REPUBLIC OF SERBIA V IMAGESAT INTERNATIONAL NV

[2009] EWHC 2853 (Comm), Queen's Bench Division, Commercial Court, Mr Justice Beatson, 6 November 2009

Arbitration - Jurisdiction - Justiciability - Arbitrator ruling that state was continuator state of an earlier union of states - Whether arbitrator possessed jurisdiction to decide the matter - Estoppel by convention - Whether right to appeal on jurisdictional grounds had been waived - Arbitration Act 1996, sections 30, 67 and 73

By an agreement dated 4 June 2005, the State Union of Serbia and Montenegro agreed to purchase a satellite ground control station from ImageSat, and the State Union also agreed to purchase exclusive rights relating to two of ImageSat's satellites. Article 18 of the agreement provided that any dispute was to be referred to ICC arbitration, governed by English law and to be held in England. The State Union did not pay sums due under the agreement, and in February 2006 the State Union asserted that the agreement was not binding on it. On 21 May 2006 a referendum was held in Montenegro, and the vote was in favour of independence. On 24 May 2006 ImageSat sent a request for arbitration to the ICC Court of Arbitration, and proposed a sole arbitrator. On 3 June 2006 Montenegro declared itself to be an independent state. The request for arbitration was thereafter copied to Serbia. By a letter dated 12 July 2006 the Serbian Public Attorney stated that the State Union had "ceased to exist" and that liabilities of the State Union had been taken over by Serbia, which would act as respondent "in this phase of the proceedings". The letter reserved Serbia's rights on submission to the jurisdiction of the arbitrator and sought an extension of time to file a response. A response was duly filed on 5 September 2006, in which Serbia did not raise any jurisdictional objection but opposed the arbitration on the ground that "there are no sufficient legal grounds for the justification of the claim". Terms of reference were subsequently agreed by a letter dated 13 February 2007, and those provided that "None of the parties is at present aware of any ground for challenging the jurisdiction of the tribunal and objecting to the appointment of the Arbitral Tribunal". On 25 May 2007 Serbia served its statement of defence. This asserted that Serbia was not a party to the agreement, and denied the jurisdiction of the arbitrator. It also denied that it had succeeded to the State Union's liabilities. Substantive defences were also put forward on a without prejudice basis. ImageSat responded by a letter dated 20 June 2007, asserting that Serbia had submitted to the arbitration and could not argue that it was not the successor to the State Union's obligations under the agreement. By a further letter dated 27 June 2007 ImageStat asked the arbitrator to determine as a preliminary question whether Serbia could take the point that it had not succeeded to the State Union's obligations and, if it could, whether there had been succession. ImageSat's case was initially put on the bases that Serbia had succeeded to the obligations of the State Union following the dissolution of the State Union, although it subsequently sought to assert in the alternative that there was simply a continuity, and that there had not been any termination of legal personality. By a partial award dated 7 May 2008 the arbitrator ruled that Serbia was the "continuator" of the State Union, and there had been no change of legal personality. The arbitrator held that ImageSat had not been precluded from relying in addition on the continuator argument even though its original case had been founded on succession. Serbia challenged the award under section 67 of the Arbitration Act 1996, asserting that the arbitrator had no jurisdiction to determine the question of whether Serbia was the continuator state of the State Union. Beatson J dismissed the application.