- The question of whether a claim falls within a substantive clause of the contract concerns an issue of admissibility, not an issue of jurisdiction. Such questions relate to the merits of the dispute and must be decided by the tribunal.
- This is to be contrasted against the question of whether a claim falls within the scope of the arbitration agreement in the contract, which can involve an issue of jurisdiction.
- Even if the parties and the tribunal have framed the issue as one of jurisdiction, the court will not necessarily adopt the characterisation if the issue is really one of admissibility.
CYY and CYZ are companies involved in the marine salvage industry. CYZ, the respondent in the court proceedings and the claimant in the arbitration, was the owner of a crane barge ("Crane Barge"). CYY, the applicant in the court proceedings and the respondent in the arbitration, was the charterer of the Crane Barge.
CYY chartered the Crane Barge to serve as the offshore command centre (including to host salvage personnel, equipment and cargo) to provide urgent salvage services in respect of a vessel that had run aground ("Salvage Operation").
The charter of the Crane Barge was governed by an agreement dated 3 January 2020 ("Contract"). Pertinently for present purposes, Clause 39 of the Contract provided the following:
All Consumables, communications and medicine on the Vessel which are used or taken by [CYY] shall be charged at Cost + 15%. All procurement services by [CYZ] at the request of [CYY] shall be charged at Cost + 15% ("Cl 39").
Throughout the Salvage Operation, CYZ procured various services, personnel, equipment and craft at CYY's request ("Disputed Claims") and issued contemporaneous invoices to CYY incorporating a 15% markup. After the conclusion of the Salvage Operation, CYY refused to make payment in respect of the Disputed Claims and CYZ commenced arbitration proceedings against CYY.
CYY objected to the jurisdiction of the arbitral tribunal on the basis that the Disputed Claims fell outside the scope of the Contract. According to CYY, the Contract and Cl 39 were strictly limited to procurement services rendered in relation to the charter of the Crane Barge, and not services rendered in relation to the Salvage Operation generally. CYY argued that the Disputed Claims were rendered in relation to the Salvage Operation generally and hence they fell outside Cl 39 and the Contract.
The tribunal found that it had the jurisdiction to determine the Disputed Claims. Pertinently, the tribunal found that applying a contextual interpretation, Cl 39 encompassed all procurement services rendered by CYZ in relation to the entire Salvage Operation ("Ruling"). CYY applied to the General Division to challenge the Ruling.
Decision of the General Division
Jeyaretnam J dismissed CYY's application. Contrary to the approach taken by the tribunal and the parties, Jeyaretnam J found that whether the Disputed Claims fell within Cl 39 of the Contract was not an issue relating to the jurisdiction of the tribunal at all. Rather, Jeyaretnam J held that this issue concerned the interpretation of a substantive clause within the Contract, which was an issue going to the merits of the claim.
Interpretation of whether a claim falls within a substantive clause of the contract is not a jurisdictional objection
Jeyaretnam J observed that disputes regarding what a substantive clause of the contract applied to were common, and that this sometimes depends on the interpretation of the substantive clause. If there is an arbitration clause contained in the contract, the arbitral tribunal is fully acting within its jurisdiction when it decides on the correct interpretation of the substantive clause and accepts or rejects the claim accordingly. It would be an error to recast this question as one of the tribunal only having jurisdiction to allow claims that fall within the proper interpretation of the substantive clause. This error would change the decision maker for a question of contractual interpretation concerning a substantive clause of the contract from the arbitrator to the court.
In this regard, Jeyaretnam J drew a distinction between challenges to the jurisdiction of a tribunal and challenges to the admissibility of claims before the tribunal. Challenges to jurisdiction were directed at the authority of the tribunal; conversely, challenges to admissibility were directed at the claim. Hence, the argument that a claim falls outside the scope of a substantive clause of the contract related to admissibility as it was directed at the claim. Issues of jurisdiction would only arise where the scope of the arbitration agreement is being interpreted.
Applying these principles to the present case, Jeyaretnam J held that the interpretation of Cl 39 (and, in particular, whether the Disputed Claims fell within Cl 39) was clearly an issue of admissibility. The objection raised by CYY was directed at the claim, rather than at the tribunal's authority under the arbitration agreement. Accordingly, the court had no power to intervene with the tribunal's interpretation of Cl 39, even if the tribunal had reached what the court might consider to be the wrong conclusion on it.
For completeness, as the parties and the tribunal had proceeded on the basis that the interpretation of Cl 39 was a jurisdictional issue, Jeyaretnam J considered the interpretation of Cl 39 and agreed with the Ruling in any event.
The General Division's decision in CYY v CYZ is a welcome addition to the jurisprudence regarding jurisdictional challenges. It provides a clear and sound conceptual basis to differentiate between true jurisdictional objections (which go to the authority of the tribunal) and objections which appear jurisdictional at first blush but in fact go to the merits of the claim, including objections on the basis that a claim does not fall within the scope of a substantive clause of the contract. This conceptual clarity will help to ensure that issues of substance and jurisdiction are kept separate and are decided by the appropriate decision maker and, therefore, that there are no backdoor incursions to the principle of minimal curial intervention.
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