In making their decision to set aside the award as neither valid nor binding due to incorrect service of the notice of arbitration, the court considered the three grounds put forward by Dana Shipping: - Implied Actual Authority In determining the extent of Beijing XCty’s implied authority, the court examined the actual circumstances of the relationship between the agent, Beijing XCty, and the principal, Sino. The Court found that while Beijing XCty had a general authority to act on behalf of Sino in connection with the COA, given the importance of commencing arbitration and significant legal consequences of such action (beyond performance of ordinary contractual obligations), Beijing XCty did not have any implied actual authority to accept the notice of arbitration on Sino’s behalf. Even where an agent has a wide general authority to act on behalf of his principal, the Court found that such authority “does not (without more) generally include an authority to accept service of a notice of arbitration” [47]. - Ostensible Authority As a form of estoppel arising from a representation by the principal to a third party that the agent has authority to act in that matter on the principal’s behalf, ostensible authority is generally founded in representations made by the principal and cannot unilaterally be asserted by an employee/agent. However, in certain circumstances, ostensible authority may arise where the principal places the agent in a position to hold themselves out to such effect, and that the principal acquiesced in such activity. The Court found that no such representation could be implied in the present circumstances. The court considered there was nothing which constituted an express representation by Sino that Beijing XCty or Mr Cai had any authority to accept the notice of arbitration, nor that Sino had put Beijing XCty or Mr Cai in a position where they could hold themselves out to such effect and that Sino had acquiesced such activity. - Ratification Given Sino had waited until Dana Shipping attempted to enforce the award to take action, it was Dana Shipping’s argument that Sino’s inaction had ratified the award. However, in considering ratification and Sino’s subsequent conduct following becoming aware of the arbitration, the Court found that a party who has not participated in arbitration proceedings cannot be taken to ratify an award by mere silence and inaction. Ultimately, the Court concluded that none of the above grounds validated Dana Shipping’s claim. The court granted the section 72 application and set aside the award, holding that the Arbitral Tribunal was not properly constituted and the award was made without jurisdiction. Comment This decision comes as a timely reminder to parties of the importance of correct service. Dealing and communicating with agents is common in commercial contracts, and parties should take extra care to ensure that if a dispute arises, service of any documents is made to the contract parties and not to an agent. An agent for commercial purposes, does not necessarily have authority to accept service of documents on a contract counterparty’s behalf.
Brief prepared by Sarah Redding, Kensington Swan Lawyers.