CMA CGM SA V HYUNDAI MIPO DOCKYARD CO LTD

[2008] EWHC 2791 (Comm), Queen’s Bench Division, Commercial Court, Mr Justice Burton, 14 November 2008

Arbitration – Error of law – Claimant becoming party to contract containing arbitration clause following novation – Whether arbitration clause extended to claim brought by claimant in France prior to novation but arising out of contract – Whether arbitrators bound to recognise foreign judgment in arbitral proceedings for damages for breach of arbitration clause – Council Regulation 44/2001, arts 1, 32, 33 and 34

In February 2004 HMD entered into four contracts with ERS to build four container vessels. Art XIII of the agreements provided that any dispute which might arise in connection with the interpretation and fulfilment of the contract would be referred to a single arbitrator in London. Art XIV provided that neither party was entitled to transfer any or all of his rights without the prior written consent of the other, such consent not to be unreasonably withheld or delayed. CMA wished to take over the shipbuilding contracts from ERS, and in April 2004 requested HMD’s consent to a novation. HMD refused. ERS took no action, but CMA issued a claim in the Marseilles Commercial Court on 2 March 2005 seeking damages in tort on the ground that HMD had unreasonably withheld its consent to a transfer. The proceedings were not discontinued but the parties nevertheless sought to resolve the disputes by agreement. The outcome was four agreements made between September 2005 and June 2006 under which novation took effect from the transfer date following the completion of the work on each vessel: on that date CMA was to be substituted in place of ERS and was thenceforth to be treated in all respects as if CMA had been named as the original buyer. The French proceedings brought by CMA continued, although HMD did not submit to the jurisdiction of the French court. In September 2006 the Marseilles Commercial Court ruled that it had jurisdiction to hear the claim and that HMD was liable in damages in the sum of US$3,646,125 plus €10,000 for the slur on CMA’s image and €30,000 costs. HMD thereafter commenced four arbitrations against CMA, seeking to recover the sums paid by it on the ground that CMA had been in breach of the arbitration clauses by pursuing proceedings in France. The arbitrators, by an award dated 13 March 2008, found in favour of HMD. They ruled that CMA had not been in breach of the arbitration clauses when they first commenced the French proceedings in March 2005, because at that time there was no agreement between HMD and CMA. However, by continuing the French proceedings after the transfer dates of the vessels and thus the novation, CMA was in breach of the arbitration clauses and HMD was entitled to recover damages. The arbitrators further ruled that they were not bound by the judgment of the Marseilles Court, and that they were entitled to consider for themselves whether there had been a breach of the shipbuilding contracts by HMD on the basis that it had unreasonably refused its consent to a novation. On the substantive issues the arbitrators concluded that HMD had not unreasonably withheld its consent and that CMA’s conduct in pursuing the French proceedings had caused loss to HMD representing the damages award by the Marseilles Court plus management time and legal costs. CMA appealed against these rulings under s 69 of the Arbitration Act 1996. Burton J dismissed the appeal and held as follows.