When can a party strike out an arbitration claim for want of prosecution?

Watch your contractual time limits | BDM Blog | BDM Law

Dera Commercial Estate v Derya Inc (The “Sur”) [2018] EWHC 1673

There has long been a dearth of authority on striking out claims under the Arbitration Act 1996. However, a 2018 judgement of the Commercial Court has provided helpful guidance on the topic.

The original claim before the Tribunal related to a shipment of Indian maize aboard the M/V Sur in 2011. The Bills of Lading issued incorporated the Hague Rules and provided for disputes to be settled under English law with LMAA arbitration in London. The Tribunal struck out the claim at first instance having found that there had been an inordinate and inexcusable delay which had caused serious prejudice to the Owners and created a substantial risk that it was not possible to have a fair resolution of the cargo claim. The case subsequently came before the Commercial Court under a section 68 challenge, appealing on four issues of law under section 69 of the Arbitration Act 1996.

There were four main issues dealt with by the Commercial Court.

1.Whether there had been an inordinate and inexcusable delay pursuant to Section 41(3) of the Arbitration Act 1996.

The Court held that where parties contract for a shorter limitation period than the statutory time bar of six years, an arbitration claim can be struck out for inordinate (and inexcusable) delay under Section 41(3) within the statutory period of six years including where the claim has already been particularised.

2. What was the impact of the one year contractual time bar under Article III Rule 6 of the Hague Rules.

It was also held that where there exists a one year time bar by virtue of Article III Rule 6 of the Hague Rules, the period of time between when the cause of action arises and the expiry of the contractual time limit should be taken in account when assessing whether or not a delay has been inordinate for the purposes of Section 41(3).

3.Whether such time bar applies in circumstances where there has been a geographical deviation in the voyage.

It was held that where a carrier by sea deviates without permission from the contractual route, the cargo owner can treat itself as not bound by any of the contractual terms. Notably the reason for this decision was that the Court found itself bound by an earlier House of Lords decision (Hain Steamship v Tate & Lyle Ltd [1936] 41 Com Cas 350) and the Court made clear that if it were not for that precedent it would have found differently.

4.The burden of proof.

Finally, it was held that the legal burden of proof lay at all times with the Owners who needed to prove that the delay was not only inordinate but also inexcusable. Where those seeking to strike out show that the delay is inordinate, this evidential burden shifts to the Respondent in the strike out proceedings.

BDM is a specialist shipping law firm offering high quality legal advice and representation at a reasonable price. Please follow us on social media by clicking below.

Other Recent Blogs

+44 203 968 0500
+44 7887 710 950