Summary

In relation to a shipbuilding contract entered into by a Mexican buyer and governed by English law, a decree made in Mexico that the tender process leading to the contract was a nullity did not deprive an arbitrator who had determined a dispute in the seller's favour of substantive jurisdiction.

Facts

The claimant brought a challenge under the Arbitration Act 1996 s.67 to an award made in the defendant's favour.

The claimant was a Mexican salt-mining company. It was a state entity subject under Mexican law to regulatory requirements, some of which were set out in the Law of Procurement, Leasing and Public Sector Services (LAASSP). The claimant's "Organo Interno de Control" (the OIC) had particular functions under LAASSP. In July 2014, the claimant as buyer entered into a shipbuilding contract with the defendant as seller for the design, construction and sale of a salt barge for $27,240,000, which was payable in four instalments. The contract was governed by English law. In May 2015, following the claimant's failure to pay the second instalment and to respond to a notice of default, the defendant gave notice terminating the contract. It began an arbitration in August 2015. In September 2016, the final hearing was fixed for five days to begin on 5 December 2016. On 16 November 2016, an OIC Resolution was made declaring as a nullity the tender process under which the defendant had won the shipbuilding contract. The OIC concluded that the negotiation and execution of the contract had not been preceded by a tender process which satisfied the requirements of LAASSP. Relying on the OIC Resolution, the claimant raised a challenge to the arbitrator's jurisdiction on 22 December 2016. The arbitrator refused to consider the claimant's "late objection" to his jurisdiction, holding that there had been unjustified delay in raising it and that the claimant had continued to take part in the arbitration when it should with reasonable diligence have been aware of the grounds on which it later sought to object to jurisdiction. He went on to make an award in the defendant's favour.

The claimant argued that the OIC Resolution had deprived the arbitrator of substantive jurisdiction.

Held

Arbitrator's jurisdiction - The claimant had participated on the merits in a London arbitration governed by English law in respect of a shipbuilding contract also governed by English law. It had accepted that the arbitration was validly commenced and that the arbitrator had jurisdiction over the defendant's substantive claim at the outset. The resulting award went against the claimant. The circumstances of the OIC's involvement, together with the way in which the claimant introduced it into the arbitral process, had caused the defendant understandable suspicion that the claimant might be guilty of gamesmanship or worse. It was not necessary to make a finding about that. The only claim advanced by the claimant, no other claim being available to it, was that the OIC Resolution in November 2016 somehow took away the arbitrator's substantive jurisdiction. It did not do so. The claimant had relied on Mexican law, but its case in that respect did not go to the arbitrator's substantive jurisdiction to make the award. In any event, the claimant had lost the right to object by the operation of s.73(1) of the 1996 Act. It would have been possible, expecting of the claimant only that it act with reasonable diligence, for the objection to jurisdiction to have been made a month or so earlier. During that month or so when the claimant could reasonably have raised but did not raise its objection, it continued to participate in the arbitration, in particular playing a full part in the five-day final hearing. The s.67 claim therefore failed (see paras 40, 53-55 of judgment).

Witness evidence - Witness statements had been filed which in large part comprised comment and submissions rather than evidence of fact. The court understood the perceived convenience in a s.67 claim of setting out the claimant's detailed case as to the material facts, with explanatory comment or an outline of the proposed argument, in a single main supporting witness statement from the claimant's solicitor. The same practice was seen in s.68 claims. That supposed convenience did not make the provision of such a statement necessary or appropriate. Where the material facts would be proved by contemporaneous documents, the proper function of a witness statement might well be only to serve as the means by which those documents could be got into evidence by being exhibited. The claimant's case as to what those documents proved, and as to the conclusions to be drawn, could and should be set out in the arbitration claim form as part of the statement of the "Remedy claimed and grounds on which claim is made". The content of any witness statement, beyond a bare identification of exhibited documents, could and should be limited to matters of fact intended to be proved, if disputed, by calling the maker of the statement as a factual witness at the final hearing (paras 24-25).

Judgment for defendant.