Facts
- An Italian charterer (Termarea S.R.L.) and a Finnish shipowner (Rederi Aktiebolaget Sally) entered into a voyage charter-party with a London arbitration clause.
- The clause contemplated a three-person tribunal: each party would appoint one arbitrator; the two appointed would appoint a third; an award by any two would bind the parties.
- Sally commenced London arbitration, appointed its arbitrator, and Termarea failed to appoint within the specified time.
- Pursuant to the clause’s default mechanism, Sally appointed an arbitrator “on behalf of” Termarea.
- The two appointed arbitrators did not appoint a third arbitrator (or umpire) and issued a joint award in Sally’s favor.
- Sally obtained an ex parte order granting leave to enforce the award as a judgment.
- Termarea applied to set aside the ex parte enforcement order, arguing the tribunal was not constituted as agreed and the award was therefore jurisdictionally defective.
Issues
- Whether an award made by two arbitrators was invalid for failure to appoint the clause’s contemplated third arbitrator (or an umpire), such that the tribunal lacked jurisdiction.
- Whether, under the Arbitration Act 1950, a clause in this form is properly construed as a two-arbitrator-plus-umpire arrangement, permitting an award by two agreeing arbitrators without appointing an umpire.
- Whether any departure from the clause’s three-person wording required the court to set aside leave to enforce the award.
Decision
- The court dismissed Termarea’s application and refused to set aside the ex parte order granting leave to enforce the award.
- The court treated the award as validly made and enforceable notwithstanding that no third arbitrator (or umpire) was appointed.
- The court accepted that, properly construed with the Arbitration Act 1950, the clause did not require the appointment of a third decision-maker where the two arbitrators were in agreement.
Legal Principles
- Tribunal-composition objections turn on the proper construction of the arbitration agreement in light of the procedural law of the seat, including statutory default rules.
- Under the Arbitration Act 1950, a clause framed in “three-person” terms may operate as a two-arbitrator-plus-umpire scheme; where the two arbitrators agree, an umpire need not be appointed for a valid final award.
- A party’s failure to exercise its right to appoint an arbitrator within the agreed time, followed by an appointment made under the clause’s default mechanism, does not itself establish a jurisdictional defect.
- Not every procedural departure from literal clause wording justifies non-enforcement; the court may treat the matter as non-fatal where the tribunal’s authority is supported by the agreement as construed under the seat’s law and the process remains fundamentally fair.
Conclusion
The Commercial Court upheld enforcement of a London arbitral award made by two arbitrators, holding that—on the proper construction of the charter-party clause together with the Arbitration Act 1950—the absence of an appointed third arbitrator (or umpire) did not invalidate an award issued by two arbitrators who were in agreement.