England and Wales High Court (Admiralty Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMIRALTY COURT

		Royal Courts of Justice
		11th April 2001

MR. JUSTICE DAVID STEEL: This is an application by the new owners of a vessel now called "Gillian" but formerly called "Ex-Press Nilgri" for an anti-suit injunction to restrain proceedings commenced by the respondents to the application, the charterers of the vessel in Dubai.

The basis of the application is that the issues in the Dubai proceedings to the effect that the new owners are, by virtue of Dubai statutory law, obliged to respect the terms of the charterparty between the respondent charterers and the former owners, is one which the new owners and the charterers have agreed to submit to English arbitration, or it is a dispute which falls within the arbitration clause in the charterparty itself.

In the event that the owners were to succeed in their application, the charterers have a counter application of their own for an interim injunction in support of the arbitration restraining the owners from acting in a way inconsistent with the charter. This application for an interim injunction is by reference to the principles adumbrated in the well-known decision of the Privy Council in The Lord Strathcona.

The background is unusual and I am afraid must be explained in a little detail. The material available by way of recount of the circumstances is surprisingly limited, and there is only one source, namely a statement of the applicants' solicitor, Mr. Hewett. No evidence of fact has been filed by the respondents at all.

The applicants are a company incorporated in Cyprus. The respondents are a company incorporated in Singapore. On 6th August 1997 by a charterparty on the "New York Produce Exchange Form, the vessel, which was then known as "Holstencarrier", was chartered by her then owners, Kandi Shipping Company, another Cypriot company, to Bengal Express Container Line of Jersey for 12 months. The charterparty contained two particularly pertinent clauses: firstly clause 17, whereby the parties agreed

"... that should any dispute arise between owners and charterers, the matter in dispute shall be referred to three persons at London, one to be appointed by each of the parties hereto, and the third by the two so chosen; their decision or that of any two of them shall be final, and for the purposes of enforcing any award this agreement may be made a rule of the court. The arbitrators shall be commercial men, familiar with shipping matters. English law to apply to this charterparty ..."

By Clause 75 it was provided that

"... the owners have the right to sell the vessel during the currency of this charter, after obtaining charterer's consent, which not to be unreasonably withheld."

There were various addenda to the charterparty whereby the owners changed from Kandi to Kestrel. The period was extended from time to time, most recently for a period of two years from 21st March 2000, and the benefit of the charterparty was transferred from the original charterers to the respondents.

Early in 2000, Kestrel apparently encountered financial difficulties and found itself in default in its financing arrangements with the Bank of Nova Scotia, the mortgagees. As a result, the vessel was offered for sale and the applicants expressed an interest in buying her. On 5th July 2000 they concluded an MOA with Kestrel. Clause 5 of the MOA provided:

"The vessel shall be delivered and taken over with charter attached to Messrs. BXCL/Seacon till 21/3/2002."

The reference to BXCL/Seacon is, in fact, a reference to the respondents.

The vessel is of some age and may be not in particularly good condition, but, for reasons which remain obscure, she suffered a major engine breakdown on 5th August and had to be salved. The salvage service was completed in Mumbai. As a result of this casualty, Kestrel were unable to comply with the terms of the MOA and the sale fell through. Thereafter, for a period of something like four or five months, the vessel remained in Mumbai under arrest from various creditors.

The applicants re-opened negotiations with Kestrel, and the outcome was an addendum to the MOA dated 7th November 2000 which provided that the old clause 5, which I have just recited, should be amended to read:

"The vessel will be delivered to the buyers charter-free of Mumbai, India" --

It should read perhaps "at Mumbai, India".

-- "between November 6th and November 30th in seller's option, with cancelling in buyer's option November 30th."

The applicants were able to negotiate these terms, and in particular the provision whereby the vessel was to be acquired charter-free, because it was clear and common ground that Kestrel was bankrupt. Furthermore, the vessel was unseaworthy; she required major work at a then estimated cost of $2.4 million to return her to trading condition, and Kestrel certainly lacked the resources to undertake that task. On the other hand, the applicants were only prepared to incur expenditure in form of the cost of repairs if, following completion of the repairs, they were free to trade her at rates reflecting the current market, which had moved in owners' favour.

In the meantime, I should record that the respondents, at some date, had chartered a replacement vessel called "Atlantic". The rate of hire was significantly greater than that under the terms of the charterparty.

In December, the applicants settled claims of various creditors of Kestrel, and by addendum no.3 to the MOA dated 13th December the applicants eventually purchased the vessel for $1. Concurrently an associate company of the new owners acquired the bank's interest in the mortgage and acquired also an assignment of any insurance recoveries.

The vessel was then arrested by other creditors and various caveats against release were entered, including one by the respondents. Most of these claims were settled, but on 22nd December 2000 the respondents voluntarily withdrew their caveat, following which the vessel was towed to Dubai. Thereafter, between December 2000 and March 2001, very extensive repairs were undertaken on the vessel at the applicants' expense.

While the repairs were being conducted, the applicants and the respondents engaged in correspondence about a spreader that was on board the vessel and about the bunkers. These minor issues do not merit any further comment at this stage.

The main dispute between the parties arose from the respondents' contention that in some way they were entitled to rely on the charterparty in relation to the applicants, and there ensured negotiation between the parties with, in February, the respondents suggesting that the vessel should be returned to their service at the charterparty rate of hire, but they would reimburse the owners' additional hire if it should be determined by arbitration in London that they were not entitled to invoke the charterparty against the applicants. Au contraire the applicants' position was that the vessel, if it was to be returned to the respondents' service, should be restored only at the current market rate, and the difference between that rate and the charter rate would be refunded by the applicants to the respondents, if the arbitrators should determine that the charterparty was material.

These discussions culminated in a proposal by the respondents on 16th March 2001 that the issue as to whether the applicants were bound or not by the charterparty should be determined by arbitration. In fact, two days later, on 18th March, the respondents arrested the vessel in Dubai. The application for precautionary attachment alleged that the respondents were entitled to rely on the charterparty as against the applicants, by virtue of the law of the UAE, and they invoked art.220 of the Federal Maritime Law of the UAE, which provides that the sale of a ship does not terminate the charter contract, but that nevertheless the purchaser may request its determination if it is established he did not know at the time of the sale about the charter contract and he was not capable of knowing about it.

The respondents, in these circumstances, claim damages of $1.3 million for the alleged breach by the applicants of their obligation to honour the charterparty, the figure representing the additional chartering costs since October plus $87,000 for bunkers and $30,000 for the spreader.

The Dubai court made an order for an arrest on that same day, and on 22nd March the new owners chartered their vessel to South Marine with a lay time of 5th to 8th April. This was later extended to 13th April to allow for additional dry docking work. Under Dubai law, an applicant for an arrest has to apparently lodge a substantive case within eight days of the arrest. In fact two days after the new owners had chartered the vessel out, on 24th March 2001, the respondents issued substantive proceedings in Dubai in respect of their claims.

The claims made in the substantive case are, to all intents and purposes, the same as those made in the application for a precautionary attachment, save for the prayer at p.5 which I will not read out. On that same day, the respondents' solicitors initiated arbitration proceedings in London, appointing Mr. Bruce Harris as arbitrator in connection with all disputes arising out of the charterparty and its addenda. In a fax of the same date, the respondents notified the applicants, purportedly pursuant to s.16 of the Arbitration Act, that the applicants should appoint their own arbitrator.

The outcome was that, on 26th March, the applicants appoint Mr. Ian Kinnell Q.C. as their arbitrator. The appointment was expressed as made in the context of an ad hoc reference to arbitration, without prejudice to the owners' claim that they were not, and had never been, a party to the charterparty. The scope of the reference was stated to be all disputes between Sea Premium and Sea Consortium of whatsoever nature in connection with the ship.

On 27th March, the applicants notified those acting for the respondents of the appointment of Mr. Kinnell, and offered to provide security by way of a bank guarantee in the sum of $650,000 on terms that the disputes between the parties would be resolved in arbitration.

On 28th March, the respondents' solicitors replied:

"Unless and until there is an unconditional respect by your clients and Kestrel of the arbitration clause in the above charterparty, the UAE courts have jurisdiction on the merits of this matter. At present your clients are endeavouring to impose various conditions which our clients do not accept. Our clients will therefore proceed with the claim on the merits in Dubai, while reserving their rights to seek injunctive relief in England should that become appropriate."

Since the respondents had issued arbitral proceedings in London on the merits of the dispute between the parties, and maintained that they would proceed with their claim on the merits in Dubai, the applicants wrote to the respondents on 30th March seeking confirmation that the respondents would take no steps to pursue the claim arising under or in connection with the charterparty other than by arbitration, and inviting them to take steps to secure the lifting of the arrest. The respondents replied that the arrest in Dubai was for the purposes of obtaining security, and:

"If your clients do not accept the arbitration clause in the charterparty binds them also for the purpose of founding jurisdiction ... If your client wishes to challenge the correctness of what we say they should do so in Dubai."

On Monday 2nd April, the applicants wrote to Mr. Kinnell confirming his appointment as arbitrator in the arbitration commenced by the respondents on 24th March, or appointing him, if he had not already been appointed. That very same day, on 2nd April, the applicants made an application ex parte for orders that there should be service on the respondents' solicitors pursuant to rule 7.2 of the Arbitration Practice Direction, and for abridgement of the time between notice and the hearing. Mr. Justice Silber granted those applications, granting the respondents liberty to apply for variation of his order and reserving costs.

It follows from that narrative that this hearing is held in the context of a need for some considerable despatch. The application commenced before me at 2 p.m. on Wednesday 5th April in anticipation of a lay time date then set for 7th or 8th April. It was resumed at 2 p.m. on Thursday, by which time, as I understood it, the vessel had in fact returned to dry dock, and the lay time date had been extended to 13th April, namely Good Friday. The hearing finished at 4.30 on the Thursday, and I indicated that any additional evidence, since I was not in a position to give judgment straight away, particularly any evidence relating to Dubai law, should be filed with me, or with my clerk, by 12 p.m. on Tuesday 10th April. Some additional material was duly filed by that time, and some further material arrived overnight and has been seen by me this morning.

At the commencement of this hearing this morning, the applicants sought a further adjournment in order to permit them some further time to adduce additional evidence with regard to UAE law, the basis for which being that, as I understand it, due to the personal circumstances of the applicants' expert, their evidence had been delayed. Given that it is now 11 a.m. on 11th April, this being the last day of the term, and I am not available tomorrow and the lay time date is on Friday, and that I felt I had given a reasonable opportunity to the parties to provide me with additional evidence relating to Dubai, I felt compelled to reject this application. But even so, this judgment has been prepared in some considerable haste, and if it fails to do justice to all the arguments that have been put before me arising out of skeleton arguments which themselves run to some 70 pages, I can only apologise.

The nature of the Dubai proceedings

The starting point which hopefully provides the key to this case is the consideration of the nature, scope and form of the Dubai proceedings.

The application for precautionary attachment is in the form of a claim in rem. By that, I mean that the respondent is the vessel. In the body of the application notice, having recited the contractual background, there is a reference in para.7 to a letter (which I regret I have not been able to find in the documents) from the new owner to the charterers, to the effect that the new owners would not respect the terms of the charter with the old owners

"... despite the legal obligation that they are bound, under the provisions of art.220 of the Maritime Law ..."

The application goes on (and I read from para.8):

"Because of the past and present owners' breach of their duties, the applicant for attachment was forced, in order to complete its obligations to its clients, to charter another vessel, 'CEC Atlantic', at a rate higher than the rate of the vessel, the subject matter of the suit, i.e. $8,000 per day (document 15). The applicant is forced to extend the charter of the said vessel because the owners of 'Gillian' declined to recognise the above-mentioned charterparty and respect the terms thereof. As such, the damages incurred by the vessel's charterers because of the breach and dishonouring of the charterparty is the difference between the charter rate of the alternative vessel and the charter rate of the original vessel for the remaining period of the charterparty."

Then jumping over the calculation damages, it goes on:

"Article 220 of the Maritime Law provides that the sale of the vessel shall not result in the termination of its charterparty. However, the purchaser may request such a termination if he proves that he was unaware of the charterparty at the time of the sale and it was not within his power to have known it. We kindly present before the court the evidence of the new owners' awareness of the charterparty. They purchased the vessel from the bank with which the vessel was mortgaged because they knew that a charterparty was still applicable on the vessel (document 18).

"Article 84 of the Maritime Law also provides that the damages for which the vessel's charterers must be compensated shall be first priority debts. Pursuant to the provisions of art.91 of the Maritime Law, such debts are due from the vessel whoever owns it."

Then it goes in, in para.13:

"Whereas the debt is a marine debt, then pursuant to the provisions of art.115 of the Maritime Law a precautionary attachment may be enforced on a vessel in order to pay a marine debt pursuant to para.D of the said article, the charterparty is included amongst the contracts which give the applicant the right to request the vessel, the subject matter of the charterparty."

What is the nature of the cause of action?

I confess to having had some difficulty in this respect. The claim is clearly a claim for damages arising from "the breach and dishonouring of the charter". Consequential damage is said to be the chartering of a substitute vessel in October 2000 coinciding with the initial failure of the sale, and not the sale in December.

The problem really is that there is no coherent attempt to distinguish between the position of the old owners and the new. Secondly - and perhaps it is the same point - the respondents have rather changed their tack as to the nature of the statutory obligations resting on the new owners. The task of analysis, I am bound to say, is not helped by the absence of any of the fifteen documents attached to and referred to in the application notice.

I start by considering the position of the old owners. As regards the old owners, a claim could only arise, as I see it, on the basis either that the engine breakdown was an actionable breach of the charterparty, or that their impecuniosity was such that they were unable to perform their contractual obligations and thus could be treated as having repudiated it; or the sale without the consent of the charterers was a repudiatory, or other, breach of contract. But no mention is made in any part of either the application notice or the substantive document that followed it of any breach in those respects on the old owners' part. To the contrary, the only reference to any concept of an actionable breach is a reference to the engine defect as such, which is simply said to give rise to an off-hire event.

The impression that I was left with when I read this document and its successor was that there was only one breach, and only one cause of action, giving rise to one head of damage recoverable by virtue of s.220. Albeit that this impression is described I think by the respondents as "ludicrous", the fact that such a first impression was legitimate, namely that the attachment only contained the claim against Sea Premium, was to some extent reinforced by the solicitors' correspondence and, for example, the assertion in the commencement of adversarial combat by Messrs. Jackson Parton that

"... under art.220 of UAE Maritime Law your clients are bound by the terms of the charter unless they can prove they are not aware of it ..."

and they contended that, as a result, as they put it, the applicants' position was "hopeless".

Even in the skeleton argument produced at the moment of the commencement of the application, it was put as follows:

"The vessel has undergone repairs for Sea Premium in Dubai. Sea Consortium have taken advantage of the physical presence of the vessel to found jurisdiction in respect of a claim which they have, as a matter of Dubai law, against Sea Premium as the new owners of the vessel."

The impression is further fortified by the material adduced by Mr. Watling in a statement which was provided during the course of the hearing to the effect that:

"Pursuant to art.220 the applicants do not become a party to the charter. However, they are obliged to abide by the terms and conditions of the charter, and this means, although they are not a party, they must not act in any way which is inconsistent with the charterparty, for example by chartering the vessel elsewhere."

Nowhere in their statement is there any reference to the old owners, or any claim other than a claim pursuant to art.220.

It is fair to say, however, that the respondents' case underwent a metamorphosis. In the skeleton argument to which I have already referred to, which was provided at the commencement of the hearing, the suggestion that the applicants were parties to the charterparty was not merely not adverted to, but was, effectively, abandoned. The submission had become (and I quote from para.13):

"Accordingly the claim advanced by Sea Consortium against the vessel/Sea Premium in Dubai is not a contractual claim, nor is it a claim under the charterparty. It is a claim invoking a statutory provision and a statutory right which a charterer has in Dubai law against the new owner of a vessel in circumstances where the vessel is present in Dubai."

Even then, there is no reference to the position of the former owners. But during the course of submissions, a further skeleton argument was produced conceding (as I understood it) for the first time that the losses attributable to any breach on the applicants' part, or any damage recoverable from them pursuant to art.220, was restricted to the extra hire costs incurred not after the breakdown, or after the sale, but after the completion of the repairs in April.

At the same time, it was for the first time submitted that there were, in the application notice, two causes of action: one against Kestrel for breach of charterparty, and one against the applicants for a breach of s.220.

It has to be said that, if that truly was the purpose and content to the Dubai proceedings, it is rather remarkable that none of these points were taken earlier, or identified earlier, let alone explained. The additional material to which I have referred, which has been produced over the last 24 hrs., is in large part directed to this very issue.

I have come to the conclusion, albeit with some hesitation, that the respondents are probably correct, although I have to say, the outcome may be more by accident than by design. The only indications in the application notice are as follows: that the claim is in rem; that the old and new owners are identified separately; there is a plea that the engines were defective at the time when the old owners were in possession and control, albeit there is no allegation of breach in respect of it, and there is equally a reference to the sale by the old owners in December, albeit no allegation of breach in respect of it; and there is also reliance on art.91, which I ought to explain reads:

"Priority debts shall follow the vessel in the hands of whomsoever it may be ..."

and one of the priority debts there referred to are:

"... breakdowns and damage giving rise to the right of compensation in favour of the charterers of the vessel ..."

At this interlocutory stage, it is not possible to reject the evidence provided for and on behalf of the respondents by their Dubai lawyers that the old owners have been impeached by the institution of the proceedings in Dubai. Indeed, as I understand it (although I am not sure I do), the Dubai court, at a hearing which was apparently conducted on Sunday after our hearing on Thursday, appears to have required some additional service with regard to Kestrel, which of itself suggests that jurisdiction has been invoked in respect of them. (Perhaps I could add this in parenthesis, that the issue is in perhaps one event potentially redundant save in regard to costs, since, in the event that the existing proceedings are not apt to cover a claim against Kestrel, I suppose new proceedings in rem would no doubt be promptly issued.)

Maritime lien

It is also necessary to consider whether there is, or was, a maritime lien in respect of the claim against the old owners.

It is common ground that the Dubai arrest occurred after the change of ownership. Is a claim for damages against the former owners enforceable in rem nonetheless? As I have already indicated, this is another point which was only formulated by the respondents very late in the day.

On this topic, I was provided with a translation of the relevant parts of the UAE Maritime law, and I have already read art.91 and art.84(f), which refers to breakdowns and damage giving rise to a right of compensation in favour of the charterers. Whilst in English law no such maritime lien exists, I confess I am not particularly surprised that such a maritime lien might exist or be recognised elsewhere. Indeed a maritime lien to that, or perhaps even broader, effect would be available under the United States Federal law.

I have come to the conclusion that there is a maritime lien, properly so categorised from the perception of an English lawyer, available to the charterers in resect of their claim against the charterers so long as it is in respect of breakdown and damage giving rise to the right to compensation.

But what does "breakdown and damage" mean? It is a rather unusual phrase. Again, there is some material before me that there may be not so much a mistranslation but a need for reading those documents in the context of their Arabic original. It may well be, as the Dubai lawyer for the respondents contends, that it simply means a claim by the charterers for damages. For the moment, I am minded to say it is more likely to mean a charterer's claim for damage arising out of damage or breakdown sustained by the ship they chartered, but if that be right, in my judgment that is sufficient for the respondents' purpose. I should add that I am not persuaded that the lien has been extinguished pursuant to art.92(b). That may not be controversial. There is certainly no evidence that the applicants performed the relevant prescribed steps. Nor am I attracted by the proposition that priority debts, which include well-established maritime liens recognised in other jurisdictions, are not enforceable by arrest, and I accept the discussion in the Lloyds Press publication, Arrest of Ships, vol.3 at p.96. Nor do I accept that the arrest could only be effected on the relevant vessel if it was still owned by the person liable in personam; such would, in effect, neuter art.91.

Accordingly, I do conclude that the proceedings in Dubai are proceedings in which claims are being made against both Kestrel and the applicants.

Let me now turn to the claim against the new owners. As I have already mentioned, there has been something of a sea change as regards the respondents' analysis of their claim against the new owners. From the outset, I have already stated that their contention appeared to be that, by virtue of art.220, the new owners became bound by the terms of the charterparty, and on the face of it this appeared to be reflected in the contents of the application for attachment in which a claim of damages for breach or dishonour of the contract was made. Furthermore, the claim as originally advanced was based on damage accruing from October 2000. Furthermore, the jurisdiction in respect to the claim was said to be under art.115, which refers to claims arising out of contracts in relation to the carriage of goods under a charterparty. Such was certainly the understanding of the applicants at the commencement of this hearing, and I am not surprised.

The change of tack was opened by a concession in the respondents' skeleton argument that, upon purchase of the vessel, Sea Premium did not become party to the charterparty. That, as I understood it, was a concession both in English and Dubai law. But so far as Dubai law was concerned, this was enlarged upon in the statement of Mr. Watling, which I have already referred to and read, that, albeit it was a claim for damages for employing a vessel in a manner inconsistent with the charterparty, this all arose in the context

"... that they were obliged to abide by the terms and conditions of the charter."

The significance of this, to my mind, is that any realistic categorisation of the nature of the cause of action that was being advanced against the new owners in Dubai was that it was contractual rather than delictual. That was supported, in my judgment, by the material provided by the applicants from their correspondent Hill Dickenson in Dubai, who had consulted a local lawyer:

"We have consulted Mr. Mohammed Al-Saidi, the local advocate we have retained in this matter on behalf of the owner, and he advises that, in his opinion, the effect of art.220 is to render a new owner who is aware of or capable of being aware of an existing charterparty at the time of his purchase contractually bound by the terms of the charter. In short, he is of the view that the new owner becomes contractually bound by the terms of the charterparty as the result of the operation of 220. In the light of this, a claim by the charterer against the new owner would appear to fall squarely within a claim for a contractual right imposed by statute."

The only additional material on this topic, as I understand it, was produced yesterday, when the applicants' lawyer, Messrs. Naji Beidoun, explains that categorisation of a claim or contract as made by the parties does not bind the judge. The court has liberty to decide to apply the categorisation as it sees fit. It does that by analysing the facts and finding a niche for them under one of the legal categorisations available.

The position is that I accept the applicants' submission that, for the purposes of categorisation, the claim is contractual rather than delictual in nature. That is of some significance when I come to consider the scope of the exchanges that have taken place with regard to arbitration, and the contents and scope of the arbitration clause in the charterparty.

But before I turn to that particular issue, I touch briefly on the relevance of Dubai to the claim in damages made against the new owner. The issue between the parties is the extent to which the new owners are obliged to abide by the terms and conditions of the charter; or, to put it in another way, the extent to which the rights and obligations under the charter affect the new owners as the third party. English conflict rules would indicate that English law, as the applicable law under the charterparty, would be the governing law in respect of that decision: see art.10 of the Rome Convention.

It is difficult to see how Dubai law is applicable simply as being the lex fori. The only evidence is that from Messrs. Hill Taylor Dickenson in the letter that I have just quoted from, which expressly asserts that, in the opinion of Mr. Mohammed Al-Saidi, the UAE law has nothing to do with the dispute. That is a view which is hardly surprising since the events giving rise to the substitute charterer presumably occurred in India, following which a caveat was issued and then withdrawn. Indeed, the only connection with Dubai adverted to in the correspondence is the rather pathetic reference to the respondents having an office there. There is certainly no support for the proposition as to the relevance of Dubai law as set out in para.13 of the respondents' skeleton argument, which I have read already.

The consideration of factors relating to forum non conveniens are, of course, of little, if any, weight in considering an application for an anti-suit injunction if the relevant matters are governed by an arbitration clause: see Toepfer v. Cargill. But it is perhaps not surprising that, even absent an agreement to arbitrate, the applicants were minded to categorise the Dubai proceedings against the new owners as vexatious and oppressive, albeit I am aware of the limitations of such a submission contained in the decision in Air Industry v. Patel. The fact remains that the respondents, having abandoned the proceedings in India, waited until the vessel was repaired in Dubai and then both issued proceedings in rem in Dubai, in reliance on art.220, on 18th March, and six days later instituted arbitration proceedings in London in reliance on The Lord Strathcona. On the face of it, the only purpose of the Dubai proceedings issued by the new owners was to seek to enforce a statutory obligation upon the applicants in circumstances where the statute was not, on the face of it, applicable. In other words Dubai, in the absence of a claim against the old owners, would not be an appropriate jurisdiction. It was simply chosen in order to apply the wrong substantive law.

With the absence of any evidence as to the doctrine of forum non conveniens in Dubai, and some concern as to whether the applicants can seek to stay or strike out the proceedings in Dubai without submission to the jurisdiction, these are matters that can be taken no further. But fortunately, the matters, in my judgment, can be determined by reference to the issue of whether there is an arbitration agreement.

The first question to consider is whether the case advanced in Dubai involves, in the same breath, acceptance that the dispute is governed by the arbitration clause in the charterparty. I have already concluded that the claim in Dubai is contractual in nature, the reliance on art.220 rendering the applicants obliged to abide by the terms and conditions of the charter, one of which is, of course the arbitration clause itself. The question whether the applicants and the respondents are bound by the arbitration clause is, in my judgment, a matter to be decided by English law. The applicants made reference, in this context, to two authorities: firstly, The Jay Bola [1997] 2 Lloyd's, where an insurer, as assignee of voyage charterers was held to take the assignment with the benefit and burden of the arbitration clause. This decision was followed by Aikens J. in Youell & Ors. v. Kara Mara Shipping Co. Ltd. & Ors., where underwriters asserting rights under a Louisiana direct action statute were held bound by the arbitration clause. I agree that the analogy is not complete, but in my judgment the present case should be decided to similar effect. The English court is entitled, using English law concepts, to analyse the nature of the claim being brought by the respondents in Dubai. As I have already indicated, the claim asserted by the respondents is by way of a quasi contractual claim for damages for failing to abide by the terms of the charterparty. In short, it is a claim made against the owners under the charter, albeit the owners are not a party to the charter either by way of novation or assignment. Because the charterparty is governed by English law, the question whether the charterers are bound by the arbitration clause is also governed by English law. In my judgment, the charterers are bound by the clause vis-a-vis any claim arising between both the owners and the charterers. The new owners, whom the charterers contend are bound to abide by the terms of the charter, are accordingly entitled to prevent the charterers from pursuing the Dubai proceedings in breach of the arbitration clause.

In case I am wrong about this analysis, I turn to the alternative case that there has been an ad hoc submission to arbitration. The respondents appointed Mr. Bruce Harris by letter of 24th March. His appointment letter read:

"Further to our brief telephone conversation, we confirm your appointment as arbitrator on behalf of Sea Consortium in connection with all disputes arising under the above charterparty and its addenda with the old and the new owners."

In line with their change of tack as to the nature of their case, the respondents suggest that this new appointment was, in effect, redundant as regards the new owners as being only in respect of a claim under the charter if an insofar as the applicants were parties to it. I do not regard that proposition as arguable both on its plain wording and in its context. The proposal was the denouement of the discussion for settlement of the dispute between the charterers and the new owners, and the letter covers all disputes arising under the charter. That offer was, in broad terms, accepted, in my judgment, by the applicants' appointment of Mr. Kinnell, albeit subject to certain conditions. The appointment was made in respect of an ad hoc reference to the arbitration on the same terms as the arbitration clause of the charterparty. The appointment was without prejudice to the submission of Sea Premium that they are not, and have never been, a party to the charterparty or to the arbitration clause contained in the charterparty. It is an appointment in respect of all disputes between Sea Premium and Sea Consortium, and the appointment is also made in connection with a claim for wrongful arrest.

The reservation under para.2, which I have just read, does not, in my judgment, invalidate the arbitration appointment. It is simply a reservation of the very argument the respondents were advancing. It is true that the scope of the disputes purportedly referred to arbitration included wrongful arrest claim. No point was taken by the respondents on that disparity, but, in any event, the mutual appointment of Mr. Kinnell was confirmed by the applicants' letter of 2nd April. It is true that there was a further reservation of a right to challenge jurisdiction, but that, in my judgment, still did not invalidate the appointment. This was only in response to the insistence of the respondents that the charter was binding on the applicants in the sense that they were parties to it - a proposition which has now been abandoned by the respondents. The situation is simply not analogous to that in The Marques de Bolarque. The reservation maintained by the applicants relates to the underlying contention that they were not bound by the charter, which is now not controversial, and were not bound to respect the charter, which is still controversial.

The scope of the arbitration, whether under clause 17 or under the ad hoc submission, is, in my judgment, fully adequate to encompass the claim made in Dubai. It follows that I conclude one way or the other the respondents are bound to arbitrate their dispute with the new owners in England, and for that matter (and it may be not controversial) the old owners.

It was accepted that, if such was my conclusion, it was appropriate to grant an anti-suit injunction subject to the issue of adequate security, albeit not, in the light of my earlier findings, an injunction requiring the release of the vessel from arrest.

Security

The applicants have offered security in the sum of $650,000 or such other sum as the court might determine. The bulk of the proposed figure is made up of the sum of about $1,560 per day from the date of completion of repairs until March 2002, the termination date of the charter.

The figure representing the difference between the applicants' assessment, based on advice from a Mr. Newman, the charterers' broker, of the difference between the market rate and the charter rate. The respondents rely upon the fixture that was entered into in October 2000 for a replacement to the vessel following the engine breakdown. This rate was some $1,000 greater than the presently assessed market rate, the disparity being explained by the shortage of available tonnage to substitute in the respondents' liner service.

If the new owners were the only parties to the Dubai proceedings, the security which could legitimately would be demanded would need to be considered in the light of two matters: first, that it had to be reduced to reflect the fact that liability can only accrue as from the completion of repairs; and secondly, that it might have to be reduced to reflect the fact that, by that time - or even, perhaps, by the time the substitute charter was apparently extended in December 2000 - there was no question of there being any shortage of comparable tonnage. But having concluded that Kestrel is a party to the Dubai proceedings, the first limitation is irrelevant and the second perhaps less potent. Assuming it remains an issue for me, and subject to some assistance on the manner and circumstances in which the Atlantic charter was extended, apparently, in December 2000, I am minded to agree that the security needed to obtain the release of the vessel from arrest should be by and large that which is put forward by the respondents.

The conclusion I have reached makes it, I believe, unnecessary to consider the respondents' cross-application for an injunction, but in case I am wrong on my reasoning so far, particularly as to the participation of the old owners in the Dubai proceedings, I ought to express my views briefly.

The application for a interim injunction is put forward as being in accord with the principles adumbrated to The Lord Strathcona. The inevitable issue that will arise is whether the decision is good law. Various provisional observations could be made. The underlying decision relied upon in The Lord Strathcona, namely De Mattos v. Gibson, has itself been exposed to a degree of criticism and questioning by decisions of the Court of Appeal. The Lord Strathcona itself has also been questioned by the Court of Appeal and, notoriously, held to be wrong by Diplock J. in Port Line v. Ben Line. The more recent resurrection, or partial resurrection, of the corpse in Swiss Bank v. Lloyds Bank was in the case in which the judgment was reversed, albeit on different grounds.

I indicated, during the course of argument, that I was not courageous enough to embark on these boisterous seas at this interlocutory stage. Suffice it to say that, whilst the general principle, as I indicated, is, in my judgment, arguable, its foundations are certainly unsure and possibly unsound. However, the applicants advanced a narrower proposition, to the effect that the principle in The Lord Strathcona, even if correct, had no application where the charterparty would not have been performed by the former owners in any event. The evidence that the owners were bankrupt and unable to repair the ship for restoration to service is unchallenged. In my judgment, there is a potentially crucial distinction from the circumstances contemplated by De Mattos v. Gibson. The requirement not to act inconsistently with the terms of the charterparty is premised by the condition that such would be to the material damage of a third party. Indeed, any analogy with the tort of procuring a breach of contract could give rise to the same consideration. If, as here, the former owners are unable to perform the charter, the obligation not to act inconsistently cannot, in my judgment, by definition, arise. The charterparty is effectively worthless. In this respect I derive some assistance from the decision of Brandon J. in The "Myrto" [1977] 2 Lloyd's, 243 and particularly the passage at p.253-254. I appreciate the decision is directly concerned with the position of a mortgagee, but I at present detect no grounds for adopting a different approach as regards a purchaser.

In these circumstances, if the point had arisen, I would have been minded to conclude that the respondents would have no real prospects of obtaining a permanent injunction. Furthermore, so far as the balance of convenience is concerned, should it have arisen, it would militate, in my judgment, in favour of maintaining the status quo. Of course, the respondents have a strong point when they say that damages would be an inadequate remedy. It is common ground that, even if The Lord Strathcona is right and there is no concurrent cause of action for damages (the precise reverse, it would appear, to the situation in Dubai, and of itself a cause for some concern). Thus prima facie, from the respondents' perspective, damages cannot provide an adequate remedy, but by the same token, albeit in not such stark form, there must be doubt whether the respondents' cross-undertaking would adequately compensate the applicants. He has brought the vessel to Dubai. He has spent a large sum of money on repairs. He has chartered the vessel out. His exposure is enormous. To interfere with his enterprise now would cause great inconvenience, whilst on the other hand the respondents have already got a substitute tonnage, albeit obtained at some higher cost. The arbitration would be able to resolve the issue with considerable despatch. In those circumstances, I would (again, if the point had ever arisen) not be minded to grant the injunction even if there was an arguable case.

But the outcome of this judgment (which is excessively long) is that I conclude that the proceedings in Dubai are instituted against both the old and the new owners; that the claim against the new owners is one which is contractual in nature and falls within the provisions of either an ad hoc arbitration clause or the charterparty arbitration clause. Accordingly, it is appropriate to grant an injunction to restrain the charterers from proceeding against the new owners in Dubai, but that does not entitle them to an order restraining the proceedings against Kestrel, and since the claim against Kestrel encompasses the entire loss sustained since October 2000, no release of the vessel could be afforded, in my judgment, if I have any jurisdiction with regard to this, save on the basis that the old owners' claim is secured in full. Accordingly, it is unnecessary for me to go on to consider whether, in the alternative, the charterers would be entitled to an injunction.

LATER:

The applicants have been partially successful, and the respondents have been partially successful. Perhaps the respondents been successful in the part of the case which is of peculiar significance and importance, but, on the other hand, only, in my judgment, in the context of what I have described as a metamorphosis of the case they had been arguing with some belligerence (if I may say so) in their solicitors' correspondence since 23rd March.

It would be appropriate, in the circumstances, in my judgment, to make no order as to costs. I think that is the right approach, rather than leave it in the case, because the case may not continue.

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