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England and Wales High Court (Commercial Court) Decisions
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Cite as:  EWHC 3518 (Comm)
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QUEEN'S BENCH DIVISION
IN THE MATTER OF THE ARBITRATION ACT 1996
Rolls Building, Fetter Lane, London, EC4A 1NL
B e f o r e :
|ASES HAVACILIK SERVIS VE DESTEK HIZMETLERI A.S.|
|- and -|
|DELKOR UK LIMITED|
Mr Robin Neill (instructed by Mogers solicitors) for the Defendant
Hearing dates: 12, 13, 14 and 15 November 2012
Crown Copyright ©
Mr Justice Hamblen:
1. This is an application by the Claimant (“ASES”) under s.67 of the Arbitration Act 1996 (“the 1996 Act”) for an order setting aside the Partial Final Award dated 24 July 2012 (“the Award”) made by John Jarvis QC (“the arbitrator”) whereby the arbitrator decided he had jurisdiction to determine the dispute between the parties.
2. ASES is, inter alia, a marketing and industrial consultant. The Defendant (“Delkor”) is a company specialising in the design, manufacture and supply of mineral processing and solid liquid/separation equipment.
3. The substantive dispute between the parties, which was purportedly referred to arbitration by Delkor on 31 May 2012, arises out of the supply by Delkor to ASES of a belt-assisted boric acid filter, which was to be delivered to the end user client ETI-Maden (“ETI”), an entity controlled by the Turkish government, at ETI’s Bandirma site in Turkey.
4. ASES took no part in the appointment of the arbitrator or in any part of the arbitration up to and including the issue of the Award because it was challenging the arbitrator’s jurisdiction under s.72 of the 1996 Act and was therefore required to maintain its non-participatory status. This was made clear in letters to the arbitrator.
5. On 22 June 2012 the arbitrator was appointed following an application by Delkor to the court under s.18 of the 1996 Act. On 3 July 2012 the arbitrator held a directions hearing. On 16 July 2012 ASES issued its application under s.72 of the 1996 Act. On 20 July 2012 the arbitrator held a hearing to determine jurisdiction. On 24 July 2012 he issued the Award. On 26 July 2012 the arbitrator decided to proceed to a final hearing of the arbitration with a hearing set for 10-12 September 2012.
6. Given that ASES’s s.72 application had been listed to be heard on 18 October 2012 this timetable put ASES in a difficult position. It decided that in the light of the arbitrator’s decision to continue the arbitration in the meantime and the fixing of a final hearing of the arbitration on 10-12 September 2012 it had no real choice but to participate in the arbitration and to challenge the Award under s.67.
7. Accordingly on 21 August 2012 it issued a s.67 application and on the same day filed a Defence in the arbitration under protest as to jurisdiction.
8. There was then a directions hearing on 28 August 2012 and, in the light of ASES’s participation and difficulties with witnesses and counsel in respect of a hearing on 10-12 September 2012, the hearing of the arbitration was moved to 21-28 November 2012 in Istanbul.
9. At a further arbitration directions hearing on 25 September 2012, the issues in the arbitration were separated and a hearing scheduled for November confined to issues of contract formation and applicable terms, with a further hearing to be scheduled to decide issues of breach and quantum.
10. The arbitrator held that he had jurisdiction on the basis that there is a valid arbitration agreement governed by English Law by virtue of clause 15 of Delkor’s Standard Conditions. This provides that:
“The terms and conditions of this proposal shall in all respects be construed and operated as a British contract and in accordance with English Law. If at any time any question, dispute, or difference whatsoever shall arise between the Seller and the Buyer in relation to, or in connection with the Goods, then every such case, dispute or difference whatsoever shall be submitted to arbitration in terms of the Arbitration Acts 1950-1979.”
11. ASES’s basis for this application is essentially that this arbitration clause was not incorporated into the contract between the parties, or was inapplicable, as the governing agreement was in fact a Limited Manufacturing Licence (“LML”) which was subject to Swiss Law and which provides for arbitration in Switzerland. ASES contends that the arbitrator wrongly concluded that the LML was irrelevant and/or inapplicable and that he further wrongly concluded that an Agency Agreement was relevant and gave effect to other documentation – specifically the document “471 ASES-Bandirma contract (draft).docx” - which had not been seen still less accepted by ASES at the material time.
12. In the light of ASES’ non-participation in the arbitration the arbitrator only had a limited amount of documentary and witness evidence before him. For the purpose of the s.67 application, I have been provided with extensive documentation, witness statements, witness evidence and expert evidence. The hearing of the application took four days.
13. The principal issues which arise are:
(1) Whether ASES is entitled to bring the s 67 application or may only do so on limited grounds.
(2) Whether the governing arbitration clause is the Swiss arbitration clause in the LML or the English arbitration clause in Delkor’s Standard Conditions.
(1) Whether ASES is entitled to bring the s 67 application or may only do so on limited grounds.
14. Delkor contends that ASES is not entitled to bring its s.67 application because:
(1) It has not exhausted any available arbitral process of appeal or review or recourse under s.57 of the 1996 Act; and/or
(2) It has brought a counterclaim in the arbitration and thereby accepted jurisdiction.
15. S.70(2) of the 1996 Act provides that:
“an application or appeal may not be brought if the applicant or appellant has not first exhausted:
(a) Any available arbitral process of appeal or review, and
(b) Any available recourse under section 57 (correction of award or additional award)”
16. S. 82(1) of the 1996 Act defines “available arbitral process” as including:
“any process of appeal to or review by an arbitral or other institution or person vested by the parties with powers in relation to that matter”.
17. S.57(3) of the 1996 Act provides that:
"(3) The tribunal may on its
own initiative or on the application of a party—
(a) correct an award so as to remove any clerical mistake or error arising from an accidental slip or omission [emphasis added] or clarify or remove any ambiguity in the award”
18. Delkor submits that s.57 provided an available process of review to ASES, whereby the arbitrator could address ASES’s case that Delkor’s Standard Conditions had not been incorporated or were otherwise inapplicable. It stressed that under the 1996 Act the arbitral process should wherever possible correct itself and that ASES should first have made use of that available process.
19. I agree, however, with ASES that there were no arbitral processes of review or appeal agreed between the parties which were available to ASES following the arbitrator’s Award. There is no provision for any such process in any of the contractual documents on either party’s case, and none has been agreed at any point following the conclusion of the contract or the arising of the substantive dispute. S.70 (2) (a) of the 1996 Act does not therefore prevent ASES from bringing this application under s.67 of the 1996 Act. If, as ASES submits, no such process is available, then ex hypothesi there is nothing to exhaust.
20. As to s.70 (2) (b), s.57 (3) (a) gives a tribunal the power, on its own initiative or on the application of a party, to correct an award “so as to remove any clerical mistake or error arising from an accidental slip or omission or clarify or remove any ambiguity in the award”. The mistake must have arisen as a result of an accidental slip or omission; the slip rule cannot be used by the tribunal to reconsider the award – Sutherland & Co v Hannevig Brothers Ltd  1 KB 336, CA. As stated by HHJ Havelock-Allan QC in Al Hadha Trading Co v Tradigrain SA  2 Lloyd’s Rep 512:
“By no stretch of the imagination does the power in s 57(3) (a) to “correct an award so as to remove any clerical mistake or error arising from an accidental slip or omission to clarify or remove an ambiguity in the award” entitle a tribunal to reconsider its conclusion about the submissions of a party, especially where those submissions have been safely received and accurately recorded in the award. I would endorse the commentary on s 57(3) (a) and (b) in Mustill & Boyd on Commercial Arbitration (2nd Ed, Companion Volume 2001 at p 341) where it says: ‘Neither of these powers is intended to enable the arbitrator to change his mind on any matter which has been decided by the award, and attempts to use the section for this purpose should be firmly resisted. ”
21. Whilst the decision” in Craske v Norfolk CC  JPL 760 indicates that the power of the arbitrator under the slip rule contained in what is now s.57 of the 1996 Act (formerly s.17 of the Arbitration Act 1950) to correct errors in the award applies to errors which were attributable to the parties, as well as errors attributable to the tribunal, it also makes it clear that it does not extend to oversights or errors in production of evidence or argument before the Arbitrator – see White Book 2012, Vol. 2, Note 2E-226 at page 648. S.57 does not apply to second thoughts, still less to second thoughts based on fresh evidence.
22. It is ASES’s case that the arbitrator came to the wrong decision on his jurisdiction based upon, inter alia, an incomplete and incorrect account of the events and the documents relevant to contract formation. The arbitrator has not “omitted” anything from his award; the award is simply based on Delkor’s version of events, since ASES was then, as it was entitled to, exercising its rights under s.72 and which required its non-participation in the proceedings. There was no accidental omission.
23. In the Award, the arbitrator has written what he intended to write, has not included any additional words or omitted any necessary words, and there is no clerical error or ambiguity.
24. For all these reasons I reject Delkor’s case on s.57. There was no clerical mistake; there was no error arising from accidental slip or omission; there is no ambiguity. There was no room on the facts of this case for an application by ASES to the arbitrator under s.57. This being so, there was no available recourse to ASES under s.57 and s.70 (2) (b) does not present a barrier to ASES’s application under s.67.
25. As to the bringing of a counterclaim, this is only brought in order to support ASES’s asserted right of set-off, which is a defence to a claim. What ASES seeks to set-off in the arbitration are sums which arise from the same dispute as the arbitrator has decided that he has jurisdiction to hear (and which ASES in the same pleading makes clear that it still disputes). To the extent that the counterclaim is relied upon only as a set-off it does not seek to invoke the arbitrator’s jurisdiction any more than any other defence.
26. ASES is not seeking to recover anything on the pleaded counterclaim. The value of ASES’s counterclaim exceeds Delkor’s potential claim only because ASES cannot be sure which parts will find favour with the arbitrator; that is hardly the same as asking him to award any surplus to ASES. This is made clear by the fact that there is no prayer in ASES’s arbitral pleading, and ASES does not seek a monetary award but instead that the value of its counterclaim (including applicable interest) is deployed to exhaust the sums which may otherwise be found due to Delkor. That is the purpose and effect of the table which appears at para. 76 of its pleading. The counterclaim is relied upon for purely defensive purposes. As such, I accept ASES’s case that by pleading and relying upon a counterclaim to support a defence of set-off it has not submitted to the arbitrator’s jurisdiction.
27. Delkor further contends that ASES can only base its s.67 application on grounds which were before the arbitrator.
28. Delkor relies on s.73 of the 1996 Act which provides that:
“73. – Loss of right to object.
(1) If a party to arbitral proceedings takes part, or continues to take part, in the proceedings without making, either forthwith or within such time as is allowed by the arbitration agreement or the tribunal or by any provision of this Part, any objection-
(a) that the tribunal lack substantive jurisdiction, he may not raise that objection later, before the tribunal or the court, unless he shows that, at the time he took part or continued to take part in the proceedings, he did not know and could not with reasonable diligence have discovered the grounds for the objection.”
29. In Primetrade v Ythan  1 Lloyds 335, Aikens J, following Colman J’s judgment in JSC Zestafoni v Ronly Holdings, held that the term “any objection” in s.73 (1) was intended to mean “any ground of objection.” He stated as follows:
“12. The point on arbitration law arises because Primetrade now appeals the majority decision on jurisdiction, exercising its right to do so under section 67(1) (a) and (b) of the 1996 Act. It is agreed on all sides that an appeal on jurisdiction under section 67(1) involves a re-hearing of the matter by the court, at which the parties can adduce evidence and reargue entirely the issue of jurisdiction. But the Owners submit that Primetrade now wishes to run new arguments on the question of whether it was ever the lawful holder of the bills of lading and, if it was, whether rights of suit were transferred to it. The Owners say that these are new "objections" to the jurisdiction of the arbitrators. The Owners say that Primetrade cannot raise new objections because of the terms of section 73(1) of the 1996 Act. So this raises the third important question: when there is an appeal under section 67 of the 1996 Act from an arbitration tribunal's decision on substantive jurisdiction, to what extent is the appellant entitled to adduce new "objections" to the arbitrators' substantive jurisdiction and to what extent is the appellant entitled to adduce new evidence on the appeal in support of either an existing or a "new" objection? I have dubbed this issue "the new objection point".
50. [In JSC Zestafoni G Nikoladze Ferroalloy Plant v Ronly Holdings Ltd] Colman J began his discussion of this point by referring to remarks Moore–Bick J (as he then was) made in Rustal Trading v Gill & Duffus SA. Moore–Bick J had described section 73(1) as being designed to ensure that if a person believes he has grounds for objecting to the constitution of the tribunal or the conduct of the proceedings, he raises those objections as soon as he is aware of them or ought to be aware of them. It would, he said, be unfair if he took part in an arbitration yet kept an objection to jurisdiction up his sleeve and only attempted to deploy it later.
"I would go further. The principle of openness and fair dealing between the parties to an arbitration demands not merely that if jurisdiction is to be challenged under s.67 the issue as to jurisdiction must normally have been raised at least on some grounds before the arbitrator but that each ground of challenge to his jurisdiction must previously have been raised before the arbitrator if it is to be raised under a s.67 application challenging the award".
He then referred to the decision of Mr Field QC in Athletic Union of Constantinople v National Basketball Association, and said that the concession of counsel was "clearly correct". Colman J continued:
"Were it otherwise, the policy of the sub-section could be frustrated by introducing at the last minute grounds of challenge not hitherto raised and thereby potential causes of delay and disruption of the application to the prejudice of the opposite party".
52. Colman J went on to hold that if a party sought to raise a new point on a section 67 appeal, it had the burden of showing good reason why the point was not raised before the arbitrator and it would usually have to do this by evidence, e.g. a statement.
59. It is clear that the intention behind section 73 is to ensure that a party objecting to jurisdiction, who has decided to take part in the arbitral proceedings, should bring forward his objections in those proceedings before the arbitrators. He should not hold them in reserve for a challenge to jurisdiction in the court. I agree with Colman J that this intention reflects a principle of "openness and fair dealing"  EWHC 2399 (Comm) note76 between parties who may, or may not, be bound by an arbitration clause. I also agree with Colman J, therefore, that to fulfil this intention and to accord with that principle, the words "any objection" and "that objection" in section 73 must mean "any ground of objection" and "that ground of objection".
30. Delkor submits that ASES’s application includes grounds based on “mistake” and that the arbitrator was “misled”, that these were grounds which were not before the arbitrator, and that these grounds of objection are therefore new. In such circumstances it is submitted that ASES needs to produce convincing evidence to demonstrate that these grounds could not reasonably have been put before the arbitrator prior to his Award on jurisdiction and there is no such evidence.
31. There is an air of unreality about a submission founded on what grounds were put before the arbitrator in circumstances where the party in question was not participating in the arbitration at the material time. Whilst it is correct that the arbitrator sought to identify and deal with such objections to jurisdiction as were apparent to him from the correspondence, it was clear, as he acknowledged, that ASES was not participating in the arbitration. As he stated at paras. 3 and 28 of the Award:
“3…..The email (of 17 July 2012) was sent on the basis that ASES did not recognize my jurisdiction to arbitrate this matter and that it had not participated and was not then participating in the arbitration proceedings…
28 Although ASES has chosen not to appear or be represented in the arbitration, I have sought to understand its objections to my jurisdiction as arbitrator in this dispute….”
32. Whilst one can understand why the arbitrator chose to take this course, he did so of his own motion and not as the result of any request or other step taken by ASES.
33. At all times up to the issue of the Award ASES was not taking part in the arbitration proceedings. In my judgment s.73 can accordingly have no application in relation to what occurred up to that time. ASES made no challenge before the arbitrator on any grounds, so there can be no “new grounds” in its s 67 application in the sense of not having been raised before him. What the arbitrator took it upon himself to take into account cannot affect the matter.
34. As to what happened thereafter, when ASES decided it would have to participate in the arbitration, given the disparity between the arbitration timetable and that for the hearing of its s.72 application, it immediately made clear that it was doing so without prejudice to its objection to the arbitrator’s jurisdiction. It then set out its detailed grounds of objection in its s.67 application and its Defence, both of which were issued on the same day, 21 August 2011. In so far as those grounds of objection were further grounds of objection and had to be raised “forthwith” I am satisfied, in all the circumstances, that they were so raised. Both the Defence and the s.67 applications required careful preparation but were issued with due speed.
35. In any event the essential basis of ASES’s objection to the arbitrator’s jurisdiction has always been the same, namely that the governing arbitration clause is the Swiss arbitration clause in the LML rather than the English arbitration clause in Delkor’s Standard Conditions.
36. In Primetrade AG v Ytham Ltd at   Aikens J emphasised the distinction between different grounds of objection and different or broader arguments relating to existing grounds.
37. In the present case I do not consider that ASES is seeking to raise new grounds of objection. Whilst the evidence and argument relied upon has expanded, ASES’s underlying ground of objection has throughout been the same, namely that it is the arbitration agreement in the LML which is the governing agreement. In any event I would not therefore regard s.73 as precluding any of the arguments relied upon by ASES on this application.
38. I accordingly dismiss all Delkor’s procedural objections to the s.67 application. It falls to be decided on its merits.
(2) Whether the governing arbitration clause is the Swiss arbitration clause in the LML or the English arbitration clause in Delkor’s Standard Conditions.
39. There was an issue between the parties as to whether this falls to be decided under Swiss law or English law. This is closely bound up with the factual findings I make in relation to contract formation. I propose to address the issue by (i) making factual findings in relation to contract formation; (ii) considering the position under English law on the basis of those findings; and (iii) considering the position under Swiss law on the basis of those findings.
40. In relation to the factual issues, for ASES I heard evidence from Mr Saffet Baysal, the managing director of ASES, and Mr Richard Bond, the former managing director of Delkor. Mr Bond was made redundant from Delkor in late 2011 and was on gardening leave from mid August 2011. For Delkor I heard evidence from Mr Terence Benkins, who was the relevant contracts and project manager, and Mrs Sharon Benkins, who was operations manager and company secretary.
41. In June 2012 Delkor obtained injunctive relief restraining ASES from making any calls under the performance guarantee and bond provided by Delkor on the grounds that claims were being made by ASES supported by apparently false documents. It is not necessary on this application to determine that dispute between the parties and it was made clear that there was further evidence relevant to it which is not before the court. However, I accept that the material before the court supports the prima facie case of fraud which founded the application for injunctive relief. Delkor submitted that this seriously undermined the credibility of Mr Baysal and to an extent Mr Bond. I accept that it means approaching the evidence of Mr Baysal in particular with a degree of caution and that it highlights the importance of corroborating documents. However, the factual issues which arise on the present application have to addressed on all the evidence before the court.
(i) Contract formation
42. Mr Baysal and Mr Bond of Delkor had had a long history of business dealings with each other covering a period of about 19 years. Until March 2007 the business had been conducted with Delkor Limited but that company then went into liquidation. Thereafter the business was conducted with the successor business, Delkor (UK) Ltd.
43. ASES operated as an agent for Delkor Limited/Delkor which meant using its contacts and knowledge of the market and Delkor products to introduce the company to customers who might have an immediate or future use for the goods Delkor manufactured. ASES’s services were similar to those which would be performed by a local customer service manager.
44. Following Delkor Limited’s liquidation an Agency Agreement dated 1 June 2007 was entered into by ASES and Delkor, although it reflected an agreement which had been reached and operated from March 2007.
45. Under the Agency Agreement ASES was appointed as Delkor’s selling agent in the Turkish region. Its provisions included an obligation on ASES that it would “make clear to all prospective customers that DELKOR concludes contracts for the sale of The Products on DELKOR’S standard conditions of business from time to time in force…”(clause 6.5) and not to “make or give any promises, warranties or guarantees or representations concerning the Products other than those contained in DELKOR’S standard conditions of business from time to time in force” (clause 6.10).
46. Delkor relied upon this as showing knowledge by ASES of the fact and content of Delkor’s Standard Conditions. It also relied on a contract concluded by ASES on Delkor’s behalf in June 2011 with Soda Mersin which was apparently on those Standard Conditions, and on the fact that during the course of the negotiations Delkor was copied in on the transmission of a Word version of the Standard Conditions. However, it was Mr Bond’s unchallenged evidence that despite overseeing hundreds of contracts over a period of 20 years there were only a handful of occasions when Delkor’s Standard Conditions in fact applied to the contracts made.
47. ETI is a Turkish publicly listed company and is the world’s leading extractor and producer of boron products. Delkor Limited had had dealings with ETI but as a result of its liquidation was unable to complete a number of contracts, including an order for a belt filter for Bandirma. This led to Delkor Limited being blacklisted by the Turkish government, and it was considered that this was likely to apply equally to Delkor, as Delkor Limited’s successor business.
48. In the autumn of 2010 ETI put out a discussion document for possible tenders for a turnkey supply of a second filtration plant at Bandirma (“the project”). In February 2011 ETI decided to activate an official tender and Mr Baysal and Mr Bond discussed collaborating in making a tender. Collaboration was necessary as ASES rather than Delkor would have to be the contracting party both because of Delkor’s potential blacklisting and also because it was initially going to be a domestic tender which would only be open to Turkish companies. Since ASES did not have the technical expertise to carry out the project itself it would need to demonstrate that it had a committed technical supplier for the bid – i.e. Delkor.
49. In the first few months of 2011 there were various discussions between Mr Bond and Mr Baysal as to how this might be done. In early April 2011 Mr Bond received from Mr Baysal the initial tender documents for the project. Mr Bond was unable to go to Turkey at the time, so Mr Benkins, Delkor’s project manager, went out to discuss how the project might be delivered. These discussions, with input from Mr Bond, resulted in three important documents being produced. The first document was a Co-Operation Agreement headed “Technical & Commercial Representation in Turkey” (“the Co-Operation Agreement”). This was so that ASES would be able to demonstrate to ETI Maden that it had entered into a formal technical partnership with Delkor. The second document was a draft tender submission (misdated 22 April 2009) which set out the process, scope of supply, commercial impact, estimated cost of supply and a detailed supply list for Delkor to deliver the belt filter (“the Tender Advice”). The third was a cost calculation spreadsheet which set out in detail the suggested scope of supply, profit margins, costs and division of responsibility in relation to the proposed offer (“the PO Calculation document”). As Mr Bond explained, the Tender Advice and the PO Calculation document would be changed regularly to reflect the parties’ ongoing discussions.
50. On 24 May 2011 Mr Baysal informed Mr Bond that the tender had been announced by ETI locally with a deadline for final submissions of 14 June 2011. The tender specification was provided in Turkish and was then gone through at length between them.
51. There was a discussion about formalising the terms of ASES and Delkor’s co-operation and on 6 June 2011 Mr Bond sent Mr Baysal a draft agreement. The draft agreement stated that it shall “be governed by English law, adjudicated in England, and arbitrated in England”. Mr Baysal replied the same day setting out various points on the draft.
52. Mr Baysal followed this up with an email the following day, 7 June 2011, with the points which “I can not accept…”. These included the English law/arbitration clause which Mr Baysal required should be changed to refer to Switzerland or Germany. He stated that:
“Arbitration and Law: Switzerland and/or Germany European Law , France, Germany or Swiss… France is not different from UK ….endless courts…Of course, we do not expect but you never know…”
53. On 9 June 2011 Mr Bond emailed Mr Baysal as follows:
Further to our discussions about the various ETI Maden Projects and our agreement in principle to cooperate with manufacturing licensed to ASES to allow DELKOR and ASES to penetrate this customers [sic] market and to reduce competitive efforts by other manufacturers. I enclose the form of agreement acceptable for DELKOR for this.
I am continuing with preparation of the tender for ETI MADEN Bandırma Filter 2 expansion; and enclose our last correspondence on this project to identify the basis of this agreement and its intent. I also enclose a copy of the cooperation agreement in place for this specific project. I confirm that the ETI Bandirma second filter project is covered by this agreement.
I request you to sign the enclosed and, return a copy by mail – we will accept a Signed and certified PDF if you have this facility. However, I have also couriered to you 2 off original documents for signature – you are required to return one copy by courier as well as any Email correspondence.”
54. The attached “form of agreement acceptable for Delkor” of which ASES’s signature was sought was the amended LML already signed by Mr Bond. It provided at clause 3.f that the agreement “be governed by Swiss law, adjudicated in Switzerland, and arbitrated in Swtizerland”.
55. Although Mr Baysal did not sign the LML until July 2011, at which stage he proposed changes to it, it was the unchallenged evidence of both Mr Bond and Mr Baysal that he agreed to it at this time.
56. The enclosed “co-operation agreement in place for this specific project” was the Co-Operation Agreement.
57. The enclosed “last correspondence on this project to identify the basis of this agreement and its intent” was the Tender Advice.
58. Later on 9 June 2011 Mr Bond sent to Mr Baysal “the technical summary bid for the Bandirma project”, adding that he would “finalise a commercial offer etc. based on the documents provided to you in April.” The document was a lengthy technical proposal running to some 70 pages. It was headed with the names of both ASES and Delkor, was addressed to ETI and was described as Proposal Documents (“the Proposal Document”). Under Section 1.6 headed “Conditions of Contract” it stated that the offers was subject to Delkor’s Standard Conditions as modified in accordance with ETI’s Commercial Conditions and Technical Conditions. Delkor’s Standard Conditions were contained in Annex 1 of the proposal.
59. Mr Baysal complained about the length of the document, commenting that he could not get it translated in the time available and that a detailed specification was not required. Mr Bond then sent him a shortened document of 11 pages. It was stated to be the bid to be sent to ETI, but with ASES to modify to suit when translating.
60. ASES submitted its bid to ETI by the deadline of 14 June 2011 and on 14 July 2011 learned that it had been awarded the contract. Mr Benkins was then sent out to Turkey to source suppliers and to finalise the contract with ASES. He went out to Turkey on 18 July 2011 and remained there until 29 July 2011.
61. On 19 July 2011 the LML was signed by Mr Baysal and the specific reference to the ETI Bandirma filter project as Item 1 in the Project Specific Agreement list was initialled by him. At the same time he made two manuscript amendments to the terms of the LML. On the same day Mr Benkins and Mr Bond were sent a draft Agreement by ASES (“the ASES draft contract”). This was based on ASES’s contract with ETI and its terms were not acceptable to Delkor.
62. Delkor then set out about preparing their preferred contract terms. To this end Mr Benkins obtained a copy of the Soda Mersin contract which he then sought to adapt for the purpose of the contract with ASES. The Soda Mersin contract included a one page Contract Order document and then a five page document containing 12 terms, with other terms and conditions set out in listed Appendices.
63. On 28 July 2011 Mr Benkins had a meeting with Mr Baysal to seek to finalise the contract. Parts of the meeting involved Mr Bond by conference call and/or Skype.
64. Early in the morning of 28 July 2011 Mr Benkins sent Mr Bond an email with an attachment entitled “471 ASES-Bandirma Contract (Draft) docx.” asking him to “have a look and answer where needed”. Attached was a Contract Order document for the supply of a Delkor filter at a price of Euros 1,376,000. It was followed by an adapted version of the Soda Mersin contract terms document with 7 listed Appendices relating to the Bandirma project. At the bottom right hand corner of each page it was stated “471 ASES-Bandirma Contract (Draft) docx.”
65. A little later Mr Benkins sent a further email to Mr Bond stating that Mr Baysal’s last offer “take it or leave it” was Euros 1,300,000.
66. At 13.46 UK time (15.46 Turkish time) Mr Bond replied stating “These are all the relevant documents in my opinion”. The attached documents were the Proposal Document; pro forma list prices; the Tender Advice; the Contract Order document; the “471 ASES-Bandirma Contract (Draft) docx.” with certain amendments (“the Delkor draft contract”) and the latest version of the PO Calculation Document. The contract price was stated to be Euros 1,376,000. The PO Calculation document had a detailed breakdown of the scope of supply and how the price was calculated and showed a “back calculation position” price of Euros 1,300,000 without spares. The Delkor draft contract stated in clause 10 that “If there are contradictory paragraphs in the contract or the appendices, the text of the contract has priority, afterwards Contract followed by Appendix 1, 2, 3 etc.” Appendix 3 was Delkor’s Standard Conditions and Appendix 6 was the LML.
67. At 14.39 UK time (16.39 Turkish time) Mr Bond emailed to Mr Benkins and Mr Baysal a “PO ADVICE doc”. This was an amended version of the Contract Order document at a price of Euros 1,300,000. That same afternoon Mr Bond sent to Mr Baysal, copied to Mr Benkins, the PO Calculation Document.
68. Mr Baysal then signed the Contract Order document (“the Contract Order”). There was a dispute as to whether other documents were signed at that time which may have significance for other issues between the parties. I am not satisfied on the evidence presently before the court that any other document was signed on that occasion.
69. The circumstances in which the Contract Order was signed were in dispute.
70. Mr Benkins’ evidence in his first witness statement in the arbitration proceedings dated 17 September 2012 was:
“These are the documents that I took to the meeting (i.e the attachments from the above two emails from Richard Bond). The remaining appendices I also took to the meeting (the LML and the English version of the ETI Technical specification which had been sent to me by Baris on the 26 ( see paragraph 17 above). Saffet was given and saw all of these documents at the meeting including Delkor’s standard terms and conditions.”
71. This suggests that the attachments were physically taken by Mr Benkins to the meeting and were given to and seen by Mr Baysal in hard copy.
72. His evidence in his first witness statement in the s.67 proceedings dated 5 October 2012 was:
“..the Contract that I had put together and used at that meeting with Saffet included all of the documents sent by Richard in his email of 28 July, as well as the revised and corrected front sheet entitled “Contract” (sent by Richard at 14.39). Saffet signed the front page of the Contract in front of me. Prior to this I had handed to Saffet on a memory stick each of the documents forming part of the Contract. These included the documents that Richard had emailed to me.”
73. Nothing was said in this statement as to the circumstances in which Mr Baysal was allegedly handed the memory stick.
74. The case put to Mr Baysal in cross examination was that Mr Benkins handed Mr Baysal the memory stick and said “Here is the contract”; “These are the terms upon which we will contract with you.”
75. Mr Benkins’ oral evidence was that he did not make the latter statement on that occasion. His evidence as to what he did say or would have said was somewhat confused. However, his evidence was to the effect that that Mr Baysal was invited to and did go away and read the documents on the memory stick. This was not put to Mr Baysal in cross examination.
76. It was Mr Benkins’ oral evidence that all the documents provided on the memory stick were agreed to by Mr Baysal and that he acknowledged this by signing the Contract Order document.
77. Mr Baysal said the only documents that he agreed to were those which he signed and initialled (on every page), in accordance with his usual practice.
78. He denied being sent or presented with the Delkor draft contract or Delkor’s Standard Conditions. He denied being provided with a memory stick.
79. I am not satisfied that Mr Baysal was provided with a memory stick with the attachments to Mr Bond’s 28 July email. If that had been done it would surely have been referred to during the protracted discussions between the parties which ensued in September 2011 as to what the contract was, and in any event at some stage prior to Mr Benkins’ second witness statement in October 2012. Moreover, no explanation is given in that statement as to the circumstances in which it was provided and what then happened, and differing accounts as to that have been given since.
80. I am also not satisfied that the attachments were agreed to by Mr Baysal in any other way. The attachments were extensive. Mr Benkins would have had to consider them before presenting them to Mr Baysal. Mr Baysal would then have had to consider them in detail. However, there was only about an hour between the sending through of the attachments and the Contract Order which was then signed off. Although Mr Benkins insisted that the attachments were the contract, if they had been agreed one would expect them to have been printed off and signed, or at least emailed to Mr Baysal so that there was some record of the fact and terms of what had been agreed. One would also expect the attachments to be amended to reflect the final price agreed, but that was not done. Whilst it is possible that Mr Benkins showed Mr Baysal on his laptop the attachments which he had received, or some of them, they were not contractually agreed.
81. I find that the only document which was contractually agreed at the meeting of 28 July 2011 was the Contract Order document signed by Mr Baysal at that meeting. I accept that initialling every page of any contractual document was his practice, as borne out both then and later.
82. The reality is that only the essential terms of the contract were agreed on 28 July 2011. As both parties understood, the detailed terms, including payment terms, remained to be agreed. Neither party was willing to sign up to the other’s draft contracts.
83. That the detailed terms of the contract remained to be agreed is borne out by subsequent events.
84. When Mr Benkins returned to the UK he handed Mrs Benkins two contractual documents to be put in the safe in a wallet. These were the signed Contract Order and the signed LML. It did not include Delkor’s draft contract.
85. Delkor then prepared for an internal contract handover which involved setting out the contractual arrangements. The internal exchanges at this time refer to the possible changes, additions and amendments, and make reference to “the contract document so far”, “the draft contract” and the “updated contract document”. Further, the contents of the contract being discussed were not exactly the same as the attachments to Mr Bond’s 28 July email that Mr Benkins said was the contract. Those attachments were also in different terms to the handover summary which involved, for example, different payment terms.
86. It would appear that Mr Benkins left matters to Mr Bond at this stage and that he expected him to put together the entire contract and then send it to Mr Baysal. In the event this was not done.
87. On 5 September 2011 Mr Baysal emailed Mr Benkins stating that the contract needed to be back to back with the ETI contract. This elicited no response from Mr Benkins.
88. On 7 September 2011 Mr Baysal sent Mrs Benkins ASES’s draft contract “for your review and advise”. On 11 September 2011 he sent a further email to her stating that “Sorry but we really need to sign the Purchase Agreement also” making reference to the ASES draft contract. On 13 September 2011 Mrs Benkins replied stating that “with regards to the purchase contract I am working with Terry to get this clarified”.
89. Mr Benkins was out in Turkey shortly thereafter and it was his oral evidence that he asked Mr Baysal whether he had received the completed contract document and was told that he had not.
90. Later in September 2011 Mr Baysal asked Delkor to provide copies of the contractual documents. The response involved various different documents being provided and demonstrates considerable confusion as to what the contractual position was. If there was a complete contract which had been agreed on 28 July 2011 it should have been simple for Delkor to identify and provide it.
91. On 27 September 2011 Mr Benkins sent to Mr Baysal attachments described as “ASES CONTRACT: Agreement”. This consisted of the signed Contract Order and signed LML. Mr Benkins said in evidence that this was a mistake and that he did not check the attachments before sending the email. He said he had asked Mrs Benkins to scan in the contract.
92. In his reply Mr Baysal said that “the Purchase Agreement: I have already sent you/Sharon the draft. This should be signed immediately for payment release”. Mr Benkins commented in his reply: “see the documentation RB sent through and the front sheet you signed”.
93. Mr Bond, who was on gardening leave, was then contacted and asked to help sort out the situation. He thought a “compiled PO” had been “created” which had been scanned and emailed to ASES. In fact no definitive document had been “created” or sent to ASES.
94. On 29 September 2011 Mr Benkins sent to Mr Baysal what was described as the “Bandirma PO/Contract”. The attached documents were not in fact the same as the 28 July email attachments which Mr Benkins said was the contract. Included among the attachments was Delkor’s draft contract with “471 ASES-Bandirma Contract (Draft) docx.” at the bottom right of each page. This was the first time since the 28 July meeting that Delkor had sent to Mr Baysal what they contended to be the complete contract. Mr Baysal immediately protested that: “I am sorry this is not what we agreed…it is simply f..n ASES”.
95. On 3 October 2011 Mr Benkins sent Mr Baysal “the contract that you signed, and was first sent to you on the 27 July which you read and signed the cover sheet”. In fact no such documents had been sent to Mr Baysal on 27 or 28 July 2011. In so far as Mr Benkins was intending to refer to the documents Mr Bond had sent to him, it is notable that he makes no reference in this or any other document to providing them to Mr Baysal on a memory stick. The attached “contract” still contained differences to the documents attached to the 28 July email.
96. At this stage Mr Bond proposed that the parties resolve their differences by a single page contract in the following terms:
“By this agreement between DELKOR and ASES we jointly confirm
1. Delkor shall commit to support ASES under the enclosed Licence Agreement for the ETI BOR Bandirma Project
2. ASES have Accepted, and DELKOR have also accepted to comply with the ETI BOR Technical Specifications for the project
3. ASES & DELKOR accept the Penalty clauses of the ETI Technical Specification, and DELKOR shall be responsible for ensuring they are achieved, or comply with the compensation under guarantee’s and the terms of the Licence Agreement.
4. Payment and Terms shall be-
5. Both parties shall make their best endeavours to meet the combined intent of both parties in this project”
97. On 4 October 2011 Mrs Benkins sent ASES an email stating: “We confirm the following:-
1. “Delkor shall commit to support ASES under the enclosed Licence Agreement for the ETI BOR Bandirma Project.
2. ASES have accepted, and Delkor have also accepted to comply with the ETI BOR Technical specifications for the project.
3. ASES and Delkor accept the penalty clauses of the ETI Technical Specification and Delkor shall be responsible for ensuring they are achieved, or comply with the compensation under guarantees and the terms of the Licence Agreement.
4. Payment terms will be 25% with APG( APG received by ASES)
50% at the delivery against APG and APG valid until the good acceptance of ETI. Released against shipping information documents.
25% after final acceptance by ETI
5. Delkor will do everything in its power to get the goods to site before 31
December 2011, however at present we know that the pumps will be late and we will do our utmost to improve this”
98. This was followed up by a signed “letter of support” in the same terms; the Contract Order; a Purchase Order ASES-47111 signed by Mr Bond and Mr Baysal; and a signed copy of the LML with Mr Bond’s initialled agreement to Mr Baysal’s manuscript changes. Shortly thereafter ASES made the first payment under the contract.
99. I find that the essential terms of the contract were agreed on 28 July 2011. There was at that stage no agreement on the detailed terms of the contract. Thereafter there was no agreement as to the further terms of the contract until 4 October 2011 when it was agreed to proceed on the basis of the terms set out in Delkor’s 4 October email and the signed documents provided in relation thereto.
(ii) The position under English law
100. The essential terms of the contract agreed on 28 July 2011 were as set out in the Contract Order, namely “Supply of one Delkor filter 40m2 and ancillary equipment in accordance with Delkor offer” at the price and on the delivery terms there stated.
101. It was Delkor’s case that such terms included its Standard Conditions because of (1) the reference to and priority afforded to them in its draft contract and/or (2) the reference to them in the Proposal Document which Delkor contended was the “Delkor offer” referred to and/or (3) the reference to all orders being subject to the Standard Conditions on the face of the Contract Order.
102. As to (1), I have found that neither party’s draft contracts were agreed to on 28 July 2011. Further, the Contract Order (unlike previous and later drafts) makes no reference to Delkor’s draft contract.
103. As to (2), the essential purpose of the reference to the “Delkor offer” was to identify the scope of supply covered by the order. That was most clearly set out in the latest version of the PO Calculation Document which I find to be the “offer” referred to. This was the document which set out what was being supplied, by whom and how the price was made up. Moreover, it was separately sent through to Mr Baysal and Mr Benkins that same afternoon.
104. It is unlikely to have been a reference to the Proposal Document. That was a document which was addressed to ETI not ASES. It had never been accepted or used by ASES who had insisted on a short form document. Although it was the technical document containing the most detail, as between ASES and Delkor there was no need for such detail. All that was needed was identification of the scope of supply, which the PO Calculation Document provided. Further, even if it had been a reference to the Delkor Proposal it would have been a reference to the technical aspects of the Proposal rather than commercial terms. Discussion and agreement on such terms was being held over.
105. As to (3), the Contract Order does refer on its face to Delkor’s Standard Conditions. However, as found, they were not provided with or attached to the Contract Order. Although ASES would have been generally aware of the Standard Conditions from prior dealings this was not in the context of direct contractual relations with Delkor. It had never had cause to consider them in that context. Moreover, the deal agreed on 28 July 2011 was essential terms only. Agreement on the detailed contractual provisions was to be held over, which would clearly include any applicable terms and conditions. Yet further, it would never have made sense for Delkor’s Standard Conditions to apply per se. It was always recognised and intended that they would as a minimum have to give way to ETI’s technical and commercial terms, as reflected in the Proposal Document. How they would apply, if at all, would need to be discussed and agreed.
106. Against the background of the nature of the agreement which I have found to be reached on 28 July 2011 I consider that the proper construction of the Contract Order is that the parties were signing up to the typed provisions of the Contract Order, not its boiler plate printed terms. No-one was contemplating, for example, that ASES was going to be sending an acknowledgment within 7 days or providing immediate notification of incorrect details, the other aspects of the printed terms. I further find that incorporation of such terms would have been contrary to the parties’ understanding and agreement to hold over discussion of and agreement on the detailed contract terms.
107. Even it that be incorrect and the Standard Conditions were incorporated, for reasons discussed below, the English arbitration clause would not be incorporated or would not be applicable.
108. In relation to the contract as finalised on 4 October 2011, by that time the parties had clarified the scope of supply covered by “Delkor’s offer” by signing a scope of supply document, which was the PO Calculation Document without the figures. Even if the Proposal Document had been the initial “offer” referred to, this was no longer the case after 4 October 2011.
109. The reference to the Standard Conditions remained on the Contract Order, but the context now was that the detailed conditions had been agreed upon and they were as set out in the signed 4 October 2011 documents, as summarised in the Delkor confirmation email and letter of support. That email/letter made no reference to the Standard Conditions. Nor were the Standard Conditions signed or included as one of the 4 October 2011 documents. If, as found, they were not agreed as part of the 28 July 2011 essential terms contract there was no further development or document which would show a subsequent intent to incorporate them – quite the contrary.
110. Even if they were incorporated the English arbitration clause would not be incorporated or would not be applicable by reason of the Swiss arbitration clause in the LML.
111. The LML provides that:
“FORM OF AGREEMENT
LIMITED MANUFACTURING LICENCE
BETWEEN DELKOR AND ASES
1. DELKOR and ASES willing and freely wish to enter into an agreement to co-operate in the Limited Licensed manufacture of specific Delkor Equipment – specifically the DELKOR Horizontal Belt Filter
2. The purpose of the agreement shall be to provide a market access route for DELKOR products and Services to ETI Maden while protecting DELKOR from ETI Maden and commercial revenue form the majority of the tender contract value.
3. The Agreement shall be –
a. this general term of agreement plus attachment relating to specific projects identified and agreed by DELKOR.
b. Limited to the country of Turkey
c. Specific to the ET MADEN group of companies; within that country
d. Specifically exclude export from Turkey, and/or delivery to third parties other than ETI Maden.
e. Void if no business is generated within 9 calendar months of the date of signature, and shall require renewal annually on the anniversary of the agreement to allow future projects to be won.
f. Governed by Swiss law, adjudicated in Switzerland, and arbitrated in Switzerland.
5. The responsibilities under this agreement of the parties shall be defined as:-
a. DELKOR shall provide to ASES the following items in exchange for receipt of funds as identified by DELKOR in their offer to ASES:-
iii. Capital equipment and components as required by the DELKOR design to deliver the projects sold by ASES.
v. To act as a procurement agent on behalf of ASES in completion of the project sold by ASES.
b. ASES shall provide
vi. Purchase those goods identified by DELKOR, or variants agreed by DELKOR within the supply budget
7. Design ownership
a. The purpose of the agreement requires utilisation of DELKOR designs to manufacture and deliver equipment.”
112. On its face the LML clearly applies to the Bandirma belt filter project and contract. It is specifically referred to in clause 1. and is listed and initialled in the “Project Specific Agreement List”. Clause 3 provides that the “Agreement shall be” not only “the general term of agreement” but also the “attachments relating to specific projects identified and agreed by DELKOR”, which included the belt filter project. The agreement relating to the belt filter project was therefore contractually agreed to be part of the LML.
113. The relevance and applicability of the LML is further confirmed by the parties’ dealings. It was agreed to in early June 2011. Mr Baysal signed it on 19 July 2011. Both parties re-signed it in the context of the 4 October 2011 agreement.
114. It is further confirmed by the terms of the 4 October 2011 agreement. That agreement involved confirmation that Delkor was supporting ASES in relation to the project “under” the LML. It was one of the 4 October 2011 signed documents which were intended to set out the contract terms, being described by Delkor as “form of agreement”.
115. Delkor contended that notwithstanding the LML’s terms and the 4 October 2011 agreement, the LML was inapplicable to the project contract because that was ultimately a contract of supply rather than of licensed manufacture. However, it is apparent from its terms that the LML was not simply concerned with licensed manufacture. The purpose of the agreement was, as expressly set out in clause 2, “to provide market access route for DELKOR products and Services while protecting DELKOR from ETI Maden terms and conditions”. That broad purpose could be achieved in various ways which might or might not involve licensed manufacture.
116. The responsibilities of the parties as set out in clauses 5 and 6 are widely drawn and in fact do not include any manufacturing responsibility on ASES’s part. Delkor’s listed responsibilities include supply of “Capital equipment and components as required by the DELKOR design to deliver the projects sold by ASES” and those of ASES include purchase of Delkor’s goods.
117. It was, as Mr Bond explained, a flexible agreement that was meant to cover various different means by which Delkor’s products and services might be provided to ETI through ASES. Licensed manufacture by ASES or others was allowed for but it was not the sole purpose of the agreement.
118. Quite apart from the specific application of the LML to the project, as set out in the LML and confirmed in the 4 October 2011 agreement, there is no difficulty about its terms being applicable to the project and the project contract. If it be the case that there was to be no licensed manufacturing in Turkey under the contract as finally agreed then clause 7 of the LML would not be relevant to the parties’ dealings, but most of the other provisions of the LML would be. The LML was and remained the framework agreement under which the project contract was made.
119. As a framework agreement of general applicability to project contracts, including, specifically, the belt filter project and contract, a generally worded arbitration clause such as clause 3.f would as a matter of English law be applicable to disputes arising under that specific project contract. This is borne out by clause 3.a which confirms the applicability of the LML to such contracts. It would, of course, be possible for the parties to contract otherwise in relation to a particular project, but the intention to derogate from the specifically agreed Swiss law/arbitration regime generally applicable would need to be made clear.
120. Even if the Standard Conditions were incorporated into the contract I consider that as a matter of English law the specifically agreed Swiss arbitration clause would prevail over the English arbitration clause incorporated, if at all, by general reference. There would in those circumstances be a clear conflict between the two provisions. There is a strong presumption in favour of one stop adjudication in construing arbitration clauses. The courts recognise the commercial implausibility of agreeing to determine related disputes by entirely different means. In this case: a different law; a different country; a different arbitration procedure and one venue which is neutral and another which is not. This conclusion is reinforced by the 4 October 2011 agreement which clearly affirms the applicability of the LML to the parties’ contract. I accordingly reject Delkor’s fallback case that the two agreements were intended to and did co-exist.
(iii) the position under Swiss law
121. In so far as the applicability of the LML arbitration clause falls to be determined as a matter of Swiss law, I am satisfied on the Swiss law evidence before the court that the same conclusion would be reached.
122. Both parties instructed Swiss law experts on the matters of Swiss Law. ASES’s expert was Dr Phillipp Habegger of Walder Wyss. He is a Court Member of the ICC International Court of Arbitration and a member of the Arbitration Court of the Swiss Rules of International Arbitration. Delkor’s expert was Mr Pierre-Yves Gunter of Python & Peter who has held various appointments in the field of international arbitration and is currently a Board Member of SIAC. Mr Gunter was unable to attend the hearing so that the only expert who gave evidence which could be tested by cross examination was Dr Habegger.
123. There was disagreement between the Swiss law experts as to whether the project contract was a “specific project” under the LML. The reasons given by Dr Habegger for concluding that it was such a project include those which I have given above and I accept his evidence on this issue. As such, it is clear as a matter of Swiss law that the arbitration agreement in the LML covered the project contract.
124. In relation to the further question of whether such an agreement would prevail over the arbitration agreement in the Standard Conditions, Swiss law adopts a similar approach to English law. As Dr Habegger stated:
“Under Swiss law, an individual agreement overrides a deviating provision contained in standard business terms. If no common intention can be established that the Parties simply forget to delete the reference to Delkor’s Standard Conditions Dated 21 July 2012 contained in the Contract (which, based on the evidence, appears to be the case), then we are confronted with the case where the Parties individually agree on a neutral governing law but signed on the same occasion a contract that refers to standard business terms providing for arbitration under the Arbitration Act and English Law. The Swiss Federal Supreme Court holds that in such scenarios, the individual agreement prevails (Decision of the Swiss Federal Supreme Court DFC 93 II 325 et seq; 81 II 350: see also Decision of the Swiss Federal Supreme Court DFC 125 III 266 et seqq.)”
125. I accept that evidence.
126. There were, however, two further reasons as a matter of Swiss law for reaching that conclusion.
127. The first is that under Swiss law, unlike English law, one considers first what was the parties’ common, subjective intention. In the present case the relevant individuals were Mr Baysal and Mr Bond who were the only persons with authority to conclude the contract. It was their evidence that they always intended the Swiss arbitration agreement to apply to any disputes under the project contract and that it was never contemplated or intended that this would be displaced by the English arbitration agreement in the Standard Conditions. I accept that evidence, which is supported by the important email exchange on 6/7 June 2011 when English arbitration was rejected and arbitration in Switzerland, a party neutral country, agreed. If that evidence is accepted then, as Dr Habegger states: “There is no further debate that the Parties agreed that the arbitration agreement contained in the Limited Manufacturing Licence was applicable to the Contract and not the arbitration clause contained in the Standard Conditions Dated July 2012.”
128. The second is that if the actual, common intention cannot be established then under Swiss law one considers what the parties intended from a reliance/good faith/objective perspective. In this case even if, contrary to Mr Bond’s evidence, Delkor intended that the Standard Conditions arbitration clause applied, it could not have assumed in good faith that ASES would share that view unless ASES expressly said so. As Dr Habegger states, in the light of the email exchange of 6/7 June 2011, “it was of paramount importance for ASES to agree on Switzerland as the seat of the arbitration” and in those circumstances it is to be inferred that had Delkor pointed out the deviating clause in its standard terms “ASES would have strongly objected.”
129. For all these reasons I am satisfied and find that as a matter of Swiss law the governing arbitration agreement is the Swiss law arbitration agreement in the LML.
130. Given that the same conclusion is arrived at whether the matter is governed by English law or Swiss law it is not necessary to determine which is the applicable law. If it did matter, in the light of my findings as to the contract formation and the general applicability of the LML, I consider that it is more likely to be Swiss law.
131. There is one further issue which arises under Swiss law and that concerns the validity of the arbitration agreement in the light of the fact that no canton or city is stipulated.
132. As Dr Habegger explained, “if the arbitration agreement fails to identify the city or canton in which the arbitration shall be seated, difficulties may arise as to how the arbitral tribunal shall be constituted”.
133. He pointed out that “mostly older doctrine and some cantonal courts have taken the view that an arbitration agreement was invalid if the parties failed to designate a city or canton within Switzerland as the seat in their arbitration agreement and if one of the parties refused to cooperate in the constitution of the arbitral tribunal and no institutional mechanism was provided for...” It was, however, Dr Habegger’s opinion that “This view is outdated and finds practically no support today in legal writing. As Laurent Hirsch puts it, ‘most recent and most authoritative legal literature” is of the opinion that an agreement on “arbitration in Switzerland” is effective and suffices to establish jurisdiction of an arbitral tribunal in Switzerland...”. He then identified three alternative solutions, all of which he agreed with, but found the third the most convincing, namely that the respondent to a reference to arbitration is under a duty to co-operate and that a failure to do so would constitute a breach of the principle of good faith entitling the claimant to choose the judge to seise with the appointment of the tribunal.
134. 134. Mr Gunter’s somewhat tentative conclusion was that :
“There remains important legal uncertainty related to such clauses and it cannot be excluded that other arbitral tribunals or other Swiss courts in different Cantons will arrive at the same conclusion and may not agree with the practical solutions suggested by some Swiss legal scholars.”
135. In his Affidavit and in evidence Dr Habegger was clear that although there is a degree of uncertainty it was “definitely more likely” that such clauses would be held to be valid. That opinion reflects the prevailing view of legal scholars and the arbitration-friendly case law of the Swiss Supreme Court. I accept his evidence on this issue and, on the evidence before the court, reject Delkor’s case that the Swiss arbitration clause was invalid under Swiss law.
136. 136. For the reasons outlined above I have concluded that ASES’s s.67 application succeeds. The good faith/reliance reasons under Swiss law for concluding that the Swiss arbitration clause is the governing clause are factually compelling. Although English law does not overtly apply such principles it is reassuring that it reaches the same result.