## 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

1. 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.
2. 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.
3. 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.


Termarea S.R.L. v. Rederi Aktiebolaget Sally, [1979] 1 W.L.R. 1320 (Q.B.)