Demurrage cannot last forever – but can go on for a bit longer.

 

MSC v Cottonex Anstalt was the case we reported last autumn about the containers of cotton that nobody came to collect from their discharge port in Bangladesh. Leggatt J held that the carrier was entitled to claim demurrage from the shipper under the bill of lading up to the point at which the contract came to an end due to its repudiation by the shipper. The Court of Appeal has upheld the first instance finding but has overturned the finding that the repudiation took place on 27 September 2011 when the shipper advised the carrier that it would not be able to collect the containers. At this time the delay was between two and a half to four months from discharge and the carrier argued that this was not a long enough period of delay to go to the root of the contract.

 

The Court of Appeal agreed ([2016] EWCA Civ 789). No reason had been given as to why the contract should be taken to have been repudiated on 27 September 2011. Instead, the Court of Appeal fixed on 2 February 2012 as the date of repudiation. That was when the carrier offered to sell the containers to the shipper in an attempt to break the impasse. That was the clearest indication that the commercial purpose of the adventure had by then become frustrated. The sale would have discharged the shipper’s obligation to redeliver the containers and with it the final obligations under the contracts of carriage which still remained to be performed. Accordingly, the shipper was liable for demurrage up to that date and for the value of the containers by way of damages.

 

Farewell to the “Fraudulent Devices” Doctrine!

The recent decision of the Supreme Court in Versloot Dredging BV v. HDI Gerling Industrie Versicherung (The DC Merwestone) [2016] UKSC 45 has hit the insurance market like a bombshell! For more than a decade, it has been assumed that if a fraudulent device (such as a “lie”) is used to promote an honest claim, as long as the device used is material in the sense that it is likely to provide an advantage to the assured in securing a settlement, the claim will be treated as a “fraudulent” one. The Supreme Court ruled with a majority (4:1) that this is not the case!

The facts are relatively straightforward. The assured’s vessel, The DC Merwestone, suffered a flooding incident in January 2010. The incident resulted in irreparable damage to her engine, located at the aft end, even though water ingress was through the bow thruster space at the forward end of the vessel. The assured claimed from its hull insurer for the cost of replacing the damaged engine. The coverage defences put forward by the underwriters were rejected by the first instance judge, Popplewell, J, but he held that the assured had forfeited its otherwise valid claim as he used fraudulent devices in advancing said claim. During the casualty investigation, the underwriters’ solicitors sought the assured’s explanation for the ingress, its spread from the bow thruster room to the engine room and the reason why the crew were unable to control it using the vessel’s pumps. The assured’s General Manager responded in a letter which contained a representation that the crew had reported that they had heard a bilge alarm (which would have alerted the crew to the flooding) at noon on the day of the casualty but had failed to investigate the alarm on the basis that its sounding had been attributed to the rolling of the vessel. The representation was untrue in that the crew had never heard or reported a noon alarm and had never given an explanation for not investigating. This representation was held to be a reckless untruth.

The majority of the Court – Lord Sumption, Lord Clarke, Lord Hughes and Lord Toulson – appreciating that this is essentially a policy question considered it to be “a step too far” and “disproportionately harsh” to deprive an assured of his claim by reason of his fraudulent conduct if at trial years later it turns out that the fraudulent device used at the claims stage had been unnecessary because the claim was in fact always recoverable. Their Lordships seem to be influenced by the fact that an assured utilising fraudulent devices to advance his claim still has a genuine belief in the accuracy of the claim whilst the same cannot be said for an assured who creates the loss in order to make a claim or who exaggerates the extent of his claim. It is worth noting that Lord Mance delivered a dissenting judgment arguing that “Abolishing the fraudulent devices rule means that claimants pursuing a bad, exaggerated or questionable claim can tell lies with virtual impunity.”

This decision means that an insurer will not be able to defend against a claim in a case where the assured uses fraudulent invoices to secure a quick settlement for his claim (see, for example, Sharon’ Bakery (Euorope) Ltd v. AXA Insurance UK plc [2011] EWHC 210 (Comm)) unless, of course, the policy contains an express clause indicating that the claim will be forfeited if promoted by making use of fraudulent devices. Such express terms are common in fire policies but perhaps, in the light of this decision, insurers should consider incorporating them into marine and energy policies as well. Institute Hull Clauses 2003 could lead the way. Clause 45.3 stipulates:

“It shall be a condition precedent to the liability of the Underwriters that the Assured shall not at any stage prior to the commencement of legal proceedings knowingly or recklessly
… mislead or attempt to mislead the Underwriters in the proper consideration of a claim or the settlement thereof by relying on any evidence which is false
… conceal any circumstance or matter from the Underwriters material to the proper consideration of a claim or a defence to such a claim.”

Settlement of fraudulent insurance claims – Insurers 1, Fraudsters 0.

Among a slew of important commercial cases this week is the Supreme Court’s decision in Hayward v Zurich Insurance plc [2016] UKSC 48, which will we suspect gladden the hearts of underwriters everywhere.

A work accident victim, CH, took the opportunity grossly to overstate his disability and claimed some £400,000 from Zurich, the employer’s insurers. Zurich thought the claim might well be a wrong ‘un, and indeed pleaded that it was. But they settled it for about £135,000. Tipped off later that CH had indeed been lying all along, they sued to undo the settlement for fraud. The judge obliged, substituted an award of about £15,000 and ordered CH to repay the rest. The Court of Appeal reversed. Having themselves had suspicions about the claim, the insurers (it was held) couldn’t put their hand on their heart and say that they thought CH had been telling the truth: it followed that they couldn’t show the necessary reliance for the purpose of invoking CH’s fraud.

This holding was, to say the least, worrying for underwriters, and not only in injury cases brought against liability insurers. Theoretically, it seemed to mean that if any insurer thought a claim by a commercial policyholder was fraudulent and said so in the course of negotiation or litigation, the claimant was nevertheless safe in possession of his loot once he had extracted an agreement to settle.

The Supreme Court were understandably unhappy with this prospect. It accordingly restored the first instance judgment. To succeed in a claim of fraud, a person did not have to show that he had believed in the truth of what the defendant had said; he merely had to show that the untruths he had been told had acted as an influence on him. Since Zurich had clearly been influenced into settling by what CH had said, the necessary reliance was present; CH retained only the damages he was actually entitled to and had to return the rest.

This result is, it is suggested, welcome. It will add to the armoury available to insurers against fraud (already augmented, in the case of fraudulently exaggerated personal injury claims, by s.57 of the Criminal Justice and Courts Act 2015 allowing their dismissal in toto), and do something to make up for their loss last week in Versloot Dredging BV & Anor v HDI Gerling Industrie Versicherung AG & Ors [2016] UKSC 45 of the ability to decline payment on the basis of collateral lies told by the assured.

Note: the Supreme Court left open the question whether a court settlement could only be reopened for fraud on the basis of evidence not reasonably detectable at the time. It is to be hoped that the answer to this is No, as already suggested in Australia. Why, one might ask, should a settling underwriter owe any duty whatever to a fraudster to check for possible evidence of the latter’s dishonesty at the time of settlement?

Penalties, banks and such-like Down Under

Contract law enthusiasts might take heart from today’s long-awaited decision of the High Court of Australia on penalties, Paciocco v ANZ Group Ltd [2016] HCA 28. Essentially four of their Honours (French CJ, Kiefel, Keane and Nettle JJ) say things consistent with Cavendish Square Holding BV v Talal El Makdessi [2015] UKSC 67, decided last November in the UKSC and noted here on this blog: namely, that the test for a penalty is now whether the agreed sum fulfils some legitimate interest in the victim in obtaining performance.  There is agreement to differ on another point (ie whether the penalties doctrine goes beyond breach of contract — the Aussies say it does, we say it doesn’t): but that issue wasn’t raised in Paciocco, and in mentioning it French CJ was merely pointing out that the common law isn’t necessarily one-size-fits-all. This point aside, London and Canberra are singing from a broadly similar hymn-sheet.

The question at stake was late payment fees on credit card accounts — in this case a straight charge of $20. By a majority (Nettle J dissenting) it was held not penal. Advantage banks.

Liars’ poker and the oil trade

“O what a tangled web we weave When first we practise to deceive”

Sir Walter Scott, Marmion, vi.17.

 

We don’t often run commodity trade cases in the blog, but OMV SA v Glencore AG [2016] EWCA Civ 778 is worth a look.  The facts, once the irrelevancies are removed, were simple. Glencore (staid corporate successor to the colourful Marc Rich AG) agreed repeatedly to ship particular grades of Iranian Heavy and GOSM crude oil to the Romanian government for refining. In fact they deliberately shipped an assortment of blends of other oils obtained in Israel which had much the same characteristics as what had been ordered, and seemed to perform about as well when refined, but were worth a good deal less on the open market. They arranged for the forgery of shipping documents referring to Iranian Heavy or GOSM, as the case might be, presented them to the buyer’s bank, and used them to obtain payment under the corresponding letters of credit.

Following a tip-off, the buyers sued Glencore for deceit, claiming some $40 million, being the difference between what they had paid and the market value of what was provided, plus a further discount they said they would have been able to insist on had they realised the truth at the moment of acceptance. With an amusing degree of chutzpah, Glencore argued that the buyers had suffered little or no loss and therefore had little to complain about. The oil had been bought for sale to refiners and sold to them; it behaved in much the same way as what they had promised to supply; in these circumstances it should be up to the buyers to prove loss of refined yield if they could.

Flaux J, deciding in favour of the buyers, was having none of it. Even if it might be open to the victim of deceit to increase his recovery by taking account of events subsequent to reliance, this choice was not available to the deceiver to reduce it. Furthermore, even if in breach of contract cases like Bence v Fasson [1998] QB 87 a seller might be allowed to say that the unsatisfactory article he had supplied had actually worked just as well, this once again could not be prayed in aid  by a liar. The Court of Appeal yesterday briefly dismissed the appeal.

Two morals to this tale. First, as we know, the tort of deceit has its own rules of damages and what counts as loss, and they are not indulgent to the defendant. Second, it is surprisingly easy to transform what looks like a simple breach of contract – albeit a deliberate one – into a deceit case, with all that involves as regards the measure of damages, the unavailability of a plea of remoteness, and so on. We are getting close to a situation where, if the price of goods sold is payable on right delivery, any knowing delivery of non-conforming or defective goods now amounts potentially to the tort of deceit. Sellers, watch out!

 

A trap for the unwary. Service of proceedings in other Member States.

 

 

CPR 6.40(3) lists service in accordance with EU Regulation 1393/2007 (the “Service Regulation”) as one of several permissible methods of service of proceedings out of the jurisdiction. However, service under the Service Regulation is actually the only permissible method of service where proceedings are served on the territory of a Member State in respect of a civil or commercial matter (see C-325/11 Alder v Orlowska [24-25]).

 

In Asefa Yusuf v A.P. Moller [2016] EWHC 1437 (Admlty) cargo claimants’ English solicitor purported to serve proceedings on shipowners in Denmark in which the Service Regulation applies by virtue of a declaration made by Denmark ([2008] OJ L331/21).  However, art. 15 of the Service Regulation provides that service may be made “through the judicial officers, officials or other competent persons of the member state addressed, where such direct service is permitted under the law of that member state.” In the case of Denmark this meant service through a bailiff. Accordingly service was not within art.15 and Simon Bryan Q.C. , acting as a Deputy Judge of the English High Court, held that there could be no exercise of discretion under any English CPR Rule (such as CPR 6.15, 6.16 or 3.10). This could only be done if there was service within Article 15 with minor errors of procedure, but this was not the case here where service was effected through an English solicitor, rather than through a Danish bailiff.

 

Accordingly the High Court had no jurisdiction to try cargo’s claim against owners and the Admiralty Claim Form and service of the Admiralty Claim Form were set aside.

 

Groundless commercial litigation – advantage defendants?

Discreetly slipped out at the same time as the more high-profile Versloot decision comes another Supreme Court case, of more subtle significance for commercial lawyers. In Willers v Joyce [2016] UKSC 43 a businessman caused his company to sue his erstwhile sidekick for breach of contract and fiduciary duty, well knowing that there was no plausible claim against the latter. The action duly failed, whereupon the erstwhile defendant sued the businessman in tort, seeking to recover the losses that had not been made good by the award of costs in his favour. His claim was dismissed at first instance, and an appeal followed.

By a 5-4 majority the Supreme Court followed the lead of the Privy Council in Crawford Adjusters (Cayman) Ltd v Sagicor General Insurance (Cayman) Ltd [2014] AC 366 and decided that there was a cause of action available for maliciously bringing civil proceedings without reasonable and probable cause and for purposes other than the bona fide enforcement of legal rights. The claim was therefore allowed to proceed.

Defendants and P&I interests might care to take note, since what was said in Willers is highly apposite to commercial litigation generally. Imagine, for example, a cargo claim brought by a claimant whose CEO or controlling mind was fairly sure that the loss was actually due to inherent vice; or a charter claim brought with a view to extracting something by way of settlement despite advice to the claimant that it was almost certainly statute-barred. In both cases it would seem that the person sued now has a plausible claim to recover damages at large, including investigation expenses and where appropriate unrecoverable costs.

Two caveats.

(1) It is not clear what degree of knowledge must be shown by the (now) claimant. Lord Toulson (with whom Lady Hale and Lords Kerr and Wilson agreed) seems to suggest actual knowledge or recklessness: Lord Clarke, who drew an analogy with liability for wrongful arrest of ships, might be taken as suggesting that extreme negligence would do. One hopes that the former criterion will be applied.

(2) If the claim is defended by, and at the expense of, insurers or P&I interests, there is a possible technical argument that it is not they, but their assureds, who are being sued, and therefore that they have no claim. Whether this will be accepted, at least where the Third Parties (Rights against Insurers) Act 1930 (or 2010) is in play, will have to be seen. A possible workaround, though one that will have to be closely looked at, might be an arrangement under which underwriters or P&I clubs take an assignment from their insureds of any rights to sue the undeserving claimant.

Common sense on limitation

Some robust old-fashioned common sense on limitation from Lord Clarke in the Privy Council today. In BORCO v The Cape Bari [2016] UKPC 20 the Cape Bari, a sizeable tanker of about 160,000 dwt, managed to demolish large parts of a Bahamian berth where it was docking to pick up a cargo of crude oil. The damage was about $22 million; the limitation fund about $16 million. The vessel had docked under a contract stating:

“If in connection with, or by reason of, the use or intended use by any vessel of the terminal facilities or any part thereof, any damage is caused to the terminal facilities or any part thereof from whatsoever cause such damage may arise, and irrespective of weather [sic] or not such damage has been caused or contributed to by the negligence of BORCO or its servants, and irrespective of whether there has been any neglect or default on the part of the vessel or the Owner, in any such event the vessel and the Owner shall hold BORCO harmless from and indemnified against all and any loss, damages, costs and expenses incurred by BORCO in connection therewith. Further, the vessel and her Owner shall hold BORCO harmless and indemnified against all and any claims, damages, cost and expenses arising out of any loss, damage or delay caused to any third party arising directly or indirectly from the use of the terminal facilities or of any part thereof by the vessel … ”

BORCO, owners of the berth, claimed their full losses, saying that the owners of the Cape Bari had contracted out of their right to limit. The first instance judge agreed with BORCO. The Court of Appeal, without the point being argued, allowed the shipowners’ appeal on the basis that the right to limit under the Limitation Convention 1976 as enacted was mandatory law and could not be ousted by agreement.

The decision of the Court of Appeal faced some little criticism, and BORCO appealed (with IISTL stalwart Peter Macdonald-Eggers QC leading the charge). The Privy Council held today (1) that the right to limit could be waived in advance; but that (2) it hadn’t been, on the proper interpretation of the contract. They therefore dismissed the appeal.

Both holdings are to be welcomed.

The first holding corresponds with what had always been assumed by shipping lawyers, and also with one’s instinctive feeling as a commercial lawyer: why ever not? It is also quite important in practice. Not only port usage agreements, but offshore construction contracts quite often contain waivers of the right to limit, with insurance arrangements doubtless made to match. There is only one word of caution: owners and P&I interests will now have to get it absolutely clear what the coverage position is where there is an effective contractual waiver of this sort (as an increasing number of ports in countries like Indonesia are said to demand).

The second holding seems entirely in accordance with the the terms of the agreement. The Privy Council rightly said that a shipowner should not lightly be regarded as having abandoned a crucial right of his: the gravamen of the clause in question was clearly aimed at making the owners strictly liable, and there was no reason to think that a reference to “all and any loss, damages, costs and expenses”, without more, implicitly got rid also of the right to limit. [Note for classical contract law buffs: the holding in that golden oldie, The Satanita [1897] AC 59, that similar words did oust the right to limit was, shall we say, not unequivocally endorsed. See Lord Clarke’s dry comment at [59]].

Speculative question for readers: how soon will the Bahamian port authorities and others re-write their terms of use to say expressly that the right to limit is waived? Answers on a postcard, please.

The Award of the Arbitral Tribunal in the South China Sea Arbitration (The Republic of the Philippines v. The People’s Republic of China): the legitimacy of China’s position takes a heavy (at least symbolic) blow

On 12 July 2016, the Arbitral Tribunal, established pursuant to Annex VII of the 1982 Law of the Sea Convention (LOSC or LOS Convention), delivered its award in the South China Sea Arbitration (The Republic of the Philippines v. The People’s Republic of China). In 2013, the proceedings were unilaterally initiated by the Philippines concerning the relevant disputes in the South China Sea between the Philippines and China. Having declared under Article 298(1)(a) LOSC its non-acceptance of arbitration with respect to maritime boundary disputes or those involving historic titles, China has refused to participate in the proceedings. Irrespective of the refusal of China to participate – which, in hindsight, seems to have not worked to its advantage – the Tribunal found in 2015 that it had jurisdiction to proceed to deal with the matter on the merits.

A critical aspect for the Tribunal to assess was whether the declaration made by China pursuant to Article 298(1)(a)(i) LOSC would prohibit it from considering the case on the merits, because the submissions of the Philippines were concerned with categories of disputes that China has excluded from the jurisdictional reach of an international court or tribunal: those concerning a historic title or maritime delimitation. The Tribunal concluded that the matters brought to its attention did not bear on the issue of delimitation (para. 214), since disputes over whether certain maritime features have entitlements to maritime zones are separate from the issue of delimitation, which is essentially concerned with dividing overlapping entitlements that have been established. On the matter of a historic title, the Tribunal went to analyse the meaning of ‘historic title’. In this context, it was deemed critical that reference was made to ‘title’, which means in legal jargon the complete ownership over something. The word ‘sovereignty’ only surfaces in the LOSC in connection with the territorial sea, where the coastal State has sovereignty up to a point that is 12 nautical miles (nm) removed from its coast. Given the Chinese reliance on that it has certain historic rights over the South China Sea, its claim was interpreted as not being concerned with the claiming of a historic title (paras. 225-226, 229).

There are a number of critical substantial findings of the Tribunal to be found in the award, some aspects which may have more wide-reaching implications. The following four findings will be briefly discussed in this blog post:

  1. One of the main findings of the Tribunal is that it dismissed the validity under international law of the Chinese ‘nine-dash line’. The specifics of the nine-dash line have never been really elaborated on by China, and have given risen to different interpretations (see e.g. here, here, here and here). One interpretation is that China has claimed to have some sort of a ‘special’ historic right over the relevant areas of the South China Sea that are within the nine-dash line, by virtue of a long and consistent practice of where some measure of authority was continuously exercised. A second interpretation is that the maritime features located within the nine-dash line are all under the sovereignty of China and, at least some of them, could project maritime zones up to at least the 200 nm limit. According to the Tribunal, the extent of maritime entitlements of States in the South China Sea are regulated by the LOSC, and the nine-dash claim of China, as far as it goes beyond the limits imposed by the LOSC, is superseded by the LOSC. Although the Tribunal found the alleged Chinese historic rights to be fully incompatible with the LOS Convention, basically, the rights China claimed to have are in fact assigned to other coastal States in the area under the concept of the Exclusive Economic Zone (EEZ). However, the door was left open for that under certain circumstances – and following, amongst others, the judgment in the Chagos Marine Protected Area Arbitration (Mauritius v. United Kingdom) – a historic title and right might be brought under the regime set out in the LOS Convention (para. 238).
  2. Another critical finding was that none of the maritime features China claims to have sovereignty over, including those that are part of the hotly contested Spratly Islands, have entitlements to an EEZ or continental shelf. Therefore, according to the Tribunal, there was no overlap of the entitlements of China and the Philippines to the same maritime space, given that China has no territory from which it is entitled to claim maritime zones up to at least 200 nm, which would have otherwise created an overlap with the entitlements and claims of the Philippines. As regards the hotly contested Spratly Islands, the reasoning of the Tribunal suggests that these have at best an entitlement to a territorial sea and a contiguous zone. According to the Tribunal, none of the disputed maritime features that are part of the Spratly Islands meet, without human assistance, the conditions set out under Article 121(3) of the LOSC, that is that they can sustain human habitation or economic life of their own. The threshold concerning when isolated maritime features would be entitled to an EEZ and continental shelf seems to have been set high by the Tribunal. Its approach as to how to define a ‘rock’ within the meaning of Article 121(3) of the LOSC may have more widespread consequences, and may raise some concerns on the part of other States that are faced with similar issues.
  3. Pursuant to the LOS Convention, different types of maritime features have different entitlements to generate maritime zones, ranging from those that can claim zones up to the 200 nm mark, or even beyond, to those that due to their characteristics have no entitlements to maritime zones at all. Falling into this latter group are so called low-tide elevations. These can, assuming they are located in close proximity to the coasts of States, be relevant in the measuring of the baseline, but have no entitlements to maritime zones of their own. In contrast, islands are principally treated similarly to land and have entitlements to a territorial sea, EEZ and continental shelf. Rocks, on the other hand, may only be accorded part of the treatment that islands receive: that is, whenever they fall within the paragraph 3 exception of Article 121 LOSC, that they are unable to sustain human habitation or have an economic life of their own, the most they can generate in terms of maritime zones is a territorial sea, and a contiguous zone of an additional 12 nm. For example, Scarborough Shoal, which has been the venue for various incidents between China and the Philippines, was classified by the Tribunal as a rock that is unable to meet the two conditions set out in Article 121(3) of the LOS Convention. Further, the Tribunal found that Mischief Reef is a low-tide elevation, which is thus unable to generate any maritime zones of its own. As a result of this classification, and given that low-tide elevations cannot be appropriated by States, there could be no sovereignty dispute over Mischief Reef, and more generally between China and the Philippines. The Tribunal went on to state that Mischief Reef is firmly placed in what can be regarded to be the EEZ of the Philippines. Therefore, amongst others, fishing activities that have been performed by Chinese fishermen at Mischief Reef infringed on the sovereign rights the Philippines has over the EEZ, pursuant to the LOS Convention. This same reef was also used by China to construct a large artificial island on top, whilst proceedings before the Tribunal were already set in motion. Given that this happened without the consent of the Philippines, which would have been required because Mischief Reef is a low-tide elevation located within its EEZ and continental shelf, China infringed on the sovereign rights that the Philippines has in this regard.
  4. More generally, and in addition to the actions undertaken concerning Mischief Reef, the land reclamation works and construction of artificial islands that China conducted on a broader scale, and in relation to a number of other maritime features (e.g. Cuarteron Reef, Fiery Cross Reef) in the South China Sea, were heavily condemned by the Tribunal. The Tribunal found that China aggravated the existing dispute between China and the Philippines through the reclamation works it conducted, whilst the dispute was brought to the consideration of the Tribunal. It also found that the Chinese actions aggravated the existing dispute between the parties over the Spratly Islands – however, it needs to be noted that this dispute figures, besides China and the Philippines, four additional players (i.e. Taiwan, Malaysia, Vietnam and Brunei). The Chinese reclamation works and building of artificial islands were also condemned for not being in line with the obligations that States have under the LOSC, particularly under Article 192 and 194(5) LOSC, in relation to the protection of the marine environment.

Directly after the award on the merits was handed down, China sought to brush over the validity of the award as being farcical in the extreme. In a further – undeniably weak – attempt to challenge the value of the award, a government sanctioned press release resorted to attacking a number of the individual members of the Arbitral Tribunal for exhibiting a perceived lack of consistency between the decision that the Tribunal arrived at and their earlier pronounced views in literature. In support of its position that the Arbitral Tribunal wrongly found to have jurisdiction over the dispute, in its view essentially by misconstruing what lies at the core of the dispute, China in this same press release cited heavily from an article previously published by Talmon, who expressed his misgivings over the Tribunal assuming jurisdiction over the dispute.

Given that the award was dismissed with a significant measure of exaggeration by China, and that it already indicated earlier, and subsequently reinforced its intentions to not follow the final outcome of the award, the question remains as to what effect the award might have on the (sometimes volatile) situation in the South China Sea. The position that China finds itself in is not an easy one. However, contrary to the ad hominin arguments aimed against individual members of the Tribunal, and the perceived biased composition it was argued to have according to the Chinese side, there is no doubt that the Tribunal was impartial and constructed in conformity with the LOS Convention – which not unimportantly, China is a party to. Although the award of the Tribunal is not enforceable, it carries substantial (diplomatic) weight. The fact that its legal position concerning the South China Sea was overwhelming rejected by the Tribunal will necessitate a rethinking on the part of China of its legal arguments, if it wants to pursue an amicable solution through diplomacy. Entering into negotiations with other claimant States bordering the South China Sea, on the basis of a position that has been essentially rejected by an independent Tribunal that has been constructed in accordance with the LOSC, is unlikely to bear much fruit.

‘That referendum’. Article 50 and Judicial Review

An application for judicial review has been launched by London Solicitors, Mischcon de Reya, with a preliminary hearing scheduled for 19 July. The claim argues that only parliament can authorise the giving of notice under Article 50.

Further details can be found in this Guardian article.

Article 50 of the Lisbon Treaty provides:

1. Any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements.

2. A Member State which decides to withdraw shall notify the European Council of its intention. In the light of the guidelines provided by the European Council, the Union shall negotiate and conclude an agreement with that State, setting out the arrangements for its withdrawal, taking account of the framework for its future relationship with the Union. That agreement shall be negotiated in accordance with Article 218(3) of the Treaty on the Functioning of the European Union. It shall be concluded on behalf of the Union by the Council, acting by a qualified majority, after obtaining the consent of the European Parliament.

3. The Treaties shall cease to apply to the State in question from the date of entry into force of the withdrawal agreement or, failing that, two years after the notification referred to in paragraph 2, unless the European Council, in agreement with the Member State concerned, unanimously decides to extend this period.

4. For the purposes of paragraphs 2 and 3, the member of the European Council or of the Council representing the withdrawing Member State shall not participate in the discussions of the European Council or Council or in decisions concerning it.

A qualified majority shall be defined in accordance with Article 238(3)(b) of the Treaty on the Functioning of the European Union.

5. If a State which has withdrawn from the Union asks to rejoin, its request shall be subject to the procedure referred to in Article 49.

Plenty to keep constitutional lawyers busy over the summer.