Azov Shipping Company v.
Baltic Shipping Company (No 2)
(England and Wales) High Court of Justice (Commercial Court), Longmore J, January 12, 1999.
Award on jurisdiction - challenge under s. 67 of the Arbitration Act 1996 ordered to be determined by rehearing - application for security for costs of the proceedings in court - s. 70(6) considered - nature of court's jurisdiction - principles to apply in considering applications for security for costs.
[Note: The principles discussed in this case may also be relevant to the tribunal's power to award security for costs, since the wording of s. 70(6) is similar to that of s. 38(3).]
Facts:
The applicant ("Azov") and the respondent ("Baltic") were former Soviet shipping companies. Disputes arose and were referred to arbitration by Baltic under an arbitration agreement in an agreement that Baltic said had been concluded with Azov relating to the interchange of containers between them. Azov disputed the existence of the agreement and the tribunal's jurisdiction. The tribunal, by award, determined that Azov was a party to the agreement and that it had jurisdiction in the matter. Azov challenged the award under s. 67 of the Arbitration Act 1996 ("the 1996 Act") and the court ordered that the question of the tribunal's jurisdiction should be determined by rehearing the relevant evidence. Baltic applied for security for costs in respect of the court proceedings, under s. 70(6) of the 1996 Act.
Held:
An order for security for costs was appropriate in this case. There was under s. 70(6) of the 1996 Act no fetter on the court's discretion in relation to security for costs, except that the court could not order security on the grounds that the party against whom the order was sought, was incorporated outside the United Kingdom. Nevertheless, the court should be guided by the provisions of s. 1(a) of the 1996 Act. This provided that the object of arbitration was the fair resolution of disputes by an impartial tribunal without unnecessary delay. It followed that cases would be rare in which a court, or indeed an arbitrator, would think it right to order security for costs if the party against whom the order was sought had sufficient assets to meet any order for costs and those assets were available for satisfaction of any such order.
It was, therefore, relevant to enquire whether Azov had assets that were available for the satisfaction of any judgement as to costs. If it did, the court would not be inclined to make any order. If it did not, or if such assets were not readily available to satisfy any court order, the court would be inclined to make an order for security.
The second potentially relevant matter might be the fact that Azov had already lost before the arbitrator and was, effectively, having a second bite of the same cherry. Although, in rehearing the jurisdictional issue, the court would approach the question afresh, this did not mean that the existence of the arbitrator's award was irrelevant in deciding whether an order for security for costs was appropriate especially where no cogent reason was put forward for saying the award was wrong. This was, however, not nearly as important a matter as the question of Azov's assets.
The merits of the underlying dispute might be relevant if the court had to decide whether to award security for the costs of the arbitration. But this was not the case where the application, as here, was only concerned with whether security for costs should be awarded in respect of the jurisdictional dispute.
Azov did not have assets outside of the Ukraine sufficiently available for the purpose of enforcing an English order for costs. It did have assets in the Ukraine, but there was considerable doubt as to the existence of any arrangements in the Ukraine to enforce costs' orders by foreign courts. In such circumstances, an order for security, in the amount agreed by the parties, was appropriate. This would have been the case even if matters were more finely balanced, because of the fact that Azov had already lost the jurisdictional argument once.
For the applicant: Mr V Flynn (instructed by Messrs Shaw & Croft).
For the respondent: Mr C Smith (instructed by Messrs More Fisher Brown).
|
