceedings. The point the claimants make is that unless and until there is an assertion of a derived right by proceedings otherwise than in accordance with an arbitration or exclusive jurisdiction agreement, no relevant inconsistency can arise. This is said to be significant because in order to obtain the benefit of the guarantees in 2010 it was not necessary for the claimants to commence proceedings. That is so, but in my judgment is immaterial for the reasons I explain below.[25]Essentially the same point made in the authorities so far considered is also made in various other authorities relied on by the claimants including The Prestige No.2 [2015] EWCA Civ 333; [2015] 2 Lloyds Rep 33, which concerned a direct claim brought by the Kingdom of Spain against the CLC insurers of a vessel that sank off the coast of Spain causing widespread oil pollution of the coasts of France and Spain. The CLC Insurers contended that it was not liable for parts of the claim by reference to a “pay to be paid” provision and that was a dispute that was required to be referred to arbitration. That was accepted both at first instance and by the Court of Appeal. As Moore-Bick LJ noted at [14]:
“Two possibilities present themselves: a right to enforce an obligation defined by the contract of insurance and an independent statutory right created by Spanish legislation and independent of the contract”
The Court of Appeal upheld the conclusions of the judge that the former rather than the latter applied because “… the terms of the legislation make it reasonably clear that the claimant is intended to be given a right to enforce the contract in place of the insured.” Once that conclusion was reached, the inconsistency arose because as Sir Geoffrey Voss MR stated when giving the judgment of the Court of Appeal in The Prestige (No.6) [2024] EWCA Civ 1536; [2025] 1 WLR 3011 at [183] “… it was the assertion of the right through legal proceedings in conflict with the contractual provision that gave rise to the inconsistency.”[26]The distinction identified by Moore-Bick LJ The Prestige No.2 (ibid.) does not apply in this case and is not material to its resolution. It was not in dispute before the arbitrators that the NMC had jurisdiction to hear the claims being made by the claimant. The issue that arose and arises in this case is whether the tribunal had jurisdiction in relation to the dispute concerning whether the exclusions contained in Article 9 are defences to the claims in the NMC proceedings. The defendant’s case is that as soon as there was a dispute to that effect, it had to be referred to arbitration because that is what the assignors and defendant had agreed should happen and it was contrary to the conditional benefit principle for the claimants to take advantage of the guarantees contained in Article 9(a) (as they did by notifying defects for the defendant to remedy, and later negotiating and then entering into the settlement agreements with the defendant as referred to earlier) but then to seek to avoid the dispute concerning the scope and effect of the exclusions being resolved by arbitration in accordance with Article 9(g).[27]In The Jay Bola No.2 (ibid.) the issue that arose concerned the assertion of a contractual right by an insurer with subrogated rights, which had they been asserted by the contracting party could only have been enforced by a reference to arbitration. Similarly, The Prestige (No.2) (ibid.) was concerned with the direct enforcement of a contractual obligation by statutory means that if permitted would have circumvented the dispute resolution machinery that would have applied under the policy.[28]Airbus SAS v Generali Italia SpA and others [2019] EWCA Civ 805; [2019] Bus LR 2997 addresses the way in which the derived rights obligation principle applies in relation to non-contractual claims brought by an assignee or successor by subrogation. That case concerned a claim for damage to an aircraft following the incomplete deployment of its landing gear. The claimant was the manufacturer of the aircraft and the defendant was the insurer of the airline that leased the aircraft. A warranty agreement between the claimant and the airline was subject to an exclusive jurisdiction clause that as a matter of construction at least realistically arguably applied both to claims under the contractual warranties and to any non-contractual obligations connected with them. Having paid the airline, the defendant then commenced a negligence claim in Italy. The claimant sought a declaration that those proceedings had been brought in breach of the exclusive jurisdiction agreement, which was granted and then upheld on appeal.[29]In arriving at that conclusion, the Court of Appeal held that if (as was at least realistically arguable) the commencement of the Italian proceedings by the airline would have been a breach of the jurisdiction clause in the warranties agreement, then their commencement by the insurers constituted a breach, not of the contract, but of an equivalent equitable obligation which the court would protect. As Males LJ summarised the applicable principles at [96]- [97]:
“… the position is: (1) Insurers exercising rights of subrogation to make a non-contractual claim are bound by an English arbitration or jurisdiction clause to the same extent as their insured would have been. (2) Whereas the commencement and pursuit of proceedings contrary to the terms of an arbitration or jurisdiction clause by the insured would constitute a breach of contract, the commencement and pursuit of such proceedings by insurers constitutes a breach, not of the contract but of an equivalent equitable obligation which the English court will protect. … … If it is held that commencement of the Italian proceedings by Alitalia would have been a breach of the jurisdiction clause in the Warranties Agreement, it follows that their commencement by the appellant insurers is a breach of an equivalent obligation in equity which Airbus is entitled to enforce and that the English court has jurisdiction to grant a declaration to say so.”
[30]The final decided case to which I need refer at this stage is The “Prestige” (No.4) [2021] EWCA Civ 1589; [2022] 1 WLR 3434. At [62], the Court of Appeal summarised the derived rights obligation principle as being “… an equitable obligation imposed by the conditional benefit principle, namely that although an assignment does not make the assignee a party to the contract, an assignee of a right to which a burden attaches can only take the benefit of that right on the condition that he observes the burden which attaches to it; he may not assert his right under the contract inconsistently with the terms of the contract…” Arbitration agreements apply to disputes, not claims as such, with the result that if the third party asserts a claim, which the contractual party against whom it is made disputes, that other party is entitled to refer that matter to arbitration seeking a declaration of non-liability: the obligation of the third party to arbitrate that dispute has arisen by virtue of assertion of the right…” [Emphasis supplied] The Court of Appeal then considered at [65] an argument by the Kingdom of Spain that reflects the argument advanced by the claimants in this case. Having recorded Spain’s argument that “… the conditional benefit principle, as applied to arbitration agreements, binds the third party discretely to arbitrate only those disputes concerning the enforcement of that party’s conditional right”, the Court of Appeal concluded:
“We would readily accept that the assertion of a claim by a third party under a contract containing an arbitration clause does not involve an agreement to arbitrate any dispute of whatever nature brought by the other party merely on the grounds that it falls within the scope of the arbitration clause. There must be a sufficient connection between the dispute and the claim which the third party has asserted.”
In rejecting a submission that the applicability of the derived rights obligation principle depends upon who is advancing the claim in question (an issue that does not arise in this case) the Court of Appeal rejected that proposition because:
“It mistakenly treats arbitration agreements as biting on claims rather than disputes. Once a claim has been disputed, and the dispute falls within the scope of an arbitration agreement, any party to the arbitration agreement is entitled to require the dispute to be arbitrated and anyone bound by the arbitration agreement is bound to arbitrate the dispute.”
[31]This analysis is important for present purposes because it proceeds on the basis that what the claimants characterise as the derived rights obligation doctrine is the application in a particular context of the conditional benefits principle. It is also important because it focuses attention on the existence of the dispute rather than of a claim as being material for present purposes. That is an important consideration in this case. The defendant has disputed the claimants’ tort claims by reference to the terms of the Article 9 exclusions, which it contends are wide enough to exclude such claims. Once the tort claims have been disputed on that basis, and assuming that there is a dispute as to the true meaning and scope of the Article 9 exclusions, then that dispute is one that the defendant is entitled to have referred to arbitration, assuming such a dispute comes within the scope of the arbitration clause as a matter of construction, and anyone bound either by contract or the equitable obligations resulting from application of the conditional benefit principle is bound to arbitrate that dispute.

Ground 1 - the Aspen ground

[32]The claimants submit they would come under a derived rights obligation to arbitrate their claims against the defendant only if and to the extent that the claimants were seeking to enforce the rights assigned to them applying the principles set out in The Jay Bola No.2, Aspen Underwriting Ltd and others v. Credit Europe Bank NV, and Airbus SAS v Generali Italia SpA (ibid.). The point which the claimants make is that the claims that are available to them as a matter of Chinese statute law and have nothing at all to do with the rights conferred by the Guarantee Agreements. It follows that since the claimants are not asserting the rights that were assigned to them by the Guarantee Agreements, there is no obligation to arbitrate the Chinese law claims, which can and should be resolved by the Chinese courts. The obligation to arbitrate would have arisen only if there was a dispute concerning the Guarantee Agreement rights that could not be resolved by agreement without recourse to proceedings.[33]The difficulty about this submission is that it ignores a key difference between this case and those on which the claimants rely. Each of the cases on which the claimants rely was concerned with a claim being made by an assignee or subrogated party, where that party was seeking to assert a claim whilst at the same time ignoring the exclusive jurisdiction or arbitration agreement that would have applied had the self-same claim been brought by the assignor or assured. In such cases the inconsistency identified in The Jay Bola (ibid) arises.[34]However this case is concerned with a different inconsistency. In this case the inconsistency arises from the claimants asserting a right to sue for breach of the statutory duties that arise as a matter of Chinese law in the face of a dispute concerning the true meaning and effect of the exclusions that formed an essential part of the guarantee rights the benefit of which had been assigned to the claimants and which they took advantage of by making guarantee claims and subsequently entering into the settlement agreements.[35]Thus the issue that arises is different from that considered by the authorities on which the claimants rely. The claimants were assigned rights under a guarantee which were conditional or qualified in the sense that they were conferred subject to the temporal limitation imposed by, and the exclusions that are set out in, Article 9. Applying the conditional benefit principle, the claimants as assignees could not take the benefit of the guarantee without also being bound by the qualifications that applied to it – see by way of example Britain & Overseas Trading (Bristles) Ltd v Brooks Wharf & Bull Wharf Ltd [1967] 2 Lloyd’s Rep. 51 (Widgery J). Thus the issue that arises is not whether the claimants were entitled to issue and pursue a claim in the NMC but whether there is a dispute concerning the scope of the exclusion provisions within Article 9. Once it is accepted that there is such a dispute, then applying the conditional benefit principle also requires that the dispute concerning the scope and effect of the exclusions should be resolved using the method agreed by the assignors and defendant – that is by arbitration in accordance with Article 9 – assuming that as a matter of construction the arbitration clause (Article 9(g)) applies to such a dispute as a matter of construction.[36]If the benefit that was conferred on the claimants by the assignment was conditional in this sense and if there is a dispute as to the true scope and effect of the exclusions which the original parties to the contract had agreed should be resolved by arbitration, it is difficult to see why the claimants should be in any different position. In principle, an assignee will be bound by the exclusions to which the assigned right is made subject and if it had been agreed between the parties that the applicability of the exclusions to any particular claim would be resolved by arbitration then the assignee is not entitled to avoid the effect of that agreement. The claimants can be in no better position than the assignors because they have not only received by way of assignment the rights conferred by Article 9(a) but taken full advantage of them and cannot be permitted to proceed thereafter otherwise than subject to the constraints imposed by the agreement conferring the rights that were assigned. In this regard I accept as correct Mr Turner KC’s submission that the obligation to sue in accordance with a forum clause to enforce rights derived from the contract containing it is simply an example of the wider conditional benefit principle as to which see(i) Tito v. Waddell (No.2) [1977] Ch 106 and(ii) the analysis set out Guest: Assignment of obligations and Liabilities, 5th Ed., Chap. 9, paragraphs 9-07 and following.[37]The only issue that remains is whether as a matter of construction the arbitration agreement in Article 9(g) applies to a dispute concerning the applicability of the Article 9 exclusions to a claim other than one under Article 9.[38]A conclusion that this is the effect of what had been agreed results in forum fragmentation because the substantive dispute will be determined by the NMC (assuming the appeal from its earlier judgment succeeds) whereas the dispute concerning the applicability of the Article 9 exclusions to the Chinese tort claims will be resolved by an arbitral tribunal. I considered that this might engage the Fiona Trust v Privalov [2007] UKHL 40 presumption in favour of a “one-stop” forum and might lead to the conclusion that on its proper construction the arbitration agreement applied only to disputes in respect of claims under the rights assigned to the claimants notwithstanding that Article 9(g) applies to “(a)ny dispute under this Article…” If correct then this would have meant that the tribunal would not have had jurisdiction as a matter of construction of Article 9(g).[39]I invited the parties to supply written supplemental submissions on this issue after the end of the hearing. Mr Turner’s submission was that:
“ The principle in Fiona Trust has no particular role here, though of course the Yard submits that the Article 9(g) arbitration clause is to be construed widely, in accordance with that principle. The reason the “independent tort claim” is within the arbitration clause, however, is because of the exclusion of such claims by Article 9(f). The Yard accepts that, if that were not so, there would be no “dispute under this Article”
. Mr Wright KC submitted that: “Any presumption as to “one-stop” dispute resolution established in Fiona Trust does not apply here. The Fiona Trust presumption is concerned with the proper interpretation of an arbitration agreement to which the parties are, or are said to be, bound as a matter of contract. In that context of construction, the Court is entitled to consider “…whether the parties, as rational businessmen, were likely to have intended that only some of the questions arising out of their relationship were to be submitted to arbitration and others were to be decided by national courts” (per Lord Hoffmann at [7]). That issue does not arise in cases involving third parties, because the issue there is one of privity. As Teare J explained in Morgan Stanley & Co International PLC v China Haisheng Juice Holdings Co Ltd [2012] 2 CLC 263 at [21], the question about a non-party being bound to an arbitration clause did not arise in Fiona Trust and “in the context of arbitration…could not arise because a non-party could not be subject to an arbitration to which it had not agreed”.[40]I am sceptical as to whether this analysis is correct. The issue that arises on a case such as this is whether the claimants are acting inconsistently by seeking to avoid arbitrating the dispute concerning the scope of the Article 9 exclusions having previously taken full advantage as assignees of the benefits conferred by Article 9. That first involves identifying whether as between the assignor and the contractual party the dispute is one that would fall within the scope of the arbitration agreement in issue. If it would not then no question of inconsistency in the relevant sense could arise. It is only if in principle, as a matter of construction, the arbitration agreement would apply to the dispute that arises that it becomes necessary to engage with the inconsistency issue.[41]DHL Project & Chartering Ltd v Gemini Ocean Shipping Co Ltd (The Newcastle Express) [2022] EWCA Civ 1555; [2023] Bus LR 584 is of no relevance. That case was concerned with whether a charterparty containing an arbitration clause that was expressly made subject to certain events occurring before it took effect meant the parties were required to arbitrate whether the contract between the parties became binding. That suggestion was rejected by Jacobs J and by the Court of Appeal. The point in that case was that the charter party was subject to a pre-condition the purpose of which was to prevent a binding contract coming into existence unless and until the condition was satisfied. Since the pre-condition was never satisfied it followed that no binding contract was concluded. Thus, as Males LJ pointed out at [58], the Court of Appeal was not concerned with the construction of the arbitration clause that was in issue in that case. As he added at [75] the Fiona Trust presumption “… is concerned with the interpretation of dispute resolution clauses, as made clear in Fiona Trust.” Morgan Stanley does not take matters any further for similar reasons.[42]Given that neither party relies on the Fiona Trust presumption and both parties maintain that it is of no application, it would be wrong of me to do anything other than leave it out of account.[43]In those circumstances, it is necessary to construe the arbitration agreement in issue applying the usual general principles of construction, bearing in mind that what is being construed is what was agreed by the original parties. Looked at in this way, it would be wrong to construe the words “(a)ny dispute under this Article…” in any way other than to give them their full force and effect. Where the parties have used unambiguous language, the Court must apply it - see Rainy Sky SA v Kookmin Bank [2011] UKSC 50 [2011] 1 WLR 2900 per Lord Clarke JSC at paragraph 23. A dispute as to the applicability of the exclusions contained in Article 9 is a “… dispute under this article”. This construction gives effect to the unambiguous language principle. It also gives effect to the principle that a court should not reject the natural meaning of a provision as incorrect simply because it appears to be an imprudent term for one of the parties to have agreed, even ignoring the benefit of the wisdom of hindsight, - see Arnold v Britton [2015] UKSC 36 [2015] AC 169 per Lord Neuberger PSC at paragraph 20 and Wood v Capita Insurance Services Ltd [2017] UKSC 24 per Lord Hodge JSC at paragraph 11. It also gives effect to the principle that sophisticated, complex agreements drafted by skilled professionals (which I conclude is the case with the agreements relevant to this case) are likely to be interpreted principally by textual analysis unless a provision lacks clarity or is apparently illogical or incoherent - see Wood v Capita Insurance Services Ltd ibid per Lord Hodge JSC at paragraph 13 and National Bank of Kazakhstan v Bank of New York Mellon [2018] EWCA Civ 1390 per Hamblen LJ at paragraphs 39 to 40.[44]It is a construction that a reasonable person with all the background knowledge which would have reasonably been available to the parties when they entered the contract, would have understood the language used by the parties to mean. I say that because Article 9 confers rights subject to exclusions and was intended to regulate between the parties the risks posed by post-delivery defects, which to be effective had to extend to any assertion of rights other than those the defendant agreed to provide to the assignors under Article 9. Thus it was clearly in contemplation that the assignors or their successors might assert a claim other than pursuant to the rights conferred by Article 9 and that a dispute would arise as to the true scope and effect of the Article 9 exclusions. That being so, an agreement to refer any dispute under Article 9 almost by definition will include and will have been intended by the parties to include a dispute as to whether the exclusions within Article 9 are effective to exclude a claim of the sort made by the claimants in the NMC proceedings.

The Independent Tort Claim Ground

[45]I have largely addressed this issue already. The claimants submit that the tribunal was wrong to conclude that it had jurisdiction over the issue “… whether as a matter of English law, the exclusions in Article 9 of the shipbuilding contracts apply to the PRC claims against the Respondents”. This submission is advanced on the basis that the tribunal was wrong to have reached that conclusion because the authorities relied on as supporting that proposition (such as Republic of Mozambique v Privinvest Shipbuilding SAL (Holding) and others [2023] UKSC 32; [2023] Bus LR 1359) were concerned with whether a dispute fell within the scope of an arbitration agreement by which the parties were contractually bound. I am not able to accept that submission.[46]The scope as a matter of construction of an allegedly applicable arbitration or exclusive jurisdiction clause will arise whether the issue concerns the original contracting parties, or an assignee (or party relying on subrogation) against whom the conditional benefit principle is being asserted. Here it is being asserted that having taken full advantage of the guarantee rights accorded to them as a result of the assignment of Article 9, the claimants cannot thereafter rely on causes of action that the exclusions contained within Article 9 would preclude them from relying on and cannot seek to have the applicability of the exclusions to the causes of action they wish to rely on resolved other than as had been agreed by the assignors and defendant. In deciding that question, it is necessary to construe the arbitration agreement. That exercise was undertaken in Privinvest Shipbuilding (ibid) between the original parties to the arbitration agreement. However in a case such as this, the same issue would arise whether the NMC claims had been brought by the assignors or (as in fact is the case) the assignees. The position in Airbus SAS (ibid) was similar: that case concerned an exclusive jurisdiction clause in favour of the English courts and its impact on a subrogated claim commenced in Italy. In that case the first issue that arose was whether as a matter of construction it was at least realistically arguable that the Italian claim fell within the scope of the exclusive jurisdiction clause. The position would have been no different if the claimant in that case had been an assignee rather than relying on subrogation[47]In paragraph 98 of his written submissions Mr Wright relies on the statement of principle in Merkin, Arbitration Law at paragraph 8.98.1 that “[i]f the third party has an independent cause of action not dependent upon that contract, it cannot be forced to arbitrate and is not in breach of contract for resorting to judicial proceedings elsewhere”. Mr Wright submits that this is “…precisely the position here”. I disagree. The third party claims are claims that the claimants are entitled to commence in the NMC. Those claims are the “… independent cause of action…” being referred to in the extract. However that is not what the tribunal asserted jurisdiction over. The issue over which the tribunal asserted jurisdiction is the availability of the exclusions contained in Article 9 as a defence to the claims started in the NMC. Thus the position is not precisely or at all the same as that being considered in the Merkin extract relied on by Mr Wright. Once it is accepted that as a matter of construction such a dispute comes within the scope of the arbitration clause at Article 9(g), then the arbitrators have jurisdiction to determine that issue applying the conditional benefit principle I refer to earlier in this judgment.

Conclusions

[48]In my judgment for the reasons set out above the tribunal had jurisdiction to determine the issue “… whether as a matter of English law, the exclusions in Article 9 of the shipbuilding contracts apply to the PRC claims against the Respondents”. In those circumstances, these claims are dismissed.