Case in Brief Sino Channel Asia Ltd v Dana Shipping and Trading Pte Singapore [2016] EWHC 1118 (Comm)
A recent UK case demonstrating the importance of correct service of a notice to commence arbitration. Incorrect service led to a US $1.68 million arbitral award being set aside as being neither valid or binding.
Background and Facts Dana Shipping and Trading Pte Singapore (“Dana Shipping”) and Sino Channel Asia Ltd (“Sino”) entered into a contract of affreightment (“COA”) as owner and charterer respectively. Under the COA, Sino was chartered to carry iron ore from Venezuela to China, but Sino anticipated that the operational side of the charter would actually be performed by a third-party affiliate, Beijing XCty Trading Limited (“Beijing XCty”). In the lead up to the COA and following its formation, Mr Daniel Cai, an employee of Beijing XCty, was the main point of contact between Dana Shipping and Sino, and presented himself to Dana as ‘Daniel of Sino Channel Asia’. A dispute arose when no shipments were arranged or performed by Beijing XCty, and Dana referred the dispute to arbitration in accordance with the COA. Under the COA, disputes between the parties were to be referred to arbitration, initiated when one party received a “notification in writing of the appointment of the other party’s arbitrator” [21]. The recipient would then have 14 days to appoint its arbitrator, “failing which the decision of the single arbitrator appointed shall apply” [21]. In accordance with the COA, Dana Shipping appointed their arbitrator and served their notice of arbitration on Mr Cai by email, calling upon Sino to appoint their arbitrator. On receipt of the notice, Mr Cai requested an extension of time, but took no further action and did not alert Sino to the notice of arbitration. Consequently, Sino never received the notice and was unaware of the arbitration entirely. Given Sino did not respond, Dana Shipping’s arbitrator became sole arbitrator in accordance with the COA, and made an award of US $1.68 million in Dana Shipping’s favour. A hard copy of the award was sent to and received by Sino’s registered office in Hong Kong, which was the first Sino had ever heard of the arbitration. It was not until Dana Shipping began enforcement proceedings that Sino took action themselves. When Dana Shipping attempted to enforce the award, Sino applied for a declaration and order pursuant to s72(1)(b) or (c) of the Arbitration Act 1996, that the award was made without jurisdiction and was of no effect, given Sino had not received the notice of arbitration and had taken no part in the arbitration. Decision In support of their application for a declaration setting aside the award, it was Sino’s case that Mr Cai had no authority to accept service of the notice of arbitration on behalf of Sino; that such purported service was therefore ineffective; and that consequently, Sino’s lack of response was because they were unaware of the arbitration and did not and could not participate in it. Dana Shipping asserted that service of the notice of arbitration was effective on the grounds that Mr Cai had implied actual authority and/or ostensible authority to receive it on Sino’s behalf, and/or that such authority was ratified by Sino.