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Jurisdiction successfully challenged as the tribunal erred in determining agency
Jurisdiction successfully challenged as the tribunal erred in determining agency
23 June 2020
Series
Blogs
23 June 2020
The English High Court recently set aside a tribunal’s award on jurisdiction because the tribunal wrongly determined that a party to the arbitration agreement had authority to enter into it as agent for another (MVV Environment Devonport Ltd v NTO Shipping GMBH & CO.KG [2020] EWHC 1371 (Comm)).
Challenges to an award in an English seated arbitration on the basis that the tribunal lacked substantive jurisdiction (which may proceed under Section 67 of the Arbitration Act 1996) are relatively rare and notable.
The judgment also contains a helpful overview of the English law on an agent’s authority to enter into a contract on behalf of a principal.
Background
The applicant (“MVV”) sought to set aside a final award on jurisdiction, pursuant to which the tribunal held that a contract of carriage (containing an arbitration agreement) had been made by MVV’s agent and that MVV was therefore a proper party to the arbitration commenced by the defendant (“NTO”).
MVV generates electricity. It contracted RockSolid BV (“RS”) to remove waste (the “Waste”) and ship it to the Netherlands for disposal (the “RS Contract”). The RS Contract was not an agency agreement and was closely akin to an Ex Works agreement, with risk and title to the Waste passing to RS when loaded onto RS’s vehicles [7].
RS transferred the Waste to Victoria Wharf (Plymouth). Pursuant to a contract between RS and Victoria Wharves Limited (the “VW Agreement”), the Waste was stored there prior to shipment on a ship chartered by RS. Under the VW Agreement, RS also appointed an agent, Sanders Stevens Limited (“SSL”) as its shipping agent to coordinate RS’s shipping requirements [10].
In January 2017, an explosion occurred on board a vessel chartered by RS from NTO for transporting the Waste, resulting in NTO commencing the arbitration in question. NTO argued that MVV was the proper respondent to the arbitration because it was a party to the contract of carriage; the corresponding bill of lading identifying MVV as the “shipper”.
Importantly, there were 33 bills of lading generated in respect of prior shipments, each emailed by SSL to MVV (the “Bills of Lading”), identifying MVV as the “shipper” without objection from MVV. This is significant because if MVV was in fact the “shipper”, it was also a party to the contract of carriage and therefore a proper party to the arbitration. MVV’s non-objection to its description in the Bills of Lading also featured prominently in NTO’s case that SSL was MVV’s agent, as summarised below.
Issues before the court
The court disagreed that the naming of MVV as the “shipper” was decisive in determining whether MVV was directly a party to the contract of carriage. This was a mistake, as evidenced by (inter alia) the terms of the RS Contract and the VW Agreement.
Consequently, whether MVV was a party to the contract of carriage depended on whether either RS or SSL concluded the contract as MVV’s agent.
• Express actual authority
The RS Contract did not authorise RS (or SSL) to enter into the contract of carriage on MVV’s behalf. However, NTO argued that the failure to contest the contents of the Bills of Lading resulted in an agreement between MVV and SSL to confer actual authority on SSL.
This turned on whether it was reasonable for SSL to think that it has been authorised to act as agent for MVV [31]. That was not the case, given that SSL decided to name MVV as “shipper” unilaterally. In the absence of any contract between MVV and SSL, MVV’s silence was insufficient to confer actual authority on SSL (“assent is not to be inferred from silence, unless there is further indication that the putative principal acquiesces in the agency” [33]).
• Implied actual authority
The Court held that neither RS nor SSL had implied actual authority. This is because such authority can arise “only in relation to someone who has been given some express authority to which the implied authority is appurtenant” [41]. However, neither RS nor SSL had any express (actual) authority to which implied authority could attach [42]. Furthermore, again, MVV’s silence as to the contents of the Bills of Lading was insufficient to establish implied actual authority [43].
• Ostensible/apparent authority
NTO argued that MVV’s failure to contest the contents of the Bills of Lading resulted in MVV holding SSL out as its agent. This argument also failed because NTO could not have relied on MVV’s silence as the Bills of Lading were issued after conclusion of the contract of carriage. [46]. The Court further clarified that a representation of authority by the agent (i.e. SSL’s naming of MVV as “shipper”) only is “generally never sufficient to give rise to apparent authority” [46].
The Court therefore held that MVV was not a party to the contract of carriage, nor its arbitration agreement.
Comment
In determining the existence of actual authority, the Court found it “understandable in the circumstances” that MVV considered each of the Bills of Lading had been sent to it “for information purposes only and had no legal significance” [34]. In different circumstances, it might be possible to rely upon silence to establish an agent’s authority (but the court’s judgment [33-34] makes it clear that this is not easily found).
In any event, a prompt, contemporaneous, objection to the misdescription in the Bills of Lading might have avoided a later arbitration to determine jurisdiction and the subsequent court challenge.
Click here for a copy of the judgment.