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Assigned contracts: can an arbitration agreement be challenged under S.67 AA 1996?

The Court has determined a novel point, namely that challenges to the assignment of arbitration agreements can be brought under s.67 AA 1996

In Cockett Marine Oil v ING Bank[1], there was a challenge to two arbitration awards under s.67 AA 1996 on the grounds that the arbitral tribunal had no jurisdiction because, inter alia, the Assignee (ING Bank) was not a party to the underlying arbitration agreement.

The arbitration arose out of contracts for the supply and sale of bunkers by subsidiaries of the OW Bunker Group (“OWBG”) to Cockett Marine Oil entities in Dubai and Asia (“CM”).

In December 2013, OWBG entered into a credit facility with ING Bank for US$700m. The security for the facility was contained in the Omnibus Security Agreement which provided for the assignment to ING Bank of all of OWBG’s “rights, title and interest in respect of the Supply Receivables”. “Supply Receivables” was defined to mean “any amount owing, or to be owed…under any Supply Contract”. “Supply Contract” meant “any one-time contract…relating to the sale of oil products traded by the Group”. OWBG filed for bankruptcy in November 2014 and the security became enforceable. No issue was taken in relation to the validity of the assignment notices.

The Tribunal was tasked with deciding whether the assignment to ING Bank under the Omnibus Security Agreement was effective to transfer the arbitration agreement under the relevant bunker supply and sale contracts. The Tribunal considered that the assignment was effective.

CM challenged this decision under s.67 AA 1996 on the grounds that the decision was wrong and that ING Bank was not a party to the arbitration agreement. CM applied under s.67 because it said that this was an issue which extended to the arbitrators’ jurisdiction to make an award against ING Bank. ING Bank/OWBG submitted that it was not open for CM to challenge this under s.67 AA 1996 as the ambit of this section did not extend to this issue.

The Court considered that s.67 AA 1996 permits a party to arbitral proceedings to challenge an award of the arbitral tribunal as to its “substantive jurisdiction” which is defined under s.30 AA 1996 to mean, inter alia, whether there is a valid arbitration agreement. In the Court’s view, a valid arbitration agreement is one which “effectively refers to arbitration a claim which the claimant wishes to bring against the defendant. Where the arbitration agreement is contained within a contract [which is assigned to another person who] wishes to arbitrate a claim under that contract, the arbitration agreement will only be valid as between the putative claimant and defendant if the assignment is valid.”

ING Bank/OWBG submitted that this analysis was wrong and that the correct interpretation of a claim under s.67 AA 1996 was whether or not there was a valid arbitration agreement under the underlying bunker supply agreements. ING/OWBG relied on A v B[2] in which the Court held that a challenge to a tribunal’s award to substitute one party for another did not fall within s.67 AA 1996. The Court distinguished the present case on the basis that the current question was whether or not there was an arbitration agreement, which would fall within the remit of s.67. This was not a situation where one party was substituted for another.

Accordingly the Court held that the assignment agreement, and therefore the arbitration agreement as between CM and ING Bank, was valid, and dismissed the s.67 challenge. This case is of note for practitioners that challenges to assigned arbitration agreements may be brought within s.67 AA 1996.

[1] [2019] EWHC1533 (Comm)

[2] [2017] 1 Lloyd’s Reports 1

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