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Recent decision of the Irish Admiralty Court on the arrest of a vessel / stay of proceedings in favo

DATE: 14.07.2011

In a judgement delivered by the Admiralty Judge, Mr. Justice Butler on 7 March 2007, the Irish Admiralty Court refused to grant a stay of proceedings pursuant to Section 5 of the Arbitration Act, 1980. The MV Sonata was arrested by order of the Admiralty Division of the High Court in Ireland on the 29 January 2007. The Plaintiffs, Common Market Fertilisers SA and Grassland Fertilisers (Kilkenny) Limited, commenced proceedings against the owners of the MV Sonata, claiming damages for breach of contract of carriage and for breach of duty including negligence arising out of damage to a cargo of compound fertiliser carried on board the vessel from St. Petersburg in Russia to Waterford in Ireland. The cargo was carried under a Bill of Lading dated 12 January 2007.

By Notice of Motion dated 12 February 2007, the defendants sought an order from the Admiralty Court that the proceedings commenced by the Plaintiff be stayed, pursuant to Section 5 of the Arbitration Act, 1980. Section 5 of the Arbitration Act, 1980 provides as follows:

“5 (1) If any party to an arbitration agreement or any person claiming through or under him, commences any proceedings in any court against any other party to such agreement, or any person claim through or under him, in respect of any matter agreed to be referred to arbitration, any party to the proceedings may, at any time after an appearance has been entered, and before delivering any pleadings or taking any other steps in the proceedings, apply to the court to stay the proceedings, and the court, unless it is satisfied that the arbitration agreement is null and void, inoperative or incapable of being performed, or that there is not in fact any dispute between the parties with regard to the matter agreed to be referred, shall make an order staying the proceedings.

(2) Nothing in this section shall be construed as limiting or otherwise affecting the power conferred on the High Court pursuant to Section 39 (3) of the Principle Act to refuse to stay any action brought in breach of an arbitration agreement.”

The defendant claimed that there was an operative agreement between the parties on the basis that there was an arbitration clause in the governing charterparty.

An arbitration agreement is defined in Section 2 of the Arbitration Act, 1980 as follows:

“An agreement in writing (including an agreement contained in an exchange of letters or telegrams) to submit to arbitration present and future differences capable of settlement by arbitration.”

The Plaintiffs were not parties to the Charterparty. The defendants submitted that as the Bill of Lading referred to the arbitration clause in the Charterparty, the plaintiffs were bound by it and the charterparty was incorporated into the Bill of Lading.

The Defendants sought to rely on the case of Sweeney –v- Mulcahy [1993] I.L.R.M. 289, in which it was held that an offer in writing of a contract that includes an arbitration clause, though not replied to in writing by the other party, is sufficient to constitute an arbitration agreement if the contract offered is subsequently acted upon by the parties.

Mr. Justice Butler held that the facts in relation to the Sonata were fundamentally different from Sweeney –v- Mulcahy in that the charterparty was generated subsequent to the Bill of Lading and could not therefore form part of it.  He accordingly refused the relief sought.

The defendants also sought to set aside the arrest of the vessel on the basis that the MV Sonata was flagged in the Commonwealth of Dominica, a non contracting party to the 1952 Arrest Convention. The 1952 Arrest Convention which was incorporated into Ireland by the Jurisdiction of the Courts (Maritime Conventions) Act, 1989. In the case of the “MV Kapitan Labunets” [1995] 1 I.L.R.M. 430, the Supreme Court held that Article 8 (2) of the Jurisdiction of the Courts (Maritime Conventions) Act, 1989 conferred jurisdiction to arrest a ship flying the flag of a non contracting state. Article 8(2) of the Convention provides:

“(2) a ship flying the flag of a non contracting state may be arrested in the jurisdiction of a contracting state in respect of any of the maritime claims enumerated in Article 1 or of any other claim for which the law of the contracting state permits arrest.”

Mr. Justice Butler accordingly held that the court had jurisdiction to arrest the vessel and confirmed that security should be fixed on the basis of the Plaintiff’s “reasonably arguable best case”. Whilst the Plaintiffs may not have succeed to the full amount of their claim, they are particularised and reasonably argued that their best case was in the amount of US$950,000 inclusive of interest and costs and accordingly the Judge deemed this be an appropriate sum to be lodged as security to release the vessel from arrest. 


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