Triple whammy arising out of charterparty arbitration award. The Hong Kong Court dismisses a court action that seeks to re-litigate matters already decided in an arbitration between related parties.

During the course of the last year Parakou Shipping Pte Limited, the Singaporean arm of the shipping company, has suffered some three mishaps in its long-running charterparty dispute with the Jinhui Shipping Group.

The dispute, in which the Jinhui Shipping Group was successful, has ended with Parakou Singapore going into liquidation.

First, Parakou Singapore lost an arbitration commenced by a Jinhui Group company in London to enforce a charterparty against Parakou Singapore. The charterparty dispute arose in 2008-09 in connection with the dry bulk cargo ship the "Jin Kang". Following the crash in the dry bulk market in the second half of 2008, Parakou Singapore refused to take delivery of the vessel claiming that the charterparty was with the wrong Jinhui Group company (which subsequently commenced the arbitration). Parakou Singapore argued that the charterparty was with a related Jinhui Group company, which was the registered owner of the vessel. The arbitration panel in London concluded that, in any event, Parakou Singapore had ratified the charterparty and that it was binding on them.

Second, rather than appealing the arbitration award made in favour of the Jinhui Shipping company, Parakou Singapore commenced court proceedings in Hong Kong against four Jinhui Group companies (but not the Jinhui Shipping company privy to the charterparty). In those court proceedings, Parakou Singapore sought an indemnity for any amount it had to pay under the London arbitration award. Those court proceedings were dismissed by a judge in the latter part of 2010 on the basis that they amounted to a collateral attack on the London arbitration award between related parties and, as such on the facts, were an abuse of process. In the court proceedings in Hong Kong, Parakou Singapore was essentially asking the court to overturn findings made by the London arbitrators that the charterparty was in any event ratified by Parakou Singapore.

Parakou Singapore had intended to proceed with an appeal of the court judgment in Hong Kong but subsequently failed to pay the required security for costs of such an appeal within the stipulated time. Therefore, Parakou Singapore's court action in Hong Kong now stands dismissed.

Third, Parakou Singapore has now gone into liquidation in Singapore, leaving the Jinhui Group to consider how best to enforce its arbitration award.

In the meantime, the outcome of the court proceedings in Hong Kong (Parakou Shipping Pte Limited v Jinhui Shipping and Transportation Limited & Ors (2011)) should serve as a salutary warning that a court can dismiss court proceedings which seek to re-litigate matters already decided in an arbitration; in so doing, that court judgment further strengthens Hong Kong's credentials as a pro-arbitration jurisdiction.

This article was first published in Lloyd's List on 24 August 2011.

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