#5171 - Marc Rich V. Impianti - Conflict of Laws BCL

Marc Rich v. Impianti

Facts

Marc Rich are a well known Swiss corporation with major business activities world-wide. Impianti are an Italian company, partly state owned.

At the beginning of 1987 Impianti sold a cargo of Iranian crude oil to Marc Rich. The contract for the sale was made or at any rate negotiated in Italy. Following the sale two disputes arose between the parties. The first dispute related to an allegation by Marc Rich as buyers that the cargo of oil was contaminated with water. The second dispute related to a contention by Marc Rich that the contract incorporated an English law and London arbitration clause.

Samples of the oil were taken and analysed. Marc Rich wished to deal with the contamination dispute by arbitration. On Feb. 29, 1988 they appointed an arbitrator and asked Impianti to appoint an arbitrator too. Meanwhile, however, on Feb. 18 Impianti had issued proceedings in the Court in Genoa (Italy). In these proceedings they sought a declaration of non-liability.

On May 20, 1988 Marc Rich issued an originating summons in the Commercial Court in London seeking the appointment of an arbitrator pursuant to s. 10(3) of the 1950 Act. They obtained leave to serve the summons out of the jurisdiction. On July 8, 1988 Impianti applied to set aside the order granting leave; Impianti contended that the contract did not contain an arbitration clause and that the dispute should be resolved in Italy.

On Nov. 22, 1988 Marc Rich lodged a petition in the Corte di Cassazione seeking a declaration to the effect that by reason of the arbitration agreement the Courts in Italy lacked jurisdiction to try the dispute.

By their judgment the Corte di Cassazione rejected the plea by Marc Rich that the proceedings in Genoa should be stayed. In summary they held (a) that as Marc Rich were a company registered in Switzerland they were not subject to the decisions of the European Court of Justice; (b) that there was no binding arbitration agreement between Marc Rich and Impianti because there was no agreement in writing as required by the New York Convention and because there was no basis for assuming that there had been a tacit acceptance by Impianti of the proposal to submit the dispute to arbitration.

Question

Whether the decision of the Corte di Cassazione is a binding decision as to the existence of the arbitration agreement.

Holding

The first defence by Marc Rich did not constitute submission

In my judgment it is important that s. 33 should not be construed too narrowly. It may well be that it was not necessary for Marc Rich to lodge an alternative defence on the merits in October, 1988, but they made it abundantly clear in the pleading that the primary purpose of the document was to challenge the jurisdiction of the Genoa Court. I am prepared to assume that the first defence did not amount to a submission. It seems to me that this conclusion is in line with the decision of the European Court in Elefanten Schuh G.m.b.H. v. Pierre Jacqmain, which was decided on June 24, 1981:

“... that Article 18 of the Convention must be interpreted as meaning that the rule on jurisdiction which that provision lays down does not apply where the defendant not only contests the court's jurisdiction but also makes submissions on the substance of the action, provided that, if the challenge to jurisdiction is not preliminary to any defence as to the substance, it does not occur after the making of the submissions which under national procedural law are considered to be the first defence addressed to the court seised.”

The Court is there saying that provided the defendant makes it clear in his first defence rather than in some subsequent defence that he is contesting the jurisdiction, that will not amount to a submission even though there is some additional material which constitutes a plea to the merits of...