A UK judge has kicked out a claim by a Mexican shipowner against the costs of a newbuilding cancellation following "understandable suspicion" it indulged in "gamesmanship".
The case before Justice Andrew Baker at the commerical court involved Mexico's Exportadora de Sal (ESSA) ordering a self-unloading salt barge from Corretaje Maritimo Sud-Americano (CMSA) in 2014 for $27.24m.
This contract was terminated in 2015 by CMSA following the failure by ESSA to pay the second instalment of the price and its failure to respond to a notice of default sent by CMSA.
This left ESSA with a liability to pay $6.81m plus contractual interest, as determined by an award of arbitration from 2017 issued by Lionel Persey QC.
He had rejected a claim by ESSA that the deal resulted from bribery of one of its employees by CMSA.
ESSA had sought a declaration that it did not have power to enter into the contract or the arbitration agreement.
The company is a Mexican salt miner 51% owned by the Mexican government and 49% by Mitsubishi Corporation.
It brought the claim under Mexico's law of procurement, leasing and public sector services (LAASSP).
ESSA's internal control department (OIC) had later concluded that the deal was rendered void due to the lack of a tender process satisfying the requirements of LAASSP.
The judge ruled that ESSA was in a position to know of any failure on its part to comply with LAASSP and of the legal consequences at all material times.
"No coincidence"
The only way it could succeed in a claim was by alleging that the OIC resolution deprived the arbitrator of substantive jurisdiction, he added.
"There is reason to think from the evidence before me that it may be no coincidence that the OIC got involved at this stage," he said.
"In short, it appears possible that members of ESSA's procurement department with commercial responsibility for the [contract] may have engineered the OIC's involvement at this point in the hope of procuring a decree of nullity in respect of the tender process, in the belief that such a decree would support ESSA in its attempts to resist CMSA's arbitration claim. It will not be necessary to make any finding about that."
The OIC's findings as to fact and reasoning are "very lengthy", he added.
"They do not themselves matter, however, as they do not constitute findings that could be binding between the parties before me, or for that matter before an arbitrator appointed and acting under English law."
"Gamesmanship or worse"
"In my judgment, ESSA failed to comply with the requirement...to raise that assertion as soon as possible after the resolution, when it failed to do so within a working day or two of receiving it."
He added: "ESSA participated on the merits in a London arbitration governed by English law in respect of a shipbuilding contract also governed by English law. ESSA accepts that the arbitration was validly commenced and that the arbitrator had jurisdiction over CMSA's substantive claim at the outset."
"The resulting award on the merits went against ESSA.
"The circumstances of the OIC's involvement from August 2016, together with the way ESSA introduced that into the arbitral process, has caused CMSA understandable suspicion that ESSA may be guilty of gamesmanship or worse. It is not necessary to consider whether such suspicion is well-founded or to make any finding about it.
"The only claim advanced by ESSA, unarguably no other claim being available to it, was that the OIC resolution in November 2016 somehow took away the arbitrator's substantive jurisdiction. It did not do so."
