Think before you jump into arbitration

Jump cliff
Insurance, and particularly reinsurance, contracts often contain an arbitration clause requiring the parties to resolve any disputes through that method. All those involved in such disputes should, therefore, take notice of the recent decision by Popplewell J in Glencore Agriculture BV v Conqueror Holdings Limited.

The case concerned an application by Glencore to set aside an arbitration award in favour of Conqueror on the grounds that the Arbitration Notice had not been properly served.

The dispute arose out of a voyage charterparty during which the chartered ship was delayed in port awaiting loading for more than nine days. The Owners, Conqueror, claimed damages for the delay at the agreed demurrage rate. They appointed a loss adjuster to pursue the claim which he eventually did by commencing arbitration proceedings. The Arbitration Notice was sent by email to “Florian.oosterman@glencore.com”. Mr Oosterman had been the Glencore employee who had corresponded with the Owners during the period that the ship was detained. In these proceedings, however, Glencore argued that service of the Arbitration Notice on Mr Oosterman was ineffective.

When the matter came to court, three arguments were raised.

First was the question of whether the Notice should have been sent to a generic company address, such as voyagecharter.rtm@glencore.com, rather than to the account of an individual employee. In that regard, Popplewell J held that service on Mr Oosterman at Glencore could only be effective if he was the company’s agent with authority to accept service. This required an examination of whether he had actual or ostensible authority.

The Judge then made the point that a general authority to conduct business on behalf of a company does not equate to an authority to accept service of proceedings. Such authority cannot be implied simply because the employee was concerned in the commercial operations which gave rise to the dispute and a distinction is to be drawn between employees whose role is operational and those with a role involving dispute resolution. In the circumstances, therefore, Mr Oosterman did not have actual authority to accept service of the Notice.

That left only the issue of ostensible authority which, in the Judge’s view, should be approached with even more caution than the question of actual authority. Again, the same distinction should be drawn between the authority to conduct business and a particular authority to accept service of proceedings.  In this case, the Judge concluded that the emails sent by Mr Oosterman concerning the delay of the ship were quite inadequate to suggest that he had authority to accept proceedings.

This case is a sobering reminder of the importance of identifying both the correct Defendant in any proceedings – a process which may not always be straightforward in reinsurance disputes – and the person or persons with authority to accept service. Mistakes in these preliminary steps can have significant consequences in costs but may also be disastrous where proceedings are issued incorrectly shortly before the expiration of the limitation period. Issues of limitation may often arise in reinsurance where disputes can take some years to materialise and mature. Those concerned with dispute resolution in this field must, therefore, be particularly alert to these problems. As this case illustrates, mistakes can easily be made and are often incapable of remedy.

Simon Cooper

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