A Tale of Whether An Arbitration Award Rendered Court Proceedings Academic in Orin Energy Investments Ltd v The Owners of The Ship Or Vessel MT ‘Cavalier’ [2022] MLJU 673 (High Court, Kuala Lumpur) per Azlan Sulaiman JC

This is a complicated case involving a writ in rem for the arrest of the MT Cavalier, as well as a parallel in personam court action, and a London Arbitration. I have tried to simply the facts and procedural steps so that the case can be understood by the average lay stakeholder in the maritime industry. Then there is also the subsequent issue of whether there was successful incorporation of a charter party arbitration clause into the bill of lading, where paying particular attention to the drafting of the incorporation clause is crucial. This article is largely about the procedural issues raise in Court in the light of the London Arbitration. The incorporation clause in the bill of lading is another story for another day. So here is the story of the procedural manoeuvres in the case.

On 15 Jully 2020, Orin Energy Investments Ltd (Orin Energy), a commodity trading company, contracted Kirk Ward Sdn Bhd (Kirk Ward) for advise on blending various oils to form ‘Bituminous Mixture’ (the Cargo), and to arrangement for shipment of the Cargo to the Purchasers. On 28 August 2020 Orin sold 230,000 barrels (or 351,000 MT) of the Cargo to Jiangsu Soho International Group Corporation (the Purchaser). Under this Sale Contract the Cargo was to be loaded at Linggi, Malaysia (the Load Port) and delivered to the Purchaser at the Port of Zhanjiang (the Discharge Port).

On 10 October 2020, Kirk Ward chartered the MT Cavalier from Daya Marine Pte Ltd (Daya Marine), the Registered Owner of the ship. Kirk Ward chartered the ship via a 10 October Fixture Recap. Orin Energy loaded the Cargo on the vessel at the Load Port for carriage to the Discharge Port. This shipment was evidenced by two Bills of Lading C/BM/1/2/ and C/BM/2/2 (the BLs). On 30 October 2020, Daya Marine requested that Orin Energy issue a Letter of Indemnity. This letter authorised Daya Marine to deliver the Cargo to the Purchaser (or its agents) at the Discharge Port without production of the original BLs.

On 18 November 2020, the MT Cavalier berthed at the Discharge Port. Orin Energy instructed the Daya Marine to deliver the Cargo to the Purchaser (or its agents). Unfortunately, Daya Marine refused to carry out this instruction. On 27 November 2020, the Purchaser terminated the Sale Contract with Orin Energy on the basis of non-delivery of the Cargo. Orin Energy refunded the price of the Cargo to the Purchaser under the terms of the Sale Contract. Orin Energy alleged that the Cargo was not properly cared for on board the MT Cavalier. The allegation is that Daya Marine failed to maintain the Cargo at the requisite temperature and the Cargo therefore deteriorated.

On 17 January 2021, Daya Marine once again asked for another letter of indemnity from Orin Energy. This time the letter was for the release of the Cargo at the Discharge Port without production of the original BLs. The Cargo was then discharged into temporary storage tanks. On 30 January 2021, Orin Energy managed to sell the Cargo as ‘distressed cargo’ to a substitute buyer.

On 2 February 2021, Daya Marine issued a Notice of Arbitration for a London Arbitration to both Kirk Ward and Orin Energy. Daya Marine contended that both Kirk Ward and Orin Energy were parties to the charter pursuant to a 14 October Fixture Recap. Orin Energy instead contended the 10 October Fixture Recap between Kirk Ward and Daya Marine was the applicable charter. Orin Energy therefore argued it was not party to a charter with Daya Marine. Therefore, Orin Energy argued that there was no arbitration agreement between itself and Daya Marine. This was therefore a preliminary objection to the London Arbitral Tribunal exercising jurisdiction in this dispute.

On 23 February 2021, filed a write in rem against the MT Cavalier on the basis of Section 24(b) of the Courts of Judicature Act 1964, and Sections 20(2)(g) and (h) of the UK’s Supreme Court Act 1981. On 26 February 2021, Orin Energy followed up by filing an In Personam Suit against Daya Marine. On 26 August 2021, Orin Energy arrest the MT Cavalier under the In Rem Suit when she called at Pasir Gudang, Johor.

A few days later on 1 October 2021, Daya Marine filed for release of the MT Cavalier. On 27 October 2021, the Court ordered the release of the MT Cavalier pursuant to a Letter of Undertaking (LOU) provided by QBE Insurance (Malaysia) Berhad (QBE). This LOU cost Daya Marine USD3,706,844.65. On 9 November 2021, the MT Cavalier was released to Daya Marine. At no time did Daya Marine challenge the validity of Orin Energy’s arrest of the ship. Orin Energy was not happy with the release and appealed to the Court of Appeal against the Vessel Release Order.

Meanwhile, on 10 December 2021, the Arbitration Tribunal in London ruled in favour of Orin Energy and Kirk Ward on preliminary jurisdictional issues. The charter was between Kirk Ward and Daya Marine under a Fixture Recap on 10 October 2020. At no point in time did an alleged Fixture Recap on 14 October 2020 amend, revised or rescind the earlier charter. As Orin Energy was not party to the earlier and only legitimate Fixture Recap on 10 October 2020, there was no arbitration agreement between Orin Energy and Daya Marine. The London Arbitral Award was described as final in respect of jurisdiction, but ‘also partial’ because the the London Tribunal still had ‘to determine all issues of costs arising in connection with this reference’.

On 22 March 2022, the Court of Appeal granted Orin Energy’s appeal against the Vessel Release Order. The Court of Appeal directed Daya Marine to issue a new LOU on terms acceptable to both parties. On 6 April 2022, the parties still could not agree on the terms of a new LOU. Daya Marine made an application for the Admiralty Suit and In Personam Suit to be stayed in favour of proceedings in London.

Azlan Sulaiman JC observed that in the light of the Award given by the London Arbitration Tribunal, under Order 12 rules 10(2) and 10(3), a defendant can enter an appearance to order a stay in the court proceedings. The court should not assume jurisdiction over a matter where Malaysia is not a proper forum for the action, or that relief should be sought in another country instead of Malaysia. His Lordship explained that this is not the case where a Malaysian does not have jurisdiction in the matter, but rather one where the parties are ordered to comply with their contractual obligations under the arbitration clause. In the unlikely event that the contractual choice for arbitration is waived, the Court does have jurisdiction, and can indeed hear the dispute between the parties.

By initiating the In Rem Proceedings and also the In Personam Proceedings, Orin Energy has indicated that it has waived its contractual right to arbitration proceedings. This was not the case with Daya Marine, as it made an amendment application for the Court proceedings to be stayed in favour of the London Arbitration. Azlan Sulaiman JC that Daya Marine’s Amendment Application was premised on the London Arbitration. As the London Award had concluded the London Arbitration, then the In Personam Set Aside action, as well as the In Rem Stay Application (filed on 11 November 2021) has indeed become academic and redundant’.

However, here in this case, where a party carries out a significant act, signifying that it is submitting to the Court’s jurisdiction, that party will be deemed to have taken a step in the proceedings, ie rather than resolving the outstanding issues via arbitration, see Carona Holdings Pte Ltd v Go Go Delicacy Pte Ltd [2008] 4 SLR (R) 460 (Singapore Court of Appeal) per VK Rajah JA. The Federal Court has held that entering a conditional appearance and making an application to set aside a writ was ‘not a step’ in the proceedings, see Cosmos Industry Solution GMBH v Jacob & Toralf Consulting Letrikon Sdn Bhd & Ors [2012] 4 MLJ 573. Azlan Sulaiman JC held that steps taken by Daya Marine in response to the In Rem Proceedings, the LOU, the proposed amended LOU, and the stay proceedings was evidence that Daya Marine had taken steps to submit to the jurisdiction of the Malaysian Courts. His Lordship therefore concluded that ‘it would certainly be unjust, unequitable and unconscionable for Daya Marine to now insist that the claim should instead be arbitrated in London’.

To conclude, since there was submission by Daya Marine to the In Rem Proceedings, his Lordship held that ‘so too should this Court hear the In Personam Suit’ based on the presumption that the parties intended that dispute arising out of their relationship should be decided by the same tribunal, see Fiona Trust v Privalov [2007] UKHL 40 and Microsoft Mobile OY Ltd v Sony Europe Limited & Ors [2017] EWHC 374. As the case was premised on the London Arbitration which had concluded, the stay application was academic and thus redundant. By participating in the proceedings connected to the Vessel Release Application, Daya Marine had taken steps in the court proceedings and thus submitted to the jurisdiction of the Court. Overall, Daya Marine was not in a good position as now it has become clear that there was no arbitration solely between Daya Marine and Orin Energy.

Thank you for reading IMSML Website Article 19/2022

Stay tuned for the next IMSML Website Article 20/2022:

Taking a Last Shot in Determining the Governing Document in a Bunkering Arrangement that May have an Arbitration Agreement that Mandated a Stay of Proceedings in Cessnet Sdn Bhd v Sapura Offshore Sdn Bhd [2022] MLJU 489 (High Court, Kuala Lumpur) per Azlan Sulaiman JC

Signing-off for today,

Dr Irwin Ooi Ui Joo, LL.B(Hons.); LL.M (Cardiff); Ph.D (Cardiff); CMILT

Professor of Maritime and Transport Law

Head of the Centre for Advocacy and Dispute Resolution

Faculty of Law

Universiti Teknologi MARA Shah Alam

Selangor, Malaysia

31 October 2022

Note that I am the corresponding author for the IMSML Website Articles. My official email address is: uijoo310@uitm.edu.my