In
The Sellers had originally entered into the MOA with X for a company to be nominated, whose performance was to be guaranteed by X. The 10% deposit was paid by X and was held in a joint account on terms that it could only be released against signatures from both the Sellers and X. Subsequently, X nominated Y as Buyers.
Upon cancellation of the MOA Sellers sought forfeiture of the deposit and successfully obtained an award against Y which provided that they should take steps to procure the release of the deposit. Y refused, so Sellers brought the present proceedings against X.
Sellers’ claim against X was for damages in the amount of the deposit, or alternatively an order that X take steps to procure the release of the deposit and accrued interest to Sellers.
X defended the claim on the basis that the Tribunal had no jurisdiction over them and that they retained no residual liability under the MOA. They argued that they were only ever acting as agents for a company to be nominated and were not a party to the MOA. Alternatively, even if they were a party to the MOA, they argued that they had subsequently been replaced by Y under the terms of the Addendum. X also argued that they were not bound by the proceedings (between Sellers and Y) to which they were not a party and that they were entitled to have the substantive issues as to whether Sellers were entitled to forfeiture of the deposit heard.
The Tribunal rejected X’s arguments. It was found that X were a party to the MOA when it was entered into and were therefore a party to the arbitration clause and were subject to the jurisdiction of the Tribunal. X could not have been acting as agent for a non-existent principal. Further, the Addendum, by which Y took over responsibilities and liabilities as Buyers, did not release X from their own, separate responsibilities under the MOA. X remained bound by the obligations of a guarantor and their duties as signatories to the deposit account. The Tribunal considered that this was in line with commercial realities and accepted practice in ship sale and purchase. Very clear words in the MOA would have been needed for the conclusion sought by X to apply, which effectively sought to deprive Sellers of the benefit of having a deposit at all.
X asserted that they were entitled to have the substantive issues determined in these proceedings and they put forward an argument of breach by the Sellers because the ship was not ready. The Tribunal found that these matters were irrelevant to the proceedings in hand, which dealt only with the guarantee of Y’s performance by X and Y’s obligation to procure the release of the deposit. In any case, the present Tribunal would not have found in X’s favour on the substantive issues. Sellers’ claim succeeded in full.
jamila.khan@incelaw.com