The seizure of a merchant vessel by pirates gave rise to a dispute which highlighted the risks of inconsistency which can arise from layering of contracts. Fundamental conflicts in the terms of a contract, a sub-contract and a sub-sub-contract could only be resolved by resort to the High Court.
The owners of the vessel (company A) had chartered her to company B which in turn sub-chartered her to company C. The final link in the contractual chain came when company C sub-sub-chartered her to company D. The vessel was hijacked and later released by pirates and a dispute arose as to liability for the losses arising.
The various contracts contained two arbitration clauses which were inconsistent with each other. One set of terms provided for a panel of two arbitrators and an umpire in the event of disagreement. The other provided for three arbitrators. There were also differences in the procedure to be adopted in appointing the arbitrators and one contract contained a time limit, whereas the other did not.
An arbitration was commenced which principally involved company A and company C. However, the proceedings had only progressed to the point of identifying the parties before company C challenged the panel’s jurisdiction. Doing its best to reconcile the inconsistencies, the Court accepted company A’s argument that three arbitrators were required and that the panel had been effectively appointed.