|FEDERAL COURT OF AUSTRALIA|
|Case Name:||Orient Overseas Container Line Ltd v APL Co Pte Ltd (No 2)  FCA 606|
|Medium Neutral Citation:|| FCA 606|
|Hearing Date(s):||3 June 2021|
|Date of Orders:||3 June 2021|
|Decision Date:||3 June 2021|
|Decision:||THE COURT ORDERS THAT:
1. Pursuant to s 7(2) of the International Arbitration Act 1974 (Cth) and in accordance with cl 15.3 of the Joint Service Agreement (referenced in the plaintiff’s Amended Concise Statement) and cl 22.2 of the Cross Slot Charterparty that is an appendix to that Agreement, this proceeding NSD 645 of 2020, brought in the Court by the plaintiff against the defendants and by the cross-claimants against the cross-respondent, be stayed until further order.
2. The stay the subject of order 1 above be on the following conditions:
(a) Any arbitration once commenced shall be treated as if it had been commenced on the date on which this proceeding was commenced.
(b) Unless and until otherwise ordered by this Court, any arbitration involving the matters the subject of this proceeding is not to proceed until the earlier of the determination, dismissal, discontinuance or withdrawal at first instance of the claims made by the applicants in proceeding NSD 66 of 2021 against either of the plaintiff or the first defendant in this proceeding.
(c) The parties to this proceeding are released from the implied undertaking to the extent of using documents and information which are produced or obtained in this proceeding or in proceeding NSD 66 of 2021 for any arbitration commenced that involves the matters the subject of this proceeding.
(d) The defendants are to preserve evidence in accordance with order 4 of the orders of 11 June 2020 and orders 2 and 3 of the orders of 18 June 2020 until the conclusion of any arbitration commenced that involves the matters the subject of this proceeding.
3. No order as to costs.
4. The parties have liberty to apply, including to apply to vary any of the conditions the subject of orders 2(b) to 2(d).
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
ARBITRATION – application for stay of proceeding subject to conditions under s 7(2) of the International Arbitration Act 1974 (Cth) – stay and certain conditions by consent, other conditions contested – scope of the power to order conditions – whether proposed conditions intrude on the arbitration – whether power to order injunction as a condition to a stay
ADMIRALTY – stay of slot-charterer’s claim against vessel interests for indemnity for any liability to cargo interests in favour of arbitration – conditions of stay with respect to cargo interests’ separate proceeding against vessel interests – common issues
|Legislation Cited:||Federal Court of Australia Act 1976 (Cth) Pt IVA
International Arbitration Act 1974 (Cth) Pt II s 7(2), Sch 1
|Cases Cited:||Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd  WASCA 66; 298 ALR 666
Hi-Fert Pty Ltd v Kiukiang Maritime Carriers Inc (No 5) (1998) 90 FCR 1
O’Brien v Tanning Research Laboratories Inc (1988) 14 NSWLR 601
Recyclers of Australia Pty Ltd v Hettinga Equipment Inc  FCA 547; 100 FCR 420
Walter Rau Neusser Oel und Fett AG v Cross Pacific Trading Ltd  FCA 1102Holmes M and Brown C, The International Arbitration Act 1974 – A Commentary (3rd ed, LexisNexis, 2018) p 63 [s 7-22]
ORIENT OVERSEAS CONTAINER LINE LTDPlaintiffAND:
ANL SINGAPORE PTE LTD
APL CO PTE LTD
CMB OCEAN 13 LEASING CO PTE
|Representation:||Counsel for the Plaintiff and Cross-Respondent: J K Kennedy
Solicitor for the Plaintiff and Cross-Respondent: HWL Ebsworth
Counsel for the Defendants and Cross-Claimants: C O Gleeson
Solicitor for the Defendants and Cross-Claimants: Thynne + Macartney
|File Number(s):||NSD 645 of 2020|
|Decision under appeal:||NIL|
- This is another interlocutory judgment arising from an incident in which the MV APL England lost scores of containers overboard, and others were damaged, when it suffered a container stow collapse on 24 May 2020 off the coast of New South Wales.
- By interlocutory application, the first defendant (the time-charterer of the vessel) sought a stay of the proceeding under s 7(2) of the International Arbitration Act 1974 (Cth) (the IAA) and the referral of the dispute as between the plaintiff (a slot-charterer) and it to arbitration. That was in reliance on an arbitration clause in the slot charterparty incorporated into a joint service agreement.
- Such a stay would have left the proceeding on foot as between the plaintiff and the second defendant (the bareboat charterer) and third defendant (the owner). Sensibly, the parties have come to an agreement to refer the claim by the plaintiff against all the defendants to arbitration together. They have also agreed a number of conditions upon which the stay should be ordered. There remains a dispute about two of the conditions that I am required to resolve.
- The conditions with respect to which there is a dispute concern the relationship between the claims in the present proceeding, and hence in the arbitration, and the claims in proceeding NSD 66 of 2021. In that proceeding, a representative proceeding under Pt IVA of the Federal Court of Australia Act 1976 (Cth), a number of cargo interests (shippers and/or consignees and their insurers) assert claims against the defendants to the present proceeding (the vessel interests) and a number of other parties including the plaintiff to the present proceeding (NVOCCs, freight forwarders and slot-charterers). The plaintiff’s claims in the present proceeding are for indemnities in respect of any liability that it might have to cargo interests, whether those interests are represented in the other proceeding or not.
- From that brief description of the two proceedings it is readily apparent that there are likely to be considerable areas of overlap between them and, hence, between the arbitration and the other proceeding once the present proceeding is stayed. For example, the seaworthiness of the vessel and the cause of the stow collapse are likely to be at the centre of both proceedings. Recognising that overlap, and the inefficiencies and discreditable spectre of conflicting outcomes that may arise from a multiplicity of proceedings on the same issues, the parties are agreed that the stay of the present proceeding should be on the condition that the arbitration is not to proceed until the determination of the other proceeding. They differ, however, on what the appropriate stage of that determination should be.
- The defendants contend for the wording that the arbitration is not to proceed until the earlier of the determination, dismissal, discontinuance or withdrawal “of all claims made in proceeding NSD 66 of 2021 by or against the parties to this proceeding”, whereas the plaintiff contends that the wording in inverted commas be replaced with “at first instance of the claims made by the applicants in proceeding NSD 66 of 2021 against either of the plaintiff or the first defendant in this proceeding.” It was explained that the defendants regard their proposed wording as having the effect of the arbitration being stayed pending the final determination, including on any appeal or appeals, of the claims in the other proceeding. The plaintiff, on the other hand, says that the stay of the arbitration should end when any claim against either the plaintiff or the first defendant in this proceeding is concluded at first instance in the other proceeding. That is the first dispute to be resolved.
- The other dispute is that the defendants say there should be a further condition that the plaintiff is not to make any claims against the defendants, by way of cross-claim or otherwise, in proceeding NSD 66 of 2021 seeking the same or similar relief as is sought in this proceeding or the arbitration. The plaintiff says that that is in the nature of an injunction for which there is no justification because there is no reasonable apprehension that such claims will be made. Moreover, it is said, if they are made then any problem that that creates can be dealt with then.
- The defendants make submissions in support of the conditions that they contend for essentially with reference to considerations relevant to convenience, practicality and sensible case management of the proceedings. For reasons that will shortly become apparent, it is not necessary to go into the detail of those submissions.
- The source of the court’s power to impose conditions on a stay under s 7(2) of the IAA, which stay the parties have in this instance agreed to, is the same sub-section. It provides, relevantly, that on the application of a party to a relevant arbitration agreement “the court shall, by order, upon such conditions (if any) as it thinks fit, stay the proceedings … and refer the parties to arbitration.”
- Section 7(3) provides that where a court makes an order under sub-s (2), it may, for the purpose of preserving the rights of the parties, make such interim or supplementary orders as it thinks fit in relation to any property that is the subject of the matter to which the first-mentioned order relates. Thus, s 7(3) explicitly confers on the court the power to make interim orders, which would naturally include orders in the form of an injunction, but restricted to being in relation to any property that is the subject of the matter to be referred to arbitration. The power to order injunctions having been included in sub-s (3), there is thus, on the face of it, no basis to read sub-s (2) as including the power to make orders in the form of an injunction.
- It is important to understand s 7(2) in proper context. It is in Pt II of the IAA which concerns the enforcement of foreign arbitration agreements and awards in order to give effect to the New York Convention, i.e., the Convention on the Recognition and Enforcement of Foreign Arbitral Awards adopted in 1958 by the United Nations Conference on International Commercial Arbitration which is set out in Sch 1 to the IAA. Article II(1) of the Convention provides that each Contracting State shall recognise an agreement in writing under which the parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them in respect of a defined legal relationship. Article II(3) of the Convention provides that the court of a Contracting State, when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of the article, shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed. There is nothing in the Convention giving power to the court to impose conditions upon a stay of proceeding and referral to arbitration. That is an indication that the power to impose conditions is to be read in a restricted way.
- The principle underlying Art II, and hence s 7, is that arbitration agreements should be recognised and enforced by staying court proceedings in favour of arbitration where the subject of the proceedings is covered by the arbitration agreement. There is no justification for construing the power to impose conditions on such a stay as including conditions which interfere with the jurisdiction and power of the arbitral tribunal or which alter the rights of the parties under their arbitration agreement; the purpose is, after all, to uphold and enforce that agreement, not to alter or undermine it or the parties’ rights under it.
- It is also to be borne in mind that in terms of ss 39(1)(b) and 39(2)(a) of the IAA, s 7(2) is to be interpreted having regard to the objects of the Act in s 2D. Section 2D includes as the objects of the Act, encouraging the use of arbitration, facilitating the use of arbitration agreements, and giving effect to Australia’s obligations under the New York Convention.
- In that regard, in O’Brien v Tanning Research Laboratories Inc (1988) 14 NSWLR 601 at 622, Kirby P acknowledged that s 7(2) of the IAA is expressed in apparently wide terms, but said that “it is obvious that the conditions are incidental and ancillary to the achievement of the main purpose of s 7(2) [which] is to hold the parties to international commercial agreements to an agreement to arbitrate.” His Honour thus declined to impose a condition that had been imposed by the primary judge that the arbitration take place in New South Wales rather than Florida and explained:
I do not consider, in this context, that it would be proper to impose a condition which effectively distorted the agreement initially entered between the parties. Nor should such a condition be imposed as would manipulate the rights of the parties under that agreement, notwithstanding their agreement to arbitrate. Nor should conditions frustrate the achievement of the policy of the statute to enforce that agreement. The “conditions” which s 7(2) of the Act contemplates are machinery conditions. They relate to hearing and the like procedures and not to conditions which determine, in effect, the substantive rights of the parties. Those substantive rights were, relevantly, fixed by the agreement. The Court should neutrally hold the parties to that agreement. In my opinion it would be wrong for the Court to distort and frustrate that agreement (whilst requiring the stay necessitated by the statute) to impose conditions which were not within the agreement which it is the purpose of the Act to enforce.
- In Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd  WASCA 66; 298 ALR 666, Martin CJ, with whom McLure P and Buss JA relevantly agreed, cited (at ) that extract from O’Brien with approval and then observed (at ):
This approach to the ambit of the powers conferred upon the court by s 7 of the Act is consistent with the limited role which national courts play when parties have agreed to resolve their disputes by international commercial arbitration. National courts are not properly regarded as competitors or rivals for the jurisdiction which the parties have agreed to confer upon an arbitral tribunal. As I have already noted, the exercise of judicial power to facilitate the agreement of the parties to resolve their disputes by arbitration, and the strictly limited supervisory role usually conferred upon national courts by the lex arbitri, which is generally limited to containing arbitral tribunals within the jurisdiction conferred upon them by the parties and ensuring that the jurisdiction is exercised, is fundamentally different in character to the role of the arbitral tribunal in resolving the dispute by making an award defining the substantive rights and obligations of the parties. International comity requires national courts to faithfully respect these limitations upon their role – in this case by appropriately construing the ambit of the powers conferred upon the court by s 7 of the Act having regard to such limitations.
- There are several cases in this Court where claims subject to an arbitration agreement and claims not so subject have been brought in the same proceeding, and the proceeding has been stayed in respect of the first-mentioned claims which have been referred to arbitration while the second-mentioned claims have continued before the court, but a condition has been imposed on the stay that the arbitration not proceed until the second-mentioned claims have been determined. See, for example, Hi-Fert Pty Ltd v Kiukiang Maritime Carriers Inc (No 5) (1998) 90 FCR 1 at 28-29 per Emmett J, Beaumont and Branson JJ agreeing; Recyclers of Australia Pty Ltd v Hettinga Equipment Inc  FCA 547; 100 FCR 420 at - per Merkel J; Walter Rau Neusser Oel und Fett AG v Cross Pacific Trading Ltd  FCA 1102 at  per Allsop J. There is, however, a view that such a condition is beyond the power of the court under s 7(2) of the IAA: Holmes M and Brown C, The International Arbitration Act 1974 – A Commentary (3rd ed, LexisNexis, 2018) p 63 [s 7-22].
- It is not necessary for present purposes to engage upon that debate. First, the present is not such a case. All the claims in the present case are to be referred to arbitration. The question that arises is not with regard to the relationship between stayed claims and non-stayed claims in this case, but rather the relationship between the stayed claims in this case and other, different claims between different parties in another case, albeit that the determination of those claims will in all likelihood determine issues that are common to the claims to be stayed in this case. Secondly, I consider that since the stay in the present case and the principal terms upon which it is to be granted is by agreement of the parties, it not having been necessary for me to decide whether there should be a stay, it would be unwise and potentially intrusive into the terrain of the arbitral tribunal for me to impose terms more restrictive on the plaintiff in its pursuit of the arbitration proceeding than it has agreed to.
- In the latter regard, it is really a matter for the arbitral tribunal whether it should stay its proceeding pending the outcome of the other proceeding in this Court, or whether for whatever reason and on whatever basis the arbitral proceeding should continue in tandem with the other proceeding in this Court. The parties have agreed by their agreement to arbitrate that those matters are matters for the tribunal, and I would accordingly be hesitant to exercise any power under s 7(2) to impose conditions on the stay of the proceeding in this Court that would trespass upon the arbitration which the parties agreed to and which this Court is bound to support, not undermine.
- It is also to be observed that the defendants’ position is that they want not only for the proceeding against them in this Court to be stayed in favour of arbitration, but they also want the arbitration to be stayed (beyond when the plaintiff has agreed to it being stayed). That strikes me as being an attempt by them to have their cake and eat it.
- In the circumstances, I am only prepared to impose conditions that are as onerous as has been agreed. The terms of conditions that go beyond such agreement are beyond what I am satisfied should be imposed, and it may be that they are in any event beyond power. That is not to say that as a general rule only conditions that have been agreed by the parties can be imposed under s 7(2) – far from it. What I am saying is that in this case where the stay is by agreement and the parties have agreed the principal conditions on which the stay should be ordered, I will not impose further conditions, or alter the wording of conditions, so as to burden the plaintiff beyond what it has agreed to when such burden is to intrude in the arbitration.
- That deals with the first issue about when the stay on the arbitration should end. Insofar as the second issue is concerned, aside from my reservations as to the power of the court to order an injunction as a “condition” under s 7(2) of the IAA, I am not persuaded that there is any need or justification at this stage for that protection which the defendants seek.
- I will accordingly make orders in the form agreed to by the plaintiff. It should be noted that in those orders it is only the wording of order 2(b) that was the subject of contest. The condition that was the subject of the other contest does not appear in the orders, and the rest of the orders are by consent which has meant that I have not had to examine them in any detail.
I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Stewart.