Jurisdiction, irregularity and error of law

UR Power GmbH v Kuok Oils and Grains Pte Ltd [2009] EWHC 1940 (Comm), a decision of Gross J, raised a whole series of complex issues concerning appeals to the court against awards on jurisdiction and procedural irregularity. Of the main issues raised, perhaps the most important related to the application of the appeal provisions to two-tier arbitration procedures and to the distinction between separability and determination of jurisdiction.

UR Power: the facts

In 2006 the parties entered into negotiations for the sale by URP to Kuok of a cargo of crude palm oil. By October 2006 the parties had agreed on cif terms, and that that the quantity was to be 10,000 metric tonnes at a price of US$480 per metric tonne. Payment by transferable letter of credit was requested by URP. The parties also agreed that the terms would be ‘As per FOSFA 80’, which included an arbitration clause. On 18 October 2006 URP asked Kuok to instruct its bank to prepare the transferable letter of credit, stating ‘If the bank can send us today the letter of credit, the contract is accepted’. A draft letter of credit was sent that day, but its terms remained under negotiation. On 25 October, Kuok’s bank sent a letter of credit to URP’s bank, and Kuok duly issued a ‘purchase contract’. The contract erroneously stated that payment was to be by way of cash against documents, but otherwise was consistent with the earlier negotiations. On 27 October URP sent an email to Kuok, which provided that URP would issue a Proof of Product Certificate and Kuok would then open a transferable letter of credit. Kuok confirmed this by telephone.