Section 44 in Maritime Arbitration: Analysis of JOL AND JWL v JPL

Background

In JOL AND JWL v JPL [2023] EWHC 2486 (Comm), the Charterers, Joint Partnership Maritime (“JPM”), chartered two vessels, ALPHA and BETA, on a bareboat charter (where no crew or provisions were provided in the arrangement) from the Owners, Joint Owners Limited (“JOL”) and Joint Warrant Limited (“JWL”).

The Owners alleged that a termination event had occurred and claimed they were entitled to terminate the charter of both vessels immediately. Termination notices were served on the Charterers, and the Owners requested the Charterers to redeliver the vessels.

The Charterers disputed the termination, and the matter was referred to arbitration. The Owner asked the Arbitration Tribunal to grant an interim injunction to force the Charterers to return the ships. However, the Arbitration Tribunal decided it did not have the power to grant an interim injunction.

The “Owners” then applied for an injunction to the High Court and applied for injunctive relief against the Charterers to force them to return the vessels or undertake requisite measures for their return, citing termination events specified in the charterparty.

Legal Framework

The application was made under two legal provisions: Section 44 of the Arbitration Act 1996 and Section 37(1) of the Senior Courts Act 1981.

Section 44 of the Arbitration Act 1996 provides that:

“(3) if the case is one of urgency, the court may, on the application of a party or proposed party to the arbitration proceedings, make such orders as it thinks necessary for the purpose of preserving evidence or assets”.

The arbitration clause in the charterparties mandated that disputes be referred to arbitration. Since the Owners had initiated arbitration, Section 44 of the 1996 Act was deemed applicable. The court explored the scope of Section 44(3), which pertains to the court’s power to make urgent orders for preserving evidence or assets in arbitral proceedings.

Charterer’s Objections

Charterers raised several objections to Owners’ claims:

They disputed the timing and validity of the Termination Notice.
They argued for relief against forfeiture, suggesting that this jurisdiction could only be invoked when the event leading to forfeiture was not a breach of contract.
They claimed it was impossible to comply with the orders as the vessels were under the control of Sub-Sub-Charterers.
Asserted that damages would be an adequate remedy for Owners but not for the Charterers or third parties affected by immediate redelivery.
Contested the appropriateness of specific performance, suggesting a final order for specific performance would not be granted.

The High Court’s decision

Mr Justice Foxton held that Section 44(3) did not limit the court’s jurisdiction “for the purpose of preserving evidence or property”, noting that the delay in obtaining the relief of the arbitral tribunal would not result in damage or risk to the vessels. He began by stating that, although the court was limited to issuing orders, this did not mean that the court could only issue freezing or search warrants. He noted that in previous cases, it had been established that (i) it is sufficient if the order is for the protection of evidence or property (the order itself need not be a protection order), and (ii) “property” includes contractual rights. It is, therefore, possible for the court to grant an injunction to enforce a disputed contractual right. However, Foxton J also noted that there is a tension between the court’s exercise of this power and the realisation of the principle that the dispute between the parties should be resolved by arbitration and not by the court. Moreover, the court left open the possibility for the owners to apply to the court for an interim injunction under Section 44(4) if the urgency requirement is not fulfilled and it is realised that the final decision will take longer.

LA Marine Comments

This case once again demonstrates that the urgency requirement of Section 44(3) must be assessed on a case-by-case basis, making it clear that where the “urgency” requirement is not fulfilled, no measures may be imposed to preserve evidence or property. On the other hand, the Law Commission has amended Section 44 of Arbitration Law No. 2024, which is scheduled to enter into force in 2024, so that third parties will also have a full right of appeal against awards made under Section 44. Apart from this amendment, there has been no change in the scope of Section 44, nor is it expected to make any difference to the interpretation and resolution of Section 44(3) in this case.