Bunge SA vs Nibulon Trading BV  EWHC 3936 (Comm)
A dispute arose between Bunge SA (Buyers) and Nibulon Trading BV (Sellers) for default damages arising from non-performance of contract for Ukrainian wheat. The dispute was submitted to Arbitration under the GAFTA nº 125 Arbitration Rules 2006 (hereinafter the 2006 Rules). Buyers served notice of arbitration to Sellers on 1st December 2006 but they wanted to wait until the outcome of another case where they were involved was known in order to pursue the claim.
According to rule 4.10 of the 2006 Rules, a claim lapses if neither party submits documentary evidence or submissions within one year from the date of the notice claiming arbitration, unless before that date the claim is renewed –for successive periods of 1 year without exceeding more than 6 years–, (a) by a notice served by either party on the other, during the 30 consecutive days prior to the expiry date, or (b) by service of documentary evidence or submissions by either party. In order to maintain the claim alive, Buyers sent notice of renewal to Sellers for four years; however, all but the first one were premature.
Arbitration took place and the tribunal upheld the Buyers’ claim. On appeal, the board reversed the decision of the tribunal, estimating that the Buyers’ claim was time barred –as alleged by the Sellers– and that the tribunal had exercised no discretion to admit the claim.
On appeal before the High Court, the Buyers accepted the board’s conclusions as to the premature character of the renewal notices. The case turns therefore on whether discretion was effectively and correctly exercised.
Rule 21(a) of the 2006 Rules confers upon the tribunal discretion to admit a claim, despite being time barred, if one of the following sets of circumstances is met: (1) if satisfied that the circumstances were outside the reasonable contemplation of the parties when they entered into the contract and that it would be just to extend the time, or (2) when the conduct of one of the party makes it unjust to hold the other party to the strict terms of the time limit in question.
Sellers argued that none of those circumstances existed in the case and, hence, the tribunal had no discretion to admit the Buyers claim, whether they exercised it or not. Being that the case, the board would have power to reverse the exercise of discretion, they argued, if there was disagreement on whether the above mentioned criterias were met.
Walker J rejected that submission, which tried to limit the wording of the relevant provision, rule 21(a), that states: “There shall be no appeal to the board of appeal against the decision of the tribunal to exercise its discretion to admit a claim”. Furthermore, the board’s award only examines whether discretion was in fact exercised or not by the tribunal, without analysing whether any of the two circumstances in rule 21(a) were met. Actually the board, an even the sellers in their submissions, acknowledged that had discretion been exercised, then the board would have had no power to reverse the decision. Otherwise, the above mentioned rule would rarely bar the board from reviewing the basis of a decision made by the tribunal to exercise discretion to admit a claim.
As to the tribunal’s actual exercise of discretion, the judge concludes that the board was wrong in interpreting paragraph 5.5 of the tribunal’s award, whose relevant part reads:
“… Furthermore, even if we were to accept Sellers’ interpretation [of Rule 4.10], the fact remains and is not disputed that Sellers were kept fully aware of Buyers’ intention to maintain their claim, albeit that later notifications may have been sent too early by a matter of days. Even so, we note that Sellers at no time prior to their submissions appear to have objected to any of the Buyers’ renewal notices and as such waived any alleged right to object at a later stage. Therefore, had Sellers’ interpretation prevailed [i.e. if Buyers’ later renewal notices were slightly premature], the Tribunal would in any case have exercised its discretion to admit buyers’ claim. Accordingly WE FIND THAT Buyers’ claim is admitted.”
In the board’s view, the tribunal’s willingness to admit the Buyer’s claim was founded on a finding of fact – the Sellers’ waiver as to the Buyers’ defective notices of renewal–, and the words used did not amount to an unequivocal exercise of discretion. Walker J disagrees and concludes that the board’s arguments were erroneous since: (1) what the tribunal said was that if it was wrong in its construction of rule 4.10, then it would exercise its discretion in buyer’s favour, and that constitutes a conditional exercise of discretion; (2) a conditional decision to admit a claim is a valid decision as a matter of discretion –as recognised in the Court of Appeal’s decision Bremer v Raiffeisen; (3) the board did not apply to the tribunal’s award the principles of interpretation identified the MRI case, under which courts strive to uphold arbitration awards, in deciding whether or nor the tribunal had exercised a discretion to admit.
1. A conditional exercise of discretion to admit a claim under rule 21(a) of the 2006 Rules is valid.
2. If arbitrators exercise the discretion granted under rule 21(a) of the 2006 Rules to admit a claim, that decision cannot be appealed in any case, even where there is disagreement on whether the circumstances set out in rule 21(a) are met.