COSCO BULK CARRIER CO LTD V ARMADA SHIPPING SA

[2011] EWHC 216 (Ch), Chancery Division, Mr Justice Briggs, 11 February 2011

Arbitration - Dispute as to whether claimant owner had a lien over sub-freight owing to charterer by sub-charterer - Charterer wound up in Switzerland - Automatic stay of arbitration proceedings - Whether court should permit arbitration proceedings to continue - UNCITRAL Model Law on Cross-Border Insolvency 1997 - Insolvency Act 1996, section 130(2)

Armada time-chartered a vessel from Cosco, and sub-chartered the vessel to STX. The time charter gave Cosco a lien on all cargoes and sub-freights, and the sub-charter prevented any assignment of rights under the contract. Both agreements contained London arbitration clauses. In January 2010 Armada was wound up by a Swiss court. Freight was outstanding, and Cosco made a claim of US$1,204,514.89 against STX by virtue of its lien on sub-freights. Two arbitrations were then initiated. The first was between Cosco and STX, Cosco asserting that its lien operated as an equitable charge so that it was effectively the assignee of Armada's right to sub-hire under the sub-charter. The second was commenced by STX against Armada seeking a declaration that it was not liable to Armada for the hire. Armada's office-holder invited the arbitrators to stay the first arbitration but the arbitrators refused. The office-holder then, in May 2010, applied for a Recognition Order under the UNCITRAL Model Law on Cross-Border Insolvency 1997, and the application was granted on 19 May 2010. This operated to stay the second arbitration. Armada and STX took the view that the first arbitration had also been stayed, but Cosco disagreed. That led to an application to the English court by the office-holder, for an order confirming that the first arbitration had been automatically stayed by the Recognition Order or, if not, then it ought to be stayed by the court. Briggs J refused a stay of the first arbitration. Under section 130(2) of the Insolvency Act 1986 there was, subject to a contrary order of the court, an automatic stay in respect of a claim against the company or its property. However, there was a dispute as to whether the claim for sub-freight was one against Armada's property and, if so, whether the claim was ousted by the non-assignability clause in the sub-charter. It was appropriate for that dispute, which involved unresolved issues of English law, to be determined by London arbitrators rather than by the Swiss court.