The Court of Appeal, composed of Chief Justice Silvio Camilleri, Mr Justice Giannino Caruana Demajo and Mr Justice Noel Cuschieri, on November 30, 2012, in the case ‘Carmelo Caruana Freeport Operations Ltd vs Medoffshore Ltd, Paul Pisani and Mario Degiorgio’ held, among other things, that the fact that English law was the governing law of the agreements did not mean that English courts had exclusive jurisdiction.

The facts in this case were as follows.

For the courts to be divested of their jurisdiction, the contract had to clearly show the intention of the parties to derogate from the usual mode for the settlement of disputes

English company Medoffshore Ltd engaged Saipem Spa for a contract of works, to be carried out in Libya. Carmelo Caruana Freeport Operations Ltd was later subcontracted for part of the works. There were two relevant agreements to regularise the relationship with Carmelo Caruana Freeport Operations Ltd.

An agreement dated November 10, 2003, stipulated: “We (Medoffshore) hereby formally subcontract all discharge, storage and load-out operations under the above contract (i.e. the agreement between Medoffshore and Saipem) to Carmelo Caruana Freeport Operations Ltd, under the same terms and conditions (Exhibit II) as amended by the special conditions (Exhibit I), as well as scope of work for logistic base services (Exhibit III) agreed upon between Medoffshore Ltd and Saipem Spa.”

Exhibit II contained clause 67 on the applicable choice of law (English Law) and an arbitration clause (clause 68) which provides that “in the event of a dispute arising out of the subcontract – including but not limited to its validity and performance – either party may give to the other written notice adequately identifying the matter(s) forming the subject of the disputes (in this article 68, such written notice is referred to as a Notice of Dispute).

Within five days of the service of a Notice of Dispute, the parties shall confer at least once to attempt to resolve the dispute. At any such conference, each party shall be represented by a person having authority to resolve the dispute. Failing resolution of the dispute within 10 days following service of the Notice of Dispute (or such longer period as the parties may mutually agree), either party may propose to the other party that the dispute be resolved by arbitration in accordance with 68.3.

All disputes which the parties agree to resolve by arbitration shall be referred to and resolved by binding arbitration under the rules of arbitration (the rules) of the International Chamber of Commerce (ICC) which rules are deemed to be incorporated by reference into this purchase order subject to the following provisions:

(a) The arbitration shall be conducted by a single arbitrator chosen by the parties, provided that if the parties shall fail to select an arbitrator within 21 days of the demand for arbitration, then such arbitrator shall be selected by the ICC;

(b) The place of arbitration shall be Milan, Italy;

(c) The arbitration request shall include an application under Rule 32.1 concerning expedited formation, and shall contain a request that the issue be resolved within 30 days from the time the request is received by the ICC;

(d) The language to be used in the arbitral proceedings shall be English.

Carmelo Caruana Freeport Operations complained that its copy of the agreement did not contain clause 68.

Another agreement dated February 11, 2004, was entered between Medoffshore and Carmelo Caruana Freeport.

Carmelo Caruana Freeport said that its agreement included no exhibits that incorporated an arbitration clause.

It resulted that Carmelo Caruana Freeport Operations Ltd, which was owed sums of money under both agreements, proceeded to file this lawsuit in Malta, against Medoffshore and its directors personally.

It claimed that the directors failed to keep books of accounts to show how the company funds were utilised, and said that they should be held personally liable for the debts of Medoffshore.

Medoffshore, in reply, raised the plea that the Malta courts lacked jurisdiction to take cognisance of the dispute, in face of an arbitration clause in the contracts, and this in application of the principle “pacta sunt servanda”.

It was argued that once the parties chose English Law as the applicable governing law, English courts had jurisdiction to decide the dispute to the exclusion of other courts. It was stated, on a ‘without prejudice’ basis, that Council Regulation 44/2001 was not applicable as the parties had selected the law to regulate their agreement.

On November 28, 2011, the First Hall of the Civil Court dismissed Medoffshore’s jurisdiction plea.

The court considered that Carmelo Caruana Freeport Operations was never given any annexes to the second agreement dated February 11, 2004, which contained an arbitration clause. It was not sufficient for Medoffshore to simply refer to a document which was never given to Carmelo Caruana Freeport. There was no tacit acceptance by Carmelo Caruana Freeport Operations.

For the courts to be divested of their jurisdiction, the contract had to clearly show the intention of the parties to derogate from the usual mode for the settlement of disputes. The court maintained that Carmelo Caruana Freeport Operations was not bound by any arbitration clause under the second agreement.

As regards the first agreement, Carmelo Caruana Freeport Operations complained that its copy of the agreement had a missing page, which did not include the page containing the arbitration clause. The court said, however, that the fact that there was a missing page did not exempt Carmelo Caruana Freeport Operations.

The first agreement included an arbitration clause. Arbitration was however optional and not mandatory. Arbitration could take place only if the parties were in agreement. A party could only propose to refer a dispute to arbitration and the jurisdiction of the courts was not excluded under both agreements. In addition, as the second agreement dated February 11, 2004, did not include any annex, there was no choice of law clause in this contract.

The first agreement did contain a choice of law clause, which did not exclude the jurisdiction of the Malta courts.

Aggrieved by the decision of the first court dated November 28, 2011, Medoffshore entered an appeal. It was submitted that:

• It was not correct to state that the arbitration clause in the agreements did not impose obligations;

• Even if the arbitration clause was not binding, Council Regulation 44/2001 did not vest the Maltese courts with jurisdiction;

• Malta was not the appropriate forum for the determination of the dispute.

• It was not correct to state that the second agreement did not include an arbitration clause.

On November 30, 2012, the Court of Appeal gave judgment by dismissing the appeal and by confirming the decision of the first court. The following reasons were given for the court’s decision:

• The first agreement included an arbitration clause even if Carmelo Caruana Freeport’s copy of agreement had a missing page. Carmelo Caruana Freeport Operations should have requested the missing page.

• The arbitration clause did not make arbitration mandatory on the parties. The parties had to be in agreement for a dispute to be referred to arbitration.

• As Medoffshore had contested the jurisdiction of the Maltese courts on the basis of the arbitration clause in the agreements, it was deemed to have renounced the right to contest the jurisdiction on other grounds even under Bruxelles I Regulations.

• It was not acceptable for Medoffshore to raise new pleas at the stage of appeal.

The fact that English Law was the governing law of the agreements did not mean that English courts had exclusive jurisdiction. The court noted that in the circumstances there was no one forum which was preponderantly the convenient forum for the determination of disputes.

Dr Karl Grech Orr is a partner at Ganado & Associates.

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